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 December 31, 1998
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Commission file number 0-23823
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WALLSTREET RACING STABLES, INC.
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(Exact name of registrant as specified in its charter)
Colorado 84-1313024
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5525 Erindale Drive, Suite 201, Colorado Springs, Colorado 80918
- ---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(719) 260-8509
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes XX No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Class of Stock Amount Outstanding
--------------- --------------------------
$.001 par value 902,450 shares outstanding
Common Stock at February 1, 1999
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
ii
Wallstreet Racing Stables, Inc.
Balance Sheets
- -------------------------------------------------------------------
Unaudited Audited
December June
31, 1998 30, 1998
ASSETS -------- --------
- ------
Current Assets:
Cash $55,644 $68,936
Accounts Receivable 1,095 665
Deposits 0 100
Prepaid Income Taxes 378 0
Prepaid Expenses 1,192 548
----- ---
Total Current Assets 58,309 70,249
------ ------
Property And Equipment
Racehorses 65,350 54,438
------ ------
Total 65,350 54,438
Accumulated Depreciation (23,490) (19,560)
------ ------
Net Property And Equipment 41,860 34,878
------ ------
TOTAL ASSETS $100,169 $105,127
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable - Trade 10,295 11,888
Accrued Salaries 22,000 0
Payroll Taxes Payable 16 0
Total Current Liabilities 32,311 11,888
------ ------
Long-Term Liabilities 0 0
- -
TOTAL LIABILITIES 32,311 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 - December
(unaudited) 902 895
Capital Paid In Excess Of Par Value 466,829 459,336
Retained (Deficit) (399,873) (366,992)
------- -------
TOTAL SHAREHOLDERS' EQUITY 67,858 93,239
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $100,169 $105,127
======== ========
The Accompanying Notes Are An Integral Part Of These Financial Statements
1
Wallstreet Racing Stables, Inc.
Statements Of Operations
- -----------------------------------------------------------------------
Unaudited Unaudited
For The For The
Three Month Three Month
Interim Period Interim Period
Ended Ended
December December
31, 1998 31, 1997
-------- --------
Revenue
Purses $90,385 $0
Horses For Resale 0 10,500
Miscellaneous Income 20,000 0
------ -
Total Revenue 110,385 10,500
------- ------
Cost of Horses Sold 0 1,255
- -----
Gross Profit 110,385 9,245
------- -----
Operating Expenses:
Boarding And Training 9,380 8,381
Depreciation 3,779 3,516
Filing and Recording Fees 461 0
Horseshoeing expense 393 219
Horse Transportation 713 776
Insurance 426 2,023
Jockey Fees 9,030 0
Legal And Accounting 4,638 1,782
Office 3,536 2,281
Professional Services 10,000 0
Race Expenses 17,298 135
Rent 1,500 1,500
Salaries 12,000 12,000
Telephone 996 781
Travel And Entertainment 11,740 2,470
Vet Expenses 7,392 3,900
----- -----
Total Operating Expenses 93,282 39,764
Income (Loss) From Operations 17,103 (30,519)
------ ------
Other Income (Expense):
Interest Income 177 5
Interest (Expense) (6) (846)
Gain (Loss) on Sale of Horse 222 0
Total Other Income (Expense) 393 (841)
--- ---
Income (Loss) Before Taxes 17,496 (31,360)
------ ------
Income Tax Expense 0 0
Net Income (Loss) $17,496 ($31,360)
======= =======
Weighted Average Common Shares Outstanding 899,950 697,000
(Loss) Per Share 0.02 (0.04)
==== ====
The Accompanying Notes Are An Integral Part Of These Financial Statements
2
Wallstreet Racing Stables, Inc.
