UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW MEXICO

In re:
FLYING STAR CAFES, INC.,
a New Mexico Corporation,

Case No. 15-10182-ta11

Debtor.
DISCLOSURE STATEMENT FOR MARK AND JEAN BERNSTEINS CHAPTER 11
PLAN OF REORGANIZATION FOR FLYING STAR CAFS, INC.
Mark and Jean Bernstein (together, the Bernsteins) submit the following disclosure
statement (the Disclosure Statement) pursuant to 1125 of the Bankruptcy Code, to Holders
of Claims entitled to vote in connection with the proceedings seeking Confirmation of Mark and
Jean Bernsteins Chapter 11 Plan of Reorganization for Flying Star Cafes, Inc. (the Plan)
filed contemporaneously herewith. Unless otherwise defined in this Disclosure Statement, all
capitalized terms shall have the meanings ascribed to them in the Plan. Creditors are urged to
refer to the Plan for such definitions.
Pursuant to the Bankruptcy Code, Holders of Allowed Claims in Classes 3, 4, 5, 6, 8 and
9 are entitled to vote on the Plan. For a description of the Classes of Claims and their treatment
under the Plan, see Article IX below.
Holders of Impaired Claims may vote either to accept or to reject the Plan. The
Bankruptcy Code defines "acceptance," with respect to a Class of Impaired Claims, as
acceptance by Holders of at least two-thirds in dollar amount and more than one-half in number
of the Allowed Claims in such Class whose Holders cast ballots.
ARTICLE I
INTRODUCTION
Attached as Exhibits to this Disclosure Statement are copies of the following:
Exhibit A Flying Stars Twelve (12) Month Historic Cash Flow
Exhibit B Estimated Administrative Claims as of the Effective Date
Exhibit C Claims by Class
Exhibit D Estimate of Minimum Pro Rata Distribution Under the Plan
Also accompanying this Disclosure Statement are copies of the following:
1.
The Order and Notice of the Bankruptcy Court approving this Disclosure
Statement and providing notice of the Confirmation Hearing, the deadlines and procedures for
voting and for objecting to Confirmation of the Plan (the "Order and Notice");
2.
A ballot for voting on the Plan (the "Ballot"); and

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3.

A stamped, return-addressed envelope for submitting the Ballot.

THIS DOCUMENT WAS COMPILED FROM INFORMATION OBTAINED BY THE

BERNSTEINS FROM SOURCES BELIEVED TO BE ACCURATE TO THE BEST OF THE
BERNSTEINS KNOWLEDGE, INFORMATION, AND BELIEF. HOWEVER, THE
BERNSTEINS DO NOT WARRANT THAT ALL INFORMATION IS ACCURATE OR
COMPLETE.
ALTHOUGH THE BERNSTEINS PROFESSIONAL ADVISORS HAVE ASSISTED
IN THE PREPARATION OF THIS DISCLOSURE STATEMENT, THEY HAVE NOT
INDEPENDENTLY VERIFIED THE INFORMATION SET FORTH HEREIN AND MAKE
NO REPRESENTATION AS TO THE ACCURACY THEREOF.
THE BERNSTEINS URGE YOU TO READ THE PLAN, AS WELL AS THE
DISCLOSURE STATEMENT, CAREFULLY. After carefully reviewing this Disclosure
Statement and the Plan, including the respective Exhibits, each Holder of an Impaired Claim
should decide whether to vote to accept or reject the Plan. Any such vote should be indicated on
the appropriate enclosed Ballot and returned in the envelope provided. If you have a Claim in
more than one Voting Class, you should utilize a separate Ballot for each Claim.
The Bankruptcy Court has scheduled a hearing on Confirmation of the Plan (the
"Confirmation Hearing") on the date and at the place specified in the Order and Notice
accompanying this Disclosure Statement. The Bankruptcy Court has directed that objections, if
any, to Confirmation of the Plan must be served and filed on or before the date specified in the
Order and Notice. The Confirmation Hearing may be continued or adjourned from time to time
by the Bankruptcy Court without further notice except for the announcement of the continuation
date made at the Confirmation Hearing or at any subsequent continued Confirmation Hearing.
In accordance with the Bankruptcy Code, the Plan classifies Claims separately and
provides, separately for each class, either that the Claims in such Class are Unimpaired or that
Holders of such Claims are Impaired and will receive consideration on account of such Claims
reflecting the relative rights and priorities of the Holders of such Claims. The treatment of
Allowed Claims under the Plan will be in full settlement, satisfaction, and discharge of all such
Claims except as otherwise specifically provided in the Plan or in the Confirmation Order. On
the Effective Date, to the maximum extent permitted under the Bankruptcy Code, Flying Star
will be discharged from all Claims that have arisen before Confirmation of the Plan. Property of
the Estate will remain liable for payments, distributions, and obligations provided for in the Plan
or in the Confirmation Order.
ARTICLE II
VOTING PROCEDURES
TO BE COUNTED, YOUR BALLOT MUST BE COMPLETELY FILLED IN,
SIGNED, AND TRANSMITTED IN THE MANNER SPECIFIED IN THE BALLOT SO
THAT IT IS RECEIVED BY THE VOTING DEADLINE SPECIFIED ON THE BALLOT.
PLEASE FOLLOW CAREFULLY ALL INSTRUCTIONS CONTAINED ON THE BALLOT.
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ANY BALLOTS RECEIVED WHICH ARE NOT COMPLETELY FILLED IN, NOT SIGNED,
NOT RECEIVED BY THE VOTING DEADLINE, DO NOT INDICATE EITHER AN
ACCEPTANCE OR REJECTION OR WHICH INDICATE BOTH AN ACCEPTANCE AND
REJECTION OF THE PLAN WILL NOT BE COUNTED.
If you have any questions about the procedures for voting, did not receive a Ballot,
received a damaged Ballot, have lost your Ballot, or if you would like an additional copy of this
Disclosure Statement, please write to the Bernsteins counsel, Askew & Mazel, LLC, ATTN:
Daniel A. White, Esq., 320 Gold Ave. SW, Ste. 300A, Albuquerque, NM 87102, call (505) 4333097, or send an e-mail to dwhite@askewmazelfirm.com.
If a Ballot is signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or other person acting in a fiduciary or representative capacity, such
person should indicate such capacity on the Ballot.
The Court has issued its Order requiring that all votes for the acceptance or rejection of
the Plan will be received by no later than ____________, 2016. Voting may be on the Ballot
which is provided along with this Disclosure Statement or in any other written manner. Mail or
deliver your Ballot so that it will be received by or before the deadline. A vote received after that
time will not be counted. The Ballot should be sent to:
Askew & Mazel, LLC
ATTN: Daniel A. White, Esq.
320 Gold Ave. SW Ste. 300A
Albuquerque, New Mexico 87102
dwhite@askewmazelfirm.com
Unless the Ballot is timely received on or prior to the date specified in the Order and
Notice, the Ballot will not be counted in connection with Confirmation of the Plan by the
Bankruptcy Court. Do not deliver your Ballot to the Bankruptcy Court or to Flying Star.
A BRIEF HISTORY OF FLYING STAR AND ITS
RELATED ENTITIES, INCLUDING EVENTS
LEADING TO CHAPTER 11 FILING
A. Double Rainbow to Flying Star
In late 1987, the Bernsteins opened the first Double Rainbow store in Albuquerque, at the
time, primarily served ice cream, coffee and dessert. In, 1988, they incorporated in New Mexico
under the name of Double Rainbow of Albuquerque, Inc.. In advance of the opening of their
second caf, the Bernsteins created another New Mexico corporation called Double Rainbow II,
Inc. Again in 1999, the Bernsteins formed a corporation in New Mexico under the name
Double Rainbow III, Inc. In 2000, all three of these corporations merged, with the subsequent
corporation having the name Double Rainbow Bakery Cafes, Inc. Double Rainbow began its
business life as a franchisee of the San Francisco ice cream chain of the same name. As new
cafes were built in different areas of the city, customer demand for a wider menu variety resulted
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in the Bernsteins expanding the menu offerings and, little by little, the ice cream portion of the
business dwindled. By mutual agreement, Double Rainbow Ice Creams of San Francisco and the
Bernsteins parted ways in 2001, and Double Rainbow Bakery Cafes, Inc. changed its name to
Flying Star Cafes, Inc. in the same year.
B. Satellite Coffee
In 1998, the Bernsteins formed a New Mexico corporation under the name Satellite
Coffee & Toys, Inc. This corporation operates coffee shops in the Albuquerque area. In 2008,
the corporation changed its name to Satellite Coffee, Inc. In 2012, the Bernsteins and Clyde
Harrington caused a limited liability company to be formed in Delaware under the name
Satellite Coffee Franchise Services, LLC. This company is registered to do business in New
Mexico, but has never engaged in any business activities.
C. Rio Chan Foods and Rio Chan Brands
In 2006, the Bernsteins caused the formation of two limited liability companies under the
laws of the State of Delaware: one named Rio Chan Foods, LLC, and the other named Rio
Chan Brands, LLC. Both of these companies registered to conduct business in the State of New
Mexico.
The companies entity architecture was designed in large part by Donna Schmidt and Clyde
Harrington. Their theory was that the companies should be organized in a fashion that mimicked
large restaurant chains, the goal being to get revenue multipliers that maximized the value of the
Flying Star Cafes, Inc. As a result of the organizational design company functions were put into
silos that isolated them from one another. For example company administration was put in one
silo, the commissary function in another silo, and so on. The problem was that the various silos
were not self-sustaining and vast amounts of money or other financial instruments had to be
moved between entities to sustain them.
As the Flying Star continued to grow along with Satellite Coffee, Rio Chan Food and Rio
Chan Brands were set up to imitate how other, large multi-unit, multi-concept restaurant
companies often organized themselves. Rio Chan Foods, having grown out of the chefs
kitchen/bakery was formed to operate the food production business which would supply food,
bakery items and coffee products to Flying Star, Satellite Coffee, and eventually outside third
parties. Rio Chan Foods charged the cafes only enough to cover its operating expenses. Rio
Chan Brands was formed to provide general and administrative services to Flying Star, Satellite
Coffee, Rio Chan Foods, and other related entities which might later be formed. Again, like
many other multi-restaurant concepts, Rio Chan Brands services were compensated on a
percent of revenues basis, and all three companies had running accounts with Rio Chan
Brands.
The percentage of revenues paid to Rio Chan Brands by each company was calculated to
provide sufficient revenues to pay only its operating expenses. Rio Chan Brands is not a selfsustaining company and makes no profit from its revenues. It was also determined that if Rio
Chan Brands contracted for certain software services and computer equipment then portioned the
costs over all locations and companies, there would be savings and efficiencies. Both Rio Chan

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Foods and Rio Chan Brands operate out of Flying Stars facility at 2701 Broadway Blvd NE in
Albuquerque.
In 2013, the Bernsteins caused a limited liability company to be formed in Delaware
under the name Rio Chan Intellectual Property Holdings, LLC, which thereafter registered to
do business in New Mexico. It was formed to hold the intellectual property of the various
Bernstein businesses, such as trade names, trade dress, recipes and the like.
D. Flying Stars Locations and Leases
Throughout most of its existence, Flying Star and its related entities were in growth
mode. For the first eighteen (18) years, the company (with the exception of register systems) did
not use credit lines and used its own revenue to finance the costs of its growth, including
equipment. Flying Star used a variety of types of financing and sources of funding. The
Bernsteins bought certain properties with their own money such as land or buildings/land in
locations that seemed to present expansion opportunities, then contributed those properties to
build new cafes without compensation.
The Bernsteins have also continued to contribute capital to the companies as needed, up
to the filing of the Bankruptcy Case. Over the years, there were large amounts of funds that were
transferred on a regular basis from the real estate holdings of the Bernsteins to the operating
companies. This went on until the real estate markets collapsed and such transfers could no
longer take place.
Later on, the company Urban Assets was formed to hold the properties and find financing
for new ones. Over the years, a couple of locations (Flying Star - Juan Tabo and Flying Star Menaul) were sold or leased back to a third party in order to raise money to build more Flying
Star locations - funding those restaurants build outs, equipment purchases, furniture, signage
and the additional soft (pre-opening) expenses. In 2006, as expansion increased, Flying Star
began to use GE Capital for financing new locations equipment, furniture and build out
improvements. These FFE loans were always seven (7) years in length and were financed out
of the locations cash flow. In properties that were not owned by the Bernsteins, such as Flying
Star - Paseo, Flying Star Downtown and Flying Star - Santa Fe, landlords sometimes provided
tenant improvement allowances towards these costs. Generally, the lease rates of these
properties reflected these allowances.
Charter Bank was the primary provider of the real estate mortgage loans to Urban Assets,
of which certain Flying Star locations became tenants.. In general, Charter Banks mortgage
loans to Urban Assets were cross-collateralized and guaranteed across all the Bernsteins
companies. Over the years, Flying Star acquired and developed restaurants at all the locations in
which it presently operates, plus the Flying Star Bernalillo, Flying Star Downtown, and
Flying Star Santa Fe locations which have subsequently been closed. The remaining restaurant
locations operated by Flying Star are as follows:
1. Flying Star Corrales: 10700 Corrales Road, Albuquerque, New Mexico 87114.
2. Flying Star Nob Hill: 3416 Central Ave. SE, Albuquerque, New Mexico 87106.

