As filed with the Securities and Exchange Commission on June 23, 1997
Registration No.___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933, as Amended
----------------------
WALLSTREET RACING STABLES, INC.
(Exact name of registrant as specified in charter)
Colorado 7948 84-1313024
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code) Identification No.)
5525 Erindale Drive, Suite 201
Colorado Springs, Colorado 80918
(719) 260-8509
(Address and telephone number of registrant's
principal executive offices and place of business)
Raymond E. McElhaney, President
5525 Erindale Drive, Suite 201
Colorado Springs, Colorado 80918
(719) 260-8509
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
David J. Babiarz, Esq.
Brad Ramming, Esq.
Overton, Babiarz & Sykes, P.C.
7720 East Belleview Avenue, Suite 200
Englewood, Colorado 80111
(303) 779-5900
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
<TABLE>
CALCULATION OF REGISTRATION FEE
================================================================================
Title of each Amount Proposed Proposed Amount of
class of securities to be maximum aggregate registration
to be registered registered offering price offering price fee
<S> <C> <C> <C> <C>
Common Shares, par value
$.001, issuable for cash..250,000 $2.00 $500,000 $151.52
Common Shares, par value
$.001, issuable upon
exercise of Warrants.. ....54,500 $2.00 $109,000 $33.03
Totals....................304,500 $609,000 $184.55
================================================================================
</TABLE>
AMENDMENT FILED IN ACCORDANCE WITH RULE 473(a)
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to dely its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission acting pursuant to said
Section 8(a) may determine.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the offering. [ ] __________
<PAGE>
If this Form is a post effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, as amended, check here: X
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATON OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
CROSS REFERENCE SHEET
Showing location in the Prospectus of Information Required by
Items 1 through 23, Part on Form SB-2
Item Number and Caption Prospectus
Caption
1. Front of Registration
Statement and Outside Front
Cover Page of Prospectus........................Cover Page
2. Inside Front Cover and Outside Inside Front and Outside
Back Cover Pages of Prospectus..................Back Cover Pages
3. Summary Information and Risk Prospectus Summary;
Factors.........................................Risk Factors
4. Use of Proceeds.................................Use of Proceeds
5. Determination of Offering Price.................Risk Factors;
Plan of Distribution
6. Dilution .......................................Risk Factors;
Dilution
7. Selling Security Holders........................Not Applicable
8. Plan of Distribution............................Outside Front Cover Page;
Plan of Distribution
9. Legal Proceeding................................Business-Legal Proceedings
10. Directors and Executive Officers,
Promoters and Control Persons...................Management
11. Security Ownership of Certain
Beneficial Owners and
Management......................................Principal Shareholders
12. Description of Securities.......................Outside Front Cover Page;
Description of Securities
<PAGE>
CROSS REFERENCE SHEET
Showing location in the Prospectus of Information Required by
Items 1 through 23, Part on Form SB-2
13. Interest of name Experts and
Counsel.........................................Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.....................................Indemnification
15. Organization within Five Years..................Business;
Certain Transactions
16. Description of Business.........................Prospectus Summary;
Business
17. Management's Discussion and Analysis
or Plan of Operation............................Use of Proceeds;
Management's Discussion and
Analysis or Plan of
Operation; Business
18. Description of Property.........................Business
19. Certain Relationships and Related
Transactions....................................Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters.....................Risk Factors; Market for
Company's Securities;
Description of Securities
21. Executive Compensation..........................Management
22. Financial Statements............................Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............................Not Applicable
<PAGE>
Prospectus
WALLSTREET RACING STABLES, INC.
304,500 Shares of Common Stock,
Par Value $.001 per share
Offering Price: $2.00 per share
Wallstreet Racing Stables, Inc. (the "Company") offers hereby
250,000 shares of its Common Stock, par value $.001 per share (the
"Common Shares") on a "best efforts" basis at an offering price of
$2.00 per share. The offering will be conducted by the Company
through its officers and directors commencing with the date of this
Prospectus and continuing for a period of ninety (90) days
thereafter, unless such period is extended in the sole discretion of
the Company for an additional period of time not to exceed thirty
(30) days in the aggregate. A commission will not be paid to the
Company or its officers and directors for sales effectuated by them.
There is no minimum number of Common Shares or sales proceeds which
must be received to complete the offering. As a result, all proceeds
will be immediately deposited into the Company's bank account and
available for all valid corporate purposes. Subscribers in the
offering will not be entitled a return of their subscription
following receipt by the Company.
The remaining 54,500 Common Shares are issuable upon exercise of
outstanding Common Stock Purchase Warrants ("Warrants"). The
transferrable Warrants were issued in connection with two private
placements previously conducted by the Company. Each Warrant is
immediately exercisable and entitles the holder to acquire one (1)
Common Share at $2.00 per share until April 30, 1998. Any
solicitation of exercise of the Warrants will be made only by the
Company, through its officers and directors, and no commissions will
be paid by the Company in connection with the exercise of any of the
Warrants.
The Common Shares currently trade in the over-the-counter market
and are quoted on the NASD Bulletin Board under the symbol "WRSB".
On June 23, 1997, the most recent date for which information is
available, the (last sales) or (closing) price of the Common Shares
as quoted in the Bulletin Board, was $.625 bid and $1.25 asked.
Prior to this Offering, there has been an extremely limited market for
the Common Shares and there is no assurance that one will continue after
completion of this offering. The offering price of the Common Shares
has been arbitrarily determined by the Company and bears no necessary
relationship to the Company's assets, book value, results of
operations or other generally accepted criteria. (See "RISK FACTORS"
and "DESCRIPTION OF SECURITIES").(Continued on Following Page)
THIS OFFERING AND THE COMMON SHARES OFFERED HEREBY INVOLVE A
HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. (SEE
"RISK FACTORS" AND "DILUTION")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
Price Underwriting Proceeds
to the Discounts and to the
Public Commissions Company(1)
<S> <C> <C> <C>
Per Common Share ..... $2.00 N/A $2.00
Total................. $500,000 $500,000
1 Before deducting expenses of the offering payable by the Company
and estimated to be $15,000. (See "USE OF PROCEEDS").
</TABLE>
The date of this Prospectus is June 23, 1997.
<PAGE>
In order to exercise the Warrants, holders of the Warrants must
reside in jurisdictions in which the Company may qualify its Common
Shares for sale. It is possible that the Warrants may be held by
persons residing in states where the Company is unable to qualify the
underlying shares for sale. Holders of Warrants residing in those
states, and in other states where the offering of the underlying
Common Shares is not qualified, would have no choice but to attempt
to sell their Warrants or let them expire unexercised. (See "RISK
FACTORS").
The Company anticipates that sales of Common Share underlying
the Warrants may be effected from time to time on and after the date
of this Prospectus, by or for the account of the holders (the
"Selling Shareholders") in negotiated transactions, in the open
market or otherwise. Sales may be made by or through broker/dealers,
either acting as agent for the Selling Shareholders or for their own
accounts. Any commission or other sales expenses will be paid by the
Selling Shareholders or the purchasers of Common Shares. The Company
will not receive any proceeds from resale of the Common Shares sold
by any of the Selling Shareholders. However, the Company will
receive the proceeds upon exercise of any or all of the outstanding
Warrants, of which there is no assurance. (See "PLAN OF
DISTRIBUTION").
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission, 450 5th Street N.W., Washington, D.C. 20549, its
Registration Statement on Form SB-2 (herein, together with all
amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended, regarding the securities offered
hereby. This Prospectus, filed as part of the Registration
Statement, omits certain information contained in the Registration
Statement. For further information regarding the Company and the
securities offered, reference is made to the Registration Statement
and the exhibits filed therewith.
The Company is not presently subject to Section 14 of the
Securities Exchange Act of 1934 (the "1934 Act"), the Federal statute
governing the use and solicitation of proxies and tender offers.
However, if this offering is completed, the Company intends to
register under the 1934 Act and to comply with all reporting
requirements imposed thereby, including delivery to its shareholders
in conjunction with each annual meeting of an annual report relating
to the operations of the Company and containing financial statements
examined and reported upon by independent accountants. In addition,
the Company may furnish to its shareholders such other reports as may
be authorized from time to time, by the Board of Directors. (See
"DESCRIPTION OF SECURITIES-Reports to Shareholders").
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained herein constitute "forward looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements include without
limitation statements regarding the Company's plan of business
operations and related expenditures, anticipated race careers of
Company owned thoroughbreds and stabling and training information.
Factors that could cause actual results to differ materially include,
among others, the following: the health and training progress of the
thoroughbreds, availability of training and stabling facilities,
general economic conditions and the overall thoroughbred horse racing
industry. Most of these factors are outside the control of the
Company. Investors are cautioned not to put undue reliance on
forward looking statements. The Company disclaims any intent or
obligation to update publicly these forward looking statements,
whether as a result of new information, future events or otherwise.
ii
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER OF THE COMMON SHARES COVERED BY THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE COMMON SHARES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE
IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
iii
<PAGE>
TABLE OF CONTENTS
Prospectus
Summary.................................................. 1
Definitions.............................................. 4
Risk Factors............................................. 5
Risk Factors Relating to the Company................ 5
Risks Relating to the Thoroughbred Racing Business.. 8
Risk Relating to the Offering....................... 9
Dilution................................................. 12
Use of
Proceeds................................................. 13
Management's Discussion and Analysis of
Financial Condition and Plan of
Operation................................................ 15
Business................................................. 20
Management............................................... 30
Conflicts of
Interest................................................. 34
Shareholdings of Management and Principal
Shareholders............................................. 35
Certain Relationships and Related
Transactions............................................. 36
Description of Securities................................ 37
Plan of Distribution..................................... 40
Legal Matters............................................ 42
Financial Statements..................................... 43
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus. Prospective
investors should carefully review the balance of this Prospectus and
the exhibits hereto before making an investment in the Securities
offered hereby.
The Company
Wallstreet Racing Stables, Inc. (the "Company") is a Colorado
corporation organized on July 18, 1995. The Company was organized to
engage in all phases of the thoroughbred horse racing industry
including, but not limited to, acquiring, breeding, racing and
selling thoroughbred racehorses, broodmares and their offspring both
privately and at public auction. From the date of its inception, the
Company's activities have been primarily limited to acquiring its
interest in racing stock, bloodstock, organizational efforts and
obtaining initial financing.
As of the date of this Prospectus, the Company owns an interest
in six Thoroughbreds. Da Hoss is a multiple stakes winning five year
old Gelding with lifetime winnings of approximately $1,400,000. The
Company owns a fifteen percent interest in that Thoroughbred, which
is currently recovering from surgery on a leg tendon and not expected
to race during the balance of the 1997 calendar year. It is
anticipated that efforts will be made by the owner of the majority
interest to bring him back from the surgery in early 1998, but there
is no assurance that his condition will allow continued racing. (See
"BUSINESS - Description of Company Thoroughbreds").
The Company also owns three two-year olds, two of which are
currently in training and expected to begin racing later in 1997, and
one of which is currently being broken in preparation to commence
training. The Company owns a 90% interest in two Colts, both of
which were acquired by the Company as Yearlings and both of which are
currently in training at Churchill Downs in Lexington, Kentucky. The
Company owns a 25% interest in the remaining two-year old, a Filly
also acquired as a Yearling at the Keeneland September Yearling Sale.
This Filly is currently boarded and being broken at a stable in
Ocala, Florida. The remaining two Thoroughbreds are a Broodmare and
her Foal, both of which management anticipates placing for sale at
the Keeneland Breeding Stock Sale in the fall of 1997. (See Table I,
"BUSINESS").
For the twelve months immediately preceding the date of this
Prospectus, management has directed its efforts at obtaining
financing to meet working capital requirements and to acquire the
Company's interest in the Company horses. Financing to date in the
amount of $109,000 has been obtained from the proceeds of two private
placements of equity securities. Management anticipates that the
future efforts of the Company will be directed toward acquiring
additional race prospects, racing them and selling or ultimately
syndicating them to generate revenues and profits for the Company.
Management does not anticipate that it will engage in the business of
breeding thoroughbred race horses, although management reserves the
right to do so should it ultimately be determined that it is in the
best interest of the Company and its shareholders. (See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION").
As the only horse of racing age, Da Hoss, is currently
recovering from surgery, the Company currently has no revenues, and
it is not anticipated that such revenues will be received until such
time as additional horses are adequately prepared for racing or the
Company determines to sell one or more of the Thoroughbreds. (See
"BUSINESS").
<PAGE>
Success of the Company will initially be dependent upon the
efforts and expertise of certain of its officers and directors.
Messrs. Raymond E. McElhaney and Bill Conrad, President and Vice-
President/Secretary, respectively, of the Company, have substantial
experience in the thoroughbred industry and will initially be
responsible for selection of racing prospects and retention of a
trainer to prepare the prospects for racing. Messrs. McElhaney and
Conrad have been engaged in different phases of the thoroughbred
industry for approximately 15 years. Messrs. McElhaney and Conrad
have also managed thoroughbred racing partnerships. (See "MANAGEMENT.").
The Company's executive offices are located at 5525 Erindale
Drive, Suite 201, Colorado Springs, Colorado 80918, and its telephone
number is (719) 260-8509.
The Offering
Securities Offered.............. 304,500 Common Shares,
par value, $.001 per share.
(See "DESCRIPTION OF SECURITIES.").
Offering Price....................... $2 per Share.
Common Shares
Outstanding Before
the Offering(1) (2)............... 697,000
Warrants Outstanding
Before the Offering........ 54,500
Common Shares
Outstanding After
the Offering(1)(2)(3).......... 947,000
Warrants Outstanding
After the Offering 54,500
Net Proceeds(4) ............ $485,000
________________________
(1) Does not include up to 1,000,000 Common Shares reserved for
issuance under the Company's Non-Qualifying Stock Option
Plan. (See "MANAGEMENT-Stock Option Plan").
(2) Excludes 54,500 Common Shares underlying the Warrants
previously issued by the Company.
(3) Assumes sale of all Common Shares offered hereby for cash,
of which there is no assurance, but issuance of no Common
Shares underlying the Warrants.
(4) Without giving effect to the possible exercise of the
Warrants, and after taking into effect the estimate
expenses of this offering of $15,000.
________________________
2
<PAGE>
Use of Proceeds
The proceeds of this offering will be used primarily for the
purchase of additional thoroughbred racing stock, for expenses to be
incurred in training and preparing the prospects for racing, other
maintenance expenses, general and administrative expenses and working
capital. (See "USE OF PROCEEDS").
Risk Factors
This offering involves a high degree of risk. Risk factors
involving the Company include lack of operating history, need for
additional working capital, dependence on key personnel, limited
racing prospects, risks inherent in the thoroughbred industry, possible
uninsured losses and inexperience of management. Risk factors
relating to the offering include lack of minimum offering proceeds,
arbitrary offering price and limited trading market for the
securities offered. (See "RISK FACTORS.")
Summary Financial Information
The following unaudited information summarizes financial
information of the Company at June 30, 1996, for the period from
inception to June 30, 1996, at March 31, 1997 and for the nine months
then ended. The information in this table should be read in
conjunction with the more detailed financial information contained in
Financial Statements appearing elsewhere in this Prospectus, together
with MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
<TABLE>
Period from Inception
(July 18, 1995) to Nine Months Ended
June 30, 1996 March 31, 1997
<S> <C> <C>
Statement of Operations Data:
Revenues.......................... -0- $104,802
Expenses.............................. $54,852 $103,687
Other income (Expenses)...............($26,692) ($ 661)
Net income (Loss).....................($65,203) $ 454
June 30, 1996 March 31, 1997
Balance Sheet Data:
Working capital......................$ 9,372 $ 26,544
Total assets.........................$ 37,204 $103,079
Long term debt...........................-0- -0-
Shareholders' equity.................$ 6,388 $ 85,566
___________________
The Company has paid no dividends since inception.
</TABLE>
3
<PAGE>
DEFINITIONS
As used in this Prospectus, the following definitions of terms are applicable:
Bloodstock shall mean any thoroughbred or other horse available for sale.
Colt shall mean a male horse, not castrated, prior to his fifth birthday.
Company Horses and Company Thoroughbreds shall mean one or more
thoroughbred racehorses owned by the Company for the business described herein.
Farrier shall mean an individual engaged in the business of shoeing
horses.
Filly shall mean a female horse prior to her fifth birthday.
Foal shall mean a horse under one year of age.
Foaled shall mean to give birth to a horse.
Gelding shall mean a castrated male horse.
In foal shall mean a pregnant horse.
Mare or Broodmare shall mean a female horse of breeding age.
As used with regard to a specific horse, mare means the female
parent.
Sire or Stallion shall mean a male horse of breeding age and
capable of breeding. As used with regard to a specific horse, sire
shall mean the male parent.
Thoroughbred shall mean a distinctive breed of horse used
primarily for racing; generally, a thoroughbred must be registered
with The Jockey Club in the United States, or a similar institution
in other countries, to participate in sanctioned races; and, in the
context of this Prospectus, any of one or more thoroughbred horses
which may be acquired, owned and sold by the Company.
Yearling shall mean any horse during the first year following
the year of its birth. All thoroughbreds become Yearlings on January
1 following the year of their birth.
Weanling means a foal prior to January 1st following the year
it was born.
4
<PAGE>
RISK FACTORS
The purchase of these securities involves a high degree of
risk. Prospective investors should carefully consider the following
facts, among others set forth in this Prospectus, before making a
decision to purchase the securities offered hereby.
Risk Factors Relating to the Company
1. Limited Operating History and Revenues. The Company was
organized on July 18, 1995 and its revenue has been limited to a
share of purses won by Da Hoss. Consequently, the Company has only a
limited operating history and limited revenues. Activities to date
have been limited to acquiring an interest in certain thoroughbreds,
organizational efforts and obtaining initial financing. The Company
must be considered in the promotional stage and in its early phase of
development embarking upon a new venture. Prospective investors
should be aware of the difficulties encountered by such enterprises,
as the Company faces all the risks inherent in any new business,
including the absence of any prior operating history, need for
working capital and intense competition. The likelihood of success
of the Company must be considered in light of such problems, expenses
and delays frequently encountered in connection with the operation of
a new business and the competitive environment in which the Company
will be operating. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION-Plan of Operation" and "BUSINESS").
2. Limited Capitalization and Lack of Working Capital. The
Company has extremely limited capitalization and is dependent on the
proceeds of this offering, achieving profitable operations and
receipt of additional financing to continue as a going concern. The
Company has substantial commitments for boarding and training of its
existing Thoroughbreds, in addition to proposed capital expenditures
for additional Bloodstock. Proceeds from this offering have been
budgeted for a limited period of time and for limited purposes and
the Company will likely require additional capital from outside
sources in order to continue as a going concern. Although the
Company will endeavor to finance its working capital needs through
additional debt or equity financing, there is no assurance that this
financing can be obtained on terms acceptable to the Company. In
addition, any debt financing may require the Company to mortgage,
pledge or hypothecate its assets. (See "MANAGEMENT'S DISCUSSION AND
ANALYSIS AND PLAN OF OPERATION - Plan of Operation.")
3. No Assured Racing Prospects. While the Company has an
interest in six different Thoroughbreds as of the date of this
Prospectus, only one of the horses is of sufficient age and
temperament to permit racing. Da Hoss is a five-year old
Thoroughbred stakes-winning Gelding in which the Company owns a
fifteen percent (15%) interest. However, Da Hoss recently underwent
surgery in an effort to correct an injury to his leg tendon. Da Hoss
will be turned out to pasture for approximately 5 months and is
anticipated to return to training on or before December 1, 1997.
Consequently, the Company does not expect to earn any revenue during
1997 from racing Da Hoss. While the two-year olds in which the
Company currently has an interest are currently being trained for
racing, the Company is unable to predict with any degree of certainty
when, if at all, their racing campaigns will commence. As a result,
as of the date of this Prospectus, the Company does not have any
Thoroughbreds of racing age with any proven track experience. (See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -
Plan of Operation" and "BUSINESS").
5
<PAGE>
4. Dependence on a Limited Number of Prospects. The
proceeds from this offering have been budgeted to acquire up to four
additional Thoroughbreds racing prospects. Accordingly, the success
of the Company will be dependent on only a limited number of
prospects. Injury or loss to any one of these prospects could
substantially and adversely effect the Company's operations. The
Company has endeavored to reduce this risk by obtaining mortality and
surgical insurance on three of the prospects currently owned, but there
is no assurance that this insurance will be continued or that it will
insure against all loses which might be incurred. Nonetheless, the
Company's future financial success will depend on the limited number
of horses currently owned until the Company can expand and diversify
its stable. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION - Plan of Operation" ).
5. Dependence on Key Personnel. Initially, success of the
Company is entirely dependent upon the management efforts and
expertise of Messrs. Raymond E. McElhaney and Bill Conrad, and to a
lesser extent, Mr. Michael Dickinson, Mr. Randy Bradshaw and other
trainers to be retained by the Company. The Company intends to
utilize the experience and contacts of Messrs. McElhaney and Conrad
in acquiring racing prospects and obtaining training assistance. The
Company heavily depends upon the skills of Messrs. McElhaney and
Conrad in administration of the Company's business. Mr. Dickinson is
the trainer of Da Hoss, and as such, is responsible for his training
and racing when Da Hoss is healthy. Mr. Randy Bradshaw is the
trainer of the two Colts and will be responsible for training and
certain racing decisions. A loss of the services of any of these
individuals could adversely affect the conduct of the Company's
business. In such event, the Company would be required to obtain
other personnel to manage and operate the Company, and there can be
no assurance that the Company would be able to employ a suitable
replacement for either of such individuals, or that a replacement
could be hired on terms which are favorable to the Company. The
Company currently maintains no key man insurance on the lives of any
of its officers or directors. (See "MANAGEMENT").
6. Conflict of Interest. Officers and directors of the
Company are subject to potential conflicts of interest in their
service to the Company. Each of the officers and directors was a
general partner of Wallstreet Racing Stables III, a Colorado General
Partnership, from which the Company acquired Da Hoss. Accordingly,
the terms and conditions of that acquisition were not negotiated in
arms length transactions. The Company did not obtain an independent
appraisal of the value of the interest in that Thoroughbred.
However, management is of the opinion that the terms and conditions
of the transaction was no less favorable than could be obtained from
an unaffiliated party.
Since each of the officers and directors is engaged in other
business enterprises, and will not devote their full time to the
affairs of the Company, they are also subject to potential conflicts
with regard to time, effort and corporate opportunity. Messrs.
McElhaney, Conrad and McGinnis are each engaged in a variety of other
businesses, both within and without the Thoroughbred industry. None
of the officers or directors will devote full time to the affairs of
the Company. However, officers and directors are aware of their
fiduciary duty to the Company and believe they have sufficient time
to devote to its affairs. In addition, each of the officers and
directors is aware of the doctrine of corporate opportunity as it
relates to their position as officers and directors. (See "CONFLICTS
OF INTEREST").
6
<PAGE>
7. Intense Competition. There are numerous nationally and
internationally-known corporations and entities which are engaged in
the type of business proposed to be engaged in by the Company.
Numerous individuals and entities are engaged as owners and trainers
of Thoroughbred racehorses, both within the United States and abroad.
Competition for the acquisition and training of thoroughbred
prospects is intense. All of these entities seek to place racing
prospects in the premier races throughout the United States, such as
the Kentucky Derby, the Preakness and Belmont Stakes. In the case of
disposition of the Company's Thoroughbreds, the Company would be
competing against major breeders and dealers at private and public
sales. Most of these competitors have substantially greater
financial and personnel resources than the Company. Accordingly, the
Company will be at a competitive disadvantage vis-a-vis its
competitors. (See "BUSINESS - Competition").
8. Control of the Company. Following the sale of all Common
Shares offered hereby, of which there is no assurance, officers and
directors of the Company will retain approximately 59% of all the
outstanding Common Stock, without taking into account other changes
subsequent to this offering and Common Stock issuable upon exercise
of the outstanding Warrants. Accordingly, management will have
control of the Company. (See "PRINCIPAL SHAREHOLDERS" and
"DESCRIPTION OF SECURITIES").
9. Lack of Dividends. The Company has paid no dividends on
its Common Stock to date, and there are no plans to pay any in the
foreseeable future. Initial earnings which the Company may realize,
if any, will be retained to finance growth of the Company. Any
future dividends, of which there can be no assurance, will be
directly dependent upon the earnings of the Company, its financial
requirements and other factors. (See "DESCRIPTION OF SECURITIES").
10. Possible Rule 144 Sales and Market Overhang. An
aggregate of 563,000 shares of the Common Stock presently outstanding
are "restricted securities" within the meaning of the 1933 Act and
may hereafter be sold in compliance with Rule 144 promulgated
thereunder. Rule 144 provides, among other things, and subject to
certain limitations, that a person holding restricted securities for
a period of one year may sell, every three months, those securities
in brokerage transactions in an amount equal to 1% of the Company's
outstanding Common Stock or the average weekly trading volume during
the four weeks preceding the sale, whichever amount is greater.
After two years, holders of restricted stock who are not affiliates
of the Company may apply to sell all restricted stock free of
restrictions. Possible sales of the Company's Common Shares pursuant
to Rule 144 may, in the future, have a depressive effect on the price
of the Company's Common Shares.
11. Preferred Stock Authorized. The Articles of
Incorporation of the Company, as amended, authorize the issuance of a
maximum of 5,000,000 shares of Preferred Stock, par value $.01 per
share. Although no Preferred Stock has been issued or is outstanding
as of the date of this Prospectus, and there is no plan to issue any
in the foreseeable future, the terms of a series of Preferred Stock
could operate to the significant disadvantage of holders of
outstanding Common Stock. Such terms can include, among others,
preferences as to voting, dividends and distributions on liquidation.
Moreover, the issuance of Preferred Stock in certain circumstances
could have the effect of delaying, deterring or preventing a change
in control of the Company. (See "DESCRIPTION OF SECURITIES -
Preferred Stock.")
7
<PAGE>
Risks Relating to the Thoroughbred Business
12. Risks Related to Thoroughbred Racing. The business of
training and racing thoroughbreds is a high-risk venture. There is
no assurance that any thoroughbred acquired by the Company will
possess qualities of a championship character. While a thoroughbred
may have an excellent bloodline, there is no assurance that the
racing performance of the thoroughbred will conform to the bloodline.
Moreover, thoroughbreds are subject to injury and disease which can
result in forced retirement from racing, or at the extreme, natural
death or euthanasia of the animal. There can be no assurances that
the value of the thoroughbreds which may be acquired and owned by the
Company, will not decrease in the future or that the Company will not
subsequently incur losses on the racing careers or sale or other
disposition of any or all of the thoroughbreds which the Company may
acquire.
13. Valuation of Thoroughbreds. The valuation of
thoroughbreds is a highly speculative matter and prices have
fluctuated widely in recent years. The success of the Company is
dependent upon the present and future values of thoroughbreds
generally, and of the Company's Thoroughbreds in particular, as well
as the racing success of the Company's Thoroughbreds. Although the
future value of thoroughbreds generally cannot be predicted, it will
be affected by the state of the economy, the amount of money
available for investment purposes, and the continued interest of
investors and enthusiasts in the thoroughbred industry. The expense
of maintaining, boarding, training and racing thoroughbreds can be
expected to increase during the term of the Company, regardless of
what happens to the future market price of thoroughbreds or the
performance of the Company Thoroughbreds.
14. Thoroughbred Racing Business. Thoroughbred racing is
extremely speculative and expensive. In the event that the Company
Thoroughbreds were to be transported to various tracks and training
centers throughout the United States, and thus exposed to many other
horses in training, the risk of injury or death increases
significantly. The Company's Thoroughbreds must earn enough through
racing to cover expenses of boarding and training. If the Company
Thoroughbreds are unsuccessful in racing, their value will be
adversely affected, as will the shareholders' investment therein.
Furthermore, revenues from racing are dependent upon the size of the
purses offered. The size of the purses depends in general on the
extent of public interest in thoroughbred racing, and in particular
on the relative quality of the specific horses in contention in any
specific meeting or race. Although public interest has been strong
in recent years, there is no assurance that public interest will
remain constant, much less increase. Legalized gambling
proliferating in many states threatens to curtail interest in horse
racing as a means of recreation. In addition, there is no assurance
that the Company Thoroughbreds will be of such quality that they may
compete in any races which offer purses of a size sufficient to cover
the Company's expenses. (See "BUSINESS").
15. Government Regulation of Racing. The racing future of
and/or market for the Company's Thoroughbreds depends upon continuing
governmental acceptance of thoroughbred racing as a form of legalized
gambling. In the opinion of management, thoroughbred racing is
gaining a greater governmental acceptance and a dependence as a
source of revenue. However, at any time, thoroughbred racing could
be subjected to restrictive regulation or banned entirely. The value
of the Company's Thoroughbreds would be substantially diminished by
any such regulation or ban.
8
<PAGE>
Thoroughbred racing is regulated in various states and foreign
countries by racing regulatory bodies with which the owners of
thoroughbreds racehorses must be licensed. In addition, many
regulatory bodies require the licensing of a stable name for owners
racing their racehorses under such a designation. Since Messrs.
McElhaney and Conrad have been or are licensed in a number of states
in which racing is likely, including California, Colorado, Kentucky,
New York, New Jersey, Nebraska, Ohio, Illinois and Arizona, it is not
anticipated that the Company will encounter obstacles to registration
when steps are initiated. However, there is no assurance that
necessary registrations can be completed.