Statements Of Operations
- -----------------------------------------------------------------------
Unaudited Unaudited
For The For The
Six Month Six Month
Interim Period Interim Period
Ended Ended
December December
31, 1998 31, 1997
-------- --------
Revenue
Purses $98,075 $126
Horses For Resale 0 10,500
Miscellaneous Income 20,000 0
------ -
Total Revenue 118,075 10,626
------- ------
Cost of Horses Sold 0 1,255
- -----
Gross Profit 118,075 9,371
------- -----
Operating Expenses:
Advertising 0 60
Boarding And Training 16,021 20,679
Commissions 0 1,800
Depreciation 7,062 6,401
Filing and Recording Fees 1,784 0
Horseshoeing expense 858 769
Horse Transportation 1,830 1,075
Impairment of Asset 2,777 0
Insurance 670 4,031
Jockey Fees 9,931 0
Legal And Accounting 17,101 6,332
Listing Fees 3,975 0
Office 5,916 6,824
Payroll Taxes 207 0
Professional Services 10,000 0
Race Expenses 18,985 1,964
Rent 3,000 3,000
Salaries 24,000 20,000
Telephone 1,724 1,276
Travel And Entertainment 15,372 9,667
Vet Expenses 10,719 7,255
------ -----
Total Operating Expenses 151,932 91,133
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(Loss) From Operations (33,857) (81,762)
------ ------
Other Income (Expense):
Interest Income 768 38
Interest (Expense) (13) (1,061)
Gain (Loss) on Sale of Horse 222 0
--- -
Total Other Income (Expense) 977 (1,023)
--- -----
(Loss) Before Taxes (32,880) (82,785)
Income Tax Expense 0 0
Net (Loss) ($32,880) ($82,785)
======= =======
Weighted Average Common Shares Outstanding 897,450 697,000
(Loss) Per Share (0.04) (0.12)
==== ====
The Accompanying Notes Are An Integral Part Of These Financial Statements
3
Wallstreet Racing Stables Inc.
Cash Flow Statements
- -----------------------------------------------------------------------
Unaudited Unaudited
For The For The
Six Month Six Month
Interim Period Interim Period
Ended Ended
December December
31, 1998 31, 1997
-------- --------
Net (Loss) Profit ($32,880) ($82,785)
Items Not Affecting Cash Flow:
Depreciation 7,062 6,401
Contribution of Services 0 4,000
Impairment of Horse 2,777 0
Gain on Sale of Horse (222) 0
Issuance of Stock for Services 7,500 0
(Increase) Decrease In Receivable (430) (8,976)
(Increase) Decrease In Prepaid Expenses (1,022) 3,204
(Increase) Decrease In Deposits 100 0
(Decrease) Increase In Accounts Payable (1,593) 19,155
(Decrease) Increase in Accrued Interest 0 951
(Decrease) Increase In Accrued Salaries 22,000 16,000
(Decrease) Increase In Payroll Taxes Payable 16 0
-- -
Net Cash Flows Provided From (Used By) Operations 3,308 (42,050)
----- ------
Cash Flows From Investing Activities:
Sale of Horses 5,000 0
Purchase Of Horses (21,600) (16,200)
------ ------
Net Cash Flows Provided From (Used By) Investing (16,600) (16,200)
------ ------
Cash Flows Provided From Financing Activities:
Note Payable - Shareholder 0 46,233
Net Cash Flows Provided From (Used By) Financing 0 46,233
- ------
Net Increase In Cash (13,292) (12,017)
Cash At Beginning Of Period 68,936 12,087
------ ------
Cash At End Of Period $55,644 $70
======= ===
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
Wallstreet Racing Stables, Inc.
Notes to the Unaudited Financial Statements
For the Six Month Period Ended December 31, 1998
- ------------------------------------------------
Note 1 - Unaudited Financial Information
- ----------------------------------------
The information furnished herein was taken from the books and records
of the Company without audit. The Company believes, however, that it
has made all adjustments necessary to reflect properly the results of
operations for the interim period presented. The adjustments consist
only of normal reoccurring accruals. The results of operations for
the six month interim period ended December 31, 1998 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 contemplates 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 is
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. As of the date of filing this Report, the
parties continue negotiations for this transaction.
5
WALLSTREET RACING STABLES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
Certain statements contained herein constitute "forward looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements include, without
limitation, statements regarding the Company's plan of business
operations and related expenditures, anticipated race careers of
Company-owned thoroughbreds and stabling and training information.
Factors that could cause actual results to differ materially include,
among others, the following: the health and training progress of the
thoroughbreds, availability of training and stabling facilities,
general economic conditions, tax legislation and the overall state of
the thoroughbred horse racing industry. Most of these factors are
outside the control of the Company. Investors are cautioned not to
put undue reliance on forward looking statements. Except as otherwise
required by applicable securities statutes or regulations, the Company
disclaims any intent or obligation to update publicly these forward
looking statements, whether as a result of new information, future
events or otherwise.
Liquidity and Capital Resources
The liquidity and capital resources of Wallstreet Racing Stables,
Inc. ("Company") decreased slightly from fiscal year end June 30, 1998
to December 31, 1998. Working capital decreased $32,363 from fiscal
year end to December 31, 1998, as a result of cash applied to
operations. At December 31, 1998, the Company had working capital of
$25,998, consisting of current assets of $58,309 and current
liabilities of $32,311. Current assets consist primarily of cash
while current liabilities consist of trade accounts payable and
accrued salaries.
