FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission file number 0-23823
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WALLSTREET RACING STABLES, INC.
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(Exact name of registrant as specified in its charter)
Colorado 84-1313024
- ------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5525 Erindale Drive, Suite 201, Colorado Springs, Colorado 80918
- ---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(719) 260-8509
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes XX No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Class of Stock Amount Outstanding
----------------- --------------------------
$.001 par value 894,950 shares outstanding
Common Stock at November 13, 1998
<PAGE>
WALLSTREET RACING STABLES, INC.
Index
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements............................1-4
Item 2. Management's Discussion and Analysis Or
Plan of Operation...............................5-7
Part II - OTHER INFORMATION....................................7
SIGNATURES.....................................................8
ii
<PAGE>
Wallstreet Racing Stables, Inc.
Balance Sheets
- -------------------------------------------------------------------
Unaudited Audited
September June
30, 1998 30, 1998
ASSETS -------- --------
- ------
Current Assets:
Cash $42,142 $68,936
Accounts Receivable 7,889 665
Deposits 0 100
Prepaid Income Taxes 378 0
Prepaid Expenses 1,618 548
----- ---
Total Current Assets 52,027 70,249
------ ------
Property And Equipment
Racehorses 70,650 54,438
------ ------
Total 70,650 54,438
Accumulated Depreciation (20,232) (19,560)
------ ------
Net Property And Equipment 50,418 34,878
------ ------
TOTAL ASSETS $102,445 $105,127
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable - Trade 49,443 11,888
Accrued Salaries 10,000 0
Payroll Taxes Payable 140 0
Total Current Liabilities 59,583 11,888
------ ------
Long-Term Liabilities 0 0
- -
TOTAL LIABILITIES 59,583 11,888
------ ------
SHAREHOLDERS' EQUITY
Preferred Stock - $.01 Par Value, 5,000,000
Shares Authorized; -0- Shares Issued And
Outstanding 0 0
Common Stock - $.001 Par Value, 15,000,000
Shares Authorized; 894,950 Shares Issued and
Outstanding 895 895
Capital Paid In Excess Of Par Value 459,336 459,336
Retained (Deficit) (417,369) (366,992)
------- -------
TOTAL SHAREHOLDERS' EQUITY 42,862 93,239
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $102,445 $105,127
======== ========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
1
<PAGE>
Wallstreet Racing Stables, Inc.
Statement Of Operations
- ------------------------------------------------------------------------
Unaudited Unaudited
For The For The
Three Month Three Month
Interim Per Interim Period
Ended Ended
September September
30, 1998 30, 1997
-------- --------
Revenue - Purses $7,690 $126
------ ----
Operating Expenses:
Advertising 0 60
Boarding And Training 6,641 12,298
Commissions 0 1,800
Depreciation 3,283 2,885
Filing and Recording Fees 1,323 0
Horseshoeing expense 466 550
Horse Transportation 1,117 299
Impairment of Asset 2,777 0
Insurance 244 2,008
Jockey Fees 901 126
Legal And Accounting 12,463 4,550
Listing Fees 3,975 0
Office 2,381 4,543
Payroll Taxes 207 0
Race Expenses 1,686 1,703
Rent 1,500 1,500
Salaries 12,000 8,000
Telephone 728 495
Travel And Entertainment 3,632 7,197
Vet Expenses 3,327 3,355
------ ------
Total Operating Expenses 58,651 51,369
------ ------
(Loss) From Operations (50,961) (51,243)
------ ------
Other Income (Expense):
Interest Income 591 33
Interest (Expense) (7) (215)
Total Other Income (Expense) 584 (182)
--- ---
(Loss) Before Taxes (50,377) (51,425)
Income Tax Expense 0 0
Net (Loss) ($50,377) ($51,425)
======= =======
Weighted Average Common Shares Outstanding 894,950 697,000
(Loss) Per Share (0.06) (0.07)
==== ====
The Accompanying Notes Are An Integral Part Of These Financial Statements.
2
<PAGE>
Wallstreet Racing Stables, Inc.
