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 June 30, 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)
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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 |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 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
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 197,918,543 shares of common stock outstanding at
June 30, 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 June 30, 2005 and its results of
operations and its cash flows for the six months ended June 30, 2005.
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INTERNATIONAL STAR, INC.
AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, 2005 December 31, 2004
Current Assets: ------------- -----------------
Cash $ 30,480 $ 200,266
Prepaid expenses 54,000
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Total Current Assets 30,480 254,266
Fixed Assets (Net of Depreciation) 30,350 33,578
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Total Assets $ 60,830 $ 287,844
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued interest $ 33,888 $ 1,275
------------- --------------
Total Current Liabilities $ 33,888 $ 1,275
Long-term Liabilities:
Note Payable 250,000 250,000
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 $ 199,371 $ 193,286
199,370,437 and 193,286,223 at June 30, 2005 and
December 31, 2004, respectively
Paid-In Capital 3,211,767 2,886,931
Accumulated Deficit (3,634,196) (3,043,648)
Total Stockholders' Equity (Deficit) (223,058) 36,569
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Total Liabilities and Stockholders' Equity $ 60,830 $ 287,844
============= =============
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
(Date of
inception of
Six Months Six Months Three Months Three Months exploration stage)
Ended Ended Ended Ended to June 30,
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004 2005
------------- ------------- ------------- ------------- -------------
Revenue: $ - $ - $ - $ - $ -
------------- ------------- ------------- ------------- -------------
Total Revenue
- - - - -
Gross Profit
$ - $ - $ - $ - $ -
Expenses:
Mineral exploration costs 274,712 161,600 95,035 51,230 505,857
Interest expense 7,500 8,569 3,750 4,819 36,777
Professional fees 16,073 20,942 7,226 4,099 103,886
Compensation & management fees 216,576 126,500 116,661 66,500 713,403
Depreciation & amortization 3,228 798 1,614 399 6,087
General & administrative 72,459 42,630 30,099 8,935 114,833
------------- ------------- ------------- ------------- -------------
Total Expenses 590,548 361,039 254,385 135,982 1,480,843
------------- ------------- ------------- ------------- -------------
Net (loss) from operations $ (590,548) $ (43,370) $ (254,385) $ (135,982) $ (1,480,843)
Other Income (Expense):
Loss on divestiture of subsidiary - - - - (99,472)
------------- ------------- ------------- ------------- -------------
Net (loss) (590,548) (404,409) (254,385) (135,982) (1,580,315)
============= ============= ============= ============= =============
Weighted Average Shares
Common Stock Outstanding 195,874,356 170,114,478 196,318,418 171,852,273
============= ============= ============= ============= =============
Net Loss Per Common Share
(Basic and Fully Dilutive) (0.00) (0.00) (0.00) (0.00)
============= ============= ============= ============= =============
See accompanying notes to financial statements.
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INTERNATIONAL STAR INC.
AND SUBSIDIARIES
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
From January
1, 2004
(Date of
inception of
Six Months Six Months Three Months Three Months exploration stage)
Ended Ended Ended Ended to June 30,
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004 2005
------------- ------------- ------------- ------------- -------------
Cash Flows Used in Operating Activities:
Net Loss $ (590,548) $ (404,409) $ (254,385) $ (135,982) $ (1,580,315)
Adjustments to reconcile net (loss)
to net cash provided by operating
activities:
Depreciation & Amortization 3,228 798 1,614 399 6,087
Loss on divestiture of subsidiary - 43,370 - - 99,472
Common stock issued for services - - - - 74,000
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
payable and accrued interest 32,613 (18,473) 11,773 (11,854) 1,920
(Decrease) increase in accrued
liability - 10,000 - 1,000 (44,474)
Cash Flows Used in Operating Activities (500,707) (363,264) (240,998) (146,437) (1,204,232)
Cash Flows from Investing Activities:
Purchase of fixed assets - - - - (29,355)
Cash Flows from Investing Activities
- - - - (29,355)
Cash Flows from Financing Activities:
Proceeds from sale of common stock 330,921 122,375 198,709 115,000 899,921
Cash Flows from Financing Activities 330,921 122,375 198,709 115,000 899,921
Net Increase (Decrease) in Cash (169,786) (240,809) (42,289) (31,437) (333,666)
Cash at Beginning of Period $ 200,266 $ 364,146 $ 72,769 $ 154,694 $ 364,146
============= ============= ============= ============= =============
Cash at End of Period $ 30,480 $ 123,257 $ 30,480 $ 123,257 $ 30,480
============= ============= ============= ============= =============
Supplemental non-cash financing activities:
Cancellation of 4,000,000 shares
originally issued to acquire Pita King
Bakery International (236,000) (236,000)
See accompanying notes to financial statements.
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INTERNATIONAL STAR, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
A. BASIS OF PRESENTATION
The Interim financial statements of International Star, Inc. and Subsidiaries
(the Company) for the six and three months ended June 30, 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 June 30, 2005
and the results of operations and cash flows for the six and three months ended
June 30, 2005 and 2004.
The results of operations for the six and three months ended June 30, 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 six and three months ended June 30, 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
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.
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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 are an exploration stage company with no reserves or mining operations.
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. In April of 2005, Zereko Nevada
conducted a surface drilling program yielding sixty-eight samples on the
Detrital Wash property from April 3, 2005 through April 7, 2005. Results of the
sampling drilling program were consistent with previous samplings and indicated
the need for further testing. During August, 2005, International Star will enter
into a drilling and sample testing contract with RMC, Ltd, for six holes to be
drilled to a depth of 100 feet, and samples taken every 10 foot. Permits for the
drilling program have been issued, and the Surety Bond has been paid to the BLM.
Results of this testing will determine whether more testing is required (i.e.,
developing a Proven Reserve), or if the property is viable for going directly
into production.
During 2005 we have secured additional funding through private placements
of our common stock. Kilpatrick Life Insurance Co. and associated individuals
from Shreveport, Louisiana purchased an additional 6,466,667 shares of our
common stock for $146,000. Additionally, we secured funding through private
placements in the amount of $360,922 for 5,084,478 shares of our common stock,
for a total of $506,922 secured for 11,551,145 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 several
months, and to commence some exploration operations on our Detrital Wash and
Wikieup properties. 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 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
Evaluation of Disclosure 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
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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.
Item 2 - Changes in Securities
During the three months ending on June 30, 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;
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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
==================== ===================== ========== ============ ============
April 5, 2005 Common Stock 833,334 $0.12(1) 3
April 12, 2005 Common Stock 166,667 $0.12(1) 1
May 24, 2005 Common Stock 975,000 $0.06(1) 6
June 1, 2005 Common Stock 150,000 $0.066(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 May 13, 2005, at a called Board of Directors meeting of International
Star, Inc., President and CEO, Robert L. Hawkins asked the be relieved of his
duties as President and CEO of International Star for personal reasons. The
Board complied with the request and Denny Cashatt was elected as President and
CEO, with Robert L. Hawkins accepting the position of Vice-President.
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On August 5, 2005, at a called Board of Directors meeting, Robert L.
Hawkins announced that he had requested and received a 45 day medical leave of
absence effective immediately. Sighting personal issues, Robert L. Hawkins
offered his resignation as an Office and Director of International Star until he
could effectively return to an active position with the Company. The Board
accepted Hawkins resignation and elected to fill the vacant seat on the Board
with Mr. Joe Therrell, Jr., of Shreveport, Louisiana, for the remainder of the
term.
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)
05-16-05 Item 7
05-31-05 Item 8
07-21-05 Item 9
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.
August 15, 2005 /s/ Denny Cashatt
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Dated President
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