FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number: 000-50340
NAVSTAR MEDIA HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 75-2980786
---------------------- -------------------
(State of incorporation) (IRS Employer ID No.)
26, Chaowai Road, Suite A2205,
Chaoyang District, Beijing, 100020, China
-----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
Phone:011-86-10-85653268
Fax: 011-86-10-85653223
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of June 30, 2008, the Registrant had 26,980,609 shares of common stock
outstanding.
Table of Contents
Item No. Description
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. 4-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk. 15
Item 4. Controls and Procedures
Item 4T. Controls and Procedures. 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 16
Item 1A Risk Factors.
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds. 16
Item 3. Defaults Upon Senior Securities. 16
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 5. Other Information. 16
Item 6. Exhibits. 17
SIGNATURES 18
Part I - Financial information
Index to Consolidated Financial Statements
Balance Sheets F-4
Statements of Income and Other Comprehensive Income F-5
Statement of Cash Flows F-6
3
NAVSTAR MEDIA HOLDINGS,INC.AND SUBSIDIARIES
(FORMERLY KNOWN AS PREMIER DOCUMENT SERVICES, INC.)
CONSOLIDATED BALANCE SHEETS
As of June 30, 2008 and June 30, 2007
June 30, June 30,
2008 2007
(Unaudited) (Unaudited)
----------- -----------
ASSETS
CURRENT ASSETS:
Cash $ -- $ 1,269
Accounts receivable
Accounts receivable - related parties
Notes receivable
Note receivable - related party
Inventories-production cost
Advances on inventory purchases
Other receivables
Other receivables - related parties
Prepaid expenses - current -- 15,000
----------- -----------
Total current assets -- 16,269
----------- -----------
Total assets $ -- $ 16,269
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 841,257 $ 484,010
Convertible debentures payable 718,921 718,921
----------- -----------
Total current liabilities 1,560,178 1,202,931
----------- -----------
SHAREHOLDERS' EQUITY:
Common Stock, $0.001 par value, 60,000,000 shares
authorized, 26,980,609 shares issued and outstanding
for both periods 26,980 26,980
Paid-in-capital 3,958,947 3,958,947
Accumulated deficit (4,220,904) (5,152,588)
Statutory reserves -- --
Accumulated other comprehensive income (20,001) (20,001)
Treasury stock, at cost (1,305,200) --
----------- -----------
Total shareholders' equity (1,560,178) (1,186,662)
----------- -----------
Total liabilities and shareholders' equity $ (0) $ 16,269
=========== ===========
See notes to consolidated financial statements
4
NAVSTAR MEDIA HOLDINGS,INC.AND SUBSIDIARIES
(FORMERLY KNOWN AS PREMIER DOCUMENT SERVICES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30,
----------------------------
2008 2007
------------ ------------
REVENUES $ -- $ --
COST OF SALES -- --
------------ ------------
GROSS PROFIT -- --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 15,500 287,449
------------ ------------
INCOME(LOSS) FROM OPERATIONS (15,500) (287,449)
OTHER EXPENSE(INCOME), NET
Interest expense 48,000 48,000
Other expense, net of (income) 1,269 --
------------ ------------
49,269 48,000
------------ ------------
INCOME(LOSS) BEFORE INCOME TAXES (64,769) (335,449)
PROVISION FOR INCOME TAXES -- --
------------ ------------
INCOME(LOSS) FROM CONTINUING OPERATION (64,769) (335,449)
LOSS FROM DISCONTINUED OPERATIONS -- (444,055)
------------ ------------
NET LOSS (64,769) (779,504)
COMPREHENSIVE INCOME(LOSS):
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS -- --
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (64,769) $ (779,504)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 26,980,609 26,980,609
============ ============
EARNINGS PER SHARE, BASIC AND DILUTED $ (0.002) $ (0.029)
============ ============
See notes to consolidated financial statements
5
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS PREMIER DOCUMENT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
2008 2007
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (64,769) $(779,504)
Adjustments to reconcile net income to cash
used in operating activities:
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 63,500 37,209
--------- ---------
Net cash used in operating activities (1,269) (742,296)
--------- ---------
DECREASE IN CASH (1,269) (742,296)
CASH, beginning of period 1,269 743,565
--------- ---------
CASH, end of period: $ -- $ 1,269
========= =========
See notes to consolidated financial statements.
