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, 2000
--------------------
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
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(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 995,950 shares outstanding
Common Stock at May 10, 2000.
<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
ii
<PAGE>
Wallstreet Racing Stables, Inc.
Balance Sheets
- ------------------------------------------------------------------
Unaudited Audited
March June
31, 2000 30, 1999
-------- --------
ASSETS
Current Assets:
Cash $25,158 $3,267
Accounts Receivable 0 6,784
Prepaid Expenses 4,091 427
----- ---
Total Current Assets 29,249 10,478
------ ------
Property And Equipment
Racehorses 900 41,950
--- ------
Total 900 41,950
Accumulated Depreciation (900) (14,123)
--- ------
Net Property And Equipment 0 27,827
- ------
TOTAL ASSETS $29,249 $38,305
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable - Trade 4,977 18,355
Accrued Salaries 0 20,000
Payroll Taxes Payable 15,888 0
------ -
Total Current Liabilities 20,865 38,355
------ ------
Long-Term Liabilities 0 0
TOTAL LIABILITIES 20,865 38,355
------ ------
SHAREHOLDERS' EQUITY<BR>
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; 902,450 Shares Issued and
Outstanding - June (audited). 995,950 Shares
Issued and Outstanding - March (unaudited). 996 902
Capital Paid In Excess Of Par Value 542,048 466,829
Retained (Deficit) (534,660) (467,781)
------- -------
TOTAL SHAREHOLDERS' EQUITY 8,384 (50)
----- --
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $29,249 $38,305
======= =======
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, 2000 31, 1999
-------- --------
Revenue
Purses $0 $8,141
------
Total Revenue 0 8,141
-----
Operating Expenses:
Boarding And Training 1,320 6,737
Depreciation 682 3,515
Filing And Recording Fees 261 185
Horseshoeing expense 28 412
Horse Transportation 7 189
Insurance 845 462
Jockey Fees 0 611
Legal And Accounting 10,253 3,886
Office 2,464 2,620
Payroll Taxes 4,780 2,501
Professional Services 3,744 50
Race Expenses 365 2,022
Rent 1,500 1,500
Salaries 12,000 12,000
Telephone 1,499 658
Travel And Entertainment 7,547 3,741
Vet Expenses 173 1,353
--- -----
Total Operating Expenses 47,468 42,442
------ ------
Income (Loss) From Operations (47,468) (34,301)
------ ------
Other Income (Expense):
Interest Income 1 140
Interest (Expense) (11) (9)
Gain (Loss) on Sale of Horse (7,892) 0
Earnest Money Income 37,000 0
------ -
Total Other Income (Expense) 29,098 131
------ ---
Income (Loss) Before Taxes (18,370) (34,170)
------ ------
Income Tax Expense 0 0
Net Income (Loss) ($18,370) ($34,170)
======= =======
Weighted Average Common Shares Outstanding 958,450 902,450
Gain (Loss) Per Share (0.02) (0.04)
==== ====
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, 2000 31, 1999
-------- --------
Revenue
Purses $24,327 $106,216
------- --------
Total Revenue 24,327 106,216
------ -------
Operating Expenses:
Boarding And Training 12,095 22,758
Depreciation 4,512 10,577
Filing and Recording Fees 2,978 1,969
Horseshoeing expense 591 1,271
Horse Transportation 643 2,019
Impairment of Asset 0 2,777
Insurance 1,545 1,132
Jockey Fees 2,428 10,542
Legal And Accounting 15,519 20,987
Listing Fees 975 3,975
Office 7,131 8,536
Payroll Taxes 4,780 2,708
Professional Services 3,745 10,050
Race Expenses 4,458 21,007
Rent 4,500 4,500
Salaries 36,000 36,000
Telephone 2,996 2,382
Travel And Entertainment 17,915 19,113
Vet Expenses 4,983 12,072
----- ------
Total Operating Expenses 127,794 194,375
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(Loss) From Operations (103,467) (88,159)
------- ------
Other Income (Expense):
Interest Income 25 909
Interest (Expense) (23) (23)
Gain (Loss) on Sale of Horse (415) 222
Earnest Money Income 37,000 20,000
------ ------
Total Other Income (Expense) 36,587 21,108
------ ------
(Loss) Before Taxes (66,880) (67,051)
------ ------
Income Tax Expense 0 0
Net (Loss) ($66,880) ($67,051)
------- -------
Weighted Average Common Shares Outstanding 923,811 899,117
(Loss) Per Share (0.07) (0.07)
==== ====
The Accompanying Notes Are An Integral Part Of These Financial Statements.
