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 September 30, 2005
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)
12890 Hilltop Road, Argyle, Texas, 76226
(Address of principal executive offices) (Zip Code)
(972) 233-0300
(Registrant's telephone number, including area code)
1900 Avenue of the Stars, Suite 2410, Los Angeles, CA 90067
(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. |X| Yes |_| No
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). |X| Yes |_| No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of October 31, 2005:
Common Stock $.01 par value 125,715,008
(Class) (Number of shares)
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
CONTENTS
Page
Number
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements.
Balance Sheets at September 30, 2005 and June 30, 2005 1
Statements of Operations for the Three Months ended
September 30, 2005 and 2004 and for the period
from November 22, 2002 (Inception of the
Development Stage) through September 30, 2005 2
Statements of Cash Flows for the Three Months ended
September 30, 2005 and 2004 and for the period
from November 22, 2002 (Inception of the
Development Stage) through September 30, 2005 3
Notes to Unaudited Financial Statements 4
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
Item 3. Controls and Procedures. 10
PART II. OTHER INFORMATION 11
Item 1. Legal Proceedings. 11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 11
Item 3. Defaults Upon Senior Securities. 11
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 5. Other Information. 11
Item 6. Exhibits. 11
Signature Page 12
Exhibit 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 - Chief Executive Officer and Chief Accounting Officer.
Exhibit 32.1 Certification pursuant to 18 U.S.C. ss. 1350, as Adopted Pursuant
to ss. 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive
Officer and Chief Accounting Officer.
i
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
2005 2005
(Unaudited) (Audited)
ASSETS
Current Assets $ -- $ --
------------- -------------
Total Assets $ -- $ --
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 56,047 $ 52,547
Accrued interest 73,258 63,058
Current portion of long-term debt - Note 3 170,857 42,000
Credit Facility - Related party - Note 4 390,625 380,304
------------- -------------
Total Current Liabilities $ 690,787 $ 537,909
Long Term Liabilities
Pre-petition tax liabilities - Note 3 $ -- $ 128,857
============= =============
Total Liabilities $ 690,787 $ 666,766
Shareholders' Equity (Deficit)
Common Stock $.01 par value, 126,396,450 shares $ 507,150 $ 507,150
shares authorized, 50,715,008 issued and
outstanding
Accumulated deficit, prior to development (1,001,679) (1,001,679)
state - Note 6
Accumulated deficit-development stage (196,258) (172,237)
------------- -------------
Total Shareholders' Deficit $ (690,787) $ (666,766)
Total Liabilities and Shareholders' Deficit $ -- $ --
============= =============
See notes to financial statements.
1
NEVSTAR GAMING AND ENTERTAINMENT CORP
STATEMENTS OF OPERATIONS
(Unaudited)
For the period
from
November 22,
2002 (inception
of the
For the three For the three development
months ended months ended stage) to
September 30, September 30, September 30,
2005 2004 2005
Revenue $ -- $ -- $ --
--------------- --------------- ---------------
Expenses
General and administrative $ 13,821 $ 10,353 $ 127,039
--------------- --------------- ---------------
Operating loss $ (13,821) $ (10,353) $ (127,039)
Other income -- -- 20,000
Interest expense (10,200) (8,004) (89,219)
--------------- --------------- ---------------
Net Loss $ (24,021) $ (18,357) $ (196,258)
=============== =============== ===============
Basic and diluted loss per share $ 0.00 $ 0.00
Weighted average shares outstanding 50,715,008 50,715,008
See notes to financial statements
2
NEVSTAR GAMING AND ENTERTAINMENT CORP
STATEMENTS OF CASH FLOWS
(Unaudited)
For the period
from November
22, 2002
(inception of the
For the three For the three development
months ended months ended stage) to
September 30, September 30, September 30,
2005 2004 2005
OPERATING ACTIVITIES
Net Loss $ (24,021) $ (18,357) $ (196,258)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Changes in assets and liabilities:
Accounts payable 3,500 5,225 (21,999)
Accrued interest 10,200 5,740 71,837
---------------- ---------------- ----------------
Net cash used by operating activities $ (10,321) $ (7,392) $ (146,420)
FINANCING ACTIVITIES
Cash provided by long-term debt $ 10,321 $ 15,392 $ 168,000
Repayment of long-term debt -- (8,000) (21,580)
---------------- ---------------- ----------------
Net cash provided by financing activities $ 10,321 $ 7,392 $ 146,420
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
3
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
Note 1 - General and Organizational
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. ("WFI") 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.
On September 6, 2005, the United States Bankruptcy Court, District of
Nevada, issued a final decree in the Chapter 11 proceeding, formally removing
the Company from the oversight of the Bankruptcy Court and ending all bankruptcy
proceedings.
