UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number: 000-28861
INTERNATIONAL STAR INC.
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(Exact name of small business as specified in its charter)
NEVADA 86-0876846
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2266 Chestnut Bluffs, Henderson, NV, Henderson, NV 89052
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(Address of principal executive offices)
(702) 897-5338
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(Issuer's telephone number)
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(Former name, former address, and former fiscal year,
if changed since last report)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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. Yes[ ] No |X|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be file
by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by the court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The Company had 57,788,741 shares of common stock outstanding at July 6, 2004.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
The following unaudited financial statements of International Star Inc.
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, these financial statements may not include all of the information
and disclosures required by generally accepted accounting principles for
complete financial statements. These financial statements should be read in
conjunction with the audited financial statements and the notes thereto for the
fiscal year ending December, 2002. In the opinion of management, these unaudited
financial statements contain all adjustments necessary to fairly present the
Company's financial position as of September 30, 2003 and its results of
operations and its cash flows for the nine months ended September 30, 2003.
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INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2003 2002
ASSETS --------------- ---------------
Current Assets:
Cash $ 3,297 $ 39,684
Accounts Receivable 14,604 27,423
Inventories 61,119 48,250
Prepaid Legal Fees 1,990 1,990
--------------- ---------------
Total Current Assets 81,010 117,347
Mineral Assets:
Screened Ore 2,600 2,600
--------------- ---------------
Total Mineral Assets 2,600 2,600
Fixed Assets (Net of Depreciation) 283,293 297,837
Other Assets & Prepaid Rent 28,680 29,514
Goodwill 64,472 64,472
--------------- ---------------
Total Assets $ 460,055 $ 511,770
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued interest $ 15,981 $ 83,009
Advances and Loans from officers
with accrued interest 163,637 148,637
Accrued Compensation and Management Fees 394,231 242,431
--------------- ---------------
Total Current Liabilities 573,849 474,077
Long-term Liabilities:
Line of Credit and Accrued Interest $ 86,077 $ 101,487
--------------- ---------------
Total Long-term Liabilities 86,077 101,487
Stockholders' Equity:
Common Stock, $.001 par value; authorized $ 37,521 $ 36,051
100,000,000 shares; issued and outstanding
37,520,737 and 36,050,737 at September 30,
2003 and December 31, 2002, respectively
Paid-In Capital 1,569,631 1,494,501
Accumulated Deficit (1,807,116) (1,594,346)
--------------- ---------------
Total Stockholders' Equity (199,964) (63,794)
--------------- ---------------
Total Liabilities and
Stockholders' Equity $ 459,962 $ 511,770
=============== ===============
See accompanying notes to the financial statements.
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INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002
---------------- ---------------- ---------------- ----------------
Revenue: $ 253,829 $ - $ 100,937 $ -
---------------- ---------------- ---------------- ----------------
Total Revenue 253,829 - 100,937 -
Cost of Goods Sold:
Materials & packaging 91,538 - 36,983 -
---------------- ---------------- ---------------- ----------------
Total Cost of Goods Sold: $ 91,538 $ - $ 36,983 $ -
Gross Profit $ 162,291 $ - $ 63,954 $ -
Expenses:
Mineral exploration costs - 7,059 - 659
Impairment of mineral lease - 400,000 - 400,000
Interest expense 7,392 193 2,015 -
Professional fees - 12,081 - 6,310
Management fees 90,000 60,000 30,000 15,000
Compensation 99,320 - 34,312 -
Research & development - 2,000 - 2,000
Depreciation & amortization 15,378 - 5,126 3,354
General & administrative 162,971 29,510 57,359 -
---------------- ---------------- ---------------- ----------------
Total Expenses 375,061 510,843 128,812 427,323
---------------- ---------------- ---------------- ----------------
Net Loss $ (212,770) $ (510,843) $ (64,858) $ (427,323)
================ ================ ================ ================
Weighted Average Shares
Common Stock Outstanding 31,836,237 31,836,237 31,836,237 31,836,237
================ ================ ================ ================
Net Loss Per Common Share
(Basic and Fully Dilutive) $ (0.00) $ (0.00) $ (0.00) $ (0.01)
================ ================ ================ ================
See accompanying notes to the financial statements.
