UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
(Mark one)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended June 30, 2007
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from ______________ to _____________
Commission File Number: 0-21071
Nevstar Corporation
(Exact name of small business issuer as specified in its charter)
Nevada 88-0309578
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(State of incorporation) (IRS Employer ID Number)
12890 Hilltop Road, Argyle, TX 76226
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(Address of principal executive offices) (Zip Code)
(972) 233-0300
(Registrant's telephone number, including area code)
Securities registered under Section 12 (b) of the Exchange Act - None
Securities registered under Section 12(g) of the Exchange Act: -
Common Stock - $0.01 par value
Check whether the issuer has (1) filed all reports required to be files by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act): Yes X No
The issuer's revenues for the fiscal year ended June 30, 2007 were $-0-.
The aggregate market value of voting common equity held by non-affiliates as of
September 12, 2007 was approximately $25,417, based on a quoted price of $0.15
per share and 169,449 shares held by non-affiliates.
As of September 12, 2007, there were 1,250,090 shares of Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format : Yes No X
Nevstar Corporation
Index to Contents
Page Number
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Part I
Item 1 Description of Business 3
Item 2 Description of Property 13
Item 3 Legal Proceedings 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Part II
Item 5 Market for Company's Common Stock and Related
Stockholders Matters 14
Item 6 Management's Discussion and Analysis or Plan of Operation 15
Item 7 Financial Statements F-1
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 17
Item 8A Controls and Procedures 17
Part III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 18
Item 10 Executive Compensation 22
Item 11 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 23
Item 12 Certain Relationships and Related Transactions 23
Item 13 Exhibits and Reports on 8-K 23
Item 14 Principal Accountant Fees and Services 23
Signatures 25
2
Caution Regarding Forward-Looking Information
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Certain statements contained in this annual filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-KSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
PART I
Item 1 - Description of Business
Background and Historical Operations
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Nevstar Corporation (Company) was incorporated under the laws of the State of
Nevada on December 2, 1993 as Mesquite Gaming Corp. On October 3, 1995, the
Company changed its name to NevStar Gaming Corporation and on September 18,
1997, changed its name to NevStar Gaming & Entertainment Corporation.
The Company was formed to acquire, develop, construct, own and manage
hotel/casino projects. The Company's strategy was to concentrate its efforts on
"niche" markets, such as "local" or "neighborhood" casinos. The Company obtained
its license and related approvals from the Nevada Gaming Commission to conduct
gaming at its initial hotel/casino, Mesquite Star Hotel and Casino (The Mesquite
Star) in Mesquite, Nevada, pursuant to an Order of Registration dated June 23,
1998. On July 1, 1998, the Mesquite Star, opened for business and the Company
began receiving revenues from operations. The Mesquite Star was located on an
approximately 25-acre property in Mesquite, Nevada.
The Company filed a Quarterly Report on Form 10-Q with the U. S. Securities and
Exchange Commission ("SEC") on Form 10-Q, for the quarter ended March 31, 1999.
At that time, the Company owned and operated the Mesquite Star, a hotel and
casino in Mesquite, Nevada. The Company filed no further reports with the SEC
until September 2002. The Company has insufficient financial records or
suppporting documentation to recreate these records for the interim period
because those records were lost or destroyed as a result of the foreclosure of
the principal asset of the Company, the Mesquite Star Hotel and Casino.
During 2002, the SEC was apprised of the Company's deficiencies, and a report
was filed on Form 8-K dated September 30, 2002 summarizing the events which had
occurred during the period since its last reporting. No reports on Form 10-K or
Form 10-KSB were filed by the Company for the any annual or quarterly periods
through November 22, 2002.
On December 1, 1999, the Company filed a voluntary petition for relief under
Chapter 11 (the First Chapter 11 Proceeding) in the United States Bankruptcy
Court, District of Nevada (Bankruptcy Court), Case No. 99-19566RCJ. The Company
acted as debtor in possession during the First Chapter 11 Proceeding. In part as
a result of the objections of certain of the Company's secured creditors and the
Bankruptcy Court's belief that the Company could not be successfully reorganized
in view of such objections, the Bankruptcy Court dismissed the First Chapter 11
Proceeding on or about March 2, 2000.
3
On March 3, 2000, Randy Black (Black) was appointed by the District Court of
Clark County, Nevada as receiver for the Company. On or about March 8, 2000,
Black caused the casino to cease all meaningful operations and the casino was
closed. The Company has not engaged in business operations since that date.
Subsequently, Black acquired the first trust deed on the casino from the bank
and he began foreclosure proceedings against the casino.
On July 10, 2000, the Company again filed a voluntary petition for relief under
Chapter 11 (the Second Chapter 11 Proceeding) in the Bankruptcy Court, Case No.
BK-S-00-15075-LBR. During the Second Chapter 11 Proceeding, the Company acted as
debtor in possession. During the course of the Second Chapter 11 Proceeding, the
Bankruptcy Court permitted Black to foreclose on the casino, which occurred on
November 13, 2000. 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 holder, 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 Plan of Reorganization authorized a reverse
split of the Common Stock, which occurred on January 12, 2006. The effect of the
reverse stock split is reflected in the accompanying financial statements as of
the first day of the first period presented.
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.
Current Status
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 250,000 newly issued, restricted post-reverse split
shares (75,000,000 pre-reverse split shares) of its common stock to HFI,
constituting a change of control of the Company.
The Company's emergence from Chapter 11 of Title 11 of the United States Code on
November 22, 2002 created the combination of a change in majority ownership and
voting control - that is, loss of control by the then-existing stockholders, a
court-approved reorganization, and a reliable measure of the entity's fair value
- resulting in a fresh start, creating, in substance, a new reporting entity.
Accordingly, the Company, post bankruptcy, has no significant assets,
liabilities or operating activities. Therefore, the Company, as a new reporting
entity, qualifies as a "development stage enterprise" as defined in Statement of
Financial Accounting Standard No. 7, as amended.
The Company's post-bankruptcy business plan is to locate and combine with an
existing, privately-held company which is profitable or, in management's view,
has growth potential, irrespective of the industry in which it is engaged.
However, the Company does not intend to combine with a private company which may
be deemed to be an investment company subject to the Investment Company Act of
1940. A combination may be structured as a merger, consolidation, exchange of
the Company's common stock for stock or assets or any other form which will
result in the combined enterprise's becoming a publicly-held corporation.
As of the date of the accompanying financial statements and subsequent thereto,
the Company does not have any operations. Accordingly, the Company and Halter
Financial Investments, LP (HFI), an entity controlled by the Company's President
and Chief Executive Officer, have acknowledged that outside funds are necessary
to support the corporate entity and comply with the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended. To this end,
HFI has agreed to lend the Company up to $50,000 with a maturity period not to
exceed two (2) years from the initial funding date at an interest rate of 6.0%
per annum. Through June 30, 2007, HFI has advanced approximately $45,700 under
this agreement, with an initial scheduled maturity date in May 2008.
During Fiscal 2007, the Company settled certain outstanding post-petition
liabilities with various creditors providing professional services during the
Company's bankruptcy period and prior to the October 11, 2005 change in control
transaction and certain pre-petition liabilities with the Nevada Department of
Taxation. As of the date of this report, the Company has nominal assets,
consisting only of cash in bank and periodic trade accounts payable directly
related to the maintenance of the corporate entity and compliance with the
Company's responsibilities under the Securities Exchange Act of 1934, as
amended; as well as the aforementioned loan payable to HFI.
The Company's equity securities are currently quoted on the Pink Sheets and have
irregular trading volumes and pricing.
4
Since the October 15, 2003 auction of the Company's assets, the Company may be
referred to as a reporting shell corporation. Shell corporations have zero or
nominal assets and typically no stated or contingent liabilities. Private
companies wishing to become publicly trading may wish to merge with a shell (a
reverse merger or reverse acquisition) whereby the shareholders of the private
company become the majority of the shareholders of the combined company. The
private company may purchase for cash all or a portion of the common shares of
the shell corporation from its major stockholders. Typically, the Board and
officers of the private company become the new Board and officers of the
combined Company and often the name of the private company becomes the name of
the combined entity.
The Company has very limited capital, and it is unlikely that the Company will
be able to take advantage of more than one such business opportunity. The
Company intends to seek opportunities demonstrating the potential of long-term
growth as opposed to short-term earnings. However, at the present time, the
Company has not identified any business opportunity that it plans to pursue, nor
has the Company reached any agreement or definitive understanding with any
person concerning an acquisition.
It is anticipated that the Company's officers and directors will contact
broker-dealers and other persons with whom they are acquainted who are involved
with corporate finance matters to advise them of the Company's existence and to
determine if any companies or businesses that they represent have a general
interest in considering a merger or acquisition with a blind pool or blank check
or shell entity. No direct discussions regarding the possibility of merger are
expected to occur until after the effective date of this registration statement.
No assurance can be given that the Company will be successful in finding or
acquiring a desirable business opportunity, given the limited funds that are
expected to be available for acquisitions. Furthermore, no assurance can be
given that any acquisition, which does occur, will be on terms that are
favorable to the Company or its current stockholders.
The Company's search will be directed toward small and medium-sized enterprises,
which have a desire to become public corporations. In addition these enterprises
may wish to satisfy, either currently or in the reasonably near future, the
minimum tangible asset requirement in order to qualify shares for trading on
NASDAQ or on an exchange such as the American Stock Exchange. (See Investigation
and Selection of Business Opportunities). The Company anticipates that the
business opportunities presented to it will (I) either be in the process of
formation, or be recently organized with limited operating history or a history
of losses attributable to under-capitalization or other factors; (ii)
experiencing financial or operating difficulties; (iii) be in need of funds to
develop new products or services or to expand into a new market, or have plans
for rapid expansion through acquisition of competing businesses; (iv) or other
similar characteristics. The Company intends to concentrate its acquisition
efforts on properties or businesses that it believes to be undervalued or that
it believes may realize a substantial benefit from being publicly owned. Given
the above factors, investors should expect that any acquisition candidate may
have little or no operating history, or a history of losses or low
profitability.
The Company does not propose to restrict its search for investment opportunities
to any particular geographical area or industry, and may, therefore, engage in
essentially any business, to the extent of its limited resources. This include
industries such as service, finance, natural resources, manufacturing, high
technology, product development, medical, communications and others. The
Company's discretion in the selection of business opportunities is unrestricted,
subject to the availability of such opportunities, economic conditions, and
other factors.
As a consequence of this registration of its securities, any entity, which has
an interest in being acquired by, or merging into the Company, is expected to be
an entity that desires to become a public Company and establish a public trading
market for its securities. In connection with such a merger or acquisition, it
is highly likely that an amount of stock constituting control of the Company
would either be issued by the Company or be purchased from the current principal
stockholders of the Company by the acquiring entity or its affiliates. If stock
is purchased from the current principal stockholders, the transaction is likely
to result in substantial gains to the current principal stockholders relative to
their purchase price for such stock. In the Company's judgment, none of the
officers and directors would thereby become an underwriter within the meaning of
the Section 2(11) of the Securities Act of 1933, as amended as long as the
transaction is a private transaction rather than a public distribution of
securities. The sale of a controlling interest by certain principal shareholders
of the Company would occur at a time when minority stockholders are unable to
sell their shares because of the lack of a public market for such shares.
