FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended June 30, 1998 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-23823
WALLSTREET RACING STABLES, INC.
_______________________________
(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)
Registrant's telephone number, including area code: (719) 260-8509
______________
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Shares, $.001 par value
______________________________
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days. Yes X No
<PAGE>
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B in this form, and no disclosure
will be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The Registrant's revenues for the most recent fiscal year were
$16,154.
The aggregate market value of the 311,183 Common Shares held by
nonaffiliates of the Company as of September 1, 1998, was
approximately $485,445 based upon the last reported sale of the
Company's Common Shares of $ 1.56 per share.
The total number of Common Shares outstanding as of September 30,
1998 was 894,950.
DOCUMENTS INCORPORATED BY REFERENCE:
None
Transitional Small Business Disclosure Format: Yes No X
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TABLE OF CONTENTS
PART I
Page
Items 1 and 2. Business and Properties............ 1
Item 3. Legal Proceedings.................. 10
Item 4. Submission of Matters to a Vote
of Security Holders ............... 10
Item 5. Market for Registrant's Securities
and Related Shareholders Matters... 10
Item 6. Management's Discussion and Analysis
or Plan of Operation............... 12
Item 7. Financial Statements and
Supplementary Data................. 15
Item 8. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... 15
PART II
Item 9. Directors, Executive Officers and
Compliance with Section 16(a) of
the Exchange Act................... 15
Item 10. Executive Compensation............. 18
Item 11. Security Ownership of Certain
Beneficial Owners and Management... 19
Item 12. Certain Relationships and Related
Transactions....................... 20
Glossary of Terms.................. 22
PART IV
Item 13. Exhibits, Reports on Form 8-K and
And Financial Statements........... 23
Signature Page.................................... 25
Index to Financial Statements..................... 26
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Additional Information
Descriptions in this Report are qualified by reference to
the contents of any contract, agreement or other documents and
are not necessarily complete. Reference is made to each such
contract, agreement or document filed as an exhibit to this
Report, or previously filed by the Company pursuant to
regulations of the Securities and Exchange Commission (the
"Commission"). (See "Item 13. Exhibits, Financial Statements,
Schedules and Reports on Form 8-K.")
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. 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.
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ITEMS 1. AND 2. BUSINESS AND PROPERTIES
See page 21 of this Report for a glossary of terms used herein.
Background
Wallstreet Racing Stables, Inc. ("Company") is a Colorado
corporation organized on July 18, 1995. The Company completed
its initial public offering in June, 1998, following the sale of
127,850 Common Shares for gross proceeds of $127,850. Concurrent
with registration of its securities under the Securities Act of
1933, the Company registered under Section 12(g) of the
Securities Exchange Act of 1934. The Company's Common Shares are
currently traded in the over the counter market and quoted in the
NASD Bulletin Board under the symbol "WRSB." The Company
presently has approximately 100 shareholders.
Narrative Description of Business
The Company currently owns a number of Thoroughbred race
horses and is engaged in the business of racing. The Company
generally owns a majority interest in each of the Thoroughbreds
and contracts training and stabling of such horses to independent
third parties. The Company owns no training or stabling
facilities of its own. The Company's horses are stabled in
various locations in the United States, primarily the mid-west
and east coast regions. Through the fiscal year ended June 30,
1998, the Company's efforts were primarily limited to
organization, obtaining initial financing and acquiring its
stable of Thoroughbreds.
A majority of the horses in which the Company had an
interest at June 30, 1998 were acquired as yearlings at public
auction. Thoroughbred race horses can be obtained by a number of
means, including ownership and breeding of the broodmare,
purchase through private sale or public auction, or claiming at a
race track. The Company's strategy to date has been to acquire
its Thoroughbreds as yearlings at a public auction and raise them
to compete in races. Public sales and premier races of
thoroughbreds are primarily centered in Kentucky, California, New
York and Florida. The annual September yearling sale in
Keeneland, Kentucky is the largest public auction of its kind in
the world.
The Company's strategy since inception has been to acquire
and maintain a stable of race horses adequate to compete in the
middle to upper echelons of the Thoroughbred horse racing
industry. Toward that end, as of the date of this filing, the
Company has acquired interests in eight Thoroughbreds.
Management hopes to add to this stable of horses consistently in
the future, working capital permitting. All of the horses owned
by the Company as of the date of this filing with the exception of
the two yearlings are either actively engaged in racing or preparing
or training for their racing careers. As of the date of filing
this Report, three of the horses are trained by Kelly Ackerman of
Carmi, Illinois, two are trained by Michael Dickinson in Maryland
and one horse is trained by Dean Sandstead in Colorado. For a
more complete description of the Company's Thoroughbreds, see "-
Description of Thoroughbreds" below.
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Management continually evaluates its stable of Thoroughbreds
to investigate opportunities to add other quality horses. Such
determination is generally made prior to the Keeneland September
sale of each year. Working capital permitting, management
generally attends that sale on an annual basis to investigate and
evaluate opportunities to add to its existing stable. During the
year ended June 30, 1998, the Company acquired one Thoroughbred
colt, Afternoon Stroll. Subsequent to year end, the Company
acquired interests in three additional Thoroughbreds, Little Big
Horn, Red Phantom, and a Filly by Quiet American. For a more
complete description of those horses, see "-Description of
Thoroughbreds" below.
Important factors in predicting racing success of
Thoroughbreds 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 retains the
services of outside consultants and veterinarians to assist in
evaluation of Bloodstock. Given the very large number of
prospects placed into the market in any given year, management
anticipates that it may be necessary to enlist the aid of
Bloodstock agents in locating Thoroughbreds suitable to the
Company's purpose in the future.
