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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
AMENDMENT NO. 2
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Thoroughbred Interests, Inc.
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(Name of Small Business Issuer in its charter)
Kentucky 61-1342734
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
127 South 6th Street, Louisville, KY 40202
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (502) 584-4434
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
Common Stock
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(Title of class)
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(Title of class)
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C>
Item 1 Description of Business 3
Item 2 Management's Discussion and Analysis or Plan of Operation 11
Item 3 Description of Property 12
Item 4 Security Ownership of Certain Beneficial
Owners and Management 13
Item 5 Directors, Executive Officers, Promoters and Control Persons 14
Item 6 Executive Compensation 15
Item 7 Certain Relationships and Related Transactions 17
Item 8 Description of Securities 17
PART II
Item 1 Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters 19
Item 2 Legal Proceedings 19
Item 3 Changes in and Disagreements with Accountants 19
Item 4 Recent Sales of Unregistered Securities 19
Item 5 Indemnification of Directors and Officers 20
SIGNATURE 22
PART F/S
Financial Statements F-1 - F-15
PART III
Index to Exhibits
Exhibits
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
THIS FORM 10-SB INCLUDES "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. WE INTEND FOR THE FORWARD
LOOKING STATEMENTS TO BE COVERED BY THE SAFE HARBOR PROVISIONS FOR
FORWARD-LOOKING STATEMENTS. ALL STATEMENTS REGARDING OUR EXPECTED FINANCIAL
POSITION AND OPERATING RESULTS, OUR BUSINESS STRATEGY, OUR FINANCING PLANS AND
THE OUTCOME OF ANY CONTINGENCIES ARE FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH OR IMPLIED BY
ANY FORWARD-LOOKING STATEMENTS. THOSE UNCERTAINTIES INCLUDE COMPETITION, RATE
OF INDUSTRY GROWTH, MARKETING CAPABILITIES AND THE CONDITION OF THE FINANCIAL
MARKETS. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
GENERAL
We were organized as a business corporation under the laws of the State of
Nevada on March 25, 1999. We were formed to engage in "pinhooking" and racing of
thoroughbred horses. "Pinhooking" involves the purchase of a yearling, that is,
a horse which is between one and two years old, with a view towards training and
then reselling that horse as a two-year old. Those horses that we are unable to
pinhook at an acceptable profit we plan to enter in races because we expect that
if a horse is successful at racing, its value will increase. As of October 31,
2000 we held full title to 16 thoroughbreds and ownership interests, ranging
from 25% to 60%, in four thoroughbreds. We purchase most of our thoroughbreds
from non-affiliated breeders of thoroughbred yearlings through non-affiliated
industry auction houses, such as Fasig-Tipton and Keeneland.
Our Chief Executive Officer, President and sole employee, James D. Tilton,
Jr., currently makes all the decisions on behalf of the Company regarding the
purchasing, training, racing and selling of the Company's thoroughbred horses.
In particular, Mr. Tilton makes the decisions regarding: (i) whether to purchase
a certain thoroughbred horse; (ii) who should be retained to break-in and train
the thoroughbred; (iii) whether the thoroughbred should be sold as a two year
old (i.e., pinhooked); (iv) whether the thoroughbred should be entered into
races; and (v) if raced, at what point if any, the thoroughbred should be sold.
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Mr. Tilton has limited experience in pinhooking and racing of thoroughbred
horses. See "Risk Factors - Limited Experience of our Sole Employee." As a
result, Mr. Tilton may, from time to time, retain consultants experienced in the
thoroughbred industry to: (i) assist him in determining which thoroughbreds to
purchase; (ii) assist him in training the purchased thoroughbreds; and (iii)
assist him in determining whether the thoroughbred should be sold as a two
year old or raced.
We expect to incur numerous expenses in our efforts to pinhook and race
thoroughbred horses. First, we expect to pay a 5% consultant fee for all
thoroughbreds we purchase with the assistance of a consultant. Second, we plan
to hire horse trainers to maintain, care and train our thoroughbreds. Such horse
trainers will bill us for veterinary, food, shipping, blacksmith, breaking in
and training expenses. We also expect to make payments to these horse trainers
of 5% of the sales price of each throughbred that they train and we sell.
Additional expenses could include sale nominations and entry fees, advertising
and video production.
We also expect to incur mortality and surgical insurance expense. This
insurance will cost approximately 2.5% of the purchase price of each horse.
Additionally, for each thoroughbred we sell at auction, we expect to pay a fee
of 5% of the sale price to the auction house.
HISTORICAL BACKGROUND OF OUR COMPANY
The following is a detailed chronology of the steps we have taken in
furtherance of our business plan, beginning in 1997, prior to our incorporation.
