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 March 31, 1999
--------------------
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.
-------------------------------
(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
--------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------
(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 902,450 shares outstanding
Common Stock at May 14, 1999
<PAGE>
WALLSTREET RACING STABLES, INC.
Index
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements...........................1-5
Item 2. Management's Discussion and Analysis Or
Plan of Operation..............................6-8
Part II - OTHER INFORMATION.....................................8
SIGNATURES......................................................9
<PAGE>
Wallstreet Racing Stables, Inc.
Balance Sheets
- ------------------------------------------------------------------
Unaudited Audited
March June
31, 1999 30, 1998
-------- --------
ASSETS
Current Assets:
Cash $11,918 $68,936
Accounts Receivable 2,818 665
Deposits 0 100
Prepaid Expenses 962 548
--- ---
Total Current Assets 15,698 70,249
------ ------
Property And Equipment
Racehorses 65,350 54,438
------ ------
Total 65,350 54,438
Accumulated Depreciation (27,004) (19,560)
------ ------
Net Property And Equipment 38,346 34,878
------ ------
TOTAL ASSETS $54,044 $105,127
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable - Trade 10,714 11,888
Accrued Salaries 8,000 0
Payroll Taxes Payable 1,642 0
----- -
Total Current Liabilities 20,356 11,888
------ ------
Long-Term Liabilities 0 0
- -
TOTAL LIABILITIES 20,356 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 - June (audited). 902,450 Shares
Issued and Outstanding - March (unaudited) 902 895
Capital Paid In Excess Of Par Value 466,829 459,336
Retained (Deficit) (434,043) (366,992)
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TOTAL SHAREHOLDERS' EQUITY 33,688 93,239
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $54,044 $105,127
======= ========
The Accompanying Notes Are An Integral Part Of These Financial Statements
1
<PAGE>
Wallstreet Racing Stables, Inc.
Statements Of Operations
- ------------------------------------------------------------------------
Unaudited Unaudited
For The For The
Three Month Three Month
Interim Period Interim Period
Ended Ended
March March
31, 1999 31, 1998
-------- --------
Revenue
Purses $8,141 $0
Total Revenue 8,141 0
----- -
Operating Expenses:
Boarding And Training 6,737 6,990
Depreciation 3,515 3,036
Filing and Recording Fees 185 0
Horseshoeing expense 412 193
Horse Transportation 189 63
Insurance 462 1,382
Jockey Fees 611 0
Legal And Accounting 3,886 3,593
Offering Costs 0 2,580
Office 2,620 2,085
Payroll Taxes 2,501 0
Professional Services 50 0
Race Expenses 2,022 194
Rent 1,500 1,500
Salaries 12,000 12,000
Telephone 658 480
Travel And Entertainment 3,741 140
Vet Expenses 1,353 48
----- --
Total Operating Expenses 42,442 34,284
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Income (Loss) From Operations (34,301) (34,284)
------ ------
Other Income (Expense):
Interest Income 140 0
Interest (Expense) (9) (1,084)
Gain (Loss) on Sale of Horse 0 (5,274)
Total Other Income (Expense) 131 (6,358)
--- -----
Income (Loss) Before Taxes (34,170) (40,642)
------ ------
Income Tax Expense 0 0
Net Income (Loss) ($34,170) ($40,642)
======= =======
Weighted Average Common Shares Outstanding 902,450 698,000
(Loss) Per Share (0.04) (0.06)
==== ====
The Accompanying Notes Are An Integral Part Of These Financial Statements
2
<PAGE>
Wallstreet Racing Stables, Inc.
Statements Of Operations
- ------------------------------------------------------------------------
Unaudited Unaudited
For The For The
Nine Month Nine Month
Interim Period Interim Period
Ended Ended
March March
31, 1999 31, 1998
-------- --------
Revenue
Purses $106,216 $126
Horses For Resale 0 10,500
Miscellaneous Income 20,000 0
------ -
Total Revenue 126,216 10,626
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Cost of Horses Sold 0 1,255
- -----
Gross Profit 126,216 9,371
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Operating Expenses:
Advertising 0 60
Boarding And Training 22,758 27,670
Commissions 0 1,800
Depreciation 10,577 9,437
Filing and Recording Fees 1,969 0
Horseshoeing expense 1,271 962
Horse Transportation 2,019 1,138
Impairment of Asset 2,777 0
Insurance 1,132 5,413
Jockey Fees 10,542 0
Legal And Accounting 20,987 9,925
Listing Fees 3,975 0
Office 8,536 11,488
Payroll Taxes 2,708 2,158
Professional Services 10,050 0
Race Expenses 21,007 0
Rent 4,500 4,500
Salaries 36,000 32,000
Telephone 2,382 1,756
Travel And Entertainment 19,113 9,807
Vet Expenses 12,072 7,303
------ -----
Total Operating Expenses 194,375 125,417
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(Loss) From Operations (68,159) (116,046)
------ -------
Other Income (Expense):
Interest Income 909 38
Interest (Expense) (23) (2,145)
Gain (Loss) on Sale of Horse 222 (5,274)
--- -----
Total Other Income (Expense) 1,108 (7,381)
----- -----
(Loss) Before Taxes (67,051) (123,427)
Income Tax Expense 0 0
Net (Loss) ($67,051) ($123,427)
======= ========
Weighted Average Common Shares Outstanding 899,117 698,000
(Loss) Per Share (0.07) (0.18)
==== ====
The Accompanying Notes Are An Integral Part Of These Financial Statements
3
<PAGE>
Wallstreet Racing Stables Inc.