6
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
Note 1 -- ORGANIZATION AND NATURE OF OPERATIONS
Navstar Media Holdings, Inc. ("Navstar" or the "Company") is a United States
based corporation that owns majority interests in companies specializing in
media content production and distribution in the People's Republic of China
("PRC"). Navstar subsidiaries generate revenues through producing television
series and movies for the PRC market and through advertising revenues generated
from the broadcast and distribution of such programs and movies, and other media
and broadcasting production and management services.
Navistar Communications Holdings, Ltd, a Hong Kong Corporation, ("NCHL") was
originally established as a Holding Company for equity ownership investments in
mainland China media companies. During 2004, NCHL acquired a 55% equity
ownership interest in Happy Times Media, Inc. ("HTM"). During 2005, NCHL
increased its ownership interest in HTM to 70%. Based in Beijing, HTM since 1998
has produced content for government-owned television stations in China, while
acting as a distributor of television series and movies for the Chinese market.
Navstar Media Holdings, Inc. was incorporated on January 28, 2002 as Premier
Document Services, Inc. (OTCBB: PDSV), a Nevada corporation, which provided
document preparation and signatory services to mortgage, real estate and other
financial services firms in the Las Vegas, Nevada market. On November 30, 2005,
the Company acquired 100% of the capital stock of NCHL. In conjunction with the
merger, Premier's former Secretary and President, Crystal Kim Han, purchased
Premier's existing document services business, including all assets and
liabilities. Prior to the Merger, no director, officer or affiliate of the
Company had any material relationship with any director, officer or affiliate of
NCHL. Upon completion of the merger, the officers and directors of Premier
resigned and were replaced by the Company's current management team and board of
directors.
Under the terms of the Agreement, NCHL will remain a 100% owned subsidiary of
the Company. The transaction contemplated by the Agreement was intended to be a
"tax-free" reorganization pursuant to the provisions of Section 351 and 368(a)
(1) (A) of the Internal Revenue Code of 1986, as amended. The original
stockholders of NCHL, as of the closing date of the merger own approximately 90%
of the Company's common stock.
The accounting for these transactions is identical to that resulting from a
reverse-acquisition, except that no goodwill or other intangible asset is
recorded. Accordingly, the financial statements of NCHL are the historical
financial statements of HTM.
The Company's common stock is registered under Section 12(g) of the Securities
Act of 1934 and is currently listed on the over the counter bulletin board under
the symbol NVMH.OB. As of June 30, 2008, there were 26,980,609 shares of common
stock of the Company outstanding.
HTM generates revenue from sales and distribution of its proprietary content,
third party programming, and imported TV and films productions in China.
In addition, HTM distributes European content from providers such as TVE (UK)
and Strawberry Films from France, as well as American content from providers
including Miramax. HTM's customers include approximately 300 Provincial and
local TV stations throughout China, China Central TV ("CCTV") stations.
Additionally, HTM has developed advertising relationships with various Chinese
and foreign companies.
7
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
Note 1 -- ORGANIZATION AND NATURE OF OPERATIONS (cont'd)
In January 2005, HTM contributed a total of RMB500,000 for the investment in
Beijing Hui Ying International Advertising Co. Ltd. ("BHYIA"). BHYIA is
considered a variable interest entity under FASB Interpretation No. 46(R),
"Consolidation of Variable Interest Entities", which requires consolidation of
business enterprises of variable interest entities meeting certain
characteristics. HTM is the primary beneficiary of BHYIA business operations and
qualifies to be consolidated under FIN 46(R).
BHYIA was established on December 15, 2004, in Beijing, People's Republic of
China by four Chinese citizens (the "Registered Shareholders") as a Chinese
limited liability company. The duration of the operation is 20 years. BHYIA
generates revenue from sales and distribution of advertisements produced by
others and sales of advertising designs and products. BHYIA is also a sales
agent for advertisements to be broadcast on various television stations in the
People's Republic of China.
To comply with China laws and regulations that prohibits or restricts foreign
ownership of companies that provide advertising services, HTM established BHYIA
which is legally owned by the Registered Shareholders. Mr. Yang Xiao Bin and Mr.
Kang Sui Jin are the legal shareholders of HTM. Mr. Liu Zhu Jiu and Mr. Shi Rian
are the local Chinese citizens. Mr. Liu Zhu Jiu is the company's legal
representative. The arrangements with the Registered Shareholders have been
undertaken solely to satisfy China regulations, which prohibits foreign
companies from owning or operating advertising businesses in China.
