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 March 31, 2004
[ ] 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 31, 2003. In the opinion of management, these
unaudited financial statements contain all adjustments necessary to fairly
present the Company's financial position as of March 31, 2004 and its results of
operations and its cash flows for the three months ended March 31, 2004.
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INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2004 2003
ASSETS --------------- ---------------
Current Assets:
Cash $ 154,694 $ 364,146
Accounts Receivable - 23,805
Inventories - 63,812
Prepaid Legal Fees 1,990 1,990
--------------- ---------------
Total Current Assets 156,684 453,753
Mineral Assets:
Screened Ore 2,600 2,600
--------------- ---------------
Total Mineral Assets 2,600 2,600
Fixed Assets (Net of Depreciation) 10,773 284,888
Other Assets & Prepaid Rent - 28,402
Goodwill - 64,472
--------------- ---------------
Total Assets $ 170,057 $ 834,115
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued interest $ 1,690 $ 31,968
Advances and Loans from officers with accrued interest 49,392 49,392
Accrued Compensation and Management Fees 40,000 117,105
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Total Current Liabilities 91,082 198,465
Long-term Liabilities:
Line of Credit and Accrued Interest $ - $ 84,206
Note Payable 250,000 250,000
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Total Long-term Liabilities 250,000 334,206
Stockholders' Equity (Deficit):
Common Stock, $.001 par value; authorized $ 56,138 $ 60,043
100,000,000 shares; issued and outstanding 56,137,226
at March 31, 2004 and 60,042,227 at December 31, 2003
Paid-In Capital 2,063,687 2,295,282
Accumulated Deficit (2,290,850) (2,053,881)
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Total Stockholders' Equity (Deficit) (171,025) 301,444
--------------- ---------------
Total Liabilities and Stockholders' Equity (Deficit) $ 170,057 $ 834,115
=============== ===============
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)
Three Months Three Months
Ended Ended
March 31, 2004 March 31, 2003
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Revenue: $ - $ 69,273
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Total Revenue - 69,273
Cost of Goods Sold:
Materials & packaging - 26,906
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Total Cost of Goods Sold: $ - $ 26,906
Gross Profit $ - $ 42,367
Expenses:
Mineral exploration & development costs 110,370 -
Interest expense 3,750 3,247
Professional fees 16,843 -
Management fees 60,000 30,000
Compensation - 35,356
Depreciation & amortization 399 5,126
General & administrative 33,695 55,201
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Total Expenses 225,057 128,930
Other Income (Expense)
Loss on divestiture of subsidiary (43,370) -
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Net Loss $ (268,427) $ (86,563)
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Weighted Average Shares
Common Stock Outstanding 56,125,560 36,050,737
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Net Loss Per Common Share
(Basic and Fully Dilutive) $ (0.00) $ (0.00)
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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)
Three Months Three Months
Ended Ended
March 31, 2004 March 31, 2003
---------------- ----------------
Cash Flows Used in Operating Activities:
Net Loss $ (268,427) $ (86,563)
Expenses Not Requiring an Outlay of Cash
Depreciation & Amortization 399 5,125
Loss on divestiture of subsidiary 43,370 5,126
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Net Cash used in Operations (224,658) (76,312)
Changes to Operating Assets and Liabilities:
(Increase) decrease in Accounts Receivable
and Prepaids 5,450 14,765
(Increase) decrease in Inventories - (9,158)
Increase (decrease) in accounts payables and
accrued interest (6,619) (23,179)
Increase in accrued management fees / compensation 9,000 51,600
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Cash Flows Used in Operating Activities (216,827) (42,284)
Cash Flows from Financing Activities:
Proceeds from sale of common stock 7,375 -
Repayment of line of credit - (7,221)
Increase in advances and loans from
officers/affiliates - 15,000
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Cash Flows from Financing Activities 7,375 7,779
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Net Increase (Decrease) in Cash (209,452) (34,505)
Cash at Beginning of Period 364,146 39,684
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Cash at End of Period $ 154,694 $ 5,179
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Interest Paid $ - $ 4,114
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Income Taxes Paid $ - $ -
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Supplemental Non-cash Financing Activities:
Cancellation of 4,000,000 shares originally
issued to acquire Pita King Bakeries Int'l, Inc. $ (236,000) $ -
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See accompanying notes to the financial statements.
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INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004
A. BASIS OF PRESENTATION
The Interim financial statements of International Star, Inc. and Subsidiaries
(the Company) for the three months ended March 31, 2004 and 2003 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, 2004
and the results of operations and cash flows for the three months ended March
31, 2004 and 2003.
