U.S. Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-Q

 

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the Quarterly Period Ended September 30, 2011

 

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

       For the Transition Period From ____to _____

 

Commission File Number

000-52548

 

BLUESKY SYSTEMS HOLDINGS, INC.

(FKA BLUESKY SYSTEMS CORP.)

 (Exact name of small business issuer as specified in its charter) 

 

 

Nevada	05-6141009
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

 

1801 Century Park East, Suite 1500, Los Angeles, California 90067

 (Address of principal executive offices)

 

(310) 277-4200

(Issuer's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [x]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	£
Non-accelerated filer	£ (Do not check if a smaller reporting company)
Accelerated filer	£
Smaller reporting company	S

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ]

 

Number of shares of common stock outstanding as of November 17, 2011: 39,535,005

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

 

    The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the "safe harbor" created by the Private Securities Litigation Reform Act of 1995.

 

  

INDEX TO FORM 10-Q

 

PART I		Page No.
Item 1.	Consolidated Financial Statements	4
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4	Controls and Procedures	28
Item 4T	Controls and Procedures	28
PART II
Item 1	Legal Proceedings	29
Item 1A	Risk Factors	29
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3	Defaults Upon Senior Securities	29
Item 4	Submission of Matters to a Vote of Security Holders	29
Item 5	Other Information	29
Item 6	Exhibits	29

  

 

 

ITEM 1. FINANCIAL STATEMENTS

 

INDEX TO BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.) CONSOLIDATED FINANCIAL STATEMENTS

 

 

	BLUESKY SYSTEMS HOLDINGS, INC	PAGE
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statement of Stockholders’ Deficit	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8

  

 

BLUESKY SYSTEMS, CORP.
Consolidated Balance Sheets
At September 30, 2011 and December 31, 2010
Assets:			(Unaudited)				(Audited)
Current assets			9/30/2011				12/31/2010
Cash		$	—			$	297
Prepaid consulting expense			—				26,469
Total current assets			—				26,766
Fixed assets
Property and equipment			105,000				105,000
Accumulated depreciation			(11,343	)			(8,426	)
Total fixed assets			93,657				96,574
Total assets		$	93,657			$	123,340
Liabilities and Stockholders' (Deficit)
Current liabilities
Accounts payable and accrued expenses		$	23,260			$	15,610
Accounts payable - related party			5,000				5,000
Accrued interest payable			5,911				2,536
Derivative liability			107,127				134,900
Current portion of notes payable - related party			1,645				1,645
Convertible note, net of discounts of $-0- and $73,782, respectively			75,000				16,218
Total current liabilities			217,943				175,909
Long-term notes payable - related party			99,234				100,379
Total liabilities			317,177				276,288
Stockholders' (Deficit)
Common stock, (50,000,000 shares authorized, 1,285,005 shares issued
and outstanding, par value $.001 per share)			1,285				852
Additional paid-in capital			1,375,650				1,326,603
Retained deficit			(1,600,455	)			(1,480,403	)
Total stockholders' (deficit)			(223,520	)			(152,948	)
Total liabilities and stockholders' (deficit)		$	93,657			$	123,340

 

The accompanying notes are an integral part of these consolidated financial statements

   

 

BLUESKY SYSTEMS, CORP.
Unaudited Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2011 and 2010
			Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
			09/30/2011				09/30/2010				09/30/2011				09/30/2010
Rental income		$	4,265			$	4,264			$	12,411			$	14,016
Total revenue			4,265				4,264				12,411				14,016
Selling, general and administrative expenses			8,192				36,415				46,030				39,613
Depreciation			973				972				2,917				2,916
Total expenses			9,165				37,387				48,947				42,529
Net ordinary (loss)			(4,900	)			(33,123	)			(36,536	)			(28,513	)
Other income (expense):
Change in fair value of derivative liability			5,422				(59,295	)			(1,707	)			(59,295	)
Interest expense			(2,863	)			(9,102	)			(81,809	)			(15,116	)
Total other income (expense)			2,559				(68,397	)			(83,516	)			(74,411	)
Net (loss)		$	(2,341	)		$	(101,520	)		$	(120,052	)		$	(102,924	)
Net (loss) per share, basic and fully diluted			*			$	(0.12	)		$	(0.11	)		$	(0.12	)
Weighted Average Common Shares Outstanding			1,068,318				851,631				1,068,339				851,631
* = Less than $.01 per share
Weighted average common shares have been retroactively restated herein for the 30 for 1 reverse stock split

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

 