Description of Thoroughbreds
As of the date of this filing the Company has an interest in
eight Thoroughbreds, ranging from two Yearlings to a six-year old
Gelding. Four of the Thoroughbreds were acquired during 1996, a
two-year old was acquired in September, 1997 and three
Thoroughbreds were acquired in September, 1998. The following
table summarizes certain information with regard to the Company's
Thoroughbreds as of June 30, 1998(1):
Name of Horse Characterization Date Acquired % of Ownership
_____________ ________________ _____________ ______________
Da Hoss 6 year old Gelding January 1, 1996 15%
El Gato Grande 3 year old Colt September 12, 1996 90%
Burnt Timber 3 year old Colt September 12, 1996 90%
Ipanema Paradise(2) 3 year old Filly September 14, 1996 25%
Afternoon Stroll 2 year old Colt September 11, 1997 90%
_____________________________
(1) Subsequent to year end, the Company acquired three additional
horses including a four-year-old Colt known as "Little Big Horn", a
Yearling Colt known as "Red Phantom", and a Yearling Filly yet to be
named, known as "the Quiet American Filly".
(2) This horse was euthanized in September, 1998 following an
injury incurred in training.
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Information summarized in the table regarding each of the
Thoroughbreds is discussed in more detail below.
Da Hoss
Effective January 1, 1996, the Company acquired a 15%
interest in Da Hoss, a multiple stakes winning six-year old
Thoroughbred Gelding. Da Hoss 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 injured while preparing for his 1997 racing
campaign. In May, 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, later that month, Da Hoss underwent tendon
splitting surgery. Following a period of recovery lasting
approximately seven months, Da Hoss commenced training in
anticipation of resuming his racing career in 1998. He returned
to training with Michael Dickinson on November 15, 1997, is
currently boarded at Tapeta Farm, Maryland and continues in that
capacity as of the date of this filing. It is anticipated that
his first race after recovery from this injury will be in October
1998, with the ultimate goal to race in the next Breeders Cup in
November, 1998. However, there is no assurance he can
successfully return to racing following this surgery.
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.
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
Stakes placed in England, who had approximate winnings of
$263,000 in his first year of racing as a two year old. As the
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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 has raced the summer of 1998 under trainer Kelly
Ackerman of Carmi, Illinois. He has won two of his nine races in
1998. His 1998 wins included a maiden race at Sportsman's Park
in Chicago and a $5,000 claiming race. He finished third in his
last race third on September 4, 1998. His total earnings are
$13,879.
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). 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.
Burnt Timber is being trained by Michael Dickinson of
Maryland. Following his initial training as a two-year old,
Burnt Timber has started eight races through September, 1998.
His race record is one win and one show (third place). He
finished third in his last race the Premier Stakes at Arapahoe
Park in September, 1998. His total earning are $10,375.
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. Ipanema Paradise
was injured in a training accident at Ellis Park. She broke her
pelvis and was euthanized. She had started once at Ellis Park
and had finished fourth in a Maiden Special Weight race. Her total
earnings were $1,165.
Afternoon Stroll
The Company acquired a 90% interest in this dark bay or
brown Colt at the 1997 Keeneland September Yearling Sale for
$18,000. This Colt was sired by Strolling Along, himself a
stakes winner of six races in the total amount of $450,852.
Strolling Along won the Futurity Stakes (Grade I), the Gulfstream
Park Budweiser Breeder's Cup Handicap (Grade II) and the Lawrence
Realization Stakes (Grade III). Foals sired by Strolling Along
during 1996 were his only crop, as Strolling Along died during
that year. The Dam of Afternoon Stroll, Sippewisset, was sired
by Damascus and a winner of $9,150 at age 2. Sippewisset also
foaled Money Run, the winner of three races ages two to six and
stakes placed in the Stanford Stakes (Grade III). Afternoon
Stroll is currently training in Colorado under Dean Sandstead to
commence his racing campaign. He will be evaluated and a
decision will be made as to where he should race.
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Little Big Horn
The Company acquired 100% of a four year old Gelding named
Little Big Horn on August 27, 1998 by claiming him at Ellis Park
for the total cost of $5300. He was bred in Texas and is by
Amber Sioux out of Silver Concho by Silver Ghost. Silver Ghost
stands at Vinery Stud in Midway, Kentucky and has eight crops
racing for total earnings of $7,523,987. Silver Ghost's yearlings
at auctions average $57,000, and his stud fee is $10,000 live
foal. Silver Ghost is by Mr. Prospector, a world premier sire.
Little Big Horn is being trained by Kelly Ackerman in Carmi,
Illinois. He has raced in a total of 27 races and has six wins,
three second place finishes and four third place finishes. His
total earnings are $68,763.
Red Phantom
The Company acquired a 50% interest in Red Phantom, a
Yearling Colt, at the Keeneland September Sale for $3,500. His
sire, Red Ransom, stands at stud in 1998 for $35,000 live foal and
his yearlings last year averaged over $100,000 in sales price.
Red Ransom has sired 19 stakes winners. Red Ransom's sire is
Roberto who won seven Stakes races and was a champion 2 year old
colt in Ireland. Roberto has sired 86 stakes winners and has
many successful sons at stud. Red Phantom's Dam is Sunshine
Linda, who is the Dam of eight other registered foals, including
Wild Linda, a filly by Wild Again with earnings of $161,347.
When Red Phantom begins training in October of 1998, Kelly Ackerman
of Carmi, Illinois will be his trainer.
Quiet American Filly
The Company also acquired 100% of a Yearling Filly, the Quiet
American Filly, at the Keeneland September Sale. She is out of
Kerygma, a graded stakes placed mare with earnings of
approximately $548,216. The Quiet American Filly is sired by Quiet
American, a grade one winner of $754,529 who has already sired many
stakes winners including this years Kentucky Derby winner, Real Quiet.
His stud fee is $20,000. Quiet American won the NYRA Mile at Aqueduct
in 1990 in 1.32 4/5 which was North America's fastest mile on dirt.
His fillies averaged $38,049 in sales over the last five years.
The Company has not decided on a name for the Quiet American Filly
and has not decided on a trainer.
Boarding of Company Thoroughbreds
As the Company does not own or operate any of its own
boarding facilities, it contracts with unrelated third parties to
provide boarding services. When Thoroughbred horses are not
actively engaged in training or racing, they are boarded at
facilities especially designed for that purpose. 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
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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
Tapeta Farm, Maryland, where he resumed training following
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. Finally, Afternoon
Stroll is boarded with trainer Dean Sandstead in Colorado, where
the Company is charged $10 per day.
