UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________to________________
Commission file number 000-29595
AMERICAN STELLAR ENERGY, INC.
(Formerly Merchant Park Communications, Inc.)
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0441332
------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2162 Acorn Court, Wheaton Ill. 60187
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(Address of principal executive offices)
(630) 462-2079
--------------------------
(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.
Yes [_] No [X]
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: September 30, 2003
45,116,169.
Transitional Small Business Disclosure Format (check one). Yes [_] No [X]
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FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS ..................................3
Consolidated Balance Sheets for September 30, 2003
and December 31, 2002............................................4
Consolidated Statements of Operations and Other
Comprehensive Income for the Three Months Ended September 30,
2003 and 2002, and for the Nine Months Ended September 30,
2003 and 2002....................................................5
Consolidated Statements of Stockholders' Equity
as of September 30, 2003 and December 31, 2002...................6
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2003 and 2002....................8
Notes to Financial Statements...................................10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATION........................11
ITEM 3. CONTROLS AND PROCEDURES.........................................13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...............................................13
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.....14
ITEM 3. DEFAULTS IN SENIOR SECURITIES...................................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............14
ITEM 5. OTHER INFORMATION ..............................................14
ITEM 6. EXHIBITS........................................................14
SIGNATURES...............................................................15
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial information set forth below with respect to our Statements of
Operations for the three months ended September 30, 2003 and the nine months
ended September 30, 2003 are unaudited. This financial information, in the
opinion of management, includes all adjustments consisting of normal recurring
entries necessary for the fair presentation of such data.
The results of operations for the three months ended September 30, 2003 and
the nine months ended September 30, 2003 are not necessarily indicative of
results to be expected for any subsequent period.
AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
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AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
2003 2002
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 34,429 $ 2,441
Total Current Assets 34,429 2,441
------------- -------------
PROPERTY AND EQUIPMENT, NET (Note 3) - -
------------- -------------
TOTAL ASSETS $ 34,429 $ 2,441
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,541 $ 22,720
Loan from related party 2,250 68,619
Accrued interest 2,941 2,941
------------- -------------
Total Current Liabilities 12,732 94,280
------------- -------------
Total Liabilities 12,732 94,280
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of
$0.001 par value, 45,116,169 and 32,341,876
shares issued and outstanding, respectively 45,115 32,341
Additional paid-in capital 1,220,594 978,693
Accumulated deficit (1,245,504) (1,104,365)
Other comprehensive income 1,492 1,492
------------- -------------
Total Stockholders' Equity (Deficit) 21,697 (91,839)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,429 $ 2,441
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
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AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
Consolidated Statements of Operations and Other Comprehensive Income
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------------- ------------- ------------ -------------
GROSS SALES $ - $ - $ - $ 14,925
COST OF GOODS SOLD - - - -
------------- ------------- ------------ -------------
NET SALES - - - 14,925
------------- ------------- ------------ -------------
EXPENSES
Depreciation and
amortization - - - 63,370
Consulting 27,800 28,140 72,755 78,073
General and
administrative 2,315 105,189 6,359 137,622
------------- ------------- ------------ -------------
Total Expenses 30,115 133,329 79,114 279,065
------------- ------------- ------------ -------------
LOSS BEFORE OTHER
INCOME (EXPENSE) (30,115) (133,329) (79,114) (264,140)
------------- ------------- ------------ -------------
OTHER INCOME (EXPENSE)
Interest income - - - -
Interest expense - (8,762) - (8,762)
Loss on extinguishment
of debt (32,025) (24,000) (62,025) (159,500)
------------- ------------- ------------ -------------
Total Other
Income (Expense) (32,025) (32,762) (62,025) (168,262)
------------- ------------- ------------ -------------
NET LOSS $ (62,140) $ (166,091) $ (141,139) $ (432,402)
============= ============= ============ =============
BASIC LOSS PER SHARE $ (0.00) $ (0.01) $ (0.00) $ (0.02)
============= ============= ============ =============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 41,400,287 20,755,573 37,220,918 20,755,573
============= ============= ============ =============
The accompanying notes are an integral part of these
consolidated financial statements.