Depending upon the nature of the transaction, the current officers and directors
of the Company may resign their management and board positions with the Company
in connection with a change of control or acquisition of a business opportunity
(See Form of Acquisition, below, and Risk Factors, The Company, Lack of
Continuity of Management). In the event of such a resignation, the Company's
current management would thereafter have no control over the conduct of the
Company's business.
5
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plan, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it will enter into a merger or acquisition
transaction with any business with which its officers or directors are currently
affiliated. Should the Company determine in the future, contrary to the forgoing
expectations, that a transaction with an affiliate would be in the best
interests of the Company and its stockholders, the Company is, in general,
permitted by Delaware law to enter into a transaction if: The material facts as
to the relationship or interest of the affiliate and as to the contract or
transaction are disclosed or are known to the Board of Directors, and the Board
in good faith authorizes, approves or ratifies the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or the material facts
as to the relationship or interest of the affiliate and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically authorized, approved or
ratified in good faith by vote of the stockholders; or the contract or
transaction is fair as to the Company as of the time it is authorized, approved
or ratified, by the Board of Directors or the stockholders.
Investigation and Selection of Business Opportunities
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis of the quality of the other Company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the business opportunity will derive from becoming a publicly held entity, and
numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of a
variety of factors, including, but not limited to, the possible need to expand
substantially, shift marketing approaches, change product emphasis, change or
substantially augment management, raise capital and the like.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to the acquisition of one business opportunity because of
the Company's limited financing. This lack of diversification will not permit
the Company to offset potential losses from one business opportunity against
profits from another, and should be considered an adverse factor affecting any
decision to purchase the Company's securities.
Certain types of business acquisition transactions may be completed without any
requirement that the Company first submit the transaction to the stockholders
for their approval. In the event the proposed transaction is structured in such
a fashion that stockholder approval is not required, holders of the Company's
securities (other than principal stockholders holding a controlling interest)
should not anticipate that they will be provided with financial statements or
any other documentation prior to the completion of the transaction. Other types
of transactions require prior approval of the stockholders.
In the event a proposed business combination or business acquisition transaction
is structured in such a fashion that prior stockholder approval is necessary,
the Company will be required to prepare a Proxy or Information Statement
describing the proposed transaction, file it with the Securities and Exchange
Commission for review and approval, and mail a copy of it to all Company
stockholders prior to holding a stockholders meeting for purposes of voting on
the proposal. Minority shareholders that do not vote in favor of a proposed
transaction will then have the right, in the event the transaction is approved
by the required number of stockholders, to exercise statutory dissenter's rights
and elect to be paid the fair value of their shares.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's officers and directors, none of whom are
professional business analysts (See Management). Although there are no current
plans to do so, Company management might hire an outside consultant to assist in
the investigation and selection of business opportunities, and might pay a
finder's fee. Since Company management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants
or advisors, the criteria to be used in selecting such consultants or advisors,
the services to be provided, the term of service, or the total amount of fees
that may be paid. However, because of the limited resources of the Company, it
is likely that any such fee the Company agrees to pay would be paid in stock and
not in cash.
Otherwise, in analyzing potential business opportunities, Company management
anticipates that it will consider, among other things, the following factors:
o Potential for growth and profitability indicated by new technology,
anticipated market expansion, or new products;
6
o The Company's perception of how any particular business opportunity
will be received by the investment community and by the Company's
stockholders;
o Whether, following the business combination, the financial condition
of the business opportunity would be, or would have a significant
prospect in the foreseeable future of becoming, sufficient to enable
the securities of the Company to qualify for listing on an exchange or
on a national automated securities quotation system, such as NASDAQ,
so as to permit the trading of such securities to be exempt from the
requirements of Rule 15g-9 adopted by the Securities and Exchange
Commission (See Risk Factors The Company Regulations of Penny Stocks).
o Capital requirements and anticipated availability of required funds,
to be provided by the Company or from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
o The extent to which the business opportunity can be advanced;
o Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the
industry as a whole;
o Strength and diversity of existing management or management prospects
that are scheduled for recruitment;
o The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
o The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required
items.
In regard to the possibility that the shares of the Company would qualify for
listing on NASDAQ, the current standards for initial listing include, among
other requirements, that the Company (1) have net tangible assets of at least
$4.0 million, or a market capitalization of $50.0 million, or net income of not
less that $0.75 million in its latest fiscal year or in two of the last three
fiscal years; (2) have a public float (i.e., shares that are not held by any
officer, director or 10% stockholder) of at least 1.0 million shares; (3) have a
minimum bid price of at least $4.00; (4) have at least 300 round lot
stockholders (i.e., stockholders who own not less than 100 shares); and (5) have
an operating history of at least one year or have a market capitalization of at
least $50.0 million. Many, and perhaps most, of the business opportunities that
might be potential candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the selection of a
business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the Company
will generally request that it be provided with written materials regarding the
business opportunity containing as much relevant information as possible,
including, but not limited to, such items as a description of products, services
and Company history; management resumes; financial information; available
projections, with related assumptions upon which they are based; an explanation
of proprietary products and services; evidence of existing patents, trademarks,
or service marks, or rights thereto; present and proposed forms of compensation
to management; a description of transactions between such Company and its
affiliates during the relevant periods; a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements; audited financial statements, or
if they are not available, unaudited financial statements, together with
reasonable assurance that audited financial statements would be able to be
produced within a reasonable period of time not to exceed 60 days following
completion of a merger or acquisition transaction; and the like.
As part of the Company's investigation, the Company's executive officers and
directors may meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be available
for consideration by the Company could be limited by the impact of Securities
and Exchange Commission regulations regarding purchase and sale of penny stocks.
The regulations would affect, and possibly impair, any market that might develop
in the Company's securities until such time as they qualify for listing on
NASDAQ or on an exchange which would make them exempt from applicability of the
penny stock regulations. (See Risk Factors Regulation of Penny Stocks)
7
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current stockholders,
acquisition candidates which have long-term plans for raising capital through
public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates, which have a need for an immediate cash infusion, are
not likely to find a potential business combination with the Company to be an
attractive alternative.
Form of Acquisition
It is impossible to predict the manner in which the Company may participate in a
business opportunity. Specific business opportunities will be reviewed as well
as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of the review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization. In addition, the present management and stockholders of the
Company most likely will not have control of a majority of the voting stock of
the Company following a merger or reorganization transaction. As part of such a
transaction, the Company's existing directors may resign and new directors may
be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "B" tax free reorganization under
the Internal Revenue Code of 1986 as amended, depends upon the issuance to the
stockholders of the acquired Company of a controlling interest (i.e., 80% or
more) of the common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of these
provisions rather than other a tax free provisions provided under the Internal
Revenue Code, the Company's current stockholders would retain in the aggregate
20% or less of the total issued and outstanding shares. This could result in
substantial additional dilution in the equity of those who were stockholders of
the Company prior to such reorganization. Any such issuance of additional shares
might also be done simultaneously with a sale or transfer of shares representing
a controlling interest in the Company by the current officers, directors and
principal stockholders.
It is anticipated that any new securities issued in any reorganization would be
issued in reliance upon one or more exemptions from registration under
applicable federal and state securities laws to the extent that such exemptions
are available. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either at the
time the transaction is consummated or under certain conditions at specified
times thereafter. The issuance of substantial additional securities and their
potential sale into any trading market that might develop in the Company's
securities may have a depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its principal
stockholders will enter into a letter of intent with the management, principals
or owners of a prospective business opportunity prior to signing a binding
agreement. Such a letter of intent will set forth the terms of the proposed
acquisition but will not bind any of the parties to consummate the transaction.
Execution of a letter of intent will by no means indicate that consummation of
an acquisition is probable. Neither the Company nor any of the other parties to
the letter of intent will be bound to consummate the acquisition unless and
until a definitive agreement is executed. Even after a definitive agreement is
executed, it is possible that the acquisition would not be consummated should
any party elect to exercise any right provided in the agreement to terminate it
on specific grounds.
8
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs incurred in the related investigation would not be recoverable. Moreover,
because many providers of goods and services require compensation at the time or
soon after the goods and services are provided, the inability of the Company to
pay until an indeterminate future time may make it impossible to produce goods
and services.
Investment Company Act and Other Regulation
The Company may participate in a business opportunity by purchasing, trading or
selling the securities of such business. The Company does not, however, intend
to engage primarily in such activities. Specifically, the Company intends to
conduct its activities so as to avoid being classified as an investment Company
under the Investment Company Act of 1940 (the Investment Act), and therefore to
avoid application of the costly and restrictive registration and other
provisions of the Investment Act, and the regulations promulgated thereunder.
The Company's plan of business may involve changes in its capital structure,
management, control and business, especially if it consummates the
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment Company securities.
Since the Company will not register as an investment Company, stockholders will
not be afforded these protections.
Competition
The Company expects to encounter substantial competition in its efforts to
locate attractive business combination opportunities. The competition may in
part come from business development companies, venture capital partnerships and
corporations, small investment companies, brokerage firms, and the like. Some of
these types of organizations are likely to be in a better position than the
Company to obtain access to attractive business acquisition candidates either
because they have greater experience, resources and managerial capabilities than
the Company, because they are able to offer immediate access to limited amounts
of cash, or for a variety of other reasons. The Company also will experience
competition from other public companies with similar business purposes, some of
which may also have funds available for use by an acquisition candidate.
Employees
The Company currently has no employees. Management of the Company expects to use
consultants, attorneys and accountants as necessary, and does not anticipate a
need to engage any full-time employees so long as it is seeking and evaluating
business opportunities. The need for employees and their availability will be
addressed in connection with the decision whether or not to acquire or
participate in specific business opportunities.
Risk Factors
------------
The Company's business and plan of operation is subject to numerous risk
factors, including, but not limited to, the following:
Limited Operating History makes Potential Difficult to Assess
-------------------------------------------------------------
The Company has had no operating history nor any revenues or earnings from
operations since 2003. All efforts from our inception through 2003 were
unsuccessful. The Company has no assets or financial resources. The Company
will, in all likelihood, continue to sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This will most likely result in the Company incurring a net
operating loss which will increase continuously until the Company can consummate
a business combination with a target company. There is no assurance that the
Company can identify such a target company and consummate such a business
combination.
There is No Agreement for a Business Combination and No Minimum Requirements for
a Business Combination
----------------------
The Company has no current arrangement, agreement or understanding with respect
to engaging in a business combination with a specific entity. There can be no
assurance that the Company will be successful in identifying and evaluating
suitable business opportunities or in concluding a business combination. No
particular industry or specific business within an industry has been selected
for a target company. The Company has not established a specific length of
operating history or a specified level of earnings, assets, net worth or other
criteria which it will require a target company to have achieved, or without
which the Company would not consider a business combination with such business
entity. Accordingly, the Company may enter into a business combination with a
business entity having no significant operating history, losses, limited or no
potential for immediate earnings, limited assets, negative net worth or other
negative characteristics. There is no assurance that the Company will be able to
negotiate a business combination on terms favorable to the Company.
9
No Assurance of Success or Profitability
----------------------------------------
There is no assurance that the Company will acquire a favorable business
opportunity. Even if the Company should become involved in a business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's outstanding shares will be increased
thereby.