The Company is an owner of a minority interest in Da Hoss
and contributes to, but does not have final say in, decisions
effecting his care and maintenance. As the owner of a majority
interest in the Colts, the Company is responsible for making
decisions which affect their care and maintenance.
Training
The Company retains the services of different individuals
for training as the needs of its Thoroughbreds dictate. El Gato
Grande, Little Big Horn and Red Phantom are currently trained by
Kelly Ackerman at Carmi, Illinois, located near Ellis Park Race
Track. The Company is charged $20 per day for this arrangement.
Da Hoss and Burnt Timber are currently stabled at Tapeta Farm
and trained by Michael Dickinson and are charged $55 per day.
Afternoon Stroll is currently stabled in Colorado and is trained
by Dean Sandstead. Management continuously evaluates training
arrangements in view of the needs and progress of various
Thoroughbreds.
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
During the fiscal year ended June 30, 1998, each of the
Company's Thoroughbreds which was physically qualified
participated in racing on the Company's behalf. Such races
occurred at various times and locations throughout the United
States. Races are selected by trainers engaged by the Company in
consultation with management. Evaluation of racing venues
depends primarily on recommendations of trainers retained by the
Company and the condition, training and breeding of Company
racing prospects.
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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.
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. Management seeks to run the Company's
Thoroughbreds 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.
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. 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 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. All of the
Company's Thoroughbreds are registered with the Jockey Club.
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Stable Name and Racing Colors
The Company's Thoroughbreds race under the stable name of
Wallstreet Racing Stables. Its silks are green and white.
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. The Company
currently maintains mortality and surgical insurance on its
interest in three of its horses, 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. Insurance was not obtained for
Ipanema Paradise, the Thoroughbred that was injured and
euthanized in September, 1998.
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. As of the date of the
filing of this Report, the Company maintained the following
mortality insurance on its Thoroughbreds: Burnt Timber, $9,500;
Afternoon Stroll, $18,000; and the Quiet American Filly, $16,000.
The amount of coverage on any particular horse is generally a
function of its perceived value; accordingly, the Company obtains
appraisals from brokers or insurance experts in order to
determine the appropriate level of insurance.
The cost of surgical insurance is not material to the
Company's business.
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 complies with the rules and regulations of that states'
racing commission.
Requirements for obtaining a racing license include the
filing of an application and payment of a registration fee.
Following these initial steps, research and investigation into
the applicant's personal and financial background is conducted by
the appropriate jurisdiction. While the Company is not privy to
deliberations by the various racing commissions regarding the
issuance of license, obstacles likely include past criminal
conduct or financial insolvency. The Company does not consider
the issuance of the requisite license to be a material obstacle
to the conduct of its business.
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The Company or its officers and directors will be required
to be licensed in each jurisdiction within which the Company
chooses to race its Thoroughbreds. Licenses are generally
obtained only in those jurisdictions where the Company
anticipates racing its prospects in the immediate future. All of
the officers and directors, together with Dewey Williams, the
owner of more than 5% of the Company's outstanding stock, are
currently licensed in the states of Colorado and Kentucky. Due
to the fact that such individuals are currently licensed in these
states, and have formerly been licensed in a number of other
states, it is not anticipated that the Company will incur any
obstacles to registration in the future. However, there is no
assurance that necessary registrations can be completed.
Competition
Competition in the thoroughbred industry is intense. The
Company faces 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 as
well as other owners and trainers 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 Dickinson, Kelly Ackerman, and Dean
Sandstead, 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")
Company Facilities
The Company maintains its administrative offices, its only
facilities, 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 lease also provides
administrative service, including reception and secretarial
services at an hourly rate and subject to availability. 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.
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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 have devoted
only a minor portion of their time to the Company during the year
ended June 30, 1998. 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.
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.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings to which the Company (or any
of its officers or directors in their capacities as such) is a
party or to which the property of the Company is subject is
pending and no such legal proceeding is known by management of
the Company to be contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held no shareholder's meeting during the fourth
fiscal quarter covered by this Report.
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED
SHAREHOLDER MATTERS
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 symbols "WRSB". The following table
sets forth the range of high and low bid quotations as reported
for the Common Shares 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.
10
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Common Shares
FISCAL YEAR 1997 High Low
___________________________________________________
Second Quarter $1.375 $1.250
(Oct. 1 through Dec. 31)
Third Quarter 1.375 0.125
(Jan. 1 through March 31)
Fourth Quarter 1.250 0.625
(April 1 through June 30)
FISCAL YEAR 1998
________________
First Quarter 1.000 0.875
(July 1 through Sept. 30)
Second Quarter 2.000 0.875
(Oct. 1 through December 31)
Third Quarter
(Jan. 1 through March 31) 2.000 2.000
Fourth Quarter 1.560 1.560
(Feb. 1 through June 30)
The number of record holders of the Common Shares as of June
30, 1998 was approximately 100, including nominees of beneficial
owners. The Company estimates that there are approximately 100
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.
11
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
Portions of the section include "forward looking statements"
within the meaning of the Private Securities Litigation Reform
Act of 1995. (See Note regarding forward looking statements,
Page iv of this filing).
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 profit through the
placement of Company Thoroughbreds in established races
throughout the United States. Management anticipates that
eventually, Company revenues and profit 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.
Results of Operations
Substantially all of the Company's revenues are obtained
from purses offered by races in which its Thoroughbreds
participate. As the Company matures, it may receive revenues
from the sale or syndication of its Thoroughbreds during or
following completion of their racing career. The Company had no
revenues from the sale or syndication of the Thoroughbreds during
the years ended June 30, 1998 or 1997. Expenses incurred by the
Company include operating expenses associated with training and
racing its Thoroughbreds, as well as administrative expenses.
Year Ended June 30, 1998
________________________
For the year ended June 30, 1998, the Company realized a net
loss of $141,278, or $.19 per share, on total revenues of
$16,154. Substantially all of the revenues represent purses
obtained by Thoroughbreds participating in races. Management
expects the Company will continue to incur losses until such
time, if ever, the Company obtains an interest in sufficient
Thoroughbreds to generate revenues sufficient to cover its
operating and overhead expenses. That, in turn, is dependent on
the Company obtaining additional working capital.