Cash Flow Statements
- ------------------------------------------------------------------------
Unaudited Unaudited
For The For The
Nine Month Nine Month
Interim Period Interim Period
Ended Ended
March March
31, 1999 31, 1998
-------- --------
Net (Loss) Profit ($67,051) ($123,427)
Items Not Affecting Cash Flow:
Depreciation 10,577 9,437
Contribution of Services 0 4,000
Impairment of Horse 2,777 0
Gain (Loss) on Sale of Horse (222) 5,273
Issuance of Stock for Services 7,500 0
(Increase) Decrease In Receivable (2,153) 134
(Increase) Decrease In Prepaid Expenses (414) 4,586
(Increase) Decrease In Deposits 100 0
(Decrease) Increase In Accounts Payable (1,174) 23,931
(Decrease) Increase in Accrued Interest 0 1,977
(Decrease) Increase In Accrued Salaries 8,000 28,000
(Decrease) Increase In Payroll Taxes Payable 1,642 0
----- -
Net Cash Flows Provided From (Used By) Operations (40,418) (46,089)
------ ------
Cash Flows From Investing Activities:
Sale of Horses 5,000 3,325
Purchase Of Horses (21,600) (16,200)
------ ------
Net Cash Flows Provided From (Used By) Investing (16,600) (12,875)
------ ------
Cash Flows Provided From Financing Activities:
Note Payable - Shareholder 0 46,233
Sale of Common Stock 0 1,000
Net Cash Flows Provided From (Used By) Financing 0 47,233
- ------
Net (Decrease) In Cash (57,018) (11,731)
Cash At Beginning Of Period 68,936 12,087
------ ------
Cash At End Of Period $11,918 $356
======= ====
Summary Of Non-Cash Investing And Financing Activities:
Stock Issued For Services $7,500 $0
The Accompanying Notes Are An Integral Part Of These Financial Statements
4
<PAGE>
Wallstreet Racing Stables, Inc.
Notes to the Unaudited Financial Statements
For the Nine Month Period Ended March 31, 1999
- ----------------------------------------------
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 periods presented. The adjustments consist only of normal reoccurring
accruals. The results of operations for the nine month interim period ended
March 31, 1999 are not necessarily indicative of the results to be expected for
the fiscal year ending 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 - Share Exchange
- -----------------------
Effective November 16, 1998, the Company executed a non-binding Letter of Intent
for a merger or acquisition with a privately-held consumer product manufacturing
company. Pursuant to the terms of the Letter of Intent, the Company
contemplated an acquisition or merger with the company in a tax free
reorganization under the Internal Revenue Code and the laws of Colorado and
Nevada. The Letter of Intent was tentative in nature and subject to a number of
contingencies, including preparation and execution of a definitive exchange
agreement, approval of the respective companies' Boards of Directors and
continuing due diligence. In connection with the Letter of Intent, the Company
received a non-refundable earnest money deposit of $20,000 to be used for due
diligence and other general and administrative expenses. On May 6, 1999, the
Letter of Intent was terminated and discussions with the other entity ceased.
5
<PAGE>
WALLSTREET RACING STABLES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
This Report (including the documents incorporated herein by reference)
contains "forward-looking statements" within the meaning of the federal
securities laws. Such forward-looking statements include, without limitation,
statements regarding the Company's need for working capital, future revenues and
results of operations and are identified by words such as "anticipates,'
"plans," "expects" and "estimates." A variety of factors could cause the
Company's actual results to differ materially from those contemplated by these
forward-looking statements, including, without limitation, those discussed
below. Most of these factors are beyond the control of the Company. Investors
are cautioned not to put undue reliance on forward-looking statements.
Liquidity and Capital Resources
The financial condition of Wallstreet Racing Stables, Inc. (the "Company")
declined further during the three month period ended March 31, 1999. Working
capital decreased $63,019 from fiscal year end June 30, 1998 to March 31, 1999,
as a result of cash applied to operations. For the nine month period ended
March 31, 1999, the Company's operations used approximately $40,000 of cash,
while investing activities used an additional $16,600 of cash. As a result, the
Company remains dependent on financing from outside sources and/or achieving
profitable operations to continue as a going concern.