BLUESKY SYSTEMS, CORP.
Consolidated Statement of Stockholders' Deficit
For the Nine Months Ended September 30, 2011
(Unaudited)
		Common																Total
		Stock								Additional								Stockholders'
		(Par Value				Common				Paid in				Retained				Equity
		$.001)				Shares				Capital				(Deficit)				(Deficit)
Balances, January 1, 2011		$	852				851,631			$	1,326,603			$	(1,480,403	)		$	(152,948	)
Common shares issued in retirement of $5,000 portion of $90,000 convertible note			33				33,333				4,967				—				5,000
Common shares issued in retirement of $10,000 portion of $90,000 convertible note			400				400,000				9,600				—				10,000
Rounding due to reverse split			—				41				—				—				—
Contributed capital from shareholder for payment of accounts payable			—				—				5,000				—				5,000
Adjustment to derivative liability for value of converion			—				—				29,480				—				29,480
Net loss for the nine months ended September 30, 2011			—				—				—				(120,052	)			(120,052	)
Balances, September 30, 2011		$	1,285				1,285,005			$	1,375,650			$	(1,600,455	)		$	(223,520	)
Common stock amount and related common shares have been retroactively restated herein for the 30 for 1 reverse stock split

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

 

BLUESKY SYSTEMS, CORP.
Unaudited Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2011 and 2010
		Nine Months Ended				Nine Months Ended
		09/30/2011				09/30/2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)		$	(120,052	)		$	(102,924	)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Change in fair value of derivative liability			1,707				59,295
Depreciation			2,917				2,916
Amortization of debt discount			73,782				4,737
Prepaid expense			26,469				3,018
Accounts payable and accrued expenses			7,650				1,193
Accrued interest payable			3,375				1,411
NET CASH (USED IN) OPERATING ACTIVITIES			(4,152	)			(30,353	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital from shareholder			5,000				—
Borrowing on debt			—				32,650
Principal repayments of long term notes payable - related party			(1,145	)			(2,088	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			3,855				30,562
NET (DECREASE) IN CASH AND CASH EQUIVALENTS			(297	)			209
CASH AND CASH EQUIVALENTS:
Beginning of period			297				53
End of period		$	(0	)		$	262
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for interest		$	4,652			$	9,128
Cash paid during the period for income taxes		$	—			$	—
Derivative liability		$	—			$	90,000
NON-CASH FINANCING ACTIVITIES:
Common shares issued in retirement of $5,000 portion of $90,000 convertible note		$	5,000			$	—

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

 

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Business Activity— BlueSky System, Corp. (“The Company”) was organized under the laws of the State of Pennsylvania in June 2004 as a C-Corporation. The Company owns one subsidiary, School Street Second Corp. (“The Subsidiary”). The purpose of the Subsidiary is to buy, sell, rent, and improve any and all aspects of real estate. The Subsidiary currently owns one building in Chicopee, Massachusetts.

 

Interim Financial Statements

These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

 

Basis of Presentation—The financial statements included herein include the accounts of the Company prepared under the accrual basis of accounting.

 

Cash and Cash Equivalents—For purposes of the Consolidated Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.

 

Management’s Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Revenue Recognition—The Company’s revenue is derived from rental income from 4 leases. The expired leases are considered month-to-month leases. In accordance with section 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition, the cost of property held for leasing by major classes of property according to nature or function, and the amount of accumulated depreciation in total, is presented in the accompanying September 30, 2011 balance sheet. There are no contingent rentals included in income in the accompanying statements of operations. With the exception of the month-to-month leases, revenue is recognized on a straight-line basis and amortized into income on a monthly basis, over the lease term.

 

 

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’)

 

Comprehensive Income (Loss)— The Company reports Comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements.

 

Loss per Common Share— Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.  Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of September 30, 2011.

 

Income Taxes— The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification.  Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

Fair Value of Financial Instruments—The carrying amounts reported in the balance sheet for cash, accounts receivable and payable approximate fair value based on the short-term maturity of these instruments.

 

Fair Value Measurements -  On January 1, 2008, the Company adopted guidance which defines fair value, establishes a framework for using fair value to measure financial assets and liabilities on a recurring basis, and expands disclosures about fair value measurements. Beginning on January 1, 2009, the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis, which includes goodwill and intangible assets. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed

 

 

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’)

 

Fair Value of Financial Instruments (Cont.)--

 

based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

  

Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2 - Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.

 

Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about the inputs that market participants would use.

 

Non-Recurring fair value metrics:

 

Level 1 – None

 

Level 2 – None

 

Level 3 – Derivative Liability - $ 107,127

  

Stock Based Transactions—The Company acquires nonmonetary assets including goods for its common stock. The goods are recorded at the fair value of the nonmonetary asset exchanged or at an independent quoted market price for items exchanged.

