SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
x
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2008
o
TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from
to
Commission
file number: 000-52763
ALLSTAR RESTAURANTS
(Exact
name of Small Business Issuer as Specified in its Charter)
|
Nevada
|
20-2638087
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
Number)
|
1458
Broad Street, Regina, Sask. S4R 1Y9, Canada
(Address
of registrant's principal executive offices)
306-529-2652
(Issuer’s
Telephone Number, Including Area Code)
Check
whether the Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes
x
No
o
Indicate
by check mark whether the Issuer is a shell company (as defined by Rule 12b-2 of
the Exchange Act).
Yes
o
No
x
State the
number of shares outstanding of each of the Issuers classes of common equity, as
of the latest practicable date:
Common,
$.001 par value per share: 9,950,000 outstanding as of July 29
th
,
2008.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial
Statements.
ALLSTAR RESTAURANTS
CONSOLIDATED
FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
ALLSTAR
RESTAURANTS
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
March
31,
|
|
|
|
|
2008
|
|
|
2008
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
|
86,594
|
|
|
$
|
49,722
|
|
|
Accounts receivable - other
|
|
|
658
|
|
|
|
621
|
|
|
Inventory - total
|
|
|
17,413
|
|
|
|
17,257
|
|
|
Prepaids
|
|
|
3,706
|
|
|
|
11,846
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
108,371
|
|
|
|
79,446
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
FIXED ASSETS
|
|
|
244,045
|
|
|
|
254,103
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
6,700
|
|
|
|
6,640
|
|
|
Debt Offering Costs
|
|
|
2,104
|
|
|
|
2,224
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER ASSETS
|
|
|
8,804
|
|
|
|
8,864
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
361,220
|
|
|
$
|
342,413
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
65,711
|
|
|
|
39,462
|
|
|
SBL
loan - current portion
|
|
|
27,464
|
|
|
|
26,070
|
|
|
Shareholder's
loan
|
|
|
211,636
|
|
|
|
212,282
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
304,811
|
|
|
|
277,814
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG
TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
Long term debt - SBL loan
|
|
|
101,794
|
|
|
|
108,387
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
406,605
|
|
|
|
386,201
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Common stock; 75,000,000 shares authorized at $0.001 par
value,
|
|
|
|
|
|
|
|
|
|
9,950,000
and 9,950,000 shares issued and outstanding,
|
|
|
|
|
|
|
|
|
|
respectively
(Note 3)
|
|
|
9,950
|
|
|
|
9,950
|
|
|
Additional
paid-in capital
|
|
|
68,392
|
|
|
|
63,740
|
|
|
Currency
Translation
|
|
|
437
|
|
|
|
486
|
|
|
Retained
Earnings (Deficit)
|
|
|
(124,164
|
)
|
|
|
(117,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
(45,385
|
)
|
|
|
(43,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
$
|
361,220
|
|
|
$
|
342,413
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F-1
|
ALLSTAR RESTAURANTS
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three Months Ended
|
|
|
|
|
June
30,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
$
|
342,316
|
|
|
$
|
265,329
|
|
|
COST
OF SALES
|
|
|
102,373
|
|
|
|
86,996
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
239,943
|
|
|
|
178,333
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
Payroll
expenses & benefits
|
|
|
137,208
|
|
|
|
104,550
|
|
|
Professional
fees
|
|
|
21,293
|
|
|
|
12,065
|
|
|
General
administrative expenses
|
|
|
17,460
|
|
|
|
15,409
|
|
|
Marketing
& advertising
|
|
|
6,421
|
|
|
|
5,926
|
|
|
Depreciation
& amortization
|
|
|
23,722
|
|
|
|
20,664
|
|
|
Rent
& utilities
|
|
|
29,125
|
|
|
|
26,887
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
235,229
|
|
|
|
185,501
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
4,714
|
|
|
|
(7,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
EXPENSES
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
10,914
|
|
|
|
11,430
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER EXPENSES
|
|
|
10,914
|
|
|
|
11,430
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
|
|
(6,200
|
)
|
|
|
(18,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$
|
(6,200
|
)
|
|
$
|
(18,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income (loss) per share of common stock