16. Uninsured Losses. A portion of the proceeds of this
offering have been budgeted for mortality insurance, and management
anticipates obtaining insurance on certain horses in an amount
sufficient to protect the Company's interests. The Company currently
maintains mortality insurance on its interest in Da Hoss in the
amount of $80,000, and intends to retain that insurance for the
foreseeable future if his performance warrants. In addition, upon
purchasing the two two-year old Colts, the Company acquired surgical
and mortality insurance on these horses in an amount equal to the
purchase price. Further, the Company acquired mortality insurance
on its interest in the Mare and her Foal and it is anticipated that
such insurance will be retained until these horses are sold.
Mortality insurance insures against the death of a horse during the
Company's ownership. Surgical insurance covers possible risks of
injury during racing or training. However, there is no assurance
that the existing insurance will be retained, that all of the horses
will be covered, that the amount of insurance will be adequate, or
that it will insure against all risks. (See "BUSINESS - Mortality
Insurance.")
Risks Relating to the Offering
17. No Minimum Proceeds Required; No Commitment to Purchase
Common Shares. The terms of this offering do not require the Company
to receive any minimum amount of proceeds, and accordingly, funds
received through sale of the Common Shares will be immediately added
to the Company's working capital. No one, including the Company or
any securities broker-dealer, has made any commitment to purchase
Common Shares; rather, the officers and directors of the Company will
use their best efforts to find purchasers for the Common Shares. All
proceeds will be immediately subject to the risks of the Company's
operations, with no assurance that the Company will receive proceeds
sufficient to fund its operation for any designated period of time.
(See "PLAN OF DISTRIBUTION" and "USE OF PROCEEDS")
18. Limited Public Market. Although there presently exists a
public market for the Company's Common Shares, there can be no
assurance that such a market can be sustained. The investment
community could show little or no interest in the Company in the
future. The Company's Common Shares are currently traded in the over-
the-counter market and are quoted on the Bulletin Board maintained by
NASDAQ. Many broker-dealers acting as market makers for securities
traded in the over-the-counter market have ceased trading securities
which are not listed in NASDAQ. This concern arises from new rules
relating to securities which are not quoted on NASDAQ, which
securities are referred to as "penny stocks." Failure of the Company
to achieve listing in NASDAQ will likely affect the trading market
for its Common Shares in the future. (See "MARKET FOR COMPANY
SECURITIES")
9
<PAGE>
19. Arbitrary Offering Price; Dilution. The offering price
of the Common Shares offered hereunder was determined by the Company,
and bears no necessary relationship to the appraised value of any
Bloodstock or any other ordinary investment criterion. In making
such determination, the prospects for the Company's pursuit of its
business plan, the proceeds to be raised by this offering, the relative
costs and expenses involved in acquiring and training thoroughbreds,
and the competition and market for thoroughbreds racehorses were all
considered. In addition, since the Company has not retained an
underwriter for purposes of this offering, the offering price has not
been subject to evaluation by any third party as would be the case in
an underwritten offering. Investors will likely experience dilution of
their investment, as the $2 per share price in this offering is greater t
han the estimated book value per share of the currently outstanding stock
of $0.10 at March 31, 1997.
20. Proceeds of Offering Will Be Inadequate. The net
proceeds of this offering have been budgeted by the Company for a
period of 12 months, assuming sale of all Common Shares offered
hereby. However, there is no assurance the maximum amount of Common
Shares will be sold. Continued operation of the Company will depend
on revenues generated by the Company through race purses, sale or
syndication of Company Thoroughbreds, if any, and additional
borrowings or financing. In order to generate revenue pending
maturation of the three two-year olds, the Company may claim or
purchase privately one or more horses of racing age, if additional
financing to obtain these prospects is available. However, there is
no assurance such horses will be available or generate sufficient
revenue to continue the Company's operation beyond the initial 12
months for which the proceeds have been budgeted. There is no
assurance that the proceeds of this offering could, if invested as
indicated in this Prospectus, result in growth or profitability for
the Company. (See "USE OF PROCEEDS" and "BUSINESS").
21. Investors Bear Risk of Loss. Substantially all of the
proceeds required to operate the Company for the next 12 months are
being sought from investors in this offering. The total investment
by present shareholders of the Company is $124,000 in cash and
contribution of a 15% interest in Da Hoss and another thoroughbred
which was subsequently sold. Accordingly, investors in this offering
will bear the risk of the Company's operations for the foreseeable
future, with no assurance that management will be successful in
applying the proceeds to increase growth and profitability of the
Company. (See- "DILUTION")
22. Limitation on Share Ownership. Existing regulations
governing thoroughbred racing in various states may limit the ability
of individuals and entities to acquire and retain Common Shares of the
Company. Such provisions are designed to regulate ownership and
control of corporations engaged in thoroughbred racing. Such
statutes provide that ownership of a substantial portion of Common
Share, generally greater than 5 or 10% of the outstanding equity in
a corporation, must be approved by the racing commission in those
jurisdictions and submit to background checks regarding financial
history and criminal record. In order to comply with these
regulations, the Company's Articles of Incorporation, as amended,
contain a provision requiring shareholders to sell their stock back
to the Company in the event such individuals or entities fail or
refuse to become licensed where such license may be required. The
repurchase price for shares of Common Shares subject to this provision
is based on the prevailing market price of the Common Shares at the
time of repurchase. The effect of such provisions may be to
discourage acquisition of large blocks of the Company's Common Shares
and depress the price of the Company's shares in any market which may
develop. (See "DESCRIPTION OF SECURITIES - Possible Restrictions on
Common Stock").
10
<PAGE>
23. Possible Inability to Exercise Warrants.
Prerequisites to the exercise of the Warrants are (i) the
effectiveness with the Securities and Exchange Commission of a
registration statement and current prospectus covering the underlying
Common Shares, and (ii) the qualification of the underlying Common
Shares under the securities laws of states in which holders of
Warrants reside. It is possible that the Company may be unable to
maintain the effectiveness of a current registration statement before
and during the exercise period. Should this occur, the Warrants
could expire unexercised. In addition, it is possible that the
Warrants may be held by persons residing in states where the Company
is unable to qualify the underlying shares for sale. Holders of the
Warrants residing in those states, and in other states where the
offering of the underlying shares is not qualified, they would have
no choice but to attempt to sell their Warrants or let them expire
unexercised. If a purchaser of the Warrants sells the Warrants or
fails to exercise them, his interest in the Company could be diluted.
(See "DESCRIPTION OF SECURITIES - Warrants").
11
<PAGE>
DILUTION
The net tangible book value of the 697,000 shares of Common
Stock of the Company outstanding at March 31, 1997, was $69,225 or
approximately $.10 per Common share. Assuming the maximum number of
shares offered hereby are sold, of which there is no assurance, and
excluding the number of shares registered for issuance upon exercise
of the Warrants, that per share value will be increased as a result
of this offering to approximately $.59 (exclusive of other changes in
net tangible book value subsequent to March 31, 1997), resulting in
immediate substantial dilution to new shareholders of 70.5%.
Dilution is the reduction of value of the purchaser's investment
measured by the difference between the price per share in this
offering and the sum of the net tangible book value at March 31, 1997
and the increase attributable to purchases by shareholders in this
offering.
The following table illustrates the effect of dilution per
Common Share on purchasers in this offering based on the number of
outstanding shares at March 31, 1997 and assuming sales of different
amounts of Common Shares up to an including the maximum, of which
there can be no assurance.
<TABLE>
Number of Shares Sold
<S> <C> <C> <C>
50,000 100,000 250,000
Net Tangible Book
Value per Share
at March 31, 1997(1)........ $.10 $ .10 $ .10
Net Tangible Book
Value per Share
After Offering(2,3).......... .21 .28 .59
Increase per Share
Attributable to
New Shareholders............ .11 .18 .49
Dilution to Purchasers
of Units.................. 1.79 1.72 1.41
Dilution as Percentage
of Purchase Price............89.5% 86.0% 70.5%
1 Net tangible book value is equal to the Company's total
assets minus its intangible assets and total liabilities.
2 Includes a net tangible book value of $.10 at March 31,
1997, plus net proceeds of this offering of $485,000,
$185,000 and $85,000 respectively.
3 Does not give effect to the possible exercise of up to
54,500 Warrants currently outstanding or 54,500 Common
Shares underlying the Warrants at the exercise price
$2.00 per share.
</TABLE>
12
<PAGE>
USE OF PROCEEDS
The net proceeds to be realized by the Company from this
offering, assuming the maximum number of shares offered are sold, of
which there can be no assurance, and excluding exercise of the
Warrants, and after allowing for estimated expenses of the Company in
connection with this offering, including legal, accounting and
printing expenses, will be approximately $485,000. Management
anticipates that the proceeds will be applied substantially as
follows during the next 12-month period based upon receipt of the
indicated dollar amounts:
<TABLE>
Description of Use(1) Dollar Amount
<S> <C> <C> <C>
$85,000 $285,000 $485,000
Thoroughbreds
Acquisitions(2) $ -0- $50,000 $150,000
Thoroughbred Boarding &
Training(3) $50,000 $70,000 $90,000
General and Administrative
Expenses(4) $32,000 $32,000 $32,000
Working Capital(5) 3,000 $97,000 $177,000
Compensation of Management(6) $ -0- $36,000 $ 36,000
Total: $85,000 $285,000 $485,000
(1) Does not give effect to the possible exercise of up to
54,500 Warrants currently outstanding or 54,500 Common
Shares underlying the Warrants at the exercise price $2.00
per share.
(2) Management does not anticipate that any Thoroughbreds will
be acquired if the net proceeds of the offering are $85,000
or less. However, if the levels indicated in the table are met,
management anticipates the purchase of up to four horses, of
which two are anticipated to be Yearlings. Also, if the Company's
current horses can earn purses enough to generate positive cash
flow, management plans to purchase horses at the September sale.
(3) Includes boarding and training expenses including, but not
limited to, insurance, miscellaneous, veterinarian, Farrier
and transportation expenses for existing Company owned
horses and horses anticipated to be acquired upon receipt
of additional funds.
(4) Includes rent, licensing, travel, legal, accounting,
medical insurance and other miscellaneous general and
administrative expenses.
(5) Management intends to use working capital for consulting
fees, entry fees for races, possible acquisition of
additional horses and unforeseen contingencies.
(6) The Company's President and Vice President have executed
employment contracts providing for payment of monthly
compensation in the amount of $2,000 commencing September
1, 1997. However, such individuals intend to defer such
compensation unless sufficient proceeds are received from
this offering. (See "MANAGEMENT")
</TABLE>
13
<PAGE>
The figures set forth above are estimates only, and cannot be
precisely calculated. Consequently, the actual application is likely
to vary from that described. Revenues and profits generated by the
Company, if any, will be utilized for boarding and training expenses
and additional thoroughbred acquisitions. To the extent proceeds are
inadequate in any area of expenditure, supplemental amounts may be
drawn from working capital, if available. Any additional proceeds
necessary for operation will be obtained through additional debt or
equity financing. However, the Company has no specific plans for
other financing at present. Any proceeds not required for proposed
expenditures will be retained and used as working capital.
Pending utilization, management may make temporary investment of
the proceeds in interest bearing certificates, including United
States government securities, short term certificates of deposit,
money market funds or other short term interest bearing investments.
The Company does not intend to register as an investment company
under the Investment Company Act of 1940. Accordingly, any
investment by the Company shall be made so as to avoid regulation as
an investment company.
MARKET FOR COMPANY'S SECURITIES
The Company's Common Shares are traded in the over-the-counter
market and are quoted on the NASD Bulletin Board and listed in the
"Pink Sheets" as published by the National Quotation Bureau under the
symbol "WRSB". The following table sets forth the range of high and low
bid quotations as reported for the Common Share of the Company. Quotations
on the Bulletin Board commenced on November 10, 1996, during the Company's
second fiscal quarter. There was no established trading market for the
Company's securities prior to that date. Quotations represent prices between
dealers, do not include retail markups, markdowns or commissions and do not
necessarily represent prices at which actual transactions were effected.
<TABLE>
Common Shares
FISCAL YEAR 1997 High Low
<S> <C> <C>
Second Quarter $1 3/8 $1 1/4
(Oct. 1 through Dec. 31)
Third Quarter $1 3/8 $1 1/8
(Jan. 1 through March 31)
Fourth Quarter $1 1/4 $ 1/8
(April 1 through June 30)
</TABLE>
The number of record holders of the Common Shares as of June 1,
1997 was approximately 40, including nominees of beneficial
owners. The Company estimates that there are approximately 50
beneficial owners of its Common Shares.
Holders of Common Shares are entitled to receive such dividends
as may be declared by the Company's Board of Directors. No dividends
on the Common Shares have been paid or declared by the Company to
date, nor does the Company anticipate that dividends will be paid in
the foreseeable future.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATION
Introduction
The Company was organized and exists for the purpose of
acquiring, owning, managing, training, racing and ultimately
syndicating thoroughbred racing prospects. It is not the intention
of the Company to enter into the business of breeding thoroughbreds,
although management reserves the right to do so should it ultimately
be determined that it is in the best interest of the Company and its
shareholders. Management has set its efforts towards producing
revenues and profits through the placement of Company Thoroughbreds
in established races throughout the United States. Management
anticipates that eventually, Company revenues and profits will depend
to a certain extent upon the sale or syndication of Company owned
Thoroughbreds. It is the intention of management to primarily focus
on the acquisition of Yearlings, although horses of racing age may be
acquired from time to time depending upon the then existing
circumstances. Management anticipates that acquisitions of
Bloodstock will initially be limited due to the Company's limited
working capital.
Plan of Operation
The general objective of the Company is to acquire Thoroughbred
race prospects, race them and ultimately syndicate them to generate
revenue and profit for the Company. Initially, revenue was limited
to the Company's portion of purses won by Da Hoss during his racing
campaign. Now that Da Hoss is injured, management does not
anticipate additional revenue from that source until at least 1998,
if at all. The Company currently has an interest in three two-year
olds, all of which are currently undergoing various stages of
training in anticipation of commencing their racing careers.
However, the Company does not anticipate revenue from any of those
horses until later 1997 or 1998. While the Company's administrative
office is located in Colorado, it is anticipated that a majority of
its activities will take place outside that state. Public sales and
premier races of thoroughbreds are primarily centered in Kentucky,
California, New York and Florida.
The three two-year olds in which the Company presently owns an
interest were acquired at the Keeneland September Yearling Sale in
Lexington, Kentucky in 1996. The Company intends to attend the 1997
Sale in an effort to obtain additional Bloodstock, proceeds from this
offering permitting. The Keeneland September Yearling Sale is the
largest public sale of Yearlings in the world. The Sale includes a
two-day select session, followed by eight days of the regular
session. An aggregate of 2,949 thoroughbred Yearlings were auctioned
in 1996, compared with an aggregate total of 2,958 Yearlings sold at
the 1995 sale. The average price for all Yearlings sold at the sale
was $46,578, an increase of 5.9% from the $43,990 average price for
1995. Finally, the median price (i.e. the point at which 50% of the
horses sold for a higher price and 50% for a lower price) for
Yearlings at the sale in the 1996 sale was $22,000 as compare with
$23,000 in 1995. The Company may also pursue acquisitions at private
sales throughout the United States to achieve its ultimate objective
to acquire Thoroughbreds with sufficient pedigree, conformation and
temperment to become quality racehorses.
15
<PAGE>
Important factors in predicting racing success are pedigree and
conformation. Pedigree refers to the breeding history of the horse
determined by bloodlines from the Sire and Dam. Conformation is the
physical attributes of the horse as determined by personal
observation. Management considers both of these attributes in
selecting all of its Thoroughbreds, and anticipates suitable
investigation for any future prospects acquired by the Company.
Management may retain the services of outside consultants and
veterinarians to assist in evaluation of future Bloodstock.
The Company may also investigate opportunities for acquisition
of older racing prospects through public or private sale or by
claiming a horse. These methods of acquisition may allow the Company
to obtain a horse of racing age and disposition without the need for
additional breaking or training. Private sales of horses stabled
throughout the United States can be negotiated directly or through
Bloodstock agents. Management will rely on its contacts in the
thoroughbred industry to investigate such opportunities. Claiming is
the process by which a thoroughbred can be purchased off the
racetrack at a predetermined price immediately following a race. A
claiming horse might be acquired in order to provide the Company an
immediate source of revenue while awaiting development of younger
prospects. However, it is not anticipated that claiming horses will
represent a majority of the Company's Bloodstock.
The Company does not maintain any boarding or training
facilities of its own. Accordingly, all of its Thoroughbreds are
boarded with independent third parties. (See "BUSINESS - Boarding").
Many factors will influence the Company's determination of
whether and where to race the thoroughbreds acquired by the Company.
Pedigree, past performance, conditioning and purses will be evaluated
by the Company in conjunction with any trainers retained by the
Company in plotting the horse's racing campaign. While no specific
venue has been determined as of the date of this Prospectus, it is
anticipated that the thoroughbreds will be raced at the premier race
tracks in the United States, as the condition and breeding of its
Bloodstock dictates. Possible venues include Churchill Downs and
Keeneland in Kentucky, Hollywood Park and Santa Anita in Los Angeles,
Del Mar in San Diego, Remington Park in Oklahoma City, Aqueduct and
Saratoga in New York, Arlington Park in Chicago and Garden State in
New Jersey. Evaluation of racing venues will depend primarily on
recommendations of trainers retained by the Company and the
condition, training and breeding of Company racing prospects.
Shareholders may be provided specific information as to important
races in advance and results following conclusion of races conducted
by thoroughbreds of the Company.
Horses not deemed qualified to be raced by the Company may be
"pinhooked" or resold by the Company shortly following acquisition.
Pinhooking can be a means of reducing the Company's risk in any
particular prospect by transferring the horse prior to completion of
his development. A ready market for resale of Thoroughbred racing
prospects exists in various parts of the United States, and
management is familiar with various sales in those venues. While
pinhooking may be utilized to reduce the Company's risk in any single
fiscal year, it is not anticipated to be a major source of revenue in
the foreseeable future.
At the end of a racing season, any Company horses may be
marketed for sale, syndicated or retained for future
competition. The Company's ultimate objective is to syndicate
one or more of its racing prospects which have demonstrated success
during its racing campaign. Syndication of a racing Colt allows
the owners to participate in stud fees generated through breeding.
Syndication of a Filly or Mare allows the owners to participate in
breeding and foaling by the Broodmare. Considerations affecting
disposition of the horse following its racing season will be past
performance, perceived value and state of the thoroughbred industry.
16
<PAGE>
Any decision to sell or syndicate Company horses will be made to
maximize value to the Company and its shareholders. Any Company
Thoroughbreds which are not sold or otherwise disposed of following
completion of the racing season will be boarded by the Company.
Typical locations for off-seasoning boarding include Kentucky, South
Carolina, Florida, Arizona and California.
The Company's long term objective is to is develop a stable of
race horses sufficient to generate a steady stream of revenue and
profit. In order to achieve this objective, management anticipates
the need for substantial additional capital. Depending upon the
success of its initial efforts, on the state of the thoroughbred
industry and other factors beyond the Company's control, management
anticipates conducting a subsequent public offering in the future to
obtain such capital. Syndication or sale of Company Thoroughbreds
may also provide a source of capital.
Liquidity and Capital Resources
June 30, 1996
Since its inception, the Company has relied upon the issuance of
Common Shares to finance operations. From inception at July 18, 1995
through June 30, 1996, the Company raised $109,000 and acquired Da
Hoss and another thoroughbred through the issuance of Common Shares.
Cash proceeds from the sale of Common Shares were used to fund
operations, including boarding and training expenses associated with
the Company's Thoroughbreds and general and administrative expenses.
Management is of the opinion that the Company will continue to rely
on capital from outside sources to fund operations until such time as
revenues are sufficient to cover the Company's ongoing expenses.
At June 30, 1996, the Company has working capital of $9,372,
consisting of current assets of $20,188 and current liabilities of
$10,816. All of the current liabilities consist of trade payables
incurred during the ordinary course of business. Working capital
existing at June 30, 1996 is insufficient to meet the Company's
liquidity and capital needs for the 1997 fiscal year and accordingly,
management anticipates further efforts to obtain funding. Capital
needs for the 1997 fiscal year include acquisition of additional
Bloodstock, boarding and training expenses associated with the
Company's Thoroughbreds and general and administrative expenses.
From inception through June 30, 1996, the Company had issued an
aggregate of 638,500 Common Shares for aggregate proceeds of $59,191,
net of offering costs. A majority of those proceeds were received in
a private placement completed May, 1996, where the Company sold
50,500 Common Shares for gross proceeds of $50,500. The remaining
shares were issued to the Company's founders and other investors, and
to acquire thoroughbred race horses from an affiliated party.
Management deems this method of financing sufficient for the
foreseeable future, although it is not anticipated that the Company
will gain profitability until more significant financing can be
obtained.
March 31, 1997
From inception through the date of this Prospectus, the Company
has obtained net proceeds of $117,691 through the sale it its
securities to founders and other accredited investors. The private
placement conducted in October of 1996 resulted in additional
proceeds of $58,500. All of these proceeds have been utilized by the
Company to acquire its interest in the Company-owned thoroughbreds,
17
<PAGE>
pay maintenance and training fees, and provide for the general and
administrative expenses associated with the management of the Company
including providing all of the Company's working capital to date.
During the nine months ended March 31, 1997, the Company expended
$47,588 on the purchase of additional Thoroughbreds. Management has
sought to reduce the risk of the Company's investment by diversifying
ownership of certain Bloodstock. The Company acquired a 25% interest
in the Shadeed Filly and Fifi La Boom Boom and her Foal. However,
the Company is dependent on the proceeds of this offering, receipt of
additional working capital and achieving profitable operations to
continue as a going concern. Management anticipates receipt of
additional working capital from the proceeds of this offering and
additional equity offerings to fund the Company's working capital
needs and the Company's business plan. The Company's immediate
working capital needs include acquisition of additional Bloodstock,
boarding and maintenance expenses for its existing Thoroughbreds and
general and administrative expenses.
The Company's working capital increased during the period ended
March 31, 1997, from $9,372 at June 30, 1996, to $26,544 at March 31,
1997. Notwithstanding such increase, management believes the Company
remains dependent on financing from outside sources to continue as a
going concern. Continuing broading, training and maintenance
expenses for the thoroughbreds, together with general and
administrative expenses, require an additional capital infusion
during fiscal 1998. Management believes that the Company has
sufficient liquidity and working capital for the balance of the 1997
fiscal year.
Results of Operations
Period from Inception to June 30, 1996
For the period from inception (July 18, 1995) to June 30, 1996,
the Company realized a net loss of $65,203, on no revenues and
operating expenses of $54,852. The Company also realized a loss on
the sale of one of its previously owned Thoroughbreds in the amount
of $26,683, resulting in a net loss for the period of $65,203. This
horse was injured repeatedly during the Company's ownership, and
accordingly, a decision was made to sell him. Management anticipates
that the Company will continue to incur losses until such time as it
obtains sufficient assets to generate revenue in an amount sufficient
to cover operating expenses.
Lack of revenues during the period ended June 30, 1996 is
attributable to a lack of horses racing at the track during that time
and lack of sales of Company Bloodstock. Da Hoss, acquired in
January, 1996, had not commenced his racing campaign for calendar
year 1996 through the period June 30, 1996. The Company's other
Thoroughbreds were not of racing age at that time.
The primary component of expenses experienced by the Company
during the period ended June 30, 1996 were boarding and training,
depreciation, thoroughbred maintenance and legal and accounting.
Depreciation, a non-cash expense, contributed almost fifty percent
(50%) of the Company's expenses through June 30, 1996. Management
anticipates this expense will increase in the future as the Company
acquires additional thoroughbreds, but will constitute an
increasingly smaller percentage of its total expenses as the
operations increase. Boarding and training will also increase
commensurate with acquisition of additional thoroughbreds. The
remaining expenses are primarily administrative expenses, including
legal and accounting, and are anticipated to remain generally
constant for the foreseeable future except for salaries payable to
management.
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<PAGE>
Nine Month Period Ended March 31, 1997
During the nine month period ended March 31, 1997, the Company
realized net income from operations of $1,115, on revenues of
$104,802 and operating expenses of $103,687. Including provision for
interest earned and paid, other expenses and a tax benefit realizable
by the Company, the total income for the period was $454.
The Company realized revenue from operations for the first time
during this period. Revenues represent exclusively the Company's
share of purses won by Da Hoss during his racing campaign during the
1996 calendar year. In October 1996, Da Hoss won the Breeder's Cup
Mile and the winner's 60% portion of the $1,000,000 purse. The
Company's portion of that purse, after deductions for expenses,
represented approximately 80% of the total revenues for the period
ended March 31, 1997.
Expenses during the period ended March 31, 1997 were generally
consistent with those experienced during the period ended June 30,
1996, although in a larger amount to reflect increased operations of
the Company. Boarding and training increased from $8,344 for the
period ended June 30, 1996 to $15,870 for the period ended March 31,
1997, reflecting additional thoroughbreds acquired by the Company.
Depreciation increased from $24,063 to $35,469 during the comparable
periods. Jockey fees and race expenses were incurred for the first
time, as one of the Company's Thoroughbreds participated in racing.
Travel and entertainment also increased substantially from the period
ended June 30, 1996 to the period ended March 31, 1997, reflecting
increased efforts of the Company officers to investigate, evaluate
and acquire additional thoroughbreds and oversee existing Bloodstock.
Management is unable to predict with any degree of certainty
when the Company might achieve profitability. Due to a recent injury
to Da Hoss, management does not anticipate any revenue from his
racing campaign during the balance of calendar year 1997. None of
the two-year olds currently in training have started to race, and
accordingly, management is unable to evaluate with any degree of
certainty expectations for revenues from that source. Finally,
while management intends to place its interests in a Mare and her
Foal in the Keeneland Breeding Stock Sale in the fall of 1997, there
is no assurance that the Company will achieve its reserve price for
these horses or that any sale will be consummated.
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BUSINESS
Introduction
Wall Street Racing Stables, Inc. was organized under the laws of
the State of Colorado on July 18, 1995. The Company was organized to
engage in all phases of the thoroughbred industry.
The Company currently has an interest in six Thoroughbreds,
including a five-year old Gelding, three two-year olds, a Broodmare
and a Foal. The Gelding, known as Da Hoss, was acquired from an
affiliate of the Company and is currently managed by Prestonwood
Farms, owner of a majority interest. In seventeen races since
beginning his career as a two-year old, Da Hoss has won ten times,
placed second in four and third in two. He is the winner lifetime of
approximately $1,394,458. The Company also owns three two-year olds
acquired at the Keeneland September Yearling Sale in 1996. One Colt
by Beau Genius, a stakes winner of over $1,000,000, was foaled on
February 3, 1995. The second Colt by Digamist, a stakes winner in
Ireland and a placed stakes winner in England, was foaled on April
17, 1995. Finally, the Company owns a 25% interest in a Filly by
Shadeed, a stakes winner in the United States and England with career
earnings of approximately $292,000. All of these two-year olds are
currently in training in preparation for their intended racing
careers.
The Company also owns a 25% interest in a Broodmare named Fifi
La Boom Boom. The Company acquired this Broodmare in foal to Summer
Squall. The foal was born in February, 1997. Management intends to
market these latter two Thoroughbreds at the Keeneland Breeding Stock
Sale in the fall of 1997.
In addition to acquisition of its interest in these
Thoroughbreds, the Company's activity since inception has been
limited to organizational efforts and obtaining initial financing.
The Company has had only limited revenues to date.
The business purpose of the Company is to acquire, own, manage,
train, race and ultimately sell or syndicate thoroughbred prospects.
The Company does not intend to be in the business of breeding
thoroughbreds, although it reserves the right to do so. The
financial goal of the Company is to produce revenue and profit
through racing purses and ultimately, through the sale or syndication
of its racing prospects. Management intends to primarily focus on
the acquisition of Yearlings, although horses of racing age may be
acquired in appropriate circumstances. Due to its limited working
capital, initial acquisition of Bloodstock by the Company will be
limited.
The Company's activities will be supervised by Raymond E.
McElhaney, President and Chief Executive Officer, and Bill Conrad,
Vice-President and Secretary. Both Messrs. McElhaney and Conrad will
supplement their efforts and experience by retaining qualified
consultants to acquire, train and race Company Thoroughbreds. Both
Messrs. McElhaney and Conrad have prior experience in the
thoroughbreds racing industry and will devote a substantial portion
of their time to the business of the Company. However, neither
individual will devote his full time to the affairs of the Company.
(See "MANAGEMENT - Directors and Officers.")
The Company's principal and executive offices are presently
located at 5525 Erindale Drive, Suite 201, Colorado Springs, Colorado
80918. Its telephone number is (719) 260-8509.
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Description of Company Thoroughbreds
The Company currently has an interest in six Thoroughbreds,
ranging from a Weanling Foal to a five-year old Gelding. Five of the
Thoroughbreds were acquired during 1996, while the Weanling was
foaled February 8, 1997. The following table summarizes certain
information with regard to the Company's Thoroughbreds as of the date
of this Prospectus:
<TABLE>
Name of Horse Characterization Date Acquired % of Ownership
<S> <C> <C> <C>
Da Hoss 5 year old January 1, 1996 15%
El Gato Grande 2 year old September 12, 1996 90%
Burnt Timber 2 year old September 12, 1996 90%
Ipanema Paradise 2 year old September 14, 1996 25%
Fifi La Boom Boom Broodmare November 15, 1996 25%
Foal out of Fifi
La Boom Boom Foal February 8, 1997 25%
Information summarized in the table regarding each of the Thoroughbreds
is discussed in more detail below.
