<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended: March 31, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
Commission File Number: 33-19980-D
Gemstar Enterprises, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0450450
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
73-251 Amber Street
Palm Desert, California 92260
(Address of principal executive offices)
760-346-4812
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes of
common equity; as of the latest practical date: 10,758,614 shares of its
$0.001 par value common stock as of May 15, 1997.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [ X ]
<PAGE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements as of March 31, 1997, and for the
three and six month periods ending March 31, 1997 and 1996, are included as a
part of the Registrant's Form 10-QSB Report for the second quarter of its fiscal
year ending September 30, 1997. These financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. However, in the
opinion of management, all adjustments (which include only normal recurring
accruals) necessary to present fairly the financial position, results of
operations, cash flows and stockholders' equity for the periods presented have
been made. These financial statements should be read in conjunction with the
accompanying notes, and with the historical financial statements and footnotes
thereto and other information contained in the Company's most recent report
on form 10-KSB Report for the fiscal year ended September 30, 1996.
<PAGE>
<PAGE> 3
Gemstar Enterprises, Inc.
(A Development Stage Company)
Balance Sheet
March 31, 1997
[Unaudited]
ASSETS
Current Assets:
Cash in bank $ 1,300
Pre-paid expense 250
Refundable deposits 250
-----------
Total Current Assets $ 1,800
-----------
TOTAL ASSETS $ 1,800
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 167
-----------
Total Current Liabilities $ 167
-----------
Stockholders' Equity:
Preferred Stock, none outstanding $ -0-
Common Stock, 10,758,614 shares outstanding 10,759
Additional paid-in capital 914,285
Deficit accumulated prior to the development stage <905,548>
Deficit accumulated during the development stage <17,863>
-----------
Total Stockholders' Equity $ 1,633
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,800
===========
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
Gemstar Enterprises, Inc.
(A Development Stage Company)
Statements of Operations
[Unaudited]
<TABLE>
<CAPTION>
From the Date
of Inception
as a Development
Stage Company
For the Three Month For the Six Month (April 10, 1993)
Period Ended Period Ended Through
March 31, March 31, March 31,
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $ -0- $ -0- $ -0- $ -0- $ -0-
-------- ------- ------- ------- -------
Expenses:
Office Supplies $ 61 $ 18 $ 61 $ 61 $ 194
Filing Fees -0- -0- 80 300 1,557
Cost of public entity 252 360 402 360 2,405
Travel -0- 268 -0- -0- 299
Taxes, non-income -0- -0- -0- -0- 127
Impairment of assets -0- 5,396 -0- 5,396 5,333
Amortization -0- -0- -0- -0- 412
------- ------- ------- ------- -------
Total Expenses $ 1,198 $ 6,042 $ 4,766 $ 6,385 $17,863
------- ------- ------- ------- -------
NET LOSS $<1,198> $<6,042> $<4,766> $<6,385> $<17,863>
======= ======= ======= ======= =======
NET LOSS PER SHARE $ <0.00> $ <0.00> $ <0.00> $ <0.00> $ <0.00>
======= ======= ======= ======= =======
Common Shares used in
Net Loss Computation 10,758,614 10,758,614 10,758,614 10,758,614 10,758,614
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
Gemstar Enterprises, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
[Unaudited]
<TABLE>
<CAPTION>
Deficit Deficit
Accum. Accum. Total
Prior to the During the Due Stockholders'
Common Stock Paid-in Development Development From Equity
Shares Amount Capital Stage Stage Officer <Deficit>
------ ------ ------- ------------ ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception
of Development Stage
April 10, 1993 1,698,864 $ 1,699 $812,150 $<905,548> $ -0- $ -0- $<91,699>
Common stock valued
at $.02 per share
for assumption of
liabilities, amounts
due shareholder and
receivable from
officer
August 16, 1993 5,000,000 5,000 95,000 -0- -0- <7,783> 92,217
Net Loss from the
start of the
Development Stage
to September 30, 1993 -0- -0- -0- -0- <1,300> -0- <1,300>
--------- ------- ------- -------- ------- ------- --------
Balance,
September 30, 1993 6,698,864 $ 6,699 $907,150 $<905,540> $<1,300> $<7,783> $ <612>
Expenses paid by
officer -0- -0- -0- -0- -0- 966 966
Net Loss for the
year ended,
September 30, 1994 -0- -0- -0- -0- <354> -0- <354>
--------- ------- ------- -------- ------- ------- --------
Balance,