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
9,950,000
|
|
|
|
9,950,000
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F-2
|
ALLSTAR
RESTAURANTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Comprehensive
|
|
|
|
|
Common
Stock
|
|
|
Paid
In
|
|
|
Income
|
|
|
Accumulated
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
(Loss)
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
MARCH 31, 2008
|
|
|
9,950,000
|
|
|
$
|
9,950
|
|
|
|
63,740
|
|
|
$
|
486
|
|
|
$
|
(117,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed
interest on shareholder loan
|
|
|
-
|
|
|
|
-
|
|
|
|
4,652
|
|
|
|
-
|
|
|
|
-
|
|
|
credited
to contributed capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Gain for the three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2008 (unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
JUNE 30, 2008
|
|
|
9,950,000
|
|
|
$
|
9,950
|
|
|
$
|
68,392
|
|
|
$
|
437
|
|
|
$
|
(124,164
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F-3
|
ALLSTAR RESTAURANTS
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
For
the Three Months Ended
|
|
|
|
|
June
30,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(6,200
|
)
|
|
$
|
(18,598
|
)
|
|
Adjustments
to reconcile net loss to net cash used by
|
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
& Amortization
|
|
|
23,722
|
|
|
|
20,664
|
|
|
Contribution
of Interest
|
|
|
4,652
|
|
|
|
4971
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Increase
in accounts receivable - other
|
|
|
-
|
|
|
|
(4,400
|
)
|
|
Increase
in Inventory
|
|
|
-
|
|
|
|
-
|
|
|
Decrease
(increase) in prepaids
|
|
|
8,140
|
|
|
|
1,633
|
|
|
(Increase)
decrease in deposits
|
|
|
-
|
|
|
|
-
|
|
|
Decrease
in debt offering costs
|
|
|
120
|
|
|
|
-
|
|
|
Increase
(decrease) in accounts payable
|
|
|
26,089
|
|
|
|
(19,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities
|
|
|
56,523
|
|
|
|
(15,597
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(11,021
|
)
|
|
|
(6,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities
|
|
|
(11,021
|
)
|
|
|
(6,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Payments on SBL loan
|
|
|
(6,471
|
)
|
|
|
(5,171
|
)
|
|
Payments
on Shareholder loan
|
|
|
(2,454
|
)
|
|
|
(6,833
|
)
|
|
Proceeds
from Shareholder loan
|
|
|
295
|
|
|
|
24,980
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
(8,630
|
)
|
|
|
12,976
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
36,872
|
|
|
$
|
(8,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
POSITION, BEGINNING OF YEAR
|
|
|
49,722
|
|
|
|
60,701
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
POSITION, END OF THREE MONTHS PERIOD
|
|
|
86,594
|
|
|
|
51,893
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR DURING THE PERIOD:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
5,721
|
|
|
$
|
6,459
|
|
|
Income
Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NON
CASH FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Interest
contributed by stockholder
|
|
$
|
4,652
|
|
|
$
|
4,971
|
|
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
ALLSTAR
RESTAURANTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and
2007
|
1.
|
BASIS
OF FINANCIAL STATEMENT PRESENTATION
|
The
accompanying unaudited consolidated 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 in accordance with such
rules and regulations. The information furnished in the interim
consolidated financial statements includes normal recurring adjustments and
reflects all adjustments, which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management
believes the disclosures and information presented are adequate to make the
information not misleading, it is suggested that these interim consolidated
financial statements be read in conjunction with the Company’s most recent
audited consolidated financial statements and notes thereto as of March 31,
2008. Operating results for the three months ended June 30, 2008 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2009.
|
2.
|
DESCRIPTION
OF THE BUSINESS
|
The
company was incorporated December 22, 2004 under the laws of the state of Nevada
as Nexstar Properties Inc. The company name was changed to Allstar
Restaurants on March 30, 2005. Allstar Restaurants was established to
pursue opportunities in the full-service segment of the restaurant and food
services industry with the objective of developing into a multi-unit restaurant
and food services operation.