 

The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

 

Accounts Receivable—Accounts deemed uncollectible are written off in the year they become uncollectible. During 2011 and 2010 interim periods, Accounts Receivable in the amounts of $-0- and $-0- were deemed uncollectible and were written off to Bad Debt Expense. As of September 30, 2011, the Company’s accounts receivable balance was $-0-.

 

 

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’)

 

Impairment of Long-Lived Assets— The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets.  Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the period ended September 30, 2011.

 

Advertising Costs—Advertising costs are expensed as incurred. Advertising expense totaled $-0- and $-0- for the three and nine months ended September 30, 2011 and 2010, respectively.

 

Recent Accounting Pronouncements — The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

 

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

 

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s consolidated financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the nine months ended September 30, 2011.

 

As a result of the Company’s implementation of the Codification during the nine months ended September 30, 2011, previous references to new accounting standards and literature are no longer applicable. In the current annual consolidated financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

 

Recent Accounting Pronouncements (cont.)

 

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

 

ASC 855 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the consolidated financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the consolidated financial statements are issued. ASC 855 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. ASC 855 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s consolidated financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s consolidated financial statements. No recognized or non-recognized subsequent events were noted.

 

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

 

ASC 350 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. ASC 350 became effective for consolidated financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of ASC 350 did not impact the Company’s consolidated financial statements.

 

  

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

Recent Accounting Pronouncements (cont.)

   

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

 

ASC 810 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. ASC 810 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented ASC 810 at the start of fiscal 2009 and no longer records an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at the time of buyout. The adoption of ASC 810 did not have any other material impact on the Company’s financial statements.

 

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

 

ASC 810 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. ASC 810 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. The Company adopted ASC 810 in fiscal 2010 and there was no material impact on the Company’s financial statements.

  

NOTE B—SUPPLEMENTAL CASH FLOW INFORMATION

 

Supplemental disclosures of cash flow information for the nine months ended September 30, 2011 and 2010 are summarized as follows:

 

Cash paid during the period for interest and income taxes:

 

Cash paid during the period for interest and income taxes:
		2011				2010
Income Taxes		$	—			$	—
Interest		$	4,652			$	9,128

  

NOTE C—INCOME TAXES

 

Due to the operating loss and the inability to recognize an income tax benefit there from, there is no provision for current or deferred federal or state income taxes for the three and nine months ended September 30, 2011 and 2010.

  

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

 

The Company’s total deferred tax asset, calculated using federal and state effective tax rates, as of September 30, 2011 and December 31, 2010 is as follows:

 

		09/30/2011				12/31/10
Total Deferred Tax Asset		$	74,400			$	42,800
Valuation Allowance			(74,400	)			(42,800	)
Net Deferred Tax Asset		$	—			$	—

 

The measurement valuation allowance increased $18,000 during the nine months ended September 30, 2011.

 

The reconciliation of income taxes computed at the federal statutory income tax rate to total income taxes for the nine months ended September 30, 2011 and 2010 is as follows:

 

		2011				2010
Income tax computed at the federal statutory rate			34	%			34	%
Valuation allowance			(34	%)			(34	%)
Total deferred tax asset			0	%			0	%

 

Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance.

 

The Company has approximately $219,000 in carry forwards available through the year 2030.

 

   

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

NOTE D—GOING CONCERN

 

As shown in the accompanying unaudited financial statements, the Company has suffered recurring losses from operations to date. It experienced losses of $120,052 during the nine months ended September 30, 2011. The Company had a net working capital deficiency and a net deficiency of $217,943 and $1,600,4558, respectively, as of September 30, 2011. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

Management’s plans in regard to this matter are to raise equity capital and seek strategic relationships and alliances in order to increase sales in an effort to generate positive cash flow. Additionally, the Company must continue to rely upon equity infusions from investors in order to improve liquidity and sustain operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

  

NOTE E—SEGMENT REPORTING

 

In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information.” This statement requires companies to report information about operating segments in interim and annual financial statements. It also requires segment disclosures about products and services, geographic areas and major customers. The Company determined that it did not have any separately reportable operating segments as of September 30, 2011 and 2010.