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3.
4.
5.
6.

Flying Star Juan Tabo: 8001 Menaul Blvd. NE, Albuquerque, New Mexico 87110.
Flying Star Menaul: 4501 Juan Tabo Blvd. NE, Albuquerque, New Mexico 87111.
Flying Star Paseo: 8000 Paseo Del Norte NE, Albuquerque, New Mexico 87122.
Flying Star Rio Grande: 4026 Rio Grande Blvd. NW, Albuquerque, New Mexico
87107.

E. The Economy and other Pressures

In 2008 and 2009, as Flying Star was in the midst of opening two restaurants Flying
Star - Bernalillo and Flying Star - Santa Fe, the financial crash occurred and the ongoing
recession in New Mexico began.
Flying Star - Bernalillo was financed by a construction loan from Urban Assets and Las
Huertas LLC and Flying Star - Santa Fe had both landlord financing and a commitment for
equipment financing from GE Capital, which evaporated during the crash.
In 2010, Charter Bank was put under receivership by the FDIC as a consequence of the
financial crash, and its loan portfolio was sold to a new entity, Charter Bank, Albuquerque, NM,
which was a newly-chartered federal savings bank, and subsidiary of Beal Financial
Corporation, headquartered in Plano, Texas. Although the new Charter Bank entity shared the
same name as the collapsed Charter Bank, and had purchased its assets, it was a separate entity,
run by a different bank. At the time, Charter Bank had two mortgage loans to Urban Assets for
Flying Star locations: Flying Star - Bernalillo and Flying Star Nob Hill.
Beal Bank, now the new owner of the loans supporting Flying Stars operations, put
substantial pressure on Flying Star by refusing to convert the construction loan on the Bernalillo
property into permanent financing, and by declaring a technical default on the mortgage for
Flying Star Nob Hill. Beal required the companies to pay a higher interest rate and fees to stay
out of foreclosure.
The real estate market remained depressed for years. In addition, Intel, a major economic
force in Sandoval County began to drastically downsize. The small shopping center in which
Flying Star Bernalillo was to be housed initially had 100% of the spaces under lease
commitments. However, all tenants but two dropped out and the property was virtually empty
for more than 3 years. The value of the real estate plummeted by almost 50% leaving the value
of the construction loan far higher than the property could possibly be sold for.
Under pressure from Beal, the Bernsteins were forced to sell several Urban Assets
properties at depressed prices to pay down the note. Beal also forced the Bernsteins to take offers
for the Flying Star Cafes and Satellite Coffee businesses as well. Unfortunately, due to sales
heavily affected by the resulting recession, and market conditions at the time, the businesses
value was also insufficient to cover the amount of the loan. The Flying Star - Bernalillo and
Flying Star - Nob Hill buildings were valued at such depressed prices that it took several years,
and substantial efforts in finding tenants to lease the other openings in the Bernalillo shopping
center to finally bring the buildings up to a reasonable market value to sell at. Finally, in 2013,
after years of trying, both the Flying Star - Nob Hill building (June 2013) and the building

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housing Flying Star - Bernalillo (January 2013) were sold to different buyers with most of the
proceeds of both going to Charter Bank in order to plug the shortfall between the sales prices
and the amount owed on the loan for the Flying Star -Bernalillo location. Most of the remaining
cash from the combined sales went to Flying Star to assist with cash flow and payables.
Flying Star remained a tenant at both locations, amending the lease at lower per square
foot value for Flying Star - Bernalillo to reflect the current market conditions of the time. The
Flying Star - Nob Hill lease was sold at the rate it was paying at the time. Since the Petition
Date, the lease rate on Flying Star - Nob Hill has been negotiated downward.
F. The Santa Fe Economy
Flying Star Santa Fe was plagued with difficulties from the start. Due to the recession,
the Santa Fe economy was very slow, resulting in hundreds of small businesses closing. Real
estate prices had crashed. Tourism seemed to have evaporated. As a result, Flying Star Santa
Fe never fully took off. The building Flying Star was a tenant in was mostly vacant for entire
time, plus there were facility problems such as no heat, no trash services and parking problems
with the City of Santa Fe. Worst of all, the movie theatre site, which Flying Star Santa Fe was
located next to, was not developed for 6 years, resulting in refuse accumulating in the area and
homeless congregating in the building site. Flying Star and related companies lost a portion of
their financing during construction of this project and the Bernsteins and the related companies
had to put up additional cash to complete the project. Flying Star used a previously unused credit
line to buy some of the equipment and fixtures. This loan was subsequently rolled into a US
Bank loan and is still being paid off in monthly installments. Flying Star Santa Fes sales were
never sufficient to cover its expenses and the cafes operating costs had to be paid for by other
Flying Star cafes.
Flying Stars sales had been affected by the financial crash and resulting recession in
2009. However, after the U.S. Government shut down in October of 2013, the Federal-based
economy in New Mexico, including in Albuquerque, seemed to be heading downward again at
an accelerated rate. Sales at all Flying Star locations even the successful ones - fell at an
alarming rate directly after the shutdown. Notably, Flying Star - Bernalillo began to crash and
the caf could barely cover its expenses. Flying Star Downtown was reeling from the loss of
day time business population in downtown (from 35K to 20K - current vacancy rate in the area is
35%). The once profitable location began to lose a great deal of money. At the end of 2013,
Flying Star and companies found themselves with three locations and a production facility
operating deeply in the negative.
Rio Chan Foods, which depended on receipts from products produced for Flying Star,
Satellite Coffee and some third party customers also began to lose money. With the loss of
business from slower caf sales and from third party sales cutbacks, both Flying Star and Rio
Chan Foods found themselves operating at a deficit with large accounts payable balances they
could not seem to get down. In early 2014, the Bernsteins also discovered that a large American
Express loan had been taken out for the amount of $449,000.00 by the previous executives in
2013. This loan had an enormous payback schedule and was choking cash flow. The Bernsteins
realized they needed to contribute cash to a) pay off this loan b) contribute another $571,000.00

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to the company in order to pay down bills and get on a stronger footing. Although these
contributions helped, the continuously declining sales during that period slowed the companies
recovery considerably.
In the last quarter of 2014, after conducting an assessment of the Albuquerque market,
Flying Star determined that Albuquerques population had shrunk by thousands, many
businesses had closed, and more national restaurant chains had entered the market competing for
a slice of an already shrinking pie. A new operating model was needed. This reassessment
resulted in the closing of Flying Star - Bernalillo, Flying Star - Santa Fe and Flying Star Downtown locations. Operating expenses and support staff have been downsized significantly,
however, sales have never fully recovered from October of 2013 levels.
G. Valley Property, LLC and Other Projects related to Flying Star Development
The Bernsteins, through Urban Assets, had acquired and remodeled the real estate leased
to Flying Star for the Flying Star - Rio Grande location in 1998. Charter Bank was the lender. In
2005, Urban Assets acquired a tract of land at Corrales Road and Coors Blvd. Financial
arrangements were made through Charter Bank to build a Flying Star Caf and small retail
shopping center. Upon completion, Charter helped arrange for financing through GE Capital
which required that the Flying Star - Rio Grande property and the Flying Star - Corrales property
were rolled into a single loan, and which required that the two properties be conveyed into a
special purpose and bankruptcy remote entity, which is Valley Properties. During the Beal
Bank crisis, the Bernsteins were forced to put these properties on the market. However, their
value was so depressed that only two offers that were received, both of which would have been
insufficient to cover the enormous early pay off penalties embedded in the GE loan.
In addition to these properties, Urban Assets also owned a tract of raw land on NM 550
in Bernalillo, financed by First Community Bank and guaranteed by Flying Star. When First
Community Bank failed, this loan was sold to U.S. Bank. The property was sold for less than the
total amount owed to U.S. Bank, and the balance was restructured into an installment loan
secured by the remaining assets of Flying Star. That loan is still in place, and is one of only five
remaining secured loans being serviced by the company. The other secured loans being serviced
are a vehicle financing loan from Hitachi Capital, a purchase loan for software and computers
from Hewlett Packard, a loan from GE Capital, and a tenant improvement loan from Mech-Con
Investments, LLC for the administrative offices at 2701 Broadway Blvd NE in Albuquerque,
shared by Flying Star, Rio Chan Foods and Rio Chan Brands.
H. Other Factors Leading to the Bankruptcy Case
The significant pressure exerted on Flying Star by Beal Bank was not the sole cause of
the bankruptcy filing. In 2006, Flying Star engaged Sockwell Partners, Inc. (Sockwell) an
executive search company, to find a qualified executive to run its operations. Sockwell presented
several candidates which it considered suitable, including Clyde Harrington (Harrington).
The Debtor selected Harrington to run its operations, because his experience seemed most
compatible with the companys business. Harrington then promoted the Debtors controller,
Donna Schmidt (Schmidt), to Chief Financial Officer and retained Monroe Moxness Berg

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P.A. (Moxness), a Minneapolis law firm, to establish an executive retention program.