September 30, 1994 6,698,864 $ 6,699 $907,150 $<905,540> $<1,484> $<6,817> $ -0-
Common stock issued
for cash at $.02 per
share
October 15, 1994 59,750 60 1,135 -0- -0- -0- -0-
Loan to officer -0- -0- -0- -0- -0- <1,195> <1,195>
Expenses paid by
officer -0- -0- -0- -0- -0- 615 615
Collection of loan
from officer
September 30, 1995 -0- -0- -0- -0- -0- 7,397 7,397
Net Loss for the
year ended,
September 30, 1995 -0- -0- -0- -0- <615> -0- <615>
--------- ------- ------- -------- ------- ------- --------
Balance,
September 30, 1995 6,758,614 $ 6,759 $908,285 $<905,540> $<2,099> $ -0- $ 7,397
Common Stock Issued
for cash at $.0025 per
share, Aug. 26, 1996 4,000,000 4,000 6,000 -0- -0- -0- 10,000
Net Loss for the
Year Ended
September 30, 1996 -0- -0- -0- -0- <10,998> -0- <10,998>
--------- ------- ------- -------- ------- ------- -------
Balance,
September 30, 1996 10,758,614 $10,759 $914,285 $<905,540> $<13,097> -0- $ 6,399
Net Loss for the
six month period,
March 31, 1997 -0- -0- -0- -0- <4,766> -0- <4,766>
--------- ------- ------- -------- ------- ------- --------
Balance,
March 31, 1997 10,758,614 $10,759 $914,285 $<905,540> $<17,863> $ -0- $ 1,633
========= ======= ======== ========= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
Gemstar Enterprises, Inc.
(A Development Stage Company)
Statements of Cash Flows
[Unaudited]
<TABLE>
<CAPTION>
From the Date
of Inception
as a Development
Stage Company
(April 10, 1993)
For the Six Month Period Through
Ended March 31, March 31,
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash Flows from
Operating Activities:
Net Loss from Operations $ <4,766> $ <6,385> $<17,863>
Amortization -0- -0- 412
Expenses paid by officer -0- -0- 1,581
Increase <Decrease> in
pre-paid expenses and
refundable deposits -0- -0- <500>
accounts payable 167 333 <455>
-------- -------- --------
Net Cash Used In
Operating Activities $ <4,599> $ <6,052> $<16,825>
-------- -------- --------
Cash Flows from
Financing Activities:
Proceeds from sale of
common stock $ -0- $ -0- $ 11,195
Advances from officer -0- 62 603
Collection of receivable
from officer -0- -0- 7,397
Advances to officer -0- -0- <1,798>
-------- -------- --------
Net Cash Provided by
Financing Activities $ -0- $ 62 $ 17,397
-------- -------- --------
Net Increase <Decrease> In Cash $ <4,599> $ <5,990> $ 572
Cash at beginning of period 5,899 8,000 728
-------- -------- --------
Cash at end of period $ 1,300 $ 2,010 $ 1,300
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
Gemstar Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
[Unaudited]
NOTE 1 - ACCOUNTING POLICIES AND OTHER DISCLOSURES
The condensed financial statements included in this Form 10-QSB Report have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. These financial
statements have been prepared in the ordinary course of business for the
purpose of providing information with respect to the interim three and six
month periods ended March 31, 1997 and 1996, and are not necessarily
indicative of the results to be expected for the entire year. The accounting
policies followed by the Company and other pertinent footnote disclosures are
set forth in the Registrant's audited financial statements contained in its Form
10-KSB Report for the fiscal year ended September 30, 1996.
The loss per common share has been computed using the number of common shares
outstanding as of the end of the latest period presented. Inasmuch as the
Company is a development stage enterprise, using the number of common shares
outstanding as of March 31, 1997, rather than the weighted average number of
common shares outstanding during each of the periods presented, provides a
more conservative approach to the loss per share computation.
<PAGE> 8
PART I - FINANCIAL INFORMATION
Item 2. Plan of Operations
Statements regarding the Registrant's expectations as to future operations
and certain other statements presented in this Form 10-QSB Report constitute
forward looking information within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Registrant believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business operations, there can be no assurance that actual
results will not differ materially from the expectations expressed herein. In
addition to matters affecting the Registrant in general, factors which could
cause expectations to differ are, but not limited to, the following: 1)
changes in federal and/or state securities laws; 2) changes in federal and/or
state income tax laws, in particular as they relate to tax free
reorganizations; 3) economic conditions, particularly as they relate to
securities markets; and 4) the Company's ability to continue to have
sufficient capital available to maintain its operations.