Cash Flow Statements
- ------------------------------------------------------------------------
Unaudited Unaudited
For The For The
Three Month Three Month
Interim Per Interim Period
Ended Ended
September September
30, 1998 30, 1997
-------- --------
Net (Loss) ($50,377) ($51,425)
Items Not Affecting Cash Flow:
Depreciation 3,283 2,885
Contribution of Services 0 4,000
Impairment of Horse 2,777 0
(Increase) Decrease In Receivable (7,224) (75)
(Increase) Decrease In Prepaid Expenses (1,448) 1,080
(Increase) Decrease In Deposits 100 0
Increase In Accounts Payable 37,555 33,350
Increase in Accrued Interest 0 121
Increase In Accrued Salaries 10,000 4,000
Increase In Payroll Taxes Payable 140 0
--- -
Net Cash Flows Provided From (Used By) Operations (5,194) (6,064)
----- -----
Cash Flows From Investing Activities:
Purchase Of Horses (21,600) (16,200)
------ ------
Net Cash Flows Provided From (Used By) Investing (21,600) (16,200)
------ ------
Cash Flows Provided From Financing Activities:
Note Payable - Shareholder 0 15,000
Net Cash Flows Provided From (Used By) Financing 0 15,000
- ------
Net Increase In Cash (26,794) (7,264)
Cash At Beginning Of Period 68,936 12,087
------ ------
Cash At End Of Period $42,142 $4,823
======= ======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
3
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to the Unaudited Financial Statements
For the Three Month Period Ended September 30, 1998
- ---------------------------------------------------
Note 1 - 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 interim period presented. The adjustments consist
only of normal reoccurring accruals. The results of operations for
the three month interim period ended September 30, 1998 are not
necessarily indicative of the results to be expected for the fiscal
year ended June 30, 1999.
Note 2 - Financial Statements
- -----------------------------
Management has elected to omit substantially all footnotes relating to
the condensed financial statements of the Company included in this
Report. For a complete set of footnotes, reference is made to the
Company's Annual Report on Form 10-KSB for the year ended June 30,
1998 as filed with the Securities and Exchange Commission and the
audited financial statements included therein.
Note 3 - Subsequent Events
- --------------------------
In November, 1998, a six-year old thoroughbred gelding in which the
Company owns a 15% interest won the winner's share of the $1,000,000
Breeder's Cup Mile.
Also in November, 1998, a four year old gelding owned by the Company
was claimed for $5000 in a claiming race. This horse was previously
acquired in August, 1998 by the Company.
4
<PAGE>
WALLSTREET RACING STABLES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
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, tax legislation and the overall state of
the 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. Except as otherwise
required by applicable securities statutes or regulations, 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.
Liquidity and Capital Resources
The liquidity and working capital of Wallstreet Racing Stables,
Inc. ("Company") decreased from fiscal year end June 30, 1998 to
September 30, 1998. Working capital decreased an aggregate of $65,917
from fiscal year end to September 30, 1998 as a result of cash applied
to operations and acquisition of additional race horses. At September
30, 1998, the Company had a working capital deficit of $7,556,
consisting of $52, 027 of current assets and $59, 583 of current
liabilities. The Company remains dependent on obtaining additional
assets and achieving profitable operations and/or obtaining additional
debt or equity financing to continue as a going concern and to realize
its assets.
The Company's liquidity was affected by its continuing need for
working capital during the first quarter of fiscal 1999. Current
assets of cash and accounts receivable would be extinguished by
payment of outstanding accounts payable. Management has accrued
salaries to assist the Company in meeting its liquidity needs.
However, the Company's liquidity was improved subsequent to the end of
the quarter as a result of the performance of one of its racehorses.
A thoroughbred in which the Company owns a 15% interest won the 60%
winner's share of the Breeders Cup Mile at Churchill Downs in
November, 1998. As a result, the Company will receive its portion of
the winner's purse, net of expenses associated with the race. Those
proceeds will assist the Company in meeting its liquidity needs for
the immediate future.
Historically, the Company has relied on the proceeds of equity
financing and advances from shareholders to continue operations.