Primary expenses experienced by the Company during the year
ended June 30, 1998 include boarding and training, depreciation,
salaries, travel and entertainment. Boarding and training
increased $8,476 from the year ended June 30, 1997 to the year
ended June 30, 1998, primarily due to the larger number of
Thoroughbreds in which the Company had an interest during fiscal
12
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1998. Boarding and training is generally directly related to the
number of Thoroughbreds in which the Company has an interest.
Depreciation increased similarly from fiscal 1997 to 1998, from
$8,512 for the year ended June 30, 1997 to $12,400 for the year
ended June 30, 1998. This expense is also directly related to
the number of Thoroughbreds owned by the Company.
Salaries increased substantially from fiscal 1997 to 1998,
from aggregate salaries of $24,000 during fiscal 1997 to aggregate
salaries of $44,000 during fiscal 1998. During fiscal 1997 services
were donated and no cash was received. During fiscal 1998 the officers
accrued $44,000 worth of salary, of which $40,000 was paid in Common Shares
of stock valued at $1.00 per share and $4,000 worth of salary was donated.
This substantial increase is due to the fact that officers waived most of
their salary during fiscal 1997. With the increased time devoted to the
Company's affairs, the officers began drawing salary monthly effective
September 1, 1997. Travel and entertainment decreased from fiscal 1997 to
1998, from $23,893 for fiscal 1997 to $13,009 for fiscal 1998. This
decrease results from less activity associated with efforts to investigate
and acquire additional Thoroughbreds.
The Company also incurred interest expense of $3,098 during
the year ended June 30, 1998. This expense represents an
increase of $2,439 from fiscal 1997 and is related to the
increased borrowing utilized by the Company to fund operations
pending receipt of proceeds from the securities sales discussed
below.
Year Ended June 30, 1997
________________________
For the year ended June 30, 1997, the Company realized a
loss from operations of $52,881 on revenues of $104,802.
Including other income or expense, the net loss was $53,070, or
$(.08) per share. This compares to a net loss of $172,644, or
$(.34) per share for the period from inception through June 30,
1996. Revenues for the year ended June 30, 1997 represents the
Company's share of racing purses won by Da Hoss. Such amount
represents the Company's prorata share of Da Hoss's winning from
The Breeder's Cup Mile in October, 1996. Expenses from that
race, included in operating expenses, included jockey fees of
$10,358 and other race expenses of $20,613.
Other significant expenses include boarding and training
($24,959), legal and accounting ($9,982) primarily related to the
Company's status as a publicly traded company and the
accompanying legal and audit fees, officers' salaries of $24,000
and travel and entertainment of approximately $24,000. While the
Company recorded $24,000 of expense for officers' salaries, such
amount was contributed by the officers to capital, and no cash
was actually paid to such individuals.
Liquidity and Capital Resources
June 30, 1998
_____________
As of June 30, 1998, the Company's only commitment for
working capital was expenses associated with boarding, training
and racing of the Company's Thoroughbreds, together with general
and administrative expenses. Boarding and training expenses are
charged at a per diem rate ranging from $10 to $65, depending
upon the trainer. Racing expenses are variable. General and
administrative expenses include officers' salary, legal and
accounting, office and insurance. Based on the Company's working
13
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capital at June 30, 1998, management anticipates the Company will
need additional resources to complete the fiscal year ended June
30, 1999.
At June 30, 1998, the Company had working capital of
$58,361, consisting of current assets of $70,249 and current
liabilities of $11,888. Assuming the Company's expenses for
fiscal 1999 are similar to those experienced during fiscal 1998,
such working capital will be insufficient to fund operations for
the coming year. Management also hopes to acquire additional
Bloodstock during fiscal 1999. Management is of the opinion that
the Company is dependent upon obtaining additional capital and
achieving profitable operations to continue as a going concern.
As a majority of the races in which the Company's Thoroughbreds
participate are conducted during the summer and fall months,
management does not anticipate substantial revenues from racing
purses during fiscal 1999. Accordingly, management expects to
undertake additional efforts to obtain working capital during
fiscal 1999.
Historically, the Company has relied on the proceeds of sale
of equity securities, together with operating revenues, to
provide working capital to fund operations. During the year
ended June 30, 1998, the Company obtained net cash flow from
financing of $121,941. Such amount was comprised substantially
of the proceeds of a public offering of its common stock of
$127,850, completed in June, 1998. The Company offered up to
500,000 Common Shares on a best efforts basis for a period of 120
days, culminating in the sale of 127,850 shares. During the year
ended June 30, 1997, the Company received $58,500 of its
operating funds from the sale of common stock. The Company's
operation continued to use, rather than provide, cash. During
the year ended June 30, 1998, the Company's operations used
$61,461. This compares to funds used during fiscal 1997 of
$7,758. Management anticipates the Company's operations will
continue to use, rather than provide funds until such time the
Company obtains an interest in additional Thoroughbreds.
A portion of the funds utilized by the Company during fiscal
1998 included loans made by principal shareholders. The Company
borrowed up to $46,000 during fiscal 1998 to defer ongoing
expenses pending receipt of proceeds from the public offering
completed in June. Those notes were paid in full from the
proceeds of the public offering and by issuance of common stock
to the lenders.
In addition to $158,413 of ongoing expenses, the Company's
cash flows during fiscal 1998 were utilized to acquire additional
Thoroughbreds. During the year ended June 30, 1998, the Company
purchased one Yearling for $16,200. Offsetting that purchase
were the sale of two Thoroughbreds for cash. The Company sold a
twelve-year-old Broodmare in January, 1998. The foal of this
Broodmare was also sold in November, 1997, the Company's portion
of which was $10,500. The Company's share of the proceeds of
those sales, net of expenses and breeding fees, was $12,569.
