HOUSTON, Nov. 15, 2007 (PRIME NEWSWIRE) -- BlueStar Health Inc. (Pink Sheets:BLSH) Chairman Naved Jafry and CEO Richard Greenwood issued a joint letter to shareholders today outlining the Company's new business, strategic pillars for future growth and the fundamental prospects for both the short and long-term in the context of the Company's strategy. The letter reads as follows:
Dear Shareholders of BlueStar Health, Inc.,
As most of you already know, the Company has undergone a lengthy and dramatic reinvention over the past year, which culminated recently with the closing of the acquisition of Zeon Fuel, Inc. The Company is now set to shed the last remnants of its Blue Star Health identity -- the corporate name, CUSIP # and trading symbol -- upon the completion of the December shareholder meeting, and begin a new journey as Zeon Global Energy, Inc. Indeed, it has been a long and difficult journey to-date, but we are happy to say that we have met all challenges successfully and now are poised to show growth of unprecedented scale over the next 3 years.
Whatever your beliefs, you will most likely agree it is important, if not critical, that the world embraces economically viable "alternative" fuels to ease the global dependence on hydrocarbon fuels. Currently, two widely-accepted alternative fuels are available that address this global need: ethanol, and biodiesel, Zeon Global Energy's biofuel product of focus. Biodiesel can be manufactured from vegetable oils, animal fats, or recycled restaurant grease, is biodegradable and is known to reduce vehicle emissions of particulates, carbon monoxide, and hydrocarbons -- all known environmental pollutants. Most biodiesel is produced from soybean oil and is already available to consumers in every state nationwide. More specifically, blends of 20% biodiesel with 80% petroleum diesel (commonly known as "B20") can be used in most unmodified diesel engines. Zeon Global Energy's business entails blending and distributing B20 and various other blends of biofuels as well as all grades of petrodiesel and gasoline to a network of existing retail pump locations to offer consumers these environmentally friendly fuel options as they continue to grow in popularity and become increasingly price competitive.
Fortunately for us, our shareholders and the world-at-large, both the social and business drivers behind the opportunity-at-hand are in lock step with one another due to the recent increase in Global environmental awareness and activism. As an industry, the growth of available biodiesel for consumer use has been quite dramatic. Annual biodiesel production increased from less than 500,000 gallons in 1998 to nearly 75 million gallons in 2005, tripling again in a single year to approximately 225 million gallons in 2006. Some forecasts project close to 700 million gallons will be produced in the current year. And with almost 2 billion gallons of total biodiesel production capacity in the U.S., the industry is poised for substantially greater growth in sales provided the price and availability of feedstock are in place. It is Zeon's goal to capitalize on this significant macro growth to facilitate the Company's enterprise growth.
The 20th century French author, Antoine de Saint-Exupery, once wrote, "A goal without a plan is just a wish." We couldn't agree more. While our broad social goal is to contribute to the expansion of environmentally friendly fuels to the benefit of all that inhabit this earth, there are a number of strategic steps we are implementing to realize our business goals of building long-term shareholder value along the way.
Currently, Zeon has seven locations it manages (retail gas stations and truck stops) from whom the Company generates its annualized revenue base of approximately $24 million per year from operations of the onsite convenience stores and sale of fuel at these locations. Going forward, Zeon's growth strategy will remain largely the same -- i.e. delivering fuel to our customers through wholesale and retail outlets but with less emphasis on managing the convenience store businesses where we will utilize strategic relationships already in place to achieve optimal results. This "control the pump" strategy will enable management to focus on its core competencies: controlling the "pumps" at each delivery point, managing and expanding relationships with wholesale terminals for petroleum based fuels and biofuels to supply customer demands at competitive prices, blending of biofuel end-product and securing the most cost-effective financing to support our sales and expansion.
Growth will be driven by three distinct strategies to this end: 1) continuing to enter into "fuel" contracts with targeted locations, 2) leasing the pumps and convenience store assets from an owner of an existing location, and/or 3) acquiring existing retail pumps and convenience store locations outright.
The Company's target retail pump locations for all three strategies are gas stations and truck stops located along major freight transportation routes that average at least 300-400,000 gallons in total fuel sales on a monthly basis. On average, the retail fuel distribution industry has approximately 5-7% spread available from the cost at the wholesale terminals for the product to the sales price at the pump for the final product. Our strategy of "controlling the pump," purchasing product directly from the wholesale fuel terminals, gives us a better opportunity to retain a larger share of that spread after transportation and insurances costs.