 

NOTE F—NOTES PAYABLE AND DERIVATIVE LIABILITY

 

A note payable incurred for the purchase of the rental property consists of the following at September 30, 2011:

 

Secured Commercial Mortgage to an unrelated party.
Interest bearing 6.875 % with a maturity of June 1, 2037,
Balance at September 30, 2011		$	100,879
Less: Short term portion of mortgage payable			(1,645	)
Long term portion of mortgage payable		$	99,234

  

The aggregate amount of long-term debt at September 30, 2011 maturing during each of the succeeding five years and thereafter is as follows:

 

For the year ending		Amount
2011		$	1,645
2012		$	1,368
2013		$	1,465
2014		$	1,569
2015		$	1,680
Thereafter		$	93,152
Total		$	100,879

 

An unsecured note payable for SEC compliance services rendered during the quarter and for the upcoming year end in the amount of $90,000 was incurred during the prior year. Included in the accompanying consolidated balance sheets at December 31, 2010 is $26,469 in prepaid consulting services which were matched with services performed in the year-end filings during the nine months ended September 30, 2011. Accordingly, $26,469 in expense is included in the accompanying statements of operations for the nine months ended September 30, 2011. The promissory note carries an annual interest rate of 5% and is due on September 30, 2011 to an unrelated consulting firm. There is $5,911 in accrued interest payable at September 30, 2011. The note carries an option to the holder of converting the note into equity at a price of $.25 per share or 50% of the then bid price at the date of issuance of such stock, whichever is less.

  

ASC Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance sheet at fair value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.

 

The Company issued convertible notes and has evaluated the terms and conditions of the conversion features contained in the notes and warrants to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined that the conversion features contained in the notes and warrants represent freestanding derivative instruments that meet the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instruments in the notes and warrants is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the convertible notes and warrants was measured at the inception date of the notes and warrants and each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense at each balance sheet date.

   

 

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

NOTE F—NOTES PAYABLE AND DERIVATIVE LIABILITY (CONT.)

 

The Company valued the conversion features in its convertible notes using the Black-Scholes model. The Black-Scholes model values the embedded derivatives based on a risk-free rate of return ranging from 0.02% to 0.30%, grant dates of stock warrants, the term of the stock warrants, conversion prices ranging from $0.005 to $0.125, current stock prices on the measurement date ranging from $0.01 to $0.25, and the computed measure of the Company’s stock volatility, ranging from 254.77% to 608.09%.

 

Included in the September 30, 2011 is a derivative liability in the amount of $107,127 to account for this transaction. There were no balances in prior periods since this liability arose in the third quarter of 2010. It will be revalued quarterly henceforth and adjusted as a gain or loss to the statements of operations depending on its value at that time. $15,000 in the Company’s notes payable was converted in the third quarter of 2011 and an adjustment for $29,480 was made to the derivative liability accordingly.

 

Included in our Statements of Operations for the nine months ended September 30, 2011 are $1,707 and $73,782 in non-cash charges pertaining to the derivative liability as it pertains to change in derivative liability and amortization of debt discount, respectively.

 

NOTE G—PROPERTY AND EQUIPMENT

 

Property and equipment—Depreciable assets are stated at cost. As of September 30, 2011, the Company had the following depreciable assets:

 

Asset		Cost				Accumulated Depreciation				Book Value				Estimated Life				Estimated Annual Depreciation
Rental Property		$	105,000			$	11,343			$	93,657				27.5			$	3,889

 

NOTE H—MATERIAL

 

During the quarter ended September 30, 2011, the Company effectuated a 1:30 reverse stock split of its common stock. These financial statements are retroactively restated herein as though the split occurred at the beginning of the periods presented.

 

The Company entered into a Share Purchase Agreement, dated as of July 27, 2011 (the “Share Purchase Agreement”), with Mr. Duane Bennett and the Northeast Nominee Trust, together being the majority shareholders of the Company (the “Shareholders”), and Supera Solutions Corp., a Nevada corporation (the “Purchaser”), pursuant to which the Shareholders agreed to sell, and the Purchasers agreed to buy, 15,600,000 pre-split common shares of the Company, representing 61.06% of the issued and outstanding capital stock of the Company.

 

The Closing of the above mentioned transaction occurred subsequent to quarter end.

 

   

BLUESKY SYSTEMS HOLDINGS, INC. (FKA BLUESKY SYSTEMS CORP.)

AND SUBSIDIARY

Notes to Consolidated Financial Statements, Unaudited

For the Nine Months Ended September 30, 2011

 

NOTE I—SUBSEQUENT EVENTS

 

The Closing of the above mentioned transaction in “Note H – Material Event” occurred subsequent to quarter end.

 

The Company engaged in a recapitalization pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended, on July 12, 2011. It exchanged $90,000 in a new convertible promissory note bearing interest at 5% for its outstanding $90,000 promissory note, dated September 17, 2010, with the new note providing substantially more protection to the holder against dilution in the event of a reverse stock split.