The Company's officers have also contributed salary for
equity in an effort to conserve working capital. During the year
ended June 30, 1998, the officers converted $40,000 of salary
into common stock at the rate of $1.00 per share and the officers
donated $4,000 in services. Certain officers and directors also
converted outstanding loans in the amount of $29,100 at the same rate.
Such efforts have assisted the Company in preserving available working
capital.
14
<PAGE>
In addition to ongoing operating expenses, the Company
requires working capital to acquire additional Bloodstock and
expand its stable of horses. While the Company does not have any
commitments for such acquisitions, management believes the
Company's long-term success is dependent on generating additional
revenue through additional horses. As management does not
believe the Company has sufficient capital resources or cash flow
to justify debt financing, future acquisitions will likely depend
on sale of additional equity securities. However, specific
equity offerings are not contemplated at this time.
June 30, 1997
_____________
At June 30, 1997, the Company had a working capital deficit
of $274, consisting of current assets of $17,199 and current
liabilities of $17,473. The Company continues to require cash
from outside sources to continue operations, as the Company's
operations use, rather than provide, cash. For the year ended
June 30, 1997, the Company's operations utilized $7,758 of cash.
With limited exceptions, the Company financed all of its
operations through June 30, 1997 with the proceeds from the
private placement of equity securities. During the year ended
June 30, 1997, the Company sold an aggregate of 58,500 units for
proceeds of $58,500. Each unit sold in that offering consisted
of one (1) share of Common Stock and one (1) Common Stock
Purchase Warrant. All of these Warrants have now expired, a
substantial majority of which were unexercised. The remaining
cash has been obtained from the Company's share of purses won by
one of its Thoroughbreds during the year.
During the year ended June 30, 1997, the Company spent an
aggregate of $47,588 on the acquisition of horses. Additional
expenses, including boarding and training, sales commissions to
Bloodstock agents and general and administrative expenses totaled
$157,683 for the year ended June 30, 1997.
Management anticipates that the Company will experience a
need for working capital until such time, if ever, the Company
can interest an underwriter in conducting a substantial offering
of the Company's securities to obtain sufficient proceeds for an
extended period of time.
Use of Proceeds From Public Offering
____________________________________
In June, 1998, the Company completed its initial public
offering, following the sale of 127,850 Common Shares at the
price of $1.00 per share. Gross proceeds from the public
offering were $127,850. Concurrent with registration of its
securities under the Securities Act of 1933, the Company
registered under Section 12(g) of the Securities Exchange Act
of 1934.
The use of the proceeds does not represent a material change
in the use of the proceeds as described in the offering
prospectus. The expenses incurred by the Company in connection
with the offering was approximately $6,910 and the net proceeds
available to the Company after the offering was approximately
$120,940.
15
<PAGE>
The following table summarizes the use of the offering
proceeds for each of the purposes listed, as of June 30, 1998.
Purpose Proceeds
_______ ________
General and administrative $13,784
Veterinarian 1,277
Board and training 24,349
Travel and entertainment 14,230
Legal and accounting 11,225
Racing expense 805
Debt repayment 19,228
Temporary investments 36,042
------
$120,940 total
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements
following Part IV of this Report for a listing of the Company's
financial statements and notes thereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the two most recent fiscal years, there have been no
changes in the Company's certified public accountants of the
nature requiring disclosure pursuant to this item.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT.
The following table sets forth the names and ages of the
members of the Company's Board of Directors and its executive
officers:
Name Age Position
____ ___ ________
Raymond E. McElhaney 42 President, Chief Executive
Officer, Chief Financial Officer
and Chairman of the Board of Directors
Bill M. Conrad 42 Vice-President, Secretary, Treasurer
and Director
16
<PAGE>
Ronald R. McGinnis 64 Vice President-Corporate Development
and Director
Clifford C. Thygesen 63 Director
Wayne Bamford 61 Director
_____________________________________
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."). From December 1993, until June 1995, and again
from December 1996 to August 1997, Mr. McElhaney was Secretary,
Treasurer and a Director of Gold Capital Corporation, a precious
metal development company. From 1987 to January, 1997, Mr.
McElhaney was the President, Treasurer 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.
BILL M. CONRAD. Mr. Conrad has served as Vice-President,
Secretary, Treasurer and a Director of the Company also since
inception. He was also President and a Director of Gold Capital
Corporation from 1993 to 1995 and from 1996 to August 1997. From
1989 to January, 1997, he 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.
17
<PAGE>
RONALD R. McGINNIS. Mr. McGinnis has been the Vice
President of Corporate Development and a director of the Company
since inception. He currently spends most of his time as a
private investor. He was also associated with Consolidated
Capital of North America, Inc., in the capacity of Vice-President
and a director. Mr. McGinnis was also Vice President and a
director of United States Exploration, Inc., a publicly traded
corporation engaged in the oil and gas business from May, 1990 to
August, 1997. 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.
Compliance with Section 16(a) of the Securities Act of 1934.
Based solely upon a review of Forms 3, 4 and 5 received by
the Company pursuant to Rule 16(a)-3 of the 1934 Act, none of the
officers, directors or beneficial owners of more than ten percent
of any class of equity securities of the Company registered
pursuant to Section 12 of the 1934 Act have failed to file on a
timely basis, Forms 3, 4 or 5 as required by Section 16(a) during
the most recent fiscal year or prior fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the
Chief Executive Officer, and other executive officers whose
compensation from the Company exceeded $100,000 during that
period (the "Named Officers"):
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SUMMARY COMPENSATION
____________________
Long Term Compensation
Securities
Annual Compensation Underlying
Stock
Name Period Salary Options
____ ______ ______ _______
Raymond E. McElhaney, Period from $ 6,000(1) -0-
President, Chief inception (August
Executive Officer, 18, 1995) to June
Chief Financial 30, 1996
Officer,and Chairman
of the Board of Year ended June
Directors 30, 1997 $ 12,000(1) -0-
Year ended June
30, 1998 $ 22,000(2) -0-
(1) Mr. McElhaney donated his services and no cash was received.
(2) Mr. McElhaney donated $2,000 worth of services and received the
remaining compensation in Common Stock valued at $1.00 per share.