Management anticipates the Company will continue to require cash from
outside sources until the Company can obtain sufficient assets to
generate additional revenues and achieve profitability. After taking
into account an increase in accounts payable and accrued salaries,
5
<PAGE>
together with items not requiring cash such as depreciation and the
write-down of an asset, the Company's operations used approximately
$5,200 of cash during the first fiscal quarter. The Company also
spent approximately $22,000 on the acquisition of new thoroughbreds.
Management believes additional investment in its stable of
thoroughbreds will be required to enhance revenues and achieve
profitability. Such acquisitions can only be made with additional
working capital from outside sources or with the sale or syndication
of existing assets. Management is continually reviewing opportunities
to obtain such assets, either alone or in conjunction with independent
third-parties in an effort to increase revenues and cash flow.
Results of Operations
During the three month period ended September 30, 1998, the
Company realized a net loss of $50,377 (or $0.06 per share) on
revenues of $7,690, compared to a net loss of $51,425 on revenues of
$126 for the three month period ended September 30, 1997. Revenues
increased from the three month period ended September 30, 1997 to the
three month period ended September 30, 1998 as a result of the
Company's ownership of additional thoroughbreds in racing and race
purses generated by those horses. During the first fiscal quarter of
1997, the Company had a limited number of horses in racing.
Race results continue to be unpredictable and the Company has yet
to develop a stable of horses sufficient to generate revenue on a
continuing basis. The Company's long-term objective is to develop a
stable of horses sufficient to generate revenues in an amount
sufficient to cover expenses and with some degree of certainty. That
objective, in turn, is dependent upon receipt of additional working
capital, or proceeds from the sale or syndication of existing horses,
as discussed above.
Expenses remained relatively constant from the first quarter of
fiscal 1998 to the first quarter of fiscal 1999. Boarding and
training actually decreased from fiscal 1998 to 1999, as a result of
management's efforts to control costs and negotiate favorable
arrangements with its trainers. Other expenses associated with care
and maintenance of the horses remained relatively constant.
Most overhead expenses increased from the first fiscal quarter of
1998 to the comparable period of 1999. Legal and accounting increased
approximately $8,000 as a result of expenses associated with
preparation and filing of the Company's Annual Report. Listing fees
increased approximately $4,000 as a result of the Company becoming
listed on Standard & Poor's. Salaries increased $4,000 from the first
quarter of 1998 to the first quarter of 1999, as the Company's
officers accrued more salary. However, travel and entertainment
decreased as a result of reduced efforts to investigate and acquire
additional thoroughbreds.
The Company also recorded an impairment of $2,777 as a result of
the loss of one of its thoroughbreds. This horse was injured in
training and subsequently destroyed.
6
<PAGE>
Management anticipates that the Company will continue losses
until such time, if ever, the Company obtains sufficient assets to
generate revenues in an amount adequate to cover expenses, including
non-cash expenses such as depreciation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No report required.
Item 2. Changes in Securities.
Proceeds received from the Company's public offering
completed in June, 1998 were applied as follows during the first
quarter of fiscal 1999:
Purpose
-------
3 Months Ended
Sept. 30, 1998 Total Proceeds
-------------- --------------
General and administrative $9,158 $22,942
Veterinarian 1,510 2,787
Boarding and training 8,598 31,947
Travel and entertainment 7,225 21,455
Legal and accounting -0- 11,225
Racing expense 715 1,520
Debt repayment -0- 19,228
Temporary investments -0- 9,836
-------
$120,940
Item 3. Defaults Upon Senior Securities.
No report required.
Item 4. Submission of Matters to a Vote of Security Holders.
No report required.
Item 5. Other Information.
No report required.
7
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits:
None.
B. Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
WALLSTREET RACING STABLES, INC.
Date: November 16, 1998 By: /s/ Raymond E. McElhaney
----------------- ---------------------------------
Raymond E. McElhaney, President,
Chief Executive Officer, Chief
Financial Officer and Chairman of
the Board of Directors
(Principal Executive Officer)
Date: November 16, 1998 By: /s/ Bill M. Conrad
----------------- ---------------------------------
Bill M. Conrad, Vice-President,
Secretary, Treasurer and Director
(Principal Financial Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 9/30/98 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<CIK> 0001040751
<NAME> WALLSTREET RACING STABLES, INC.
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