 

Effective October 4, 2011, the Company entered into a License Agreement with Supera Group, LLC (“Supera”) pursuant to which Supera granted to the Company an exclusive license to use Supera’s technology, including patents for the manufacture and sale of readers/writers and high-capacity data storage in a card format for use in healthcare, patient management, medical, dental and pharmaceutical records and any other health application. In connection with entering into the License Agreement, the Company issued 30,200,000 post-split shares to Supera and agreed to pay 4% of gross sales from licensed products. The term of the license grant is for until the last to expire of the Licensed Patents. An additional 400,000 post-split common shares were issued during the quarter ended September 30, 2011 in connection with the reverse merger and conversion of debt into equity.

 

Effective October 20, 2011, the Company issued an aggregate of 8,050,000 post-split common shares of its Common Stock to four persons who are not affiliates of the Company. The shares were issued pursuant to the conversion of the Company’s convertible promissory note rendering a zero balance currently.

 

 

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Management’s Discussion and Analysis contains various “forward looking statements” within regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

 

Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial statements included herein.

 

BUSINESS DESCRIPTION

 

Effective October 4, 2011, we entered into an Exclusive License Agreement (the “License Agreement”) with Supera Group, LLC (“Supera”) pursuant to which Supera granted to us an exclusive license to use Supera’s technology, including patents for the manufacture and sale of readers/writers and high-capacity data storage in a card format for use in healthcare, patient management, medical, dental and pharmaceutical records and any other health application. In connection with entering into the License Agreement, we issued 30,000,000 shares to Supera and agreed to pay 4% of gross sales from licensed products. The term of the license grant is for until the last to expire of the Licensed Patents.

 

Since the transaction closed after September 30, 2011, this Form 10-Q describes the business prior to such transaction.

 

We were incorporated on September 21, 2004 under the laws of the State of Pennsylvania to engage in the business of buying, selling, renting, and improving real estate. Over the last year we have been engaged in buying and selling our property and we have entered into new agreements for the management of new rental property. In 2008, we owned 100% of the common stock of School Second Corp., which, in turn, owned property in central downtown Chicopee, Massachusetts at 192 School Street. Specifically, we owned a two-story building that consists of four units and generated revenues by rentals on units. During 2008 we sold this property and acquired a new property in Chicopee Massachusetts near Springfield in western Massachusetts at 12-14 Osgood Street. Accordingly, all of the leases and agreements relating to the property at 192 School Street were terminated.  

 

The Registrant sold the property at 192 School Street, Chicopee, Massachusetts to Serena Cieplinski of 5126 Castle Harbor Way, Centreville, VA 20120 on October 29, 2008 for $212,500.

 

Also on October 29, 2008 the Registrant entered into a Stock Purchase Agreement between Pablo Torres, the majority shareholder of Oswego Real Estate Services, Inc. (“Seller”) and Bluesky Systems Corporation (“Buyer” or “Bluesky”). 

 

The Seller sold 20,000,000 shares (twenty million) of Oswego Real Estate Services, Inc. (“Oswego”) in exchange for 250,000 shares (two hundred fifty thousand) of Bluesky Systems Corporation and $5,000 so that such property located at 12-14 Osgood Street in Springfield, Massachusetts (“Property”) is owned by the Buyer. The Buyer and Seller agreed and Philips become a wholly owned subsidiary of the Buyer.

 

  

As per the terms of the Stock Purchase Agreement, the mortgage will continue to be the personal liability of the Seller until paid in full by him. All rental proceeds are to be collected by and controlled by the Seller until the property is resold and any negative cash flows for repairs or expenses will be the sole responsibility of the Seller. Furthermore in the event, cash flow after all expenses exceeds 20%, Bluesky and the Seller will equally share the proceeds. Upon liquidation of the property after expenses, the Seller will receive 25% of the capital gains profit and Bluesky will receive 75% of the capital gains profit. If the Seller is incapable of managing the property, then Bluesky will hire a professional property management company to manage the day to day operations, at the Seller’s expense. Additionally, 100,000 (one hundred thousand) shares of the 250,000 (two hundred fifty thousand) shares are to be sold at a mutually acceptable price and the proceeds to be used exclusively for the pay down of the mortgage on the 12-14 Osgood Street property. Bluesky paid $5,000 (five thousand) dollars for consideration in this transaction

 

Our executive offices are located at 191 Chestnut Street in Springfield, Massachusetts 01103. Our telephone number is (413) 734-3116. We are currently authorized to issue 50,000,000 shares of common stock. We currently have 39,535,005 shares of common stock issued and outstanding.