Effective September 1, 1997, Messrs. McElhaney and Conrad
entered into Executive Employment Agreements (the "Employment
Agreements") with the Company. 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.
The Employment Agreements provide for payment of monthly
compensation in the amount of $2,000 commencing September, 1997.
However, both individuals agreed to defer receipt of such
compensation pending receipt of sufficient proceeds from the
recent public offering. Both individuals 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 and directors of the
Company.
The Company does not pay compensation to its members of the
Board of Directors. A director may receive compensation as an
officer or employee for those duties exclusively.
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 June 30, 1998, no options
have been granted pursuant to the Plan.
The Plan is administered by the Board of Directors, who
selects 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 considers, 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
19
<PAGE>
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.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of the date of the end of the fiscal year, June 30,
1998, there were a total of 894,950 shares of Common Stock of the
Company outstanding. The following tabulates holdings of Common
Shares of the Company by each person who 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 up to 1,000,000 shares of
Common Stock issuable under the Company's Incentive Stock Option
Plan. The shareholders listed below have sole voting and
investment power, except as otherwise noted.
Number Percent
Name and Address of Shares of Voting Securities
________________ _________ ____________________
Raymond E. McElhaney(1,2)
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918 207,834 23.22%
Bill Conrad(1,2)
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918 196,934 22.00%
Ronald R. McGinnis(1,3)
5525 Erindale Drive, Suite 201
Colorado Springs, CO 80918 71,333 7.97%
Clifford C. Thygesen(1)
4893 Idylwild Trail
Boulder, CO 80301 61,333 6.85%
Wayne Bamford(1)
5948 East King Court
Parker, CO 80134 46,333 5.18%
Dewey L. Williams
4611 Langland Road, #104
Dallas, Texas 75244 77,333 8.64%
All Officers and Directors
as a Group (5 persons) 583,767 65.23%
__________________________
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(1) Officer or director.
(2) Includes 1,500 shares held by MCM Capital Management of
which Messrs McElhaney and Conrad are officers,
directors and principal shareholders.
(3) Includes 25,000 Common Shares held by the McGinnis
Family Limited Partnership of which Mr. McGinnis is the
general partner.
__________________________
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.
Finally, it is conceivable that certain of the officers and
directors could become eligible for stock option grants under one
or both of the Company stock option plans.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
______________________________________________
Acquisition of Da Hoss
Effective January 1, 1996, the Company acquired its
interest in Da Hoss from Wallstreet Racing Stables III ("WS
III"), a Colorado general partnership. Messrs. McElhaney,
Conrad, McGinnis, Thygesen and Bamford, officers and/or directors
of the Company, and Dewey Williams, the owner of more than 5% of
the Company's Common Stock, were also general partners in WS III
at the time of that transaction. 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
individual 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 valued at $.50 per share. 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 an oral agreement effective
21
<PAGE>
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.
Beginning in September, 1997, certain officers or directors
of the Company have advanced funds to finance acquisition of
Company Thoroughbreds and for operating expenses. Messrs.
McElhaney, Conrad and Thygesen loaned in the aggregate $46,232.75
to the Company from September, 1997 to June, 1998, bearing
interest at 9%. Of that amount, Mr. McElhaney advanced
$32,132.75, Mr. Conrad $9,100 and Mr. Thygesen $5,000. The
Company issued an aggregate of 29,100 Common Shares as a
conversion of this debt due in June, 1998. The shares were
valued at $1.00 per share and 9,100 Common Shares were issued to
Mr. Conrad, 15,000 Common Shares were issued to Mr. McElhaney and
5,000 Common Shares were issued to Mr. Thygesen. The remaining
portion of Mr. McElhaney's note was paid in cash. The Board of
Directors are of the opinion that the shares were acquired under
terms and conditions no more favorable than those offered to any
other shareholder.
The McGinnis Family Limited Partnership, of which Mr.
McGinnis is the general partner, purchased 25,000 Common Shares
in the June, 1998 public offering of the Company's stock, at the
price of $1.00 per share. Mr. McGinnis is an officer and
director of the Company. The shares were purchased on the same
terms and conditions as other third-party investors.
Messrs. Conrad and McElhaney each obtained 20,000 Common
Shares as compensation for services rendered to the Company
through June 30, 1998. The shares were valued at $1.00 per share
and the accrued compensation, due to each Messrs. Conrad and
McElhaney, was valued at $20,000 each. Messrs. Conrad and
McElhaney are officers and directors of the Company, and the
Board of Directors is of the opinion that the shares were
obtained under terms and conditions that were no more favorable
than those offered to any other shareholder.
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GLOSSARY OF TERMS
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.
Dam means a female parent of a horse, as used in regard to
a specific horse.
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 filng, 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 to was born.
23
<PAGE>
PART IV
ITEM 13. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENTS
(a) Exhibits.
Except as otherwise indicated, each of the following
documents were included as exhibits to the Company's
Registration Statement on Form SB-2 filed under the
Securities Act of 1933, File No. 333-29859 as amended
and are incorporated herein by this reference.
Exhibit No.
___________
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 the State
of Colorado.
3.3 Bylaws of the Company.
3.4 Amendment to the Bylaws of the Company.
4.1 Form of Certificate for Common Shares, $.0001
par value per share.
9 Not applicable.
10.1 Non-Qualifying Stock Option and Stock Grant
Plan, dated August 1, 1995.
10.2 Employment Agreement, dated June 1, 1997, by
and between the Company and Raymond E. McElhaney.
10.3 Employment Agreement, dated June 1, 1997, by
and between the Company and William M. Conrad.
10.4 Purchase and Sale Agreement by and between
Wallstreet Racing Stables, Inc. And Wallstreet
Racing Stables III, dated January 1, 1996.
11 Not applicable.
13 Not applicable.
24
<PAGE>
16 Not applicable.
18 Not applicable.
21 Not applicable.
22 Not applicable.
23 Not applicable.
24 Not applicable.
99 Not applicable.
(b) Reports on Form 8-K
Not applicable.
(c) Financial Statements and Schedules.
The Financial Statements filed herein are described in
the Index to Financial Statements following Part IV of
this Report.