Plainly stated, our objective is to have at least 25 locations by the end of the first 12 months of operation, 50 locations at the end of our second year, and 90 locations after three years. Based on the fuel distribution industry's basic business metrics for our target market, this growth should translate into an annualized run rate of $75 million in revenue by the end of 12 months, $200 million annualized run rate at the end of 24 months and $360 million by the end of 36 months. While initially our focus will be pump sites in the areas of Houston and southeast Texas, the long-term intent is to create a branded and recognizable national presence. Currently, Zeon management is evaluating opportunities to enter into fuel contracts, lease or acquire outright a number of retail pump outlets.
Petroleum fuel products and biofuels are available through a number of outlets (wholesale terminals and processing sites) in our initial markets. While we have a number of relationships in place already, we will continue to establish new relationships and supply contracts with strategically located providers so we can optimize supply and transportation costs. Fuel is transported from wholesale terminals to our outlets primarily through a fleet of independent contractors and a limited number of our own trucks. Orders, distribution, and delivery are controlled centrally through our logistics center using the latest technology to monitor the status of each order, inventory in transit and delivery at each location.
Financing the projected growth of Zeon is a major consideration, and of course a major concern for existing Company shareholders. As Zeon management owns over 80% of the issued and outstanding Company equity, our financial well-being is inextricably linked to that of every shareholder. Zeon will use basic inventory and receivable lines of credit to facilitate throughput fuel volume sales. Given the nature of our business, this is our most significant financing requirement. Our challenge will be to find the level of financing we need at the lowest interest cost available to us to support our sales volume as it grows. In terms of leasing and acquiring retail pump and convenience store locations outright, management is evaluating a mix of senior debt facilities and responsible equity financing to be able to finance these strategies. Management is currently in initial and advanced discussions with well-known providers of such financing.
For the record, the Company's current capital structure, which will be finalized after the December shareholder meeting, is as follows: The 10,000 shares of Series A preferred stock will convert into 44 million shares of insider-owned restricted common stock upon completion of December's shareholder meeting. This will result in approximately 67 million issued and outstanding shares in the company's common stock, approximately 14 million shares of which are in the DTC system and notated as the "tradable float." Additionally, The 10,000 shares of Series B preferred stock will convert into a little over 46 million insider-owned common shares in approximately 12 months.
In conclusion, as we start this journey we do have a lot to do and believe everything is in place for our company to experience sold growth. With the right financing, we will be able to steadily and quickly add locations and fuel sales volume. Our challenge will not be revenue opportunity as much as it will be ensuring we have the proper logistics and controls in place to optimize the available margin to the bottom line. If we deliver on that challenge it is not unreasonable for us to have a major regional if not national presence within the next five years.
We believe we have the right formula to maximize our opportunity and provide our shareholders a solid short term as well as long term return on investment. We anticipate and are committed to making a long term contribution to the "greening" of America by making economically viable choices available to our customers and supporting the development of high yielding biofuel feedstock that does not compete with our food source such as algae and jathopra.
Once again, we want to thank our old shareholders for staying with us and we welcome our new shareholders. Our commitment to you is the board and management team will always strive to optimize your investment through the execution of our strategy and to keep you informed about what and how our company is doing on a regular basis.
We are excited about the opportunity ahead of us and look forward to sharing it with you.
Sincerely,
Naved Jafry, Chairman Richard Greenwood, CEO
About BlueStar Health
BlueStar Health, through its wholly owned subsidiary Zeon Fuel, Inc., is engaged in the business of blending purchased biodiesel and petroleum diesel fuels and distributing the blended product as well as the full range of petroleum based fuel products through retail outlets. The company intends to expand its distribution through owned and leased facilities as well as fuel contracts with retail outlets. For more information on the Company, please visit www.zeonglobalenergy.com
Forward-Looking Statements
This news release includes comments that may be deemed forward-looking within the meaning of the safe harbor provisions of the U.S. Federal Securities Laws. These include, among other things, statements about expectations of future events or transactions, sales of products or performance. Forward-looking statements are subject to risks and uncertainties that may cause the company's results to differ materially from expectations. These risks include the company's ability to execute its business plan, having necessary financing in time to meet contractual obligations and support the business activity, and other such risks as the company may identify and discuss from time to time, including those risks disclosed in the company's current and future filings with the Securities and Exchange Commission. Accordingly, there is no certainty that the company's plans will be achieved.