 

As shown in the accompanying financial statements, we suffered recurring losses from operations to date. We experienced losses of $120,052 during the nine months ended September 30, 2011. We had a net working capital deficiency and a net deficiency of $217,943 and $1,600,455, respectively, as of September 30, 2011. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

THE BUILDING AT 12-14 OSGOOD STREET, SPRINGFIELD, MASSACHUSETTS

 

On October 29, 2008, we acquired 20,000,000 shares of common stock of Oswego Real Estate Services, Inc. (“Oswego) in exchange for 250,000 shares of the Company along with $5,000 in additional cash consideration. In turn, Oswego became a wholly owned subsidiary of the Company and the property located at 12-14 Osgood Street in Springfield, Massachusetts is now owned by the Company through its subsidiary Oswego Real Estate Services.

 

The building at 12-14 Osgood Street consists of 2 family rental units. Both units are currently leased and yield approximately $1,200 rental income per month. The mortgage payable on this property as of December 31, 2008 is $105,000.

 

As of October 4, 2011, the Company entered into an agreement for a 90 day period of time pursuant to which the Osgood Street units will be operated and then disposed of to Pablo Torres or his nominee for a nominal price with Mr. Torres assuming the mortgage.

 

Recent Events

 

We and successor by merger to ourselves, entered into a Share Purchase Agreement, dated as of July 27, 2011 (the “Share Purchase Agreement”), with Mr. Duane Bennett and the Northeast Nominee Trust, together being our majority shareholders (the “Shareholders”), and Supera Solutions Corp., a Nevada corporation (the “Purchaser”), pursuant to which the Shareholders agreed to sell, and the Purchasers agreed to buy, 15,600,000 of our common shares, representing 61.06% of our issued and outstanding capital stock. The Purchaser agreed to pay an aggregate $310,000 for our shares.

 

We engaged in a recapitalization pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended, on July 12, 2011. We exchanged $90,000 in a new convertible promissory note bearing interest at 5% for its outstanding $90,000 promissory note, dated September 17, 2010, with the new note providing substantially more protection to the holder against dilution in the event of a reverse stock split.

 

On July 27, 2011, we entered into an agreement (the “Debt Purchase Agreement”), by and among Galileo Partners, LLC, a California limited liability company (the “Assignee”), and Greentree Financial Group, Inc., a Florida corporation (the “Assignor”), pursuant to which the Assignor agreed to sell, assign, transfer and convey unto Assignee its partial rights and interests of $15,000 in principal of the new note in exchange for a payment in the amount of $15,000 from the Assignee. The remaining rights and interests in the balance of the new Promissory Note (if any) will remain with the Assignor. The Assignee is not an affiliate of the Assignor or the Purchaser within the meaning of Rule 405 under the Securities Act of 1933, as amended.

 

 

On August 18, 2011, we filed Articles of Amendment to our Articles of Incorporation (the “Amendment”) to implement a one-for-thirty reverse split of our common stock (the “Reverse Split”), as previously authorized and approved by action by written consent of our majority shareholders and by action by written consent of our Board of Directors. The Reverse Split was effective as of 9:00 a.m. (Eastern Time) on September 1, 2011, and our common stock began trading on the OTCBB on a post-split basis on September 1, 2011.

 

As a result of the Reverse Split, every thirty shares of common stock were combined into one (1) share of common stock. The Reverse Split affects all our common stock outstanding immediately prior to the effective time of the Reverse Split. Shareholders will not receive fractional post-reverse stock split shares in connection with the Reverse Stock Split. Instead, all fractional shares were rounded up to the next whole share.

 

On September 21, 2010, Bluesky Systems Corp., a Pennsylvania corporation, consummated a redomicile merger with Bluesky Systems Holdings, Inc., a Nevada corporation, and thereafter became Bluesky Systems Holdings, Inc., a Nevada corporation. A Definitive Information Statement on Schedule 14C describing the Federal and state law implications of this change in domicile was filed with the Commission on August 27, 2010 and was mailed to shareholders on the same date.

 

Effective October 4, 2011, we entered into an Exclusive License Agreement (the “License Agreement”) with Supera Group, LLC (“Supera”) pursuant to which Supera granted to us an exclusive license to use Supera’s technology, including patents for the manufacture and sale of readers/writers and high-capacity data storage in a card format for use in healthcare, patient management, medical, dental and pharmaceutical records and any other health application. In connection with entering into the License Agreement, we issued 30,200,000 shares to Supera and agreed to pay 4% of gross sales from licensed products. The term of the license grant is for until the last to expire of the Licensed Patents.