The Registrant was incorporated under the laws of the state of Nevada in
October of 1987, under the name of North Star Petroleum, Inc. and completed a
public offering of its common stock and warrants in August of 1988. Subsequent
to the public offering, the Registrant engaged in the exploration, development
and production of oil and gas on a joint venture basis with other industry
partners.
In May of 1990, the Registrant amended its Articles of Incorporation to
accomplish the following: a) change its name to Gemstar Enterprises, Inc.; b)
increase the par value of its common stock to $0.02 per share; and c) authorize
for issuance, in addition to its common stock, 5,000,000 shares of preferred
stock.
At the same time that the Registrant's shareholders approved the Amendments
to its Articles of Incorporation, they also voted to a) reverse split the issued
and outstanding shares of its common stock on the basis of one share for every
twenty shares (any references to the number of common shares contained herein
has taken this reverse split into account); b) approve the Registrant's
acquisition of approximately 200 acres of real property located in Alexander
County, North Carolina.
Neither the Registrant's oil and gas operations nor its investment in real
estate generate sufficient revenue to result in profitable operations. Thus, in
order for the Registrant to avoid filing for bankruptcy, receivership or any
similar proceeding, the Registrant commenced selling its assets and the
liabilities associated with those assets. Consequently, by April 1993, all of
the Company's assets had been disposed of and all liabilities which has remained
after the sale of the Registrant's assets were assumed by the sole officer and
director of the Registrant at such time, fir which the Registrant issued shares
of its common stock at a value of $0.02 per share to the officer and retained a
receivable from him which amounted to less than $10,000.
During the past six months, as well as during the Registrant's latest
fiscal year, ending in September, 1997, and for its preceding two fiscal years
the Registrant did not engage in any revenue producing business activity. In
order to pay its operating costs, the Registrant sold 4,000,000 shares of its
common stock in a private transaction during August 1996. The Registrant is now
actively seeking to acquire assets or to acquire or merge with an existing
operating entity in order to establish business operations.
<PAGE> 9
The Registrant can not assure success in this endeavor and the acquisition
of any asset or business enterprise (profitable or not profitable) will in all
likelihood result in dilution in the percentage ownership that a current
shareholder has in the Registrant. This dilution will be a result of the
Company issuing additional equity securities in exchange for the assets or
operations being acquired and the only asset or incentive the Registrant has is
its shares of its common stock. Additionally, as an incentive to having their
business acquired by the Registrant, the Registrant may also agree to sell
shares of its equity securities to increase the combined cash available upon the
completion of such a reorgainization. Upon completion of the afore mentioned
events, the current owners of the assets or business enterprise which the
Registrant has acquired will in most instances retain a controlling interest in
the issued and outstanding common shares of the Registrant.
The Registrant had no employees during the past six months and its current
fiscal, nor in either of its last two fiscal years. If the Registrant business
operations were to change through an acquisition of an existing business
operation, then the current employees of the business acquired would most likely
be retained and additional employees may be hired. At the present time,
Management is providing the Registrant with a location for its principal
executive offices on a rent free basis and no salaries or other form of
compensation are currently being paid by the Registrant for the time and efforts
required by management to seek an entity for the purpose of entering into a
reorganization.
The Registrant intends to reimburse management for its out-of-pocket costs
and to compensate management for the time required to fulfill its
responsibilities to the Registrant. During 1993, the board of directors approved
resolutions authorizing the issuance of the Registrant's common stock as
consideration for amounts advanced to the Registrant by its stockholders and may
again do so in the future.
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 will
require the Registrant to incur substantial costs for payment of accountants,
attorneys and others, which may include management. If a decision is made not
to participate in or complete the acquisition of a specific business
opportunity, the costs thus incurred may not be recoverable.
Currently, management is not utilizing all of its available time and
resources in seeking to find a future business prospect for the Registrant.
Management believes that the Registrant can serve a unique purpose for an
entity which is seeking to become a public entity through a merger or
acquisition. Management is actively engaged in helping start-up companies with
respect to organizational matters and in structuring the start-up entity. Even
though there may be a similarity in purpose, and assuming that such activities
are in conflict with the Registrant's intended purpose, management believes that
significant different forces are driving the intent of a start-up entity with
the desired results of the Registrant. However, to the extent that the
Registrant could serve a purpose in the progression of a start-up entity,
management intends to give first priority to the Registrant in participating in
such a venture or acquisition if deemed appropriate by all parties to such a
transaction. In any event, management will make full disclosure of its
responsibilities to the Registrant if such a situation should arise and keep
both shareholders of the Registrant, as well as the owners of such other entity,
advised of the possibility that such a reorganization may occur.