Questions and concerns about payroll practices and other compensation matters led to the
termination of Harrington and Schmidts employment in January of 2014. In response,
Harrington and Schmidt filed suit against the Debtor and the Bernsteins, personally, initiating
Case No. D-202-CV-2014-01011. The Debtor and the Bernsteins filed counterclaims against
Harrington and Schmidt, as well as third party claims against Moxness and another firm
involved in setting up the executive compensation plan. Since Harrington and Schmidts
employment contracts contained mandatory arbitration clauses, matters between Harrington and
Schmidt, on the one hand, and the Debtor and the Bernsteins, on the other hand, were moved
into an arbitration proceeding which was pending as of the Petition Date, while the Debtors and
the Bernsteins third party claims against Moxness and Sockwell remain in court, but are
presently stayed. By agreement of the parties to the arbitration proceedings, the bankruptcy stay
has been modified to allow the arbitration proceedings to go forward in order to liquidate the
Claims of Harrington and Schmidt against the Debtor. It has taken the first year and a half of the
bankruptcy proceeding to resolve this dispute, including the large claims filed by Harrington and
Schmidt. The dispute has now been tentatively settled and the settlement is awaiting Bankruptcy
Court approval. With this dispute behind it, the Bernsteins believe the Debtor is now ready and
able to proceed forward.
ARTICLE IV
PROPERTY OF THE ESTATE
The Debtor leases each of the buildings from which it operates from various landlords.
As a result, the Debtor itself owns no real property. As a restaurant business, the Debtor has
furniture, fixtures, restaurant equipment, and inventory which it uses to operate. However, the
value of this property compared to the value of the Debtors operations as a going concern is
minimal, and virtually all of this property is encumbered by liens, making it of little value were
the Debtor to be liquidated. For example, in June 2016, the Debtor had total receipts of
$1,307,068.47, the vast majority of which were cash sales from its restaurant business. By
contrast, the book value of the Debtors inventory assets was only $68,017. Debtors June 2016
Monthly Operating Report, Doc. No. 313, pp. 3, 6. Although the Debtors June operating report
shows the book value of the Debtors hard assets, primarily consisting of tenant improvements,
furniture, fixtures and restaurant equipment as $3,436,631.00, the Bernsteins believe that if the
Debtor were to be liquidated, these assets would be worth only a small fraction of that amount.
In addition to these assets, as of June 30, 2016, the Debtor had $335,733.88 in cash. June
2016 Monthly Operating Report, p. 3. Now that the Debtors operations have been slimmed
down, and some of its leases renegotiated so that the locations it currently operates are
profitable, the Debtors greatest asset is its value as a going concern. The Plan proposes to
monetize the Debtors going concern value through an auction of the post-confirmation equity in
the Debtor, enabling the Debtors creditors to reap the benefits of the Debtors going concern
value shortly after the Plan becomes effective, rather than having to collect plan payments over a
series of years, as is frequently the case with Chapter 11 bankruptcies.

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ARTICLE V
SIGNIFICANT POST PETITION EVENTS
On January 30, 2015, the Debtor filed a voluntary petition for relief under Chapter 11 of
the Bankruptcy Code, commencing the Bankruptcy Case. Thereafter, the Debtors first priority
was to retain bankruptcy counsel, and obtain court approval of its employee benefit programs,
customer rewards programs, obtain authority to use cash collateral, continue its insurance
financing arrangements, and continue to pay its utility expenses, necessary acts to ensure the
Debtors continued operation. The Debtor also immediately entered into an adequate protection
agreement with U.S. Bank, one of its major secured creditors, under which U.S. Bank retains its
collateral and receives $10,000.00 per month in adequate protection payments. On February 24,
2015, the UCC was formed, and shortly thereafter, employed Modrall, Sperling, Roehl, Harris
and Sisk, P.A. (Paul M. Fish) as its counsel.
On February 12, 2015, the Debtor filed the Debtors First Omnibus Motion to Reject
Certain Unexpired Leases and Related Executory Contracts (Doc. No. 35), which requested the
Bankruptcy Courts approval to reject its Contracts and Leases pertaining to Flying Star
Bernalillo and Flying Star Santa Fe. The Debtor had vacated these properties effective January
30, 2015. The Debtor filed a motion to assume its lease for Flying Star Downtown, and later
withdrew it after determining that location should be closed. An order rejecting that lease was
entered on November 18, 2015 (Doc. No. 185). The Debtors motion to assume its lease for
Flying Star Paseo was filed on February 12, 2015, has been objected to by the UCC, and
remains pending. On August 11, 2015, the Debtor filed motions to assume its leases for Flying
Star Central, Flying Star Menaul and Flying Star Juan Tabo, which have been objected to
by the UCC and remain pending. On January 25, 2016, the Court entered an Order Approving
Debtors Assumption of Unexpired Lease with Mech-Con Investments, LLC (doc. No. 1999),
approving the Debtors assumption of its lease for its administrative offices. On June 20, 2016,
an Order Approving Debtors Assumption of Unexpired Leases with Valley Properties, LLC
(Doc. No. 290) was entered, assuming the leases for Flying Star Rio Grande and Flying Star
Corrales at lower rent rates.
On April 16, 2015, Hitachi Capital filed a motion for relief from the Debtors automatic
stay with respect to two trucks financed by Hitachi Capital. The Debtor subsequently negotiated
an adequate protection agreement with Hitachi Capital whereby the Debtor makes adequate
protection payments of $3,000.00 per month to Hitachi Capital and Hitachi Capital retains its
liens.
On June 20, the Bankruptcy Court entered its Order Approving Debtors Assumption of
Unexpired Leases with Valley Properties, LLC (Doc. No. 290), authorizing the Debtors
assumption of the leases for the Flying Star Corrales and Flying Star Rio Grande at rents
which were reduced by an average of 16%.
On July 19, 2016, Flying Star filed the Debtors Motion for Order Approving
Compromise of Controversy between Debtor and Clyde Harrington and Donna Schmidt (Doc.
No. 311). In general, the settlement, if approved, would result in dismissal of Harrington and
Schmidts claims against Flying Star, and the reduction of Harrington and Schmidts unsecured
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claims to the aggregate amount of $611,523.00, from the aggregate amount of $7,302,934.80,
without Flying Star or any of its related entities having to make any payment to Harrington or
Schmidt. For more information, please refer to the settlement agreement attached to the
settlement motion. Under the proposed settlement, the Debtor and the Bernsteins would not be
able to object to Harrington and Schmidts amended claims, but other creditors would be free to
do so.
In general, since the filing of the case, the Debtor has continued its business operations,
and, as mentioned previously, has streamlined its operations considerably. It has closed three
locations - Flying Star Santa Fe, Flying Star Bernalillo, and Flying Star Downtown, which
were unprofitable to the point that they were draining operating and cash resources. They have
continued to make cuts in the management structure since 2014. Overall, they have reduced the
management staff. The Bernsteins have also overhauled Flying Stars field operations in order to
increase its operating margins, with modest success. The decline in sales has been stabilized. A
difficult, remaining issue is the more than ten years of facility and equipment deferred
maintenance, resulting in a large capital investment required to replace dying equipment and
perform many needed repairs and upgrades to facilities. Capital will be required since these
expenses can easily exceed operating income on a monthly basis.
ARTICLE VI
MANAGEMENT AND INSIDER COMPENSATION
Since the Bernsteins removed Harrington and Schmidt as managers of the Debtor in
2014, the Bernsteins have been managing the Debtors operations, together with Amy Ahyo. Ms.
Ahyo has been the Debtors controller since February, 2014. The Bernsteins previously managed
the Debtor from its formation through January 1, 2006, when Harrington and Schmidt were
installed as Chief Executive Officer and Chief Financial Officer, respectively. In addition to the
Bernsteins and Ms. Ahyo, each location of the debtor has an on-site manager. It is anticipated
that the Debtors current management structure will remain in place indefinitely after
confirmation of the Plan.
The Bernsteins are insiders of the Debtor, who each own a 50% stake in the Debtor. The
Debtor proposes to compensate them for their services in managing the Debtor by continuing to
pay their current annual salaries, which are $209,005.00 for Jean Bernstein and $15,120.00 for
Mark Bernstein.
ARTICLE VII
FEASIBILITY
As shown by the Debtors monthly operating reports, and summarized on Exhibit A
attached hereto, the Debtor has been operating on a break-even basis over the last twelve (12)
months, with an average monthly net profit of $4,118.88.
However, there are several factors which indicate that the Debtors post-confirmation net
profits would be higher than a twelve-month retrospective might suggest. First, on June 20, 2016,
the Court entered an Order Approving Debtors Assumption of Unexpired Leases with Valley

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Properties, LLC (Doc. No. 290). This order also modified the Debtors leases for the Flying Star
Rio Grande and Flying Star Corrales locations to reduce the rent Flying Star pays there.
Second, in winter 2015, the Debtor closed the Flying Star Downtown because it was not
profitable. Third the amount Flying Star currently spends on legal fees would decline after
confirmation of a plan, and also because Flying Star has reached a tentative settlement with
Harrington and Schmidt. Fourth, under the proposed Plan, the Unsecured Creditors Committee
would be dissolved, thereby saving Flying Star a significant amount in legal expenses. From the
beginning of the bankruptcy case through February 23, 2015, the Unsecured Creditors
Committee charged Flying Star $90,947.09 in attorneys fees, costs, and gross receipts tax
thereon, compared with only $65,287.22 charged by Flying Stars bankruptcy Counsel from the
beginning of the case through January 31, 2016. The Debtors actions to streamline its business
operations have also resulted in modest improvements to the Debtors profitability.
Considering these factors, the Bernsteins believe that within the year after Confirmation,
the Debtors average monthly net profit will rise. Nonetheless, even if Flying Stars net operating
income does not rise, maintaining its net operating income at current levels would be sufficient
to pay Flying Stars post-petition accounts payable, as well as the payments to be made to
secured creditors under the Plan, since those expenses are already being paid as they come due
by Flying Star.
With respect to administrative, priority, and general unsecured claims, the Plan is feasible
because the Auction of the equity in the reorganized Debtor will generate sufficient proceeds to
pay all Administrative Claims and Priority Claims in full, and to make the proposed Pro Rata
distribution to general unsecured creditors. Since the Bernsteins have agreed to bid at least
$1,500,000.00 for the equity in the reorganized Debtor, and the Bernsteins believe that as of the
Effective Date there will be approximately $470,800.84 in Administrative Claims to be paid, as
well as Priority Clams of $239,097.86. Post-petition payables to vendors and taxes incurred in
the ordinary course of Flying Stars business would be paid in the ordinary course of Flying
Stars business.
As will be set forth in more detail in Article VIII, below, the Bernsteins estimate that
Priority Claims and Administrative Claims on the effective date would total $709,101.20. Given
that the Bernsteins have agreed to bid at least $1,500,000.00 for the equity in the Reorganized
Debtor, even if no other party bids, and even if Flying Star is not able to collect any funds from
Satellite Coffee, there would be at least $709,101.20 available to distribute to Holders of
Unsecured Claims shortly after the Effective Date.
In conclusion, the minimum bid is sufficient to pay Administrative and Priority Claims in
full, with substantial funds remaining thereafter to distribute to Holders of Unsecured Claims.
Flying Stars past performance indicates that it can continue to pay holders of Secured Claims
and post-petition vendors in the ordinary course of business. Therefore, the Bernsteins believe
the Plan is feasible.