</TABLE>
Da Hoss
Effective January 1, 1996, the Company acquired a 15% interest
in Da Hoss, a multiple stakes winning five-year old Thoroughbred
Gelding. Da Hoss was acquired from an Affiliate of the Company and
is managed by Prestonwood Farms, owner of a majority interest. In 17
races since beginning his career as a two-year old, Da Hoss has won
10 times, placed second in 4 and placed third in 2. He is the winner
of approximately $1,400,000 in his career. In his most recent outing
at the Breeder's Cup Mile in October 1996, Da Hoss took the winner's
share of the $1,000,000 purse. Da Hoss is also the winner of the
$300,000 Del Mar Invitational on September 4, 1995, the $150,000 New
Jersey Derby on May 27, 1995, the $100,000 Four Star Dave on July 29,
1996, the $75,000 added Best Turn Stakes on March 4, 1995, as well as
other stakes races.
Da Hoss was recently injured while preparing for his 1997 racing
campaign. On May 2, 1997, management was notified by Michael
Dickinson, trainer of Da Hoss, that he had suffered an injury to his tendon.
In consultation with an equine veterinarian, it was determined to
perform surgery in an effort to correct the injury. Consequently, on
May 12, 1997, Da Hoss underwent tendon splitting surgery. It is
anticipated that recovery from this surgery will last approximately
nine months, following which efforts will be undertaken to evaluate
Da Hoss for further racing. There is no assurance that he will
successfully return from this injury.
Da Hoss was operated on at the New Bolton Clinic at the
University of Pennsylvania by renown veterinarians Drs. Ross and
Northrup. In the opinion of these veterinarians, the surgery was
successful and provides Da Hoss a 65% chance of returning to racing
following adequate recovery. It is management's understanding that
the owner of a majority interest in Da Hoss intends to allow an
adequate opportunity for Da Hoss to recover and to undertake efforts
to return him to racing in 1998.
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Da Hoss is a thoroughbred Gelding in which the Company acquired
a minority interest on January 1, 1996. He is a multiple stakes-
winning five-year old Thoroughbred sired by the stakes winning
Stallion, Gone West. Since his racing campaign began as a two year
old in 1994, Da Hoss has won a total of $1,394,458 in a total of 17
races. Da Hoss is also the winner of the $300,000 Del Mar
Invitational on September 4, 1995, the $150,000 New Jersey Derby on
May 27, 1995, the $100,000 Four Star Dave on July 29, 1996, the
$75,000 added Best Turn Stakes on March 4, 1995, as well as other
stakes races.
Gone West, the Sire of Da Hoss, has sired 23 stakes winners and
was himself a multiple stakes winner over two years of racing. Gone
West was a winner of $682,000, having won the Dwyer States (Grade I)
the Grade II Gotham Stakes, Grade II Withers Stakes and placing
second in the Wood Memorial Invitational Stakes (Grade I), the Peter
Pan Stakes (Grade II) and the Grade III Hutcheson Stakes. Gone West
is the son of the prolific Stallion, Mr. Prospector, himself a son of
Raise A Native, and grandson of Native Dancer. Secrettame, the Mare
of Gone West, is a daughter of Secretariat, winner of the Triple
Crown.
Da Hoss started his racing campaign at Turf Paradise, outside
Phoenix, Arizona. He won his maiden debut in a five and one-half
furlong special weight race. In the ATBA Sales Stakes Trials, he won
again by three lengths in preparation for the final race of his two
year old career. At the ATBA Sales Stake in October, 1994, Da Hoss
won his first stakes race, winning approximately $32,000, and,
according to the Daily Racing Form, a recognized thoroughbred
magazine, setting a world's record for a two year old at a distance
of six furlongs.
Da Hoss continued his winning in his next start as a three year
old, winning the Best Turn Stakes (Grade III) at Aqueduct on March 4,
1995. In his first race at one mile, Da Hoss placed second in the
$250,000 Grade II Gotham Mile, also at Aqueduct. After a tune-up and
an allowance race at Garden State Park in New Jersey, Da Hoss was
entered in the Illinois Derby, a $500,000 Grade II stakes race, in
which he placed second. He won his next start in the New Jersey
Derby, a $150,000 Grade II stakes race on May 27, 1995. After
placing second in the $500,000 Grade II Swaps Stakes, Da Hoss won the
$300,000 Grade II T Delmar Invitational on September 4, 1995.
Da Hoss was originally acquired by WS III in September, 1993 at
the Keeneland September Select Yearling Sale. In 1994, he was placed
in the fall sale of the Arizona Thoroughbred Breeders Association,
but did not bring his reserve price, and was reacquired by WS III.
Da Hoss was raced by WS III during the balance of 1994. In February,
1995, representatives of WS III were approached to sell Da Hoss,
which negotiations culminated in a sale of an 85% interest to
Prestonwood Farms for $200,000. Da Hoss has been managed by
Prestonwood and trained by Mr. Dickinson since that date.
As co-owner with Prestonwood Farms, the Company shares income
and expense associated with Da Hoss's racing campaign. The Company
is obligated to pay a pro rata share of all expenses associated with
his maintenance and training, including trainer, veterinarian,
Farrier, transportation and entry fees. The Company also shares in
all revenue generated by Da Hoss as a result of his racing efforts.
As owner of a majority interest in Da Hoss, Prestonwood Farms is
responsible for all decisions on conduct of his racing campaign. Due
to his status as a Gelding, the objective of Prestonwood Farms is to
maximize revenue from racing while preserving his health.
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<PAGE>
El Gato Grande
Effective September 12, 1996, the Company acquired a 90%
interest in two Colts at the Keeneland September Yearling Sale. The
first, El Gato Grande, a dark bay or brown Colt, was foaled on
February 3, 1995, by Beau Genius, a stakes winner of over $1,000,000.
The second, Burnt Timber, a bay Colt, was foaled on April 17, 1995,
by Digamist, a stakes winner in Ireland and a placed Stakes winner in
England, who has approximate winnings of $263,000 in his first year
of racing as a two year old. Currently, both Colts are being stabled
at Churchill Downs in Kentucky where they have been undergoing their
race training. As the owners of a majority interest in the two
Colts, the Company, in conjunction with trainers and other
consultants, makes all decisions regarding their upbringing,
training, racing and ultimately, disposition.
El Gato Grande was foaled on February 3, 1995 by Beau Genius out
of Full Treasure. The Sire of this Colt, Beau Genius, is a multiple
stakes winner having collected purses in the amount of $1,055,600.
Beau Genius has won the Display Stakes, Autumn Handicap, Thistledown
Breeders' Cup Sprint Handicap, the Philip H. Iselin Handicap (Grade
I), Michigan Mile and One-Eighth Handicap (Grade II), the Arlington
Challenge Cup Invitational Stakes, Deputy Minister Handicap, Olympic
Handicap, Churchill Downs Handicap, Hallandale Handicap, Isaac Murphy
Stakes and the Aristides Breeders' Cup Stakes. Beau Genius' first
crop of foals produced nine stakes winners with winnings of
$1,300,000 including a Champion and a Grade I Stakes winner. In
addition, Beau Genius is the leading second crop Sire by winners and
wins in the United States and a top five second crop sire worldwide.
His second crop of foals includes Big Foot Kid who has won five of
the his first six starts including four Stakes races.
Burnt Timber
Burnt Timber, the bay Colt, was foaled on April 17, 1995 by
Digamist out of Sophisticated Lynn. The Sire of Burnt Timber,
Digamist, is a stakes winner in Ireland having won the Heinz `57
Phoenix Stakes (Grade I) and is a stakes placed winner in England at
the Coventry Stakes (Grade III). Digamist is by Blushing Groom who
had 7 wins in 10 starts during his second and third years of racing,
in England and France, including Poule d'Essai des Poulains (Grade
I), Grand Criterium (Grade I), Pr.de la Salamandre (Grade I), Pr.
Morny (Grade I), Pr. Robert Papin (Grade I), and Pr. de Fontinebleau
Derby (Grade I). Blushing Groom has 48 other sons at stud
including Rainbow Quest, Sire of six Champions including Lighted
Rainbow (Horse of the Year in Belgium), Mt. Livermore, Sire of two
Champions including Eliza, the Champion two-year old at the Breeder's
Cup Juvenile Fillies Stakes (Grade I) and Runaway Groom, Sire of two
Champions including Cherokee Run Champion Sprinter, Breeders Cup
Sprint Stakes (Grade I). The Dam, Sophisticated Lynn, is a stakes
winner with five wins from the age of two to four and total purses of
approximately $87,000.
Ipanema Paradise
Effective September 14, 1996 the Company acquired a 25% interest
in Ipanema Paradise, a Filly by Shadeed, at the Keeneland September
Yearling Sale. Shadeed is a Stakes winner in the United States and
England with winnings of $292,545. Mariano Villar Urquiza is the
owner of the majority interest in this Thoroughbred, and responsible
for her training.
23
<PAGE>
Ipanema Paradise is by Shadeed out of Paradise. The Sire of
this Filly, Shadeed, is a stakes winner in England having won
Houghton Stakes as a two year old and the General Accident Two
Thousand Guineas (Grade I), the Queen Elizabeth II Stakes (Grade II),
the Craven Stakes (Grade III) as a three year old. Shadeed is by
Nijinski II who had eleven wins as a two and three year old and was
named the horse of the year in England and Champion two and three
year old in England. His wins include the Derby Stakes, Two Thousand
Guineas Stakes, St. Leger Stakes, Irish Sweeps Derby, Railway Stakes,
Anglesey Stakes, Beresford Stakes, Dewhurst Stakes, Gladness Stakes,
and the King George II and Queen Elizabeth Stakes. Nijinski II has
109 other active sons at stud including Green Dancer, the sire of 5
champions including Suave Dancer, winner of the CIGA Pr. de l'Arc de
Triomphe (France-Grade I), Meadow Meats Irish Champion Stakes
(Ireland-Grade I) and the Market Booster Stakes (Germany- Grade I).
The Dam of this Filly, Paradise, is a stakes winner as a two and
three year old in France having won the Prix Cleopatre (Grade III)
and a winner as a four year old in the United States.
Fifi La Boom Boom
On November 15, 1996 the Company acquired a 25% interest in Fifi
La Boom Boom who was then in foal to Summer Squall. The foal was
born on February 8, 1997. Fifi La Boom Boom is by Majestic Light, a
stakes winner having won the Swaps Stakes (Grade I) with winnings of
$650,158. Majestic Light is the sire of sixteen crops of racing age
which includes 714 foals of which 502 are starters including 59
stakes winners and 333 winners of 1087 races and earning $23,715,667.
The Dam of Fifi La Boom Boom is Buckshee, a winner in two starts as a
three-year old. Buckshee is the Dam of eight other registered foals
all eight of which are of racing age and four of which are winners
including Buck'n Bronc and Pertsemlidis.
Foal out of Fifi La Boom Boom
The Company owns a 25% interest in this Colt foaled on February
8, 1997. The foal was sired by Summer Squall. Summer Squall is a
stakes winner having won the Hopeful Stakes (Grade I), Saratoga
Special Stakes (Grade II), Bashford Manor Stakes and the Kentucky
Breeders' Cup Stakes as a two year old. In his third year, Summer
Squall won the Preakness Stakes (Grade I), Jim Beam Stakes (Grade
II), Pennsylvania Derby (Grade II) and the Blue Grass Stakes (Grade
II). As a four year old Summer Squall won the Fayette Handicap
Stakes (Grade II). Summer Squall has won purses of $1,844,282
during his racing career. Summer Squall also sired Storm Song,
Golden Gale and Mackie. As of 1996, Summer Squall has sired 44
starters, including 18 winners, three stakes winners and five
superior runners with total earnings of $1,406,313. The Mare and her
Foal are currently being boarded at York Run Farm in Mt. Sterling,
Kentucky.
Boarding of Company Thoroughbreds
When thoroughbred horses are not actively engaged in training or
racing, they are boarded at stable facilities specifically designed
for that purpose. Such facilities typically provide for the care,
feeding and maintenance of a number of past, present or future racing
prospectus.
24
<PAGE>
As the Company does not own or operate any of its own boarding
facilities, it contracts with unrelated third parties to provide
boarding services. Factors considered by the Company in selecting
such facilities include the reputation of the owners/operators,
proximity to intended racing venues, costs, facilities and climate.
Due to the costs of constructing and maintaining such facilities,
management does not anticipate the Company will acquire its own
boarding or training facilities in the foreseeable future.
As mentioned previously, Da Hoss is currently boarded at Fair
Hill, Maryland, where he is recovering from surgery. The Company is
currently charged a prorata share of $55 per day for training plus
its share of necessary expenses, including veterinarian and Farrier
costs.
Burnt Timber and El Gato Grande are currently in training at
Churchill Downs in Kentucky. The Company is charged a prorata share
of the $65 per day per horse for boarding and training plus necessary
expenses such as veterinarian and Farrier costs. Ipanema Paradise is
currently boarded at Hopple's Horse & Cattle Farm in Ocala, Florida.
The Company is charged a prorata share of the $30 per day for
boarding, plus necessary expenses, including veterinarian and Farrier
costs. Fifi La Boom Boom and her Foal are currently boarded at York
Run Farm in Mt. Sterling, Kentucky. The Company is charged a prorata
share of the $16 per day for the Mare and her Foal, plus a prorata
share of expenses.
The Company is an owner of a minority interest in Da Hoss,
Ipanema Paradise, Fifi La Boom and the Foal and contributes to the
decisions but does not have final say in decisions effecting their
care and maintenance. As the owner of a majority interest in the two-
year old Colts, the Company is responsible for making decisions which
affect the care and maintenance. It is anticipated that
Thoroughbreds acquired by the Company in the future may be boarded
under similar arrangements.
Training
When thoroughbreds reach an age and disposition to commence
racing, they are typically placed for breaking and training with
qualified professionals. This process typically begins during the
second year of a horse's life, although such time may be later
depending upon conformation and disposition of the animal. Breaking
is usually accomplished at off-track venues, where the horse is
introduced to various aspects of racing, including equipment, jockeys
and racetrack facilities. This process typically lasts from thirty
to ninety days, although the process varies widely depending upon the
temperment and maturity of the animal. Ipanema Paradise is currently
being broken at Hopple Farms in Ocala, Florida. The Company is
currently charged a prorata share of $30 per day boarding and
breaking fee, together with an allocable share of expenses. It is
anticipated that this arrangement will continue until Ipanema
Paradise is deemed qualified for on-track training.
Once the process of breaking a horse has been completed, it is
typically placed at a race track to continue training in preparation
for commencement of its racing career. At the track, the horse will
undergo additional physical conditioning, together with increased
simulation of actual race circumstances. The ultimate goal is to
prepare the horse for race participation.
El Gato Grande and Burnt Timber are currently trained by Randy
K. Bradshaw Stables, located at Churchill Downs in Lexington,
Kentucky and headed by Randy Bradshaw. The Company is charged $65
per day per horse, plus expenses, including veterinary, Farrier,
medication and equipment. It is anticipated that this arrangement
25
<PAGE>
will continue pending determination of when the Colts are ready to
commence their racing careers. At such time, a decision will be made
as to what venues are appropriate for that purpose.
It is usual and customary in the thoroughbred racing industry
that the trainer of a racehorse receives between 10% - 13% of the
purses won by a thoroughbreds trained by him. Jockeys are also
typically paid 10% of the purse. In addition, a trainer may be
entitled to receive from the Company a commission on the sale of any
of the Company Thoroughbreds which are sold privately at the request
of the Company. Any trainer who may be engaged by the Company to
train Company Thoroughbreds will also be engaged in the training and
racing of thoroughbreds owned by other persons and entities, which
may result in conflicts of races, time and training.
Thoroughbred Racing in the United States
Thoroughbred racing is a multi-billion dollar industry in the
United States. The following information has been obtained from
Thoroughbred Racing Comm., Inc. During 1994, the most recent year
for which information is available, nearly 75,000 thoroughbreds
competed in races in North America, with several thousand more in
training. With an estimated average annual cost of $20,000 per
horse, approximately $1.7 billion is spent each year on the care of
thoroughbred race horses. Parimutuel handle in North America totaled
$10.8 billion in 1994, up more than $500 million over the previous
year. The value of the 12,500 thoroughbreds sold at auction as
racing prospects in 1994 was approximately $329 million.
During 1994, thoroughbred racing continued as a healthy
industry, despite the encroachment of lotteries and small stakes
gambling proliferating throughout the United States. While the
number of live races in the United States declined marginally during
1994, and has declined each year since 1990, total prize money showed
a healthy increase in 1994 from 1993. Total purses in the United
States for 1994 equaled almost $748 million, an increase of 4.4% from
1993. Gross purses in North America have increased annually for all
but two years since 1980. Parimutuel betting also increased from
1993, from $9.6 billion in 1993 to $10.2 billion in 1994. Management
is confident that the interest in thoroughbred racing will continue
in the future.
Types of Races
During its career, a thoroughbred may run in a variety of races.
In "allowance" races, the weight that each horse will carry is set by
the track's racing secretary, making specific allowances in weights
for horses with less impressive past performances and saddling better
horses with more weight. A "weight for age" race is one in which a
standard scale of weights established by the Jockey Club, which
assigns certain weights to horses based upon their age and the month
of the year, is used.
The most important thoroughbreds races, "stakes" races, attract
the best horses, the most public attention and, consequently, the
highest purses. Owners must pay a "nomination" fee or a series of
nomination fees well in advance, and a "starter fee" at the time of
that race. The stakes money raised by these fees is supplemented by
"added" money contributed to the purse by the track, and in some
cases, further supplemented by state breeders association awards or
sponsors' contributions. Examples of some of the more prestigious
stakes races are the Kentucky Derby, the Preakness and the Belmont
Stakes.
26
<PAGE>
A "claiming" race is a race in which any horse running may be
purchased at a specified "claiming" price which is posted as a
condition of entry. During 1994, claiming races accounted for 70% of
all races run. However, based on the proceeds anticipated to be
received from this offering, it is anticipated that any thoroughbreds
acquired by the Company will run in predominantly stakes or allowance
races. However, the final determination as to which race is
appropriate for any Thoroughbreds owned by the Company will be made
by management in conjunction with the trainer and other experts
retained for that purpose.
The Jockey Club
The Jockey Club, 380 Madison Avenue, New York, New York, 10017,
is the organization which registers bloodlines of thoroughbreds
horses in the United States. In order to race a thoroughbreds at
sanctioned thoroughbreds races, a thoroughbreds must be named and
registered with The Jockey Club.
Stable Name and Racing Colors
The Company Thoroughbreds will race under the stable name of
Wallstreet Racing Stables. It will be necessary for the Company to
obtain stable racing colors and jockey silks. Management shall have
responsibility for securing the same.
Insurance
Due to the potential loss resulting from the injury or death of
any of the Company Thoroughbreds, management has obtained insurance
on its interest in certain Thoroughbreds and will endeavor to insure
the Company's interest in additional Bloodstock proposed to be
acquired from the proceeds of this offering. The Company currently
maintains mortality and surgical insurance on its interest in Da
Hoss, the two two-year old Colts, the Mare and her Foal, although
there is no assurance such insurance will be continued indefinitely.
The continuation and amount of insurance is generally dictated by the
perceived value of the horse. Mortality insurance insures against
financial loss to the Company from the premature death of a
thoroughbred. Surgical insurance protects against costs incurred in
connection with medical procedures necessary to diagnose and repair
injury or sickness of Company Thoroughbreds up to the amount of
$5,000 per horse. However, investors should be aware that insurance
does not protect or insure against every loss which the Company might
incur.
The amount and extent of insurance to be acquired or retained by
the Company will depend on management's evaluation of its economic
benefit to the Company. It is not anticipated that all thoroughbreds
will be insured. Rather, management may determine to insure only the
more valuable Bloodstock which may be acquired. The amount of
coverage on any particular horse is generally a function of its
perceived value; initially, the amount of insurance may be based on
the purchase price of Yearling Thoroughbreds. Thereafter, the
Company may obtain appraisals from brokers or insurance experts in
order to determine the appropriate level of insurance.
The cost of surgical insurance is not anticipated to be material
to the Company's business.
27
<PAGE>
Government Regulation
As a form of legalized gambling, horse racing is subject to
regulation throughout the United States. Every state that sanctions
horse racing has a racing commission which regulates the licensing of
owners, trainers, and their employees, and determines the eligibility
of horses to compete in racing events within its jurisdiction.
Accordingly, to the extent the Company determines to participate in
racing in any particular state, the Company will be forced to comply
with the rules and regulations of that states' racing commission.
Messrs. McElhaney, Conrad and McGinnis, officers and directors
of the Company, are presently or have been licensed in several
jurisdictions pursuant to their capacities in other racing
partnerships. Those jurisdictions include California, Colorado, New
York, New Jersey, Nebraska, Ohio, Illinois, Arizona and Kentucky. In
addition, applications are pending in the states of Oklahoma,
Kentucky, Arkansas and Florida. As a result, it is not anticipated
that the Company will realize any obstacles in its efforts to become
licensed in any jurisdiction. While the Company will be required to
comply with the license requirements of various state racing
commissions, it is not anticipated that such licensing will adversely
affect the Company's operations.
Competition
Competition in the thoroughbreds industry is intense. The
Company will face competition for the acquisition of racing prospects
from major, established thoroughbred owners and trainers located
throughout the United States and in other countries. While it is
difficult to estimate the number of competitors, management is of the
opinion that a large number of these companies and individuals are
large, well established entities with substantial financial
capabilities and sound earnings records. Thoroughbred markets are
international and select auctions are internationally advertised.
Accordingly, acquisition, sale and/or syndication of the Company's
Thoroughbreds will be subject to intense competition from major horse
breeders and dealers throughout the United States and abroad.
The Company will also face stiff competition for acquisition of
trainers to prepare and manage its Bloodstock for racing. Also in
this respect, the Company will face competition from larger, well
established companies and individuals with greater financial
resources than the Company. While the Company's Thoroughbreds are
currently trained by Michael Dickenson and Randy Bradshaw, there is
no assurance they will continue in that capacity indefinitely and the
Company may consider different or additional trainers in the future.
(See "MANAGEMENT - Consultants")
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Company Facilities
The Company maintains its administrative offices in Colorado
Springs, where it leases space from an affiliate. The Company shares
office space, conference and reception area, with MCM Capital
Management, Inc., in exchange for payment of $500 per month. The
Company occupies this space on a month to month basis. (See "CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.") The Company may lease
or acquire additional space in the future, as the needs of its
business require and its working capital permits. However,
management is of the opinion that such space is adequate for the
needs of the Company for the foreseeable future.
Employees
The Company currently has three employees, its President and
Chief Executive Officer, Vice President and Vice President of
Corporate Development. All of these individuals currently devote a
minor portion of their time to the Company and serve without
compensation, although the Company may pay medical insurance on
behalf of such individuals. The Company has entered into employment
contracts with the President and Vice President, providing for
payment of compensation beginning in September, 1997. Such
individuals may devote additional time to the Company as its business
requires and as working capital permits.
The Company will retain other individuals on a contract basis to
fulfill specific needs, including Bloodstock consultants,
veterinarians, trainers and jockeys. Bloodstock agents or
consultants are typically paid a commission for purchases or sales
effected with their assistance. Trainers are paid a day rate for
horses, plus a percentage of purses won by horses under their care.
Jockeys are paid a percentage of purses obtained through their
efforts on the Company's behalf. Finally, the Company may obtain
secretarial and administrative support on an hourly basis pursuant to
its lease with MCM.
The Company may retain additional personnel in the future as its
needs dictate and its working capital permits. However, management
believes that its present and contemplated arrangements will be
satisfactory for the foreseeable future.
Legal Proceedings
Neither the Company nor any of its officers or directors in
their capacity as such is a party to any pending legal proceeding and
no such proceeding is contemplated to the best of their knowledge and
belief.
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<PAGE>
<TABLE>
MANAGEMENT
Directors and Officers
<S> <C> <C>
Name Age Position
Raymond E. McElhaney 40 President, Chief Executive Officer,
Chief Financial Officer and
Chairman of the Board of Directors
Bill M. Conrad 40 Vice-President, Secretary,
Treasurer and Director
Ronald R. McGinnis 62 Vice President-Corporate
Development and Director
Clifford C. Thygesen 60 Director
Wayne Bamford 60 Director
</TABLE>
Messrs. McElhaney, Conrad and McGinnis should be considered
"founders" and "parents" of the Company (as such terms are defined by
rule under the Securities Exchange Act of 1934, as amended), inasmuch
as each has taken initiative in founding and organizing the business
of the Company.
The Board of Directors of the Company has been divided into
classes. Pursuant to authority contained in the Articles of
Incorporation, the term of the first class, including Messrs. Bamford
and Thygesen, expire on the first annual meeting of shareholders; the
term of the second class, including Messrs. McGinnis and Conrad,
expire on the second annual meeting of shareholders; and the term of
the third class, presently including Mr. McElhaney, expires on the
third annual meeting of the shareholders. Upon election of their
successors, directors will serve successive terms of two or three
years, as appropriate. Officers will serve at the will of the Board
of Directors.
RAYMOND E. McELHANEY. Mr. McElhaney has served as President,
Chief Executive and Financial Officer and director of the Company
since inception. Mr. McElhaney is also President and a director of
MCM Capital Management, Inc., a private Colorado corporation engaged
in financial public relations, where he devotes a minor portion of
his time. Mr. McElhaney has occupied that position since 1984. MCM
Capital Management was also the managing partner of Wallstreet Racing
Stables II (hereinafter referred to as "WS II") and Wallstreet Racing
Stables III (hereinafter referred to as "WS III"), both general
partnerships engaged in the acquisition, training and racing of
thoroughbreds horses. (See "-Previous Experience with Thoroughbreds
Syndications."). Mr. McElhaney is also Secretary, Treasurer and a
Director of Gold Capital Corporation, a precious metal development
company whose securities are traded over-the-counter and quoted in
the Bulletin Board. Mr. McElhaney also devotes a minor portion of
his time to those positions. From 1987 to January, 1997, Mr.
McElhaney was the President, Treasure and a director of Consolidated
Capital of North America, Inc., a publicly traded real estate company
with securities traded on the NASD over-the-counter bulletin board.
From July, 1992 to October, 1992 Mr. McElhaney was affiliated with
Rocky Mountain Securities, a NASD member firm, as a sales
representative.
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<PAGE>
BILL M. CONRAD. Mr. Conrad has served as Vice-President,
Secretary, Treasurer and a Director of the Company also since
inception. He is also President and a Director of Gold Capital
Corporation. From 1989 to January, 1997, he has also served as Vice-
President of Corporate Development, Secretary and a director of
Consolidated Capital of North America, Inc. He is also currently
Vice President and a director of MCM Capital Management, Inc. From
August, 1991 to October, 1992, Mr. Conrad was a registered
representative for Rocky Mountain Securities, a NASD member firm
located in Denver, Colorado.
RONALD R. McGINNIS. Mr. McGinnis has been the Vice President of
Corporate Development and a director of the Company since inception.
He was also associated with Consolidated Capital of North America,
Inc., in the capacity of Vice-President and a director. Mr. McGinnis
has also been Vice President and a director of United States
Exploration, Inc., a publicly traded corporation engaged in the oil
and gas business since May, 1990. His responsibilities as Vice
President include identification and evaluation of oil and gas and
other assets to be acquired by that entity, as well as strategic
planning. He currently devotes a minor portion of his time to that
entity. Since 1990, he has also been President, sole director and
shareholder of ARGAS Pipeline Company, a private Kansas corporation.
Mr. McGinnis is also a joint venture partner with ARGAS, Inc., a
privately held company engaged in the business of oil and gas
drilling and installation of natural gas collection systems since
March, 1987.
CLIFFORD C. THYGESEN. Mr. Thygesen has been a director of
the Company since August 9, 1995. Since 1988, Mr. Thygesen has been
principally engaged as a private investor. Prior to that, he was in
managerial and executive positions with a recreation supply company
based in Boulder, Colorado. He is also currently President and a
director of American Educational Products, Inc., a publicly traded
company involved in the manufacture and distribution of educational
products. The securities of American Educational Products, Inc. are
traded on NASDAQ.
WAYNE BAMFORD. Mr. Bamford has been a director of the Company
since August 9, 1995. He has been a self employed businessman for
approximately ten years, managing numerous investments and business
interest during that time. Prior to that, Mr. Bamford was the
operator of a ranch located southeast of Denver, where he boarded,
bred and raised thoroughbred race horses on behalf of himself and
independent third parties. Prior to that time, Mr. Bamford assisted
his father in the operation of a ranch near Sterling, Colorado where
he was also involved in the ownership, breeding, raising and training
of thoroughbred racehorses. Mr. Bamford has been associated with
thoroughbred race horses in various capacities for over forty years.
No family relationships exist between any of the officers and
directors of the Company.
Compensation
Employees have received no compensation for their services as
officers or directors of the Company, although each individual is
entitled to participate in the Company's Non-Qualifying Stock Option
and Stock Grant Plan, and to be reimbursed for reasonable out of
pocket expenses incurred on behalf of the Company. However, the
Company has executed employment agreements with certain of its
officers providing for payment of compensation beginning September 1,
1997. (See "MANAGEMENT - Employment Contracts" below). The Company
31
<PAGE>
may also pay medical insurance premiums on behalf of the officers,
upon approval of the Board of Directors. The Company also retains
the right to compensate members of the Board of Directors and an
advisory board for special services rendered to the Company.
Employment Contracts
Effective June 1, 1997, the Company entered into employment
agreements with Messrs. McElhaney and Conrad, President and Vice
President of the Company, respectively. The Employment Agreements
are effective for a period of eighteen months and are automatically
renewable unless written notice of termination is given by the
Company not less than 90 days prior to expiration of the eighteen month
term. The Agreements may also be terminated by the Company for
cause, and by the employee on not less than 90 days advance written
notice.