On March 11, 2006, the Company entered into an agreement with the shareholders
of Beijing Broadcasting and Television Media Co., Ltd. ("Beijing Media") to
acquire 70% ownership interest and operational control of Beijing Media.
Pursuant to the Agreement, the Company agreed to issue 2,400,000 shares of its
common stock valued at $1.00 per share to the existing shareholders of Beijing
Media, of which 900,000 shares were to be returned and cancelled if certain
condition were not met. In June 2006, the Company waived the requirement to meet
the conditions.
The Board of Directors and management evaluated the fair value of Beijing
Media's 2,400,000 shares based on the Company's trading history. The shares
approximated the fair value of the net assets acquire. Therefore, no goodwill
was recorded as a result of this transaction.
8
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
Note 1 -- ORGANIZATION AND NATURE OF OPERATIONS (cont'd)
Beijing Media is a media content production and distribution company located in
the People's Republic of China ("PRC"). Beijing Media generates revenues through
producing television series and movies for the PRC market, TV syndicated
programming production and other media and broadcasting production and
management services.
On July 9, 2006, the Company entered into a definitive agreement to acquire 70%
of ownership interest in Beijing Lucky Star Century Advertisement Co. Ltd.
("Lucky Star"). The purchase price is 2,800,000 shares of the Company's common
stock.
The Board of Directors and management evaluated the fair value of the 2,800,000
shares based upon the stock trading history and concluded the value was $0.25
per share or $700,000. This determination generated goodwill of approximately
$641,417 from this transaction.
Lucky Star was established on October 20, 2001 in Beijing, the People's Republic
of China ("PRC"). Lucky Star is a Chinese registered limited liability company
with a legal structure similar to a limited liability company organized under
state laws in the United States of America. The Company principally engages in
advertising business in TV commercials, newspapers, magazines, and outdoor media
in China.
On December 28, 2006, the Company entered into an agreement with the minority
shareholders of Happy Times Media Inc. ("HTM") to transfer its interest back to
HTM. Pursuant to the agreement all consideration paid to the shareholders of
600,000 shares of the Company's common stock will be returned to the Company. In
return, the 70% ownership interest of HTM will be returned to HTM's shareholders
or its designated party. As a result, HTM would no longer be a subsidiary of the
Company and its financial results ceased to be consolidated into the Company's
2006 financial statements. The Company believes that in view of the
unsatisfactory performance of HTM, this recession of the agreement and the
disposal of HTM's operations will have a positive impact on the Company's
performance and financial results in the long run
On January 1, 2007, the Company agreed to allow Beijing Media and Lucky Star to
operate independently while it focused on identifying merger candidates with
substantial operations to merge with. The Company disposed Beijing Media and
Lucky Star to return these two companies with all their assets and liabilities
to their original shareholders and all the shares issued to the shareholders of
these two companies as of January 1, 2007. Currently, the Company has only one
subsidiary Navstar Communications Holdings, ltd. in Hong Kong with no
substantial operations.
9
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
Note 2 -- SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America. The consolidated
financial statements reflect activities of the Company and the following
subsidiaries:
Company name Place of incorporation Ownership
- -------------------------- ------------------------------ ---------
Navistar Communications
Holdings, Ltd. Hong Kong 100%
All material inter-company transactions and balances are eliminated in
consolidation.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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 revenue and expenses
during the reporting period. Actual results, when ultimately realized could
differ from those estimates.
Fair Value of Financial Instruments
- -----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires certain disclosures regarding the fair
value of financial instruments. Accounts receivable, accounts payable, accrued
liabilities and convertible debentures payable are reflected in the financial
statements at fair value because of the short-term maturity of the instruments.
Impairment of Long Lived Assets
- -------------------------------
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", a long-lived assets and certain identifiable intangible assets
held and used by the Company are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. For the purposes of evaluating the recoverability of long-lived
assets, the recoverability test is performed using undiscounted net cash flows
related to the long-lived assets. The Company determined the carrying values are
not impaired.
10
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
Note 2 -- SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Foreign Currency Translation
- ----------------------------
The reporting currency of the Company is the US dollar. The Company uses their
local currency, Renminbi (RMB), as their functional currency. Results of
operations and cash flow are translated at average exchange rates during the
period, and assets and liabilities are translated at the unified exchange rate
as quoted by the People's Bank of China at the end of each reporting period.
Equity accounts are translated at their historical rate. This quotation of the
exchange rates does not imply free convertibility of RMB to other foreign
currencies.