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ARTICLE VIII
CLAIMS AGAINST THE ESTATE AND INTERESTS IN THE DEBTOR
Administrative Claims
The Bernsteins estimate of unpaid Administrative Claims as of the Effective Date is
attached hereto as Exhibit B. As set forth thereon, the Bernsteins believe that as of the Effective
Date, there will be $470,800.84 in unpaid Administrative Claims against Flying Stars
bankruptcy estate, excluding any claims of post-petition vendors. In addition to these claims, 3rd
and Gold, LLC has requested allowance of an Administrative Claim of $71,468.33 for rent,
maintenance and repair costs, late charges, real property taxes, insurance, interest, and attorneys
fees and costs relating to the lease of Flying Star - Downtown. The Debtor does not believe this
claim is valid, is in the process of disputing this Claim, and the Bernsteins believe it will be
Disallowed. Treatment of Allowed Administrative Claims is set forth in section 3.16 of the Plan,
and is summarized below.
Holders of Allowed Administrative Clams shall be paid in full under the Plan. Holders of
Administrative Claims which are Allowed as of the Effective Date, shall be paid in full on or
before fourteen (14) days after the Effective Date. Holders of other Administrative Claims shall
be paid in full within fourteen (14) days of the date such Administrative Claim becomes an
Allowed Claim.
Requests for payment of Administrative Claims must be filed and served on the Debtor
and the United States Trustee no later than forty-five (45) days after the Effective Date.
Likewise, all Professionals requesting compensation or reimbursement of expenses under 327,
328, 330, 331 and 503(b) of the Bankruptcy Code for services rendered before the Effective Date
shall file and serve a Fee Application on the Debtor and the United States Trustee no later than
forty-five (45) days after the Effective Date. This bar date shall not apply to charges incurred
after the Effective Date. U.S. Trustees quarterly fees shall be paid in full on or before the
Effective Date.
Secured, Priority, and Unsecured Claims
Attached hereto as Exhibit C is a chart summarizing the Claims against the Debtor by
Class. The summary is based on the proofs of Claim that were filed or scheduled as of July,
2016. Pursuant to the Order Fixing Time For Filing Proofs of Claim and Interests entered July 2,
2016 (Doc. No. 130), creditors who were not scheduled and did not file a proof of claim, and
creditors who were identified on the Debtors schedules as disputed, contingent and/or
unliquidated, but did not file a timely proof of claim, are not entitled to receive a distribution
under the Plan. With respect to the Secured Claims, the Total Allowed amount listed on
Exhibit C is the Bernsteins estimate of the amount of such Claim as of July 27, 2016.
Equity Interests
The Bernsteins each own 50% of the shares in Flying Star. If the the claims of Harrington
and Schmidt are re-characterized as equity interests, those interests would also be included in
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Class 11. There are no other equity interests in Flying Star. Equity interests are classified in
Class 11 of the Plan.
For purposes of voting and all other Plan Confirmation matters, except as otherwise
provided herein, all Claims shall be classified as set forth in this Article. Administrative Claims
are not separately classified, and there are no claims of the kind specified in 11 U.S.C. 507(a)(3),
since this is a voluntary bankruptcy case.
Under this Plan, Claims and Interests are classified as follows:
Class 1 (Priority Tax Claims). Class 1 consists of Allowed unsecured Priority Tax Claims
under 11 U.S.C. 507(a)(8). Class 1 claims include the claims of the New Mexico Department of
Workforce Solutions, New Mexico Taxation and Revenue Department, Bernalillo County
Treasurer and Sandoval County Treasurer. Class 1 Claims are Unimpaired under the Plan, and are
not entitled to vote to accept or reject the Plan.
Class 2 (Priority Non-Tax Claims). Class 2 consists of Allowed unsecured Priority NonTax Claims under 507(a)(1), (4), (5), (6), and (7) of the Bankruptcy Code, and shall not include
any Priority Tax Claim. Class 2 Claims are Unimpaired under the Plan.
Class 3 (Claim of U.S. Bank). Class 3 consists of the Claim of U.S. Bank secured by
substantially all of the assets of the Debtor. Class 3 is Impaired under the Plan.
Class 4 (Claim of Hitachi Capital). Class 4 consists of the Claim of Hitachi Capital,
secured by a purchase money security interest in a 2013 Hino 268 delivery truck, a 2013 Morgan
Gold Star refrigerator body, a 2013 Carrier Supra 660 refrigerator unit, and a 2013 Maxon RC-3
liftgate. Class 4 is Impaired under the Plan.
Class 5 (Claim of Hewlett Packard). Class 5 consists of the Claim of Hewlett Packard,
secured by various miscellaneous electronic equipment and software. Class 5 is Impaired under
the Plan.
Class 6 (Claim of GE Capital). Class 6 consists of the Claim of GE Capital, secured by
furniture, fixtures, equipment and inventory. Class 6 Impaired under the Plan.
Class 7 (Secured Claim of Railyard Co.). Class 7 consists of the Secured Claim of Railyard
Co., if any, to the extent secured by various furniture, fixtures, equipment and software used at
Flying Star Santa Fe. Class 7 is Impaired under the Plan.
Class 8 (Claim of Mech-Con Investments, LLC). Class 8 consists of the Claim of Mech
Con Investments, LLC for tenant improvements to the Administrative Offices. Class 8 is
Unimpaired under the Plan.
Class 9 (General Unsecured Non-Priority Claims). Class 9 consists of Unsecured NonPriority Claims which are not otherwise classified. A list of Class 9 Claims is set forth in Exhibit
B to this Disclosure Statement. Class 9 is Impaired under the Plan.

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Class 10 (Insider Unsecured Claims). Class 10 consists of Unsecured Non-Priority Claims

Holders are Insiders. A list of Class 10 Claims is set forth in Exhibit B to this Disclosure
Statement. Class 10 is Impaired under the Plan.
Class 11 (Equity Shareholders). Class 11 consists of all equity ownership Interests in the
Debtor. Class 11 is Impaired under the Plan.
ARTICLE IX
TREATMENT OF CLAIMS
Claims in Classes 3, 4, 5, 6, 8 and 9 are Impaired by this Plan and holders of such Claims
may be entitled to vote for or against Confirmation of this Plan. Claims which are Allowed
pursuant to the Bankruptcy Code and Rules shall be treated as follows:
3.1
Class 1. Class 1 Claims (Allowed Priority Tax Claims) shall be paid in full on or
before fourteen (14) days after the Effective Date. Class 1 Claims are not entitled to vote on the
Plan because they are Unimpaired.
3.2
Class 2. Class 2 Claims (Allowed Priority Non-Tax Claims) shall be paid in full on
or before fourteen (14) days after the Effective Date. Class 2 Claims are not entitled to vote on the
Plan because they are Unimpaired.
3.3
Class 3. The Class 3 Claim of U.S. Bank shall be paid in monthly installments of
$10,000.00, beginning on the first day of the first month following the month in which the
Effective Date occurs, until the balance of the Claim, with interest at the rate of 5.25% per annum
has been paid in full. U.S. Bank shall retain all liens it had as of the Effective Date. Class 3 is
Impaired and entitled to vote to accept or reject this Plan.
3.4
Class 4. The Class 4 Claim of Hitachi Capital shall be paid in monthly installments
of $3,000.00, beginning on the first day of the first month following the month in which the
Effective Date occurs, until the balance of the Claim, with interest at the rate of 5.5% per annum
has been paid in full. Hitachi Capital shall retain all liens it had as of the Effective Date until its
Claim is paid in full. Class 4 is Impaired and entitled to vote to accept or reject this Plan.
3.5

Class 5. The Class 5 Claim of Hewlett Packard shall be treated as follows:

(a)
The Bernsteins hereby incorporate the payment terms contained in the
Debtors Pre-Petition Agreements with Hewlett Packard into the Plan. Hewlett Packards claim
will be paid according to the payment terms in such agreements. This treatment shall cure any
possible default under the Pre-Petition Agreements, and on the Effective Date of the Plan, all PrePetition Agreements, including loan documents, between the Debtor and Hewlett Packard shall be
reinstated to their non-default and non-accelerated status.

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(b)
The preceding paragraph notwithstanding, section 5.17 of this Plan shall
apply to the Debtors loan from Hewlett Packard and to all Pre-Petition Agreements between the
Debtor and Hewlett Packard.
(c)
Hewlett Packard shall retain all liens it had as of the Effective Date until its
Claim is paid in full.
3.6

Class 6. The Class 6 Claim of GE Capital shall be treated as follows:

(a)
The Bernsteins hereby incorporate the payment terms contained in the
Debtors Pre-Petition Agreements with GE Capital into the Plan. GE Capitals claim will be paid
according to the payment terms in such agreements. This treatment shall cure any possible default
under the Pre-Petition Agreements, and on the Effective Date of the Plan, all Pre-Petition
Agreements, including loan documents, between the Debtor and GE Capital shall be reinstated to
their non-default and non-accelerated status.
(b)
The preceding paragraph notwithstanding, section 5.17 of this Plan shall
apply to the Debtors loan from GE Capital and to all Pre-Petition Agreements between the Debtor
and GE Capital.
(c)
GE Capital shall retain all liens it had as of the Effective Date until its
Claim is paid in full.
3.7

Class 7. The Class 7 secured Claim of Railyard Co. shall be treated as follows:

Upon occurrence of the Effective Date, any property to which a valid lien of Railyard Co.
had attached as of the Petition Date shall be deemed surrendered to Railyard Co. in full
satisfaction of its secured claim.
3.8
Class 8. The Class 8 secured Claim of Mech-Con Investments, LLC shall be paid in
full in accordance with the terms of the Order Approving Debtors Assumption of Unexpired
Lease with Mech-Con Investments, LLC (Doc. No. 199) and the Amended Tenant Improvement
Note dated August 1, 2015, which are incorporated herein by reference.
3.9.

Class 9. Class 9 Claims (General Unsecured Claims) shall be paid as follows:

(a)
On or before sixty (60) days after the Effective Date, Holders of Allowed
Class 9 Claims shall be entitled to a Pro Rata distribution of the proceeds of the Auction after
payment in full of all Allowed Administrative Claims, Allowed Priority Tax Claims and Allowed
Priority Non-Tax Claims, as set forth in more detail in section 3.11 of this Plan.
(b)
Holders of Allowed Class 9 Claims shall be entitled to a Pro Rata
distribution of 100% of the Net Collection Proceeds of any debt which a court determines is owed
to the Debtor by Satellite Coffee, to be paid at the discretion of the Debtor, provided that the
Reorganized Debtor must distribute any Net Collection Proceeds no later than the end of the

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calendar quarter after the calendar quarter in which the Net Collection Proceeds are actually
received by the Reorganized Debtor.
3.10 Class 10. Class 10 Claims (Insider Unsecured Claims) shall receive the same
treatment as Class 9 claims, except that in the event that the Bernsteins bid to purchase the equity
in the Reorganized Debtor, is approved by the Bankruptcy Court, Class 10 Claims shall be
subordinated to Class 9 Claims and shall not receive any payment until all Class 9 Claims are paid
in full, as further discussed in section 3.11(h) of this Plan. However, in the event that the
Bernsteins bid to purchase the equity in the Reorganized Debtor is approved by the Bankruptcy
Court, and that approval is later rescinded, overturned on appeal, or otherwise invalidated, Class
10 Claims shall not be subordinated as set forth herein.
3.11

Class 11. Class 11 Interests (Equity Shareholders) shall be treated as follows:

(a)
shall be cancelled.

On the Effective Date, all existing shares and equity interests in the Debtor

(b)
On the date that is fourteen (14) days after Confirmation Order is entered,
if the Confirmation Order has become a Final Order; or, if the Confirmation Order has not
become a Final Order on such date, on the date that is the first date on which the Confirmation
Order has become a Final Order that is at least seven (7) days following the Confirmation Date,
the Debtor shall hold an Auction of the equity interests in the Reorganized Debtor, in accordance
with the following procedures:
i.
ii.
iii.
iv.

v.

vi.

The asset to be auctioned is 9,000 shares in the Reorganized Debtor, which shall be
100% of the shares in the Reorganized Debtor on the Effective Date.
100% of the shares in the Reorganized Debtor will be sold as a single package; offers
for only a portion of the shares in the Reorganized Debtor shall not be allowed.
The minimum bid at the Auction shall be $1,500,000.00.
The Auction shall take place in Albuquerque, New Mexico at a location designated
by the Court at a date and time designated by the Court, to be noticed to creditors and
other parties of interest.
Parties other than the Bernsteins wishing to participate in the auction must submit an
Expression of Interest to the Debtor declaring their desire to bid. The Expression of
Interest must be received by the Debtors counsel at least five (5) Business Days prior
to the date of the Auction. The Expression of Interest must demonstrate that the
bidder has the financial means by which to complete the purchase of the membership
interest. This may be accomplished by furnishing to the Debtors counsel
documentation showing available funds of at least the purchase price that the bidder
will bid at the sale, or by providing a cashiers check of $100,000.00, which shall be
fully refunded if the party providing this is not the successful bidder at the auction.
No party shall be allowed to bid contingent on the bidder receiving financing, nor
may bids be contingent on a bidder receiving approval from its board of directors or a
regulatory body, or contingent on any event other than approval of the bid by the
Bankruptcy Court.