The
company commenced operations with its first restaurant acquisition as of July 1,
2005. On July 1, 2005, a wholly owned subsidiary, Fastserve Foods Inc.,
incorporated under the laws of the province of Saskatchewan, Canada, in the City
of Regina, was acquired. Fastserve Foods Inc., which changed its name to China
Doll Foods Ltd. during the previous fiscal period, operates an established
restaurant and sports lounge called China Doll Restaurant and Lounge, located in
the City of Regina, in the province of Saskatchewan, Canada. This subsidiary
acts as an operating company for all business activities relating to the
company’s restaurant businesses in Canada.
As of
June 30, 2008, the company has authorized 75,000,000 common voting shares each
with a par value of $0.001. As of the period ended June 30, 2008, the company
had 9,950,000 common shares outstanding.
|
4.
|
RELATED
PARTY TRANSACTIONS
|
The total
outstanding balance of the shareholder loan as at June 30, 2008 is $211,636 and
the full amount is shown as a current liability on the balance sheet. This
shareholder loan carries no set terms of principal repayment. The shareholder
does not expect to make a specific claim on the interest for this loan during
the current year or foreseeable future. Imputed Interest for the nine months
period ended has been recorded on the balance sheet at the rate of 9.00 % on the
outstanding loan balance for the three months ended June 30, 2008. Additional
Paid-In Capital in the form of imputed interest on the shareholder loan was
recorded. The total of this cost is shown on the balance sheet as Additional
Paid-In Capital of $4,652 and in the income statement as interest expense for
the same amount.
On July
1, 2005, a wholly owned subsidiary, Fastserve Foods Inc., incorporated under the
laws of the province of Saskatchewan, Canada, in the City of Regina, was
acquired. Fastserve Foods Inc. operates an established restaurant and
sports lounge called China Doll Restaurant and Lounge, located in the City of
Regina, in the province of Saskatchewan, Canada. This subsidiary, now known
as China Doll Foods Ltd., currently acts as the operating entity for all
business activities relating to the company’s restaurant businesses in
Canada.
F-5
ALLSTAR
RESTAURANTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 2008 and
2007
|
4.
|
RELATED
PARTY TRANSACTIONS (continued)
|
The
acquisition was executed by exchanging all (100%) of the issued and outstanding
common shares (100) of Fastserve Foods Inc., for 5,000,000 common shares issued
by Allstar Restaurants. As stated, the majority shareholder is
currently the Chairman of the Board and Chief Executive Officer of Allstar
Restaurants. As of the date of this filing, the shareholder holds a total of
5,100,000 common shares of Allstar Restaurants.
|
5.
|
FOREIGN CURRENCY
TRANSLATIONS
|
The
Company’s functional currency is the Canadian dollar. The Company’s reporting
currency is the U.S. dollar. All transactions initiated in other
currencies are re-measured into the functional currency as follows:
Monetary
assets and liabilities at the rate of exchange in effect at the balance sheet
date,
ii)
Non-monetary assets and liabilities, and equity at historical rates,
and
iii)
Revenue and expense items at the average rate of exchange prevailing during the
period.
Gains and
losses on re-measurement are included in determining net income for the
period
Translation
of balances from the functional currency into the reporting currency is
conducted as follows:
Assets
and liabilities at the rate of exchange in effect at the balance sheet
date,
ii)
Equity at historical rates, and
iii)
Revenue and expense items at the average rate of exchange prevailing during the
period.
Translation
adjustments resulting from translation of balances from functional to reporting
currency are accumulated as a separate component of shareholders’ equity as a
component of comprehensive income or loss.
The
Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going concern
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business. For the three months period ended June 30, 2008,
the Company has incurred a net loss of $(6,200) and losses from operations in
recent prior periods. The company’s current liabilities exceed its current
assets by $196,440. These factors may create uncertainty about the Company\'s
ability to continue as a going concern. In order to continue as a going concern
and achieve a profitable level of operations, the Company will require, among
other things, additional capital resources. Management's plans to obtain such
resources for the Company include (1) Issuing promissory notes in exchange for
additional shareholder loans; (2) conversion of existing promissory notes into
common stock; (3) the company will actively seek to execute additional
acquisitions of established restaurant businesses that present opportunities for
additional cash flow and value creation via marketing and operational
enhancements. However, it is anticipated that any future acquisition(s) will not
be executed prior to the end of the fiscal year ended 2009; (4) The Company has
filed a Form SB-2 Registration statement to the United States Securities and
Exchange Commission with the intention of becoming a fully reporting and
publicly-traded corporation. We had received a Notice of Effectiveness on August
13, 2007, officially making us a fully reporting Public Company. This will
provide additional opportunities in the future for the Company to raise capital
via stock offerings.