All foreign exchange transactions continue to take place either through the
People's Bank of China or other banks authorized to buy and sell foreign
currencies at the exchange rate quoted by the People's Bank of China. Approval
of foreign currency payments by the Bank of China or other institutions requires
submitting a payment application form together with invoices, shipping documents
and signed contracts.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred. These amounts are not
material to the consolidated financial statements.
Cash and Concentration of Risk
- ------------------------------
Cash includes cash on hand and demand deposits in accounts maintained with
State-owned banks within the People's Republic of China. Total cash in these
Banks at June 30, 2008 and June 30, 2007 amounted to $0 and $1,269 respectively,
of which no deposits are covered by insurance. The Company has not experienced
any loss in such accounts and believes it is not exposed to any significant
risks on its cash in bank accounts.
Earnings (Loss) Per Share
- -------------------------
The Company reports earnings per share in accordance with the provisions of SFAS
No. 128, "Earnings Per Share." SFAS No. 128 requires presentation of basic and
diluted earnings per share in conjunction with the disclosure of the methodology
used in computing such earnings per share. Basic earnings (loss) per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average common shares outstanding during the
period. Diluted earnings (loss) per share takes into account the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised and converted into common stock. All shares that have
antidilutive effect are not included in the diluted earnings per share
computation.
11
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
The weighted average number of shares used to calculate earnings (loss) per
share for the three months ended June 30, 2008 and 2007 both totaled 26,980,609.
Note 2 -- SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Revenue Recognition
- -------------------
Revenue from the sales or licensing of proprietary content, third party
programming, imported TV and films, and sales and distribution of advertisement
programs are recognized upon meeting all recognition requirements of Statement
of Position (SOP) 00-2 "Accounting by Producers or Distributors of Films".
Revenue from sales of advertisement designs and products are recognized when the
products are delivered and title has passed.
Cash payments received are recorded as deferred revenue until all the conditions
of revenue recognition have been met.
Stock-Based Compensation
- ------------------------
Previously, pursuant to Accounting Principles Board Opinion No.25, "Accounting
for Stock Issued to Employees", the Company accounted for stock based employee
compensation arrangements using the intrinsic value method.
Effective January 1, 2006, the Company adopted SFAS No.123 (revised 2004),
"Shares Based Payment" ("SFAS No. 123R") which eliminates the use of APB 25 and
the intrinsic value method of accounting, and requires companies to recognize
the cost of employee services received in exchange for awards of equity
instruments, based on the grant date fair value of those awards, in the
financial statements. The Company has adopted the modified prospective method
whereby compensation cost is recognized in the financial statements beginning
with the effective date based on the requirements of SFAS No. 123R for all
share-based payments granted after that date. The Company did not issue any
stock options prior to the effective date, and therefore there was no impact to
the Company's operations, cash flow or financial condition.
Note 3 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses mainly consist of payments to be made for
cost of sales and expenses incurred for the Company's operating activities.
Accounts payable and accrued expenses as of June 30, 2008 and 2007 are $841,257
and $484,010 respectively.
12
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
NOTE 4 - DISCONTINUED OPERATIONS
The Company has spun off Beijing Media and Lucky Star together with their
liabilities and assets to their original shares holders against the return
5,200,000 shares of the Company's common stock issued to them in connection with
the original acquisition. In accordance with Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment and Disposal of
Long Lived Assets," we have reported the Assets, Liabilities and operating
results of these businesses as discontinued operations in our consolidated
financial statements. Revenues and pre-tax losses from discontinued operations
for the three months ended June 30, 2008 and 2007 are presented below:
------------------------
June 30 June 30
2008 2007
------------------------
(Dollars in Thousands)
Assets $ 0 $ 0
Liabilities $ 0 $ 0
Revenues $ 0 $ 0
Loss before income taxes $ 0 $ 0
NOTE 5 - ON GOING CONCERN
The Company has large accumulated loss and has significant debt and other
payment obligations and its long term viability is doubt if it cannot consummate
a merger with candidate with substantial operations. The noteholders have not
exercised their right for default payment in the expectation that the Company
will consummate the merger with Lewell Ltd. There is considerable risk that the
merger will be delayed or may not happen within the expected timeframe.