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vii.

viii.
ix.

x.
xi.

xii.

xiii.
xiv.

xv.

Any party bidding at the Auction must identify itself. An individual bidding on behalf
of someone else, an organization, corporation, or trust must identify his or her
principal.
Any bid submitted at the Auction must be irrevocable until the closing and final
approval by the Bankruptcy Court.
Bids may not include a request for, or be subject to payment of, any transaction or
break-up fee, expense reimbursement, or other transaction expenses paid from the
purchase price.
A back-up bid shall be solicited at the time of the auction in the event that the
winning bidder is unable to finalize the sale.
If the winning bidder is unable to finalize the sale because of lack of funding, and if
such bidder paid $100,000.00 to be able to participate in the auction, then such bidder
shall forfeit $50,000.00 of such monies to the Reorganized Debtor.
The highest and best bid, and the bid which shall be accepted as the winning bid, is
the bid which would result in the highest payment, by Pro Rata percentage, to the
unsecured creditors which would have Allowed Claims after the entry of the Bid
Approval Order.
The proceeds of the Auction shall be property of the Estate and used in accordance
with this Plan.
If no valid Expressions of Interest are received by the Debtors counsel at least five
(5) Business Days prior to the date of the Auction, the Bernsteins bid of
$1,500,000.00 and subordination of all Class 10 Claims shall be considered the
winning bid, and the Auction shall not be held.
The minimum increment by which a bid must be higher than the previous bid is
$25,000.00.

(c)
The Debtor will provide a due diligence package to all known
potential bidders or any Person or entity that requests it prior to the date of the Auction.
(d)
Upon conclusion of the Auction, the Debtor will review each bid. The
highest and best bid, and the bid which the Debtor shall conditionally accept as the winning bid,
is the bid which would result in the highest payment, by Pro Rata percentage, to the unsecured
creditors which would have Allowed Claims after the entry of the Bid Approval Order. The
Debtor will announce its determination as to the winning bid and back-up bid by filing a notice
in the Bankruptcy Case on or before the Business Day after the Auction. The Debtor shall
conditionally accept what it deems to be the winning bid, subject to approval by the Bankruptcy
Court. The Debtor may also conditionally accept the bid determined by the Debtor to be the
second best bid, conditioned on (i) Bankruptcy Court approval of a sale to that bidder, (ii) the
winning bidder failing to close, and (iii) the agreement of the back-up bidder to act as such.
After the Auction is conducted, the Debtor shall promptly seek Bankruptcy Court approval of the
winning bid, including a determination by the Bankruptcy Court that the purchaser acted in good
faith.
(e)
The Debtor will return all earnest money deposits by the end of the next
Business Day after conclusion of the Auction, except for the earnest deposits of the winning
bidder and the back-up bidder.

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(f)
If the winning bid contained subordination or disallowance of any Claims
as a part of the offer, the Bid Approval Order shall disallow or subordinate such Claims.
(g)
Within seven (7) Business Days after the date that both (1) the Bid
Approval Order has become a Final Order, and (2) the Debtor has received the full bid amount
from the party whose bid was approved by the Bankruptcy Court in the Bid Approval Order, the
Debtor, pursuant to 11 U.S.C. 1123(a)(5)(J), shall issue new shares in the Reorganized Debtor
comprising 100% of all equity interests in the Reorganized Debtor, to the party whose bid was
approved in the Bid Approval Order. To the extent applicable, 11 U.S.C. 1145 is invoked.
(h)
After the Effective Date, as further provided herein, the Debtor shall apply
the proceeds of the Auction, or the payment of the Bernsteins, as applicable, as follows:
i.

ii.
iii.
iv.

First, to pay all Allowed Administrative Claims in full, including setting aside
an amount sufficient to pay in full any pending Administrative Claims by
Professionals not yet Allowed;
Second, to pay all Allowed Priority Tax Claims in full;
Third, to pay all Allowed Priority Non-Tax Claims in full; and
Fourth, distributing the amount remaining after making payments as set forth
in subsections (i) through (iii) above shall be distributed Pro Rata to holders
of Allowed Class 9 Claims.

3.15 Surrender of Instruments and Release of Liens. Each Holder of an Allowed

Secured Claim, shall not be entitled to receive final payment due under this Plan until such Holder
surrenders any negotiable instruments it holds executed by the Debtor and executes a release of its
lien(s) (in recordable form if appropriate), and delivers the same to the Debtor. Any Holder that
fails to surrender such instrument or satisfactorily explain its non-availability or to execute such
release of lien(s) within ninety (90) days of the date the final payment would otherwise have been
made under this Plan shall be deemed to have no further Claim and shall not receive the final
payment under the Plan.
3.16

Administrative Claims.

(a)
Except as otherwise agreed to by the Debtor and the Holder of an Allowed
Administrative Claim, and except as specifically provided for below, each such Holder shall be
paid in full in Cash on the later of:
i.
ii.

On or before fourteen (14) days after the Effective Date, or

Within fourteen (14) days of the date such Administrative Claim becomes an
Allowed Administrative Claim.

(b)
The United States Trustees quarterly fees shall be paid in full without
prior approval pursuant to 28 U.S.C. 1930 on or before the Effective Date. Any dispute related
to the amount of the fees shall be resolved by the Court at the Confirmation Hearing.

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(c)
Estimated administrative expenses as of the Effective Date are identified
on Exhibit B to the Disclosure Statement. Requests for payment of such Claims must be filed
and served on the Debtor and the United States Trustee no later than twenty-one (21) days after
the Effective Date, which shall be the Administrative Claim Bar Date. Likewise, all
Professionals requesting compensation or reimbursement of expenses under 327, 328, 330,
331 and 503(b) of the Bankruptcy Code for services rendered before the Effective Date shall file
and serve a Fee Application on the Debtor and the United States Trustee no later than the
Administrative Claim Bar Date. This bar date shall not apply to charges incurred after the
Effective Date.
Any Holder of an unpaid Administrative Claim to which the Administrative Claim Bar
Date applies which fails to file a request seeking to have its expense allowed on or before said
Bar Date, and any Professional to which the Administrative Claim Bar Date applies who fails to
comply with the provisions of this section shall be forever barred from seeking the allowance of
its Administrative Claim, and the Debtor and the Estate shall not be liable for any obligation on
such expense or any related expense.
After the Effective Date, Court approval shall not be required for payment of any fee,
cost or expense which, prior to the Effective Date, would have qualified as an Administrative
Claim under 503 of the Bankruptcy Code, including payment of Professionals.
(d)
The provisions set forth in this section do not apply to debts incurred by
the Debtor after the Effective Date, even if such debts would have been Administrative Claims,
had they been incurred prior to the Effective Date. Such debts will be paid by the Debtor in the
ordinary course of its business.
ARTICLE X
ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN OF REORGANIZATION
A. Liquidation under Chapter 7.
If no plan can be confirmed in the Bankruptcy Case, the Debtor's Bankruptcy Case could
be converted to a case under Chapter 7 of the Bankruptcy Code.
In a Chapter 7 case, a trustee would be elected or appointed to liquidate the Property of
the Estate for distribution to creditors in accordance with the priorities established by the
Bankruptcy Code.
To determine the value that the Holders of Impaired Claims would receive if the estate
assets were liquidated, the Bankruptcy Court would determine the dollar amount that would be
generated from the liquidation of the Debtor's assets and properties in the context of a Chapter 7
liquidation case. Section 704 of the Bankruptcy Code requires a Chapter 7 trustee to collect and
reduce to money the Property of the Estate as expeditiously as is compatible with the best
interests of parties in interest.

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In a Chapter 7 case, as under the Plan, the cash amount that would be available for
satisfaction of Allowed Administrative Claims and Allowed Claims would consist of the
proceeds resulting from the disposition of Property of the Estate. Any such cash amount then
would be reduced by the amount of any Claims validly secured by such assets, and the costs and
expenses of the liquidation (including broker and dealer commissions, and attorneys and
accountants fees).
The costs of liquidation under Chapter 7 would include the fees payable to a trustee in
bankruptcy. A Chapter 7 trustee would be entitled to a reasonable fee, not to exceed 25% on the
first $5,000 paid to creditors, 10% of amounts in excess of $5,000 but not in excess of $50,000,
5% of amounts in excess of $50,000 but not in excess of $1 million, and 3% of amounts in
excess of$1 million. For example, Chapter 7 trustee fees based on disbursement of $10 million
would be an amount not to exceed $323,250.00, in addition to fees incurred by the Chapter 7
trustee for appraisers, brokers, auctioneers, insurance premiums, and other costs associated with
holding, preparing and selling property, fees incurred to legal counsel, and fees incurred to an
accountant for the Chapter 7 estate.
B. Liquidation Analysis.
In addition to the unsecured claims shown on Exhibit C, conversion to Chapter 7 would
result in the rejection of many of Flying Stars long term leases, and the landlords holding such
leases would be likely to file claims for rejection damages, which could result in millions of
dollars worth of claims, many of which would be administrative claims for the rejection of
leases already assumed by the Debtor. The Bernsteins believe that administrative claims for lease
rejection damages would be likely to wipe out any equity which might otherwise remain for
unsecured creditors in the Debtors bankruptcy estate. Rejection of Flying Stars other executory
contracts with its current vendors would also result in additional unsecured claims for rejection
damages. Furthermore, despite the high book value of the Debtors furniture, fixtures and
equipment, the Bernsteins believe that, if the Debtor were to stop operating, a likely result of
conversion to chapter 7, these assets would have minimal to no value. First, the Debtors
landlords would likely assert landlords liens on much of the equipment, likely arguing that items
such as stoves, fume hoods and other restaurant equipment were fixtures. Second, even if the
Debtor were able to successfully remove these items, the Debtor does not believe this equipment
would receive a high price at auction, due to its nature as used restaurant equipment. Although
these assets are quite valuable to the Debtor as an ongoing business, their liquidation value is
very low.
Under this Plan, the Bernsteins estimate that the Debtors creditors would receive at least
21.54 cents on the dollar for their claims, more than such creditors would be likely to receive in a
Chapter 7 case. Attached hereto as Exhibit D is a chart supporting the Bernsteins estimate of the
minimum Pro Rata distribution to Holders of Unsecured Claims under the Plan.
In a Chapter 7 case, the Chapter 7 trustee would not make a distribution to creditors until
all of the Debtors assets had been liquidated. On the contrary, under the Bernsteins proposed
plan, the Debtor could begin making payments as soon as the Effective Date of the Plan.
Additionally, converting this case to Chapter 7 of the Bankruptcy Code would result in a new