 

Pursuant to the License Agreement, we issued to Supera an aggregate of 30,200,000 shares of its Common Stock (the “Shares”) of which 200,000 Shares were transferred to Duane Bennett for services rendered in connection with negotiating the License Agreement. The Shares were issued under an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof and Regulation D.

 

Effective October 4, 2011, Duane Bennett resigned as our President, Secretary and Treasurer, and Dan Kehoe was appointed to such offices as of such date. Mr. Bennett retained his position as a director of the Company agreeing to resign effective as of the expiration of the ten day waiting period under Rule 14f-1 of the Securities Exchange Act of 1934, as amended.

 

Effective October 20, 2011, we issued an aggregate of 8,050,000 common shares to four persons who are not affiliates. The shares were issued pursuant to the conversion of our Convertible Promissory Note. The shares were issued under an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof and Regulation D.

 

 

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

 

Revenues (for the Three Months Ended September 30, 2011 and 2010).

 

Revenues increased $1 to $4,265 for the three months ended September 30, 2011, as compared with $4,264 for the three months ended September 30, 2010. Revenues consisted of rentals on residential rental properties. We had four leases, of which three expired in May 2006. The expired leases are now considered month-to-month leases. The increase in revenues is attributable to the rental rates and vacancy rates of our property which was sold and the acquisition of the Osgood Street property.

 

All sales transactions were with unrelated parties.

 

Revenues (for the Nine Months Ended September 30, 2011 and 2010).

 

Revenues decreased $1,605 to $12,411 for the nine months ended September 30, 2011, as compared with $14,016 for the nine months ended September 30, 2010. Revenues consisted of rentals on residential rental properties. We had four leases, of which three expired in May 2006. The expired leases are now considered month-to-month leases. The increase in revenues is attributable to the rental rates and vacancy rates of our property which was sold and the acquisition of the Osgood Street property.

 

All sales transactions were with unrelated parties.

 

Cost of Sales (for the Three Months Ended September 30, 2011 and 2010).

 

None.

 

Cost of Sales (for the Nine Months Ended September 30, 2011 and 2010).

 

None.

 

Expenses (for the Three Months Ended September 30, 2011 and 2010).

 

Operating expenses for the three months ended September 30, 2011 decreased $28,222 to $9,165 from $37,387 for the three months ended September 30, 2010. The decrease in expenses through the three months ended September 30, 2011 was due to decreased selling, general and administrative expenses attributable to lesser consulting related fees for services we received.

 

We do not have any lease agreements for our principal office and do not currently have any employment agreements.

 

Expenses (for the Nine Months Ended September 30, 2011 and 2010).

 

Operating expenses for the nine months ended September 30, 2011 increased $6,418 to $48,947 from $42,529 for the three months ended September 30, 2010. The increase in expenses through the nine months ended September 30, 2011 was due to increased selling, general and administrative expenses attributable to higher accounting fees for accounting service we received and expiration of a prior period prepaid expense item in 2011.

 

We do not have any lease agreements for our principal office and do not currently have any employment agreements.

 

 

Income Taxes (for the Three Months Ended September 30, 2011 and 2010).

 

We had no provision for income taxes for the three months ended September 30, 2011 and 2010, respectively, due to our net loss.

 

If we incur losses, we may have a deferred tax asset. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. We do not currently have any net deferred tax assets.

 

Income Taxes (for the Nine Months Ended September 30, 2011 and 2010).

 

We had no provision for income taxes for the nine months ended September 30, 2011 and 2010, respectively, due to our net loss.

 

If we incur losses, we may have a deferred tax asset. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. We do not currently have any net deferred tax assets.

 

Income/Losses (for the Three Months Ended September 30, 2011 and 2010).

 

We had a net loss of $2,341, or less than $0.01 per common share for the three months ended September 30, 2011. This compares to a net loss of $101,520, or $.12 per common share for the three months ended September 30, 2010. The net loss is attributable to the decrease in general and administrative expenses as mentioned above, the decrease in interest expense and a decrease in change in fair value of derivative liability.

 

Income/Losses (for the Nine Months Ended September 30, 2011 and 2010).

 

We had a net loss of $120,052, or $0.11 per common share for the nine months ended September 30, 2011. This compares to a net loss of $102,924, or $.12 per common share for the nine months ended September 30, 2010. The net loss is attributable to the increase in general and administrative expenses as mentioned above, the increase in interest expense and a change in fair value of derivative liability.

 

Impact of Inflation.