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results
Of Operations
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report. This
Quarterly Report on Form 10-Q contains "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. These forward-looking statements involve known
and unknown risks and uncertainties, many of which are beyond the Company's
control, including adverse changes in economic, political and market conditions,
losses from the Company's market-making and trading activities arising from
counter-party failures and changes in market conditions, the possible loss of
key personnel, the impact of increasing competition, the impact of changes in
government regulation, the possibility of liabilities arising from violations of
federal and state securities laws and the impact of changes in technology in the
securities and commodities trading industries. Although the Company believes
that its forward-looking statements are based upon reasonable assumptions
regarding its business and future market conditions, there can be no assurances
that the Company's actual results will not differ materially from any results
expressed or implied by the Company's forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers are cautioned that any forward-looking statements are not guarantees of
future performance.
Overview
- --------
Navstar Media Holdings, Inc. ("the Company") owns majority interests in firms
specializing in media content production and distribution in the People's
Republic of China ("PRC"). Navstar subsidiaries generate revenues through
television program production and distribution and through advertising revenues
generated the broadcast and distribution of such programs, outdoor billboard
advertising and other media and broadcasting production and management services.
13
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
On March 11, 2006, the Company entered into an agreement with the shareholders
of Beijing Broadcasting and Television Media Co., Ltd ("Beijing Media") to
acquire 70% ownership interest and operational control of Beijing Media, a media
content production and distribution company located in Beijing, PRC. Pursuant to
the agreement, the Company issued 2,400,000 shares of its common stock to the
existing shareholders of Beijing Media, of which 900,000 shares were to be
returned and cancelled if certain condition were not met. In June 2006, the
Company waived the requirement to meet the conditions. The consolidated 2006
financial statements of the Company as presented in this Report include the
results of Beijing Media for a period of nine months from April to December.
On July 9, 2006, the Company entered into a definitive agreement to acquire 70%
of ownership interest in Beijing Lucky Star Advertising Company ("Lucky Star").
Founded in 1992, Lucky Star is engaged in advertising business in the following
areas: TV commercials, newspaper, magazines, and outdoor media. The purchase
price was 2,800,000 shares of the Company's common stock. The consolidated 2006
financial statements of the Company as presented in this Report include the
results of Lucky Star for a period of nine months from July to December.
On July 31, 2006, the subordinated debenture of $1,000,000 was extended till
November 30, 2006 with its conversion price adjusted to $0.40 and warrant price
adjusted to $0.50 per shares. In addition, there is an increase of 20% of the
principal and additional 20% warrants issued to the debenture holders. These
Debentures were again extended for another four months until June 30, 2007 with
the conversion price further reduced to $0.20 per share and Warrant exercise
price reduced to $0.30 per share. The notes were extended again till July 31,
2007 with certain members of the management transferring approximately 600,000
shares of common stock owned to the holders of the debenture as compensation for
the extension. The notes are currently over due and in default. The note holders
and the Company are working out arrangement on the notes to allow the Company to
move forward with its future business. On January 30, 2007, the Company has
filed a registration statement with SEC covering the underlying shares of common
stock in connection with the debentures.
On September 30, 2006, the Company through its subsidiary and its exclusive
agent signed an agreement with CCTV TV Shopping Co., Ltd., the TV shopping arm
of the state monopoly CCTV network to apply for special permits from the 2008
Olympic Committee for selling 2008 Olympic Games products over a jointly
developed TV shopping program as a start to launch a nation-wide TV shopping
program in China. According to the State Statistics Bureau of China, TV shopping
in China constitutes approximately 0.1% of the national retail sales (as
compared to 7% in U.S. and Europe and 10% in Japan and Korean), which reached
US$850 billion in 2005. Retail sales have been growing at approximately 10% per
year for the last four years with accelerating growth. There is no national
leader in the TV shopping market in China. The Company currently produces TV
shopping related TV programs for CCTV and the Company intends to break into the
nascent TV shopping market in China and open up a major sustainable source of
revenues and income.
So far the Company has not obtained the relevant approvals to launch the joint
venture with CCTV and believes that the issuance of a TV shopping license from
the 2008 Olympic Committee may not happen. Given the closeness to the 2008
Olympic Games, it may not be practical to launch a Olympic goods fouced TV
shopping program even if the license from the 2008 Olympic Committee is issued.