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claims bar date being set, permitting additional creditors of the Debtor to file proofs of claim.
While the Bernsteins are not aware of any significant claims which might be filed as a result
thereof, the possibility exists for a claim that the Bernsteins are not presently aware of to be filed
after conversion to Chapter 7.
The liquidation analysis shows the estimated liquidation value of the property of the
Estate and the estimated amount of the Claims that would be allowed, together with an estimate
of certain costs and expenses that would likely result during the liquidation process. While the
Bernsteins believe that the assumptions utilized in the liquidation analysis are reasonable and
conservative, the validity of such assumptions may be affected by the occurrence of events and
the existence of conditions not now contemplated or by other factors, many of which would be
beyond the control of the Bankruptcy Court, the Bernsteins, the Debtor and any other person.
The actual liquidation value of the property of the Estate would likely vary from that presented in
the liquidation analysis.
This liquidation analysis is qualified in its entirety by the fact that such a liquidation
analysis involves known and unknown risks, uncertainties, and other factors that may cause the
actual results to be materially different from any estimated results. Such factors include, but are
not limited to, national, regional, and local general economic and market conditions and
economic and market conditions specifically impacting agriculture that can affect the prices for
which assets can be sold, such as fluctuations in the prices of commodities, interest rates, land
and water prices, and weather conditions. The foregoing are merely examples of factors that
could affect actual liquidation results, and should not be read to be an exhaustive list of such
factors.
C. Dismissal.
If the plan is not confirmed, and the Debtor does not voluntarily convert the case and a
Chapter 11 trustee is not appointed, the Bankruptcy Case could be dismissed. The Bernsteins
believe dismissal is possible, but would not be in the interest of the Debtors creditors. Dismissal
likely would result in the Debtors creditors pursuing their remedies against Flying Star in state
court, which would be extremely costly for Flying Star and could eventually lead to Flying Stars
closure. Dismissal would likely result in a race to collect under which many unsecured creditors
might not be paid at all.
THE BERNSTEINS BELIEVE THAT CONFIRMATION AND IMPLEMENTATION
OF THE PLAN IS PREFERABLE TO ANY OF THE ALTERNATIVES DESCRIBED
HEREIN, AND URGES CREDITORS TO VOTE FOR THE PLAN.
ARTICLE XI
CONFIRMATION PROCEDURE
In order for the Plan to be confirmed by the Bankruptcy Court, all of the applicable
requirements of 1129 of the Bankruptcy Code must be met. These include, among others, the
requirements that the Plan: (i) is accepted by all Impaired classes of Claims or, if rejected or
deemed rejected by an Impaired class, "does not discriminate unfairly" and is "fair and equitable"
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as to each rejecting Class; (ii) is feasible; and (iii) is in the "best interest" of Holders of Claims in
each Class Impaired under the Plan.
A. Voting; Acceptance.
Any Holder of an Allowed Claim in any Class is entitled to vote on the Plan, unless such
Claim has been disallowed for voting purposes by the Bankruptcy Court. A vote may be
disregarded if the Bankruptcy Court determines, after notice and a hearing, that an acceptance or
rejection was not solicited or procured or made in good faith or in accordance with the provisions
of the Bankruptcy Code.
Each of the Voting Classes of Claims will be deemed to have accepted the Plan if the
Plan is accepted by Holders of at least two-thirds in dollar amount and more than one-half in
number of the Claims of such Class (excluding certain Claims designated under 1126(e) of the
Bankruptcy Code) that vote to accept or reject the Plan.
ANY HOLDER OF A CLAIM OF A VOTING CLASS THAT WISHES TO VOTE ON
THE PLAN MAY DO SO BY FILLING IN, SIGNING, AND RETURNING AN
APPROPRIATE BALLOT IN THE MANNER SPECIFIED ON THE BALLOT SO THAT IT
IS RECEIVED NO LATER THAN THE VOTING DEADLINE SPECIFIED ON THE
BALLOT. SEE ARTICLE II OF THIS DISCLOSURE STATEMENT, ENTITLED "VOTING
PROCEDURES."
B. Confirmation Hearing.
Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to
hold a Confirmation Hearing of the Plan. The Confirmation Hearing may be postponed from
time to time by the Bankruptcy Court without further notice except for an announcement of the
postponement made at the Confirmation Hearing. Section 1128(b) of the Bankruptcy Code
provides that any party in interest may object to Confirmation of the Plan. Objections must be
made in writing, specifying in detail the name and address of the person or entity objecting, the
grounds for the objection, and the nature and amount of the Claim held by the objector, and
otherwise complying with the requirements of the Bankruptcy Rules and Local Bankruptcy
Rules. Objections must be filed with the Clerk of the Bankruptcy Court and served upon the
parties so designated in the Order and Notice in the manner set forth therein, on or before the
time and date designated in the Order and Notice as being the last date for serving and filing
objections to Confirmation of the Plan. UNLESS AN OBJECTION TO CONFIRMATION IS
TIMELY SERVED AND FILED IN ACCORDANCE WITH THE ORDER AND NOTICE, IT
MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT.
At the Confirmation Hearing, the Bankruptcy Court will determine, among other things,
whether the following Confirmation requirements specified in section 1129 of the Bankruptcy
Code have been satisfied:
1. The Plan complies with the applicable provisions of the Bankruptcy Code.

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2. The Bernsteins have complied with the applicable provisions of the Bankruptcy Code.
3. The Plan has been proposed in good faith and not by any means proscribed by law.
4. Any payment made or promised by the Debtor for services or for costs and expenses
in, or in connection with, the Bankruptcy Case, or in connection with the Plan and
incident to the Bankruptcy Case, has been disclosed to the Bankruptcy Court, and any
such payment made before the Confirmation of the Plan is reasonable or, if such payment
is to be fixed after the Confirmation of the Plan, such payment is subject to the approval
of the Bankruptcy Court as reasonable.
5. The Bernsteins have disclosed the identity and affiliations of any individual proposed
to serve, after Confirmation of the Plan, as a director or officer of the Debtor, and the
appointment to, or continuance in, such office of such individual is consistent with the
interests of creditors and with public policy, and he Bernsteins have disclosed the identity
of any insider that will be employed or retained by the Debtor and the nature of any
compensation for such insider.
6. Each Holder of an Impaired Claim either has accepted the Plan or will receive or
retain under the Plan on account of such holder's Claims property of a value, as of the
Effective Date, that is not less than the amount that such entity would receive or retain if
the Debtor were liquidated on such date under Chapter 7 of the Bankruptcy Code.
7. Each Class of Claims has either accepted the Plan or is not Impaired under the Plan, or
the Bernsteins have satisfied the requirements of Section 1129(b) of the Bankruptcy Code
as to any non-consenting Class. Confirmation by invoking Section 1129(b) is discussed in
the section below entitled Nonconsensual Confirmation
8. Except to the extent that the Holder of a particular Claim has agreed to a different
treatment of such Claim, the Plan provides that Administrative Expenses and Other
Priority Claims will be paid in full on the Effective Date and that Holders of Priority Tax
Claims will receive on account of such Claims either payment in full on the Effective
Date or deferred cash payments, over a period not exceeding five years after the Petition
Date, of a value as of the Effective Date equal to the allowed amount of such Claims.
9. At least one Class of Claims has accepted the Plan, determined without including any
acceptance of the Plan by any insider holding a Claim in such class.
10. Confirmation of the Plan is not likely to be followed by the liquidation, or the need
for further financial reorganization, of the Debtor or any successor to the Debtor under
the Plan, unless such liquidation or reorganization is proposed in the Plan. See
"Feasibility."
The Bernsteins believe that, upon acceptance of the Plan by each of the Voting Classes,
the Plan will satisfy all of the statutory requirements of Chapter 11 of the Bankruptcy Code, that

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the Bernsteins have complied or will have complied with all of the requirements of Chapter 11,
and that the Plan is being proposed and submitted to the Bankruptcy Court in good faith.
C. Best Interests Test.
As referred to above, Confirmation of the Plan requires that each Holder of an Impaired
Claim either (a) accepts the Plan or (b) receives or retains under the Plan property of a value, as
of the Effective Date, that is not less than the value such Holder would receive or retain if the
Debtor were liquidated under Chapter 7 of the Bankruptcy Code.
The Bernsteins have determined that Confirmation of the Plan will provide each Holder
of an Impaired Claim with a recovery that is not less than that which it would receive pursuant to
a liquidation of the Debtor under Chapter 7 of the Bankruptcy Code.
D. Feasibility.
The Bankruptcy Code requires that, in order for the Plan of reorganization to be
confirmed by the Bankruptcy Court, it must be demonstrated that consummation of the Plan is
not likely to be followed by liquidation or the need for further financial reorganization of the
Debtor, except as contemplated by the Plan. The Bernsteins believe the Plan is achievable, and
supports a finding of feasibility.
E. Nonconsensual Confirmation.
In the event that any Impaired class of Claims does not accept the Plan, the Bankruptcy
Court may nevertheless confirm the Plan at the Bernsteins request if all other requirements of
section 1129(a) of the Bankruptcy Code are satisfied, and if, as to each impaired Class which has
not accepted the Plan, the Bankruptcy Court determines that the Plan "does not discriminate
unfairly" and is "fair and equitable" with respect to such non-accepting Class. The Bernsteins
will seek Confirmation even if Classes of creditors vote to reject the Plan. Requirements that
apply only with respect to a Class of creditors that has voted to reject the Plan include:
1.

No Unfair Discrimination.

A Plan of reorganization generally "does not discriminate unfairly" if (a) the legal rights
of a non-accepting Class are treated in a manner that is consistent with the treatment of
other Classes whose legal rights are intertwined with those of the non-accepting Class,
and (b) no Class receives payments in excess of that which it is legally entitled to receive
for its Claims.
2.

Fair and Equitable Test.

The Bankruptcy Code establishes different "fair and equitable" tests for holders of
Secured Claims and holders of unsecured Claims, as follows:

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(a) Secured Claims. Either (i) each Holder of an Impaired Secured Claim either
(x) retains the liens securing its Secured Claim and receives on account of its
Allowed Secured Claim deferred cash payments having a present value equal to
the amount of its Allowed Secured Claim, or (y) realizes the "indubitable
equivalent" of its Allowed Secured Claim, or (ii) the property securing the Claim
is sold free and clear of liens, with such liens to attach to the proceeds, and the
liens against such proceeds are treated in accordance with clause (i) of this
subparagraph(a).
(b) Unsecured Claims. Either (i) each holder of an Impaired unsecured Claim
receives or retains under the Plan property of a value equal to the amount of its
Allowed Claim, or (ii) the Holders of Claims that are junior to the Claims of the
non-accepting Class do not receive any property under the Plan on account of
such Claims; except that the Debtor may retain property included in the
bankruptcy Estate under Bankruptcy Code 1115. The language "except ... the
debtor may retain property included in the estate under section 1115..." was added
to the Bankruptcy Code by an amendment that became effective October 17,
2005. It appears that this added language in the Bankruptcy Code permits the
Court to confirm the Plan even if the class of unsecured creditors votes to reject
the Plan.
ARTICLE XII
RISK FACTORS
The greatest risks to creditors under the Plan include normal risks relating to leasing and
selling commercial real property. Those risks include, among other things, maintaining and
preserving the property, maintaining high occupancy rates for the leased premises, ensuring
tenants timely pay rent payments, and obtaining a high sales price for the properties if sold.
ARTICLE XIII
TAX CONSEQUENCES
A. Tax Consequences Generally. The discussion of tax consequences set forth below is
necessarily general in nature and does not necessarily describe all of the tax consequences to the
Debtor or the Creditors arising under the Plan. The Bernsteins have not obtained rulings from the
Internal Revenue Service with respect to any of these matters, and the anticipated federal income
tax consequences are not binding on the Internal Revenue Service. This discussion is not
intended as a substitute for professional tax advice, including the evaluation of recently enacted
and pending legislation. The brevity of the discussion required omission of matters that might
affect one or more creditors, depending upon individual circumstances. Creditors are urged to
consult their own tax advisors as to the consequences to them, under federal and applicable state
and local laws, of the consummation of the Plan.
B. Tax Consequences to the Creditors. THE BERNSTEINS AND THEIR COUNSEL
AND ACCOUNTANTS EXPRESS NO OPINION THAT ANY CREDITOR MAY RELY
UPON AS TO THE TAX CONSEQUENCES TO ANY CLAIMANT UNDER THE PLAN.
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EACH CREDITOR IS URGED TO CONSULT AN APPROPRIATE TAX ADVISOR. In very