Type of Business To Be Acquired
-------------------------------
The type of business to be acquired may be one that desires to avoid effecting
its own public offering and the accompanying expense, delays, uncertainties, and
federal and state requirements which purport to protect investors. Because of
the Company's limited capital, it is more likely than not that any acquisition
by the Company will involve other parties whose primary interest is the
acquisition of control of a publicly traded Company. Moreover, any business
opportunity acquired may be currently unprofitable or present other negative
factors.
Lack of Diversification
-----------------------
Because of the limited financial resources that the Company has, it is unlikely
that the Company will be able to diversify its acquisitions or operations. The
Company's probable inability to diversify its activities into more than one area
will subject the Company to economic fluctuations within a particular business
or industry and therefore increase the risks associated with the Company's
operations.
Only One Director and Officer
-----------------------------
Because management consists of only one person, while seeking a business
combination, Timothy P. Halter, the Company's President, will be the only person
responsible in conducting the day-to-day operations of the Company. The Company
does not benefit from multiple judgments that a greater number of directors or
officers would provide, and the Company will rely completely on the judgment of
its one officer and director when selecting a target company. Mr. Halter
anticipates devoting only a limited amount of time per month to the business of
the Company. Mr. Halter has not entered into a written employment agreement with
the Company and he is not expected to do so. The Company does not anticipate
obtaining key man life insurance on Mr. Halter. The loss of the services of Mr.
Halter would adversely affect development of the Company's business and its
likelihood of continuing operations.
Dependence Upon Management, Limited Participation of Management
---------------------------------------------------------------
The Company will be entirely dependant upon the experience of its officer and
director in seeking, investigating, and acquiring a business and in making
decisions regarding the Company's operations. Because investors will not be able
to evaluate the merits of possible future business acquisitions by the Company,
they should critically assess the information concerning the Company's officers
and directors. (See Management.)
Conflicts of Interest
---------------------
Certain conflicts of interest exist between the Company and its officer and
director. He has other business interests to which he currently devotes
attention and is expected to continue to do so. As a result, conflicts of
interest may arise that can be resolved only through his exercise of judgement
in a manner which is consistent with his fiduciary duties to the Company. (See
Management, Conflicts of Interest.)
It is anticipated that the Company's principal shareholder may actively
negotiate or otherwise consent to the purchase of a portion of his common stock
as a condition to, or, in connection with, a proposed merger or acquisition
transaction. In this process, the Company's principal shareholders may consider
his own personal pecuniary benefit rather than the best interest of other
Company shareholders. Depending upon the nature of a proposed transaction,
Company shareholder other than the principal shareholders may not be afforded
the opportunity to approve or consent to a particular transaction.
Possible Need For Additional Financing
--------------------------------------
The Company has very limited funds, and such funds, may not be adequate to take
advantage of any available business opportunities. Even if the Company's
currently available funds prove to be sufficient to pay for its operations until
it is able to acquire an interest in, or complete a transaction with, a business
opportunity, such funds will clearly not be sufficient to enable it to exploit
the opportunity. Thus, the ultimate success of the Company will depend, in part,
upon its availability to raise additional capital. In the event that the Company
requires modest amounts of additional capital to fund its operations until it is
able to complete a business acquisition or transaction, such funds, are expected
to be provided by the principal shareholder. However, the Company has not
10
investigated the availability, source, or terms that might govern the
acquisition of the additional capital which is expected to be required in order
to exploit a business opportunity, and will not do so until it has determined
the level of need for such additional financing. There is no assurance that
additional capital will be available from any source or, if available, that it
can be obtained on terms acceptable to the Company. If not available, the
Company's operations will be limited to those that can be financed with its
modest capital.
Dependence Upon Outside Advisors
--------------------------------
To supplement the business experience of its officer and director, the Company
may be required to employ accountants, technical experts, appraisers, attorneys,
or other consultants or advisors. The selection of any such advisors will be
made by the Company's officer, without any input by shareholders. Furthermore,
it is anticipated that such persons may be engaged on an as needed basis without
a continuing fiduciary or other obligation to the Company. In the event the
officer of the Company considers it necessary to hire outside advisors, he may
elect to hire persons who are affiliates, if those affiliates are able to
provide the required services.
Regulation of Penny Stocks
--------------------------
The U. S. Securities and Exchange Commission (SEC) has adopted a number of rules
to regulate "penny stocks." Because the securities of the Company may constitute
"penny stocks" within the meaning of the rules (as any equity security that has
a market price of less than $5.00 per share or with an exercise price of less
than $5.00 per share, largely traded in the National Association of Securities
Dealers' (NASD) OTC Bulletin Board or the "Pink Sheets", the rules would apply
to the Company and to its securities. The Commission has adopted Rule 15g-9
which established sales practice requirements for certain low price securities.
Unless the transaction is exempt, it shall be unlawful for a broker or dealer to
sell a penny stock to, or to effect the purchase of a penny stock by, any person
unless prior to the transaction: (i) the broker or dealer has approved the
person's account for transactions in penny stock pursuant to this rule and (ii)
the broker or dealer has received from the person a written agreement to the
transaction setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stock, the broker or dealer must: (a) obtain from the person information
concerning the person's financial situation, investment experience, and
investment objectives; (b) reasonably determine that transactions in penny stock
are suitable for that person, and that the person has sufficient knowledge and
experience in financial matters that the person reasonably may be expected to be
capable of evaluating the risks of transactions in penny stock; deliver to the
person a written statement setting forth the basis on which the broker or dealer
made the determination (i) stating in a highlighted format that it is unlawful
for the broker or dealer to affect a transaction in penny stock unless the
broker or dealer has received, prior to the transaction, a written agreement to
the transaction from the person; and (ii) stating in a highlighted format
immediately preceding the customer signature line that (iii) the broker or
dealer is required to provide the person with the written statement; and (iv)
the person should not sign and return the written statement to the broker or
dealer if it does not accurately reflect the person's financial situation,
investment experience, and investment objectives; and (C) receive from the
person a manually signed and dated copy of the written statement. It is also
required that disclosure be made as to the risks of investing in penny stock and
the commissions payable to the broker-dealer, as well as current price
quotations and the remedies and rights available in cases of fraud in penny
stock transactions. Statements, on a monthly basis, must be sent to the investor
listing recent prices for the Penny Stock and information on the limited market.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid ask differential and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
There May Be A Scarcity of and/or Significant Competition For Business
Opportunities and/or Combinations
---------------------------------
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Company will also
11
compete in seeking merger or acquisition candidates with other public shell
companies, some of which may also have funds available for use by an acquisition
candidate.
Reporting Requirements May Delay or Preclude Acquisition
--------------------------------------------------------
Pursuant to the requirements of Section 13 of the Exchange Act, the Company is
required to provide certain information about significant acquisitions including
audited financial statements of the acquired company. These audited financial
statements must be furnished within 4 days following the effective date of a
business combination. Obtaining audited financial statements are the economic
responsibility of the target company. The additional time and costs that may be
incurred by some potential target companies to prepare such financial statements
may significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by the Company. Acquisition prospects that do not have or
are unable to obtain the required audited statements may not be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. When a non-reporting company becomes the successor of a reporting
company by merger, consolidation, exchange of securities, and acquisition of
assets or otherwise, the successor company is required to provide in a Current
Report on Form 8-K the same kind of information that would appear in a
Registration Statement or an Annual Report on Form 10-KSB, including audited and
pro forma financial statements. The Commission treats these Form 8-K filings in
the same way it treats the Registration Statements on Form 10-SB filings. The
Commission subjects them to its standards of review selection, and the
Commission may issue substantive comments on the sufficiency of the disclosures
represented. If the Company enters into a business combination with a
non-reporting company, such non-reporting company will not receive reporting
status until the Commission has determined that it will not review the 8-K
filing or all of the comments have been cleared by the Commission.
Lack of Market Research or Marketing Organization
-------------------------------------------------
The Company has neither conducted, nor have others made available to it, market
research indicating that demand exists for the transactions contemplated by the
Company. In the event demand exists for a transaction of the type contemplated
by the Company, there is no assurance the Company will be successful in
completing any such business combination.
Probable Change in Control of The Company and/or Management
-----------------------------------------------------------
In conjunction with completion of a business acquisition, it is anticipated that
the Company will issue an amount of the Company's authorized but unissued common
stock that represents the greater majority of the voting power and equity of the
Company, which will, in all likelihood, result in shareholders of a target
company obtaining a controlling interest in the Company. As a condition of the
business combination agreement, the current shareholder of the Company may agree
to sell or transfer all or a portion of the Company's common stock he owns so to
provide the target company with all or majority control. The resulting change in
control of the Company will likely result in removal of the present officer and
director of the Company and a corresponding reduction in or elimination of his
participation in the future affairs of the Company.
Possible Dilution of Value of Shares Upon Business Combination
--------------------------------------------------------------
A business combination normally will involve the issuance of a significant
number of additional shares. Depending upon the value of the assets acquired in
such business combination, the per share value of the Company's common stock may
increase or decrease, perhaps significantly.
Limited or No Public Market Exists
----------------------------------
There is currently a limited public market for the Company's common stock, via
the "Pink Sheets" and no assurance can be given that a market will develop or
that a shareholder ever will be able to liquidate his investment without
considerable delay, if at all. If a market should develop, the price may be
highly volatile. Factors such as those discussed in this "Risk Factors" section
may have a significant impact upon the market price of the securities offered
hereby. Owing to the low price of the securities, many brokerage firms may not
be willing to effect transactions in the securities. Even if a purchaser finds a
broker willing to effect a transaction in theses securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the sales proceeds.
Registration of Shares is Required
----------------------------------
It is the SEC's position that securities issued by a "shell" company cannot be
sold under the exemption from registration provided by Rule 144 promulgated
under the Securities Act of 1933 (the "Act"), but must be registered under the
Securities Act of 1933. Any other securities issued to individuals in the
capacity of management, affiliates, control persons and promoters will also be
registered with the SEC prior to resale and shall be issued with appropriate
12
restricted legend to reflect the registration requirements. The Company will
make appropriate provisions under the Securities Act of 1933 to register the
Company's shares for resale."
Blue Sky Consideration
----------------------
Because the securities registered hereunder have not been registered for resale
under the Blue Sky laws of any state, the holders of such shares and persons who
desire to purchase them in any trading market that might develop in the future,
should be aware, that there may be significant state Blue Sky law restrictions
upon the ability of investors to sell the securities and of purchasers to
purchase the securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.
Additional Risks Doing Business in a Foreign Country
----------------------------------------------------
The Company may effectuate a business combination with a merger target whose
business operations or even headquarters, place of formation or primary place of
business are located outside the United States of America. In such event, the
Company may face the significant additional risks associated with doing business
in that country. In addition to the language barriers, different presentations
of financial information, different business practices, and other cultural
differences and barriers that may make it difficult to evaluate such a merger
target, ongoing business risks result from the international political
situation, uncertain legal systems and applications of law, prejudice against
foreigners, corrupt practices, uncertain economic policies and potential
political and economic instability that may be exacerbated in various foreign
countries.
Taxation
--------
Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination that the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax-free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition of both
federal and state taxes, which may have an adverse effect on both parties to the
transaction.
Item 2 - Description of Property
The Company currently maintains a mailing address at 12890 Hilltop Road, Argyle,
TX 76226. The Company's telephone number there is (972) 233-0300. Other than
this mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of the mailing address as these offices are used virtually full-time
by other businesses of the Company's President.