The Company is currently exploring other opportunities for growth and expansion
and may change its business direction and strategy to protect and increase its
shareholders value. On December 13, 2007, the Company has entered into a merger
agreement with Leewell Investment, Ltd. (LWL"), the shareholder of a real estate
company in China on the condition that the Company shall spin off its media
operations and to cancel the shares issued for the media operation acquisitions
and to the Company's employees to restructure the Company's operations as well
as satisfactory of its outstanding convertible notes issue. On December 14,
2007, the Company entered an agreement with the shareholders of Beijing Media
and Lucky Star to return these two companies with all their assets and
liabilities to its original shareholders and all the shares issued to the
shareholders of these two companies.
Results of Operations for Six months Ended June 30, 2008 versus June 30, 2007
For the three months ended June 30, 2008, the Company had no revenue-generating
Operating activities either through the parent shell company or its subsidiary
Based out of H.K., resulting in zero operating profit.
Selling, general and administrative expenses decreased to $15,500, for the six
months ended June 30, 2008, compared to $287,449 for the same period last year,
which is primarily due to decreased staffing cost and public company maintenance
cost after the divesture.
The Company incurred an interest expense of $48,000 for the six months ended
June 30 of both 2008 and 2007, which is calculated as 8% on the effective
Outstanding principal balance of $1,200,000.
14
NAVSTAR MEDIA HOLDINGS, INC. AND SUBSIDIARIES
(Formerly Known As Premier Document Services, Inc.)
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(Unaudited)
After accounting for the various components of the income statement, the company
recorded a loss of $64,769 or $0.002 per share versus a loss of $779,504, or
$0.029 per share in the prior year. At June 30, 2008, there were 26,980,609
shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
After paying off the bank with its bank account cash balance as settlement of
Accured bank charges, the Company has zero cash balance and no liquidity.
The Company is working with certain strategic partners, as well as its
investment bankers to secure additional financing to increase working capital.
OFF BALANCE SHEET ARRANGEMENTS
We have not entered into any off-balance sheet financing arrangements and have
not established any special purpose entities. We have not guaranteed any debt or
commitments of other entities or entered into any options on non-financial
assets.
CRITICAL ACCOUNTING POLICES
The preparation of consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. We evaluate our estimates on an on-going basis. We base our
estimates on current information, historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from the estimates we used under different assumptions
or conditions. We believe the following concentrations and critical accounting
policies relate to our more significant judgments and estimates used in the
preparation of our consolidated financial statements.
REVENUE RECOGNITION
Revenue from the sales or licensing of proprietary content, third party
programming, imported TV and films, and sales and distribution of advertisement
programs are recognized upon meeting all recognition requirements of Statement
of Position (SOP) 00-2 "Accounting by Producers or Distributors of Films".
Revenue from sales of advertisement designs and products are recognized when the
products are delivered and title has passed.
Cash payments received are recorded as deferred revenue until all the conditions
of revenue recognition have been met.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
ITEM 4 Control and Procedures
Disclosure Controls and Procedures. Our disclosure controls and procedures are
designed to ensure that information required to be disclosed in reports that we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the United States Securities and Exchange Commission. Our Chief Executive
Officer and Chief Financial Officer have reviewed the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 Rules 13a-14(c) and 15d-14(c)) within the end of the period covered by
this Quarterly Report on Form 10-Q and have concluded that the disclosure
controls and procedures are effective to ensure that material information
relating to the Company is recorded, processed, summarized, and reported in a
timely manner. There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
last day they were evaluated by our Chief Executive Officer and Chief Financial
Officer Changes in Internal Control over Financial Reporting. During the fiscal
quarter ended June 30, 2008, there have been no changes in the Company's
internal control over financial reporting, identified in connection with our
evaluation thereof, that have materially affected, or are reasonably likely to
materially affect, its internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Default on Senior Securities
The Company is in default over the convertible notes issued in 2006 and is
working with creditors to allow the Company to move forward with the merger with
Leewell, Ltd.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. other Information
The Company has accepted the resignation of Edward Meng as a director and the
Chief Financial officer of the Company effective August 19, 2008.
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Item 6. Exhibits
Exhibits: The following exhibits are filed with this report:
31.1 Certification pursuant to Rule 13a-14(a) or 15d-14(a) under The
Securities Exchange Act of 1934 as amended.
31.2 Certification pursuant to Rule 13a-14(a) or 15d-14(a) under The
Securities Exchange Act of 1934 as amended.
32.1 Certifications pursuant to 18 U.S.C section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certifications pursuant to 18 U.S.C section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Date: August 19, 2008
/s/ Ranny Liang
- ----------------
Chief Executive Officer
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