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AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
Consolidated Statements of Stockholders' Equity
Additional Other
Common Stock Paid in Comprehensive Accumulated
Shares Amount Capital Income Deficit
------------- ------------- ------------- ------------- -------------
Balance, December 31, 2001 18,160,400 $ 18,160 $ 661,929 $ 911 $ (426,774)
Stock issued for services
at $0.027 per share 562,500 565 14,625 - -
Stock issued for debt at
$0.50 per share 44,976 45 22,443 - -
Stock issued for debt at
$0.25 per share 900,000 900 224,100 - -
Stock issued for cash at
$0.005 per share 5,750,000 5,750 23,000 - -
Stock issued for cash at
$0.001 per share 250,000 250 - - -
Stock issued for debt at
$0.007 per share 1,000,000 1,000 6,000 - -
Stock issued for debt at
$0.006 per share 3,900,000 3,900 19,500 - -
Stock issued for services at
$0.027 per share 1,774,000 1,771 7,096 - -
Currency translation
adjustment - - - 581 -
Net loss for the year ended
December 31, 2002 - - - - (677,591)
------------- ------------- ------------- ------------- -------------
Balance, December 31, 2002 32,341,876 32,341 978,693 1,492 (1,104,365)
------------- ------------- ------------- ------------- -------------
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AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
Consolidated Statements of Stockholders' Equity (continued)
Additional Other
Common Stock Paid in Comprehensive Accumulated
Shares Amount Capital Income Deficit
------------- ------------- ------------- ------------- -------------
Balance, December 31, 2002 32,341,876 32,341 978,693 1,492 (1,104,365)
Stock issued for cash at
$0.005 per share 1,131,208 1,131 4,519 - -
Stock issued for cash at
$0.024 per share 1,673,640 1,674 38,326 - -
Stock issued for debt at
$0.02 per share 3,000,000 3,000 57,000 - -
Stock issued for cash at
$0.01 per share 500,000 500 4,500 - -
Stock issued for cash at
$0.02 per share 250,000 250 4,750 - -
Stock issued for debt at
$0.02 per share 2,900,000 2,900 55,100 - -
Stock issued for cash at
$0.005 per share 200,000 200 800 - -
Stock issued for debt at
$0.02 per share 600,000 600 11,400 - -
Stock issued for debt at
$0.027 per share 2,519,445 2,519 65,506 - -
Net loss for the nine months
ended September 30, 2003 - - - - (141,139)
------------- ------------- ------------- ------------- -------------
Balance, September 30, 2003 45,116,169 $ 45,115 $ 1,220,594 $ 1,492 $ (1,245,504)
============= ============= ============= ============= =============
Accumulated deficit prior to the development stage $ (1,104,365)
Accumulated deficit during to the development stage (141,139)
-------------
$ (1,245,504)
=============
The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
Consolidated Statements of Cash Flows
For the Nine Months Ended
September 30,
---------------------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (141,139) $ (432,402)
Adjustments to reconcile net loss to net cash flows
used by operating activities:
Depreciation and amortization - 63,370
Loss on the extinguishment of debt 62,025 159,500
Common stock issued for services - 15,190
Changes in operating assets and liabilities:
Decrease (Increase) in prepaids and other assets - (1,087)
Increase in accrued interest - 8,762
Increase (decrease) in accounts payable and other debt (77,204) 69,913
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Net Cash Flows Used by Operating Activities (156,318) (116,754)
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CASH FLOWS FROM INVESTING ACTIVITIES
Net Cash Flows Used by Investing Activities - -
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CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 56,650 29,000
Proceeds from loans from related party 131,656 85,419
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Net Cash Flows Provided by Financing Activities 188,306 114,419
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NET INCREASE (DECREASE) IN CASH 31,988 (2,335)
CASH AT BEGINNING OF PERIOD 2,441 2,335
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CASH AT END OF PERIOD $ 34,429 $ -
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended
September 30,
---------------------------
2003 2002
------------- -------------
CASH PAID DURING THE YEAR:
Interest $ - $ -
Income taxes $ - $ -
NON-CASH TRANSACTIONS
Common stock issued for debt $ 198,028 $ 283,488
Common stock issued for services $ - $ 15,190
The accompanying notes are an integral part of these consolidated financial statements.
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AMERICAN STELLAR ENERGY, INC. AND SUBSIDIARIES
(Formerly Merchantpark Communications, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2003 and December 31, 2002
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying September 30, 2003 financial statements have been prepared by
the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at September 30,
2003 and 2002 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. It
is suggested that these condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
December 31, 2002 audited financial statements. The results of operations for
period ended September 30, 2003 are not necessarily indicative of the
operating results for the full year.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred losses for the periods
ended September 30, 2003 and 2002 that have resulted in an accumulated deficit
of approximately $1,245,000 at September 30, 2003, which raises substantial
doubt about the Company's ability to continue as a going concern. The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of liabilities that might
result from the outcome of this uncertainty. It is management's intent to
seek additional financing through new stock issuances and lines of credit.
