UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[Mark one]
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission File Number: 0-21071
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88-0309578
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1900 Avenue of the Stars, Suite 2410 Los Angeles CA 90067
(Address of principal executive offices) (Zip Code)
(310) 553-7176
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has 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. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of January 31, 2004.
Common Stock $.01 par value 50,715,008
(Class) (Number of shares)
2
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
CONTENTS
Page
Number
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheets at December 31, 2003 and
June 30, 2003 3
Statements of Operations for the three months and
six months ended December 31, 2003 and for the
period from November 22, 2002 (Inception of the
Development Stage) through December 31, 2002 and
the period November 22, 2002 through December 31, 2003 4
Statements of Cash Flows for the six months
ended December 31, 2003, for the period from
November 22, 2002 (Inception of the Development
Stage) through December 31, 2002 amd for the
the period November 22, 2002 through December 31, 2003 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION 10
Item 1. Litigation 11
Item 3. Defaults on Senior Securities 11
Item 4. Exhibits and Reports on Form 8-K 11
Signature Page 11
Exhibit 31 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
3
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
BALANCE SHEETS
DECEMBER 31, JUNE 30,
2003 2003
(Unaudited) (audited)
ASSETS
Current Assets $ - $ -
------ ------
Total Assets $ - $ -
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 52,547 $ 57,996
Accrued interest 29,506 15,767
Current portion of long-term debt - Note 3 32,000 -
------ ------
Total Current Liabilities $ 114,053 $ 73,763
Long Term Liabilities
Pre-petition tax liabilities - Note 3 $162,858 $194,858
Long-term credit facility, related
party - Note 4 299,145 261,915
------- -------
Total Liabilities $576,056 $530,536
Shareholders' Equity (Deficit)
Common Stock $.01 par value,
126,396,450 shares authorized,
50,715,008 issued and outstanding $507,150 $507,150
Accumulated deficit, prior to development
state - Note 6 (1,001,679) (1,001,679)
Accumulated deficit-development stage (81,527) (36,007)
---------- ----------
Total Shareholders' Deficit $(576,056) $(530,536)
Total Liabilities and
Shareholders' Deficit $ - $ -
======== ========
See notes to financial statments.
4
NEVSTAR GAMING AND ENTERTAINMENT CORP
STATEMENTS OF OPERATIONS
(Unaudited)
For the three For the period from For the six For the period from
months ended November 22, 2002 months ended November 22, 2002
December 31, 2003 (Inception of the December 31, 2003 to December 31, 2003
development stage)
to December 31, 2002
Revenue $ - $ - $ - $ -
-------- -------- -------- --------
Expenses
General and
administrative $ 20,389 $ 13,814 $ 31,781 $ 72,021
-------- --------- --------- ---------
Operating loss $(20,389) $ (13,814) $ (31,781) $ (72,021)
Other income -- -- -- 20,000
Interest expense 7,053 -- 13,739 29,506
-------- -------- --------- ---------
Net Loss $(27,442) $(13,814) $ (45,520) $ (81,527)
========= ========= ========== ==========
Basic and diluted
loss per share $0.00 $0.00 $0.00 $0.00
Weighted average
shares outstanding 50,715,008 50,715,008 50,715,008 50,715,008
See notes to financial statements
5
NEVSTAR GAMING AND ENTERTAINMENT CORP
STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended For the Period from For the period from
December 31, 2003 November 22, 2002 to November 22, 2002 (Inception
December 31, 2002 of the development stage) to
December 31, 2003
OPERATING ACTIVITIES
Net Loss $ (45,520) $ (13,814) $ (81,527)
Adjustments to reconcile net loss
to net cash used in operating activities:
Changes in assets and liabilities:
Accounts payable (5,449) 13,041 (25,499)
Accrued interest 13,739 -- 29,506
-------- ------- ---------
Net cash used by by operating activities (37,230) (773) (77,520)
FINANCING ACTIVITIES
Cash provided by long-term debt 37,230 773 77,520
------- ------- --------
Net cash for the period 0 0 0
Net cash a beginning of period 0 0 0
--------- -------- --------
Net cash at end of period $ 0 $ 0 $ 0
========= ======== ========
See notes to financial statements
6
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2003
Note 1 - Bankruptcy Proceedings
On July 10, 2000, the Company, a Nevada Corporation
filed a voluntary petition for relief under Chapter 11 (the "Chapter 11
Proceeding")in the Bankruptcy Court, Case No. BK-S-00-15075-LBR. During
the Chapter 11 Proceeding, the Company acted as debtor in possession.