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INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Nine Months
Ended Ended
Sept. 30, 2003 Sept. 30, 2002
--------------- ---------------
Cash Flows Used in Operating Activities:
Net Loss $ (212,770) $ (510,843)
Expenses Not Requiring an Outlay of Cash
Mineral properties written off 400,000
Depreciation & Amortization 15,378 -
--------------- ---------------
Net Cash used in Operations $ (197,392) $ (110,843)
Changes to Operating Assets and Liabilities:
(Increase) decrease in Accounts Receivable
and Prepaids 12,820 (20)
(Increase) decrease in Inventories (12,869) -
Increase (decrease) in accounts payables
and accrued interest (66,936) (3,857)
Increase in accrued management
fees / compensation 151,800 60,000
--------------- ---------------
Cash Flows Used in
Operating Activities (112,577) (54,680)
Cash Flows from Financing Activities:
Common stock issued for cash 76,600 -
Repayment of line of credit (15,410) -
Increase in advances and loans
from officers/affiliates 15,000 55,497
--------------- ---------------
Cash Flows from
Financing Activities 76,190 55,497
--------------- ---------------
Net Increase (Decrease) in Cash (36,387) 817
Cash at Beginning of Period 39,684 (837)
--------------- ---------------
Cash at End of Period $ 3,297 $ (20)
=============== ===============
Interest Paid $ 8,259 $ -
=============== ===============
Income Taxes Paid $ - $ -
=============== ===============
See accompanying notes to the financial statements.
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INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
A. BASIS OF PRESENTATION
The Interim financial statements of International Star, Inc. and Subsidiaries
(the Company) for the nine months ended September 30, 2003 and 2002 are not
audited. The financial statements are prepared in accordance with the
requirements for unaudited interim periods, and consequently do not include all
disclosures required to be in conformity with accounting principles generally
accepted in the United States of America.
In the opinion of management, the accompanying consolidated financial statements
contain all adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the Company's financial position as of March 31, 2003
and the results of operations and cash flows for the nine months ended September
30, 2003 and 2002.
The results of operations for the nine months ended September 30, 2003 and 2002
are not necessarily indicative of the results for a full year period.
B. SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation and Accounting Methods
These consolidated financial statements include the accounts of
International Star, Inc., Pita King Bakeries International, Inc. (a wholly
owned subsidiary) and Qwik Track, Inc. (a wholly owned subsidiary) for the
nine months ended September 30, 2003 and 2002.
2. Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3. Dividend Policy
The Company has not adopted a policy regarding the payment of dividends.
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4. Mineral Properties and Equipment
The Company has expensed the costs of acquiring and exploring its
properties during the periods in which they were incurred, and will
continue to do so until it is able to determine that commercially
recoverable ore reserves are present on the properties. If it determines
that such reserves exist, it will capitalize further costs.
5. Basic and Dilutive Net Income (Loss) Per Share
Basic net income (loss) per share amounts are computed based on the
weighted average number of shares actively outstanding in accordance with
SFAS NO. 128 "Earnings Per Share." Diluted net income (loss) per share
amounts are computed using the weighted average number of common shares and
common equivalent shares outstanding as if shares had been issued on the
exercise of any common share rights unless the exercise becomes antidultive
and then only the basic per share amounts are shown in the report.
6. Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires inclusion of foreign currency translation adjustments, reported
separately in its Statement of Stockholders' Equity, in other comprehensive
income. Such amounts are immaterial and have not been reported separately.
The Company had no other forms of comprehensive income since inception.
7. Stock Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.25
(APB 25) and related interpretations in accounting for its employee stock
options. Under APB25, when the exercise price of employee stock options is
equal to the estimated market price of the stock on the date of grant, no
compensation expense is recorded. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
No. 123 (SFAS 123) with respect to employee stock options.
8. Income Taxes
The Company has adopted SFAS No. 109 "Accounting for Income Taxes". The
Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. In estimating future tax
consequences, all expected future events, other than enactment of changes
in the tax laws or rates, are considered.
Due to the uncertainty regarding the Company's future profitability, the
future tax benefits of its losses have been fully reserved and no net tax
benefit has been recorded in these financial statements.
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9. Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash, tax credit recoverable, reclamation bond, accounts payable
and accrued liabilities, amount due to a director and loan payable.
10. Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent account
pronouncements will have a material effect on its financial statements.
11. Revenue Recognition
Revenue will be recognized on the sale and delivery of a product or the
completion of a service provided.
12. Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be
cash equivalents.