Our President, Mr. Tilton, has dedicated much of the past three years to
developing and building the Company.
(a) 1997: Mr. Tilton spent much of 1997 studying and developing a plan
for engaging in profitable pinhooking. Mr. Tilton's market
research came from several sources, including his personal
experience (e.g., by growing up in Louisville, Kentucky --
the heart of the thoroughbred industry), his participation in
horse ownership, and from his extensive reading of books and
trade publications in the field, including periodicals such
as Blood Horse and Thoroughbred Times. Mr. Tilton's objective
was threefold. He wished to (i) build a solid understanding
of the thoroughbred market, (ii) conduct extensive first hand
research, and (iii) develop a solid business plan for the
Company.
(b) January-June
of 1998: In addition to networking in Kentucky, Mr.Tilton made
numerous trips to Florida and California to meet with
individuals and entities in the thoroughbred industry.
Mr. Tilton continued to own a few race horses with other
individuals. His continued involvement with other horse
owners provided additional market research.
(c) July-Dec.
of 1998: Mr. Tilton attended thoroughbred auctions around the country,
including, but not limited to, the Fasig-Tipton Auctions. Mr.
Tilton met consigners in the horse breeding and training
business. He purchased one race horse in September of 1998,
five race horses in October and two in December. Three of
these horses were resold for a profit in 1999.
(d) March 1999: Mr. Tilton formed the Company. The Company issued 2,050,000
shares of its Common Stock to 5 investors in exchange for
services. The Company subsequently issued 43,000 shares of
its Common Stock at $.10 per share to 43 investors for a
total capital raise of $4,300. The Company relied upon
the exemption afforded by Section 4(2) of the Securities Act
of 1933,as amended, for the issuance of these shares.
(e) July 1999: The Company purchased its first horse at the Fasig Tipton
Auction. Mr Tilton loaned the Company $50,000 for the
purpose of making that purchase.
(f) Aug. 1999: We acquired two additional horses for a total sum of
$121,000 at the Fasig Tipton New York Auction. The
funds used to purchase the horses were also borrowed
from Mr. Tilton.
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(g) Sept. 1999: We purchased one horse at the Keeneland sale.
(h) Sept. 30,
1999: The Augustine Fund, L.P., an Illinois Limited Partnership
with offices at 141 West Jackson Street, Suite 2182, Chicago,
Illinois 60604 (the "Augustine Fund") loaned the Company
$300,000 for operating expenses. The loan is evidenced by a
promissory note and is secured by 6,000,000 shares of our
Common Stock owned by Mr. Tilton. The promissory note was
initially due and payable in the amount of $375,000 on or
before March 28, 2000. On March 22, 2000, the Augustine Fund
extended the due date to May 29, 2000. On October 3, 2000,
The Augustine Fund granted us an additional extension to
March 31, 2001. The entire loan is convertible, at the sole
discretion of the Augustine Fund, into shares of the
Company's Common Stock (the "Converted Shares") at $.10 per
share and warrants excercisable into one-half the number of
Converted Shares at $.15 per share.
(i) October 1999: We purchased three horses at the Fasig Tipton auction
in Maryland and two horses in Kentucky.
(j) December 15,
1999: Mr. Andrew Dyer, with an address c/o The Dyer Group, 100
Tower Drive, Greenville, S.C. 29650, loaned the Company
$50,000 for operating expenses. The loan is evidenced by a
promissory note. The loan was originally due on August 13,
2000 but was extended on October 11, 1999 to March 31, 2001.
The loan is convertible, at the sole discretion of Mr. Dyer,
into shares of the Company's Common Stock (the "Converted
Shares") at $.10 per share and warrants excercisable into
one-half the number of Converted Shares at $.15 per
share.
(k) January 31,
2000: Mr. Andrew Dyer, with an address c/o The Dyer Group, 100
Tower Drive, Greenhille, S.C. 29600, loaned the Company an
additional $50,000 for operating expenses. The loan is
evidenced by a promissory note. The loan was originally due
on August 13, 2000 but was extended on October 11, 1999 to
March 31, 2001. The loan is convertible, at the sole
discretion of Mr. Dyer, into shares of the Company's Common
Stock (the "Converted Shares") at $.10 per share and warrants
excercisable into one-half the number of Converted Shares at
$.15 per share.
(l) Feb. 2000: We sold two of our horses at the Ocalar Breeder Sales "OBS"
February sale in Miami. We also sold a 75% ownership interest
in another horse in a private transaction.
(m) March 2000- We sold three of our horses, one at the OBS March sales in
April 2000: Ocala, and two at the Keeneland April sale in Lexington,
Kentucky.