Each employment agreement provides for payment of monthly
compensation in the amount of $2,000 commencing September, 1997.
Each individuals is also entitled to be reimbursed for reasonable and
necessary expenses incurred on behalf of the Company. Finally,
Messrs. McElhaney and Conrad are entitled, pursuant to the terms of
the Employment Agreements, to participate in group health,
disability, life, bonus, profit sharing and stock option plans
maintained for other employees of the Company.
Stock Option Plan
The Company has adopted a Non-Qualified Stock Option and Stock
Grant Plan ("Plan") for the benefit of key personnel and others
providing significant services to the Company. An aggregate of
1,000,000 shares of Common Stock have been reserved for issuance
under the Plan. As of the date of this Prospectus, no options have
been granted pursuant to the Plan.
The Plan is administered by the Board of Directors, who shall
select optionees and recipients of any stock grants, the number of
shares and the terms and condition of any options or grants of key
persons defined in the Plan. In determining the value of services
rendered to the Company, the Board will consider, among other things,
such person's employment position in relationship with the Company,
his duties and responsibilities, ability, productivity, length of
service or association, moral, interest in the Company,
recommendation by supervisors and the value of comparable services
rendered by others in the community who are similarly situated. All
options granted pursuant to the Plan shall be exercisable at a price
not less than the fair market value of the Common Stock on the date
of grant. Unless otherwise specified, the options expire ten years
from the date of grant.
Previous Experience in Thoroughbreds Syndications
Messrs. McElhaney and Conrad have been involved in three recent
thoroughbred syndications, together with additional experience
owning, training and racing thoroughbreds individually. Their
participation in the thoroughbreds industry commenced in
approximately 1982. While engaged in unrelated businesses, Messrs.
McElhaney and Conrad acquired thoroughbreds individually and in
partnership with other individual for purposes of training and
racing. Those endeavors, while generally self-sustaining from a
financial standpoint, came to a conclusion in approximately 1986,
when the thoroughbred industry underwent a substantial retrenchment.
Tax legislation adopted in that year, including adoption of the
passive activity rules, substantially effected economics in the
thoroughbreds industry. Accordingly, Messrs. McElhaney and Conrad
temporarily abandoned their participation.
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<PAGE>
Their interest in horse racing was rekindled in approximately
1992. Since that date, they have organized three general
partnerships devoted to the acquisition, training and racing of
thoroughbred horses, in addition to the Company.
Most recently, through MCM Capital Management, Messrs. McElhaney
and Conrad organized WS III, prior owner of Da Hoss. That entity was
organized in the summer of 1993 to acquire, train, race and sell or
syndicate thoroughbred Yearlings. The partnership raised initial
capital of $56,000, which, together with additional contributions,
was used to acquire four Thoroughbred Yearlings, including Da Hoss.
A Yearling Filly by "Bet Twice" was acquired at the Fasig-Tipton
September sale for $12,000. Subsequent to acquisition, the Filly was
raced, but did not place, and was sold for $2,500 to an independent
third party. WS III also acquired a Yearling Colt by "Relaunch" for
$27,000 at the Keeneland September Select Yearling Sale. Prior to
commencing his racing career, that Colt was sold for $20,000.
Finally, WS III acquired a "Woodman" Filly for $20,000 in 1994. That
Filly was subsequently sold at the Barrett's March select sale for 2
year olds in training for $27,000. WS III also received revenues of
approximately $38,000 from racing Da Hoss prior to sale of an 85%
interest to Prestonwood Farm for $200,000, and approximately $90,000
additional since that time.
Prior to WS III, Messrs. McElhaney and Conrad organized WS II,
another general partnership organized to acquire and race
thoroughbreds. That entity acquired a thoroughbred Gelding called
"Lucky Sync" together with two Yearlings at the Keeneland September
Select Yearling Sale in 1992. Lucky Sync's racing career came to an
end shortly after being named 1992 Colorado Older Horse of the Year
and earning $30,000 for the Partnership and was sold for a price of
$8,000 to one of the partners.
The careers of the two Yearlings acquired by that partnership
were cut short due to injury of the horses. A four year old Filly
named "Cherokee Go" of which the Company acquired a one half interest
at the Keeneland September Yearling Sale for $13,000, was injured
shortly after commencing what looked to be a very promising racing
career, and was subsequently sold for an aggregate price of $2,500.
"Seminole Win" was a five year old Gelding acquired at the same time
for $20,000. His racing career included starts in Arizona,
California, Colorado and Iowa, where he started 19 times, winning
four, placing second five times and third twice. His career earnings
were approximately $46,500.
WS II also claimed "Maggie's Bid" for $6,250 as a four year old
with then-earnings of $11,500, including twelve starts and five wins.
Under the management of WS II, Maggie's Bid subsequently raced and
was sold for $5,000, after upping his career earnings to $29,000,
including 34 starts, ten wins, four seconds and two thirds.
The initial partnership organized by Messrs. McElhaney and
Conrad was Wallstreet Racing Stables, a partnership comprised of nine
individuals and aggregate capital contributions of $10,000. Those
contributions were utilized to acquire Lucky Sync for $3,000, at that
time a six-year old thoroughbred Gelding who had been laid off from
racing. Subsequent to acquisition by Wallstreet I, Lucky Sync earned
an aggregate of $23,000, including winning the Mt. Elbert Stakes and
was named 1992 Colorado Older Horse of the Year and was runner up to
Colorado Horse of the Year in 1993. Lucky Sync was subsequently
acquired by Wallstreet II.
33
<PAGE>
CONFLICTS OF INTEREST
Acquisition of Da Hoss
The Company acquired its interest in Da Hoss from WS III, a
Colorado general partnership in which an affiliate of Messrs.
McElhaney and Conrad was the managing general partner. All of the
remaining officers and directors of the Company were also general
partners in WS III. The Company acquired its 15% interest in Da Hoss
in exchange for the issuance of 80,000 shares of Common Stock
pursuant to a Purchase Agreement effective January 1, 1996. Messrs.
McElhaney, Conrad , McGinnis, Thygesen and Bamford are partners in WS
III and comprised the entire Board of Directors participating in the
decision to acquire the Company's interest in that thoroughbred.
Accordingly, the Purchase Agreement was not negotiated in an arms-
length transaction. The value placed on Da Hoss in that transaction
was based on a valuation obtained by WS III for insurance purposes.
Accordingly, while the Company did not obtain an independent
appraisal, management is of the opinion that the terms and conditions
of the Purchase Agreement is no less favorable than could be obtained
from an unaffiliated third party. Nonetheless, the Board of
Directors was subject to a conflict of interest in negotiating and
completing the acquisition of this Thoroughbred.
General
As participants in a number of business endeavors, Messrs.
McElhaney, Conrad and McGinnis will be faced with potential conflicts
of interest in regard to time, effort and corporate opportunity on
behalf of the Company. Although each will devote substantial time to
the affairs of the Company, none will devote full time to their
duties as officers. Accordingly, their responsibilities as officers
of the Company will conflict with other commitments outside the
Company. Messrs. McElhaney and Conrad also devote substantial time
to their duties as officers and director of MCM Capital Management
and as officers and directors of Gold Capital Corporation, and Mr.
McGinnis to United States Exploration, Inc., as they have
responsibilities to those entities. Nonetheless, Messrs. McElhaney,
McGinnis and Conrad believe they have sufficient time to devote to
the affairs of the Company. Finally, while none of the other
entities with which Messrs. McElhaney, Conrad and McGinnis are
currently affiliated are engaged in the thoroughbred business, they
are aware of the doctrine of corporate opportunity. Such doctrine
provides that business opportunities which come to the attention of
company officers within the realm of its business activities must
first be offered to the Company. Messrs. McElhaney, Conrad and
McGinnis have recognized this obligation in their position as
officers of the Company.
34
<PAGE>
SHAREHOLDINGS OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
As of the date of this Prospectus, there were a total of 697,000
shares of Common Stock of the Company outstanding. The following
tabulates holdings of Common Shares of the Company by each person
who, as of the date of this Prospectus, holds of record or is known
by management of the Company to own beneficially more than 5% of the
voting securities outstanding and, in addition, by all directors and
officers of the Company individually and as a group. The table does
not reflect the possible exercise of the Warrants or up to 1,000,000
shares of Common Stock under the Company's Incentive Stock Option
Plan. The shareholders listed below have sole voting and investment
power, except as otherwise noted.
<TABLE>
Number Percent
Name and Address of Shares of
Voting Securities
Before After
Offering Offering(3,4)
<S> <C> <C> <C>
Raymond E. McElhaney(1,2)
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918 203,833 29.24% 21.52%
Bill Conrad(1,2)
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918 203,333 29.17% 21.47%
Ronald R. McGinnis(1)
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918 46,333 6.64% 4.89%
Clifford C. Thygesen(1)
4893 Idylwild Trail
Boulder, CO 80301 56,333 8.08% 5.94%
Wayne Bamford(1)
5948 East King Court
Parker, CO 80134 46,333 6.64% 4.89%
Dewey L. Williams
4611 Langland Road, #104
Dallas, Texas 75244 76,333 10.95% 8.06%
All Officers and Directors
as a Group (5 persons) 556,165 79.79% 58.73%
1 Officer or director.
2 Includes 2,500 shares held by MCM Capital Management of
which Messrs McElhaney and Conrad are officers, directors
and principal shareholders.
3 Assumes sale of all Common Shares offered hereby, of which
there is no assurance.
4 Does not take into account the issuance of 54,500 Common
Shares issuable upon exercise of the Warrants.
The Company knows of no arrangement, including the pledge by any
person of securities of the Company, which may at a subsequent date
result in a change of control of the Company.
</TABLE>
35
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Recent Private Financings
The Company commenced its capitalization on July 19, 1995 by
issuing 500,000 shares of its Common Stock to Messrs. McElhaney and
Conrad for a price of $.01 per share. Messrs. McElhaney and Conrad
comprised a majority of the Board of Directors when that transaction
was approved, but abstained from voting due to the inherent conflict
of interest. In February, 1996, Messrs. McElhaney and Conrad each
donated 75,000 shares back to the Company.
On August 9, 1995, the Company issued an aggregate of 75,000
shares to Messrs. McGinnis, Thygesen and Bamford, for consideration
totaling $2,500 each, or $.10 per share. That transaction was
approved by the Board of Directors consisting of Messrs. McElhaney
and Conrad, the sole disinterested members at that time.
Acquisition of Da Hoss
Effective January 1, 1996, the Company acquired its interest in
Da Hoss from WS III, an Affiliate of the Company. Messrs. McElhaney,
Conrad, McGinnis, Thygesen and Bamford were also general partners in
WS III at the time of these transactions. The Company issued 80,000
Common Shares for a 15% interest in Da Hoss valued at $80,000 for
purposes of this transaction. As partners in WS III, each member of
the Board of Directors received one sixth interest in the Common Stock
received by WS III in this transaction. The value placed on Da Hoss in
this transaction was based on a valuation of that interest received by
WS III for mortality insurance purposes. However, no appraisal was
obtained from an independent third party regarding the fairness of the
transaction to the Company. Nonetheless, management is of the opinion
that the transaction was no less favorable than could be obtained from an
unaffiliated third party.
Acquisition and Disposition of Broker John
Also effective January 1, 1996, the Company acquired the two-
year old Colt, Broker John. The Company acquired a 100% interest in
this Colt for $39,000, based on an original purchase price of $31,000
plus training and boarding expenses accrued to that date. Broker
John was acquired from WS III for $15,000 cash and 48,000 common
shares. Broker John's race career was marred by injuries and
consequently, management determined that he should be sold at
auction. The sale of Broker John netted the Company $9,000 in
proceeds, which was added to working capital.
Miscellaneous Transactions
The Company currently shares office facilities, consisting of
office space with conference facilities, with MCM Capital Management,
Inc. pursuant to a agreement effective September 1, 1995. The
agreement provides the Company with office space, conference
facilities and other support for a monthly payment of $500. The
agreement is effective on a month to month basis commencing September
1. Messrs. McElhaney and Conrad are also officers, directors and
principal shareholders of MCM.
36
<PAGE>
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 15,000,000 shares
of Common Stock, $.001 par value and 5,000,000 shares of Preferred
Stock, $.01 par value. The following description of the Company's
securities is qualified in its entirety by reference to the Company's
Articles of Incorporation, as amended, a copy of which is available
upon request to the Company.
Common Stock
Each share of Common Share is entitled to one vote at all
meetings of shareholders. All shares are equal to each other with
respect to liquidation rights and dividend rights. There are no
preemptive rights to purchase any additional Shares. The Articles
of Incorporation of the Company prohibit cumulative voting in the
election of directors. In the event of liquidation, dissolution or
winding up of the Company, holders of Common Shares will be entitled
to receive on a pro rata basis all assets of the Company remaining after
satisfaction of all liabilities and all liquidation preferences, if any,
granted to holders of the Company's Preferred Stock.
All of the Company's issued and outstanding Common Shares is,
and, when paid for according to the terms of the offering will be,
fully paid and non-assessable and are not subject to any future call.
Possible Restrictions on Common Stock
Under regulations adopted by various state racing commissions,
persons who acquire substantial amounts of a corporation licensee's
stock (generally ranging from four to ten percent) must themselves be
licensed by the racing commission. The process of licensing involves
applications with the racing commission, payment of a small fee and a
background investigation, including financial condition and criminal
history. In order to accommodate the possibility that one or more
purchasers of Company Stock may not qualify as licensees, the
Company's Articles of Incorporation have been amended to provide that
the Company may repurchase any stock of an investor who fails to
qualify as a licensee when required. The Amendment provides, in
pertinent part, that the investor will sell, and the Company will
purchase, any Common Share of such person or entity for a purchase
price equal to the current market price of the securities within
thirty days of written request by the Company. Stop transfer
instructions will be placed with the Company's transfer agent for
Common Shares owned by any investor who refuses to comply with such
provision.
The restrictions noted in the foregoing paragraph will be
contained in a legend on each certificate issued by the Company.
Preferred Stock
The Articles of Incorporation vest the Board of Directors of the
Company with authority to divide the Preferred Stock into series and
to fix and determine the relative rights and preferences of the
shares of any such series so established to the full extent permitted
by the laws of the State of Colorado and the Articles of
Incorporation in respect to, among other things, (i) the number of
shares to constitute such series and the distinctive designations
thereof; (ii) the rate and preference of dividends, if any, the time
37
<PAGE>
of payment of dividends, whether dividends are cumulative and the
date from which any dividend shall accrue; (iii) whether Preferred
Stock may be redeemed and, if so, the redemption price and the terms
and conditions of redemption; (iv) the liquidation preferences
payable on Preferred Stock in the event of involuntary or voluntary
liquidation; (v) sinking fund or other provisions, if any, for
redemption or purchase of Preferred Stock; (vi) the terms and
conditions by which Preferred Stock may be converted, if the
Preferred Stock of any series are issued with the privilege of
conversion; and (vii) voting rights, if any.
There are no shares of Preferred Stock issued or outstanding on
the date of this Prospectus and management has no present intent or
plan to issue any shares. Preferred Stock could be issued to deter
or delay a takeover which is unwanted by management or, in connection
with a business acquisition. (See "Risk Factors")
Warrants and Options
Warrants In connection with two private placements of its
securities pursuant to exemptions from the registration requirements
of the 1933 Act, the Company currently has outstanding 54,500
Warrants. Each Warrant entitles the holder thereof to purchase one Common
Share for the purchase price of $2.00 per share and is exercisable until
April 30, 1998 (the "Exercise Period"). Thereafter, the Warrants will
expire, become void and of no further force or effect, unless extended in
the sole discretion of the Company. The Company reserves the right to
modify the exercise price. All of the Company's Warrants have been issued
under a Warrant Agreement between the Company and Corporate Stock Transfer,
Inc. ("Transfer Agent"). In connection with the offering contemplated
herein, the Company has authorized and reserved for issuance up to 54,500
shares of Common Stock issuable upon exercise of the Warrants.
Any decision to extend the Exercise Period of the Warrants or
change the exercise price will rest in the discretion of the Company.
In the event a decision is made to extend the Exercise Period or
change the exercise price, such notice shall be delivered to holders
by written notice not less than thirty days prior to expiration of
the Exercise Period. Upon expiration of the Exercise Period, it is
anticipated that any market which might have existed for the Warrants
will terminate.
The Warrants contain the usual anti-dilution provisions so as to
avoid dilution of the equity which is represented by the underlying
Common Stock upon the occurrence of certain events, such as stock
dividends or splits. In the event of liquidation, dissolution, or
winding up of the Company, holders of the Warrants will not be
entitled to participate in the assets of the Company. Holders of
Warrants will have no voting, preemptive, liquidation or other rights
of a stockholder, and no dividends will be declared on the Warrants.
The Warrants are redeemable at the election of the Company upon
thirty days advance written notice to the holders at a redemption price
of $.0001 per Warrant. Notice of the Company's decision to redeem the
Warrants shall be given to the holders by regular mail at the last known
address maintained by the Company's Warrant Agent. The failure of
the holder of such Warrants to purchase the Common Stock within the
thirty day period will result in such holders' forfeiture of the
right to purchase the Common Stock underlying the Warrants.
38
<PAGE>
The Warrants may not be exercised unless the holder resides in a
state where such exercise will be permitted under applicable state
securities laws. The Company anticipates that the issuance of the
Common Stock underlying the Warrants will be permitted in each
jurisdiction wherein holder of the Warrants reside. However,
subsequent transfer of the Warrants may result in the inability of
the holder to exercise the Warrants.
Reports to Shareholders
Following this offering, the Company intends to file a
registration statement to register its Common Shares under Section 12
of the Securities Exchange Act of 1934, as amended (the "1934 Act").
As a result, upon effectiveness of such registration statement, the
Company will be required to file periodic reports with the Commission
and comply with the proxy solicitation rules contained in the 1934
Act. It is also anticipated that the Company will deliver annual
reports to shareholders containing audited financial statements of
the Company. The Company may also prepare and deliver quarterly and
other interim statements to shareholders as management deems
appropriate.
Transfer and Warrant Agent
The Company's transfer agent for the Common Stock and Warrants
is Corporate Stock Transfer, 370 17th Street, Suite 2350, Denver,
Colorado 80203, telephone number (303) 595-3300.
Dividends
No dividend has been declared or paid by the Company on its
shares of Common Stock since inception and no dividends on shares of
Common Stock are contemplated in the foreseeable future.
39
<PAGE>
PLAN OF DISTRIBUTION
Plan of Distribution
The Company is offering, through its officers and directors, on
a "best efforts" basis at an offering price of $2.00 per Common
Share a total of 304,500 Common Shares of the Company. Of that
amount, 250,000 Common Shares are being offered by the Company
for cash for a period of ninety days from the date of this Prospectus,
unless extended for an additional period not to exceed thirty days in
the aggregate. A commission will not be paid to the Company or its
officers and directors for sales effectuated by them. No one, including
the Company, has made any commitment to purchase any or all of the Common
Shares. Rather, the officers and directors will use their best efforts to
find purchasers for the Common Shares for a period of 90 days from the date
of this Prospectus, subject to an extension in the sole discretion of the
Company for an additional period not to exceed 30 days in the aggregate.
The remaining 54,500 Common Shares are being offered in
connection with the exercise of previously issued and outstanding
Warrants. These Common Shares will only be available for purchase by
those individuals and entities holding the previously issued and outstanding
Warrants which are exercisable up through and including April 30, 1998.
A commission will not be paid to the Company or its officers and directors
for sales effectuated in connection with the exercise of the Warrants.
(See- "PLAN OF DISTRIBUTION-Exercise of Warrants).
In either case, there is no minimum number of Common Shares or
sales proceeds which must be received to complete the Offering. As a
result, all proceeds will be immediately deposited in the Company's
bank account and available for all valid corporate purposes.
Purchasers in this Offering will not be entitled to a return of their
purchase price following receipt by the Company.
The Company anticipates making sale of Common Shares to persons whom it
believes may be interested or who have contacted the Company with interest
in purchasing the securities. The Company may sell Common Shares to such
persons if they reside in a state in which the Common Shares may be sold and
in which the Company is permitted to sell the Common Shares. The Company is
not obligated to sell Common Shares to any such person.
Officers, directors, present shareholders of the Company and
persons associated with them may be sold some of the Common Shares.
However, officers, directors, and their affiliates shall not be
permitted to purchase more than 20% of the Common Shares sold
hereunder and such purchases will be held for investment and not for
resale. In addition, no proceeds from this offering will be used to
finance any purchases by such persons.
Pricing the Offering
The offering price of the Common Shares was determined
arbitrarily by the Company. In arriving at the offering price, the
Company took into account such factors as the history and lack of
operation of the Company, its assets and anticipated expenses of
acquiring and maintaining the thoroughbreds and the current trading
price of the Common Shares. However, the offering price of the Common
Shares should not be utilized as an indication of value of the securities
or an assurance that purchasers will be able to resell these securities
for an amount equal to the offering price or any price in excess of that
amount. The exercise price of the Warrants was also arbitrarily determined
by the Company. The offering price of the Common Shares and exercise price
of the Warrants bears no necessary relationship to the Company's assets,
book value, lack of earnings, net worth or any other traditional
criterion of value.
40
<PAGE>
In as much as the Company is offering the Common Shares and an
underwriter was not retained for such purposes, the Company's
determination of the offering price and the exercise price of the
Warrants has not been determined by negotiation with an underwriter,
as is customary in most offerings. To the extent an underwriter has
not been involved in determining the offering price, subscribers are
subject to an increased risk that the price of the Company's
securities has been arrived at arbitrarily.
Exercises of Warrants
The 54,500 Common Shares which may be acquired upon exercise of
the Warrants, of which there can be no assurance, are being offered
by the Company on a "best efforts" basis. No commissions will be
paid to any person in connection with the exercise of the Warrants.
Any solicitations of the holders of the Warrants to exercise their
Warrants will be made only by the Company and will be accompanied or
preceded by the delivery of this Prospectus.
Each Warrant entitles the holder to purchase one Common Share at
an exercise price of $2.00 (the "Exercise Price") for a period up
through and including April 30, 1998. The Company has undertaken to
maintain the effectiveness of this Registration Statement pending
expiration of the exercise period. Persons wishing to exercise their
Warrants must present and surrender the Warrant to the Company at its
office or at the office of its transfer agent, Corporate Stock
Transfer, Inc., 370 17th Street, Denver, Colorado 80202, (303) 595-
3300, along with a duly executed Form of Election and accompanied by
payment of the Exercise Price for the number of shares specified in
that form, together with all applicable Federal and state taxes
including all transfer fees, if any. All payments must be received
prior to the termination of the exercise period, and Warrants not
exercised prior to termination will expire. The Warrants are
redeemable by the Company upon thirty days notice to the holder by
regular mail at the last known address maintained by the Company's
Transfer Agent. (See "DESCRIPTION OF SECURITIES- Warrants).
41
<PAGE>
LEGAL MATTERS
The legality of the securities of the Company offered hereby
will be passed on for the Company by Overton, Babiarz & Sykes, P.C.,
7720 East Belleview Avenue, Suite 200, Englewood, Colorado 80111,
legal counsel for the Company. Overton, Babiarz & Sykes, P.C. owns
fifteen thousand (15,000) Common Shares of the Company.
EXPERTS
The financial statements of the Company included herein and in
the Registration Statement have been examined by Kish, Leake &
Associates, P.C., independent certified public accountants, and are
included herein and in the Registration Statement in reliance upon
the report of such firm given on their authority as experts in
accounting and auditing.
INDEMNIFICATION
Colorado Revised Statutes, Section 7-3-101.5 permits the Company
to indemnify a person made or threatened to be made a party to a
proceeding by reason of the former or present official capacity of
the person with respect to the Company, against judgments, penalties,
fines, settlements and reasonable expenses, if such person (i) has
not been indemnified by another organization or employee benefit plan
with respect to the same acts or omissions; (ii) acted in good faith;
(iii) received no improper personal benefit, and statutory procedure
has been followed in the case of any conflict of interest by a
director; (iv) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (v) in the
case of acts or omissions occurring in the person's performance in
the official capacity of director or, for a person not a director, in
the official capacity of officer, committee member, employee or
agent, reasonably believed that the conduct was in the best interests
of the Company. In addition, Section 7-3-101.5 permits payment by
the Company, upon written request, of reasonable expenses in advance
of final disposition of the proceeding in certain instances. A
decision as to required indemnification is made by a disinterested
majority of the Board of Directors present at a meeting at which a
disinterested quorum is present, or by a designated committee of the
Board, by special legal counsel, by the shareholders or by a court.
As permitted by the Colorado Corporation Code, the Articles of
Incorporation of the Company eliminate the liability of the directors
of the Company for monetary damages arising from any breach of
fiduciary duties as a member of the Company's Board of Directors
(except as expressly prohibited by Colorado Corporation Code, Section
7-3-101.5).
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions,
the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy
as expressed in such Act and is therefore unenforceable.
42
<PAGE>
WALLSTREET RACING STABLES, INC.
FINANCIAL STATEMENTS
With Independent Auditors's Report
July 18, 1995 (Inception) Through June 30, 1996
And The Unaudited Nine Month Period Ended March 31, 1997
<PAGE>
WALLSTREET RACING STABLES, INC.
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Balance Sheet 2
Income Statement 3
Statement of Retained Earnings 4
Statement of Cash Flows 5
Notes to Financial Statements 6-9
<PAGE>
Independent Auditors' Report
We have audited the accompanying balance sheet of Wallstreet
Racing Stables, Inc., as of June 30, 1996, and the related
statements of income, shareholders' equity and cash flows for the
period July 18, 1995 (Inception) through June 30, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Wallstreet racing Stables, Inc. At June 30, 1996 and the
results of its operations and its cash flows for the period July
18, 1995 (Inception) through June 30, 1996 in conformity with
generally accepted accounting principles.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
May 20, 1997
<PAGE>
Wallstreet Racing Stables, Inc.
Balance Sheet
<TABLE>
Unaudited Audited
March June
Notes 31, 1997 30,1996
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $36,905 $3,433
Accounts Receivable 1 172 9,350
Stock Subscriptions Receivable 2 0 5,500
Prepaid Expenses 6,981 1,905
Total Current Assets 44,058 20,188
Property And Equipment
Broodmares 10,250 0
Racehorses 2 38,238 900
Total 48,488 900
Accumulated Depreciation (6,032) (225)
Net Property And Equipment 42,456 675
Other Assets - Long-Term Portion Of Deferred
Tax Asset 3 19,096 19,096
TOTAL ASSETS $105,610 $39,959
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities - Accounts Payable - Trade 17,513 10,816
Long-Term Liabilities 0 0
TOTAL LIABILITIES 17,513 10,816
SHAREHOLDERS' EQUITY 2
Preferred Stock - $.01 Par Value, 5,000,000
Shares Authorized -0- Shares (unaudited) At
March 31, 1997 -0- Shares At June 30, 1996
Issued And Outstanding 0 0
Common Stock - $.001 Par Value, 15,000,000
Shares Authorized 697,000 Shares (unaudited)
At March 31, 1997 And 638,500 Shares At
June 30, 1996 Issued And Outstanding 697 639
Capital Paid In Excess Of Par Value 1 149,394 90,952
Retained (Deficit) (61,994) (62,448)
TOTAL SHAREHOLDERS' EQUITY 88,097 29,143
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $105,610 $39,959
The Accompanying Notes Are An Integral Part Of These Financial Statements
</TABLE>
F - 2
<PAGE>
Wallstreet Racing Stables, Inc.
Statement Of Operations
<TABLE>
Unaudited Audited
Nine Month July 18,1995
Interim Period (Inception)
Ended March Through June
Notes 31, 1997 30,1996
<S> <C> <C> <C>
Revenue - Purses $104,802 0
Operating Expenses:
Boarding And Training 15,870 8,344
Commissions 4,575 0
Depreciation 5,807 4,288
Horse Transportation 2,391 599
Insurance 4,535 720
Jockey Fees 10,358 0
Legal And Accounting 6,320 5,325
Offering Costs 1 0 20,000
Office 5,750 1,813
Race Expenses 17,639 0
Rent 4 4,500 3,000
Telephone 2,352 653
Travel And Entertainment 19,375 6,110
Vet Expenses 4,215 4,000
Total Operating Expenses 103,687 54,852
Net Income (Loss) From Operations 1,115 (54,852)
Other Income (Expense):
Interest Income 299 0
Interest (Expense) (960) (9)
(Loss) On Sale Of Horse 0 (26,683)
Total Other Income (Expense) (661) (26,692)
Net Profit (Loss) Before Taxes 454 (81,544)
Tax Benefit 0 19,096
Net Profit (Loss) $454 ($62,448)
Weighted Average Common Shares Outstanding 662,875 503,775
Earnings Profit (Loss) Per Share 1 0.00 (0.12)
The Accompanying Notes Are An Integral Part Of These Financial Statements
</TABLE>
F - 3
<PAGE>
Wallstreet Racing Stables, Inc.