The Company remains dependent upon obtaining additional assets
and/or achieving profitable operations to continue as a going concern
and realize its assets. Primarily as the result of a large racing
purse and accrual of salaries by the officers, the Company's
operations generated cash of approximately $3,300 during the six month
period ended December 31, 1998. Historically, however, the Company's
operations have used, rather than provided, cash and the Company has
relied on equity financing for acquisition of assets and continuing
operations. Based on existing working capital, liabilities and
capital requirements, management anticipates the Company will have
sufficient liquidity and resources through the end of the current
fiscal year ending June 30, 1999. However, the Company will require
capital from outside sources to continue operation beyond that time.
The majority of cash provided to the Company during the quarter
ended December 31, 1998 was from a purse won by a racehorse in which
the Company owns an interest. Da Hoss, a six-year-old thoroughbred
in which the Company owns a 15% interest, won the 60% winner's share
of the purse for the Breeders Cup Mile at Churchill Downs in November,
1998. Those winnings, together with other purses won by the Company's
thoroughbreds, provided revenues of approximately $90,000 during the
6
three month period ended December 31, 1998. However, as Da Hoss is
not anticipated to run again until the summer of 1999, management does
not anticipate significant revenues from that source in the immediate
future. The Company will therefore be dependent on the performance of
other thoroughbreds to provide working capital for the foreseeable
future.
The Company is currently negotiating with a privately-held
consumer product manufacturing company for the acquisition of the
company by merger or share exchange. Consummation of that transaction,
of which there is no assurance, would propel the Company into the
consumer products industry and diversify its existing business.
Management views that transaction as a means of substantially
increasing the Company's assets and improving operations, as well as
attracting additional investment capital. The Letter of Intent
executed by the parties in November, 1998 is subject to a number of
contingencies, including negotiation and execution of a definitive
contract, approval of the respective parties' Boards of Directors and
continuing due diligence, among others. Negotiations between the
parties continue as of the date of this Report.
Due to the nature and amount of its assets, the Company is not a
candidate for bank or other traditional third-party debt financing.
According, any additional capital required for operations in the
future will be sought from equity financing or loans from existing
shareholders of the Company.
Results of Operations
During the three month period ended December 31, 1998, the
Company realized net income of $17,496 on revenues of $110,385.
However, combined with results from the prior three month period, the
Company lost $32,880 for the six month period ended December 31, 1998
on revenues of $118,075. As mentioned previously, the single greatest
factor contributing to the net income during the three month period
ended December 31, 1998 was a substantial purse won by Da Hoss.
However, management does not expect a repeat of that performance
during the remainder of the fiscal year.
While the Company continues to acquire interests in a greater
number of thoroughbreds, revenues from racing purses and other sources
continue to fall short of expenses. Total expenses for the three and
six month periods ending December 31, 1998 increased from the
comparable periods ending December 31, 1997. Generally, this increase
is attributable to the greater number of thoroughbreds in which the
Company had an interest during the latter periods. However, boarding
and training expenses associated with those horses decreased for the
six month period ending December 31, 1998, from $20,679 to $18,021.
This reflects management's efforts to control expenses by negotiating
prudent boarding arrangements.
Depreciation increased from the six month period ended December
31, 1997, commensurate with an increase in the number of horses in
which the Company had an interest. Jockey fees increased
substantially, as it is customary for the jockey to receive a portion
of the purse won by the owner. Race expenses increased substantially
from the period ended December 31, 1997 to the period ended December
31, 1998 as a result of an increase in the number of thoroughbreds
participating in races. Legal and accounting fees also increased
substantially, concurrent with the Company's status as a public
7
reporting company under the rules and regulations of the Securities
and Exchange Commission. Finally, consulting services increased
$10,000 as a result of consulting services rendered in connection with
the Letter of Intent.
Management anticipates the Company will continue to incur losses
until such time, if ever, it obtains assets sufficient to generate
revenues to cover operating, general and administrative expenses.
Negotiations by the Company with the manufacturing company represent
an effort in that direction. If those negotiations are unsuccessful,
the Company will continue its efforts to obtain interests in additional
thoroughbreds to increase revenues.
Year 2000 Disclosure
- --------------------
A complete assessment of the Company's Year 2000 readiness has not
been completed, especially the preparedness of its vendors. However,
management does not believe that Year 2000 issues will have a material
effect on the Company's business, results of operations or financial
condition.
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.
No report required.
Item 6. Exhibits and Reports on Form 8-K.
None.
8
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: February 5, 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: February 5, 1999 By: /s/ Bill M. Conrad
----------------- ---------------------------------
Bill M. Conrad, Vice-President,
Secretary, Treasurer and Director
(Principal Financial Officer)
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 12/31/98 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
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<NAME> WALLSTREET RACING STABLES, INC.
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