On October 11 2005, the Company entered into a Stock Purchase Agreement
with Halter Financial Investments, L.P., a Texas limited partnership ("HFI")
pursuant to which the Company sold 75,000,000 newly issued, restricted shares of
its common stock to HFI, constituting a change of control of the Company. See
Note 7.
The Company does not currently have any operations.
4
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
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 has funded 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.
At the present time, the Company has not reached any agreement or
definitive understanding with any third party concerning a combination
transaction.
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.
5
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
Note 2 - Going Concern and Summary of Significant Accounting Policies
(Continued)
Management uses its knowledge and expertise in making these estimates. Actual
results could differ from those estimates.
Income Taxes
The Company utilizes the liability 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 $170,857 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. Since the Company is in default with regard to
its payments, the total pre-petition tax liabilities is presented as current.
Principal payments due on these liabilities under the original terms of the
stipulations during the next five years would be as follows:
Fiscal Year Ending June 30,
---------------------------
2006 $42,000
2007 $32,000
2008 $32,000
2009 $64,857
Note 4 - Credit Facility, Related Party
The credit facility consists of $390,625 outstanding on a $250,000
revolving line of credit 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, including the bankruptcy related 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 totaled $62,251 as of September 30, 2005.
The Company exceeded it credit limit and is in default in the interest
payments due under the agreement. Because the lender has the right, due to the
existence of these defaults, to call its loan, the balance outstanding is
presented as current.
6
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
Note 5 - Income Taxes
The Company's net operating loss carryforwards have not been determined,
and 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. For financial reporting purposes, a valuation allowance has been
recognized in an amount equal to estimate of deferred tax assets due to the
uncertainty surrounding their ultimate realization. The Company has not filed
federal income tax returns since 1998.
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 - Subsequent Events - Sale of Unregistered Securities, Change of Control,
Departure of Directors and Principal Officers and Election of Officers and
Directors
On October 11, 2005, the Company entered into a Stock Purchase Agreement by
and between Halter Financial Investments, L.P., a Texas limited partnership
("HFI") and Nevstar dated October 11, 2005 (the "Stock Purchase Agreement"),
pursuant to which the Company sold 75,000,000 newly issued, restricted shares of
its common capital stock, par value $0.01 per share, to HFI. Neither the Company
nor any of its affiliates have any relationship with HFI or any of its
affiliates other than in respect of the Stock Purchase Agreement. Following its
purchase of the shares pursuant to the Stock Purchase Agreement, HFI became the
holder of approximately 59.7% of Nevstar's issued and outstanding common capital
stock.
The Stock Purchase Agreement requires the Company to effect a 300 for one
reverse split (the "reverse split") of the Company's common stock within 30 days
of the Company's execution of the Stock Purchase Agreement. Immediately
following the completion of the reverse split, the Stock Purchase Agreement
requires the Company to sell HFI an additional 723,641 newly issued, restricted
shares of the Company's common stock for a purchase price of $0.30 per share
(for an aggregate purchase price of $217,092.30).
7
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
Note 7 - Subsequent Events - Sale of Unregistered Securities, Change of Control,
Departure of Directors and Principal Officers and Election of Officers and
Directors (Continued)
Also immediately following completion of the reverse split, the Stock
Purchase Agreement requires the Company to enter into a Settlement and Stock
Issuance Agreement with W/F Investment Corp., a California corporation ("W/F
Investment"), pursuant to which (i) W/F Investment shall forgive the
approximately $452,875 that it loaned the Company for purposes of providing the
Company with working capital, and in return, the Company will pay W/F Investment
$100,000 and issue 107,000 newly issued, restricted shares of the Company's
common stock to W/F Investment. W/F Investment is a secured lender of the
Company and a member of W/F Nevstar LLC, a California corporation ("W/F
Nevstar") and a principal stockholder of the Company. William O. Fleischman, a
member and previously chairman of our board of directors, is the managing member
of W/F Nevstar.
Immediately following the execution of the Settlement and Stock Issuance
Agreement described above, the Stock Purchase Agreement calls for HFI and W/F
Investment to enter into a Put Option Agreement pursuant to which W/F Investment
may require HFI to purchase up to 199,869 shares of the common stock of the
Company held by W/F Investment at a price per share of $2.00 at any time during
the period of time (i) commencing 180 days following the execution of the Stock
Purchase Agreement and (ii) ending upon the earlier of six months following the
Company's completion of a transaction whereby the Company acquires operating
control, or substantially all of the assets, of a privately held corporation
generating revenues as reported in financial statements audited in conformity
with accounting practices generally accepted in the United States or two years
following the execution of the Stock Purchase Agreement.