(n) May 2000: We sold one of our horses at the Fasig Tipton May Midatlantic
sale in Baltimore, Maryland. We also purchased a horse
as a racing prospect at the same sale.
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(o) June 2000: We purchased a horse at the OBS June sale in Ocala as a
racing prospect.
(p) July 2000: We sold ownership interests in three of our horses in private
transactions.
(q) August 2000-
October 2000: We purchased five horses at the Keeneland September sale, 6
horses at the Fasig Tipton Midatlantic sale, 3 horses at the
Fasig Tipton Kentucky sale, and one horse through a private
transaction. We borrowed $300,000 from Mr. Tilton as partial
payment for the horses and in consideration thereof gave
Mr. Tilton a security interest in certain of our horses.
(r) September
2000: We purchased the domain name Thoroughbredsales.com in
exchange for 25,000 shares of our Common Stock. We intend to
construct a corporate website using this domain name.
We currently maintain our principal office at 127 South 6th Street, Louisville,
Kentucky 40242. Our telephone number is (502)584-4434 and our facsimile number
is (502) 584-4850.
RISK FACTORS
We provide the following cautionary discussion of risks, uncertainties and
possible inaccurate assumptions relevant to our business. These are only some of
the factors that we think could cause our actual results to differ from
expected results. Other factors besides those listed here could adversely
affect us.
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WE HAVE INCURRED LOSSES FROM INCEPTION AND MAY NEVER GENERATE PROFITS.
We have only recently been incorporated and we are still engaged in
structuring our management and our proposed operations. Our operations are
subject to all of the risks inherent in the establishment of a new business
enterprise, including the lack of significant operating history. There can be no
assurance that future operations will be profitable. Revenues and profits, if
any, will depend upon various factors, including our ability to acquire horses
suitable for pinhooking, to adequately train such horses in order that they
achieve their potential, the expertise of our management, the market acceptance
of the products offered, costs and general economic conditions. There can be no
assurance that we will achieve our projected goals or accomplish our business
plans; and such failure could have a material adverse effect on us and the value
and price of our securities.
BECAUSE OF THE LIMITED EXPERIENCE OF MANAGEMENT IN PINHOOKING AND RACING OF
THOROUGHBRED HORSES OUR BUSINESS COULD SUFFER.
James D. Tilton, our President and sole employee, has had limited
experience in pinhooking and racing of thoroughbred horses. There can be no
assurance that Mr. Tilton will be able to make the decisions necessary to earn a
profit in the business.
WE MAY NOT BE ABLE TO OBTAIN THE CAPITAL NEEDED TO FINANCE GROWTH AND CAPITAL
REQUIREMENTS.
We may be required to seek additional funds and to raise additional capital
from public or private equity or debt sources in order to fund our general and
administrative costs and expenses and pay off startup loans.
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There is no guarantee that we will be able to raise any such capital on
terms acceptable to us or at all. Such financing may be upon terms that are
dilutive or potentially dilutive to our stockholders. If alternative sources of
financing are required, but are insufficient or unavailable, we will be required
to modify our growth and operating plans in accordance with the extent of
available funding. At the present time, we do not intend to obtain any loan
financing from a lending institution. If necessary, Mr. Tilton may make a
personal loan to the Company at or below market rates, on terms customarily used
by lending institutions in making loans.
If we are required to obtain loan financing, the amount of our profits (if
any) will decrease or the amount of our losses will increase due to the interest
charged on the loan. Loan financing may subject our operations to restrictions
imposed by the lending institution, hindering our ability to operate in the
manner best determined by our management and/or Board of Directors, with the
potential that such restrictions will impede or prevent our growth and/or
negatively impact our level of profits. Additionally, the use of debt financing
or leverage would subject us to the risk that any downturns in the thoroughbred
industry and any changes in interests rates (if we have an adjustable rate loan)
will substantially increase the likelihood that our operations will not be
profitable, possibly causing us to become bankrupt or to dissolve the
corporation.
WE DEPEND ON KEY PERSONNEL AND MAY NOT BE ABLE TO RETAIN THEM.
Our future success will depend largely on the efforts and abilities of our
management, especially of our current sole officer and director,
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James D. Tilton, Jr. The loss of the services of Mr. Tilton or the inability
to attract additional, experienced management personnel could have a
substantial adverse effect on the Company. We have not obtained a "key man"
insurance policy for Mr. Tilton. Our ability to implement our strategies
depends upon our ability to attract highly talented managerial personnel.
There can be no assurance that we will attract and retain such employees in
the future.