At March 31, 1999, the Company had negative working capital of $4,658,
consisting of current assets of $15,698 and current liabilities of $20,356. A
majority of the current liabilities consist of accounts payable to third-parties
in the approximate amount of $11,000. In an effort to conserve its remaining
cash, management may seek to negotiate settlement of some or all of those
payables through issuance of common stock or other equity securities. The
Company also had accrued salaries of $8,000 at March 31, 1999, which may also be
satisfied through issuance of equity securities. However, management believes
the Company remains dependent on improving operations and receiving additional
financing from outside sources to continue operations.
Since its inception, the Company has relied primarily on equity financing
to sustain operations. The Company's existing stable of thoroughbred race
horses has generally not generated revenue sufficient to pay operating expenses
and overhead. As a result, management has sought additional avenues for
generating revenue and profit.
During the quarter ended December 31, 1998, the Company executed a letter
of intent with a consumer products manufacturing entity for a merger or
acquisition. Management envisioned that transaction as a means of broadening
the Company's business and generating additional revenues. However, discussions
for completion of that transaction were terminated in May. Accordingly, the
6
<PAGE>
Company is considering other alternatives including acquisition of additional
thoroughbreds and other business opportunities to increase revenue.
Results of Operations
During the nine month period ended March 31, 1999, the Company realized a
net loss of $67,051, on total revenues of $126,216 and expenses of $194,375.
This represents an improvement from the loss of $123,427 for the nine months
ended March 31, 1998. Results for the three month period ended March 31, 1999
were consistent with the nine month period, as the Company lost $34,170 on
revenues of $8,141.
Generally, revenues are generated through racing purses awarded by races in
which the Company's thoroughbreds are entered, as well as proceeds received by
the Company from the sale or other disposition of those thoroughbreds upon
transfer. In the nine months ended March 31, 1999, the Company received
approximately $100,000 in racing purses and miscellaneous income of $20,000,
consisting of an earnest money deposit on the proposed acquisition discussed
above. However, the Company's stable of thoroughbreds has generally been unable
to generate revenues sufficient to pay operating and overhead expenses.
Significant operating expenses incurred by the Company include boarding and
training, jockey fees, racing expenses and veterinarian. Significant overhead
expenses include legal, accounting and other professional services, travel and
entertainment. As a group, total expenses increased from the nine months ended
March 31, 1998 to the nine month ended March 31, 1999. Generally, such
increase is a result of a greater number of thoroughbreds in which the Company
had an interest during the latter period.
Within the operating expenses, boarding and training decreased from the
nine month period ended March 31, 1998 to the nine month period ended March 31,
1999, as management instituted steps to conserve available working capital. A
number of the Company's thoroughbreds were boarded at facilities off track to
reduce expenses. Jockey fees increased substantially from 1998 to 1999, as the
Company paid a percentage of its purses to the successful jockey. Racing
expenses also increased substantially (by an aggregate of approximately $21,000)
commensurate with race winnings. Finally, vet expenses increased from $7,303 to
$12,072, generally consistent with a greater number of horses.
Overhead expenses also increased from 1998 to 1999. Legal and accounting
increased from $9,925 to $20,987. The Company completed preparation and filing
an annual report on Form 10-KSB and an accompanying audit of its financial
statements. Professional services increased approximately $10,000, as a result
of consulting services engaged by the Company in connection with the proposed
merger or acquisition discussed above. Finally, travel and entertainment
increased approximately $10,000 while management investigated additional
business opportunities for the Company.
7
<PAGE>
Management anticipates the Company will continue to incur losses until such
time, if ever, the Company obtains an interest in a sufficient number of
thoroughbreds to generate purses or sale proceeds sufficient to cover operating
and other expenses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No report required.
Item 2. Changes in Securities.
No report required.
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.
Effective May 6, 1999, the Company terminated discussions
with a private consumer products manufacturing company to acquire its assets
or complete a merger. A letter of intent executed by the parties in November,
1998 had expired, and management deemed it in the best interest of the Company
to terminate such discussions. Management will continue to explore other
opportunities for the Company and its shareholders.
Item 6. Exhibits and Reports on Form 8-K.
No report required.
8
<PAGE>
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: May 13, 1999 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: May 13, 1999 By: /s/ Bill M. Conrad
--------------- ---------------------------------------
Bill M. Conrad, Vice-President, Secretary,
Treasurer and Director
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 3/31/99 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<CIK> 0001040751
<NAME> WALLSTREET RACING STABLES, INC.
<MULTIPLIER> 1
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 11,918
<SECURITIES> 0
<RECEIVABLES> 2,818
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<CURRENT-ASSETS> 15,698
<PP&E> 65,350
<DEPRECIATION> 27,004
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<CURRENT-LIABILITIES> 20,356
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<COMMON> 902
<OTHER-SE> 32,786
<TOTAL-LIABILITY-AND-EQUITY> 54,044
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<TOTAL-REVENUES> 126,216
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<OTHER-EXPENSES> 194,375
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