3
<PAGE>
Wallstreet Racing Stables Inc.
Cash Flow Statements
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Unaudited Unaudited
For The For The
Nine Month Nine Month
Interim Period Interim Period
Ended Ended
March March
31, 2000 31, 1999
-------- --------
Net (Loss) Profit ($66,880) ($67,051)
Items Not Affecting Cash Flow:
Depreciation 4,512 10,577
Impairment of Asset 0 2,777
(Gain) Loss on Sale of Horse 415 (222)
Issuance of Stock for Services 30,313 7,500
Stock Options Exercised 45,000 0
(Increase) Decrease In Receivable 6,784 (2,153)
(Increase) Decrease In Prepaid Expenses (3,664) (414)
(Increase) Decrease In Deposits 0 100
(Decrease) Increase In Accounts Payable (13,377) (1,174)
(Decrease) Increase In Accrued Salaries (20,000) 8,000
(Decrease) Increase In Payroll Taxes Payable 15,888 1,642
------ -----
Net Cash Flows Provided From (Used By)
Operations (1,009) (40,418)
----- ------
Cash Flows From Investing Activities:
Sale of Horses 22,900 5,000
Purchase Of Horses 0 (21,600)
- ------
Net Cash Flows Provided From (Used By) Investing 22,900 (16,600)
------ ------
Cash Flows Provided From Financing Activities 0 0
Net Cash Flows Provided From (Used By) Financing 0 0
- -
Net Increase (Decrease) In Cash 21,891 (57,018)
Cash At Beginning Of Period 3,267 68,936
----- ------
Cash At End Of Period $25,158 $11,918
======= =======
Summary of Non-Cash Investing And Financing Activities:
Stock Issued For Services $30,313 $7,500
Stock Options Exercised 45,000
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, 2000
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Note 1 - Unaudited Financial Information
- ----------------------------------------
The condensed, unaudited financial information furnished herein was taken
from the books and records of the Company without audit and has been prepared
in accordance with the rules for Form 10-QSB. 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 consists only
of normal reoccurring accruals. The results of operations for the nine month
interim period ended March 31, 2000 are not necessarily indicative of the
results to be expected for the fiscal year ended June 30, 2000.
Note 2 - Financial Statements
- -----------------------------
Management has elected to omit substantially all footnotes relating to the
condensed financial statements of the Company included in the 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, 1999 as filed with the
Securities and Exchange Commission and the audited financial statements
included therein.
Note 3 - Basis Of Presentation
- ------------------------------
In the course of its activities, the Company has sustained continuing
losses and expects such losses to continue in the foreseeable future. The
Company's ability to continue as a going concern is dependent upon funding
from outside sources which may take the form of acquisitions, mergers,
joint ventures, acquisitions of additional assets or other business
opportunities.
Note 4 - Discontinued Operations
- --------------------------------
During the fiscal quarter ended December 31, 1999, management determined
that the Company should discontinue operations in the thoroughbred horse
racing industry. That decision was prompted by continuing losses from
operations and difficulties encountered in obtaining capital to acquire
sufficient assets to make the Company profitable. Accordingly, during that
fiscal quarter, one horse in which the Company had an interest was retired
and the Company sold its interest in two additional horses. During the
current fiscal quarter, ended March 31, 2000, the Company sold its interest
in two of the remaining horses. Additionally, the Company has entered into
an agreement with a merger candidate.
5
<PAGE>
WALLSTREET RACING STABLES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
This Report 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 business transactions, 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
At March 31, 2000, Wallstreet Racing Stables, Inc. (the "Company") had
working capital of $8,384, an improvement from the working capital existing
at December 31, 1999 of negative $27,877. Shareholders' equity also equaled
$8,384, as the Company's assets consisted entirely of current assets. The
Company has sold or will dispose of all its racehorses in anticipation of
discontinuing operations in that industry. The interest in the remaining
horse has been fully depreciated.
While the Company's financial condition improved slightly from year-
end June 30, 1999, the Company still had insufficient capital to survive on
a long term basis or pursue any foreseeable business plan. The Company is
therefore dependent on developing a new business plan and receipt of
additional financing from outside sources to continue as a going concern.