It is likely that the Company will not establish an office until it has
completed a business acquisition transaction, but it is not possible to predict
what arrangements will actually be made with respect to future office
facilities.
Item 3 - Legal Proceedings
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has not conducted any meetings of shareholders during the preceding
quarter or periods subsequent thereto.
13
PART II
Item 5 - Market for Company's Common Stock and Related Stockholder Matters
Market for Trading
The Company's equity securities are currently quoted on the Pink Sheets
over-the-counter market under the symbol "NVSC" and have irregular and
infrequent trading volumes and pricing.
The table below sets forth the high and low bid prices for the Company's common
stock as obtained from the "historical quotes" section of www.bigcharts.com.
Bids represent inter-dealer prices, without retail mark-up, markdown or
commissions, and may not represent actual transactions.
The following table sets forth the high and low closing bid prices for the
periods indicated:
Year ended June 30, 2005 High Low
------------------------ ---- ---
1st Quarter $0.30 $0.30
2nd Quarter 0.30 0.30
3rd Quarter 0.30 0.30
4th Quarter 0.30 0.30
Year ended June 30, 2006
------------------------
1st Quarter $6.01 $0.30
2nd Quarter 4.50 1.50
3rd Quarter 7.55 1.50
4th Quarter 7.55 7.51
Year ended June 30, 2007
------------------------
1st Quarter $7.51 $7.51
2nd Quarter 7.51 0.15
3rd Quarter 0.15 0.15
4th Quarter 0.15 0.15
These quotations are inter-dealer prices without retail markup, markdown or
commissions, and may not necessarily represent actual transactions.
As of September 12, 2007, there were approximately 671 shareholders of record of
the Company's common stock
Transfer Agent
Our independent stock transfer agent is Transfer Online, Inc., located in
Portland, Oregon. Their mailing address and telephone number is: 317 SW Alder
Street, 2nd Floor, Portland, Oregon 97204; (503) 227-2950 (voice); (503)
227-6874 (fax).
Reports to Stockholders
The Company plans to furnish its stockholders with an annual report for each
fiscal year ending June 30 containing financial statements audited by its
independent certified public accountants. In the event the Company enters into a
business combination with another Company, it is the present intention of
management to continue furnishing annual reports to stockholders. Additionally,
the Company may, in its sole discretion, issue unaudited quarterly or other
interim reports to its stockholders when it deems appropriate. The Company
intends to maintain compliance with the periodic reporting requirements of the
Securities Exchange Act of 1934.
Dividend Policy
No dividends have been paid to date and the Company's Board of Directors does
not anticipate paying dividends in the foreseeable future. It is the current
policy of the Company's Board of Directors to retain all earnings, if any, to
support future growth and expansion.
14
Recent Issuances of Unregistered Securities
On October 11, 2005, the Company sold 250,000 post-reverse split shares of
restricted common stock for gross proceeds of $75,000, pursuant to a
subscription agreement, to Halter Financial Investments, L. P., (a Texas Limited
Partnership) (HFI), an entity controlled by Timothy P. Halter, who became the
Company's current Chief Executive Officer. The Company relied upon Section 4(2)
of The Securities Act of 1933, as amended, for an exemption from registration of
these shares and no underwriter was used in this transaction. As a result of
this transaction, HFI became the Company's controlling stockholder, owning
approximately 59.60% of the 419,436 issued and outstanding shares of the
Company's common stock.
The $75,000 in proceeds was used to satisfy the pre-petition debt payable to the
Nevada Gaming Commission, retire certain trade accounts payable and pay certain
operating expenses of the Company to maintain compliance with the requirements
of the Securities Exchange Act of 1934, as amended
On November 17, 2006, the Company sold to HFI 723,641 shares of restricted
common stock for approximately $217,000 or $0.30 per share. The transaction was
effected pursuant to the terms of a Stock Purchase Agreement entered into by the
Company and HFI on October 11, 2005. The purchase transaction was effected
without registration in reliance upon Section 4(2) of the Securities Act of
1933. The form and terms of the purchase agreement were agreed upon as part of
the October 2005 change in control transaction as disclosed in the Company's
Current Report on Form 8-K filed with the SEC on October 12, 2005. As this
selling price was substantially below the "fair value" of comparable
transactions, the Company recognized a charge to operations for consulting
expense of approximately $1,736,700 equivalent to the difference between the
established "fair value" of $2.70 per share (as determined by the quoted closing
price of the Company's common stock on the date of the transaction) and the
selling price of $0.30 per share.
On November 17, 2006, the Company satisfied the terms and conditions of a
Settlement and Stock Issuance Agreement with W/F Investment Corp. (W/F), a
shareholder of the Company, with the payment of $100,000 cash and the issuance
of 107,000 shares of restricted common stock to settle the Company's debt
obligation to W/F of approximately $501,945. The form and terms of the agreement
were agreed upon as part of the October 2005 change in control transaction as
disclosed in the Company's Current Report on Form 8-K filed with the SEC on
October 12, 2005.
Item 6 - Management's Discussion and Analysis or Plan of Operation
Results of Operations
The Company had no revenue for the respective years ended June 30, 2007 and
2006, respectively.
During each of the years ended June 30, 2007 and 2006, the Company recognized
general operating expenses of approximately $10,600 and $39,700, respectively,
which were directly related to the Company's compliance with the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended.
Further, during the quarter ended June 30, 2007, the Company recognized a
one-time gain on forgiveness of debt or approximately $44,600 related to the
settlement and payment in full of the pre-petition tax liability owed to the
Nevada Department of Taxation..
The Company accrued interest expense on pre-petition tax liabilities and the
Line of Credit notes payable to two separate shareholders totaled approximately
$28,600 and $40,900 for each of the years ended June 30, 2007 and 2006,
respectively. During the year ended June 30, 2007, the Company settled the
outstanding obligations to the Nevada Department of Taxation and W/F Investment
Corp. on April 9, 2007 and November 17, 2006, respectively. There are no
continuing obligation on the part of the Company for either of these items.
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under The Securities Exchange Act of 1934 unless and until
such time that the Company's operating subsidiary begins meaningful operations.
At June 30, 2007 and 2006, the Company had working capital of approximately
$(37,900) and $(654,800), respectively.
It is the belief of management and significant stockholders that sufficient
working capital necessary to support and preserve the integrity of the corporate
entity will be present. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
15
The Company's need for working capital may change dramatically as a result of
any business acquisition or combination transaction. There can be no assurance
that the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
Plan of Business
General
The Company intends to locate and combine with an existing, privately-held
company which is profitable or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, the Company does
not intend to combine with a private company which may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, the Company's management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage attorneys
and/or accountants in its efforts to investigate a combination candidate and to
consummate a business combination. The Company may require payment of fees by
such combination candidate to fund the investigation of such candidate. In the
event such a combination candidate is engaged in a high technology business, the
Company may also obtain reports from independent organizations of recognized
standing covering the technology being developed and/or used by the candidate.
The Company's limited financial resources may make the acquisition of such
reports difficult or even impossible to obtain and, thus, there can be no
assurance that the Company will have sufficient funds to obtain such reports
when considering combination proposals or candidates. To the extent the Company
is unable to obtain the advice or reports from experts, the risks of any
combined enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal shareholders or general
partners:
1) will not have been convicted of securities fraud, mail fraud, tax
fraud, embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
2) will not have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
3) will not have been a defendant in a civil action which resulted in a
final judgement against it or him awarding damages or rescission based
upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination candidates.
Such persons will also ask pertinent questions of others who may be involved in
the combination proceedings. However, the officers and directors of the Company
16
will not generally take other steps to verify independently information obtained
in this manner which is favorable. Unless something comes to their attention
which puts them on notice of a possible disqualification which is being
concealed from them, such persons will rely on information received from the
management of the prospective combination candidate and from others who may be
involved in the combination proceedings.
Liquidity and Capital Resources
It is the belief of management and significant stockholders that sufficient
working capital necessary to support and preserve the integrity of the corporate
entity will be present. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company and Halter Financial Investments, LP (HFI), an entity controlled by
the Company's President and Chief Executive Officer, have acknowledged that
outside funds are necessary to support the corporate entity and comply with the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended. To this end, HFI has agreed to lend the Company up to $50,000 with a
maturity period not to exceed two (2) years from the initial funding date at an
interest rate of 6.0% per annum. Through June 30, 2007, HFI has advanced
approximately $45,700 under this agreement, with an initial scheduled maturity
date in May 2008.
The Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location
of a merger or acquisition candidate. Accordingly, there can be no assurance
that sufficient funds will be available to the Company to allow it to cover the
expenses related to such activities.
The Company does not currently contemplate making a Regulation S offering.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash. For information as to the
Company's policy in regard to payment for consulting services, see Certain
Relationships and Transactions.
Item 7 - Index to Financial Statements
The required financial statements begin on page F-1 of this document.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Item 8A - Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer,
we conducted an evaluation of our disclosure controls and procedures, as
such term is defined under Rule 13a-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2007. Based
on this evaluation, our principal executive officer and principal financial
officer concluded that our disclosure controls and procedures are effective
in alerting them on a timely basis to material information relating to our
Company required to be included in our reports filed or submitted under the
Exchange Act.
(b) Changes in Internal Controls
There were no significant changes (including corrective actions with regard
to significant deficiencies or material weaknesses) in our internal
controls over financial reporting that occurred during the quarter ended
June 30, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
17
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The directors and executive officers serving the Company are as follows:
Name Age Position Held and Tenure
---- --- ------------------------
Timothy P. Halter 41 President, Chief Executive Officer
Chief Financial Officer and
Director
The director named above will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected and have
qualified. Directors will be elected for one-year terms at the annual
stockholders meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between any
of the directors or officers of the Company and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current
directors to the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders that may directly or
indirectly participate in or influence the management of the Company's affairs.
The directors and officers will devote their time to the Company's affairs on an
as needed basis, which, depending on the circumstances, could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely encompass less than four (4) hours per month. There are no agreements or
understandings for any officer or director to resign at the request of another
person, and none of the officers or directors are acting on behalf of, or will
act at the direction of, any other person.
Biographical Information
Timothy P. Halter - Since 1995, Mr. Halter has been the president and the sole
stockholder of Halter Financial Group, Inc., a Dallas, Texas based consulting
firm specializing in the area of mergers, acquisitions and corporate finance. In
September 2005, Mr. Halter and other minority partners formed HFI. HFI conducts
no business operations. Mr. Halter currently serves as a director of DXP
Enterprises, Inc., a public corporation (Nasdaq: DXPE), and is an officer and
director of Nevstar Corporation, a Nevada corporation, Marketing Acquisition
Corp., a Nevada corporation, Energroup Technologies Corp., a Utah corporation,
BTHC VIII, Inc. and BTHC X, Inc., each a Delaware corporation. Each of the
afore-referenced companies is current in the filing of their periodic reports
with the SEC. Except for DXP Enterprises, each of the afore-referenced companies
for which Mr. Halter acts as an officer and director may be deemed shell
corporations. Mr. Halter will devote as much of his time to our business affairs
as may be necessary to implement our business plan.