Immediately subsequent to and as a result of the closing of the Stock
Purchase Agreement, HFI became Nevstar's controlling stockholder, owning
approximately 59.7% of Nevstar's issued and outstanding shares of common capital
stock. HFI used "working capital" to purchase the stock. As used herein, the
term "working capital" includes income from the business operations of HFI plus
sums borrowed from, among other sources, banks and brokerage firm margin
accounts, to operate HFI in general. Before the execution of the Stock Purchase
Agreement, Nevstar's controlling stockholder was W/F Nevstar. William O.
Fleischman, a member and previously chairman of our board of directors, is the
managing member of W/F Nevstar.
Upon the execution of the Stock Purchase Agreement, Douglas Hrdlicka
resigned as a member of the Nevstar board of directors. Following the
resignation, the sole remaining director, William O. Fleischman, adopted
resolutions electing Timothy P. Halter to the Nevstar board of directors,
filling the vacancy created by the resignation of Mr. Hrdlicka. Mr. Fleischman
then resigned as chairman of the board, retaining his position as a director,
and the newly constituted board of directors voted to elect Mr. Halter chairman
of the board.
8
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
Note 7 - Subsequent Events - Sale of Unregistered Securities, Change of Control,
Departure of Directors and Principal Officers and Election of Officers and
Directors (Continued)
Mr. Halter has been the President and sole shareholder of Halter Financial
Group, Inc., a Texas corporation ("HFG"), since 1995. HFG is a Dallas, Texas
based consulting firm specializing in the areas of mergers, acquisitions and
corporate finance. During 2001, 2002, and 2003, Mr. Halter was also a registered
representative with Founder's Equity Securities, Inc., a NASD member firm. In
2003, Mr. Halter terminated his relationship with Founder's Equity Securities,
Inc. Mr. Halter currently serves as sole officer and director of two public
companies: DXP Enterprises, Inc., a Texas corporation, and TS Electronics, Inc.,
a Delaware corporation.
Upon the execution of the Stock Purchase Agreement, William O. Fleischman
resigned as Chief Executive Officer and Chief Financial Officer, and Douglas
Hrdlicka resigned as Secretary. The newly constituted board of directors voted
to elect Mr. Halter its sole officer.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion should be read in conjunction with our
consolidated financial statements and the notes thereto and the other financial
information appearing elsewhere in this document. In addition to historical
information, the following discussion and other parts of this document contain
certain forward-looking information. Our financial statements are in accordance
with accounting principles generally accepted in the United States. When used in
this discussion, the words "may," "believes," "anticipates," "expects," and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, which could cause
actual results to differ materially from those projected due to a number of
factors beyond our control. We do not undertake to publicly update or revise any
of the forward-looking statements even if experience or future changes show that
the indicated results or events will not be realized. You are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof.
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.
At the present time, the Company has not reached any agreement or
definitive understanding with any third party concerning a combination
transaction.
9
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
Item 3. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in its Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified in the Security and Exchange Commission's rules and forms, and that
such information is accumulated and communicated to the Company's management,
including the Company's Chief Executive Officer and Chief Accounting Officer, as
appropriate, to allow timely decisions regarding required disclosure. Management
necessarily applied its judgment in assessing the costs and benefits of such
controls and procedures, which, by their nature, can provide only reasonable
assurance regarding management's control objectives.
The Company carried out an evaluation, under the supervision and with the
participation of its management, including its Chief Executive Officer and Chief
Accounting Officer, on the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and
15d-15 as of the end of the period covered by this report. Based upon that
evaluation, the Company's Chief Executive Officer and Chief Accounting Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to information relating to the Company required to be
included in the Company's Exchange Act reports.
While the Company believes that its existing disclosure controls and
procedures have been effective to accomplish their objectives, the Company
intends to continue to examine, refine and document its disclosure controls and
procedures and to monitor ongoing developments in this area.
(b) Changes in Internal Controls
During the quarter ended September 30, 2005, there were no changes
(including corrective actions with regard to significant deficiencies or
material weaknesses) in the Company's internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.
10
NEVSTAR GAMING AND ENTERTAINMENT CORP
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
As of September 30, 2005, the Company was $62,251 in arrears in its
interest payments to W/F Investment Corp and had overdrawn its line of credit by
$140,625 under the terms of the loan from W/F Investment Corp (sees Note 4 and 7
to Financial Statements).
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits.
Exhibits
--------
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
- Chief Executive Officer and Chief Accounting Officer (furnished, but
not filed, herewith).
32.1 Certification pursuant to 18 U.S.C. ss. 1350, as Adopted Pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer and
Chief Accounting Officer (furnished, but not filed, herewith).
11
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NEVSTAR GAMING AND
ENTERTAINMENT CORP
/s/ Timothy P. Halter
---------------------------
Date: November 9, 2005 Timothy P. Halter
President,
Chief Executive Officer and
Chief Accounting Officer
12