25
<PAGE>
SIGNATURE
_________
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 in Colorado Springs, Colorado on the
28th. day of September, 1998.
WALLSTREET RACING STABLES, INC.
By: /s/ Raymond E. McElhaney
------------------------------
Raymond E. McElhaney,
President, Chief Executive
Officer, Chief Financial
Officer and Chairman of the
Board
Pursuant to the requirements of the Security Exchange Act
of 1934, as amended, this Report 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, 9/28/98
- - -------------------------- Chief Financial Officer and Chairman -------
Raymond E. McElhaney of the Board of Directors
/s/ Bill M. Conrad Vice President, Secretary, Treasurer 9/28/98
- - -------------------------- and Director -------
Bill M. Conrad
/s/ Ronald R. McGinnis Vice President - Corporate 9/28/98
- - -------------------------- Development and Director -------
Ronald R. McGinnis
/s/ Clifford C. Thygesen Director 9/28/98
- - -------------------------- -------
Clifford C. Thygesen
/s/ Wayne Bamford Director 9/28/98
- - -------------------------- -------
Wayne Bamford
26
<PAGE>
WALLSTREET RACING STABLES, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report........................... F-1
Balance Sheet at June 30, 1998......................... F-2
Statement of Operations for the Fiscal Year Ended
June 30, 1997 and the Fiscal Year Ended June 30, 1998.. F-3
Cash Flow Statement for the Fiscal Year Ended June 30,
1997 and the Fiscal Year Ended June 30, 1998........... F-4
Statement of Shareholders' Equity...................... F-5
Notes to Financial Statements.......................... F-6
27
<PAGE>
WALLSTREET RACING STABLES, INC.
FINANCIAL STATEMENTS
With Independent Auditors' Report
For the Fiscal Year Ended June 30, 1998 and 1997
<PAGE>
Independent Auditors' Report
____________________________
We have audited the accompanying balance sheet of Wallstreet
Racing Stables, Inc., as of June 30, 1998, and the related
statements of income, shareholders' equity and cash flows for the
fiscal years ended June 30, 1998 and 1997. 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, 1998 and the
results of its operations and its cash flows for the fiscal years
ended June 30, 1998 and 1997 in conformity with generally
accepted accounting principles.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
August 28, 1998
F-1
<PAGE>
Wallstreet Racing Stables, Inc.
Balance Sheet
June 30, 1998
___________________________________________________________________
ASSETS
- - ------
Current Assets:
Cash $68,936
Accounts Receivable 665
Deposits 100
Prepaid Expenses 548
---
Total Current Assets 70,249
------
Property And Equipment
Racehorses 54,438
------
Total 54,438
Accumulated Depreciation (19,560)
-------
Net Property And Equipment 34,878
------
TOTAL ASSETS $105,127
========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities:
Accounts Payable - Trade 11,888
Total Current Liabilities 11,888
------
Long-Term Liabilities 0
-
TOTAL LIABILITIES 11,888
------
SHAREHOLDERS' EQUITY
Preferred Stock - $.01 Par Value, 5,000,000 Shares
Authorized; -0- Shares Issued And Outstanding 0
Common Stock - $.001 Par Value, 15,000,000 Shares
Authorized; 894,950 Shares Issued and Outstanding 895
Capital Paid In Excess Of Par Value 459,336
Retained (Deficit) (366,992)
---------
TOTAL SHAREHOLDERS' EQUITY 93,239
------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $105,127
========
The Accompanying Notes Are An Integral Part Of These Financial Statements
F - 2
<PAGE>
Wallstreet Racing Stables, Inc.
Statement Of Operations
___________________________________________________________________
For The For The
Year Ended Year Ended
June June
30, 1998 30, 1997
________ ________
Revenue
Purses $15,289 $104,802
Miscellaneous Income 865 0
--- -
Total Revenue 16,154 104,802
------ -------
Operating Expenses:
Advertising 60 0
Auction Sales Expenses 2,722 0
Boarding And Training 33,445 24,959
Commissions 1,800 4,575
Depreciation 12,400 8,512
Filing and Recording Fees 1,076 0
Horseshoeing Expense 1,334 180
Horse Transportation 1,779 3,120
Insurance 5,625 6,549
Jockey Fees 1,786 10,358
Legal And Accounting 7,128 9,982
Offering Costs 0 67
Office 9,618 6,377
Race Expenses 5,380 20,613
Rent 6,000 6,000
Salaries 44,000 24,000
Telephone 2,573 2,706
Travel And Entertainment 13,009 23,893
Vet Expenses 8,678 5,792
----- -----
Total Operating Expenses 158,413 157,683
------- -------
(Loss) From Operations (142,259) (52,881)
--------- --------
Other Income (Expense):
Interest Income 182 470
Interest (Expense) (3,098) (659)
Gain On Sale Of Horse 3,897 0
Total Other Income (Expense) 981 (189)
--- -----
(Loss) Before Taxes (141,278) (53,070)
Income Tax Expense 0 0
Net (Loss) ($141,278) ($53,070)
========== =========
Weighted Average Common Shares Outstanding 750,604 677,500
Basic (Loss) Per Share (0.19) (0.08)
====== ======
The Accompanying Notes Are An Integral Part Of These Financial Statements
F - 3
<PAGE>
Wallstreet Racing Stables, Inc.