Mr. Halter has significant experience acting in the capacity of the principal
stockholder, a director and an executive officer of blank check companies. The
following table identifies those companies with which Mr. Halter has been
affiliated that operated as a blank check company at some point in their history
and whose securities are registered under the Exchange Act. The table also
details Mr. Halter's prior and present involvement with each referenced company
and the current status of each company's business operations. The business
descriptions provided below are derived from the respective entities' periodic
reports as filed with the SEC. Except for Nevstar Corporation, BTHC VIII, Inc.,
BTHC X, Inc., Marketing Acquisition Corp., and Energroup Technologies Corp., we
have made no independent verification of the accuracy of the disclosure found in
such reports or whether the entities are current in the filing of their
respective periodic reports with the SEC.
As noted in the table below, Mr. Halter is currently a director, officer and
principal shareholder of Nevstar Corporation, a Nevada corporation, Marketing
Acquisition Corp., a Nevada corporation, Energroup Technologies Corp., a Utah
corporation, BTHC VII, Inc., BTHC VIII, Inc. and BTHC X, Inc., and BTHC XIV,
Inc., each a Delaware corporation.. Regarding the other registrants listed in
the table, Mr. Halter was not affiliated with any of the operating businesses
prior to the consummation of the reverse merger transaction and resigned as an
officer and director upon consummation of the transaction. After the merger
transaction, Mr. Halter did not participate in the management of any of the
registrants and ceased being a principal shareholder. Other than being a
minority shareholder of certain of the registrants, Mr. Halter is not affiliated
with, and does not control, any of the registrants.
18
---------------------- ------------------------------- ----------------------------------- -----------------------------
Name of Registrant Date of Registration/SEC File Nature of Interest Current Status of Registrant
Number
---------------------- ------------------------------- ----------------------------------- -----------------------------
Athersys, Inc. Form 10 filed on July 6, Mr. Halter remains a minority The company is in the
(formerly BTHC VI, 2006; SEC File Number stockholder of the company. Mr. business of developing
Inc.) 000-52108 Halter resigned as an officer and therapeutic product
director of the company as a candidates.
result of a change in control
transaction completed on June 8,
2007.
---------------------- ------------------------------- ----------------------------------- -----------------------------
Avatar Systems, Inc. Form 10 filed on June 25, Mr. Halter remains a minority The company is in the
2001; SEC File Number stockholder of the company. Mr. business of providing
000-32925 Halter resigned as an officer and petroleum industry
director of the company as a solutions for accounting
result of a change in control and financial management.
transaction completed on November
14, 2000.
---------------------- ------------------------------- ----------------------------------- -----------------------------
Bitech Pharma, Inc. Form 10 filed on December Mr. Halter remains a minority The company is in the
16, 2005; SEC File Number stockholder of the company. Mr. business of developing and
000-51684 Halter resigned as an officer and producing therapeutic
director of the company as a protein products.
result of a change in control
transaction completed on June 30,
2005.
---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC VII, Inc. Form 10 filed on July 10, Mr. Halter remains a minority The company is engaged in
2006; SEC File Number stockholder of the company. Mr. the retail jewelry business.
000-52123 Halter resigned as an officer and
director of the company as a
result of a change in control
transaction completed in July
2007.
---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC VIII, Inc. Form 10-SB filed on September Mr. Halter acquired control on The company is a shell
21, 2006; SEC File Number August 7, 2006 and currently company.
0-52232 serves as its sole officer and
director.
---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC X, Inc. Form 10 filed on September Mr. Halter acquired control on The company is a shell
22, 2006; SEC File Number August 16, 2006 and currently company.
0-52237 serves as its sole officer and
director.
---------------------- ------------------------------- ----------------------------------- -----------------------------
BTHC XIV, Inc. Form 10-SB filed on July 9, Mr. Halter acquired control on The company is a shell
2007; SEC File Number August 16, 2006 and currently company.
000-52722 serves as its sole officer and
director.
---------------------- ------------------------------- ----------------------------------- -----------------------------
China Agritech, Inc. Form 10 filed on February 2, Mr. Halter acquired a controlling The company is currently
2002; Current SEC File Number interest in the company on May engaged in the business of
0-49608 25, 2004, and acted as its sole producing organic liquid
officer and director until his compound fertilizers.
resignation as a result of a
change in control transaction
completed on February 3, 2005.
Mr. Halter remains a minority
stockholder of the company.
---------------------- ------------------------------- ----------------------------------- -----------------------------
China BAK Battery, The company originally filed Mr. Halter acquired a controlling The company is a
Inc. a registration statement on interest in the company on June manufacturer of lithium-ion
Form S-1 on June 10, 2000 and 14, 2004, and acted as its sole batteries and related
a Form 8-A12G on March 29, officer and director until his products.
2002; SEC File Number resignation as a result of a
000-49712 change in control transaction
completed on January 20, 2005.
Mr. Halter remains a minority
stockholder of the company
---------------------- ------------------------------- ----------------------------------- -----------------------------
China Digital The company originally became Mr. Halter acquired a controlling The company is a provider
Wireless, Inc. obligated to file reports interest in the company on of value added information
with the SEC in 1983 with the February 23, 2004, and acted as services to mobile phone
filing of a Registration its sole officer and director subscribers in China.
Statement on Form S-18(File until his resignation as a result
Number 2-84351); Current SEC of a change in control
File Number 0-12536. transaction completed on June 23,
2004. Mr. Halter remains
a minority stockholder of
the company.
---------------------- ------------------------------- ----------------------------------- -----------------------------
China Pharma Form 10 filed on February 15, Mr. Halter acquired a controlling The company's primary
Holdings, Inc. 2000; SEC File Number 000-29523 interest in the company on May 11, business is research,
2005, and acted as its sole development, manufacturing
officer and director until the and sale of
completion of a change in control bio-pharmaceutical products.
transaction on October 20, 2005.
Mr. Halter remains a minority
stockholder of the company.
------------------------------------------------------------------------------------------------------------------------
China Ritar Power Form 10-SB filed on April 29, Mr. Halter remains a minority The company is a
Corp. (formerly 1999; SEC File Number 000-25901 stockholder of the company. Mr. manufacturer of lead acid
Concept Ventures Halter resigned as an officer and batteries.
Corp.) director of the company as a
result of a change in control
transaction completed on February
16, 2007.
------------------------------------------------------------------------------------------------------------------------
19
------------------------------------------------------------------------------------------------------------------------
Games, Inc Form 10 filed on November 15, Mr. Halter remains a minority The company is a technology
2001; SEC File Number 000-33345 stockholder of the company. Mr. company operating in the
Halter resigned as an officer and area of interactive
director of the company as a entertainment.
result of a change in control
transaction completed on September
30, 2001.
------------------------------------------------------------------------------------------------------------------------
International Stem Form 10 filed on April 4, Mr. Halter remains a minority The company is engaged in
Cell Corp. (formerly 2006; SEC File Number 000-51891 stockholder of the company. Mr. the business of developing
BTHC III, Inc.) Halter resigned as an officer and theraeutic products.
director of the company as
a result of a change in
control transaction
completed on December 28,
2006.
------------------------------------------------------------------------------------------------------------------------
KMG Chemicals, Inc. Form 10 filed on December 6, Mr. Halter is not a current The company is a seller of
1996; SEC File Number 000-29278 stockholder of the company. Mr. industrial wood preserving
Halter resigned as an officer and chemicals in the United
director of the company as a States.
result of a change in control
transaction completed on October
15, 1996.
------------------------------------------------------------------------------------------------------------------------
MGCC Investment The company became public via Mr. Halter remains a minority The company is a
Strategies, Inc. the filing of a SB-2 stockholder of the company. Mr. manufacturer of auto parts.
registration statement filed Halter resigned as an officer and
in October 2001, SEC File director of the company as a
Number 000-50883 result of the change in control
transaction completed on June 22,
2006.
------------------------------------------------------------------------------------------------------------------------
Millennium Quest, The company became public via Mr. Halter remains a minority The company is a shell
Inc. the filing of a Form 10 stockholder of the company. Mr. company.
registration statement filed Halter resigned as an officer and
in September 2000, SEC File director of the company as a
Number 000-31619 result of the change in control
transaction completed on May3,
2007.
------------------------------------------------------------------------------------------------------------------------
Microwave Form 10 filed on March 31, Mr. Halter is not a current The company is currently
Transmission 2000; SEC File Number 000-30722 stockholder of the company. Mr. engaged in the business of
Systems, Inc. Halter resigned as an officer and constructing and maintaining
director of the company on as a wireless communications
result of a change in control transmitting and recovering
transaction completed on August 6, facilities.
1999.
------------------------------------------------------------------------------------------------------------------------
Nevstar Corporation The Company filed a Mr. Halter acquired control of The company is a shell
registration statement on the company on October 11, 2005 company.
Form S-1 on September 24, and currently serves as its sole
1997; SEC File Number officer and director.
000-21071
---------------------- ------------------------------- ----------------------------------- -----------------------------
Playlogic The company filed with the SEC Mr. Halter acquired a controlling The company is presently
Entertainment, Inc. a registration statement on interest in the company on engaged in the business of
Form SB-2 on August 30, 2001 December 15, 2004, and acted
as developing gaming software. and a Form 8-A12G on
February its sole officer and director 28, 2002; SEC File
Number until the completion of a change 000-49649 in
control transaction on June 3,
2005. Mr. Halter remains a
minority stockholder of
the company.
------------------------------------------------------------------------------------------------------------------------
Polymedix, Inc. Form 10 filed on April 5, Mr. Halter resigned as an officer The company is a
2006; SEC File Number 000-51895 and director on October 6, 2005. bio-technology company
Mr. Halter remains a
minority focusing on
research of stockholder of
the company. infectious
diseases.
------------------------------------------------------------------------------------------------------------------------
Point Acquisition The company became public via Mr. Halter remains a minority The company is engaged in
Corp. the filing of a Form 10 stockholder of the company. Mr. the business of
registration statement filed Halter resigned as an officer and manufacturing monolithic
in September 2005, SEC File director of the company as a refractory products.
Number 000-51527 result of the change in control
transaction completed on April 25,
2007
------------------------------------------------------------------------------------------------------------------------
Redpoint Bio Corp. The company became public via Mr. Halter remains a minority The company is presently
(formerly Robcor the filing of a SB-2 stockholder of the company. Mr. engaged in the development
Properties, Inc.) registration statement filed Halter resigned as an officer and of biotech products.
on May 19, 2005; SEC File director of the company as a
Number 000-51708 result of a change in control
transaction completed on March 12,
2007.
------------------------------------------------------------------------------------------------------------------------
20
------------------------------------------------------------------------------------------------------------------------
RTO Holdings, Inc. The Company originally became Mr. Halter acquired control of the The company is presently
public in 1986 pursuant to the company on June 21, 2006 and engaged in the development
filing of a registration served as its sole officer and and operation of ethanol
statement under the Securities director until August 29, 2006 manufacturing facilities.
Act of 1933; SEC File Number when a change in control
000-15579 transaction was consummated. Mr.
Halter remains a minority
stockholder of the
company.
------------------------------------------------------------------------------------------------------------------------
Segmentz, Inc. Form 10 filed on January 30, Mr. Halter remains a minority The company is currently
2002; SEC File Number 000-49606 stockholder of the company. Mr. engaged in the business of
Halter resigned as officer and providing transportation
director of the company as a services to clients in the
result of a change in control U.S. and Canada.
transaction completed on January
31, 2001.