The results of operations for the three months ended March 31, 2004 and 2003 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., and Qwik Track, Inc. (a wholly owned subsidiary)
for the three months ended March 31, 2004 and includes the accounts of
International Star, Inc., Pita King, Bakeries International, Inc., and Qwik
Trak, Inc. for the three months ended March 31, 2003.
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.
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.
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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.
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.
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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
C. DIVESTITURE OF PITA KING BAKERIES INTERNATIONAL, INC.
Effective January 1, 2004, the original shareholders of Pita King Bakeries,
International Inc. and the management of International Star, Inc. (the Company)
mutually agreed to dissolve their business relationship. Under terms of this
dissolution, the original shareholders of Pita King Bakeries International, Inc.
returned 4,000,000 shares of common stock to the Company and the Company agreed
to forgive a $35,000 loan made to Pita King Bakeries International, Inc. The
original shareholders of Pita King Bakeries International, Inc. were allowed to
retain 139,500 share of the Company's common stock which they had received as
part of the original purchase of Pita King Bakeries International, Inc. by the
Company. The Company has recognized a loss of $43,370 on the divestiture of Pita
King Bakeries International, Inc.
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. The funding raised in November 2003 allowed us the opportunity to
initiate the first significant exploration efforts on our properties since the
limited sampling conducted in 1998 by AuRIC Metallurgical Laboratories which we
believe warranted further investigation of the mineral potential of that
property.
Planning was finalized January 9, 2004 and Kokanee Placer, Inc. of
White Rock, BC, a geological exploration company, began to execute the initial
phase of an exploration program on our 1,280 acre Detrital Wash property, the
results of which will dictate subsequent exploration phases, if found to be
practical.
This initial work effort called for surface sampling of the property in
a grid pattern at intervals of every 500 feet (in excess of 200 samples). We are
currently evaluating the sample analysis along with Kokanee to determine the
practicality of a second phase of exploration, what that plan would entail, if
warranted, and the associated costs. When the evaluation process is complete, we
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intend to review the findings with Kokanee's lead geologist, announce the
findings of our evaluation and either plan the second phase of exploration or
direct our efforts elsewhere.
In February of 2004 we reached an agreement in principle with the
holders of 131 placer association claims covering approximately 20,000 acres
adjacent to and surrounding our Detrital Wash property. The agreement will grant
us exclusive exploration rights on the claims, and first right of refusal for
exclusive development rights in exchange for a 0.25% net smelter return payable
to the claimholders. The agreement will require the company to expend a minimum
of $125,000 on exploration during a three-year period.
As previously announced, we have transitioned from one accounting firm
to another, suspended further development of our Qwik Track subsidiary,
dissolved our business relationship with the Pita King subsidiary and now
believe we are positioned to focus all the Company's resources on the further
development of our mineral interest in the Detrital Wash and Wikieup properties.
We have no credit lines or other sources of revenues since we divested
our Pita King subsidiary. However, current cash on hand of $154,694 should
sustain business operations through yearend. We will continue our efforts to
obtain cash from borrowing, a sale of our common stock, or other means 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.
If we raise capital by selling our equity stock, the proportionate
ownership of existing shareholders will be diminished (i.e., "diluted").
Loss On Sale of Pita King Subsidary
In June of 2004, subsequent to the period covered by this report, we
sold our Pita King Bakeries International, Inc. subsidiary back to its founding
shareholders, giving effect to the sale as of January 1, 2004. 4,000,000 shares
of our common stock were returned to us and cancelled, and we forgave $35,000 in
loans to the subsidiary. Our financial statements for the three month period
ended March 31, 2004 reflect a loss of $43,370 recognized on the sale.
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.
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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 three months ending on March 31, 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. Selling prices for
the shares may have been discounted from then prevailing market prices to
reflect the restricted status of the shares or the urgency of our need for
capital. 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.
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 under the Securities
Act of 1933, as amended, and may not be sold or transferred without registration
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except in accordance with that 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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3/29/04 Common Stock 125,000 $0.06 2
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Also during the quarter we cancelled 30,000 previously issued shares for
non-payment of the subscription amount.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
We filed the following Current Reports on Form 8-K during the period:
Date Item(s)
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02-02-04 Item 9 - Regulation FD Disclosure
The following exhibits are filed with this annual report:
Ex. 10.1 Material Contract
Ex. 31.1 Certification of CEO
Ex. 31.2 Certification of CFO
Ex. 32.1 Certification of CEO
Ex. 32.2 Certification of CFO
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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 29, 2004 /s/ Robert L. Hawkins
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Dated President, Acting Chief
Financial Officer
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