Cash Flow Statement
<TABLE>
Unaudited Audited
Nine Month July 18, 1995
Interim Period (Inception)
Ended March Through June
Notes 31, 1997 30,1996
<S> <C> <C> <C>
Net (Loss) $454 ($62,448)
Items Not Affecting Cash Flow:
Depreciation 1 5,807 225
Deferred Tax Benefit 3 0 (19,096)
(Increase) Decrease In Receivable 9,178 (9,350)
(Increase) In Prepaid Expenses (5,076) (1,905)
Increase In Accounts Payable 6,697 10,816
Net Cash Flows Provided From Operations 17,060 (81,758)
Cash Flows From Investing Activities:
Purchase Of Horses (47,588) 0
Net Cash Flows Provided From Investing (47,588) 0
Cash Flows Provided From Financing Activities:
Sale Of Common Stock 2 64,000 91,500
Deferred Offering Costs 1 0 (6,309)
Net Cash Flows Provided From Financing 64,000 85,191
Net Increase In Cash 33,472 3,433
Cash At Beginning Of Period 3,433 0
Cash At End Of Period $36,905 $3,433
Summary Of Non-Cash Investing And Financing Activities:
Horses Purchased From Related Parties For
Common Stock 2 0 $24,900
Stock Issued For Subscriptions
Receivable 2 0 $5,500
Stock Issued For Legal Services 2 0 $7,500
The Accompanying Notes Are An Integral Part Of These Financial Statements
</TABLE>
F - 4
<PAGE>
Wallstreet Racing Stables, Inc.
Unaudited Statement Of Shareholders Equity
<TABLE>
Number Of Number Of Capital Paid
Common Preferred Common In Excess Of Accumulated
Notes Shares Shares Stock Par Value (Deficit) Total
<S> <C> <C> <C> <C> <C> <C>
Balance At July 18, 1995
1, 2 0 0 $0 $0 $0 $0
Issuance Of Common Stock:
July 1995 For
Cash @ $.01
Per Share 500,000 0 500 4,500 5,000
August 1995 For
Cash @ $.10
Per Share 100,000 0 100 9,900 10,000
January/February
1996 For: Purchase
Race Horse @ $.50
Per Share 48,000 0 48 23,952 24,000
Legal Services @
$.75 Per Share 10,000 0 10 7,490 7,500
Purchase Race
Horse @ $.01125
Per Share 80,000 0 80 820 900
May 1996 Private
Offering For
Cash @ $1.00 Per
Share 50,500 0 51 50,449 50,500
Deferred Offering
Costs (6,309) (6,309)
February 1996
Returned And
Cancelled
Shares (150,000) 0 (150) 150 0
Net (Loss)
June 30, 1996 (62,448) (62,448)
Balance At
June 30, 1996 638,500 0 639 90,952 (62,448) 29,143
November 1996
Private Offering
For Cash @ $1.00
Per Share
(Unaudited) 58,500 58 58,442 58,500
Unaudited Net
Profit
March 31, 1997 454 454
Unaudited
Balance At
March 31, 1997 697,000 0 $697 $149,394 ($62,994) $88,097
The Accompanying Notes Are An Integral Part Of These Financial Statements
</TABLE>
F - 5
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1996
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
On July 18, 1995 Wallstreet Racing Stables, Inc. (the Company)
was incorporated under the laws of Colorado. The Company's
primary purpose is to engage in all phases of the thoroughbred
horse racing industry.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Depreciation
Race Horses are stated at cost and are depreciated over their
estimated economic lives ranging from 1 to 5 years depending on
their age when purchased. Brood mares are stated at cost and are
depreciated over their estimated economic lives ranging from 3 to
7 years depending on their age when purchased.
Deferred Offering Costs
In connection with the offering of its common shares, the Company
incurred offering costs consisting of legal, printing, and fees
totaling $20,000 for an unsuccessful public offering and $6,309
consisting of legal and printing for a successful private
offering. The costs are reflected on the balance sheet as
deferred offering costs until such time as the offering is
completed. Should the offering be unsuccessful, deferred offering
costs to date will be charged to expense. Therefore $20,000 has
been charged against expense and $6,309 reduced the offering
proceeds at June 30, 1996.
-6-
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1996
Statement of Cash Flows
For purposes of the statement of cash flows, the Company
considered demand deposits and highly liquid-debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Cash paid for interest during the year ended June 30, 1996 was $9.
Cash paid for income taxes for the year ended June 30, 1996 was $ -0-.
Accounts Receivable - Allowance for Doubtful Accounts
Bad debts are provided on the allowance method based on
historical experience and management's evaluation of outstanding
accounts receivable at the end of each year. The allowance at
June 30, 1996 was $ -0-.
Net Income (Loss) Per Common Stock
The net income (loss) per common share is computed by dividing
the net income (loss) for the year by the weighted average number
of common shares outstanding at June 30, 1996.
Revenue Recognition
Revenue is recognized when a purse from a race is earned.
Note 2 - Equity
The Company initially authorized 20,000,000 shares of stock.
5,000,000 shares of $.01 par value preferred stock and 15,000,000
shares of $.001 par value common stock.
In July 1995 the Company issued various officers and directors
500,000 shares of common stock for $5,000 cash or $.01 per share.
In February 1996, 150,000 of these shares were returned to the
Company and canceled. In August 1995, the Company issued 100,000
shares of common stock for $10,000 cash or $.10 per share. In
January and February 1996, the Company exchanged 48,000 shares of
stock valued at $24,000 or $.50 per share for part of the
purchase price of a racehorse from an entity owned by a related
party, 10,000 shares of common stock for legal services valued at
$7,500 or $.75 per share, and 80,000 shares of common stock
valued at $80,000 or $1.00 per share for a 15% ownership in a
race horse from an entity owned by a related party. However due
to APB 16, Interpretation #39 this transaction was booked at
historical cost, or $900.
In May 1996, the Company closed out a private offering in which
it sold 25,250 units and raised $50,500 less $6,309 in deferred
offering costs, each unit consisting of two shares of common
stock and one warrant exercisable within twelve months from the
date of the purchase of the unit to buy one share of common stock
for $2.00.
-7-
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1996
Note 3 - Income Taxes
The Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," (SFAS 109) effective
January 1, 1993. The statement requires that deferred income
taxes reflect the tax consequences on future years of differences
between the tax basis of assets and liabilities and their basis
for financial reporting purposes. In addition, SFAS 109 requires
the recognition of future tax benefits, such as net operating
loss carry forwards (NOLs), to the extent that realization of
such benefits are more likely than not. There was no cumulative
effect of this accounting change at the time of adoption.
The Company has an NOL of approximately $95,321 at June 30, 1996.
These carry forwards, which management expects will be fully
utilized, will expire in 2010.
The components of the deferred income tax assets and liabilities
arising under FASB Statement No. 109 were as follows:
Deferred Tax Assets
Book Over Tax Depreciation $161
Net operating loss carry forward 95,321
$ 95,482
Note 4 - Related Party Events
The Company leases office space and secretarial services from a
company owned by the Vice President for $500 per month on a month
to month basis. The facilities are located at 5525 Erindale
Drive, Suite 201, Colorado Springs, CO 80918.
The Company has purchased race horses from an entity owned by its
officers and directors. Common stock was issued as part of the
transaction to various individuals in the related entity.
-8-
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1996
Note 5 - Subsequent Events
The Company raised an additional $58,500 from the sale of a
second private placement which closed in February 1997. It sold
29,250 units, each unit consisting of two shares of common stock
and one warrant which can be exercised for $2.00 per share within
twelve months of the purchase of the unit.
The Company plans to file a form SB-2 with the Securities and
Exchange Commission and raise up to $500,000 by selling 250,000
shares of $.001 par value common stock for $2.00 on a best
efforts basis.
Note 6 - Unaudited Financial Information
The information furnished herein was taken from the books and
records of the Company without audit. The Company believes,
however, that it has made all adjustments necessary to reflect
properly the results of operations for the nine month interim
period ended March 31, 1997. The adjustments consist only of
normal reoccurring accruals. The results of operations for the
nine month interim period ended March 31, 1997, are not
necessarily indicative of the results to be expected for the year
ended June 30, 1997.
-9-
<PAGE>
WALLSTREET RACING STABLES, INC.
304,500 Common Shares
par value $.001
==============
PROSPECTUS
==============
Until September 23, 1997 (90 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or
not participating in the distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
June 20, 1997
<PAGE>
PART II
Information Not Required in Prospectus
Item 24. Indemnification of Officers and Directors
Under Section 7-109-102 of the Colorado Business Corporation Act
(the "Act") and Article IX of the Registrant's Articles of Incorporation
filed as Exhibit 3.1 to this Registration Statement, the Registrant's
directors and officers may be indemnified against certain liabilities
which they may incur in their capacities as such.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended (the "1933 Act") and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of
such issue.
Item 25. Other Expenses of Issuance and Distribution
All expenses of the offering, presently estimated not to exceed
$15,000 in the aggregate, are as follows:
<TABLE>
<S> <C>
S.E.C. Registration Fee $184.55
NASD Filing Fee -0-
Blue Sky Filing Fees
and Expenses 1,000*
Accounting Fees and Expenses 2,500*
Legal Fees and Expenses 7,500
Transfer Agent Fees
and Expenses 1,000*
Printing Fees and Expenses 500*
Miscellaneous Expenses 2,315.45
----------
TOTAL $15,000
==========
- ----------------
* Indicates estimates for purposes of this filing.
________________
</TABLE>
II - 1
<PAGE>
Item 26. Recent Sales of Unregistered Securities
Since July 19, 1995, the Company has made sales of its Common Shares
or other securities to the following persons for cash or other consideration
indicated, which sales were not registered under the 1933 Act.
<TABLE>
Number of
Common Date of Total
Name or Description of Purchasers Shares Issuance Consideration
<S> <C> <C> <C>
1. Raymond E. McElhaney(1) 250,000 7/19/95 $2,500
2. Bill M. Conrad(1) 250,000 7/19/95 $2,500
3. Ronald R. McGinnis 25,000 8/9/95 $2,500
4. Clifford Thygesen 25,000 8/9/95 $2,500
5. Wayne Bamford 25,000 8/9/95 $2,500
6. Dewey L. Williams 25,000 8/9/95 $2,500
7. Wallstreet Racing Stables III 48,000 1/1/96 $24,000
a Colorado corporation
8. Wallstreet Racing Stables III 80,000 1/1/96 $80,000
a Colorado corporation
9. Qualified Investors(2) 50,500 3/22/96 $50,500
10. Qualified Investors(2) 58,500 10/4/96 $58,500
11. Overton, Babiarz &
Sykes, P.C. 10,000 8/15/96 7,500
- --------------------------------------
1. In February of 1996, Messrs. McElhaney and Conrad each transferred
back to the Company 75,000 Common Shares for no consideration.
2. On March 22, 1996 and October 4, 1996, the Company offered units
consisting of Common Shares and Warrants to qualified investors pursuant
to the non-public offering exemption from registration with the Securities
and Exchange Commission provided by Regulation D, Rule 504 of the 1933 Act.
- --------------------------------------
</TABLE>
The Company commenced its initial capitalization in July, 1995 by
issuing 500,000 Common Shares to the individuals and for the consideration
set forth at Nos. 1-2 of the foregoing table. On August 9, 1995 the Company
issued an aggregate total of 100,000 Common Shares to the individuals and
for the consideration set forth at Nos. 3-6. On January 1, 1996 in
connection with the Company's purchase of Broker John, the Company issued a
total of 48,000 Common Shares as reflected in No. 7 above. For the purposes
of this transaction, the Common Shares were valued at $.50 per share. On
January 1, 1996 in connection with the Company's purchase of Da Hoss, the
Company issued a total of 80,000 Common Shares as reflected in No. 8 above.
For the purposes of this transaction, the Common Shares were valued at $1.00
per share. On March 22, 1996, the Company commenced a private placement of
its securities. As reflected in No. 9 above, the Company realized proceeds
from that offering of $50,500 representing the purchase of 50,500 Common Shares
of the Company's securities by certain individuals and entities determined
to be "qualified investors" as that term was defined in the Private Placement
Memorandum. On October 4, 1996, the Company commenced its second non-public
offering of securities. As reflected in No. 10 above, the Company realized
II- 2
<PAGE>
proceeds from that offering of $58,500 representing the purchase of 58,500
Common Shares of the Companies securities by certain individuals and entities
determined to be "qualified investors" as that term was defined in the
Private Placement Memorandum.
In connection with the non-public offerings of the Company's securities
referenced in Nos. 9 and 10 above, the Company relied on Regulation D, Rule
504 of the 1933 Act for an exemption from the registration requirements for
such securities. Each investor in these offerings was required to meet or
exceed certain conditions contained within the Private Placement Memorandums
which were included to ensure that the investor was qualified to purchase
such securities. The securities issued to said investors did not contain a
legend restricting the transfer of said shares.
In connection with the offerings not covered under Regulation D, Rule
504, the Company relied on exemptions from the registration requirements
contained at Section 4(2) and/or 3(b) of the 1933 Act. Each investor was able
to fend for himself in the transaction. The Company obtained a representation
from each investor of his intent to acquire the shares of the Company for the
purpose of investment only and not with a view toward resale or redistribution
thereof. Finally, each certificate was embossed with a legend restricting
transfer and the Company has issued stop transfer instructions with regard
to those shares.
The firm of Overton, Babiarz & Sykes, P.C. received 10,000 shares of
Common Stock in consideration for legal services rendered to the Company.
For the purposes of this transaction, the shares were considered to have been
issued for the sum of $.75 per share.
Item 27. Exhibits
The following is a complete list of exhibits filed or
incorporated as part of this Registration Statement.
1 Not applicable.
2 Not applicable.
3.1 Articles of Incorporation of the Company as filed July 18, 1995
with the Secretary of State of the State of Colorado.
3.2 Articles of Amendment to the Articles of Incorporation of the
Company as filed September 13, 1995 with the Secretary of
State of Colorado.
3.3 Bylaws of the Company.
3.4 Amendment to the Bylaws of the Company.
4.1 Non-Qualified Stock Option and Grant Plan dated August 1, 1995.
4.2 Form of Certificate for Common Shares, $.0001 par value per share.
II - 3
<PAGE>
4.3 Form of Warrant.
4.4 Form of Warrant Agreement between the Company and Corporate Stock
Transfer.
5* Opinion of Overton, Babiarz & Sykes, P.C., 7720 E. Belleview
Ave., Suite 200, Englewood, Colorado 80111, regarding the legality
of the securities registered under this Registration Statement.
6 Not applicable.
7 Not applicable.
8 Not applicable.
9 Not Applicable.
10 Purchase and Sale Agreement between the Company and Wallstreet
Racing Stables, III dated January 1, 1996.
10.1 Employment Agreement with Raymond E. McElhaney dated June 1, 1997.
10.2 Employment Agreement with William M. Conrad dated June 1, 1997.
11 Not applicable.
12 Not applicable.
13 Not applicable.
14 Not applicable.
15 Not applicable.
16 Not applicable.
21 Not applicable.
22 Not Applicable.
24.1* Consent of Overton, Babiarz & Sykes, P.C., counsel for the
Registrant, to the use of their opinion with regard to the legality
of the securities covered by the Registration Statement and to the
references to such firm in the Prospectus filed as part of the
Registration Statement is contained in such opinion as Exhibit 5
to this Registration Statement.
II - 4
<PAGE>
24.2 Consent of Kish, Leake & Associates, independent certified public
accountants for the Registrant.
25 Not applicable.
26 Not applicable.
27 Financial Data Schedule for audited period end June 30, 1996.
27.1 Financial Data Schedule for unaudited period end March 31, 1997.
28 Not applicable.
29 Not applicable.
- ------------------------------
* To be filed by amendment.
- ------------------------------
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended (the "1933 Act") and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
II - 5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2 and has duly caused
this Registration Statement or Amendment to be signed on its behalf by the
undersigned thereunto duly authorized in Colorado Springs, Colorado on
the 23rd day of June, 1997.
WALLSTREET RACING STABLES, INC.
By: /s/ Raymond E. McElhaney
Raymond E. McElhaney,
President, Chief Executive
Officer,Chief Financial
Officer and Chairman of the
Board of Directors
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement or Amendment thereto has been signed by the
following persons in the capacities and on the dates indicated.
Signatures
Title Date
/s/ Raymond E. McElhaney President, Chief Executive Officer,
Raymond E. McElhaney Chief Financial Officer and
Chairman of the Board of Directors
/s/ Bill M. Conrad Vice President, Secretary, Treasurer
Bill M. Conrad and Director
/s/ Ronald R. McGinnis Vice President-Corporate Development
Ronald R. McGinnis and Director
/s/ Clifford Thygesen Director
Clifford Thygesen
/s/ Wayne Bamford Director
Wayne Bamford
ARTICLES OF INCORPORATION
OF
WALLSTREET RACING STABLES, INC.
--------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
Incorporator, being a natural person of the age of eighteen years
or more, and desiring to form a body corporate under the laws of
the State of Colorado, does hereby sign, verify and deliver in
duplicate to the Secretary of State of the State of Colorado
these Articles of Incorporation:
ARTICLE I. Name. The Name of the Corporation is
WALLSTREET RACING STABLES, INC.
ARTICLE II. Duration. The Corporation shall have perpetual
duration.
ARTICLE III. Purposes. The nature of the business of the
Corporation and the objects and purposes and business thereof
proposed to be transacted, promoted or carried on are to engage
in any lawful act or activity for which corporations may be
organized under the Colorado Corporation Code.
ARTICLE IV. Capital Structure.
Section 1. Authorized Capital. The total number of
shares of all classes which the Corporation shall have authority
to issue is 20,000,000 of which 5,000,000 shall be Preferred
Shares, par value $.01 per share, and 15,000,000 shall be Common
Shares, par value $.001 per share, and the designations,
preferences, limitations and relative rights of the shares of
each class are as follows:
Section 2. Preferred Shares. The Corporation, by
resolution of its Board of Directors, may divide and issue the
Preferred Shares in series. Preferred Shares of each series when
issued shall be designated to distinguish them from the shares of
all other series. The Board of Directors is hereby expressly
vested with authority to divide the class of Preferred Shares
into series and to fix and determine the relative rights and
preferences of the shares of any such series so established to
the full extent permitted by these Articles of Incorporation and
the Colorado Corporation Code in respect to the following:
A. The number of shares to constitute such series,
and the distinctive designations thereof;
B. The rate and preference of dividends, if any, the
time of payment of dividends, whether dividends are
cumulative and the date from which any dividend shall
accrue;
C. Whether shares may be redeemed and, if so, the
redemption price and the terms and conditions of redemption;
D. The amount payable upon shares in event of
involuntary liquidation;
<PAGE>
E. The amount payable upon shares in event of
voluntary liquidation;
F. Sinking fund or other provisions, if any, for
the redemption or purchase of shares;
G. The terms and conditions on which shares may
be converted, if the shares of any series are issued
with the privilege of conversion;
H. Voting powers, if any; and
I. Any other relative rights and preferences of
shares of such series, including, without limitation,
any restriction on an increase in the number of shares
of any series theretofore authorized and any limitation
or restriction of rights or powers to which shares of
any future series shall be subject.
Section 3. Common Shares.
A. The rights of holders of Common Shares to
receive dividends or share in the distribution of
assets in the event of liquidation, dissolution or
winding up of the affairs of the Corporation shall be
subject to the preferences, limitations and relative
rights of the Preferred Shares fixed in the resolution
or resolutions which may be adopted from time to time
by the Board of Directors of the Corporation providing
for the issuance of one or more series of the Preferred
Shares.
B. The holders of the Common Shares shall be
entitled to one vote for each Common Share held by them
of record at the time for determining the holders
thereof entitled to vote.
ARTICLE V. Board of Directors. The business and affairs
of the Corporation shall be managed by the Board of Directors.
The number of directors constituting the Board of Directors shall
be fixed in the manner provided in the Bylaws of the Corporation,
subject to the limitation that the initial Board of Directors of
the Corporation shall consist of three persons. Those persons
shall serve as directors of the Corporation until the first
annual meeting of shareholders or until their successors shall
have been elected and qualified. The names and addresses of the
initial Board of Directors are as follows:
Raymond E. McElhaney Bill M. Conrad
5525 Erindale Drive, Suite 201 5525 Erindale Drive, Suite 201
Colorado Springs, Colorado 80918 Colorado Springs, Colorado 80918
2
<PAGE>
Ronald R. McGinnis
1901 New Street
Independence, Kansas 67301
In accordance with the Bylaws of the Corporation, the Board
of Directors may thereupon be divided into classes, each class to
be as nearly equal in number as possible, with the term of office
of directors of the first class to expire at the first annual
meeting of shareholders after their election, and the terms of
the successive classes expiring at successive annual meetings of
shareholders thereafter. At each annual meeting following such
classification and division of the members of the Board of
Directors, a number of directors equal to the number of
directorships in the class whose term expires at the time of such
meeting shall be elected to hold office for a term of years equal
to the number of classes, and such term shall expire at the
annual meeting held during the final year of the term.
ARTICLE VI. Powers of Board of Directors. The following
provisions are inserted for the management of the business and
for the conduct of the affairs of the Corporation, and its is
expressly provided that they are intended to be in furtherance
and not in limitation or exclusion of the powers conferred by the
statutes of the State of Colorado.
Section 1. The number of directors of the Corporation shall
be fixed from time to time by, or in the manner provided in, the
Bylaws, but in no case shall the number be less than three.
Section 2. The Board of Directors shall have the power from
time to time to fix and to determine and vary the amount of the
working capital of the Corporation and to direct and determine
the use and disposition of any surplus or net profits over and
above the capital as determined pursuant to, and subject to, the
provisions of the Colorado Corporation Code; and in its
discretion the Board of Directors may use and apply any such
surplus or accumulative profits in purchasing or acquiring bonds,
debentures, notes, or other obligations or securities of the
Corporation or shares of its own stock of any class so far as may
be permitted by law, to such extent and in such manner and upon
such terms as the Board of Directors shall deem expedient, but
any such bonds, debentures, notes, obligations, securities or
stock so purchased or acquired (together with any stock or
securities acquired in satisfaction of a debt or otherwise), may
be resold. Nothing herein contained, however, shall be held to
limit the general power of the Corporation to apply any other
funds or assets to the purchase or acquisition or retirement of
its stock, bonds, debentures, notes or other obligations or
securities.
Section 3. The Board of Directors, subject to the
applicable provisions of the Colorado Corporation Code, may from
time to time determine whether and to what extent, and at what
times and places and under what conditions and regulations the
accounts and books of the Corporation or any of them shall be
open to the inspection of the stockholder; and no stockholder
shall have any right to inspect any account, book or document of
the Corporation, except as conferred by law or as authorized by
the Board of Directors or by resolutions of the stockholders.
3
<PAGE>
Section 4. The books of the Corporation may be kept within
or without the State of Colorado at such place or places as may
be designated from time to time by the Board of Directors.
Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
Section 5. The Board of Directors may authorize and cause
to be executed mortgages, deeds of trust, pledges and liens upon
the real and personal property of the Corporation, without
limitation as to amount or otherwise.
Section 6. Except as otherwise provided by law and, subject
to any limitations contained in the Bylaws adopted by the holders
of the Corporation's Common Shares, the Board of Directors may,
by the favorable vote of a majority of the directors present at a
meeting at which a quorum is present, or as otherwise specified
in the Bylaws, adopt, amend, alter or repeal Bylaws from time to
time; Bylaws, including Bylaws adopted by the Board of Directors,
may also be altered, amended or repealed by the holders of the
Corporation's Common Shares entitled to vote thereon as specified
in the Bylaws.
Section 7. Special meetings of the stockholders of the
Corporation may be called by the Board of Directors, and shall be
called by the Corporation at the request of any shareholder or
group of shareholders holding not less than 10% of the then
outstanding Common Shares and at the request of such other
person or persons as may be authorized by the Bylaws.
Section 8. The Board of Directors may determine, from time
to time, the amount of compensation which shall be paid to its
members. The Board shall also have power, in its discretion, to
provide for and to pay directors rendering unusual or exceptional
services to the Corporation special compensation appropriate to
the value of such services as determined by the Board of
Directors from time to time.
Section 9. In addition to the powers and authorities
hereinbefore or by statute expressly conferred upon it, the Board
of Directors is hereby empowered to exercise all such powers and
to do all such acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the provisions of the
statutes of the State of Colorado, of these Articles of
Incorporation and of any Bylaws from time to time made by the
shareholders; provided, however, that no Bylaws so made shall
invalidate any prior act of the Board of Directors which would
have been valid if such Bylaws had not been made.
ARTICLE VII. Voting by Shareholders.
Section 1. Cumulative Voting. Cumulative voting shall not
be allowed in the election of directors of the Corporation and
every shareholder entitled to vote at such election shall have
the right to vote the number of shares owned by him for as many
persons as there are directors to be elected, and for whose
election he has a right to vote.
4
<PAGE>
Section 2. Denial of Preemptive Rights. No shareholder of
the Corporation shall by reasons of his holding shares of any
class or series have any preemptive or preferential rights to
purchase or subscribe to any shares of any class or series of the
Corporation now or hereafter to be authorized, or any notes,
debentures, bonds or other securities convertible into or
carrying options or warrants to purchase shares of any class or
series now or hereafter to be authorized, whether or not the
issuance of any such shares or notes, debentures, bonds or other
securities would adversely effect the dividend or voting rights
of such shareholder, other than such rights, if any, as the Board
of Directors, in its discretion from time to time, may grant, and
at such price as the Board of Directors, in its discretion, may
fix; and the Board of Directors, if otherwise authorized by the
provisions of these Articles of Incorporation may issue shares of
any class or series of the Corporation or any notes, debentures,
bonds or other securities convertible into or carrying options or
warrants to purchase shares of any class or series, without
offering any such shares of any class or series either in whole
or in part to the existing shareholders of any class or series.
Section 3. Majority Vote. When, with respect to any
action to be taken by the shareholders of the Corporation, the
Colorado Corporation Code requires the vote or concurrence of the
holders of greater than a majority of the outstanding shares, or
of any class or series entitled to vote thereon, any and every
such action shall be taken, notwithstanding the requirements of
the Colorado Corporation Code, by the affirmative vote or
concurrent of the holders of a majority of the outstanding
shares, or of any class or series entitled to vote thereon.
ARTICLE VIII. Right of Directors to Contract with
Corporation.
Section 1. No contract or other transaction between the
Corporation and one or more of its directors or any other
corporation, firm, association or entity in which one or more of
the directors of the Corporation are directors or officers or are
financially interested, shall be either void or voidable solely
because such directors are present at the meeting of the Board of
Directors or a committee thereof which authorizes or approves
such contract or transaction or solely because their votes are
counted for such purpose if:
A. The fact of such relationship or interest is
disclosed or known to the Board of Directors or
committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent sufficient
for that purpose without counting the votes or consents
of the interested directors; or
B. The fact of such relationship or interest is
disclosed or known to the shareholders entitled to vote
and they authorize, approve or ratify such contract or
transaction by vote or written consent; or
C. The contract or transaction is fair and
reasonable to the Corporation.
5
<PAGE>
Section 2. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or a committee thereof which authorizes, approves or
ratifies such contract or transaction.
ARTICLE IX. Indemnification of Officers, Directors and
Others. The Board of Directors of the Corporation shall have the
power to:
Section 1. Indemnify any director, officer, employee or
agent of the Corporation to the fullest extent permitted by the
Colorado Corporation Code as presently existing or as hereafter
amended.
Section 2. Authorize payment of expenses (including
attorney's fees) incurred in defending a civil or criminal
action, suit or proceeding in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay
such amount unless it is ultimately determined that he is
entitled to be indemnified by the Corporation as authorized in
this Article IX.
Section 3. Purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of
the Corporation or who is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and
incurred by him in any such capacity or arising out of his status
as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this
Article IX.
The indemnification provided by this Article IX shall not be
deemed exclusive of any other rights to which those indemnified
may be entitled under these Articles of Incorporation, and
Bylaws, agreement, vote of shareholders or disinterested
directors or otherwise, and any procedure provided for by any of
the foregoing, both as to action in his official capacity and as
to action in another capacity while holding such office, shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE X. Corporate Opportunity. The officers,
directors and other members of management of this Corporation
shall be subject to the doctrine of "corporate opportunities"
only insofar as it applies to business opportunities in which
this Corporation has expressed an interest as determined from
time to time by this Corporation's Board of Directors as
evidenced by resolutions appearing in the Corporation's minutes.
Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the
attention of the officers, directors, and other members of
management of this Corporation shall be disclosed promptly to
this Corporation and made available to it. The Board of
Directors may reject any business opportunity presented to it and
thereafter any officers, directors or other member of management
may avail himself of such opportunity. Until such time as this
Corporation, through its Board of Directors, has designated an
area of interest, the officers, directors and other members of
management of this Corporation shall be free to engage in such
areas of interest on their own and this doctrine shall not limit
the right of any officer, director or other member of management
of this Corporation to continue a business existing prior to the
time that such area of interest is designated by the Corporation.
This provision shall be construed to release any employee of this
Corporation (other than an officer, director or member of
management) from any duties which he may have to this
Corporation.
6
<PAGE>
ARTICLE XI. Limitations on Director Liability. To the
fullest extent permitted by the Colorado Corporation Code as the
same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as
a director, so long as such director acted in good faith.
ARTICLE XII. Powers and Limitations. The powers and
limitations of the Corporation shall be those set forth by the
Colorado Corporation Code, under which this Corporation is
formed.
ARTICLE XIII Registered Office and Registered Agent. The
principal and registered office of the Corporation is 5525 Erindale Drive,
Suite 201, Colorado Springs, Colorado 80918; the name of the
registered agent of the Corporation at such address is Raymond E.
McElhaney.
ARTICLE XIV. Incorporator. The name and address of the
Incorporator is as follows:
Raymond E. McElhaney 5525 Erindale Drive, Suite 201
Colorado Springs, Colorado 80918
ARTICLE XV. Rights to Amend, Alter, Change or Repeal.