In April, 2001, the Company and W/F Investment Corp. ("W/F") submitted
to the Bankruptcy Court a plan of reorganization, which was amended from time
to time (the "Plan of Reorganization").
On February 20, 2002, the Bankruptcy Court issued an order confirming the
Plan of Reorganization.
On November 22, 2002 the plan of reorganization became effective. The
Company issued 15,141,674 shares of common stock to holders of unsecured claims;
156,428 shares of common stock to certain administrative claimants and to a
previously secured claim, and 27,807,219 shares of common stock to the Plan
Proponents. The 7,583,687 shares of Common Stock that were previously
outstanding were retained by the holders of those shares. There are a total
of 50,715,008 shares of common Stock outstanding after the issuance of shares
under the Plan of Reorganization.
The Company is in the process of completing the administrative procedures,
which include the acquisition of an operating entity, to allow it to formally
emerge from the oversight of the Bankruptcy Court.
The Company does not currently have any operations.
Note 2 - Going Concern and Summary of Significant Accounting Policies
Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
does not generate any revenue, and has a net capital deficiency. These
factors among others may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time. The Company
currently funds its disbursements by a line of credit from one of its Plan
Proponents. There are insufficient funds available under that line of
credit to meet the Company's current obligations.
These financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company is no longer operating, and will attempt to locate a new
business (operating company) and offer itself as a merger vehicle for a
company that may desire to go public through a merger rather than through
its own public stock offering.
The accompanying interim unaudited financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opionion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
and six-month period ended December 31, 2003 are not necessarily indicative of
the results that may be expected for the year ending June 30, 2004. For
further information, refer to the financial statements for the year ended
June 30, 2003 and the notes thereto included in the Company's Annual Report
on Form 10-K.
7
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
Note 2 - Going Concern and Summary of Significant Accounting Policies
(Continued)
Accounting for Reorganization
The Company applied Financial Accounting Standards No. 15 ("Accounting
for Debtors and Creditors for Troubled Debt Restructuring") for its
emergence from Bankruptcy. The Company also adopted the Fresh Start
Reporting (see Note 6).
Use of estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
reported in the accompanying financial statements. Management uses its
knowledge and expertise in making these estimates. Actual results could
differ from those estimates.
Income Taxes
The Company utilizes the liablity method to account for income taxes.
Under this method, deferred taxes and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted rates and laws expected to
apply when the differences are expected to reverse.
Note 3 - Pre-petition Tax Liabilities
Pre-petition tax liabilities consist of $194,858 payable to the Nevada
Department of Taxation and the Nevada Gaming Authority. Pursuant to the
Bankruptcy Code and stipulations entered into between the parties and the
Company, the amounts will be paid in full, plus interest at 5% in quarterly
payments commencing January, 2004 and ending September, 2009. Payments due
on these liabilities during the next five years are as follows:
Twelve months ending December 31,
---------------------------
2004 $ 32,000
2005 $ 32,000
2006 $ 32,000
2007 $ 32,000
2008 $ 32,000
Note 4 - Long Term Credit Facility, Related Party
The credit facility consists of a $250,000 revolving line of credit,
which is fully drawn, and an approved overdraft on that line of $49,145,
issued to the Company by W/F Investment Corp, a shareholder of the Company
and a proponent of the bankruptcy Plan of Reorganization. The line of
credit has been used to pay the Company's obligations through November 22, 2002,
the Effective Date of the Plan of Reorganization, including the allowed
administrative expenses, accounting, legal and related expenses. The line
of credit bears interest at prime plus 2%, payable monthly. It is due
October 31, 2007. Accrued interest on the credit facility as of
December 31, 2003 totalled $18,603.
8
Note 5 - Income Taxes
At December 31, 2003 the Company had net operating loss carryforwards
of approximately $19 million for federal tax purposes, which expire from 2012
to 2015. Because of statutory ownership changes, the amount of net operating
losses which may be utilized in future years may be subject to significant
annual limitations. At December 31, 2003, total deferred tax assets,
consisting principally of net operating loss carry forwards, amounted to
approximately $6.5 million. For financial reporting purposes, a valuation
allowance has been recognized in an amount equal to such deferred tax assets
due to the uncertainty surrounding their ultimate realization.