general terms, which may not apply to any individual creditor, to the extent that a Holder of a
Claim receives or expects to receive less from the Debtor under the Plan than the Holder's tax
basis in the Claim to which such amount relates, such Holder may be entitled to claim a bad debt
deduction. The amount and availability of such deduction will depend, among other things, upon
the Holder's tax accounting method for bad debts. It should be noted that if the debt is not
business related the deduction might be available only if the debt is worthless. To the extent that
a Holder receives payment pursuant to the Plan in an amount in excess of the Holder's adjusted
tax basis of the Claim to which payment relates, such excess may be income to the Holder.
C. Tax Consequences to the Estate. A reduction of tax attributes will be required if and
to the extent cancellation of indebtedness income is excluded from gross income pursuant to IRC
section 108(a). Tax attributes are reduced in the following order of priority: net operating losses
and net operating loss carryovers; general business credits; minimum tax credits; capital loss
carryovers; basis of property of the taxpayer; passive activity loss or credit carryovers; and
foreign tax credit carryovers. Tax attributes are generally reduced by one dollar for each dollar
excluded from gross income, except that general tax credits, minimum tax credits, and foreign
tax credits are reduced by a lesser percentage for each dollar excluded from gross income.
Dated July 29, 2016
Respectfully submitted,
ASKEW & MAZEL, LLC
By: /s submitted electronically
James A. Askew
Daniel A. White
320 Gold Ave. SW, Suite 300A
Albuquerque, NM 87102
(505) 433.3097
(505) 717.1494 (fax)
jaskew@askewmazelfirm.com
dwhite@askewmazelfirm.com
Attorneys for Mark and Jean Bernstein
CERTIFICATE OF SERVICE:
I hereby certify that on this 29th day of July, 2016, I filed the foregoing pleading electronically
through the CM/ECF system, which caused all counsel of record to be served.
s/ Daniel A. White
Daniel A. White

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Flying Star Cafes Inc. Bankruptcy Estate

Exhibit A
Flying Star's 12-Month Retrospective Cash Flow and Profits

June 2015
July 2015
August 2015
September 2015
October 2015
November 2015
December 2015
January 2016
February 2016
March 2016
April 2016
May 2016
June 2016
Average

Beginning Cash
$ 286,307.36
$ 431,383.16
$ 388,796.16
$ 402,880.96
$ 247,040.95
$ 307,901.83
$ 386,657.38
$ 419,289.30
$ 509,915.74
$ 460,617.93
$ 267,116.39
$ 353,174.43
$ 330,852.55
$ 399,327.85

Total Receipts Total Disbursements

$ 1,389,977.89 $
1,244,902.09
$ 1,415,409.71 $
1,457,996.71
$ 1,321,901.07 $
1,307,816.27
$ 1,450,960.18 $
1,606,800.19
$ 1,437,484.58 $
1,376,623.70
$ 1,304,522.34 $
1,225,766.79
$ 1,430,616.87 $
1,397,984.95
$ 1,310,080.29 $
1,219,453.85
$ 1,239,062.39 $
1,288,360.20
$ 1,410,387.96 $
1,603,889.50
$ 1,374,700.54 $
1,288,642.50
$ 1,338,762.85 $
1,361,084.73
$ 1,307,068.47 $
1,302,187.14
$ 1,477,577.93 $
1,473,459.05

Case 15-10182-t11

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Filed 07/29/16

Ending Cash
$ 431,383.16
$ 388,796.16
$ 402,880.96
$ 247,040.95
$ 307,901.83
$ 386,657.38
$ 419,289.30
$ 509,915.74
$ 460,617.93
$ 267,116.39
$ 353,174.43
$ 330,852.55
$ 335,733.88
$ 403,446.72

Monthly Net Profit

$
145,075.80
$
(42,587.00)
$
14,084.80
$
(155,840.01)
$
60,860.88
$
78,755.55
$
32,631.92
$
90,626.44
$
(49,297.81)
$
(193,501.54)
$
86,058.04
$
(22,321.88)
$
4,881.33
$
4,118.88

Entered 07/29/16 16:14:12 Page 1 of 1

Exhibit A
Page 1 of 1

Flying Star Cafes Inc. Bankruptcy Estate

Exhibit B
Estimated Administrative Claims as of the Effective Date
Administrative Claimant
Chappell Law Firm, P.A.
Modrall Sperling Roehl Harris & Sisk, P.A.
Moore, Berkson, Bassan & Behles, P.C.
Dawn Food Products, Inc.
Shamrock Foods Company
Shamrock Foods Company
U.S. Foods, Inc.
Sysco New Mexico
Post-Petition Vendor Payables
Total

Case 15-10182-t11

Estimated Amount
$
5,000.00
$
60,000.00
$
60,000.00
$
19,979.11
$
75,717.40
$
47,330.62
$
1,465.69
$
201,308.02
$

Doc 323-2

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Exhibit B
Page 1 of 1

Flying Star Cafes Inc. Bankruptcy Estate

Exhibit C
Creditors by Class
Class 1 (Priority Tax Claims)
Creditor
Internal Revenue Service
NM Department of Workforce Solutions
NM Taxation and Revenue Department
Bernalillo County Treasurer
Bernalillo County Treasurer
Bernalillo County Treasurer
Bernalillo County Treasurer
Bernalillo County Treasurer
Bernalillo County Treasurer
Bernalillo County Treasurer
Sandoval County Treasurer
TOTAL

Claim No.
2-5
3-1
14-2
15-1
16-1
19-1
20-1
21-1
22-1
23-1
54-1

Total Amount
$
$
7,852.99
$ 225,843.46
$
1,324.88
$
473.50
$
903.12
$
403.58
$
3,818.66
$
711.68
$
785.92
$
3,637.34
$ 245,755.13

Allowed Priority
$
$
7,852.99
$
219,186.19
$
1,324.88
$
473.50
$
903.12
$
403.58
$
3,818.66
$
711.68
$
785.92
$
3,637.34
$
239,097.86

Comments
Amended to $0.00

Claim does not state amount entitled to priority

Class 2 (Priority Non-Tax Claims)

Creditor
Claim No. Total Amount
Allowed Priority
The Bernsteins do not believe there are any priority non-tax claims against Flying Star's bankruptcy estate
TOTAL
$
$
Class 3 (Secured Claim of U.S. Bank)
Creditor
U.S. Bank, N.A.
TOTAL

Comments

Claim No. Total Amount

N/A
$ 340,063.62
$ 340,063.62

Total Allowed
189,927.00 Schedule D, p. 13
189,927.00

Comments

$
$

Class 4 (Secured Claim of Hitachi Capital America Corp.)

Creditor
Claim No. Total Amount
Hitachi Capital America Corp.
53-1
$ 148,542.53
TOTAL
$ 148,542.53

Total Allowed
119,115.00
119,115.00

Comments

$
$

Class 5 (Secured Claim of Hewlett Packard Financial Services)

Creditor
Claim No. Total Amount
Hewlett Packard Financial Services
N/A
$
21,143.63
TOTAL
$
21,143.63

Total Allowed
21,143.63 Schedule D, p. 12.
21,143.63

Comments

$
$

Class 6 (Secured Claim of GE Capital)

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Exhibit C
Page 1 of 5

Creditor
GE Capital
TOTAL

Claim No. Total Amount

43-1
$
38,275.69
$
38,275.69

Total Allowed
$
38,275.69
$
38,275.69

Class 7 (Secured Claim of Railyard Co., LLC)

Creditor
Railyard Co., LLC
TOTAL

Claim No. Total Amount

59-1
$ 4,057,962.37
$ 4,057,962.37

$
$

Total Allowed
-

Class 8 (Secured Claim of Mech-Con Investments LLC)

Creditor
Claim No. Total Amount
Mech-Con Investments, LLC
N/A
$ 404,429.00
TOTAL
$ 404,429.00

$
$

Total Allowed
404,429.00
404,429.00

Class 9 (General Unsecured Claims)

Creditor
Claim No.
3rd and Gold, LLC
49-2
ABCWUA
N/A
Abq. Convention & Visitors Bureau
N/A
ABQ-Commercial
N/A
Accounting Principals
N/A
ACM Industries, Inc.
N/A
Albuquerque Carpet Care & Restoration
N/A
Albuquerque The Magazine
N/A
Alibi
N/A
Ambiance Radio, LLC
N/A
American Alliance
N/A
American Express Bank FSB
24-1
American Express Travel Related Services Company, Inc35-1
American Waste Removal, Inc.
N/A
American Waste Removal, Inc.
N/A
Argyle Welding Supply, Inc.
N/A
Armed Response Team, Inc.
40-1
Auto-Chlor System of NM
N/A
Auto-Chlor System of NM
N/A
AzTech Window Cleaning
N/A
Biotec of NM, Inc.
N/A
Biotec Pest
N/A
Bob Garretch Supply Inc.
N/A
Brink's Inc.
38-1

Allowed Unsecured
$
151,887.08
$
12,127.00
$
312.00
$
12,662.00
$
5,323.00
$
9,614.00
$
2,848.00
$
4,891.00
$
482.00
$
774.00
$
2,647.00
$
49.98
$
12,708.59
$
2,077.00
$
537.00
$
4,994.00
$
3,214.19
$
91,626.00
$
10,775.00
$
2,540.00
$
2,012.00
$
10,350.00
$
1,570.00
$
28,765.13

Case 15-10182-t11

Total Amount
$ 151,887.08
$
12,127.00
$
312.00
$
12,662.00
$
5,323.00
$
9,614.00
$
2,848.00
$
4,891.00
$
482.00
$
774.00
$
2,647.00
$
49.98
$
12,708.59
$
2,077.00
$
537.00
$
4,994.00
$
3,214.19
$
91,626.00
$
10,775.00
$
2,540.00
$
2,012.00
$
10,350.00
$
1,570.00
$
28,765.13

Doc 323-3

Filed 07/29/16

Comments

Comments
Objection Pending (Doc. No. 204). P/N assigned

Comments

Comments
Administrative expenses being litigated
Schedule F, p. 17.
Schedule F, p. 17.
Schedule F, p. 17.
Schedule F, p. 17.
Schedule F, p. 18.
Schedule F, p. 18.
Schedule F, p. 18.
Schedule F, p. 18.
Schedule F, p. 19.
Schedule F, p. 19.

Schedule F, p. 19.
Schedule F, p. 19.
Schedule F, p. 20.
Schedule F, p. 20.
Schedule F, p. 20.
Schedule F, p. 20.
Schedule F, p. 21.
Schedule F, p. 21.
Schedule F, p. 21.

Entered 07/29/16 16:14:12 Page 2 of 5

Exhibit C
Page 2 of 5

Business Printing Services, Inc.