The Company plans to continue generating revenues through sales of dedicated
servers and professional services that include consulting web design, system
architecture and server management.
NOTE 3 - PROPERTY AND EQUIPMENT
During the year ended December 31, 2002 the Company elected to discontinue a
software development project begun in a prior year. The Company expensed all
previously capitalized amounts related to this project and incurred a loss of
$218,836.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
In this report, references to "American Stellar," "Merchant Park," "we," "us,"
and "our" refer to American Stellar Energy, Inc. (formerly Merchant Park
Communications, Inc.).
Safe Harbor for Forward-Looking Statements
When used in this report, the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," "intend," and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27a of the Securities Act of 1933 and Section 21e of the Securities Exchange
Act of 1934 regarding events, conditions, and financial trends that may affect
the Company's future plans of operations, business strategy, operating
results, and financial position. Persons reviewing this report are cautioned
that any forward-looking statements are not guarantees of future performance
and are subject to risks and uncertainties and that actual results may differ
materially from those included within the forward-looking statements as a
result of various factors. Such factors are discussed under the "Item 2.
Management's Discussion and Analysis of Financial Condition or Plan of
Operations," and also include general economic factors and conditions that may
directly or indirectly impact the Company's financial condition or results of
operations.
General
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The Company was incorporated on October 14, 1999 in the State of Nevada as
Westnet Communications Group, Inc., for the purpose of developing a special
interest worldwide web site. In March 2001, the Company acquired Merchant
Park Communications, changed its name to Merchant Park Communications, Inc.,
and changed its business direction to that of the developing proprietary 2nd
generation E-business software for licensing to end users and web hosting. In
March 2002, the Company discontinued the development of the software due to
lack of operating capital, assigned all software and assets to a subsidiary
company in exchange for a royalty fee, and began pursuing a new business
opportunity; in September 2004, the assignee abandoned the project due to lack
of revenues. During the fourth quarter of 2003, the Company entered into an
agreement with Armen Energy LLC, whereby it obtained an undivided 45% working
interest by way of a "Farm Out Agreement" on acreage that will be held-by-
production. In November 2003, the Company amended its Articles to reflect a
name change to American Stellar Energy, Inc. As of February 2005, three
productive wells have been drilled with one additional well in the development
stage. Exact flow rates and costs are not yet available.
Results of Operations for the Three Months Ended September 30, 2003 and 2002
----------------------------------------------------------------------------
All years stated in this section refer to the third quarter of that year. In
2003, the Company did not generate any revenues from any source as the Company
continued to seek new direction. In 2002, there was no revenue as web hosting
services had been terminated earlier in the year.
Consulting and General and administrative expense decreased from $133,329 in
2002 to $30,115 in 2003 due to reduced costs as a result of the company
restructure.
Depreciation and amortization for 2003 were recorded as zero due to the write
off of all company assets in that year. In 2002 depreciation was recorded as
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zero since the software development project had been terminated. This was the
only capitalized asset of the Company which was subsequently written off in
2003.
The Company incurred a loss of $62,140 in 2003 due to restructuring efforts in
the absence of revenue. A loss of $166,091 was incurred in 2002 due to
remaining operating expenses at the beginning of the restructuring and zero
revenue.
Results of Operations for the Nine Months Ended September 30, 2003 and 2002
---------------------------------------------------------------------------
All years stated in this section refer to the nine months ended of that year.
For 2003, the company did not generate any revenues from any source. In 2002,
almost all of the sales revenue of $ 14,925 was recorded in the first quarter
and was derived from web hosting and related services prior to the termination
of services and the lay off of all staff.
Consulting and General and administrative expense decreased from $215,695 in
2002 to $79,114 in 2003 as software development and web hosting activities
ceased in March 2002 and the Company began a period of restructuring.
Depreciation and amortization for 2003 were recorded as zero due to the write
off of all company assets in that year. In 2002 depreciation of $63,370 was
recorded.
The Company incurred a loss of $141,139 in 2003 due to restructuring efforts
in the absence of revenue. A loss of $432,402 was incurred in 2002 as the
Company ceased software development and web hosting activities which failed to
be profitable.
The Company had a cash flow deficiency of $156,318 in 2003 and $116,754 in
2002. Cash flow financing was provided to the Company by the sale of Company
stock and related party loans in both years. These activities resulted in
period end cash balances of $34,429 in 2003 and zero in 2002.