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation
in the manner now or hereinafter prescribed herein or by statute,
and all rights conferred upon shareholders herein are granted
subject to this reservation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 13th. day of July, 1995.
/s/ Raymond E. McElhaney
__________________________________
Raymond E. McElhaney, Incorporator
STATE OF COLORADO )
)ss.
COUNTY OF ARAPAHOE )
The undersigned, a Notary Public, hereby certifies that on
this 13th. day of July, 1995, personally appeared Raymond E. McElhaney,
who, being by me first duly sworn, declared that he is the person who signed
the foregoing document as Incorporator, and that the statements therein
contained are true.
7
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 13th. day of July, 1995.
Witness my hand and official seal.
My commission expires: 12-15-98
/s/
___________________________________
Notary Public
CONSENT OF REGISTERED AGENT
The undersigned, hereby certifies that on this 13th. day
of July, 1995, does consent to act as Registered Agent for Wallstreet Racing
Stables, Inc.
/s/ Raymond E. McElhaney
____________________________________
Registered Agent
8
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
WALLSTREET RACING STABLES, INC.
Pursuant to the provisions of the Colorado Business
Corporation Act, the undersigned Corporation adopts the following
Articles of Amendment to the Articles of Incorporation:
FIRST: The name of the Corporation is Wallstreet Racing
Stables, Inc.
SECOND: The following amendment to the Articles of
Incorporation was adopted by the stock holders of the Corporation
on August 16, 1995, in the manner prescribed by the Business
Corporation Act. The number of shares voted for the amendment
was sufficient for approval.
THIRD: The text of the amendment is as follows:
A new section 4, entitled "Repurchase of Stock" is hereby
added to Article IV, which section shall read as follows:
Any person owning, holding, purchasing or otherwise
acquiring equity securities of the Corporation, whether
shares of Common Stock or Preferred Stock shall be
subject to the following restrictions:
A. Should the racing commission of any state or
jurisdiction determine that a holder or beneficial
owner of the Corporation's equity securities is
required to be licensed and such person or entity shall
fail or refuse to become licensed within 60 days of
such determination, or should the Board of Directors of
the Corporation conclude for just cause that the status
of any person or entity as a stockholder of the
Corporation jeopardizes its license or application for
license, the Corporation shall have the right and
option to acquire such person's shares of the
Corporation at a price equal to the following amount:
i. In the event the Corporation's stock is
listed in Nasdaq at the time of election, the
purchase price shall be equal to the mean
between the closing bid and asked prices for
the stock on the date immediately preceding
the date notification is received by such
stockholder of the Corporation's option to
acquire his capital stock;
ii. In the event the Corporation's stock is
listed or quoted in any other recognized
medium, such as the OTC BULLETIN BOARD or
"pink sheets" maintained by the member of the
NASD, the purchase price shall be equal to
the last sales price for the Company's stock
on the date immediately preceding receipt of
notice by the stockholder;
<PAGE>
iii. In the event no recognized medium for
quotation or trading exists for the stock,
the purchase price shall be equal to the
purchase price paid by the investor, as
evidenced by reasonably acceptable evidence
including canceled checks, wire transfer or
evidence other of consideration paid.
B. The Corporation shall give notice of its desire to exercise
its option to acquire stock in accordance with the foregoing
provision in writing to the last known address of the
stockholder, as listed in the stock transfer records of the
Corporation or maintained by the Corporation's transfer agent.
Such notice shall state that the stockholder shall have 15 days
to tender a certificate representing the stock to the Corporation
at its principal place of business. Immediately upon receipt of
the certificate, Corporation shall deliver a check payable to the
stockholder in the amount determined in subsection A above.
C. In the event any stockholder shall refuse to comply with the
determination of the Corporation to exercise its option, any
shares owned by that stockholder shall become automatically null
and void, shall be canceled on the books and records of the
Corporation, and the Corporation shall deliver stop transfer
instructions to its transfer agent restricting transfer of the
shares. Until such captial stock is owned by persons found by
the respective racing commissions to be suitable to own them, the
Corporation shall not be required or permitted to pay any
dividend or interest with regard to the outstanding stock and the
holder of such capital stock shall not be entitled to vote on any
matter as the holder of voting securities or other voting
interests, and such voting securities shall not for any purposes
be included in the voting securities of the Corporaiton in time
to vote.
D. Any person or group acquiring shares of the Corporation's
capital stock consents to the initial and continuing obligation
to provide personal, background and financial information to the
applicable racing commission and agrees to respond truthfully to
questions from such racing authorities in accordance with the
provisions of applicable laws and regulations.
E. A legend shall be placed on each certificate representing
capital stock of the Corporation setting forth the foregoing
restrictions.
FOURTH: With the foregoing exceptions, the Articles of
Incorporation shall remain unchanged.
Dated this 16th. of August, 1995.
WALLSTREET RACING STABLES, INC.
By: /s/ Raymond E. McElhaney
-------------------------------
Raymond E. McElhaney, President
By: /s/ Bill M. Conrad
-------------------------------
Bill M. Conrad, Secretary
2
BYLAWS
OF
WALLSTREET RACING STABLES, INC.
____________________
ARTICLE I
Office
The principal office of the Corporation in the State of
Colorado shall be located at 5525 Erindale Drive, Suite 201,
Colorado Springs, Colorado 80918, and thereafter at such location
as the Board of Directors may determine.
The Corporation may have such other offices, either within
or without the State of Colorado, as the Board of Directors may
determine or as the affairs of the Corporation may require from
time to time.
The Corporation shall have and continuously maintain in the
State of Colorado a registered office, and a registered agent
whose office is identical with such registered office as required
by the Colorado Corporation Code.
ARTICLE II
Stockholders' Meetings
Section 1. Annual Meetings.
A. Time and Place. The Annual Meeting of the
Stockholders of the Corporation, commencing with the year of
incorporation, shall be as determined by the Board of Directors
on a date not less frequent than once every 365 days. If said
day is a legal holiday, the meeting shall be held on the next
succeeding day not a legal holiday.
B. Purpose of Annual Meeting. The business to be
transacted at such Annual Meeting shall be the election of
Directors and such other business as shall be properly brought
before the meeting.
C. Alternate Election Date. If the election of
Directors shall not be held on the day designated for the Annual
Meeting, or at the designated date upon adjournment of such
meeting, the Board of Directors shall call a Special Meeting of
the Stockholders as soon as conveniently possible thereafter. At
such meeting, the election of Directors shall take place, and
such election and any other business transacted there at shall
have the same force and effect as at an Annual Meeting duly
called and held.
<PAGE>
D. Notice. Written notice at the address last shown
on the books of the Corporation stating the place, day and hour
of the meeting, and in the case of a Special Meeting the purpose
for which the meeting is called, shall be delivered not less than
ten (10) days nor more than fifty (50) days before the date of
the meeting, either personally or by mail at the direction of the
President, Secretary or other officer or person calling the
meeting; except that if the authorized shares of the Corporation
are to be increased, at least thirty (30) days notice shall be
given.
Section 2. Special Meetings. Special Meetings of the
Stockholders may be called by the President, Board of Directors
or by the holders of at least ten percent (10%) of the stock
entitled to vote at such meeting.
Section 3. Waiver of Notice. A Stockholder may waive the
notice of meeting by attendance, either in person or by proxy, at
the meeting, or by so stating in writing either before or after
such meeting. Attendance at a meeting for the express purpose of
objecting that the meeting was not lawfully called or convened
shall not, however, constitute a waiver of notice. Except where
otherwise required by law, notice need not be given of any
adjourned meeting of the Stockholders.
Section 4. Quorum. A quorum at all meetings of
Stockholders shall consist of a majority of the Shares entitled
to vote (of record), represented in person or by proxy.
Section 5. Closing of Transfer Books; Record Date. In
order to determine the Stockholders of record of the Corpora
tion's stock who are entitled to notice of meetings, to vote at a
meeting or adjournment thereof, and to receive payment of any
dividend, or to make a determination of the Stockholders of
record for any other proper purpose, the Board of Directors of
the Corporation may order that the Stock Transfer Books be closed
for a period not to exceed fifty (50) days. If the purpose of
such closing is to determine who is entitled to notice of a
meeting and to vote at such meeting, the Stock Transfer Books
shall be closed for at least ten (10) days preceding such
meeting.
A. Record Date. In lieu of closing the Stock
Transfer Books, the Board of Directors may fix a date as the
record date for such determination of Stockholders, such date in
any case to be not more than fifty (50) days prior to the date of
action which requires such determination, nor in the case of a
Stockholders' meeting, not less than ten (10) days in advance of
such meeting.
B. Alternate Record Date. If the Stock Transfer
Books are not closed and no record date is fixed for such
determination of the Stockholders of record, the date on which
notice of the meeting is mailed or on which the resolution of the
Board of Directors declaring a dividend is adopted, as the case
may be, shall be the record date for such determination of
Stockholders.
C. Adjournment. When a determination of Stockholders
entitled to vote at any meeting has been made, as provided in
this Section, such determination shall apply to any adjournment
of such meeting.
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Section 6. Presiding Officer. Meetings of the Stockholders
shall be presided over by the President.
Section 7. Proxies. At all meetings of Stockholders, a
Stockholder may vote by proxy executed in writing by a Stock
holder or Stockholder's duly authorized attorney-in-fact. Such
proxies shall be filed with the Secretary of the Corporation
before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Section 8. Voting of Shares by Stockholders. Neither
treasury shares, nor shares of its own stock held by the
Corporation in a fiduciary capacity, nor shares held by another
Corporation if a majority of the shares entitled to vote for the
election of Directors of such other Corporation is held by this
Corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares at any given
time.
Section 9. Informal Action by Stockholders. Any action
required to be taken at a meeting of the Stockholders or any
other action which may be taken at a meeting of the Stockholders
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the Stock
holders entitled to vote with respect to the subject matter
thereof. Such consent shall have the same force and effect as a
unanimous vote of the Stockholders and may be stated as such in
any documents filed with the Secretary of State of Colorado under
the Colorado Corporation Code.
Section 10. Presumption of Assent. A Stockholder of the
Corporation who is present at a meeting of the Stockholders at
which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless such Stockholder's
dissent shall be entered in the Minutes of the meeting or unless
such Stockholder shall have filed written dissent to such action
with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by certified
mail to the Secretary of the Corporation immediately following
the adjournment of the meeting. Such right to dissent shall not
apply to a Stockholder who voted in favor of such action.
ARTICLE III
Directors
Section 1. Number. The property, affairs and business of
the Corporation shall be managed by a Board of Directors of not
less than three (3) persons as shall be fixed by the Board of
Directors. Except as hereinafter provided, Directors shall be
elected at the Annual Meeting of the Stockholders and each
Director shall serve until the next annual meeting of
shareholders or his resignation or removal and until his
successor shall be elected and qualify.
Section 2. Increase in Numbers. The number of Directors
may be increased or decreased from time to time by a majority
vote of the whole Board of Directors, provided however, that no
vote to decrease the number of Directors shall have the effect of
shortening the term of any incumbent Director.
3
<PAGE>
Section 3. Qualification. Directors need not be Stock
holders of the Corporation.
Section 4. Quorum. Not less than two-thirds (2/3) of the
Directors in office shall be necessary to constitute a quorum for
the transaction of business. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority
of those present may adjourn the meeting without further notice,
from time to time, until a quorum shall have been obtained.
Section 5. Vacancies. Any Director may resign at any time
by giving written notice to the President or to the Secretary of
the Corporation. Such resignation shall take effect at the time
specified therein except such resignations as shall be submitted
effective retroactively, which shall be effective when received.
Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Any
Director may be removed at any time in the manner provided in the
Colorado Corporation Code. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of the Stock
holders, or by the remaining Directors, though less than a
quorum, or by a sole remaining Director. A Director elected to
fill a vacancy shall be elected for the unexpired term of such
Director's predecessor in office. Any Directorship to be filled
by the affirmative vote of a majority of Directors then in office
or by an election at an Annual Meeting or at a Special Meeting of
Stockholders called for that purpose, and a Director so chosen
shall hold office until the next Annual meeting of Stockholders
and thereafter until such Director's successor shall have been
elected and qualified.
Section 6. Meetings. Regular meetings of the Board of
Directors shall be held at such times as are fixed from time to
time by resolution of the Board. Special Meetings may be held at
any time upon call of the President, or a majority of Directors
serving as members of the Board of Directors. A meeting of the
Board of Directors shall be held without notice immediately
following the Annual Meeting of the Stockholders. Notice need
not be given of regular meetings of the Board of Directors held
at any time without notice if all the Directors are present, or
if before the meeting those not present waive such notice in
writing. Notice of a meeting of the Board of Directors need not
state the purpose of nor the business to be transacted at such
meeting.
Section 7. Presumption of Assent. A Director of the
Corporation who is present at a meeting of the Board of Directors
at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless such
Director's dissent shall be entered in the Minutes of the meeting
or unless such Director shall have filed written dissent to such
action with the person acting as the Secretary of the meeting
before the adjournment thereof or shall forward such dissent by
certified mail to the Secretary of the Corporation immediately
following the adjournment of the meeting. Such right to dissent
shall not apply to a Director who voted in favor of such action.
Section 8. Removal. At any meeting of Stockholders, any
Director or Directors may be removed from office, without
assignment of any reason therefor, by a majority vote of the
Stockholders. When any Director or Directors are removed, new
Directors may be elected at the same meeting of Stockholders for
the unexpired term of the Director or Directors to be removed.
If the Stockholders fail to elect persons to fill the unexpired
term or terms of the Director or Directors removed, such un
expired terms shall be considered vacancies on the Board to be
filled by the remaining Directors.
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Section 9. Informal Action by Directors. Any action
required to be taken at a meeting of the Board of Directors or
any other action which may be taken at a meeting of the Board of
Directors may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the
Directors entitled to vote with respect to the subject matter
thereof. Such consent shall have the same force and effect as a
unanimous vote of the Directors and may be stated as such in any
documents filed with the Secretary of State of Colorado under the
Colorado Corporation Code.
Section 10. Compensation. Directors and members of any
committee of the Board of Directors shall be entitled to such
reasonable compensation for their services as Directors and
members of any such committee as shall be fixed from time to time
by resolution of the Board of Directors, and shall also be
entitled to reimbursement for any reasonable expenses incurred in
attending such meetings. The compensation of Directors may be on
such basis as is determined in the resolution of the Board of
Directors. Any Directors receiving compensation under these
provisions shall not be barred from serving the Corporation in
any other capacity and receiving reasonable compensation for such
other services.
Section 11. Committees. The Board of Directors, by a
resolution or resolutions adopted by a majority of the members of
the whole Board, may appoint an executive committee and such
other committees as it may deem appropriate. Each such committee
shall consist of at least two (2) members of the Board of
Directors. Each committee shall have and may exercise such
powers as shall be conferred or authorized by the resolution
appointing it and as otherwise limited by Colorado law. A
majority of any such committee may determine its action and may
fix the time and place of its meetings, unless provided otherwise
by the Board of Directors. The Board of Directors shall have the
power at any time to fill vacancies in, to change the size of
membership of and to discharge any such committee.
A. Committee to Keep Written Records. Each such
committee shall keep a written record of its acts and proceedings
and shall submit such record to the Board of Directors at each
regular meeting thereof and at such other times as requested by
the Board of Directors.
B. Failure to Keep Written Records. Failure to
submit such records, or failure of the Board to approve any
action indicated therein will not, however, invalidate such
action to the extent it has been carried out by the Corporation
prior to the time the record of such action was, or should have
been, submitted to the Board of Directors as herein provided.
Section 12. Director Voting. At all meetings of the Board
of Directors, each Director present shall have one (1) vote,
irrespective of the number of shares of stock, if any, which such
Director may hold.
5
<PAGE>
Section 13. Majority. The action of a majority of the
Directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors with respect to
regularly conducted business affairs. Any action authorized, in
writing, by all of the Directors entitled to vote thereon and
filed with the minutes of the Corporation shall be the act of the
Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the
Board.
ARTICLE IV
Officers
Section 1. Election and Term of Office. The Officers of
the Corporation shall be elected by the Board of Directors
annually at the first meeting of the Board held after each Annual
Meeting of the Stockholders. If the election of the Officers
shall not be held at such meeting, such election shall be held as
soon thereafter as conveniently may occur. Each Officer shall
hold office until the first of the following to occur: until
such Officer's successor shall have been duly elected and shall
have qualified; or until such Officer's death; or until such
Officer shall resign; or until such Officer shall have been
removed in the manner herein provided. The Officers of the
Corporation shall be a President, Secretary, Treasurer and one
(1) or more Vice-Presidents, Assistant Secretaries or Assistant
Treasurers, at the discretion of the Board of Directors. In
addition, there may be a Chairman of the Board of Directors and
such subordinate Officers as the Board of Directors may deem
necessary.
Section 2. Removal. Any Officer or agent or employee of
the Corporation may be removed by a majority vote of the Board of
Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of any Officer or agent
shall not of itself create contract rights.
Section 3. Vacancies. Any vacancy in an office from any
cause may be filled for the unexpired portion of the term by the
Board of Directors.
Section 4. Duties of President. The President shall be
the chief executive and operating Officer of the Corporation and
shall exercise detailed supervision over the business of the
Corporation and over its several Officers, subject, however, to
the control of the Board of Directors. In the absence of a
Chairman, the President shall preside at all meetings of the
Stockholders and Directors, and in general perform all duties
incident to the office of President and such other duties as from
time to time may be assigned to the President by the Board of
Directors.
The President shall execute all deeds, conveyances,
deeds of trust, bonds and other contracts requiring a seal, under
the seal of the Corporation, except where required or permitted
by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the
Board of Directors to some Officer or agent of the Corporation.
Section 5. Duties of Secretary. The Secretary shall:
A. Keep the minutes of the meeting of the Stockholders and
of the Board of Directors in books provided for that purpose.
6
<PAGE>
B. Disseminate all notices in accordance with the provisi
ons of these Bylaws or as required by law.
C. Maintain custody of the seal of the Corporation and
affix the seal to all stock certificates prior to their issuance
and to all other documents, the execution of which on behalf of
the Corporation under its seal is duly authorized and in accor
dance with the provisions of these Bylaws.
D. Keep or cause to be kept records relating to the
transfer of stock in such manner as to show at any time the
amount of stock of the Corporation issued and outstanding, the
manner in which and the time when such stock was paid for, the
names and addresses of the holders of record.
E. Execute certificates of stock of the Corporation with
the President.
F. Maintain all books, reports, statements, certificates
and all other documents of the Corporation required by law in a
proper fashion.
G. Perform all duties incident to the office of Secretary
and such other duties as, from time to time, may be assigned by
the Board of Directors or by the President.
Section 6. Duties of Treasurer. The Treasurer shall:
A. Have charge and custody of, and be responsible for, all
funds and securities of the Corporation.
B. Render a statement of the condition of the finances of
the Corporation from time to time and at the specific request of
the Board of Directors.
C. Receive and give receipts for monies due and payable to
the Corporation from any source whatsoever.
D. Perform all duties incident to the office of Treasurer,
and such other duties as from time to time may be assigned by the
Board of Directors or by the President. The Treasurer may be
required to give bond for the faithful performance of Treasurer's
duties in such sum and with such surety as may be determined by
the Board of Directors.
Section 7. Duties of Vice-President. The Vice-
President(s), if appointed in the discretion of the Board of
Directors, shall perform such duties as are incident to their
offices, or are properly required of them by the Board of
Directors or are assigned to them by the Articles of Incorpora
tion or these Bylaws.
Section 8. Duties of Assistant Secretaries, Assistant
Treasurers and Other Subordinate Officers. Assistant
Secretaries, Assistant Treasurers, and other subordinate Officers
appointed by the Board of Directors shall exercise such powers
and perform such duties as may be delegated to them by the
resolutions appointing them, or by subsequent resolutions adopted
from time to time.
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<PAGE>
Section 9. Salaries. The salaries of all Officers of the
Corporation shall be fixed by the Board of Directors. No Officer
shall be ineligible to receive such salary by reason of the fact
that he is also a Director of the Corporation and receiving
compensation therefor.
Section 10. Checks and Endorsements. All checks and drafts
upon the funds to the credit of the Corporation in any of its
depositories shall be signed by such of its Officers or agents as
shall from time to time be determined by resolution of the Board
of Directors which may provide for the use of signatures under
specific conditions, and all notes, bills, receivables, trade
acceptances, drafts and other evidences of indebtedness payable
to the Corporation shall, for the purpose of deposit, discount,
or collection be endorsed by such Officers or agents of the
Corporation or in such manner as shall from time to time be
determined by resolution of the Board of Directors.
ARTICLE V
Stock
Section 1. Certificates. The shares of stock shall be
represented by consecutively numbered certificates signed in the
name of the Corporation by its President and the Secretary and
shall be sealed with the seal of the Corporation, or with a
facsimile thereof. The signatures of the Corporation's Officers
on such certificate may also be a facsimile engraved or printed
if the certificate is countersigned by the transfer agent, or
registered by a registrar. In the event any Officer who has
signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such before the certificate
is issued, it may be issued by the Corporation with the same
effect as if such Officer had not ceased to be an officer at the
date of its issue. Certificates of stock shall be in such form
consistent with law as shall be prescribed by the Board of
Directors. No certificate shall be issued until the shares
represented thereby are fully paid.
Section 2. Consideration for Shares. Shares shall be
issued for such consideration, expressed in dollars, as shall be
fixed from time to time by the Board of Directors. Treasury
shares shall be disposed of for such consideration expressed in
dollars as may be fixed from time to time by the Board. Such
consideration may consist in whole or in part of money, other
property, tangible or intangible, or in labor or services
actually performed for the Corporation, but neither promissory
notes nor future services shall constitute payment or part
payment for shares, unless permitted by the laws of the State of
Colorado.
Section 3. Lost, Destroyed or Stolen Certificates. No
certificates for shares of stock in the Corporation shall be
issued in place of any certificate alleged to have been lost,
destroyed or stolen except on production of evidence satisfactory
to the Board of Directors of such loss, destruction or theft; and
if the Board of Directors so requires, upon the furnishing of an
indemnity bond in such amount and with such terms and such surety
as the Board of Directors may, in its discretion, require.
Section 4. Transfer of Shares.
8
<PAGE>
A. Upon surrender to the Corporation of a certificate
of stock duly endorsed or accompanied by proper evidence of
succession, assignment, or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such
transfer of stock shall be entered on the stock book of the
Corporation which shall be kept either at the offices of the
Corporation's legal counsel, at the Corporation's principal
office or by its registered duly appointed agent.
B. The Corporation shall be entitled to treat the
holder of record of any share of stock as the holder in fact
thereof, and, accordingly, shall not be bound to recognize any
equitable or other claim to interest in such share on the part of
any other person whether or not it shall have express or other
notice thereof, except as may be required by the law of Colorado
ARTICLE VI
Bank Depositories
The Board of Directors shall select banks or other deposito
ries in which all funds of the Corporation not otherwise employed
shall, from time to time, be deposited to the credit of the
Corporation.
ARTICLE VII
Corporate Seal
The corporate seal of the Corporation shall consist of a
circular imprint bearing around the outside rim the name of the
Corporation and the word "Colorado" and in the center shall be
inscribed the word "Seal".
ARTICLE VIII
Amendment of Bylaws
Section 1. By Stockholders. All Bylaws of the Corporation
shall be subject to alteration or repeal and new By-laws may be
made by the requisite vote of Stockholders, a quorum being
present in person or by proxy, provided that the notice or waiver
of notice of such meeting shall have summarized or set forth in
full therein the proposed amendment.
Section 2. By Directors. The Board of Directors shall have
power to make, adopt, alter, amend or repeal, from time to time,
these By-laws of the Corporation.
9
<PAGE>
ARTICLE IX
Fiscal Year
The Fiscal year end of the Corporation shall be determined
by the Board of Directors.
/s/ Bill M. Conrad
--------------------------
Bill M. Conrad, Secretary
10
AMENDMENT
AMENDMENT to the Bylaws of WALLSTREET RACING STABLES, INC.,
a corporation organized and existing under the laws of the State
of Colorado, adopted this 1st. day of June, 1996.
Article III, Section 1 is hereby amended to read in its
entirety as follows:
Section 1. Number. The property, affairs and business
of the Corporation shall be managed by a Board of Directors of
not less than three (3) persons as shall be fixed by the Board of
Directors. Except as hereinafter provided, Directors shall be
elected at the Annual Meeting of Shareholders and each Director
shall serve until the next Annual Meeting of Shareholders or his
resignation or removal and until his successor shall be elected
and qualified.
Section 1.1 Classes of Directors. The Board of
Directors shall be divided into three classes; Class I, Class II
and Class III. Classes I and II shall consist of two members and
Class III shall consist of one member. Those persons elected to
serve in Class I shall serve a term which shall expire at the
first Annual Meeting of Shareholders after their election or
their resignation or removal and until such time as their
successor shall be duly elected and qualified. Those persons
elected to serve in Class II shall serve a term which shall
expire at the second Annual Meeting of Shareholders after their
election or their resignation or removal and until such time as
their successor shall be duly elected and qualified. The
individual elected to serve in Class III shall serve a term which
shall expire at the third Annual Meeting of Shareholder after
his/her election or resignation or removal and until such time as
his/her successor shall have been duly elected and qualified.
With the foregoing exception, the remaining provisions of the
Bylaws of the Corporation shall remain in full force and effect.
IN WITNESS WHEREOF, I have fixed my signature and the seal
of the Corporation this 1st. day of June, 1996.
/s/ Bill M. Conrad
-----------------------------
Secretary
WALLSTREET RACING STABLES, INC.
NON-QUALIFIED STOCK OPTION AND STOCK GRANT PLAN
This Non-Qualified Stock Option and Stock Grant Plan (the
"Plan") is adopted in consideration of services rendered and to
be rendered by key personnel to Wallstreet Racing Stables, Inc.,
its subsidiaries and affiliates.
1. Definitions.
The terms used in this Plan shall, unless otherwise
indicated or required by the particular context, have the
following meanings:
Board: The Board of Directors of Wallstreet Racing Stables,
Inc., or any duly authorized committee of the Board.
Common Stock: The $.001 par value Common Stock of
Wallstreet Racing Stables, Inc..
Company: Wallstreet Racing Stables, Inc., a corporation
incorporated under the laws of Colorado, and any successors in
interest by merger, operation of law, assignment or purchase of
all or substantially all of the property, assets or business of
the Company.
Date of Grant: The date on which an Option (see below) is
granted under the Plan.
Fair Market Value: The Fair Market Value of the Option
Shares. Such Fair Market Value as of any date shall be
reasonably determined by the Board; provided, however, that if
there is a public market for the Common Stock, the Fair Market
Value of the Option Shares as of any date shall not be less than
the bid price for the Common Stock on that date (or on the
preceding business day if such date is a Saturday, Sunday, or a
holiday), on either an over-the-counter market or national
exchange, as reported thereby, or if not available there, in the
Wall Street Journal or other public news source; provided,
further, that if no such published bid price is available, the
Fair Market Value of such shares shall not be less than the
average of the means between the bid and asked prices quoted on
that date by any two independent persons or entities making a
market for the Common Stock, such persons or entities to be
selected by the Board. Fair Market Value shall be determined
without regard to any restriction other than a restriction which,
by its terms, will never lapse.
Key Person: A person (including, without limitation,
employees, directors, officers, consultants or advisors)
designated by the Board upon whose judgment, initiative and
efforts the Company or a Related Company may rely.
Option: The rights granted to a Key Person to purchase
Common Stock pursuant to the terms and conditions of an Option
Agreement (see below).
<PAGE>
Option Agreement: The written agreement (and any amendment
or supplement thereto) between the Company and a Key Person
designating the terms and conditions of an Option.
Option Shares: The shares of Common Stock underlying an
Option granted to a Key Person.
Optionee: A Key Person who has been granted an Option.
Recipient: A Key Person who has been granted a Stock Grant.
Related Company: Any subsidiary or affiliate of the
Company. The determination of whether a corporation is a Related
Company shall be made without regard to whether the entity or the
relationship between the entity and the Company now exists or
comes into existence hereafter.
Stock Grant: The grant of shares of the Company's Common
Stock to a Key Person pursuant to the terms of the Plan.
Stock Grant Shares: The shares of Common Stock represented
by a Stock Grant.
2. Purpose and Scope.
(a) The purpose of the Plan is to advance the interests of
the Company and its stockholders by affording Key Persons, upon
whose judgment, initiative and efforts the Company may rely for
the successful conduct of their businesses, an opportunity for
investment in the Company and the incentive advantages inherent
in stock ownership in the Company.
(b) This Plan authorizes the Board to grant Options and
make Stock Grants to Key Persons selected by the Board while
considering criteria such as employment position or other
relationship with the Company, duties and responsibilities,
ability, productivity, length of service or association, morale,
interest in the Company, recommendations by supervisors, and
other matters.
3. Administration of the Plan.
The Plan shall be administered by the Board. The Board
shall have the authority granted to it under this section and
under each other section of the Plan.
In accordance with and subject to the provisions of the
Plan, the Board shall select the Optionees and Recipients, shall
determine (i) the number of shares of Common Stock to be subject
to each Option and/or Stock Grant, (ii) the time at which each
Option and/or Stock Grant is to be granted, (iii) whether an
Option shall be granted in exchange for the cancellation and
termination of a previously granted option or options under the
Plan or otherwise, (iv) the purchase price for Option Shares, (v)
the option period, (vi) the consideration (if any) for a Stock
Grant, and (vii) the manner in which an Option becomes
exercisable. In addition, the Board shall fix such other terms
of each Option and/or Stock Grant as it may deem necessary or
desirable. The Board shall determine the form of Option
Agreement to evidence each Option.