Management
cannot provide any assurances that the Company will be successful in
accomplishing any of its plans. The ability of the Company to continue as a
going concern is dependent upon its ability to successfully accomplish the plans
described in the preceding paragraph and eventually secure other sources of
financing and attain profitable operations.
F-6
Item 2. Management’s Discussion and
Analysis or Plan of Operation.
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes thereto contained elsewhere in this Form 10-QSB.
Forward-Looking
Statements
This
discussion contains forward-looking statements that involve risks and
uncertainties. All statements regarding future events, our future financial
performance and operating results, our business strategy and our financing plans
are forward-looking statements. In many cases, you can identify forward-looking
statements by terminology, such as “may”, “should”, “expects”, “intends”,
“plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or
“continue” or the negative of such terms and other comparable terminology.
These statements are only predictions. Known and unknown risks,
uncertainties and other factors could cause our actual results to differ
materially from those projected in any forward-looking statements. We do
not intend to update these forward-looking statements.
Overview
Allstar
Restaurants
,
(referred
to herein as the “Company”, “Allstar”, “we”, “us” and “our”) is primarily
engaged in the restaurant business located in the city of Regina, in the
province of Saskatchewan, Western Canada.
We were
incorporated on December 22, 2004 under the laws of the State of Nevada
originally under the name Nexstar Properties, Inc. By Director’s resolution, on
March 30, 2005, the company’s name was changed to Allstar Restaurants. The
company’s United States registered office is located at 3155 East Patrick Lane,
Suite 1, Las Vegas, Nevada 89120-3481. Our principal executive offices are
located at 1458 Broad Street, Regina, Saskatchewan, S4R 1Y9, Canada. The
telephone number for our executive office is 306.529.2652. The fax number is
306.352.1597.
We are a
restaurant company with the objective of developing into a multi-unit
full-service restaurant and food services business. The company was established
to pursue opportunities in the family style full-service casual dining segment
of the restaurant industry. Allstar Restaurants, through a wholly owned
subsidiary called Fastserve Foods Inc., acquired on July 1, 2005, currently owns
and operates an established restaurant and licensed lounge called China Doll
Restaurant and Lounge. This restaurant is located in the city of Regina, in the
province Saskatchewan, Canada. This subsidiary, which recently changed its name
to China Doll Foods Ltd., currently acts as the operating company for all
business activities relating to the company’s restaurant business(s) in Western
Canada. The China Doll Restaurant is currently the only restaurant location
operated and wholly-owned by Allstar Restaurants.
We have
received a going concern opinion from our auditors which contemplates, among
other things, the realization of assets and satisfaction of liabilities in the
normal course of business. For the three months period ended June 30, 2008,
the Company had a net loss of $(6,200) and an accumulated retained earnings
deficit as at June 30, 2008 of $(124,164). The Company intends to fund
operations over the next nine to twelve months through improved cash flow
generated from operations as well as equity financing arrangements, both of
which may be insufficient to fund its capital expenditures, working capital and
other cash requirements over the next nine months to the year ending March 31,
2009. Please refer to Note 6, “Going Concern”, accompanying the financial
statements.
The
discussion below provides an overview of our operations, discusses our results
of operations, our plan of operations and our liquidity and capital
resources.
Results
of Operations
Overview
- Quarter ended June 30, 2008
Total
sales
for the three
months ended June 30, 2008 were $342,316 compared to $265,329 in sales for the
three months ended June 30, 2007, representing a 29% increase in
period-over-period sales. This increase in sales was the result of a combination
of an increased advertising budget, menu price increases, and the continued
strength of the Western Canadian economy. Gross profit, herein defined as sales
less cost of sales, was $239,943 for the three months ended June 30, 2008,
compared to $178,333 in gross profit for the three months ended June 30,
2007.