The Company has experienced a lack of liquidity and working capital
since approximately fiscal year end June 30, 1999. Expectations that the
Company could generate working capital through racing purses and the sale
or syndication of its thoroughbred horses were unfulfilled. The Company
was also unable to attract capital from outside sources in an amount
sufficient to reach profitability on a consistent basis. In view of this
situation, a decision was made to discontinue operations in the
thoroughbred industry.
During the quarter ended March 31, 2000, and in an effort to address
the lack of working capital, the Company executed a non-binding agreement
to merge with or acquire an unrelated entity engaged in the
telecommunications industry. This agreement resulted in additional
negotiations, and on April 28, 2000, a definitive agreement was executed
whereby the Company would acquire Pipeline Technologies, Inc. in a tax-free
exchange. Pipeline is a private, Florida corporation with offices in
Jacksonville. It is a development-stage company proposing to provide long
distance telecommunication services over the internet. Up to the date of
executing the agreement with the Company, it had no or nominal revenues.
While the acquisition of Pipeline represents a divergence from the
Company's original business plan, management believes that it represents
the best opportunity for the shareholders.
6
<PAGE>
Closing of the transaction with Pipeline is scheduled for later in
May, although there is no assurance that the acquisition will be completed.
The closing is subject to a number of contingencies, including continuing
due diligence, regulatory filings and financing.
During the nine month period ended March 31, 2000, the Company's
operations used approximately $1,009 in cash. This compares to negative
cash flow of $40,418 for the nine month period ended March 31, 1999. Cash
flow during the nine month period ending March 31, 2000 was helped by the
sale of Company assets in the amount of $22,900 and the receipt of an
earnest money deposit of $37,000 in connection with the proposed
acquisition of Pipeline and another terminated agreement. The proceeds of
those transactions have been used by the Company to pay expenses associated
with the proposed acquisitions and other general and administrative
expenses.
Sale of the Company's assets during the quarter ended March 31, 2000
should assist in reducing expenses and preserving any remaining working
capital. Direct expenses associated with care and maintenance of the
thoroughbreds, such as boarding and training, depreciation, race and vet
expenses, should be eliminated as the horses are sold. However, fixed
expenses, such as salaries, rent, legal and accounting fees will remain
generally constant.
Results of Operations
During the nine month period ended March 31, 2000, the Company
realized a net loss from operations of $103,467 on revenues of $24,327.
The net loss for that period, including other income and expense, was
$66,880, or $(.07) per share. This compares to a loss for the nine month
period ended March 31, 1999 of $67,051, or $(.07) per share. During the
three month period ended March 31, 2000, the Company lost $18,370,
compared to a loss of $34,170 for the three month period ended March 31,
1999.
Revenues decreased substantially from the nine month period ended
March 31, 1999 to the comparable period ended March 31, 2000, from $106,216
to $24,327. This decrease is attributable to lack of success of the
Company's thoroughbreds in racing during the recent nine month period. Da
Hoss, the most successful of the thoroughbreds in which the Company has an
interest, was permanently retired in Lexington, Kentucky in the fall of
1999. Da Hoss will be boarded at a horse park, where all of his care and
maintenance expenses will be paid by a third party. The remaining
thoroughbreds in which the Company had an interest during the nine months
ended March 31, 2000 were not of a caliber to generate purses similar to
those previously won by Da Hoss. Management attributes this failure, in
turn, to a lack of working capital with which to acquire better
thoroughbreds.
With the decrease in thoroughbreds, operating expenses decreased from
third quarter 1999 to third quarter 2000. Operating expenses for the nine
months ended March 31, 2000 were $127,794, compared to $194,375 for the
comparable period ended in 1999. This decrease in expenses contributed to
reducing the net loss which the Company would otherwise have realized.
Direct expenses associated with care and maintenance of the thoroughbreds,
such as boarding and training, depreciation, transportation, race expenses,
travel and entertainment were reduced with the sale of all thoroughbreds.
Other expenses such as legal and accounting and professional services also
decreased, contributing to the decrease in overall expenses. However,
7
<PAGE>
management anticipates the Company will continue to incur losses until such
time as it obtains assets sufficient to generate revenues to cover direct
and indirect expenses.
The net loss for the nine month period ended March 31, 2000 was
reduced by other income in the amount of $37,000 representing a
nonrefundable deposit in connection with the execution of the agreements
discussed above.
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.
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 11, 2000 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 11, 2000 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 03/31/00 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<CIK> 0001040751
<NAME> WALLSTREET RACING STABLES, INC.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
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