Cash Flow Statement
____________________________________________________________________
For The For The
Year Ended Year Ended
June June
30, 1998 30, 1997
________ ________
Net (Loss) ($141,278) ($53,070)
Items Not Affecting Cash Flow:
Depreciation 12,400 8,512
Conversion of Salary to Stock 40,000 0
Contributed Services 4,000 24,000
Gain on Sale of Horse (3,897) 0
Conversion of Debt to Stock 29,100 0
(Increase) Decrease In Receivable (521) 9,206
(Increase) Decrease In Prepaid Expenses 4,420 (3,063)
(Increase) Decrease In Deposits (100) 6,657
(Decrease) In Accounts Payable (5,585) 0
------- -
Net Cash Flows Provided From (Used By)
Operations (61,461) (7,758)
-------- -------
Cash Flows From Investing Activities:
Sale of Horses 12,569 0
Purchase Of Horses (16,200) (47,588)
-------- --------
Net Cash Flows Provided From (Used By)
Investing (3,631) (47,588)
------- --------
Cash Flows Provided From Financing Activities:
Advances Received From Related Party 17,133 0
Repayment Of Advances From Related Party (17,133) 0
Sale Of Common Stock 127,850 58,500
Deferred Offering Costs (6,909) 0
Stock Subscriptions Exercised 0 5,500
Warrants Exercised 1,000 0
----- -
Net Cash Flows Provided From (Used By)
Financing 121,941 64,000
------- ------
Net Increase In Cash 56,849 8,654
Cash At Beginning Of Period 12,087 3,433
------ -----
Cash At End Of Period $68,936 $12,087
======= =======
Summary Of Non-Cash Investing And Financing Activities:
Stock Issued For Salaries 40,000 0
Contributed Services 4,000
Stock Issued For Debt 29,100 0
The Accompanying Notes Are An Integral Part Of These Financial Statements
F - 4
<PAGE>
Wallstreet Racing Stables, Inc.
Statement Of Shareholders Equity
_______________________________________________________________________________
Number Of Number Of Capital Paid
Common Preferred Common In Excess Of Accumulated
Shares Shares Stock Par Value (Deficit) Total
______ ______ _____ _________ _________ _____
Balance At
June 30, 1996 638,500 0 $639 $182,052 ($172,644) $10,047
------- - ---- -------- ---------- -------
November 1996
Private Offering
For Cash @ $1
Per Share 58,500 58 58,442 58,500
Contributed
Services 24,000 24,000
Net (Loss)
June 30, 1997 (53,070) (53,070)
------- - --- ------- -------- --------
Balance At
June 30, 1997 697,000 0 697 264,494 (225,714) 39,477
------- - --- ------- --------- ------
Contributed
Services 4,000 4,000
Exercise of
Warrants 1,000 1 999 1,000
June 1998
Offering for
Cash @ $1 Per
Share 127,850 128 127,722 127,850
Deferred
Offering Costs (6,910) (6,910)
June 1998 Issue
of Stock for
Salary @ $1
Per Share 40,000 40 39,960 40,000
June 1998 Issue
of Stock for
Promissory Notes
@ $1 Per Share 29,100 29 29,071 29,100
Net (Loss)
June 30, 1998 (141,278) (141,278)
Balance at
June 30, 1998 894,950 0 $895 $459,336 ($366,992) $93,239
======= = ==== ======== ========== =======
The Accompanying Notes Are An Integral Part Of These Financial Statements
F - 5
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1998 and 1997
_________________________________________
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.
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. Broodmares are stated at cost and are
depreciated over their estimated economic lives ranging from 3 to
7 years depending on their age when purchased.
Broodmares
Broodmares consist of registered thoroughbred horses. If a
broodmare is acquired in foal, the cost is allocated between the
broodmare and the unborn foal on the basis of their relative
values at the time of acquisition.
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, 1998 and
1997 was $3,098 and $659, respectively. Cash paid for income
taxes for the year ended June 30, 1998 and 1997 was $ -0-.
F - 6
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1998 and 1997
_________________________________________
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, 1997 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, 1998 and 1997.
Revenue Recognition
Revenue is recognized when a purse from a race is earned.
Note 2 - Equity
_______________
The Company raised $58,500 from the sale of a 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. All of the warrants have expired as of
February 1998.
In March 1998 1,000 shares of common stock were issued for
exercised warrants at $1.00 per share, or $1,000. An offering
which closed in June 1998 sold 127,850 shares of common stock for
cash at $1.00 per share, or $127,850 less $6,910 in deferred
offering costs. In June 1998 common stock was issued to
officer/directors at $1.00 per share, or $40,000, and for
promissory notes for $1.00 per share or $29,100.
The Company has adopted a Non-Qualified Stock Option and Stock
Grant 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 this
plan. As of June 30, 1998, no options have been granted pursuant
to this plan.
F - 7
<PAGE>
Wall Street Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1998 and 1997
_________________________________________
Note 3 - Income Taxes
_____________________
The Company follows Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes" (SFAS #109),
which requires, among other things, an asset and liability
approach to calculating deferred income taxes. The components of
the net deferred tax asset recognized in the accompanying balance
sheet are as follows:
Deferred tax asset $ 60,517
Valuation allowance (60,517)
---------
$ -0-
=========
The net change in the valuation allowance for the year ended June
30, 1998 is $31,175.
The types of temporary differences between the tax basis of
assets and their financial reporting amounts that give rise to a
significant portion of the deferred tax asset are as follows:
Temporary Tax
Difference Effect
---------- ------
Net operating loss carry
forward $302,584 $60,517
======== =======
The Company's NOL carryforward of approximately $302,584 at June
30, 1998, which management expects will be fully utilized, will
expire in various amounts between 2010 and 2012.
Note 4- Related Party Events
- - ----------------------------
The Company leases office space and secretarial services from a
company owned by certain officers of the Company for $500 per
month, on a month to month basis. The facilities are located at
5525 Erindale Drive, Suite 201, Colorado Springs, Colorado 80918.
Certain officers of the Company loan money to the Company at
various times during the year when cash is needed.
F - 8
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to Financial Statements
For the Year Ended June 30, 1998 and 1997
_________________________________________
Note 5 - Officer Compensation
_____________________________
During the year ended June 30, 1998 Company management
contributed $4,000 in services which have been recorded as a
contribution of equity.
Note 6 - Deferred Offering Costs
________________________________
In connection with the offering of its common shares, the Company
incurred offering costs consisting of legal, printing, and audit
fees totaling $6,910 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 or terminated.
Should the offering be unsuccessful, deferred offering costs are
charged to expense. Therefore, the offering expense for the
successful June 1998 offering reduced the offering proceeds.
F - 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 6/30/98 FORM
10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
<CIK> 0001040751
<NAME> WALLSTREET RACING STABLES, INC.
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<PERIOD-TYPE> 12-MOS
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<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
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