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 March 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 May 10, 2004.
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 March 31, 2004 and
June 30, 2003 3
Statements of Operations for the three months and
nine months ended March 31, 2004 and for the
three months ended March 31, 2003 and for the
period from November 22, 2002 (Inception of the
Development Stage) through March 31, 2003 and
the period November 22, 2002 through March 31, 2004 4
Statements of Cash Flows for the nine months
ended March 31, 2004, for the period from
November 22, 2002 (Inception of the Development
Stage) through March 31, 2003 and for the
the period November 22, 2002 through March 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
MARCH 31, JUNE 30,
2004 2003
(Unaudited) (audited)
ASSETS
Current Assets $ - $ -
------ ------
Total Assets $ - $ -
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 52,548 $ 57,996
Accrued interest 28,685 15,767
Current portion of long-term debt - Note 3 32,000 -
------ ------
Total Current Liabilities $ 113,233 $ 73,763
Long Term Liabilities
Pre-petition tax liabilities - Note 3 $161,858 $194,858
Long-term credit facility, related
party - Note 4 318,680 261,915
------- -------
Total Liabilities $593,771 $530,536
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 (99,242) (36,007)
---------- ----------
Total Shareholders' Deficit $(593,771) $(530,536)
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 three For the nine For the period from For the period from
months ended months ended months ended November 22, 2002 November 22, 2002
March 31, 2004 March 31, 2003 March 31, 2004 (Inception of the to March 31, 2004
development stage)
to March 31, 2003
Revenue $ - $ - $ - $ - $ -
-------- -------- -------- -------- ---------
Expenses
General and
administrative $ 10,535 $ 14,629 $ 42,316 $ 28,443 $ 82,556
-------- -------- --------- --------- ---------
Operating loss $(10,535) $ 14,629 $ (42,316) $ (28,443) $ (82,556)
Other income -- -- -- -- 20,000
Interest expense 7,180 7,000 20,919 7,000 36,686
-------- -------- -------- --------- ---------
Net Loss $(17,715) $(21,629) $(63,235) $ (35,443) $ (99,242)
========= ========= ========= ========== ==========
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 nine For the period from For the period from
months ended November 22, 2002 November 22, 2002
March 31, 2004 (Inception of the to March 31, 2004
of the development stage)
to March 31, 2003
OPERATING ACTIVITIES
Net Loss $ (63,235) $ (35,443) $ (99,242)
Adjustments to reconcile net loss
to net cash used in operating activities:
Changes in assets and liabilities:
Accounts payable (5,448) 6,396 (25,498)
Accrued interest 12,918 -- 28,685
Pre-petition tax liabilities (1,000) (1,000)
-------- ------- ---------
Net cash used by by operating activities (56,765) (29,047) (97,055)
FINANCING ACTIVITIES
Cash provided by long-term debt 56,765 29,047 97,055
------- ------- --------
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 CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2004
Note 1 - Bankruptcy Proceedings
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 Company issued 15,141,674 shares of common stock to holders of
unsecured claims; 156,428 shares of common stock to certain
administrative claimants and to a previously secured claim, and
27,807,219 shares of common stock to the Plan Proponents. 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 in the process of completing 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.
The accompanying interim unaudited financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission. In the
opionion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and nine-month periods ended
March 31, 2004 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2004. For further information, refer
to the financial statements for the year ended June 30, 2003 and the notes
thereto included in the Company's Annual Report on Form 10-K.
7
NEVSTAR GAMING AND ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 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. 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 $193,858 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 commencing January, 2004 and ending September, 2009. Payments due
on these liabilities during the next five years are as follows:
Twelve months ending March 31,
---------------------------
2005 $ 32,000
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 $68,680,
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 through November 22,
2002, the Effective Date of the Plan of Reorganization, including the
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 as of
March 31, 2004 totalled $23,329.
8
Note 5 - Income Taxes
The Company has been unable to file federal income returns for the
periods during which it operated the Mesquite Star Hotel and Casino due
to its inability to gather sufficient financial information to prepare
accurate returns. The Internal Revenue Service has communicated that it
does not have the authority to waive the filing of these returns, however,
it will not take further action against the Company. The result of this
failure to file will be that the Company will not be able to estabish
net operating loss carryforwards that could be used to offset future income
tax liabilities. The Company had previously recorded a valuation allowance
equal to the amount of the anticipated net operating loss carryforward,
therefore there is no impact on the reported financial condition of the
Company.
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 - Legal Proceedings
The Company has an unliquidated claim against Randy Black Sr. ("Black"),
the former receiver of the Company appointed by the Bankruptcy Court during
the Chapter 11 Proceeding, and related entities. The Company alleges, inter
alia, that Black violated antitrust laws and his fiduciary responsibility to
the Company by using confidential information obtained in connection with
his duties as receiver to evaluate and consummate a transaction which lead
to the foreclosure by Black on the Company's former gaming property located
in Mesquite, Nevada. Black also owns four of the five casino properties
located in Mesquite.
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 in the process of completing the steps outlined in the
Plan to obtain a final decree and formally emerge from the oversight of the
Bankruptcy Court.
The Company has no current operations, and is seeking to acquire a new
business (operating company), or offer iself as a merger vehicle for a
company that may desire to go public through 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.
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 end of the period
covered by this report, 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 has an unliquidated claim against Randy Black Sr. ("Black"),
the former receiver of the Company appointed by the Bankruptcy Court
during the Chapter 11 Proceeding, and Virgin River Casino Corporation
(see Note 7 to Financial Statements).
Item 3. Defaults on Senior Securities
As of March 31, 2004, the Company was $23,329 in arrears in its
interest payments to W/F Investment Corp under the terms of the loans
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
March 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: May 10, 2004 William O. Fleischman
Chief Executive Officer and
Chief Financial Officer
Exhibit 31
Exhibit 32