Camino del Pueblo 200/400, LLC
Captiva Group
Cardmember Service Charter Bank
CenturyLink
Chase Visa SW Cardmember Services
City of Albuquerque
Citylink Telecommunications

N/A
25-1
39-1
N/A
N/A
N/A
N/A
N/A

$
$
$
$
$
$
$
$

5,680.00
246,410.43
1,627.30
5,130.00
1,409.00
5,218.00
1,100.00
1,367.00

$
$
$
$
$
$
$
$

Clyde Harrington
Communications Diversified Inc.
Computer Solutions Group
Continuum Retail Energy Services
Corporation Service Company
Cottonwood Sales & Dist., Inc.
CrunchTime Information Systems, Inc.
CT Power & Iceberg Enterprises
Dawn Food Products, Inc.
Direct First Aid

31-1
4-1
N/A
N/A
51-1
N/A
45-1
50-1
11-1
N/A

$ 4,633,085.34
$
203.84
$
400.00
$
11,807.00
$
4,971.00
$
5,037.00
$
4,136.22
$
1,196.65
$
64,286.87
$
317.00

$
$
$
$
$
$
$
$
$

Donna Schmidt
Ecolab Pest Elimination Div.
Excel Landscape Maint. Inc.
Foodtools, Inc.
For Life
Garrity Group
Glenda Fagan
Guebert Bruckner, P.C.
Hobart Services
Horne Depot Credit Services
Inmoment, Inc. (a/k/a Empathica)
Italco Food Products Inc.
KeHE Distributors
KUNM-FM
Level 3 Communications, LLC
Lincoln Financial Group

32-1
N/A
N/A
48-1
N/A
N/A
36-1
8-1
9-1
N/A
55-1
N/A
N/A
N/A
13-1
N/A

$ 2,669,849.96
$
793.00
$
10,657.00
$
210.00
$
750.00
$
1,095.00
$
33,550.00
$
46,136.63
$
6,397.90
$
4,430.00
$
24,994.75
$
3,340.00
$
653.00
$
800.00
$
71.62
$
2,945.00

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

Mech-Con Investments, LLC

Mech-Con Investments, LLC
Mocha Magic LLC

28-1
30-1
N/A

$
9,684.31
$ 1,132,666.80
$
187.00

$
$
$

Case 15-10182-t11

Doc 323-3

Filed 07/29/16

5,680.00
246,410.43
1,627.30
5,130.00
1,409.00
5,218.00
1,100.00
1,367.00

Schedule F, p. 22.

Schedule F, p. 22.
Schedule F, p. 22.
Schedule F, p. 23.
Schedule F, p. 23.
Schedule F, p. 23.
Objection filed (Doc. No. 210). To be amended as a result of
$381,909.00 settlement.
203.84
400.00 Schedule F, p. 24.
11,807.00 Schedule F, p. 24.
4,971.00
5,037.00 Schedule F, p. 24.
4,136.22
1,196.65
44,307.76 Unsecured portion of claim only
317.00 Schedule F, p. 25.
Objection filed (Doc. No. 211). To be amended as a result of
$229,614.00 settlement.
793.00 Schedule F, p. 26.
10,657.00 Schedule F, p. 26.
210.00 Claim says secured.
750.00 Schedule F, p. 26.
1,095.00 Schedule F, p. 27.
33,550.00
46,136.63
6,397.90
4,430.00 Schedule F, p. 28.
24,994.75
3,340.00 Schedule F, p. 28.
653.00 Schedule F, p. 28.
800.00 Schedule F, p. 28.
71.62
2,945.00 Schedule F, p. 29.
9,684.31
This lease has been assumed.Claim will be disallowed.
187.00 Schedule F, p. 30.

Entered 07/29/16 16:14:12 Page 3 of 5

Exhibit C
Page 3 of 5

Monroe Moxness Berg

Mountanos Brothers Coffee Co.
Nat'l Distributing Co., Inc.
NCR Corporation
NCR Corporation
New Mexico Air Filter Inc.
NM Bakery Service Company
NM Restaurant Association
NM Taxation and Revenue Department
Nob Hill Investors LLC
Nob Hill Main Street
NuCity Publications, Inc.
One Source Magazine Dist., LLC.
One Source Magazine Dist., LLC.
Pacific Pectin, Inc.
Peacock Myers, P.C.
Pete's Top Quality Landscaping, LLC
Pitney Bowes Inc.
Prudential Overall Supply
Prudential Overall Supply
Public Service Company of New Mexico PNM
Qtrade Teas & Herbs
R&B Commercial Services Inc.
R&C Distributing, Inc.
Railyard Co., LLC
RDS Southwest
REDW LLC
Retail Data Systems of Kansas
Richard Jaramillo
Ricoh Americas Corp.
Rodey, Dickason, Sloan, Akin P.A.
Ryder Truck Rental Inc.
Santa Fe County Treasurer
Southwest Custom Stainless LLC
Southwest Cyberport
Southwest Structural Services, Inc.
Standard Automatic Fire Enterprises
Standard Restaurant Equipment
Swiss Chalet Fine Foods
Sysco New Mexico

Case 15-10182-t11

N/A
N/A
N/A
34-1
62-1
5-1
6-1
N/A
14-2
N/A
N/A
41-1
N/A
N/A
N/A
33-2
N/A
12-1
N/A
N/A
37-1
N/A
N/A
N/A
59-1
N/A
N/A
N/A
61-1
N/A
N/A
7-1
N/A
N/A
N/A
60-1
N/A
47-1
N/A
56-1

$
206.00
$
426.00
$
1,979.00
$
27,270.52
$
21,961.75
$
3,463.17
$
74,055.61
$
1,500.00
$ 225,843.46
$
7,742.00
$
1,345.00
$
481.50
$
2,304.00
$
2,752.00
$
462.00
$
2,989.22
$
1,316.00
$
1,734.67
$
11,239.00
$
1,411.00
$
62,695.88
$
1,246.00
$
5,199.00
$
18,352.00
$ 4,057,962.37
$
12,317.00
$
2,669.00
$
11,584.00
$
4,280.00
$
15,736.00
$
1,526.00
$
1,010.23
$
3,481.00
$
1,512.00
$
1,591.00
$ 1,300,000.00
$
2,351.00
$
37,072.01
$
1,789.00
$ 607,230.83

Doc 323-3

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

Filed 07/29/16

206.00
426.00
1,979.00
27,270.52
21,961.75
3,463.17
74,055.61
1,500.00
6,657.27
7,742.00
1,345.00
481.50
2,304.00
2,752.00
462.00
2,989.22
1,316.00
1,734.67
11,239.00
1,411.00
62,695.88
1,246.00
5,199.00
18,352.00
12,317.00
2,669.00
11,584.00
4,280.00
15,736.00
1,526.00
1,010.23
3,481.00
1,512.00
1,591.00
1,300,000.00
2,351.00
37,072.01
1,789.00
405,922.81

Schedule F, p. 31.
Schedule F, p. 31.
Schedule F, p. 31.
Filed after bar date. Overlaps with Claim 34.

Schedule F, p. 33.
Unsecured portion of claim only
Schedule F, p. 34.
Schedule F, p. 34.
Schedule F, p. 34.
Schedule F, p. 34.
Schedule F, p. 34.
Schedule F, p. 34.
Schedule F, p. 35.
Schedule F, p. 36.
Schedule F, p. 36.
Schedule F, p. 36.
Schedule F, p. 36.
Objection pending. Bernsteins believe this claim is invalid.
Schedule F, p. 36.
Schedule F, p. 37.
Schedule F, p. 37.
Schedule F, p. 37.
Schedule F, p. 38.
Schedule F, p. 38.
Schedule F, p. 39.
Schedule F, p. 39.
Schedules say secured. Railyard P/N.
Schedule F, p. 39.
Alleged as secured, but appears to be unsecured
Schedule F, p. 40.
Unsecured portion of claim only

Entered 07/29/16 16:14:12 Page 4 of 5

Exhibit C
Page 4 of 5

The Home Depot

The Knife Guys Cutlery Service
The Knife Guys Cutlery Service
The Printer's Press, Inc.
The Unger Company
The Unger Company
The Wasserstrom Company
The Wasserstrom Company
ThyssenKrup Elevator Corp.
TLC Company, Inc.
Town of Bernalillo Water Dept.
TW Telecom
U.S. Foods, Inc.
Ubiquity Distributors Inc.
ULINE
Uniforms & More
Waste Management of NM
Wellbridge Club Management Inc.
Wells Fargo Equipment Finance
Willis of Tennessee, Inc.
TOTAL
Class 10 (Insider Unsecured Claims)
Creditor
Mark Bernstein and Jean Bernstein
Urban Assets, LLC
Valley Property, LLC
TOTAL

Case 15-10182-t11

N/A
N/A
N/A
N/A
10-1
44-1
N/A
N/A
N/A
N/A
46-1
N/A
52-1
42-1
N/A
N/A
N/A
N/A
N/A
N/A

$
4,634.00
$
2,360.00
$
145.00
$
674.00
$
8,074.95
$
8,074.95
$
53,842.00
$
11,277.00
$
4,551.00
$
8,954.00
$
694.84
$
5,423.00
$
6,580.53
$
1,400.00
$
2,067.00
$
2,039.00
$
1,712.00
$
5,725.00
$
1,800.00
$
39,739.00
$ 16,027,234.08

Claim No. Total Amount

57-1
$ 480,461.00
58-1
$ 536,768.27
N/A
$
13,270.00
$ 1,030,499.27

Doc 323-3

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

4,634.00
2,360.00
145.00
674.00
8,074.95
53,842.00
11,277.00
4,551.00
8,954.00
694.84
5,423.00
5,114.84
1,400.00
2,067.00
2,039.00
1,712.00
5,725.00
1,800.00
3,655,439.65

Schedule F, p. 40.
Schedule F, p. 40.
Schedule F, p. 41.
Schedule F, p. 41.
44-1 is a duplicate of this Claim
10-1 is a duplicate of this Claim
Schedule F, p. 41.
Schedule F, p. 41.
Schedule F, p. 42.
Schedule F, p. 42.
Schedule F, p. 42.
Unsecured portion of claim only
Schedule F, p. 43.
Schedule F, p. 43.
Schedule F, p. 44.
Schedule F, p. 44.
Schedule F, p. 44.
Schedule F, p. 44. Flying Star believes this has been paid.

Allowed Unsecured
$
480,461.00
$
536,768.27
$
13,270.00 Schedule F, p. 43.
$
1,030,499.27

Filed 07/29/16

Comments

Entered 07/29/16 16:14:12 Page 5 of 5

Exhibit C
Page 5 of 5

Flying Star Cafes Inc. Bankruptcy Estate

Exhibit D
Estimate of Minimum Pro Rata Distribution to Unsecured Creditors Under Plan
Administrative Expenses
Priority Claims
Total Claims to Pay Before Unsecured Creditors

$
$
$

470,800.94
239,097.86
709,898.80

Post-Petition Payables
Secured Claims

Paid in the ordinary course of business

Paid through plan

Minimum Bid for Equity in Reorganized Debtor

Total Claims to Pay Before Unsecured Creditors
Total Amount Remaining to Pay Unsecured Creditors

$
$
$

1,500,000.00
(709,898.80)
790,101.20

Total Unsecured Claims

Bernstein Claim (Subordinated)
Urban Assets Claim (Subordinated)
Total Claims to Pay

$
$
$
$

4,685,938.92
(480,461.00)
(536,768.27)
3,668,709.65

Total Amount Remaining to Pay Unsecured Creditors

Total Claims to Pay
Minimum Pro Rata Distribution Percentage

$
$

790,101.20
3,668,709.65
21.54%

The actual Pro Rata distribution percentage may increase further if further claims are disallowed.
Additional Potential Distributions
In addition to this amount, the Bernsteins propose that a court would determine the
total amount due and owing to Flying Star from Satellite Coffee, and that Flying Star
would take commercially reasonable actions to collect any such debt owed from
Satellite Coffee, then distribute the net proceeds, after payment of costs of collection,
to Flying Star's unsecured creditors.

Case 15-10182-t11

Doc 323-4

Filed 07/29/16

Entered 07/29/16 16:14:12 Page 1 of 1

Exhibit D
Page 1 of 1