Note 6 - Fresh Start Reporting
In accordance with its Plan of Reorganization, the Company converted
unsecured liabilities amounting to approximately $18,300,000 to 15,167,674
shares of its common stock. The Company also issued 156,428 shares of its
common stock in payment of administrative claims totaling approximately
$20,000, and 27,807,219 shares of its common stock to its Plan Proponents.
The shares issued were valued at $0.01 per share, generating a gain on debt
forgiveness of approximately $18,000,000. The amount of accumulated deficit
prior to the reclassification in accordance with Fresh Start Reporting
amounted to approximately $19,000,000. Management estimated the fair value
of the shares issued at par value, based on the fact that no cash flows are
expected in the foreseeable future. The balance of accumulated deficit after
the adjustment required by the Fresh Start Reporting represents the
"Excess Reorganization Value", which was impaired due to the fact that no
cash flows are expected in the foreseeable future.
Note 7 - Legal Proceedings
The Company has an unliquidated claim against Randy Black Sr. ("Black"),
the former receiver of the Company appointed by the Bankruptcy Court during
the Chapter 11 Proceeding, and related entities. The Company alleges, inter
alia, that Black violated antitrust laws and his fiduciary responsibility to
the Company by using confidential information obtained in connection with
his duties as receiver to evaluate and consummate a transaction which lead
to the foreclosure by Black on the Company's former gaming property located
in Mesquite, Nevada.
9
NEVSTAR GAMING AND ENTERTAINMENT CORP
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Unaudited)
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
This Quarterly Report on Form 10-Q includes certain forward-looking statements
based upon management's beliefs, as well as assumptions made by and data
currently available to management. This information has been, or in the
future, may be included in reliance on the "safe harbor" provision of the
Private Securities Litigation Reform Act of 1995. These statements are subject
to a number of risks and uncertainties including, but not limited to, the
following: (a) the Company does not generate any revenue, and has a net capital
deficiency which may impair its ability to continue as a going concern; (b)
the ability of the Company to find a merger candidate or other business
opportunity to bring profitable business operations into the Company;
(c) the absence of an active public trading market for the Company's common
stock; and (d) the Company does not have sufficient funds available on its
line of credit to meet its current obligations.
Actual results may differ materially from those anticipated in any such
forward-looking statements. The Company undertakes no obligation to update or
revise any forward-looking statements to reflect subsequent events or
circumstances.
The Company's Bankruptcy Plan of Reorganization became effective November 22,
2002. The Company is in the process of completing the steps outlined in the
Plan to obtain a final decree and formally emerge from the oversight of the
Bankruptcy Court.
The Company has no current operations, and is seeking to acquire a new business
(operating company), or offer iself as a merger vehicle for a company that may
desire to go public through merger rather than through its own public stock
offering.
10
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
The Company owns no financial instruments or other assets, nor has it entered
into any contracts or commitments, which would expose it to market risks such
as interest rate risk, foreign currency exchange rate risk or commodity
price risk as required to be disclosed pursuant to Regulation S-K, Item 305,
of the 1934 Securities Exchange Act, as amended.
Item 4.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that
information required to be disclosed in the reports filed or
submitted under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information
required to be disclosed in the reports filed under the Exchange Act is
accumulated and communicated to management, to allow timely decisions
regarding required disclosures.
The Company carried out an evaluation under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures.
Based upon and as of the end of the period covered by this report, the
Company's Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective to
ensure that the information required to be disclosed in the reports the
Company files and submits under the Exchange Act is recorded, processed,
summarized, and reported as and when required.
11
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
(b) Changes in Internal Controls
There were no changes in the Company's internal controls or in other
factors that could have significantly affected those controls subsequent
to the date of the Company's most recent evaluation.
PART II - OTHER INFORMATION
Item 1. Litigation.
The Company has an unliquidated claim against Randy Black Sr. ("Black"),
the former receiver of the Company appointed by the Bankruptcy Court
during the Chapter 11 Proceeding, and Virgin River Casino Corporation
(see Note 7 to Financial Statements).
Item 3. Defaults on Senior Securities
As of December 31, 2003, the Company was $18,603 in arrears in its
interest payments to W/F Investment Corp under the terms of the loans from
W/F Investment Corp (see Note 4 to Financial Statements).
Item 6.(b) Exhibits and Reports on Form 8-K.
The Company filed no reports on Form 8-K during the quarter ended
December 31, 2003.
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.
NEVSTAR GAMING AND ENTERTAINMENT CORP
/s/ William O. Fleischman
Date: January 31, 2004 William O. Fleischman
Chief Executive Officer and
Chief Financial Officer
Exhibit 31
Exhibit 32