Management's activities in this regard should not be understood to give any
assurance that the Registrant will be able to acquire an interest in any such
prospects, products or opportunities. Furthermore, although the Registrant may
be involved in some existing venture or in some kind of business activity, such
participation in or the acquisition of such a business prospect, can in no way
assure that profitable operations will result therefrom.
<PAGE> 10
Liquidity and Capital Resources
As of March 31, 1997, the Company had $1,300 in cash available and $168 in
liabilities. The Registrant's cash position declined only about one-third of
the amount it decreased furing the first quarter. This reduction was due to the
fact that the majority of the Registrant's costs were relative to bringing its
financial records current. In doing so, legal and accounting fees were incurred
that are not anticipated as being reoccuring. During the same period in its
prior fiscal year the Registrant expended funds in purchasing software to assist
the Registrant in its filing of reports electronically with the Securities and
Exchange Commission.
Nevertheless, the need to cover a continued cash outflow as a result of the
Registrant's position as a public entity will continue. Consequently,
management realizes that a certain amount of urgency in finding an appropriate
acquisition needs to be weighed against the cost of raising capital through the
private placement of the Registrant's common stock. The nature of the
Registrant's activities relative to investigating potential acquisitions will
also result in more costs being incurred, both out-of-pocket expenses and legal
and accounting fees. Also, as additional time commitments are being given to
the Registrant by management, the likelihood of making payments to management
increases.
As a result of these primary concerns, the need for additional capital
will become more pressing. Management believes that those costs relative to
maintaining such limited operations can be obtained from either existing
shareholders or from management itself. If any major funding is required in
conjunction with an acquisition, management believes that reliance on an
underwriter or other professional, such as investment banker or venture
capitalist would be needed.
Results of Operations
The Registrant has not engaged in any business operations, other than as
previously disclosed herein, during the quarters ended March 31, 1996 and
1997, and primarily since the sale of the Registrant's assets in 1993.
Consequently, an evaluation of its business operations can only be associated
with the Registrant's efforts in seeking to acquire an established business
operation.
PART II - OTHER INFORMATION
Item 1 -Legal Proceedings:
None.
Item 2 -Changes in Securities:
None.
Item 3 -Defaults upon Senior Securities:
None.
Item 4 -Submission of Matters to a Vote of Security Holders:
None.
<PAGE> 11
Item 5 - Other Information:
None.
Item 6 - Exhibits and Reports on Form 8-K.
The Company has not filed any Reports on Form 8-K during the quarter being
covered by this Form 10-QSB.
Index of Exhibits:
Number 3: Initial Articles of Incorporation and By-laws
Incorporated by reference to the Registrant's registration statement on
Form S-18, File No. 33-19980-D
Number 3: Amended Articles of Incorporation
Incorporated by reference to the Registrant's Form 10-KSB, for the year
ended September 30, 1989
Number 3: Amended Articles of Incorporation
Incorporated by reference to the Registrant's Form 10-QSB, for the quarter
ended December 31, 1995
Number 3: Amended Articles of Incorporation
Incorporated by reference to the Company's Form 10-KSB, for the year
ended March 31, 1996
Number 4: Warrant Agent Agreement
Incorporated by reference to the Company's registration statement on Form
S-18, File No. 33-19980-D
Number 4: First Amendment to Warrant Agent Agreement
Incorporated by reference to the Registrant's Form 10-KSB, for the year
ended September 30, 1995
Number 4: Second Amendment to Warrant Agent Agreement
Incorporated by reference to the Company's Form 10-KSB, for the year
ended September 30, 1995
Number 27: Financial Data Schedule
Included in this Report as Exhibit 27
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GEMSTAR ENTERPRISES, INC.
By: /S/Denny W. Nestripke
Denny W. Nestripke
Chief Executive Officer and
Chief Financial Officer
Date: May 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000829323
<NAME> GEMSTAR ENTERPRISES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,300
<SECURITIES> 0
<RECEIVABLES> 500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,800
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,800
<CURRENT-LIABILITIES> 168
<BONDS> 0
0
0
<COMMON> 925,044
<OTHER-SE> (923,411)
<TOTAL-LIABILITY-AND-EQUITY> 1,800
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,198)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,198)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