 

We believe that inflation has had a negligible effect on operations since inception. We believe that we can offset inflationary increases in the cost of operations by increasing sales and improving operating efficiencies.

 

Liquidity and Capital Resources (for the Nine Months Ended September 30, 2011 and 2010).

 

Cash flows used in operations were $4,152 and $30,353 for the nine months ended September 30, 2011 and 2010, respectively. The positive cash flow in 2011 and 2010 is attributable to non-cash charges exceeding net loss.

 

We had no cash flows provided by investing activities for the nine months ended September 30, 2011 and 2010.

 

Cash flows provided by financing activities were $3,855 and $30,562 for the nine months ended September 30, 2011 and 2010, respectively. Cash flows used in these periods were due primarily to repayments on notes payable on our income producing rental property. Cash was provided by a borrowing on debt in 2010 and from a capital contribution from our shareholder in 2011.

 

  

We had cash on hand of $-0- and a working capital deficit of $217,943 as of September 30, 2011. Our current amount of cash in the bank is insufficient to fund our operations for the next twelve months. We will rely on the existence of revenue from our business, if any, and funding from outside sources; however, we have no current or projected capital reserves that will sustain our business for the next 12 months. Also, if the projected revenues fall short of needed capital we will not be able to sustain our capital needs for the next twelve months. We will then need to obtain additional capital through equity or debt financing to sustain operations for an additional year. A lack of significant revenues during 2011 will significantly affect our cash position and make it necessary to raise additional funds through equity or debt financing. Our current level of operations would require capital of approximately $10,000 to sustain operations through year 2011 and approximately $35,000 per year thereafter. Modifications to our business plans or additional property acquisitions may require additional capital for us to operate. There can be no assurance that additional capital will be available to us when needed or available on terms favorable to us.

  

Going concern

 

As shown in the accompanying financial statements, we have suffered recurring losses from operation to date. We have a net deficiency of $ 600,475 as of September 30, 2011. These factors raise substantial doubt about our ability to continue as a going concern.

 

Management's plans in regard to this matter are to raise equity capital and seek strategic relationships and alliances in order to increase revenues in an effort to generate positive cash flow. Additionally, we must continue to rely upon equity infusions from investors in order to improve liquidity and sustain operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The information to be reported under this item is not required of smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and its Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

 

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were not effective as of September 30, 2011. Management is in the process of identifying deficiencies with respect to the Company's disclosure controls and procedures in order to implement corrective measures.

 

The Certifying Officers have also concluded that there was no change in our internal controls over financial reporting identified in connection with the evaluation that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

ITEM 4T. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

The management of the Company is required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (one individual) as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (one individual), of the Company's disclosure controls and procedures. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not were not effective as of September 30, 2011. Management is in the process of identifying deficiencies with respect to the Company's disclosure controls and procedures in order to implement corrective measures.

The Certifying Officers have also concluded that there was no change in our internal controls over financial reporting identified in connection with the evaluation that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II.  OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

 

As of the date of this report, we are not a party to any pending legal proceeding and are not aware of any threatened legal proceeding.

 

ITEM 1A. RISK FACTORS

 

The information to be reported under this item has not changed since the previously filed 10K, for the year ended December 31, 2010.

 

ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

We issued 33,333 unregistered post-split common shares during the period ended September 30, 2011 for retirement of $15,000 worth of our $90,000 convertible promissory note payable.

 

We hereby voluntarily disclose certain sales of unregistered equity securities made subsequent to September 30, 2011 but prior to the issuance of this Form 10-Q as follows:

 

We issued 30,200,000 unregistered post-split shares to Supera after September 30, 2011 as part of the reverse merger. An additional 400,000 unregistered post-split common shares were issued during the quarter end in connection with the reverse merger.

 

We issued an aggregate of 8,050,000 unregistered post-split common shares to four non-affiliated persons after September 30, 2011. The shares were issued pursuant to the conversion of our convertible promissory note.

 

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

 

We have not had any default upon senior securities.

 

ITEM 4.      REMOVED AND RESERVED

 

 

ITEM 5.      OTHER INFORMATION

 

None.

 

ITEM 6.      EXHIBITS

 

31.1 CEO Certification Pursuant to Section 302

31.2 CFO Certification Pursuant to Section 302 (included in Exhibit 31.1)

32.1 CEO Certification Pursuant to Section 906

32.2 CFO Certification Pursuant to Section 906 (included in Exhibit 32.1)

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	BLUESKY SYSTEMS HOLDINGS, INC. (Registrant)
Date: November 17, 2011	By:	Dan Kehoe
		Dan Kehoe President, Chief Executive Officer, and Chief Financial Officer