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, 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.
--------------------------------------------------------------
(Exact name of small business as specified in its charter)
NEVADA 86-0876846
----------------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2266 Chestnut Bluffs, Henderson, NV, Henderson, NV 89052
--------------------------------------------------------------------
(Address of principal executive offices)
(702) 897-5338
--------------------------------------------------------------------
(Issuer's telephone number)
--------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
-i-
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]
-ii-
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 March 31, 2003 and its results of operations
and its cash flows for the three months ended March 31, 2003.
-1-
INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2003 2002
ASSETS -------------- --------------
Current Assets:
Cash $ 54 $ 39,684
Accounts Receivable 12,659 27,423
Inventories 57,408 48,250
Prepaid Legal Fees 1,990 1,990
-------------- --------------
Total Current Assets 72,111 117,347
Mineral Assets:
Screened Ore 2,600 2,600
-------------- --------------
Total Mineral Assets 2,600 2,600
Fixed Assets (Net of Depreciation) 292,989 297,837
Other Assets & Prepaid Rent 29,236 29,514
Goodwill 64,472 64,472
-------------- --------------
Total Assets $ 461,408 $ 511,770
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued interest $ 59,831 $ 83,009
Advances and Loans from officers
with accrued interest 163,637 148,637
Accrued Compensation and Management Fees 294,031 242,431
-------------- --------------
Total Current Liabilities 517,499 474,077
Long-term Liabilities:
Line of Credit and Accrued Interest $ 94,266 $ 101,487
-------------- --------------
Total Long-term Liabilities 94,266 101,487
Stockholders' Equity:
Common Stock, $.001 par value;
authorized 100,000,000 shares;
issued and outstanding 36,050,737
at March 31, 2003 and December 31, 2002 $ 36,051 $ 36,051
Paid-In Capital 1,494,501 1,494,501
Accumulated Deficit (1,680,909) (1,594,346)
-------------- --------------
Total Stockholders' Equity (150,357) (63,794)
-------------- --------------
Total Liabilities and Stockholders' Equity $ 461,408 $ 511,770
============== ==============
See accompanying notes to the financial statements.
-2-
INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
---------------- ----------------
Revenue: $ 69,273 $ -
---------------- ----------------
Total Revenue 69,273 -
Cost of Goods Sold:
Materials & packaging 26,906 -
---------------- ----------------
Total Cost of Goods Sold $ 26,906 $ -
Gross Profit $ 42,367 $ -
Expenses:
Mineral exploration & development costs - 500
Interest expense 3,247 193
Professional fees - 5,770
Management fees 30,000 30,000
Compensation 35,356 -
Depreciation & amortization 5,126 -
General & administrative 55,201 21,681
---------------- ----------------
Total Expenses 128,930 58,144
---------------- ----------------
Net Loss $ (86,563) $ (58,144)
================ ================
Weighted Average Shares
Common Stock Outstanding 36,050,737 31,836,237
================ ================
Net Loss Per Common Share
(Basic and Fully Dilutive) $ (0.00) $ (0.00)
================ ================
See accompanying notes to the financial statements.
-3-
INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
--------------- ---------------
Cash Flows Used in Operating Activities:
Net Loss $ (86,563) $ (58,144)
Expenses Not Requiring an Outlay of Cash
Depreciation & Amortization 5,126 -
--------------- ---------------
Net Cash used in Operations $ (81,437) $ (58,144)
Changes to Operating Assets and Liabilities:
(Increase) decrease in Accounts Receivable
and Prepaids 14,765 (20)
(Increase) decrease in Inventories (9,158) -
Increase (decrease) in accounts
payables and accrued interest (23,179) (2,230)
Increase in accrued management
fees / compensation 51,600 30,000
--------------- ---------------
Cash Flows Used in Operating Activities (47,409) (30,394)
Cash Flows from Financing Activities:
Repayment of line of credit (7,221) -
Increase in advances and loans from
officers/affiliates 15,000 31,246
--------------- ---------------
Cash Flows from Financing Activities 7,779 31,246
Net Increase (Decrease) in Cash (39,630) 852
Cash at Beginning of Period 39,684 (837)
Cash at End of Period 54 15
=============== ===============
Interest Paid $ 4,114 $ -
=============== ===============
Income Taxes Paid $ - $ -
=============== ===============
See accompanying notes to the financial statements.
-4-
INTERNATIONAL STAR, INC.
(an Exploration Stage Company)
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
A. BASIS OF PRESENTATION
The Interim financial statements of International Star, Inc. and Subsidiaries
(the Company) for the three months ended March 31, 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 three months ended March
31, 2003 and 2002.
The results of operations for the three months ended March 31, 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
three months ended March 31, 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.
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
-5-
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.
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.
-6-
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.
If we raise capital by selling our equity stock, the proportionate
ownership of existing shareholders will be diminished (i.e., "diluted").
-7-
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
None.
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 no Current Reports on Form 8-K during the period:
-8-
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 21, 2004 /s/ Robert L. Hawkins
------------------ ----------------------------
Dated President, Chief Executive
Officer
-9-