RISKS ASSOCIATED WITH MANAGEMENT OF POTENTIAL GROWTH.
We anticipate that we will have rapid growth in the number of horses that
we own. This will place a strain on our managerial, operational, and financial
resources. We will initially use outside consultants and specialists to provide
thoroughbred consulting, legal counsel and preliminary accounting until such
persons are required on a full time or ongoing basis. We currently employ one
person, Mr. Tilton. Our future employment of personnel is dependent on the
number of horses we obtain. We expect to employ a bookkeeper in the near future.
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There can be no assurance that we will be able to effectively manage the
expansion of our operations, or that our facilities, systems, procedures or
controls will be adequate to support our expanded operations. Our inability to
effectively manage our future growth will have a material adverse effect on us.
WE MAY NOT BE ABLE TO COMPLY WITH ALL CURRENT AND FUTURE GOVERNMENT REGULATION.
Our business operations are subject to all government regulations normally
incident to conducting business (e.g., occupational safety and health acts,
workmen's compensation statutes, unemployment insurance legislation, income tax
and social security laws and regulations, environmental laws and regulations,
consumer safety laws and regulations, etc.) as well as to governmental laws and
regulations applicable to small public companies and their capital formation
efforts. In addition, we are subject to laws and regulations regarding the
purchase, sale, breeding, transportation, care, and possibly, racing of horses.
Although we will make every effort to comply with applicable laws and
regulations, we can provide no assurance of our ability to do so, nor can we
predict the effect of those regulations on our proposed business activities.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY WITH OUR COMPETITORS.
There are many competitors in the pinhooking industry. Due to the fact
that the majority of pinhooking operations are run by private companies and
partnerships, we are unable to state the size or profitability of our
competitors.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THIS FORM 10-SB INCLUDES "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. WE INTEND FOR THE FORWARD
LOOKING STATEMENTS TO BE COVERED BY THE SAFE HARBOR PROVISIONS FOR
FORWARD-LOOKING STATEMENTS. ALL STATEMENTS REGARDING OUR EXPECTED FINANCIAL
POSITION AND OPERATING RESULTS, OUR BUSINESS STRATEGY, OUR FINANCING PLANS AND
THE OUTCOME OF ANY CONTINGENCIES ARE FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH OR IMPLIED BY
ANY FORWARD-LOOKING STATEMENTS. THOSE UNCERTAINTIES INCLUDE COMPETITION, RATE
OF INDUSTRY GROWTH, MARKETING CAPABILITIES AND THE CONDITION OF THE FINANCIAL
MARKETS. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
The following discussion and analysis should be read in conjunction with
the financial statements of the Company included elsewhere herein.
PLAN OF OPERATIONS FOR THE NEXT 12 MONTHS
We have developed a plan of operations reflecting our objectives and
anticipated growth for the next 12 months and beyond. In our plan, we identify
our cash requirements, our anticipated purchases of new horses, and our required
staffing and additional funding requirements to fulfill our business objectives.
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Cash Requirements
We estimate that we require a minimum of approximately $400,000 and a
maximum of approximately $1,000,000 to operate for the next 12 months from the
date of this Registration Statement. The minimum of $400,000 is required for
operating expenses. The maximum will be required, however, if the Augustine Fund
and Mr. Andrew Dyer do not convert their promissory notes into Common Stock of
the Company. This estimate of required funds includes the $375,000 due and
payable to the Augustine Fund as of March 31, 2001, the $100,000 due and payable
to Mr. Andrew Dyer as of March 31, 2001 and $400,000 in estimated operating
expenses including office rent, boarding, training and/or racing our horses.
Although there can be no assurance, we expect that both the Augustine Fund
and Andrew Dyer will convert their notes payable into our Common Stock pursuant
to their Amended Promissory Notes.
Additionally, as of October 31, 2000, we held full title to 16
thoroughbreds and ownership interests, ranging from 25% to 60% in four
thoroughbreds. We expect to generate approximately $750,000 to $1,000,000 in
revenue from the sales of these horses. This projection is based upon our
historical performance to date. Specifically, we have pinhooked 10 horses to
date and generated a net profit of approximately $237,600.00 from these efforts.
To the extent we are unable to meet our operating expenses or matured notes
payable, we may borrow funds from our president Mr. Tilton or others, or we may
attempt to raise capital from large institutional investment equity funds. Any
funds generated from sales of horses or from equity investments, if any, in our
company that exceeds our operating expenses and debt repayments will be used to
purchase additional thoroughbred horses.
Change in Number of Employees
We may hire up to three additional employees in 2001, finances permitted,
in the areas of marketing and sales.