Our
operating expenses were $235,229 for the three months ended June 30, 2008
compared to operating expenses of $185,501 for the three months ended June 30,
2007. Operating expenses increased primarily as a result of an increase in
payroll expenses and benefits to $137,208 for the three months period ended June
30, 2008 as compared to $104,550 for the previous three months period ended June
30, 2007. The increase in payroll expenses for the period was the result of a
general per-hour wage increase for most staff as a mandated Provincial minimum
wage increase came into effect. Also, the addition of some kitchen staff as a
result of the trend in increases sales realized for the period was a
contributing factor. Depreciation and amortization expense has increased from
$20,664 for the three months ended June 30, 2007 to $23,722 for the three months
ended June 30, 2008 due to an increase in investment in leasehold improvements
that took place during the third and fourth quarters of the most recent fiscal
period ending March 31, 2008.
We
realized a net loss of $(6,200) for the three months ended June 30, 2008
compared to a net loss of $(18,598) for the three months period ended June 30,
2007.
Operations
Outlook
The
Company's plan of operations and primary objective for the next nine months to
the fiscal period ending March 31, 2009 is to increase its existing restaurant
location sales while controlling costs. We will also begin to analyze prospects
for acquiring additional restaurant locations to either extend our existing
brand concept or look to acquire other existing established restaurant
operations.
For our
existing restaurant operation, the company intends to reach its sales objectives
as follows:
|
|
·
|
Increase
marketing expenditures near the end of the second quarter (September) of
our fiscal year. We will continue to focus our marketing efforts on
continuing to position our restaurant business based on the highly
differentiated quality of our core Chinese food menu items as well as our
superior customer service both for the dine-in and takeout segments of our
business. We will accomplish this by emphasizing the message of “quality
with great service” in our print, radio, on-line, and direct mail
campaigns which will begin near the end of the summer
season.
|
|
|
·
|
Continue
to reinvest in the existing restaurant business where necessary to improve
and freshen the interior and exterior
appearance,
|
|
|
·
|
Continue
to focus on improving overall customer satisfaction measures through
enhanced management and customer service training
processes,
|
|
|
·
|
Bring
into effect a menu-wide price
increase,
|
|
|
·
|
Focus
on expanding our city-wide delivery and takeout service concept by
improving efficiency and utilizing creative and aggressive marketing
initiatives,
|
|
|
·
|
Continue
to streamline and standardize our cost and accounting controls systems and
procedures.
|
Allstar
Restaurants’ objective and plan for our existing restaurant operation, the China
Doll Restaurant, is to continue to strive to increase restaurant sales through
increased customer counts in each primary day-part (lunch, dinner and
late-night, takeout), selective menu and price promotions and effective
marketing of China Doll Restaurant’s competitive attributes of high quality food
products, superior taste and value pricing. Over the next three months the
number of our employees, in particular kitchen staff, may increase as our sales
growth trend continues. We may also extend our operations hours to accommodate a
greater customer base, which may also have an impact on overhead
expenses. Management will continue to standardize and document
operations procedures with the objective of extending the China Doll Restaurant
brand in the future to either additional corporate-owned locations or explore
the feasibility of future franchise offerings.
Although
we cannot predict with certainty what revenues we can expect during the next
twelve months, we believe that we probably will have enough revenue, when added
to our cash on hand, to pay our operating expenses for the next twelve months.
We anticipate that we may have an opportunity to raise additional capital to
expand our operations through equity financings. However, we cannot guarantee
that we will be able to raise that capital, in which event our operations plans
may be required to be altered or even curtailed.
Liquidity
and Capital Resources
Overview
– Three Months Ended June 30, 2008
For the
three months period ended June 30, 2008, net cash provided by operating
activities was $56,523. Net cash (used) in operating activities for the three
months period ended June 30, 2007 was $(15,597). The increase in cash provided
by operating activities for the three months period ended June 30, 2008 was
primarily due to a substantial increase in sales for the period which was
$342,316 as compared to $265,329 for the previous three months ended June 30,
2007.
Cash
(used) by investing activities during the three months ended June 30, 2008 was
$(11,021). Net cash (used) by investing activities for the three months ended
June 30, 2007 was $(6,187).
