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, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE EXCHANGE ACT
For the transition period from _____ to _____
Commission file number: 000-28861
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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)
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 |X| No |_|
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
filed 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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
The Company had 196,696,043 shares of common stock outstanding at May
5, 2005.
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, 2004. 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, 2005 and its results of
operations and its cash flows for the three months ended March 31, 2005.
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INTERNATIONAL STAR, INC.
AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
2005 2004
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Current Assets:
Cash $ 72,769 $ 200,266
Prepaid expenses - 54,000
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Total Current Assets 72,769 254,266
Mineral Assets:
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Total Mineral Assets - -
Fixed Assets (Net of Depreciation) 31,964 33,578
Total Assets $ 104,733 $ 287,844
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued interest $ 22,115 $ 1,275
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Total Current Liabilities 22,115 1,275
Long-term Liabilities:
Note Payable 250,000 250,000
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Total Long-term Liabilities 250,000 250,000
Stockholders' Equity (Deficit):
Preferred stock, undesignated par value; authorized
20,000,000 shares, no shares issued and outstanding
Common Stock, $.001 par value; authorized
780,000,000 shares; issued and outstanding
197,035,857 and 193,286,223 at March 31, 2005
and December 31, 2004, respectively. $ 197,036 $ 64,430
Paid-In Capital 3,015,393 3,015,787
Accumulated Deficit (3,379,811) (3,043,648)
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Total Stockholders' Equity (Deficit) (167,382) 36,569
Total Liabilities and Stockholders' Equity $ 104,733 $ (287,844)
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See accompanying notes to the financial statements.
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INTERNATIONAL STAR INC.
AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
From January 1, 2004
Three Months Three Months (Date of inception
Ended Ended of exploration stage)
March 31, 2005 March 31, 2004 to March 31, 2005
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Revenue: $ $ $
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Total Revenue - - -
Gross Profit $ - $ - $ -
Expenses:
Mineral exploration costs 179,677 110,370 410,822
Interest expense 3,750 3,750 33,027
Professional fees 8,847 16,843 96,660
Compensation & management fees 99,915 60,000 596,742
Depreciation & amortization 1,614 399 4,473
General & administrative 42,360 33,695 84,734
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Total Expenses (336,163) 225,057 1,226,458
Net (loss) from operations $ (336,163) (225,057) (1,226,458)
Other Income (Expense):
Loss on divestiture of subsidiary
- (43,370) (99,472)
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Net (loss) (336,163) (268,427) (1,325,930)
Weighted Average Shares
Common Stock Outstanding 194,986,233 180,400,545
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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.
AND SUBSIDIARIES
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
From January 1, 2004
Three Months Three Months (date of inception of
Ended Ended exploration stage) to
March 31, 2005 March 31, 2004 March 31, 2005
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Cash Flows Used in Operating Activities:
Net Loss $ (336,163) $ (268,427) $ (1,325,930)
Adjustments to reconcile net (loss) to net
cash provided
by operating activites:
Depreciation & Amortization
1,614 399 4,473
Loss in divestiture of subsidiary
- 43,370 99,472
Common stock issued for services
- - 74,000
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Net Cash used in Operations (334,549) (224,658) (1,147,985)
Changes to Operating Assets and Liabilities:
(Increase) decrease in Accounts Receivable
and Prepaids 54,000 5,450 79,792
(Increase) decrease in inventories - - 63,812
(Increase) decrease in other assets - - 95,474
(Decrease) increase in accounts payables
and accrued interest 20,840 (6,619) (9,853)
(Decrease) increase in accrued liability - 9,000 (44,474)
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Cash Flows Used in Operating Activities (259,709) (216,827) (963,234)
Cash Flows from Investing Activities:
Purchase of fixed assets - - (29,355)
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Cash Flows from Investing Activities - - (29,355)
Cash Flows from Financing Activities:
Proceeds from sale of common stock 132,212 7,375 701,212
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Cash Flows from Financing Activities 132,212 7,375 701,212
Net Increase (Decrease) in Cash (127,497) (209,452) (291,377)
Cash at Beginning of Period 200,266 364,146 364,146
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Cash at End of Period $ 72,769 $ 154,694 $ 72,769
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See accompanying notes to the financial statements.