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ITEM 3. DESCRIPTION OF PROPERTY
As of March of 2000, we moved our main office to a new facility located at
127 South 6th Street in Louisville, Kentucky, 40402. We lease this facility from
a non-affiliated party. It has approximately 1865 square feet of office space
consisting of three separate offices, a library, a conference room, a kitchen
and a bathroom. The monthly rent is $2,630 of which Thoroughbred Interests, Inc.
pays 50% with the other 50% paid by Technology Capital Group, Inc. Thoroughbred
Interests, Inc. and Technology Capital Group, Inc., together own the office
equipment and furniture. Management believes that this facility is adequate for
us for at least the next 12 months. Our phone number is (502) 584-4434, and our
facsimile number is (502) 584-4850.
ITEM 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 15, 2000, the number of and
percentages of shares of outstanding Common Stock owned by each person owning at
least 5% of the Company's outstanding Common Stock, each officer and director,
and all officers and directors as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES OF PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS (1)
---------------- ------------------- ------------
<S> <C> <C>
James D. Tilton, Jr. 27,000,000 (2)(3) 91.80%
8702 Twin Ridge Road
Louisville, KY 40242
</TABLE>
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<TABLE>
<S> <C> <C>
All Officers and Directors as 27,000,000 91.80%
a Group (1 Person)
</TABLE>
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(1) Based upon 26,411,000 shares issued and outstanding
(2) Includes 6,000,000 shares being held in escrow by H. Glen Bagwell as
security for the loan made by The Augustine Fund, L.P. (the "Augustine Fund")
to the Company and will be returned to James D. Tilton upon repayment to
the Augustine Fund of the loan or the conversion by the Augustine Fund of the
amount owing into Common Stock of the Company. Mr. Tilton has sole voting and
investment power in all 24,000,000 shares.
(3) Includes 3,000,000 options to purchase 3,000,000 shares of the Company's
Common Stock pursuant to the Company's Millenium Stock Option Plan. All of the
options are vested and immediately exercisable.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS. The position(s) held by each of our executive
officers and Directors as of November 15, 2000 is shown in the following table.
Biographical information for each is set forth following the table.
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Each Director serves for a one year term and until a successor is elected and
qualified. Each officer serves at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James "Jim" D. Tilton, Jr. 39 Chairman of the Board, President
Chief Executive Officer and Secretary
</TABLE>
JAMES D. TILTON, JR. has been the Company's Chief Executive Officer since its
incorporation. He is also Chairman of our Board of Directors. Mr. Tilton has
also been since January 6, 1999 President, Secretary, Treasurer and Chairman of
the Board of Technology Capital Group, Inc., an interactive media content
provider with a network of integrated technology businesses. Mr. Tilton was born
and raised in Louisville, Kentucky. In 1982 he received a B.A in Political
Science with a concentration in accounting and business from the University of
Louisville.
From 1993 to the present Mr. Tilton has worked in the securities industry. He
started in 1993 as a stockbroker with Prudential Securities and was subsequently
recruited to Smith Barney in 1994 and then to Morgan Keegan in 1995. He began
working independently in the securities industry in January 1997, specializing
in corporate finance/investment banking. Mr. Tilton has been involved in the
financing of over 15 both private and public small growth companies.
Mr. Tilton is a member of the Thoroughbred Owners and Breeders Association, the
Kentucky Thoroughbred Owners and Breeders Association, and the Turf Club at
Churchill Downs. Since 1997 he has been a partner in thoroughbred horse owning
partnerships.
ITEM 6: EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS. At the present time we have only one director, Mr.
Tilton. As an "inside" director (an employee) he is not compensated for his
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services as a director and it is our current policy not to compensate inside
directors. However, we are seeking to expand the Board of Directors by the
addition of qualified persons who may not be our employees and in that event we
would expect to provide compensation in the form of :
(a) expense reimbursement for attendance at meetings;
(b) cash;
(c) stock and/or
(d) stock options;
or a combination of any or all four, as circumstances may require. The Directors
shall serve for a term of one year, or until their successor are elected and
qualify.
COMPENSATION OF MANAGEMENT. Our only employee is Mr. Tilton, who serves as our
President, Secretary and Treasurer. Under his employment agreement, Mr. Tilton
is to be paid an annual base salary of $90,000 for calendar year 2000, $120,000
for calendar year 2001 and $180,000 for calendar year 2002. The agreement
provides for annual incentive bonus based upon EBITDA. The agreement also
provides for an issuance of three million (3,000,000) common stock options
pursuant to our Millennium Stock Option Plan. All of the options are vested and
are immediately exercisable. See "Employment Agreements", below. Mr. Tilton has
agreed to defer the payment of his salary by the Company.