------------------------------------------------------------------------------------------------------------------------
Shelron Group, Inc. Form 10 filed on October 11, Mr. Halter is not a current The company is currently
2000; SEC File Number 000-31176 stockholder of the company. Mr. engaged in the business of
Halter resigned as an
officer and developing
business director of the
company as a intelligence
software and result of a
change in control
comparative shopping
transaction completed on
April 26, software
programs. 2000.
------------------------------------------------------------------------------------------------------------------------
Sutor Technology, The company originally became Mr. Halter remains a minority The company is engaged in
Inc. obligated to file reports with stockholder of the company. Mr. the business of
the SEC as the result of its Halter resigned as an officer and manufacturing and selling
1989 filing of a registration director of the company as a steel fabrication products.
statement on Form SB-2; SEC result of a change in control
File Number 333-83351. transaction completed on February
1, 2007.
------------------------------------------------------------------------------------------------------------------------
Tiens Biotech Group, Form 10 filed on March 7, Mr. Halter remains a minority The Company primarily
Inc. 2002; SEC File Number stockholder of the company. Mr. engages in the development,
000-49666 Halter resigned as an officer and manufacturing, and
director of the company as a marketing of nutrition
result of a change in control supplement products.
transaction completed on February
11, 2002.
---------------------- ------------------------------- ----------------------------------- -----------------------------
Winner Medical The company originally became Mr. Halter acquired a controlling The company is involved in
Group, Inc. obligated to file reports with interest in the company on the development,
the SEC as the result of its November 4, 2005, and acted as its manufacturing and marketing
1989 filing of a registration sole officer and director until of medical dressings and
statement on Form S-18; SEC the completion of a change in medical disposables.
File Number 000-16547. control transaction on December
16, 2005. Mr. Halter remains a
minority stockholder of the
company.
------------------------------------------------------------------------------------------------------------------------
Zeolite Exploration The company originally became Mr. Halter acquired a controlling The company owns and
Company public with the filing of a interest in the company on operates a nano
Registration Statement on November 30, 2005, and acted as precipitated calcium
Form SB-2 on October 23, its sole officer and director carbonate manufacturing
2002; SEC File Number until the completion of a change company in China.
333-74670 in control transaction on March
31, 2006. Mr. Halter remains a
minority stockholder of the
company.
---------------------- ------------------------------- ----------------------------------- -----------------------------
In addition to the companies listed above, Mr. Halter is an officer, director,
and shareholder of several private companies.
It is specifically noted that the relative success or failure of any of the
entities referenced above subsequent to Mr. Halter's affiliation should not be
deemed an indication of the possibility of our success or failure upon the
completion of our current plan of operations.
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
Section 16(a) of the Exchange Act requires the Company's directors, executive
officers and persons who own more than ten percent of a registered class of the
Company's equity securities ("10% holders"), to file with the Securities and
Exchange Commission (SEC) initial reports of ownership and reports of changes in
ownership of Common stock and other equity securities of the Company.
Directors, officers and 10% holders are required by SEC regulation to furnish
the Company with copies of all of the Section 16(a) reports they file. Based
solely on a review of reports furnished to he Company or written representations
from the Company's directors and executive officers during the fiscal year ended
June 30, 2007 and/or 2006 no Section 16(a) filing requirements applicable to its
directors, officers and 10% holders for such year were complied with.
21
Conflicts of Interest
None of the officers of the Company will devote more than a small portion of
their respective time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of the officers' other business and investment activities. Such conflicts may
require that the Company attempt to employ additional personnel. There is no
assurance that the services of such persons will be available or that they can
be obtained upon terms favorable to the Company.
The officers, directors and principal shareholders of the Company may actively
negotiate for the purchase of a portion of their common stock as a condition to,
or in connection with, a proposed merger or acquisition transaction. It is
anticipated that a substantial premium may be paid by the purchaser in
conjunction with any sale of shares by the Company's officers, directors and
principal shareholders made as a condition to, or in connection with, a proposed
merger or acquisition transaction. The fact that a substantial premium may be
paid to members of Company management to acquire their shares creates a conflict
of interest for them and may compromise their state law fiduciary duties to the
Company's other shareholders. In making any such sale, members of Company
management may consider their own personal pecuniary benefit rather than the
best interests of the Company and the Company's other shareholders, and the
other shareholders are not expected to be afforded the opportunity to approve or
consent to any particular buy-out transaction involving shares held by members
of Company management.
The Company has adopted a policy under which any consulting or finders fee that
may be paid to a third party for consulting services to assist management in
evaluating a prospective business opportunity would be paid in stock rather than
in cash. Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether, or in what amount, such
stock issuance might be made.
It is not currently anticipated that any salary, consulting fee, or finders fee
shall be paid to any of the Company's directors or executive officers, or to any
other affiliate of the Company except as described under Executive Compensation
above.
Although management has no current plans to cause the Company to do so, it is
possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
Item 10 - Executive Compensation
Since the change in control in October 2005, management of the Company requires
less than four (4) hours per calendar quarter. Accordingly, no officer or
director has received any compensation from the Company. Until the Company
acquires additional capital, it is not anticipated that any officer or director
will receive compensation from the Company other than reimbursement for
out-of-pocket expenses incurred on behalf of the Company. See Certain
Relationships and Related Transactions.
Prior to the October 2005 change in control, no compensation of any type was
paid to any Company officer or director.
The Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.
(Remainder of this page left blank intentionally)
22
Item 11 - Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the date of this Registration Statement,
the number of shares of Common Stock owned of record and beneficially by
executive officers, directors and persons who hold 5% or more of the outstanding
Common Stock of the Company. Also included are the shares held by all executive
officers and directors as a group.
% of Class
Name and address Number of Shares Beneficially Owned
---------------- ---------------- ------------------
Halter Financial Investments, L. P. 973,641 77.89%
12890 Hilltop Road
Argyle TX 76226
W/F Investment Corp. 107,000 8.56%
1900 Avenue of the Stars, Suite 2410,
Los Angeles CA 90067
Executive Officers and Directors as 973,641 77.89%
a group (three persons)
Halter Financial Investments, L. P. is controlled by the Company's sole director
and officer, Timothy P. Halter.
Item 12 - Certain Relationships and Related Transactions
The Company currently maintains a mailing address at 12890 Hilltop Road, Argyle,
Texas 76226. The Company's telephone number there is (972) 233-0300. Other than
this mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of the mailing address as these offices are used virtually full-time
by other businesses of the Company's President.
Item 13 - Exhibits and Reports on Form 8-K
Exhibits
--------
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
Reports on Form 8-K
-------------------
None
Item 14 - Principal Accountant Fees and Services
Year ended Year ended
June 30, 2007 June 30, 2006
------------- -------------
1. Audit fees $16,000 $17,500
2. Audit-related fees -- --
3. Tax fees -- --
4. All other fees -- --
------- -------
Totals $16,000 $17,500
======= =======
The Company has not designated a formal audit committee. However, as defined in
Sarbanes-Oxley Act of 2002, the entire Board of Directors (Board), in the
absence of a formally appointed committee, is, by definition, the Company's
audit committee.
In discharging its oversight responsibility as to the audit process, commencing
with the engagement of Rose, Snyder & Jacobs, the Board obtained from the
independent auditors a formal written statement describing all relationships
between the auditors and the Company that might bear on the auditors'
independence as required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees." The Board discussed with the
23
auditors any relationships that may impact their objectivity and independence,
including fees for non-audit services, and satisfied itself as to the auditors'
independence.
The Board discussed and reviewed with the independent auditors all matters
required to be discussed by auditing standards generally accepted in the United
States of America, including those described in Statement on Auditing Standards
No. 61, as amended, "Communication with Audit Committees".
The Board reviewed the audited financial statements of the Company as of and for
the years ended June 30, 2007 and 2006 with management and the independent
auditors. Management has the sole ultimate responsibility for the preparation of
the Company's financial statements and the independent auditors have the
responsibility for their examination of those statements.
Based on the above-mentioned review and discussions with the independent
auditors and management, the Board of Directors approved the Company's audited
financial statements and recommended that they be included in its Annual Report
on Form 10-KSB for the year ended June 30, 2007 for filing with the U. S.
Securities and Exchange Commission.
The Company's principal accountant, Rose, Snyder & Jacobs did not engage any
other persons or firms other than the principal accountant's full-time,
permanent employees.
(Remainder of this page left blank intentionally)
(Financial statements follow, beginning on Page F-1)
24
Nevstar Corporation
(a development stage company)
Contents
Page
Report of Independent Registered Certified Public Accounting Firm F-2
Financial Statements
Balance Sheets
as of June 30, 2007 and 2006 F-3
Statements of Operations and Comprehensive Loss
for the years ended June 30, 2007 and 2006 and
for the period from November 22, 2002
(date of bankruptcy settlement) through June 30, 2007 F-4
Statements of Changes in Stockholders' Equity
for the period from November 22, 2002
(date of bankruptcy settlement) through June 30, 2007 F-5
Statements of Cash Flows
for the years ended June 30, 2007 and 2006 and
for the period from November 22, 2002
(date of bankruptcy settlement) through June 30, 2007 F-6
Notes to Financial Statements F-7
F-1
LETTERHEAD OF ROSE, SNYDER & JACOBS
A CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Nevstar Corporation
We have audited the accompanying balance sheets of Nevstar Corporation (the
Company) (a Nevada corporation and development stage company) as of June 30,
2007 and 2006 and the related statements of operations, changes in shareholders'
deficit and cash flows for the years ended June 30, 2007 and 2006, and for the
period from November 22, 2002 (date of bankruptcy settlement) through June 30,
2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nevstar Corporation as of June
30, 2007 and 2006, and the results of its operations and its cash flows for the
years ended June 30, 2007 and 2006, and for the period from November 22, 2002
through June 30, 2007, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note C to the
financial statements, the Company did not generate revenue and is not operating
which raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note C. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Rose, Snyder & Jacobs
Rose, Snyder & Jacobs
A Corporation of Certified Public Accountants
Encino, California
August 22, 2007
F-2
Nevstar Corporation
(a development stage enterprise)
Balance Sheets
June 30, 2007 and 2006
June 30, 2007 June 30, 2006
----------- -----------
Assets
Assets
Cash on hand and in bank $ 9,342 $ 2,146
----------- -----------
Total Assets $ 9,342 $ 2,146
=========== ===========
Liabilities and Stockholders' Deficit
Current Liabilities
Current portion of long-term pre-petition tax liabilities $ -- $ 113,638
Accounts payable - trade 275 52,797
Accrued interest payable 1,233 99,927
Line of credit payable to shareholder 45,753 390,625
----------- -----------
47,261 656,987
----------- -----------
Long-Term Liabilities
Line of credit payable to shareholder -- 7,500
----------- -----------
Total Liabilities 47,261 664,487
----------- -----------
Commitments and contingencies
Stockholders' Deficit Preferred stock - $0.01 par value.
10,000,000 shares authorized
None issued and outstanding -- --
Common stock - $0.01 par value.
150,000,000 shares authorized.