Liquidity, Capital Resources and Financial Condition
----------------------------------------------------
As of the nine month period ended September 30, 2003, the Company had $34,429
in total assets consisting entirely of cash on hand. The Company also had
accounts payable of $7,541 consisting mostly of consulting and marketing
expenses, a related party payable of $2,250 and accrued interest of $2,941 for
total liabilities of $12,732. The Company had no revenues during the first
nine months in 2003.
The Company had sufficient cash to service its debts, but not enough to
satisfy ongoing operating requirements. During the first quarter of 2002 the
Company had already discontinued its software development project due to this
lack of capital.
Financing
---------
Historically, the Company has funded acquisitions and satisfaction of debt
through the sale of common stock. The Company issued 6,969,445 shares of
common stock during the third quarter of 2003. This stock was used to satisfy
$138,025 in debts to related parties and raise $11,000 in cash. Management
anticipates that net losses will continue for the foreseeable future and
expects that any additional capital will likely be provided by advances from
related parties or private placements of our common stock. There were no
agreements with any parties regarding advances, loans or purchases of stock.
-12-
If the Company decides to complete a private placement of stock, it will
likely rely on exemptions from the registration requirements provided by
federal and state securities laws. The purchasers and manner of issuance will
be determined according to the Company's financial needs and the available
exemptions. The Company does not currently intend to make a public offering
of its common stock. It should also be noted that if the Company issues more
shares of our common stock then shareholders may experience dilution in the
value per share of their common stock.
Subsequent Events
-----------------
As discussed above, in March 2002 the Company ceased its development of
propriety technology and the associated business plan to license this software
and technology to small business end users. Further, web development and
associated services were discontinued with the layoff of all staff. This began
a restructuring period wherein the Company disposed of all remaining assets
and looked for new business opportunities in the energy sector. In October
2003 the Company identified a suitable property in Corsicana, Texas, and
entered into a Farm Out Agreement with Armen Energy LLC, whereby it obtained
an undivided 45% working interest on a 1,000 acre property that will be held-
by-production. As of February 2005, three producing wells had been drilled
with one additional well in the development stage. Exact flow rates and costs
are not yet available.
The Company plans to drill 10 additional wells in 2005 and intends to raise
the necessary capital from the sale of its securities and oil production
revenues from the three producing wells.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on the evaluation
of our disclosure controls and procedures (as defined in Securities Exchange
Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act
Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer/Chief Financial
Officer has concluded that as of the end of the period covered by this report,
our disclosure controls and procedures were effective.
(b) Changes in internal controls. There were no changes in our internal
control over financial reporting that occurred during our most recent fiscal
quarter 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
None.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following unregistered securities were issued in the quarter ended
September 30, 2003:
. On July 8, 2003 the Company issued 500,000 shares of common stock at $0.01
per share for $5,000 in cash.
. On August 5, 2003 the Company issued 250,000 shares of common stock at
$0.02 per share for $5,000 in cash.
. On August 12, 2003 the Company issued 1,000,000 shares of common stock at
$0.02 per share to satisfy $20,000 of debt.
. On August 12, 2003 the Company issued 1,200,000 shares of common stock at
$0.02 per share to satisfy $24,000 of debt.
. On August 12, 2003 the Company issued 700,000 shares of common stock at
$0.02 per share to satisfy $14,000 of debt.
. On August 5, 2003 the Company issued 200,000 shares of common stock at
$0.005 per share for $1,000 in cash.
. On August 12, 2003 the Company issued 600,000 shares of common stock at
$0.02 per share to satisfy $12,000 of debt.
. On September 8, 2003 the Company issued 2,519,445 shares of common stock
at $0.027 per share to satisfy $68,025 of debt.
All of the above issued shares were issued under section 4(2) of the 1933
Securities Act and bear a restrictive legend.
As of September 30, 2003 the Company had 45,116,169 shares of common stock
issued and outstanding.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
During July 2003, Mr. Peter Matousek resigned as President and CEO and was
succeeded by Mr. Francis R. Biscan, Jr. who became President, Chief Executive
Officer and a Director at that time.
ITEM 6. EXHIBITS
Exhibit
Number Title
------------------------------------------------------
31.1 Section 302 Certification - CEO
31.2 Section 302 Certification - CFO
32.1 Section 906 Certification - CEO
32.2 Section 906 Certification - CFO
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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.
AMERICAN STELLAR ENERGY, INC.
(Registrant)
DATE: March 8, 2005
By: /s/ Francis R. Biscan Jr.
________________________________________
Francis R. Biscan Jr.
President, Chief Executive
Officer and Director
DATE: March 8, 2005 By: /s/ Clifford Brown
________________________________________
Clifford Brown
Chief Financial Officer
Secretary, Director
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