<PAGE>
The Board from time to time may adopt such rules and
regulations for carrying out the purposes of the Plan as it may
deem proper and in the best interests of the Company.
The Board may from time to time make such changes in and
additions to the Plan as it may deem proper and in the best
interest of the Company provided, however, that no such change or
addition shall impair any Option or Stock Grant previously
granted under the Plan.
Each determination, interpretation or other action made or
taken by the Board shall be final, conclusive and binding on all
persons, including without limitation, the Company, the Related
Companies, the stockholders, directors, officers and employees of
the Company and the Related Companies, and the Optionees, the
Recipients and their respective successors in interest.
4. The Common Stock.
The Board is authorized to appropriate, grant Options and
make Stock Grants with respect to, and otherwise issue and sell
for the purposes of the Plan, a total number not in excess of
1,000,000 shares of Common Stock, either treasury or authorized
but unissued, or the number and kind of shares of stock or other
securities which in accordance with Section 9 shall be
substituted for the 1,000,000 shares or into which such 1,000,000
shares shall be adjusted. All or any unsold shares subject to an
Option that for any reason expires or otherwise terminates may
again be made subject to Options and Stock Grants under the Plan.
5. Eligibility.
Options and Stock Grants shall be granted only to Key
Persons. Key Persons may hold more than one Option or Stock
Grant under the Plan and may hold Options and Stock Grants under
the Plan and options granted pursuant to other plans or
otherwise.
6. Option Price.
The Board shall determine the purchase price for the Option
Shares; provided, however, that the purchase price to be paid by
Optionees for Option Shares shall not be less than one hundred
percent of the Fair Market Value of the Option Shares on the Date
of Grant.
7. Duration and Exercise of Options.
(a) The option period shall commence on the Date of Grant
and shall be up to 10 years in length subject to the limitations
in this Section 7 and the Option Agreement.
(b) During the lifetime of the Optionee, the Option shall
be exercisable only by the Optionee. Any Option held by an
Optionee at the time of his death may be exercised by his estate
only within six months of his death or such longer period as the
Board may determine.
(c) The Board may determine whether an Option shall be
exercisable as provided in Paragraph (a) of this Section 7 or
whether the Option shall be exercisable in installments only; if
the Board determines the latter, it shall determine the number of
installments and the percentage of the Option exercisable at each
installment date. All such installments shall be cumulative.
<PAGE>
(d) In the case of an Optionee who is an employee of the
Company or a Related Company, if, for any reason, other than the
Optionee's death, the Optionee ceases to be employed by either
the Company or a Related Company, any option held by the Optionee
at the time his employment ceases may be exercised within 90 days
after the date that his employment ceased, (subject to the
limitations of Paragraph (a) above), but only to the extent that
the option was exercisable according to its terms on the date the
Optionee's employment ceased. After such 90 day period, any
unexercised portion of an Option shall expire.
(e) Notwithstanding the provision of Paragraph (d) of this
Section 7, in the case of an Optionee who is an employee of the
Company or a Related Company, if the Optionee's employment by the
Company or a Related Company ceases due to the Company's or
Related Company's termination of such Optionee's employment for
cause, any unexercised portion of any Option held by the Optionee
shall immediately expire.
(f) Each Option shall be exercised in whole or in part by
delivering to the office of the Treasurer of the Company written
notice of the number of shares with respect to which the Option
is to be exercised and by paying in full the purchase price for
the Option Shares purchased as set forth in Section 8; provided,
that an Option may not be exercised in part unless the purchase
price for the Option Shares Purchased is at least $1,000.00
8. Payment for Option Shares.
If the purchase price of the Option Shares Purchased by any
Optionee at one time exceeds $2,000, the Board may permit all or
part of the Purchase price for the Option Shares to be paid by
delivery to the Company for cancellation shares of the Company's
Common Stock previously owned by the Optionee with a Fair Market
Value as of the date of the payment equal to the portion of the
purchase price for the Option Shares that the Optionee does not
pay in cash. In the case of all other Option exercises, the
purchase price shall be paid in cash or certified funds upon
exercise of the Option.
9. Change in Stock, Adjustments Etc.
In the event that each of the outstanding shares of Common
Stock (other than shares held by dissenting stockholders that are
not changed or exchanged) should be changed into, or exchanged
for, a different number or kind of shares of stock or other
securities of the Company, or, if further changes or exchanges of
any stock or other securities into which the Common Stock shall
have been changed, or for which it shall have been exchanged,
shall be made (whether by reason of merger, consolidation,
reorganization, recapitalization, stock dividends,
reclassification, split-up, combination of shares or otherwise),
then there shall be substituted for each share of Common Stock
that is subject to the Plan, the number and kind of shares of
stock or other securities into which each outstanding share of
Common Stock (other than
<PAGE>
shares held by dissenting stockholders which are not changed or
exchanged) shall be so changed or for which each outstanding share of
Common Stock (other than shares held by dissenting stockholders) shall
be so changed or for which each such share shall be exchanged. Any
securities so substituted shall be subject to similar successive
adjustments. In the event of any such changes or exchanges, the Board
shall determine whether, in order to prevent dilution or enlargement of
rights, an adjustment should be made in the number, kind, or
option price of the shares or other securities then subject to an
Option or Stock Grant granted pursuant to the Plan and the Board
shall make any such adjustment, and such adjustments shall be
made and shall be effective and binding for all purposes of the Plan.
10. Relationship to Employment.
Nothing contained in the Plan, or in any Option or Stock
Grant granted pursuant to the Plan, shall confer upon any
Optionee or Recipient any right with respect to employment by the
Company, or interfere in any way with the right of the Company to
terminate the Optionee's or Recipient's employment or services at
any time.
11. Nontransferability of Option or Stock Grant.
No Option or Stock Grant granted under the Plan shall be
transferable by the Optionee or Recipient, either voluntarily or
involuntarily, except by will or the laws of descent and
distribution, and any attempt to do so shall be null and void.
12. Rights as a Stockholder.
No person shall have any rights as a stockholder with
respect to any share covered by an Option or Stock Grant until
that person shall become the holder of record of such shares and,
except as provided in Section 9, no adjustments shall be made for
dividends or other distributions or other rights as to which
there is an earlier record date.
13. Securities Laws Requirements.
No Option Shares or Stock Grants shall be issued unless and
until, in the opinion of the Company, any applicable registration
requirements of the Securities Act of 1933, as amended, any
applicable listing requirements of any securities exchange on
which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery, have been fully
complied with. Each Option and each Option and Stock Grant Share
certificate may be imprinted with legends reflecting federal and
state securities laws restrictions and conditions, and the
Company may comply therewith and issue "stop transfer"
instructions to its transfer agent and registrar in good faith
without liability.
14. Disposition of Shares.
Each Optionee, as a condition of exercise, and each Recipient
shall represent, warrant and agree, in a form of written certificate
approved by the Company, as follows: (a) that all Option and Stock
Grant Shares are being acquired solely for his own account and not
on behalf of any other person or entity; (b) that no Option or
Stock Grant Shares will be sold or otherwise distributed in
<PAGE>
violation of the Securities Act of 1933, as amended, or any other
applicable federal or state securities laws; (c) that if he is subject
to reporting requirements under Section 16(a) of the Securities
Exchange Act of 1934, as amended, he will (i) not sell any shares of
Common Stock within six months of the date he acquired any Option or
Stock Grant, (ii) furnish the Company with a copy of each Form 3, 4
or 5 filed by him, and (iii) timely file all reports required under
the federal securities laws; and (d) that he will report all sales of
Option and/or Stock Grant Shares to the Company in writing on a form
prescribed by the Company.
15. Effective Date of Plan; Termination Date of Plan.
The Plan shall be deemed effective as of August 1, 1995.
The Plan shall terminate at midnight on July 31, 2005 except as
to Options previously granted and outstanding under the Plan at
that time. No Options or Stock Grants shall be granted after the
date on which the Plan terminates. The Plan may be amended,
extended, abandoned or terminated at any earlier time by the
Board, except with respect to any Options or Stock Grant then
outstanding under the Plan.
16. Other Provisions.
The following provisions are also in effect under the Plan:
(a) The use of a masculine gender in the Plan shall also
include within its meaning the feminine, and the singular may
include the plural, and the plural may include the singular,
unless the context clearly indicates to the contrary.
(b) Any expense of administering the Plan shall be borne by
the Company.
(c) This Plan shall be construed to be in addition to any
and all other compensation plans or programs. The adoption of
the Plan by the Board shall not be construed as creating any
limitations on the power or authority of the Board to adopt such
other additional incentive or other compensation arrangements as
the Board may deem necessary or desirable.
(d) The validity, construction, interpretation,
administration and effect of the Plan and of its rules and
regulations, and the rights of any and all personnel having or
claiming to have an interest therein or thereunder shall be
governed by and determined exclusively and solely in accordance
with the laws of the state of Colorado.
Adopted by the Board of Directors of Wallstreet Racing
Stables, Inc., effective this 1st. day of August, 1995.
/s/ Raymond E. McElhaney /s/ Bill M. Conrad
- --------------------------- ---------------------------
Chairman Secretary
Number Shares
WALLSTREET RACING STABLES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
THIS CERTIFIES THAT _________________ is the owner of
___________ fully paid and non-assessable Shares of the above
Corporation transferable only on the books of the Corporation by
the holder hereof in person or by duly authorized Attorney upon
surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and to
be sealed with the Seal of the Corporation.
Dated ________________
_____________________________ _____________________________
Secretary President
Should the racing commission of any state or jurisdiction determine that
a holder or beneficial owners of the Corporation's equity securities is
required to be licensed and such person or entity shall fail or refuse to
become licensed within 60 days of such determination, or should the Board of
Directors of the Corporation conclude for just cause that the status of any
person or entity as a stockholder of the Corporation jeopardizes its license
or application for license, the Corporation shall have the right and option to
acquire such person's shares of the Corporation at a price equal to the
following amount:
i. In the event the Corporation's stock is listed in Nasdaq
at the time of election, the purchase price shall be equal to the
mean between the closing bid and asked prices for the stock on the
date immediately preceding the date notification is received by such
stockholder of the Corporation's option to acquire his capital stock;
ii. In the event the Corporation's stock is listed in any other
recognized medium, such as the OTC BULLETIN BOARD or "pink sheets"
maintained by the member of the NASD, the purchase price shall be
equal to the last sales price for the Company's stock on the date
immediately preceding receipt of the notice by the stockholder.
iii. In the event no recognized medium for quotation or trading
exists for the stock, the purchase price shall be equal to the
purchase price paid by the investor, as evidenced by reasonably
acceptable evidence including canceled checks, wire transfer or
evidence other than consideration paid.
Warrant No. A-_________ Warrant to Purchase ______
Common Shares, $.0001 Par Value,
Of Wallstreet Racing Stables, Inc.
WALLSTREET RACING STABLES, INC.
WARRANT TO PURCHASE COMMON SHARES
THIS CERTIFIES THAT, for value received _______________________
or registered assigns (Holder) is entitled to purchase, subject to
the provisions of this Warrant, from WALLSTREET RACING STABLES, INC.,
a Colorado corporation (the "Company"), commencing as of the date of
this Warrant and for a period thereafter set forth in this Warrant,
_______ Common Shares of the Company, par value $.0001 per share
("Common Shares"). The number of Common Shares to be received upon
the exercise of this Warrant and the price to be paid per share may
be adjusted from time to time as hereinafter set forth. The Common
Shares deliverable upon such exercise, as adjusted from time to time,
and hereinafter sometimes referred to as Warrant Shares and the
exercise price of a share of Common Shares in effect at any time as is
adjusted from time to time is hereinafter sometimes referred to as
the Exercise Price.
(a) EXERCISE OF WARRANT. Subject to the provisions of Section
(f) hereof, the Holder is entitled to purchase an aggregate of Common
Shares at an exercise price equal to $2.00 per share, commencing on
the date hereof and continuing until April 30, 1998 (the "Exercise
Period" or "Expiration Date"). Any Warrants remaining unexercised
following expiration of the Exercise Period shall be void and of no
further effect. The Warrants shall become void at 5:00 p.m. Mountain
time on the Expiration Date, or if such date is a day on which
banking institutions are authorized by the laws of the State of
Colorado to close, then on the next succeeding day which shall not be
such a day. The Warrants shall be exercisable by presentation and
surrender thereof to the Company or at the office of its stock
transfer agent, if any, with the Form of Election annexed hereto duly
executed and accompanied by payment of the Exercise Price for the
number of shares specified in that form, together with all Federal
and state taxes applicable thereto and transfer fees, if any. If
this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver
a new Warrant evidencing the right of the Holder to purchase the
balance of the shares purchasable hereunder. Upon receipt by the
Company of this Warrant at the office or agency of the Company, in
proper form for exercise, together with payment of the Exercise
Price, the Holder shall be deemed to be the holder of record of the
Common Shares issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that
certificates representing such Common Shares shall not then be
actually delivered to the Holder.
(b) RESERVATION OF SHARES. The Company hereby agrees that at
all times, there shall be reserved for issuance and/or delivery upon
exercise of this Warrant such number of its Common Shares as shall be
required for issuance or delivery upon exercise of this Warrant.
(c) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of
its stock transfer agent, if any, for other Warrants of different
denominations entitling the Holder thereof to purchase in the
aggregate the same number of Common Shares purchasable hereunder.
Except as restricted by law or as otherwise Provided herein, this
Warrant and all rights hereunder are transferable by the Holder in
person or by duly authorized attorney on the books of the Company upon
surrender of this Warrant, with the Form of Assignment annexed hereto duly
executed, to the Company or at the office of its stock transfer agent,
if any, accompanied by payment of all transfer taxes, if any, payable in
connection herewith; whereupon the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such
instrument or assignment and this Warrant shall promptly be cancelled.
This Warrant may be divided or combined with other warrants which carry
the same rights upon presentation hereof at the office of the Company,
together with a written notice specifying the names and denominations in
which new Warrants are to be issued and signed by the Holder hereof. The
term "Warrant" as used herein includes any Warrants issued in substitution
for or replacement of this Warrant, or into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute
and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall be the legal, valid and binding
obligation of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS WARRANT SET
FORTH ON THE REVERSE HEREOF WHICH SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH HEREIN.
IN WITNESSS WHEREOF, the Company has caused this Warrant
Certificate to be signed by its President and by its Secretary, each
by a facsimile of said officers' signatures, and has caused a facsimile
of its corporate seal to be imprinted hereon.
WALLSTREET RACING STABLES, INC.
By: /s/ Raymond E. McElhaney
Raymond E. McElhaney, President
ATTEST:
/s/ Bill M. Conrad
Bill M. Conrad, Secretary
ADDITIONAL PROVISIONS
(d) RIGHTS OF THE HOLDERS. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company,
either at law or equity, and the rights of the Holder are limited to
those expressed in the Warrant and are not enforceable against the
Company except to the extent set forth herein.
(e) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall
be outstanding and unexercised (i) if the Company shall pay any
dividend or make any distribution upon the Common Shares or (ii)
if any capital reorganization of the Company, reclassification of
the capital stock of the Company, consolidation or merger of the
Company with or into another corporation, sale, lease or transfer
of all or substantially all of the property and assets of the
Company to another corporation, or voluntary or involuntary
dissolution, liquidation or winding up of the Company shall be
effected, then, in any such case, the Company shall cause to be
delivered to the Holder, at least ten days prior to the date
specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating
the date on which (x) a record is to be taken for the purpose of
such dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any is to be
fixed, as of which the holders of Commons Shares or record shall be
entitled to exchange their Common Shares for securities or other property
deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
(f) RECLASSIFICATION, REORGANIZATION, OR MERGER. In the case of
any reclassification, capital reorganization or other change outstanding
Common Shares of the Company (other than a change in par value, or
from par value to no par value, or from no par value to par value, or
as a result of an issuance of Common Shares by way of dividend or other
distribution or a subdividsion or combination), or in case of any
consolidation or merger of the Company with or into another corporation
(other than a merger in which the Company is the continuing corporation
and which does not result in any reclassification, capital reorganization
or other change of outstanding Common Shares of the class issuable upon
exercise of this Warrant) or in the case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company shall cause effective provision
to be made so that the Holder shall have the right thereafter, by exercising
this Warrant, to purchase the kind and amount of shares of stock and other
securities and property that would have been received by such Holder if he
had owned the number of shares purchasable upon exercise of the Warrant at
the time of such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments provided for in this Warrant. The foregoing
provisions of this Section (f) shall similarly apply to successive
reclassification, capital reorganizations and changes of Common Shares and
to successive consolidations, mergers, sales or conveyances.
(g) SHARES, SPLITS, OR COMBINATIONS. In the case the Company
shall at any time subdivide or combine the outstanding Common Shares, the
Exercise Price shall be proportionately decreased in the case of such
subdivision or increased in the case of such combination on the date that
such subdivision or combination shall become effective. The Company shall
not be required to give effect to any adjustment in the Exercise Price
unless and until the net effect of one or more adjustments, determined as
set forth above, shall have required a change of the Exercise Price by at
least $.10. Upon any adjustment of the Exercise Price, the holder of the
Warrant shall thereafter be entitled to purchase, at the new Exercise Price,
the number of Common Shares calculated to the nearest full share, obtained
by multiplying the number of Common Shares initially issuable upon exercise
of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the New Exercise Price.
(h) TRANSFER TO COMPLY WITH THE 1933 ACT.
(1) This Warrant or the Warrant Shares or any other security
issued or issuable upon exercise of this Warrant, unless registered, may
not be sold, transferred or otherwise disposed of except to a person who,
in the opinion of counsel for the Company, is a person to whom this
Warrant or such Warrant Shares may legally be transferred pursuant to
Section (c) hereof without registration and without delivery of a current
prospectus under the 1933 Act with respect thereto and then only against
receipt of any agreement of such person to comply with the provisions of
this Section (h) with respect to any resale or other disposition of such
securities.
(2) The Company may cause the following legend to be set forth
on each certificate representing Warrant Shares or any other security
issued or issuable upon exercise of this Warrant not theretofore
registered for distribution to the public, unless counsel for the
Company is of the opinion as to any such certificate that such legend is
unnecessary.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT MADE UNDER THE SECURITIES ACT OF 1933 (THE "1933
ACT"), OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
THE AVAILABILTY OF WHICH IS TO BE ESTABLISHED TO THE SATISIFACTION
OF THE COMPANY.
(i) APPLICABLE LAW. This Warrant shall be governed by, and construed
in accordance with the law of the State of Colorado.
(j) EFFECTIVE DATE. This Warrant shall be effective as of June 1996.
Should the racing commission of any state or jurisdiction determine
that a holder or beneficial owner of the Corporation's equity securities
is required to be licensed and such person or entity shall fail or refuse to
become licensed within 60 days of such determination, or should the Board
of Directors of the Corporation conclude for just cause that the status of
any person or entity as a stockholder of the Corporation jeopardizes its
license or application for license, the Corporation shall have the right
and option to acquire such person's shares of the Corporation at a price
equal to the following amount:
i. In the event the Corporation's stock is listed on Nasdaq at
the time of election, the purchase price shall be equal to the mean
between the closing bid and asked prices for the stock on the date
immediately preceding the date notification is received by such
stockholder of the Corporation's option to acquire his capital stock;
ii. In the event the Corporation's stock is listed or quoted in any
other recognized medium, such as OTC BULLETION BOARD or "pink sheets"
maintained by the member of the NASD, the purchase price shall be
equal to the last sales price for the Company's stock on the date
immediately preceding receipt of notice by the stockholder;
iii. In the event no recognized medium for quotation or trading exists
for the stock, the purchase price shall be equal to the purchase price
paid by the investor, as evidenced by reasonably acceptable evidence
including canceled checks, wire transfer or other evidence of
consideration paid.
WALLSTREET RACING STABLES, INC.
FORM OF ELECTION
(To be executed by the Registered Holder if he desires to exercise
Warrants evidenced by the within Warrant Certificate)
TO: WALLSTREET RACING STABLES, INC.
The undersigned hereby irrevocably elects to exercise ________________
Warrants, evidenced by the within Warrant Certificate for, and to purchase
thereunder _________________________ full Common Shares issuable upon
exercise of said Warrants and delivery of $ ______________________ and any
applicable taxes.
The undersigned requests that certificates for such shares be issued in
the name of:
_________________________________________ PLEASE INSERT SOCIAL SECURITY
(Please print name and address) OR TAX IDENTIFICATION NUMBER:
_________________________________________ ______________________________
_________________________________________
If said number of Warrants shall not be all the Warrants evidenced by the
within Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to:
_________________________________________ PLEASE INSERT SOCIAL SECURITY
(Please print name and address) OR TAX IDENTIFICATION NUMBER:
_________________________________________ ______________________________
_________________________________________
Dated: ___________________________ Signature:____________________
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever, or if signed by any other
person the Form of Assignment hereon must be duly executed and if the
certificate representing the shares or any Warrant Certificate representing
Warrants not exercised is to be registered in a name other than that in
which the within Warrant Certificate is registered, the signature of the
holder hereof must be guaranteed.
Signature Guaranteed: ____________________________________
SIGNATURES MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF
THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK
EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
WALLSTREET RACING STABLES, INC.
FORM OF ASSIGNMENT
(To be executed by the Registered Holder if he desires to assign
Warrants evidenced by the within Warrant Certificate)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers unto _________________________, (#) _____________________
Warrants, evidenced by the within Warrant Certificate, and does hereby
irrevocably constitute and appoint _________________________ Attorney to
transfer the said Warrant evidenced by the within Warrant Certificate on
the books of the Company, with full power of substitution.
Dated: ______________________________ _____________________________________
(Signature)
_____________________________________
(Please Print Name)
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Signature Guaranteed: ____________________________________
SIGNATURES MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF
THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST
STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
Warrant No. A - _______ Warrant to Purchase________
Common Shares, $.0001 Par Value,
of Wallstreet Racing Stables, Inc.
WALLSTREET RACING STABLES, INC.
WARRANT TO PURCHASE COMMON SHARES
This is to Certify That, FOR VALUE RECEIVED,
or registered assigns ("Holder") is entitled to purchase, subject
to the provisions of this Warrant, from WALLSTREET RACING
STABLES, INC., a Colorado corporation (the "Company"), commencing
as of the date of this Warrant and for a period thereafter set
forth in this Warrant, ________ Common Shares of the Company, par
value $.0001 per share ("Common Shares"). The number of Common
Shares to be received upon the exercise of this Warrant and the
price to be paid per share may be adjusted from time to time as
hereinafter set forth. The Common Shares delivered or
deliverable upon such exercise, as adjusted from time to time,
are hereinafter sometimes referred to as "Warrant Shares" and the
exercise price of a share of Common Shares in effect at any time
as is adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price."
(a) EXERCISE OF WARRANT. Subject to the provisions of
Section (f) hereof, the Holder is entitled to purchase an
aggregate of _________ Common Shares at an exercise price equal
to $_____ per share, commencing on the date hereof and continuing
until ____________ (the "Exercise Period" or "Expiration Date").
Any Warrants remaining unexercised following expiration of the
Exercise Period shall be void and of no further effect. The
Warrants shall become void at 5:00 p.m. Mountain time on the
Expiration Date, or if such date is a day on which banking
institutions are authorized by law to close, then on the next
succeeding day which shall not be such a day. The Warrants shall
be exercisable by presentation and surrender thereof to the
Company or at the office of its stock transfer agent, if any,
with the Form of Election annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of
shares specified in that form, together with all Federal and
state taxes applicable thereto and transfer fees, if any. If
this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to
purchase the balance of the shares purchasable hereunder. Upon
receipt by the Company of this Warrant at the office or agency of
the Company, in proper form for exercise, together with payment
of the Exercise Price, the Holder shall be deemed to be the
holder of record of the Common Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing
such Common Shares shall not then be actually delivered to the
Holder.
(b) RESERVATION OF SHARES. The Company hereby agrees that
at all times, there shall be reserved for issuance and/or
delivery upon exercise of this Warrant such number of its Common
Shares as shall be required for issuance or delivery upon
exercise of this Warrant.
(c) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant
is exchangeable, without expense, at the option of the Holder,
upon presentation and surrender hereof to the Company or at the
office of its stock transfer agent, if any, for other Warrants of
different denominations entitling the Holder thereof to purchase
in the aggregate the same number of Common Shares purchasable
hereunder. Except as restricted by law or as otherwise provided
herein, this Warrant and all rights hereunder are transferable by
the Holder in person or by duly authorized attorney on the books
of the Company upon surrender of this Warrant, with the Form of
Assignment annexed hereto duly executed, to the Company or at the
office of its stock transfer agent, if any, accompanied by
payment of all transfer taxes, if any, payable in connection
herewith; whereupon the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in
such instrument or assignment and this Warrant shall promptly be
cancelled. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation hereof at
the office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are
to be issued and signed by the Holder hereof. The term "Warrant"
as used herein includes any Warrants issued in substitution for
or replacement of this Warrant, or into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall be the legal, valid
<PAGE>
and binding obligation of the Company, whether or not this
Warrant so lost, stolen, destroyed, or mutilated shall be at any
time enforceable by anyone.
(d) RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the
Company, either at law or equity, and the rights of the Holder
are limited to those expressed in the Warrant and are not
enforceable against the Company except to the extent set forth
herein.
(e) NOTICES TO WARRANT HOLDERS. So long as this Warrant
shall be outstanding and unexercised (i) if the Company shall pay
any dividend or make any distribution upon the Common Shares or
(ii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all
of the property and assets of the Company to another corporation,
or voluntary or involuntary dissolution, liquidation or winding
up of the Company shall be effected, then, in any such case, the
Company shall cause to be delivered to the Holder, at least ten
days prior to the date specified in (x) or (y) below, as the case
may be, a notice containing a brief description of the proposed
action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to
take place and the date, if any is to be fixed, as of which the
holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities or other property deliverable
upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
(f) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of
any reclassification, capital reorganization or other change of
outstanding Common Shares of the Company (other than a change in
par value, or from par value to no par value, or from no par
value to par value, or as a result of an issuance of Common
Shares by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other
than a merger in which the Company is the continuing corporation
and which does not result in any reclassification, capital
reorganization or other change of outstanding Common Shares of
the class issuable upon exercise of this Warrant) or in case of
any sale or conveyance to another corporation of the property of
the Company as an entirety or substantially as an entirety, the
Company shall cause effective provision to be made so that the
Holder shall have the right thereafter, by exercising this
Warrant, to purchase the kind and amount of shares of stock and
other securities and property that would have been received by
such Holder if he had owned the number of shares purchasable upon
exercise of this Warrant at the time of such reclassification,
capital reorganization or other change, consolidation, merger,
sale or conveyance. Any such provision shall include provision
for adjustments provided for in this Warrant. The foregoing
provisions of this Section (f) shall similarly apply to
successive reclassifications, capital reorganizations and changes
of Common Shares and to successive consolidations, mergers, sales
or conveyances.
(g) SHARE SPLITS OR COMBINATIONS. In case the Company
shall at any time subdivide or combine the outstanding Common
Shares, the Exercise Price shall be proportionately decreased in
the case of such subdivision or increased in the case of such
combination on the date that such subdivision or combination
shall become effective. The Company shall not be required to
give effect to any adjustment in the Exercise Price unless and
until the net effect of one or more adjustments, determined as
set forth above, shall have required a change of the Exercise
Price by at least $.10. Upon any adjustment of the Exercise
Price, the holder of the Warrant shall thereafter be entitled to
purchase, at the new Exercise Price, the number of Common Shares
calculated to the nearest full share, obtained by multiplying the
number of Common Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the new Exercise Price.
(h) TRANSFER TO COMPLY WITH THE 1933 ACT.
(1) This Warrant or the Warrant Shares or any other
security issued or issuable upon exercise of this Warrant,
unless registered, may not be sold, transferred or otherwise
disposed of except to a person who, in the opinion of
counsel for the Company, is a person to whom this Warrant or
such Warrant Shares may legally be transferred pursuant to
Section (c) hereof without registration and without the
delivery of a current prospectus under the 1933 Act with
respect thereto and then only against receipt of any
agreement of such person to comply with the provisions of
this Section (h) with respect to any resale or other
disposition of such securities.
2
<PAGE>
(2) The Company may cause the following legend to be
set forth on each certificate representing Warrant Shares or
any other security issued or issuable upon exercise of this
Warrant not theretofore registered for distribution to the
public, unless counsel for the Company is of the opinion as
to any such certificate that such legend is unnecessary:
The securities represented by this
certificate may not be offered for sale, sold
or otherwise transferred except pursuant to
an effective registration statement made
under the Securities Act of 1933 (the "1933
Act"), or pursuant to an exemption from
registration under the 1933 Act the
availability of which is to be established to
the satisfaction of the Company.
(i) APPLICABLE LAW. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of Colorado.
(j) EFFECTIVE DATE. This Warrant shall be effective as of June,
1996.
WALLSTREET RACING STABLES, INC.
By: /s/ Raymond E. McElhaney
-----------------------------------
Raymond E. McElhaney, President
ATTEST:
/s/ Bill M. Conrad
- --------------------------------
Bill M. Conrad, Secretary
3
<PAGE>
WALLSTREET RACING STABLES, INC.
FORM OF ELECTION
(To be executed by the Registered Holder if he desires to exercise
Warrants evidenced by the within Warrant Certificate)
TO: WALLSTREET RACING STABLES, INC.
The undersigned hereby irrevocably elects to exercise
________________ Warrants, evidenced by the within Warrant Certificate
for, and to purchase thereunder _____________________ full Common Shares
issuable upon exercise of said Warrants and delivery of $ _______________
and any applicable taxes.