1,250,090 and 419,449 shares
issued and outstanding, respectively 12,501 4,194
Additional paid-in capital 2,925,425 577,956
Accumulated deficit prior to development stage (1,001,679) (1,001,679)
Deficit accumulated during development stage (1,974,166) (242,812)
----------- -----------
Total Stockholders' Deficit (37,919) (662,341)
----------- -----------
Total Liabilities and Stockholders' Deficit $ 9,342 $ 2,146
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
Nevstar Corporation
(a development stage enterprise)
Statements of Operations and Comprehensive Loss
Years ended June 30, 2007 and 2006 and
Period from November 22, 2002 (date of bankruptcy settlement)
through June 30, 2007
Period from
November 22, 2002
(date of bankruptcy
Year ended Year ended settlement) through
June 30, 2006 June 30, 2007 June 30, 2007
----------- ----------- -----------
Revenues $ -- $ -- $ --
Operating Expenses
General and administrative expenses 10,627 39,706 163,551
Consulting expense related to issuance
of common stock at less than "fair value" 1,736,738 -- 1,736,738
----------- ----------- -----------
Total Operating Expenses 1,747,365 39,706 1,900,289
----------- ----------- -----------
Loss from Operations (1,747,365) (39,706) (1,900,289)
Other Expense
Other income -- -- 20 000
Gain on settlement of liabilities 44,581 9,985 54,566
Interest expense (28,570) (40,854) (148,443)
----------- ----------- -----------
Loss before Provision for Income Taxes (1,731,354) (70,575) (1,974,166)
Provision for Income Taxes -- -- --
----------- ----------- -----------
Net Loss (1,731,354) (70,575) (1,974,166)
Other Comprehensive Income -- -- --
----------- ----------- -----------
Comprehensive Loss $(1,731,354) $ (70,575) $(1,974,166)
=========== =========== ===========
Loss per weighted-average share of common stock
outstanding, computed on Net Loss -
basic and fully diluted $ (1.86) $ (0.20)
=========== ===========
Weighted-average number of shares
of common stock outstanding 933,764 349,586
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
Nevstar Corporation
(a development stage enterprise)
Statement of Changes in Stockholders'
Deficit Period from November 22, 2002 (date of bankruptcy
settlement) through June 30, 2007
Accumulated Deficit
deficit accumulated
Common Stock Additional prior to during the
------------ paid-in development development
Shares Amount capital stage stage Total
----------- ----------- ----------- ----------- ----------- -----------
Stock issued pursuant
to Plan of Reorganization
at Settlement Date on
November 22, 2002 50,715,008 $ 507,150 $ -- $(1,001,679) $ -- $ (494,529)
Effect of January 12, 2006
1 for 300 reverse stock split (50,545,559) (505,456) 505,456 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
As restated 169,449 1,694 505,456 (1,001,679) -- (494,529)
Net loss for the period -- -- -- -- (36,007) (36,007)
----------- ----------- ----------- ----------- ----------- -----------
Balances at
June 30, 2003 169,449 1,694 505,456 (1,001,679) (36,007) (530,536)
Net loss for the year -- -- -- -- (78,612) (78,612)
----------- ----------- ----------- ----------- ----------- -----------
Balances at
June 30, 2004 169,449 1,694 505,456 (1,001,679) (114,619) (609,148)
Net loss for the year -- -- -- -- (57,618) (36,007)
----------- ----------- ----------- ----------- ----------- -----------
Balances at
June 30, 2005 169,449 1,694 505,456 (1,001,679) (172,237) (666,766)
Private placement sale
of common stock 250,000 2,500 72,500 -- -- 75,000
Net loss for the year -- -- -- -- (70,575) (70,575)
----------- ----------- ----------- ----------- ----------- -----------
Balances at
June 30, 2006 419,449 4,194 577,956 (1,001,679) (242,812) (662,341)
Issuance of common stock
for private placement for cash 723,641 7,237 209,856 -- -- 217,093
for retirement of debt and
accrued interest 107,000 1,070 400,875 -- -- 401,945
Consulting expense for
value of common stock
sold at less than "fair value" -- -- 1,736,738 -- -- 1,736,738
Net loss for the year -- -- -- -- (1,731,354) (1,731,354)
----------- ----------- ----------- ----------- ----------- -----------
Balances at
June 30, 2007 1,250,090 $ 12,501 $ 2,925,425 $(1,001,679) $(1,974,166) $ (37,919)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
Nevstar Corporation
(a development stage enterprise)
Statements of Cash Flows
Years ended June 30, 2007 and 2006 and
Period from November 22, 2002 (date of bankruptcy settlement)
through June 30, 2007
Period from
November 22, 2002
(date of bankruptcy
Year ended Year ended settlement) through
June 30, 2007 June 30, 2006 June 30, 2007
----------- ----------- -----------
Cash Flows from Operating Activities
Net Loss $(1,731,354) $ (70,575) $(1,974,166)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation -- -- --
Consulting expense related to issuance
of common stock at less than "fair value" 1,736,738 -- 1,736,738
Gain on negotiated debt reduction in
pre-petition tax liabilities (44,581) (9,985) (54,566)
Increase (Decrease) in
Accounts payable - trade (52,522) 250 (77,771)
Pre-petition tax liabilities (85,000) (47,234) (132,234)
Accrued interest payable 28,570 36,869 127,076
----------- ----------- -----------
Net cash used in operating activities (148,149) (90,675) (374,923)
----------- ----------- -----------
Cash Flows from Investing Activities -- -- --
----------- ----------- -----------
Cash Flows from Financing Activities
Proceeds from sale of common stock 217,092 75,000 292,092
Proceeds from loans payable to stockholders 38,253 17,821 213,753
Cash paid on loans payable to stockholders (100,000) -- (121,580)
----------- ----------- -----------
Net cash provided by financing activities 155,345 92,821 384,265
----------- ----------- -----------
Increase in Cash and Cash Equivalents 7,196 2,146 9,342
Cash and cash equivalents at beginning of period 2,146 -- --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 9,342 $ 2,146 $ 9,342
=========== =========== ===========
Supplemental Disclosures of
Interest and Income Taxes Paid
Interest paid during the period $ -- $ 3,985 $ 19,985
=========== =========== ===========
Income taxes paid (refunded) $ -- $ -- $ --
=========== =========== ===========
Supplemental Disclosures of
Non-Cash Investing and Financing Activities
Conversion of note payable and accrued interest
to stockholder into common stock $ 401,946 $ -- $ 301,946
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
Nevstar Corporation
(a development stage enterprise)
Notes to Financial Statements
June 30, 2007 and 2006
Note A - Organization and Description of Business
Nevstar Corporation (Company) was incorporated under the laws of the State of
Nevada on December 2, 1993 as Mesquite Gaming Corp. On October 3, 1995, the
Company changed its name to NevStar Gaming Corporation and on September 18,
1997, changed its name to NevStar Gaming & Entertainment Corporation.
The Company was formed to acquire, develop, construct, own and manage
hotel/casino projects. The Company's strategy was to concentrate its efforts on
"niche" markets, such as "local" or "neighborhood" casinos. The Company obtained
its license and related approvals from the Nevada Gaming Commission to conduct
gaming at its initial hotel/casino, Mesquite Star Hotel and Casino (The Mesquite
Star) in Mesquite, Nevada, pursuant to an Order of Registration dated June 23,
1998. On July 1, 1998, the Mesquite Star, opened for business and the Company
began receiving revenues from operations. The Mesquite Star was located on an
approximately 25-acre property in Mesquite, Nevada.
On December 1, 1999, the Company filed a voluntary petition for relief under
Chapter 11 (the First Chapter 11 Proceeding) in the United States Bankruptcy
Court, District of Nevada (Bankruptcy Court), Case No. 99-19566RCJ. The Company
acted as debtor in possession during the First Chapter 11 Proceeding. In part as
a result of the objections of certain of the Company's secured creditors and the
Bankruptcy Court's belief that the Company could not be successfully reorganized
in view of such objections, the Bankruptcy Court dismissed the First Chapter 11
Proceeding on or about March 2, 2000.
On March 3, 2000, Randy Black (Black) was appointed by the District Court of
Clark County, Nevada as receiver for the Company. On or about March 8, 2000,
Black caused the casino to cease all meaningful operations and the casino was
closed. The Company has not engaged in business operations since that date.
Subsequently, Black acquired the first trust deed on the casino from the bank
and he began foreclosure proceedings against the casino.
On July 10, 2000, the Company again filed a voluntary petition for relief under
Chapter 11 (the Second Chapter 11 Proceeding) in the Bankruptcy Court, Case No.
BK-S-00-15075-LBR. During the Second Chapter 11 Proceeding, the Company acted as
debtor in possession. During the course of the Second Chapter 11 Proceeding, the
Bankruptcy Court permitted Black to foreclose on the casino, which occurred on
November 13, 2000. 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 holder, 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 Plan of Reorganization authorized a reverse
split of the Common Stock, which occurred on January 12, 2006. The effect of the
reverse stock split is reflected in the accompanying financial statements as of
the first day of the first period presented.
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 250,000 newly issued, restricted post-reverse split
shares (75,000,000 pre-reverse split shares) of its common stock to HFI,
constituting a change of control of the Company.
F-7
Nevstar Corporation
(a development stage enterprise)
Notes to Financial Statements - Continued
June 30, 2007 and 2006
Note A - Organization and Description of Business - Continued
The Company's emergence from Chapter 11 of Title 11 of the United States Code on
November 22, 2002 created the combination of a change in majority ownership and
voting control - that is, loss of control by the then-existing stockholders, a
court-approved reorganization, and a reliable measure of the entity's fair value
- resulting in a fresh start, creating, in substance, a new reporting entity.
Accordingly, the Company, post bankruptcy, has no significant assets,
liabilities or operating activities. Therefore, the Company, as a new reporting
entity, qualifies as a "development stage enterprise" as defined in Statement of
Financial Accounting Standard No. 7, as amended.
The Company's post-bankruptcy business plan is to locate and combine with an
existing, privately-held company which is profitable or, in management's view,
has growth potential, irrespective of the industry in which it is engaged.
However, the Company does not intend to combine with a private company which may
be deemed to be an investment company subject to the Investment Company Act of
1940. A combination may be structured as a merger, consolidation, exchange of
the Company's common stock for stock or assets or any other form which will
result in the combined enterprise's becoming a publicly-held corporation.
As of the date of the accompanying financial statements and subsequent thereto,
the Company does not have any operations.
Note B - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
a year-end of June 30.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts 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.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented
Note C - Going Concern Uncertainty
The Company has no post-bankruptcy operating history, limited cash on hand, no
other operating assets and has a business plan with inherent risk. Because of
these factors, the Company's auditors have issued an audit opinion on the
Company's financial statements for each of the years ended June 30, 2007 and
2006, respectively, which includes a statement describing the Company's going
concern status. This means, in the Company's auditor's opinion, substantial
doubt exists about the Company's ability to continue as a going concern at the
date of their opinion.
The Company's majority stockholder maintains the corporate status of the Company
and has provided all nominal working capital support on the Company's behalf
since the bankruptcy discharge date. Because of the Company's lack of operating
assets, its continuance is fully dependent upon the majority stockholder's
continuing support. The majority stockholder intends to continue the funding of
nominal necessary expenses to sustain the corporate entity.
F-8
Nevstar Corporation
(a development stage enterprise)
Notes to Financial Statements - Continued
June 30, 2007 and 2006
Note C - Going Concern Uncertainty - Continued
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis. Further, the Company faces considerable risk in its business plan
and a potential shortfall of funding due to our inability to raise capital in
the equity securities market. If no additional operating capital is received
during the next twelve months, the Company will be forced to rely on existing
cash in the bank and additional funds loaned by management and/or significant
stockholders. In the event, the Company is unable to acquire advances from
management and/or significant stockholders, the Company's ongoing operations
would be negatively impacted.