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INTERNATIONAL STAR, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
A. BASIS OF PRESENTATION
The Interim financial statements of International Star, Inc. and Subsidiaries
(the Company) for the three months ended March 31, 2005 and 2004 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, 2005
and the results of operations and cash flows for the three months ended March
31, 2005 and 2004.
The results of operations for the three months ended March 31, 2005 and 2004 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, 2005 and 2004.
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
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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.
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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 nine 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 $99,472 on the divestiture of Pita
King Bakeries International, Inc.
D. Common Stock
On February 18, 2005, the Company adopted a plan for a 3:1 forward split of its
common stock. As a result of this plan, the shareholders of record of the
Company as of February 22, 2005 received three shares of the Company's common
stock in exchange for one share. The Company increased its authorized common
shares to 780,000,000 at $0.001 par value. The Company also authorized
20,000,000 shares of undesignated preferred stock. The weighted average shares
outstanding and net loss per common share have been compiled as if the forward
split had occurred at inception of the Company. The total outstanding shares of
common stock prior to the forward split were 64,428,741 and after the 3:1
forward split the total number of shares outstanding were 193,286,223.
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Item 2 - Management's Discussion and Analysis or Plan of Operation
We intend to focus on rising 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 and completion of surface
sampling program conducted by Kokanee Placer Ltd. warrant further investigation
of the mineral potential of that property. During the year we secured additional
funding through private placements of our common stock. Kilpatrick Life
Insurance Co. and associated individuals of Shreveport, Louisiana purchased
4,765,152 shares of our common stock for $425,000. Additionally, we secured
funding through private placements in the amount of $147,473 for 1,516,364
shares of our common stock, for a total of $572,473 secured for 6,281,516 shares
of common stock for the year.
We have no credit lines or other sources of cash. We believe our current cash is
sufficient to sustain our administrative overhead over the next twelve months,
and to commence some exploration operations on our Detrital Wash property. We
will continue to pursue means to expand our exploration activities, either by
seeking additional capital through loans or private placements of our
securities, or possibly entering joint venture arrangements with one or more
other, more substantial companies. However, there are no arrangements now in
place to further fund the company by any of these means, and the outcome of the
discussions with other entities cannot be predicted. If we raise capital by
selling our equity stock, the proportionate ownership of existing shareholders
will be diminished (i.e., "diluted").
Item 3 - Controls And Procedures
Our Principal Executive Officer and Principal Financial Officer have reviewed
and evaluated the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by
this report. Based on that evaluation, the Principal Executive Officer and
Principal Financial Officer have concluded that the company's current disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the company in reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms. There was
no change in the company's internal controls that occurred during the fourth
quarter of the period covered by this report that has materially affected, or is
reasonably likely to affect, the company's internal controls over financial
reporting.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
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Item 2 - Changes in Securities
During the three months ending on March 31, 2005, 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, and Regulation S, relating to
securities sold in bona fide offshore transactions. 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. 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
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
----------------------- ----------------- --------- ---------- --- ------------
January 27, 2005 Common Stock 193,098 $0.15 (1) 2
February 11, 2005 Common Stock 257,073 $0.15 (1) 1
February 18, 2005 Common Stock 509,306 $0.049 (1) 1
March 23, 2005 Common Stock 500,000 $0.10 (1) 1
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(1) Issued for cash
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Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
On February 18, 2005, the Company adopted a plan for a 3:1 forward split of
its common stock. As a result of this plan, the shareholders of record of the
Company as of February 22, 2005 received three shares of the Company's common
stock in exchange for one share. The Company increased its authorized common
shares to 780,000,000 at $0.001 par value. The Company also authorized
20,000,000 shares of undesignated preferred stock. The weighted average shares
outstanding and net loss per common share have been compiled as if the forward
split had occurred at inception of the Company. The total outstanding shares of
common stock prior to the forward split were 64,428,741 and after the 3:1
forward split the total number of shares outstanding were 193,286,223.
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)
01-05-05 Item 7
02-10-05 Item 8
02-16-05 Item 9, Item 10
02-18-05 Item 11
03-25-05 Item 12
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The following exhibits are filed with this quarterly report:
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.
May 16, 2005 /s/ Robert L. Hawkins
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Dated President
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