The undersigned requests that certificates for such shares be
issued in the name of:
_________________________________________ PLEASE INSERT SOCIAL SECURITY
(Please print name and address) OR TAX IDENTIFICATION NUMBER:
_________________________________________ _____________________________
_________________________________________
If said number of Warrants shall not be all the Warrants evidenced by the
within Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name
of and delivered to:
_________________________________________ PLEASE INSERT SOCIAL SECURITY
(Please print name and address) OR TAX IDENTIFICATION NUMBER:
_________________________________________ _____________________________
_________________________________________
Dated: ___________________________ Signature:_________________________________
NOTICE: The above signature must correspond with the name as
written upon the face of the within Warrant Certificate
in every particular, without alteration or enlargement
or any change whatsoever, or if signed by any other
person the Form of Assignment hereon must be duly
executed and if the certificate representing the shares
or any Warrant Certificate representing Warrants not
exercised is to be registered in a name other than that
in which the within Warrant Certificate is registered,
the signature of the holder hereof must be guaranteed.
Signature Guaranteed: ____________________________________
SIGNATURES MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM
OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK
EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE,
OR MIDWEST STOCK EXCHANGE.
<PAGE>
WALLSTREET RACING STABLES, INC.
FORM OF ASSIGNMENT
(To be executed by the Registered Holder if he desires
to assign Warrants evidenced by the within Warrant Certificate)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers unto _________________________, (#)______________________
Warrants, evidenced by the within Warrant Certificate, and does
hereby irrevocably constitute and appoint _________________________
Attorney to transfer the said Warrant evidenced by the within Warrant
Certificate on the books of the Company, with full power of substitution.
Dated: ______________________________
_____________________________________
(Signature)
_____________________________________
(Please Print Name)
NOTICE: The above signature must correspond with the name as
written upon the face of the within Warrant Certificate
in every particular, without alteration or enlargement
or any change whatsoever.
Signature Guaranteed: ____________________________________
SIGNATURES MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM
OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK
EXCHANGE, PACIFIC COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE,
OR MIDWEST STOCK EXCHANGE.
PURCHASE AND SALE AGREEMENT
This Agreement is made, entered into and effective this 1st
day of January, 1996 (hereinafter the "Effective Date"), by and
between WALLSTREET RACING STABLES, INC., a Colorado corporation
(hereinafter referred to as "Purchaser"), duly authorized and
empowered to transact all lawful business for which corporations
may be engaged under the terms and conditions of the Colorado
Business Corporations Act 7-101-101 et seq, with its principal
place of business located at 5525 Erindale Drive, Suite 201,
Colorado Springs, Colorado 80918, and WALLSTREET RACING STABLES
III, a Colorado General Partnership (hereinafter referred to as
"Seller" ),duly authorized and empowered to transact all lawful
business for which partnerships may be engaged under the terms
and conditions of the Colorado Uniform Partnership Law 7-60-101
et seq, with its principal place of business at 5525 Erindale
Drive, Suite 201, Colorado Springs, Colorado 80918.
RECITALS
WHEREAS the Seller, a Partnership consisting of six
individual Partners, owns an undivided Fifteen percent (15%)
interest in and to that certain thoroughbred race horse known as
"Da Hoss";
WHEREAS the Purchaser is desirous of obtaining the Seller's
interest in and to that certain thoroughbred race horse known as
Da Hoss.
NOW THEREFORE, in consideration of the mutual promises and
conditions hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, Purchaser and Seller hereby agree as follows:
ARTICLE I
Purchase and Sale
1.01 Conveyance. Subject to the terms, conditions and
consideration hereinafter set forth, Seller agrees to sell and
Purchaser agrees to purchase an undivided Fifteen percent (15%)
interest in and to Da Hoss as of the Effective Date of this
Agreement. In addition, the Seller hereby covenants and agrees
to deliver to the Purchaser a valid and enforceable Bill of Sale
and all such other documents as may be necessary in order to
transfer the Seller's interest in and to Da Hoss to the Purchaser
including, but not limited to, all registration documents
required by the Jockey Club of America evidencing the Purchasers
ownership of Da Hoss.
1.02 Purchase Price. The total consideration for the
transfer of the Seller's interest in and to that certain Fifteen
percent (15%) of Da Hoss shall be 80,000 shares of the
Purchaser's Common Stock, valued at $1.00 per share, which the
Purchaser shall transfer to the Seller upon execution of this
Agreement.
A. Upon receipt and acceptance of an executed
combined Subscription Agreement and Purchaser
Questionnaire, in substantially the same form as is
attached hereto as Exhibit "A" and incorporated by
reference, executed by a duly authorized and empowered
representative of the Partnership, the Purchaser shall
issue in the name of the Partnership, that number of
the Purchaser's Common Shares as described hereinabove.
<PAGE>
1.03 Valuation of Common Shares. For the purposes of this
transaction, the parties hereby agree that the shares of the
Purchaser shall be valued at $1.00 per share.
1.04 Nature of Securities Issued. The Seller understands
that the Shares contemplated to be transferred by the terms and
conditions of this Agreement are "Restricted Securities" as that
term is defined in Rule 144 under the Securities Act of 1933, as
amended, and applicable state securities laws. Accordingly,
Seller warrants that the Shares acquired may not be offered or
resold except pursuant to registration under such Act or
exemptions from such registration provisions. The Purchaser has
not conferred any rights to registration upon the Seller.
ARTICLE II
Representations and Warranties
2.01 Representations of Seller. Seller represents and
warrants to Purchaser as follows:
A. Seller warrants that it has fully considered
the fact that a high degree of risk is associated with
any investment in the Purchaser, and that the risks
associated with such an investment include, but are not
limited to, the following:
(i) the Purchaser's lack of operating
history and limited financial resources;
(ii) substantial dilution may result
from subsequent sales of additional
securities by the Purchaser; and
(iii) No public market exists for the
Purchaser's securities and there can be no
assurance that such a market will develop.
B. Seller warrants that it is accepting the
Purchaser's securities for its own account, with the
intention of holding the Common Shares for investment,
with no present intention of allowing others to
participate in ownership or of reselling or otherwise
participating, directly or indirectly, in any
distribution of the Common Shares; and shall not make
any sale, transfer or other disposition of the Common
Shares without registration under the 1933 Act and any
applicable securities act of any state or unless an
exemption from registration is available under those
acts, respectively.
C. Seller warrants that it has adequate means of
providing for its current financial needs and
contingencies and has no need for liquidity in the
securities contemplated to be transferred.
2
<PAGE>
D. Seller warrants that it is financially able
to bear the economic risk of an investment in the
Purchaser's securities, including the ability to hold
the same for an indefinite period and to afford a
complete loss of the investment.
E. Seller warrants that it has such knowledge
and experience in financial and business matters as to
be capable of evaluating the merits and risks of an
investment in the Purchaser's securities.
F. Seller warrants that it has been given the
opportunity to ask questions of, and receive answers
from the Purchaser concerning an investment in the
Purchaser's securities and to obtain such other
information as Seller may require in order to evaluate
an investment in the securities of the Purchaser.
G. Seller understands that the provisions of
Rule 144 under the 1933 Act are not available for at
least two (2) years to permit resales of the Common
Shares and there can be no assurance that the
conditions necessary to permit resales of the Common
Shares under Rule 144 will ever be satisfied, and, if
Rule 144 should become available, resales made in
reliance on its provisions could be made only in
limited amounts and in accordance with the terms and
conditions of the Rule. Seller understands that in
connection with resales of the Common Shares for which
Rule 144 is not available, compliance with some other
registration exemption will be required.
H. Seller understands and agrees that stop
transfer instructions may be given to Purchaser's
transfer agent or the officer in charge of its stock
records and noted on the appropriate records of the
Purchaser to the effect that the Common Shares may not
be transferred out of Seller's name unless it is
established to the satisfaction of counsel to Purchaser
that such transfer is in compliance with applicable
securities laws. Seller further understands that there
will be placed on the certificates for the Common
Shares, or any substitutions therefore, a restrictive
legend stating in substance as follows:
These securities have not been registered
under the Securities Act of 1933, as amended,
("Act") and may not be sold, assigned or
transferred except (i) pursuant to a
Registration Statement under the Act which
has become effective and is current with
respect to these shares, or (ii) pursuant to
a specific exemption from registration under
the Act but only upon a holder hereof first
having obtained the written opinion of
counsel to the Corporation, or other counsel
acceptable to the Corporation, that the
proposed disposition is consistent with all
applicable provisions of the Act as well as
any applicable "Blue Sky" or similar
securities laws.
I. Authority and Compliance. Seller warrants
that the person who executed this Agreement has full
and lawful authority to act on behalf of the Seller.
This Agreement has been duly and validly executed and
delivered by Seller on behalf of the individual
Partners and constitutes a valid obligation of Seller,
enforceable in accordance with its terms.
3
<PAGE>
J. Title. Seller is the sole owner of an
undivided interest in and to Fifteen percent (15%) of
Da Hoss and has good and marketable title to the same
and owns the same free and clear of any and all liens,
claims and encumbrances of any nature, form or
description. Seller warrants and will defend title to
Da Hoss to be transferred to Purchaser hereunder.
K. Legal Proceedings. There are no disputes,
claims, actions, suits, proceedings, arbitrations or
investigations, either administrative or judicial,
pending, threatened or contemplated by or against
Seller or its interest in Da Hoss, at law or in equity,
before or by any court or governmental agency, body or
before an arbitrator of any kind, which, if determined
adversely to Seller, would materially affect the value
of its interest in Da Hoss.
L. Indemnification. Seller shall indemnify,
defend and hold harmless Purchaser, its agent,
successors and insurers of the same from and against
any claim, liability, obligation, loss, damage,
assessment, judgment, cost, expense, action, suit,
proceeding or demand, of any kind or character
(including without limitation, reasonable attorney's
fees and expenses and costs and expenses reasonably
incurred in investigation, preparing or defending any
litigation or claim), resulting from or attributable to
any failure of Seller to pay, perform, fulfill or
discharge any liability related in any way to its
ownership of an undivided interest in and to Fifteen
percent (15%) of Da Hoss and which relates to any event
or circumstances occurring prior to the Effective Date
of this Agreement.
M. Physical Condition of Da Hoss. As of the
Effective Date, the Seller hereby warrants that the
physical condition of Da Hoss is such that no
impediments are present which would hinder Da Hoss'
ability to take part in the thoroughbred racing
industry. Specifically, Seller represents and warrants
that Da Hoss does not suffer from Colic, Degenerative
Joint Disease, Exercise Induced Pulmonary Hemorrhage,
Laminitis or any other form of equine disease.
N. Upon the effective date of this Agreement,
all daily operating expenses (up to 15% of the total)
associated with the care, health and maintenance of Da
Hoss shall become the responsibility of the Purchaser.
The Seller hereby represents and warrants to the
Purchaser, that should the Private Offering, referred
to herein, of the Purchaser's securities not to be
completed during the offering period, including any
extensions thereof, then Seller shall repay to
Purchaser all expenses incurred by Purchaser from the
Effective Date of this Agreement until such time as the
Offering is deemed terminated.
4
<PAGE>
2.02 Representations of Purchaser. Purchaser represents,
warrants, and agrees as follows:
A. Indemnification. Purchaser shall
indemnify, defend and hold harmless Seller from and
against any claim, liability, obligation, loss, damage,
assessment, judgment, cost, expense, action, suit,
proceeding or demand, of any kind or character
(including without limitation, reasonable attorney's
fees and expenses and costs and expenses reasonably
incurred in investigation, preparing or defending any
litigation or claim), resulting from or attributable to
any failure of Purchaser to pay, perform, fulfill or
discharge any liability related in any way to Da Hoss
and which relates to any event or circumstances
occurring subsequent to the Effective Date of this
Agreement.
ARTICLE III
Miscellaneous
3.01 Costs. Each party shall bear all costs incurred
by it in the Transaction.
3.02 Amendment. This Agreement may not be altered or
amended, nor any rights or conditions hereunder be waived, except
by an instrument in writing executed by the party or parties to
be charged with such amendment or waiver. No waiver of any term,
provision, or condition in this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, provision or condition of
this Agreement.
5
<PAGE>
3.03 Further Assurances. The parties to this Agreement
shall execute, acknowledge and deliver, or cause to be executed,
shall take such other action as may be necessary or advisable to
carry out their respective obligations under this Agreement.
3.04 Assignment. No party may assign its rights or
delegate its duties or obligations under this Agreement without
the prior written consent of all of the other parties.
3.05 Headings. The headings of the Articles and Sections of
this Agreement are for convenience of reference only and shall
not limit or otherwise affect any of the terms or provisions of
this Agreement.
3.06 Governing Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of
Colorado.
3.07 Survival. All of the covenants, agreements,
representations and warranties set forth in this Agreement shall
survive and inure to the benefit of the parties so long as this
Agreement is effective.
3.08 Counterparts. This Agreement may be executed by the
parties in any number of counterparts, each of which shall be
deemed an original instrument, all of which together shall
constitute one and the same agreement.
3.09 Parties in Interest. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights or
remedies whatsoever.
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the
parties to be effective as of the date first above written.
Seller:
WALLSTREET RACING STABLES III
By: /s/ Clifford C. Thygesen
Title: Authorized General Partner
Purchaser:
WALLSTREET RACING STABLES, INC.
By: /s/ Raymond E. McElhaney
Title: President
ATTEST:
/s/ Bill M. Conrad
Secretary
7
<PAGE>
TABLE OF ATTACHMENTS
Exhibit "A"- Subscription Agreement
& Purchaser Questionnaire
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, effective as of the 1st day of
June, 1997, by and between WALLSTREET RACING STABLES, INC., a
Colorado Company with its principal place of business located at
5525 Erindale Drive, Suite 201, Colorado Springs, Colorado 80918
(hereinafter referred to as "Company" or "Employer") and RAYMOND
E. MCELHANEY (the "Employee").
The Company hereby employs the Employee and the Employee
hereby accepts employment on the terms and conditions hereinafter
set forth.
1. Term. Subject to the provisions for termination
hereinafter provided, the initial term of this Agreement shall
commence on June 1, 1997 and terminate on December 31, 1998,
and shall continue thereafter on a year to year basis unless
terminated by the Company by delivery of written notice to the
Employee not later than thirty (90) days prior to the date for
termination as indicated in said notice.
2. Compensation and Performance Review
(a) For all services rendered by the Employee under
this Agreement, commencing September 1, 1997, the Company shall
be obligated to pay the Employee a monthly salary of $2,000.00
per month thereafter and continuing on the first day of each
month thereafter during the term of this Agreement.
(b) Following the first anniversary of this Agreement
(namely, on June 1, 1998, or as soon thereafter as practicable),
and following each anniversary, if any, thereafter, the Company
shall grant the Employee a performance and salary review for the
purposes of gauging the performance of the Employee for the
preceding year and adjusting the salary of the Employee hereunder
looking to the results of such review and the Company's financial
progress, among other things, as guides in such adjustments; provided,
however, compensation payable to the Employee pursuant to this
provision shall in no event be reduced from that fixed by Subparagraph
(a) in this Section 2.
3. Duties. Employee is engaged as the President/Chief
Executive Officer/Chief Financial Officer and Chairman of the
Board of Directors of the Company. In such capacities, Employee
shall exercise detailed supervision over the operations of the
Company subject, however, to control by the Board of Directors.
The Employee shall perform all duties incident to the title of
President/Chief Executive Officer/Chief Financial Officer and
Chairman of the Board of Directors and such other duties as from
time to time may be assigned to him by the Board of Directors.
4. Best Efforts of Employee. The Employee shall devote
such time as is necessary or as deemed necessary by the Board of
Directors to carry out the duties required of him by the Company
and will devote that time to the Company during normal business
hours. The Employee shall at all times faithfully, with diligence
and to the best of his ability, experience and talents, perform
all the duties that may be required of and from him pursuant to
the express and implicit terms hereof to the reasonable
satisfaction of the Company. Such services shall be rendered at
such other place or places as the Company shall in good faith
require or as the interest, needs, business or opportunity of the
Company shall require.
<PAGE>
5. Working Facilities. The Employee shall be furnished
with all such facilities and services suitable to his position
and adequate for the performance of his duties.
6. Expenses. The Employee is authorized to incur
reasonable expenses for promoting the business of the Company,
including his out-of-pocket expenses for entertainment, travel
and similar items. The Company shall reimburse the Employee for
all such expenses on the presentation by the Employee, from time
to time, of an itemized account of such expenditures in
accordance with the guidelines set forth by the Internal Revenue
Service for travel and entertainment.
7. Vacation. The Employee shall be entitled each year to a
vacation of a reasonable amount during which time his
compensation shall be paid in full.
8. Disability.
(a) Should the Employee, by reason of illness or
incapacity, be unable to perform his job for a period of up to
and including a maximum of 3 months, the compensation payable to
him for and during such period under this Agreement shall be
unabated. The Board of Directors shall have the right to
determine the incapacity of the Employee for the purposes of this
provision, and any such determination shall be evidenced by its
written opinion delivered to the Employee. Such written opinion
shall specify with particularity the reasons supporting such
opinion and be manually signed by at least a majority of the
Board.
(b) The Employee's compensation thereafter shall be
reduced to zero. The Employee shall receive full compensation
upon his return to employment and regular discharge of his full
duties hereunder. Should the Employee be absent from his
employment for whatever cause for a continuous period of more
than 365 calendar days, the Company may terminate this Agreement
and all obligations of the Company hereunder shall cease upon
such termination.
9. Termination. (a) The Company may terminate this
Agreement with cause at any time under immediate notice to the
Employee thereof, and such notice having been given, this
Agreement shall terminate in accordance therewith. For the
purpose of this Section 9, "cause" shall be defined as meaning
such conduct by the Employee which constitutes in fact and/or law
a breach of fiduciary duty or felonious conduct having the
effect, in the opinion of the Board of Directors, of materially
adversely affecting the Company and/or its reputation.
(b) The Employee may terminate this Agreement without
cause by giving 90 days written notice to the Company, and such
notice having been given, this Agreement shall terminate in
accordance therewith.
10. Confidentiality. The Employee shall not divulge to
others any information he may obtain during the course of his
employment relating to the business of the Company without first
obtaining written permission of the Company.
11. Notices. All notices, demands, elections, opinions or
requests (however characterized or described) required or
authorized hereunder shall be deemed given sufficiently if in
<PAGE>
writing and sent by registered or certified mail, return receipt
requested and postage prepaid, or by tested telex, telegram or
cable to, in the case of the Company:
Wallstreet Racing Stables, Inc.
5525 Erindale Drive, Suite 201
Colorado Springs, Colorado 80918
and in the case of the Employee:
Mr. Raymond E. McElhaney
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918
12. Assignment of Agreement. No party may assign or
otherwise transfer this Agreement or any of its rights or
obligations hereunder without the prior written consent to such
assignment or transfer by the other party hereto; and all the
provisions of this Agreement shall be binding upon the respective
employees, delegates, successors, heirs and assigns of the
parties.
13. Survival of Representations, Warranties and Covenants.
This Agreement and the representations, warranties, covenants and
other agreements (however characterized or described) by both
parties hereto and contained herein or made pursuant to the
provisions hereof shall survive the execution and delivery of
this Agreement and any inspection or investigation made at any
time with respect to any thereof until any and all monies,
payments, obligations and liabilities which either party hereto
shall have made, incurred or become liable for pursuant to the
terms of this Agreement shall have been paid in full.
14. Further Instruments. The parties shall execute and
deliver any and all such other instruments and shall take any and
all such other actions as may be reasonably necessary to carry
the intent of this Agreement into full force and effect.
15. Severability. If any provisions of this Agreement
shall be held, declared or pronounced void, voidable, invalid,
unenforceable or inoperative for any reason by any court of
competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely
any other provision of this Agreement, which shall otherwise
remain in full force and effect and be enforced in accordance
with its terms and the effect of such holding, declaration or
pronouncement shall be limited to the territory or jurisdiction
in which made.
16. Waiver. All the rights and remedies of either party
under this Agreement are cumulative and not exclusive of any
other rights and remedies provided by law. No delay or failure
on the part of either party in the exercise of any right or
remedy arising from a breach of this Agreement shall operate as a
waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party
where required hereunder to any act of occurrence shall not be
deemed to be a consent to any other act of occurrence.
<PAGE>
17. General Provisions. This Agreement shall be construed
and enforced in accordance with, and governed by, the laws of the
State of Colorado. Except as otherwise expressly stated herein,
time is of the essence in performing hereunder. This Agreement
embodies the entire agreement and understanding between the
parties and supersedes all prior agreements and understanding
relating to the subject matter hereof, and this Agreement may not
be modified or amended or any term of provision hereof waived or
discharged except in writing signed by the party against whom
such amendment, modification, waiver of discharge is sought to be
enforced. The headings of this Agreement are for convenience in
reference only and shall not limit or otherwise affect the
meaning thereof. The Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all
of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
THE COMPANY: THE EMPLOYEE:
WALLSTREET RACING STABLES, INC.
By: /s/ Bill M. Conrad /s/ Raymond E. McElhaney
Title: Vice-President Raymond E. McElhaney
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, effective as of the 1st day of
June, 1997, by and between WALLSTREET RACING STABLES, INC., a
Colorado Company with its principal place of business located at
5525 Erindale Drive, Suite 201, Colorado Springs, Colorado 80918
(hereinafter referred to as "Company" or "Employer") and BILL M.
CONRAD (the "Employee").
The Company hereby employs the Employee and the Employee
hereby accepts employment on the terms and conditions hereinafter
set forth.
1. Term. Subject to the provisions for termination
hereinafter provided, the initial term of this Agreement shall
commence on June 1, 1997 and terminate on December 31, 1998, and shall
continue thereafter on a year to year basis unless terminated by
the Company by delivery of written notice to the Employee not later
than thirty (90) days prior to the date for termination as indicated
in said notice.
2. Compensation and Performance Review
(a) For all services rendered by the Employee under
this Agreement, commencing September 1, 1997, the Company shall
be obligated to pay the Employee a monthly salary of $2,000.00
per month thereafter and continuing on the first day of each
month thereafter during the term of this Agreement.
(b) Following the first anniversary of this Agreement
(namely, on June 1, 1998, or as soon thereafter as practicable),
and following each anniversary, if any, thereafter, the Company shall
grant the Employee a performance and salary review for the purposes of
gauging the performance of the Employee for the preceding year and
adjusting the salary of the Employee hereunder looking to the results of
such review and the Company's financial progress, among other things, as
guides in such adjustments; provided, however, compensation payable to the
Employee pursuant to this provision shall in no event be reduced from that
fixed by Subparagraph (a) in this Section 2.
3. Duties. Employee is engaged as the Vice-President/
Secretary/ Treasurer of the Company. In such capacities, Employee
shall exercise detailed supervision over the operations of the
Company subject, however, to control by the Board of Directors.
The Employee shall perform all duties incident to the title of
Vice-President/Secretary/Treasurer and such other duties as from
time to time may be assigned to him by the Board of Directors.
4. Best Efforts of Employee. The Employee shall devote
such time as is necessary or as deemed necessary by the Board of
Directors to carry out the duties required of him by the Company
and will devote that time to the Company during normal business
hours. The Employee shall at all times faithfully, with diligence
and to the best of his ability, experience and talents, perform
all the duties that may be required of and from him pursuant to
the express and implicit terms hereof to the reasonable
satisfaction of the Company. Such services shall be rendered at
such other place or places as the Company shall in good faith
require or as the interest, needs, business or opportunity of the
Company shall require.
<PAGE>
5. Working Facilities. The Employee shall be furnished
with all such facilities and services suitable to his position
and adequate for the performance of his duties.
6. Expenses. The Employee is authorized to incur
reasonable expenses for promoting the business of the Company,
including his out-of-pocket expenses for entertainment, travel
and similar items. The Company shall reimburse the Employee for
all such expenses on the presentation by the Employee, from time
to time, of an itemized account of such expenditures in
accordance with the guidelines set forth by the Internal Revenue
Service for travel and entertainment.
7. Vacation. The Employee shall be entitled each year to a
vacation of a reasonable amount during which time his
compensation shall be paid in full.
8. Disability.
(a) Should the Employee, by reason of illness or
incapacity, be unable to perform his job for a period of up to
and including a maximum of 3 months, the compensation payable to
him for and during such period under this Agreement shall be
unabated. The Board of Directors shall have the right to
determine the incapacity of the Employee for the purposes of this
provision, and any such determination shall be evidenced by its
written opinion delivered to the Employee. Such written opinion
shall specify with particularity the reasons supporting such
opinion and be manually signed by at least a majority of the
Board.
(b) The Employee's compensation thereafter shall be
reduced to zero. The Employee shall receive full compensation
upon his return to employment and regular discharge of his full
duties hereunder. Should the Employee be absent from his
employment for whatever cause for a continuous period of more
than 365 calendar days, the Company may terminate this Agreement
and all obligations of the Company hereunder shall cease upon
such termination.
9. Termination. (a) The Company may terminate this
Agreement with cause at any time under immediate notice to the
Employee thereof, and such notice having been given, this
Agreement shall terminate in accordance therewith. For the
purpose of this Section 9, "cause" shall be defined as meaning
such conduct by the Employee which constitutes in fact and/or law
a breach of fiduciary duty or felonious conduct having the
effect, in the opinion of the Board of Directors, of materially
adversely affecting the Company and/or its reputation.
(b) The Employee may terminate this Agreement without
cause by giving 90 days written notice to the Company, and such
notice having been given, this Agreement shall terminate in
accordance therewith.
10. Confidentiality. The Employee shall not divulge to
others any information he may obtain during the course of his
employment relating to the business of the Company without first
obtaining written permission of the Company.
11. Notices. All notices, demands, elections, opinions or
requests (however characterized or described) required or
authorized hereunder shall be deemed given sufficiently if in
<PAGE>
writing and sent by registered or certified mail, return receipt
requested and postage prepaid, or by tested telex, telegram or
cable to, in the case of the Company:
Wallstreet Racing Stables, Inc.
5525 Erindale Drive, Suite 201
Colorado Springs, Colorado 80918
and in the case of the Employee:
Mr. Bill M. Conrad
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918
12. Assignment of Agreement. No party may assign or
otherwise transfer this Agreement or any of its rights or
obligations hereunder without the prior written consent to such
assignment or transfer by the other party hereto; and all the
provisions of this Agreement shall be binding upon the respective
employees, delegates, successors, heirs and assigns of the
parties.
13. Survival of Representations, Warranties and Covenants.
This Agreement and the representations, warranties, covenants and
other agreements (however characterized or described) by both
parties hereto and contained herein or made pursuant to the
provisions hereof shall survive the execution and delivery of
this Agreement and any inspection or investigation made at any
time with respect to any thereof until any and all monies,
payments, obligations and liabilities which either party hereto
shall have made, incurred or become liable for pursuant to the
terms of this Agreement shall have been paid in full.
14. Further Instruments. The parties shall execute and
deliver any and all such other instruments and shall take any and
all such other actions as may be reasonably necessary to carry
the intent of this Agreement into full force and effect.
15. Severability. If any provisions of this Agreement
shall be held, declared or pronounced void, voidable, invalid,
unenforceable or inoperative for any reason by any court of
competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely
any other provision of this Agreement, which shall otherwise
remain in full force and effect and be enforced in accordance
with its terms and the effect of such holding, declaration or
pronouncement shall be limited to the territory or jurisdiction
in which made.
16. Waiver. All the rights and remedies of either party
under this Agreement are cumulative and not exclusive of any
other rights and remedies provided by law. No delay or failure
on the part of either party in the exercise of any right or
remedy arising from a breach of this Agreement shall operate as a
waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party
where required hereunder to any act of occurrence shall not be
deemed to be a consent to any other act of occurrence.
<PAGE>
17. General Provisions. This Agreement shall be construed
and enforced in accordance with, and governed by, the laws of the
State of Colorado. Except as otherwise expressly stated herein,
time is of the essence in performing hereunder. This Agreement
embodies the entire agreement and understanding between the
parties and supersedes all prior agreements and understanding
relating to the subject matter hereof, and this Agreement may not
be modified or amended or any term of provision hereof waived or
discharged except in writing signed by the party against whom
such amendment, modification, waiver of discharge is sought to be
enforced. The headings of this Agreement are for convenience in
reference only and shall not limit or otherwise affect the
meaning thereof. The Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all
of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
THE COMPANY: THE EMPLOYEE:
WALLSTREET RACING STABLES, INC.
By: /s/ Raymond E. McElhaney /s/ Bill M. Conrad
Title: President Bill M. Conrad
KISH LEAKE & ASSOCIATES, P.C.
Certified Public Accountants
J.D. Kish, C.P.A., M.B.A. 7901 E. Belleview Ave., Suite 220
James D. Leake, C.P.A., M.T. Englewood, Colorado 80111
-------------------- Telephone (303) 779-5006
Arleen R. Brogan, C.P.A. Facsimile (303) 779-5724
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form SB-2 of our report dated May 20,
1997, relating to the financial statements of Wallstreet Racing Stables,
Inc. for the fiscal year ended June 30, 1996 and the period July 18, 1995
(inception) to June 30, 1996.
/s/ Kish, Leake and Associates, P.C.
Kish, Leake and Associates, P.C.
Certified Public Accountants
June 13, 1997
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 6/97 FORM
SB-2 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM SB-2.
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<NAME> WALLSTREET RACING STABLES, INC.
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 6/97 FORM
SB-2 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FROM SB-2.
</LEGEND>
<CIK> 0001040751
<NAME> WALLSTREET RACING STABLES, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
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