The Company's business plan is to seek an acquisition or merger with a private
operating company which offers an opportunity for growth and possible
appreciation of our stockholders' investment in the then issued and outstanding
common stock. However, there is no assurance that the Company will be able to
successfully consummate an acquisition or merger with a private operating
company or, if successful, that any acquisition or merger will result in the
appreciation of our stockholders' investment in the then outstanding common
stock.
The Company remains dependent upon additional external sources of financing;
including being dependent upon its management and/or significant stockholders to
provide sufficient working capital in excess of the Company's initial
capitalization to preserve the integrity of the corporate entity.
The Company anticipates offering future sales of equity securities. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding.
Note D - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At June 30, 2006 and 2005, respectively, the deferred tax asset and
deferred tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes.
As of June 30, 2007 and 2006, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code, the Company may have no net operating
loss carryforwards available to offset financial statement or tax return
taxable income in future periods as a result of a change in control
involving 50 percentage points or more of the issued and outstanding
securities of the Company.
3. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common shareholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
F-9
Nevstar Corporation
(a development stage enterprise)
Notes to Financial Statements - Continued
June 30, 2007 and 2006
Note D - Summary of Significant Accounting Policies - Continued
3. Earnings (loss) per share - continued
-------------------------------------
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
At June 30, 2007 and 2006, and subsequent thereto, the Company had no
outstanding common stock equivalents.
The weighted-average number of shares issued and outstanding as reflected
in the accompanying financial statements have been adjusted to give effect
to the aforementioned 1-for-300 reverse stock split.
4. Pending and/or New Accounting Pronouncements
--------------------------------------------
In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes (FIN
48). This interpretation requires the recognition and measurement of
uncertain income tax positions using a "more-likely-than-not" approach. The
provisions of FIN 48 are effective for fiscal years beginning after
December 15, 2006. The Company does not anticipate that the adoption of
this accounting pronouncement will have a material effect on its financial
statements.
The Company is also of the opinion that any other pending accounting
pronouncements, either in the adoption phase or not yet required to be
adopted, will not have a significant impact on the Company's financial
position or results of operations.
Note E - Fair Value of Financial Instruments
The carrying amount of cash, accounts payable and notes payable, as applicable,
approximates fair value due to the short term nature of these items and/or the
current interest rates payable in relation to current market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
Note F - Pre-Petition Tax Liabilities
Certain pre-petition tax liabilities to the Nevada Department of Taxation were
agreed to be retired, pursuant to the Bankruptcy Code and stipulations entered
into between the parties and the Company, plus interest at 5% in quarterly
payments ending September, 2009. The Company settled this debt for $85,000 cash
on April 9, 2007 and recognized an approximate $44,580 gain on debt
extinguishment.
During the quarter ended December 31, 2005, the Company reached a settlement
agreement with the Nevada Gaming Commission and paid approximately $51,220 as a
"settlement in full" on the outstanding debt, resulting in an approximate $9,985
gain on debt extinguishment.
F-10
Nevstar Corporation
(a development stage enterprise)
Notes to Financial Statements - Continued
June 30, 2007 and 2006
Note G - Line of Credit Notes Payable to Shareholders
W/F Investment Corp.
--------------------
The Company had a $250,000 revolving line of credit with W/F Investment Corp, a
company shareholder and key participant of the Company's Plan of Reorganization
in the Second Chapter 11 Proceeding. As of June 30, 2007 and 2006, respectively,
this Line of Credit has an outstanding balance of approximately $-0- and
$390,625.
Proceeds from this Line of Credit were used to pay the Company's obligations,
including the bankruptcy related allowed administrative expenses, accounting,
legal and related expenses. The Line of Credit bore interest at prime plus 2%,
payable monthly. The Line of Credit was due October 31, 2007. Accrued interest
on the Line of Credit totaled approximately $-0- and $88,219 at June 30, 2007
and 2006, respectively.
On November 17, 2006, the Company satisfied the terms and conditions of a
Settlement and Stock Issuance Agreement with W/F Investment Corp. (W/F), a
shareholder of the Company, with the payment of $100,000 cash and the issuance
of 107,000 shares of restricted common stock to settle the Company's aggregate
approximately $501,946 debt obligation to W/F. The form and terms of the
agreement were agreed upon as part of the October 2005 change in control
transaction as disclosed in the Company's Current Report on Form 8-K filed with
the SEC on October 12, 2005.
Halter Financial Investments, LP
--------------------------------
The Company and Halter Financial Investments, LP (HFI), an entity controlled by
the Company's President and Chief Executive Officer, have acknowledged that
outside funds are necessary to support the corporate entity and comply with the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended. To this end, HFI has agreed to lend the Company up to$50,000 with a
maturity period not to exceed two (2) years from the initial funding date at an
interest rate of 6.0% per annum. Through June 30, 2007 and 2006, respectively,
HFI has advanced approximately $45,753 and $7,500, respectively, under this
agreement, with an initial scheduled maturity date in May 2008.
Note H - Income Taxes
The components of income tax (benefit) expense for each of the years ended June
30, 2007 and 2006 and for the period from November 22, 2002 (date of bankruptcy
settlement) through June 30, 2007 is as follows:
Period from
November 22, 2002
(date of bankruptcy
Year ended Year ended settlement) through
June 30, 2007 June 30, 2006 June 30, 2007
------------- ------------- -------------
Federal:
Current $ -- $ -- $ --
Deferred -- -- --
------- ------ ------
-- -- --
------- ------ ------
State:
Current -- -- --
Deferred -- -- --
------- ------ ------
-- -- --
------- ------ ------
Total $ -- $ -- $ --
======= ======= =======
F-11
Nevstar Corporation
(a development stage enterprise)
Notes to Financial Statements - Continued
June 30, 2007 and 2006
Note H - Income Taxes - Continued
As a result of a October 28, 2005 change in control, the Company has a net
operating loss carryforward of approximately $41,000 to offset future taxable
income. The amount and availability of any net operating loss carryforwards may
be subject to limitations set forth by the Internal Revenue Code. Factors such
as the number of shares ultimately issued within a three year look-back period;
whether there is a deemed more than 50 percent change in control involving
holders of 5.0% or more of the issued and outstanding shares of common stock;
the applicable long-term tax exempt bond rate; continuity of historical
business; and subsequent income of the Company all enter into the annual
computation of allowable annual utilization of the carryforwards.
The Company's income tax expense (benefit) for each of the years ended June 30,
2007 and 2006 and for the period from November 22, 2002 (date of bankruptcy
settlement) through June 30, 2007 respectively, differed from the statutory
federal rate of 34 percent as follows:
Period from
November 22, 2002
(date of bankruptcy
Year ended Year ended settlement) through
June 30, 2007 June 30, 2006 June 30, 2007
------------- ------------- -------------
Statutory rate applied to income before income taxes $(588,700) $ (24,000) $(671,300)
Increase (decrease) in income taxes resulting from:
State income taxes -- -- --
Compensation expense related to common
stock issuances at less than "fair value" 590,500 -- 590,500
Other, including reserve for deferred tax asset
and application of net operating loss carryforward (1,800) 24,000 80,800
--------- --------- ---------
Income tax expense $ -- $ -- $ --
========= ========= =========
The Company's available net operating loss carryforward, subsequent to the
October 28, 2005 change in control, is approximately $41,000 and gives rise to a
deferred tax asset of approximately $14,000 as of June 30, 2007. This deferred
tax asset is fully reserved due to the uncertainty of it's ultimate utilization,
if any, in future periods.
Note I - Common Stock Transactions
Authorized Shares and Reincorporation
On January 3, 2006, the Company filed an Amendment and Restatement of its
Articles of Incorporation with the Secretary of State of the State of Nevada.
This Amendment allows for the issuance of up to 150,000,000 shares, consisting
of any combination of Common Stock, par value $0.01 and up to 10,000,000 shares
of Preferred Stock, par value $0.01 per share. Prior to this change, the Company
was authorized to issue up to 126,396,000 shares of $0.01 par value Common Stock
and up to 10,000,000 shares of $0.01 par value Preferred Stock. The effect of
this change is reflected in the accompanying financial statements as of the
first day of the first period presented.
On January 12, 2006, the Company effected a 1-for-300 share reverse stock split
of the then issued and outstanding common stock. The reverse stock split did not
change the number of authorized shares of common stock or the par value of the
Company's common stock. Except for any changes as a result of the treatment of
fractional shares, each stockholder holds the same percentage of common stock
outstanding immediately following the reverse stock split as such stockholder
did immediately prior to the reverse stock split.
This action caused the issued and outstanding shares to decrease from
125,715,008 to approximately 419,436. The effect of this action is reflected in
the accompanying financial statements as of the first day of the first period
presented.
F-12
Nevstar Corporation
(a development stage enterprise)
Notes to Financial Statements - Continued
June 30, 2007 and 2006
Note I - Common Stock Transactions - Continued
Stock issuances
On October 11, 2005, the Company sold 250,000 post-reverse split shares of
restricted common stock for gross proceeds of $75,000, pursuant to a
subscription agreement, to Halter Financial Investments, L. P., (a Texas Limited
Partnership), an entity controlled by Timothy P. Halter, who became the
Company's current Chief Executive Officer. The Company relied upon Section 4(2)
of The Securities Act of 1933, as amended, for an exemption from registration of
these shares and no underwriter was used in this transaction.
On November 17, 2006, the Company sold to HFI 723,641 shares of restricted
common stock for approximately $217,000 or $0.30 per share. The transaction was
effected pursuant to the terms of a Stock Purchase Agreement entered into by the
Company and HFI on October 11, 2005. The purchase transaction was effected
without registration in reliance upon Section 4(2) of the Securities Act of
1933. The form and terms of the purchase agreement were agreed upon as part of
the October 2005 change in control transaction as disclosed in the Company's
Current Report on Form 8-K filed with the SEC on October 12, 2005. As this
selling price was substantially below the "fair value" of comparable
transactions, the Company recognized a charge to operations for consulting
expense of approximately $1,736,700 equivalent to the difference between the
established "fair value" of $2.70 per share (as determined by the quoted closing
price of the Company's common stock on the date of the transaction) and the
selling price of $0.30 per share.
On November 17, 2006, the Company satisfied the terms and conditions of a
Settlement and Stock Issuance Agreement with W/F Investment Corp. (W/F), a
shareholder of the Company, with the payment of $100,000 cash and the issuance
of 107,000 shares of restricted common stock to settle the Company's debt
obligation to W/F of approximately $501,945. The form and terms of the agreement
were agreed upon as part of the October 2005 change in control transaction as
disclosed in the Company's Current Report on Form 8-K filed with the SEC on
October 12, 2005.
(Remainder of this page left blank intentionally)
(Signatures follow on next page)
F-13
SIGNATURES
In accord with Section 13 or 15(d) of the Securities Act of 1933, as amended,
the Company caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
Nevstar Corporation
Dated: September 12, 2007 By: /s/ Timothy P. Halter
------------------ ------------------------
Timothy P. Halter
President, Sole Director
Chief Executive Officer and
Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date as indicated.
Nevstar Corporation
Dated: September 12, 2007 By: /s/ Timothy P. Halter
------------------ ------------------------
Timothy P. Halter
President, Sole Director
Chief Executive Officer and
Chief Financial Officer