13. Financial and Concentration Risk
The Company does not have any concentration or related financial credit
risk
Item 2 - Management's Discussion and Analysis or Plan of Operation
Plan of Operation
We are an exploration stage company with no reserves or mining
operations. We intend to focus on raising the funding necessary for further
exploration on the Detrital Wash property. We believe the results of the limited
sampling conducted in 1998 by AuRIC Metallurgical Laboratories warrant further
investigation of the mineral potential of that property, but we currently lack
financial resources to conduct adequate exploration to determine whether
precious metals exist on the property in commercial quantities.
We have no credit lines or other sources of cash. From time to time we
have met operating expenses by borrowing from our executive officers and
accruing their expenses and management fees. We are currently out of cash and
will have to obtain cash from borrowing, a sale of our common stock, or other
means if we are to continue in business over the next twelve months, and we will
need a substantial infusion of cash in order to conduct meaningful exploration
activities on our properties. We may consider a joint venture arrangement with
an established resource company as well, although we currently have no specific
prospects for such an arrangement.
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If we raise capital by selling our equity stock, the proportionate
ownership of existing shareholders will be diminished (i.e., "diluted").
Results from Discontinued Operations
Our operating results for the nine months ended September 30, 2003
include revenues of $253,829 versus $0 for the corresponding period in 2002. All
of the increase is attributable to sales by our Pita King Bakeries International
subsidiary, which we acquired in the fourth quarter of 2002. Inasmuch as we sold
the Pita King subsidiary as of December 31, 2003 the results have no impact on
our continuing operations.
Item 3 - Controls And Procedures
Evaluation of Disclosure Controls and Procedures
Within the 90 days prior to the filing date of this report, the Company
carried out an evaluation of the effectiveness of the design and operation of
its disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.
This evaluation was done under the supervision and with the participation of the
Company's principal executive officer and principal financial officer. Based
upon that evaluation, they concluded that the Company's disclosure controls and
procedures are effective in gathering, analyzing and disclosing information
needed to satisfy the Company's disclosure obligations under the Exchange Act.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect those controls since the most
recent evaluation of such controls.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
Recent Sales of Unregistered Securities
During the fiscal quarter ending on September 30, 2003, we issued and/or
sold the securities listed in the table below without registration under the
Securities Act of 1933.
No underwriters were involved in these transactions. All of the shares sold
were at prices, which reflected a discount from the then prevailing market
prices. The discount reflected the restricted status of the shares. When shares
were issued for property or services, in each instance the valuation of the
property or services was based on the board of director's determination of the
value received for the shares.
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The securities were sold by our officers without the use of an underwriter.
In effecting the sales, we relied on the exemption authority provided by Section
4(2) of the Securities Act of 1933, as amended, relating to sales not involving
any public offering. We believe that all such sales were made by our executive
officers in private, negotiated transactions without any advertising, public
announcements or general solicitation. The purchasers of the shares represented
themselves in writing to be, and we believe them to be, members of one or more
of the following classes of purchaser:
a. Officers, directors, promoters or control persons of the issuer;
b. Accredited investors, as defined in Rule 501 under Regulation D of the
Securities Act;
c. Purchasers in bona fide overseas transactions, as defined in Rule 902
of Regulation S under the Securities Act; and
d. Individuals who:
i. Are knowledgeable and sophisticated in investment matters;
ii. Are able to assess the risks of an investment such as in our
securities;
iii. Are financially able to bear the risk of a loss of their entire
investment; and
iv. Have access to pertinent information regarding the issuer and its
operations.
The shares are subject to the resale provisions of Rule 144 or Regulation S
under the Securities Act of 1933, as amended, and may not be sold or transferred
without registration except in accordance with the applicable rule. Certificates
representing the securities bear a legend to that effect.
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Number of
Date Issued Class Amount Price Purchasers
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Aug. 13, 2003 Common Stock 185,000 $0.10 2
Aug. 13, 2003 Common Stock 1,000,000 $0.05 1
Sept. 25, 2003 Common Stock 255,000 $0.02 2
Sept. 25, 2003 Common Stock 30,000 $0.10 1
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Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
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Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
We filed no Current Reports on Form 8-K during the period.
The following exhibits are filed herewith:
Ex. 31.1 Certification of CEO
Ex. 31.2 Certification of CFO
Ex. 32.1 Certification of CEO
Ex. 32.2 Certification of CFO
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERNATIONAL STAR INC.
July 23, 2004 /s/ Robert L. Hawkins
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Dated President, Chief
Exexutive Officer
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