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We have an employment agreement with James D. Tilton, Jr. which ends on
December 31, 2002. The Agreement provides for the payment of an annual base
salary of $90,000 for calendar year 2000, $120,000 for calendar year 2001 and
$180,000 for calendar year 2002. The employment agreement also provides for an
annual incentive bonus equal to: (a) 30% of his annual base salary if the
Company's annual earnings before income taxes, depreciation and amortization
("EBITDA") is at least $1 million; (b)50% of his annual base salary if the
Company's EBITDA is at least $2 million, or (c) 100% of his annual base salary
if the Company's EBITDA is at least $4 million. The Agreement provides for a
grant of incentive stock options pursuant to our Millennium Stock Option Plan,
on 3,000,000 shares of our Common Stock to Mr. Tilton at 110% of the fair market
value of our Common Stock on the date of grant. The options are vested and are
exercisable immediately. The employment agreement further provides for the
payment to Mr. Tilton upon the occurrence of a change of control of the Company,
as defined in the agreement, or upon the death or disability of Mr. Tilton, the
discharge of Mr. Tilton without cause or the resignation of Mr. Tilton for "good
reeason", as defined in the agreement, of a lump sum equal to his annual base
salary and bonus. In addition, if the terminating event occurs on or before June
30, 2001, the Company is to pay to Mr. Tilton an additional $100,000.
Mr. Tilton also has an employment agreement with Technology Capital Group,
Inc., an interactive media content provider with a network of integrated
technology business, of which he is Chief Executive Officer and Chairman of the
Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with our incorporation, we issued 12,000,000 shares of our
Common Stock to Mr. Tilton at the par value of $.001 per share. Mr. Tilton
received these shares in recognition of his pre-incorporation services.
Subsequently, due to our 2 for 1 forward stock split, Mr. Tilton's shares
were increased to 24,000,000 shares. 6,000,000 of these shares are being held in
escrow in the name of H. Glen Bagwell as security for the Augustine Fund, L.P.
There is no affiliation between Mr. Tilton and The Augustine Fund, L.P. or
Glen Bagwell, Jr.
In connection with our purchase of several thoroughbreds in September and
October of 2000, pursuant to a written promissory note dated October 31, 2000
(the "Note"), Mr. Tilton loaned the Company $300,000 to pay for the horses. In
consideration for the Note, pursuant to a Pledge and Security Agreement dated
October 31, 2000, the Company gave Mr. Tilton a security interest in some of its
horses.
ITEM 8. DESCRIPTION OF SECURITIES
Our authorized capital structure consists of Preferred Stock, par value
$.001, and Common Stock, par value $.001. The number of shares authorized and
outstanding as of the date hereof is as follows:
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<TABLE>
<CAPTION>
SECURITY AUTHORIZED OUTSTANDING
<S> <C> <C>
Preferred Stock 10,000,000 0
Common Stock 100,000,000 26,411,000
Stock Options 10,000,000 3,000,000
</TABLE>
PREFERRED STOCK. The 10,000,000 shares of Preferred Stock having a par value of
$.001 authorized are undesignated as to preferences, privileges and
restrictions. When the shares are issued, the Board of Directors must establish
a "series" of the shares to be issued and designate the preferences, privileges
and restrictions applicable to that series.
To date, the Board of Directors has not designated any series.
COMMON STOCK. Our authorized common equity consists of 100,000,000 shares of
Common Stock, with a $.001 par value, of which 26,411,000 shares of Common Stock
are issued and outstanding. Shareholders (i) have general ratable rights to
dividends from funds legally available, therefore; when and if declared by the
Board of Directors; (ii) are entitled to share ratably in all of our assets
available for distribution to shareholders upon liquidation, dissolution or
winding up of our affairs; (iii) do not have preemptive, subscription or
conversion rights, nor are there any redemption or sinking fund provisions
applicable thereto; and (iv) are entitled to one vote per share on all matters
on which shareholders may vote at all shareholder meetings. All shares of Common
Stock now outstanding are fully paid and nonassessable.
The Common Stock does not have cumulative voting rights, which means that
the holders of more than fifty percent of the Common Stock voting for election
of directors can elect one hundred percent of our directors if they choose to do
so. We have not had any earnings, have not paid any dividends on our Common
Stock and do not anticipated that any dividends will be paid in the foreseeable
future. Dividends upon Preferred shares must have been paid in full for all past
dividend periods before distribution can be made to the holders of Common Stock.
In the event of a voluntary or involuntary liquidation, all of our assets and
funds remaining after payments to the holders of Preferred Stock will be divided
and distributed among the holders of Common Stock according to their respective
shares.