Net cash
(used) by financing activities for the three months ended June 30, 2008 was
$(8,630). Net cash provided by financing activities for the period ending June
30, 2007 was $12,976. For the three months period ended June 30, 2008 we made
payments to reduce the SBL Loan while receiving no proceeds from financings,
which accounted for the net cash (used) by financing activities for the three
months ended June 30, 2008.
As at
June 30, 2008 we had $86,594 in cash, compared to $51,893 as at June 30, 2007.
We had a negative working capital of $(196,440) as at June 30, 2008 compared to
a negative working capital of $(198,368) as at June 30, 2007.
We will continue to have professional
fees which include accounting, auditing, legal, and statutory filing fees, and
those fees may increase because of our reporting status and the required filings
for requisite quarterly and annual reports with the Securities and Exchange
Commission. We expect that we will have additional filings whereby our auditors
may be required to prepare further financial reports. We are aware that
audit fees have generally increased as a function of the increased reporting
requirements mandated by the recently enacted Sarbanes-Oxley Act. We are
optimistic that our business activities will increase, which will require
auditing procedures over a greater transaction base. We expect our other
administrative expenses to increase in the next quarter as our legal fees may
increase as we further our strategic goals and additional advice and/or opinions
may be required.
Due to
the foregoing factors, our operating results are difficult to forecast.
You should evaluate our prospects in light of the risk, expenses and
difficulties commonly encountered by comparable development-stage companies in
rapidly evolving markets. We cannot assure you that we will
successfully address such
risks and challenges. In addition, even
though we
have an operational business with revenues, we cannot
assure you that our
revenues will
increase or that we will
continue to be profitable in the future.
Other
Information - Certain Relationships and Related Transactions
We intend
that any transactions between us and our officers, directors, principal
stockholders, affiliates or advisors will be on terms no less favorable to us
than those reasonably obtainable from third parties. To date, the
following related party transactions have taken place:
As noted
in Note 4 of the Consolidated Financial Statements of June 30, 2008: During the
three months ended June 30, 2008, the principal shareholder provided no
additional loans to the company. The total outstanding balance of the
shareholder loans as at June 30, 2008 is $211,636, and the full amount is shown
as a current liability on the balance sheet. This shareholder loan carries
interest but has no set terms of principal repayment. The shareholder does not
expect to make a specific claim on the interest for this loan during the current
year or foreseeable future. Imputed Interest on the shareholder loan for the
three months period ended has been recorded on the income statement as interest
expense at the rate of 9.00 % on the outstanding loan balance for the three
months ended June 30, 2008. This imputed interest in the amount of $4,652 was
recorded on the balance sheet in the form of Additional Paid-In
Capital.
On
October 4
th
, 2007,
we received clearance from the NASD to have our securities trade publicly on the
Over-the-Counter Bulletin Board exchange under the symbol AREN.OB. There is no
assurance that a liquid trading market will develop, or, if developed, that it
will be sustained. A purchaser of our shares may, therefore, find it difficult
to resell our shares publicly should he or she desire to do so. Furthermore, our
shares are not marginal and it is unlikely that a lending institution would
accept our common stock as collateral for a loan.
Item 3. Controls and
Procedures.
Management
has evaluated, with the participation of our Principal Executive Officer and
Principal Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) as of the
end of the period covered by this report. Based upon this evaluation, our
Principal Executive Officer and Principal Financial Officer concluded that, as
of the end of the period covered by this report, our disclosure controls and
procedures were effective to ensure that information required to be disclosed by
us in the reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Commission’s rules and forms. There have been no significant changes in
our internal controls over financial reporting that occurred during the fiscal
quarter covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal
Proceedings.
There are
no material pending legal proceedings to which the Company is a party or to
which any of its property is subject.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior
Securities.
None.
Item
4. Submission of Matters to a Vote of
Security-Holders
.
Item 5. Other
Information.
None.
Item 6. Exhibits.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the Registrant caused this
Report to be signed on its behalf by the undersigned thereunto duly
authorized.
ALLSTAR RESTAURANTS
(Registrant)
Dated: July
29
th
,
2008
By:
/s/
Terry G.
Bowering
Terry G. Bowering, Chief Executive Officer
(Principal Executive Officer) Chief Financial Officer,
Chief Accounting Officer (Principal Financial Officer)
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