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, 2004
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 February 5, 2005.
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, 2004 and
June 30, 2004 3
Statements of Operations for the three months and
six months ended December 31, 2004 and 2003, and
for the period from November 22, 2002 (Inception of the
Development Stage) through December 31, 2004 4
Statements of Cash Flows for the six months
ended December 31, 2004 and 2003, for the period from
November 22, 2002 (Inception of the Development
Stage) through December 31, 2004 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,
2004 2004
(Unaudited) (audited)
ASSETS
Current Assets $ - $ -
-------- --------
Total Assets $ - $ -
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 52,547 $ 57,086
Accrued interest 44,629 28,184
Current portion of long-term debt - Note 3 35,000 32,000
-------- --------
Total Current Liabilities $132,176 $117,270
Long Term Liabilities
Pre-petition tax liabilities - Note 3 $144,858 $161,858
Long-term credit facility, related
party - Note 4 362,161 330,020
-------- --------
Total Liabilities $639,195 $609,148
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 (144,666) (114,619)
---------- ----------
Total Shareholders' Deficit $(639,195) $(609,148)
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 six For the three For the six For the period
months ended months ended months ended months ended from November 22,
December 31, December 31, December 31, December 31, 2002
2004 2004 2003 2003 (inception of the
development stage)
to December 31,
2004
Revenue $ - $ - $ - $ - $ -
--------- -------- --------- --------- ---------
Expenses
General and
administrative $ 3,250 $ 13,603 $ 20,389 $ 31,781 $104,077
-------- --------- --------- --------- ---------
Operating loss $(3,250) $(13,603) $(20,389) $(31,781) $(104,077)
Other income - - - - 20,000
Interest expense (8,440) (16,444) (7,053) (13,739) (60,589)
--------- --------- --------- --------- ----------
Net Loss $(11,694) $(30,047) $(27,442) $(45,520) $(144,666)
========= ========= ========= ========= ==========
Basic and diluted
loss per share $0.00 $0.00 $0.00 $0.00 $0.00
Weighted average
shares
outstanding 50,715,008 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 For the six For the period
months ended months ended from November 22,
December 31, December 31, 2002
2004 2003 (inception of the
development stage)
to December 31,
2004
OPERATING ACTIVITIES
Net Loss $(30,047) $(45,520) $(144,666)
Adjustments to
reconcile net loss
to net cash used
in operating
activities:
Changes in assets
and liabilities:
Accounts payable (4,539) (5,449) (25,499)
Accrued interest 16,445 13,739 44,629
-------- --------- ---------
Net cash used by
operating activities $(18,141) $(37,230) $(125,536)
FINANCING ACTIVITIES
Cash provided by
long-term debt $ 32,141 $37,230 $139,536
Repayment of
long-term debt (14,000) - (14,000)
-------- --------- ---------
Net cash provided by
financing activities $ 18,141 $37,230 $125,536
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 C ORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2004
Note 1 - General and Bankruptcy Proceedings
As contemplated by the Securities and Exchange Commission under
Item 310(b) of Regulations S-B, the accompanying financial statements
and footnotes have been condensed and therefore do not contain all disclosures
required by generally accepted accounting principles. The interim financial
data are unaudited; however, in the opinion of management, the interim
data include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the
interim periods. Results for the interim periods are not necessarily
indicative of those to be expected for the full year.
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
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 endeavoring to complete 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.
7
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
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. Significant estimates made
in preparing these financial statements include the value of shares of common
stock issued to the unsecured creditors in accordance with the Plan of
Reorganization. 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 $179,858 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 ending September, 2009. Accrued and unpaid interest was $4,512 at
December 31, 2004. Payments due on these liabilities during the next five
years are as follows:
For the 12 months ending December 31,
-------------------------------------
2005 $35,000
2006 $32,000
2007 $32,000
2008 $32,000
2009 $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 $112,161 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. The line of credit bears interest at prime plus 2%,
payable monthly. It is due October 31, 2007. Accrued interest on the
credit facility totalled $40,116 as of December 31, 2004.
8
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
Note 5 - Income Taxes
At December 31, 2004 the Company had net operating loss carryforwards
of approximately $1.1 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 June 30, 2004, total deferred tax assets,
consisting principally of net operating loss carry forwards, amounted to
approximately $375,000. 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 adjustement requred 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.
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 endeavoring to complete the administrative procedures
to allow it to formally emerge from the oversight of the Bankruptcy Court.
The Company is no longer operating, and will attempt to locate a new business
(operating company), and offer iself as a merger vehicle for a company that may
desire to go public through a 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.
Within the 90 days prior to this report, 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 date of that evaluation, 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 is not party to any litigation.
Item 3. Defaults on Senior Securities
As of December 31, 2004, the Company was $40,116 in arrears in its
interest payments to W/F Investment Corp and had overdrawn its line
of credit by $112,161 under the terms of the loan 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, 2004.
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, 2005 William O. Fleischman
Chief Executive Officer and
Chief Financial Officer
Exhibit 31 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32 Certifications Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002