STOCK OPTIONS. Options to purchase Shares of our Common Stock were made
available in a Millennium Stock Option Plan. We created this plan to compensate
executives, key management personnel, employees and consultants who either have
previously contributed to our continuity and growth, or who are contributing
currently to our continuity and growth. Also, we hope to provide an incentive
for employees and consultants to expand and improve the profits and prosperity
of our Company and to assist us in attracting and retaining executives, key
management personnel, employees and consultants through the grant of Options to
purchase shares of our Common Stock. Presently, options are allocated as
follows:
18
<PAGE>
<TABLE>
<CAPTION>
Title and amount of
securities called
Name of for by options, Exercise Date
Holder warrants or rights price Exercised
<S> <C> <C> <C>
James D. Tilton, Jr. Options to purchase $0.11 per share N/A. See below.
3,000,000 shares of
Common Stock
</TABLE>
These options were issued to James D. Tilton, Jr. pursuant to our Millennium
Stock Option Plan. All of the options have vested and are exercisable
immediately. Mr. Tilton has sole investment power and sole voting power over the
shares which may be issued under these options.
DIVIDEND POLICY. We have recently been incorporated, have had no operations,
earnings or profits, and will be required to re-invest any future earnings in
our operations. We have not paid any cash dividends on our Common Stock or our
Preferred Stock. Moreover, our Board of Directors has no present intention of
declaring any cash dividends. We expect to re-invest all profits in the business
for additional working capital for continuity and growth. The declaration and
payment of dividends in the future will be determined by our Board of Directors
considering the conditions then existing, including our earnings, financial
condition, capital requirements, and other factors.
PART II
ITEM 1.MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
A. MARKET PRICE. There is no trading market for the Company's Common Stock at
present and there has been no trading market to date. There is no assurance that
a trading market will ever develop or, if such a market does develop, that it
will continue.
B. HOLDERS. There are approximately 53 holders of record of the Company's Common
Stock.
C. DIVIDEND POLICY. We have not had any earnings or profits and have not paid
any dividends. Our proposed operations are capital intensive and we need working
capital. Therefore, we will be required to reinvest any future earnings in the
Company's operations. Our Board of Directors has no present intention of
declaring any cash dividends, as we expect to re-invest all profits in the
business for additional working capital for continuity and growth. The
declaration and payment of dividends in the future will be determined by our
Board of Directors considering the conditions then existing financial condition,
including the Company's earnings, capital requirements, and other factors.
ITEM 2. LEGAL PROCEEDINGS
We are not aware of any legal proceedings pending, threatened or contemplated,
against any of our officers and directors, respectively, in their capacities
19
<PAGE>
as such.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In connection with our incorporation, we issued 12,000,000 shares of our
Common Stock to Mr. Tilton at the par value of $.001 per share. These shares
were issued to Mr. Tilton in recognition of his pre-incorporation services.
Subsequently, due to our 2 for 1 forward stock split, Mr. Tilton's shares
were increased to 24,000,000 shares. 6,000,000 of these shares are being held in
escrow in the name of H. Glen Bagwell as security for the Augustine Fund, L.P.
In March 1999, we issued 2,050,000 shares of our Common Stock to five
investors in exchange for services rendered to the Company. We also issued in
March 1999, 43,000 shares of our Common Stock at $.10 per share to 43 investors.
On September 30, 2000, we issued 25,000 shares of our common Stock in
exchange for the domain name Thoroughbredsales.com.
All of the above shares of common stock have been issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended. The basis for such
exemption was the Company's belief that the investors were either accredited or
sophisticated. For those investors deemed sophisticated, they had access to
information on the Company necessary to make an informed investment decision.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada Corporation Law
Section 78.7502 of the Nevada General Corporation Law contains provisions
authorizing indemnification by the Company of directors, officers, employees or
agents against certain liabilities and expenses which they may incur as
directors, officers, employees or agents of the Company or of certain other
entities. Section 78.7502(3) provides for mandatory indemnification, including
attorney's fees, if the director, officer, employee or agent has been successful
on the merits or otherwise in defense of any action, suit or proceeding or in
defense of any claim, issue or matter therein. Section 78.751 provides that such
indemnification may include payment by the Company of expenses incurred in
defending a civil or criminal action or proceeding in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by the
person indemnified to repay such payment if he shall be ultimately found not to
be entitled to indemnification under the Section. Indemnification may be
provided even though the person to be indemnified is no longer a director,
officer, employee or agent of the Company or such other entities. Section 78.752
authorizes the Company to obtain insurance on behalf of any such director,
officer employee or agent against liabilities, whether or not the Company would
have the power to indemnify such person against such liabilities under the
provisions of the Section 78.7502.
Under Section 78.751(e) the indemnification and advancement of expenses
provided pursuant to Sections 78.7502 and 78.751 are not exclusive, and subject
to certain conditions, the Company may make other or further
20
<PAGE>
indemnification or advancement of expenses of any of its directors, officers,
employees or agents.
Articles of Incorporation and By-Laws
Our Articles of Incorporation and By-Laws empower us to indemnify current or
former directors, officers, employees or agents of the Company or persons
serving by request of the Company in such capacities in any other enterprise or
persons who have served by the request of the Company is such capacities in any
other enterprise to the full extent permitted by the laws of the State of
Nevada.
Officers and Directors Liability Insurance
At present, we do not maintain Officers and Directors Liability Insurance and,
because of the anticipated cost of such insurance, we have no present plans to
obtain such insurance.
Indemnity Agreements
In order to induce and encourage highly experienced capable persons to serve as
directors and officers, we have entered into an Indemnity Agreement with each
director and officer presently serving us and will provide the same agreement to
future directors and officers as well as certain agents and employees. The
Agreement provides that we shall indemnify the director and /or officer, or
other person, when he or she is a party to, or threatened to be made a party to,
a proceeding against us. Expenses incurred by the indemnified person in any
proceeding are to be paid to the fullest extent permitted by applicable law. The
Agreement may at some time require us to pay out funds which might otherwise be
utilized to further our business objectives, thereby reducing our ability to
carry out our projected business plans.
Sec Position on Indemnification for Security Act Liability
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that is the opinion of the Securities and Exchange
21
<PAGE>
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suite
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
Page
----
PART F/S
Report of Independent Certified Public Accountants,
dated March 3, 2000 ............................................ F-1
Audited Financial Statements for the Period Ended December 31, 1999
Balance Sheet .................................................. F-2
Statement of Income ............................................ F-3
Statement of Changes in Stockholders' Equity.................... F-4
Statement of Cash Flows ........................................ F-5
Notes to Financial Statements .................................. F-6
Unaudited Financial Statements for the Period Ended
September 30, 2000
Balance Sheet................................................... F-9
Statement of Income............................................. F-10
Statement of Cash Flows......................................... F-11
Statement of Changes in Stockholders' Equity.................... F-12
Notes to Financial Statements................................... F-13
22
<PAGE>
BAUM & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
1515 UNIVERSITY DRIVE - SUITE 209
CORAL SPRINGS, FLORIDA 33071
INDEPENDENT AUDITORS REPORT
The Board of Directors
Thoroughbred Interests, Inc.
Louisville, Kentucky
We have audited the accompanying balance sheet of Thoroughbred Interests, Inc.
(A Development Stage Company) as of December 31, 1999 and the related statement
of income, changes in stockholders' equity and cash flows for the period
commencing March 25, 1999 (inception) to December 31, 1999 then ended. 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 audits 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Thoroughbred Interests, Inc. (A Development
Stage Company) at December 31, 1999 and the statement of income, changes in
stockholders' equity and cash flows for the period commencing March 25, 1999
(inception) to December 31, 1999 then ended in conformity with generally
accepted accounting principles.
Baum & Company, P.A.
Coral Springs, Florida
March 3, 2000
F-1
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current Assets
Cash in bank $ 11,348
Investment in thoroughbred horses ( note 1 ) 441,107
---------
452,455
Other assets
Deferred registration costs ( note 1 ) 5,385
---------
Total assets $ 457,840
=========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Note payable ( note 6 ) $ 350,000
Accounts payable and accrued expenses 102,235
---------
Total current liabilities 452,235
Other liabilities
Loan payable - stockholder ( note 3 ) 113,511
---------
Total liabilities 565,746
---------
Stockholders equity
Common stock, par value $.001, 100,000,000 shares authorized;
26,386,000 shares issued and outstanding 26,386
Preferred stock, par value $.001, 10,000 shares authorized;
no shares issued
Deficit accumulated in the development stage (134,167)
Less: subscription receivable (125)
---------
(107,906)
---------
Total liabilities & stockholders equity $ 457,840
=========
See accompanying notes to the financial statements.
F-2
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THE PERIOD COMMENCING MARCH 25, 1999 (INCEPTION)
TO DECEMBER 31, 1999
Revenue $ - 0 -
Expenses
Operational costs 55,720
General & administrative 27,727
Startup and organizational costs 11,220
-----------
Total expenses 94,667
-----------
Net income (loss) Before other expenses (94,667)
Other expenses
Interest expense 39,500
-----------
Net income before provision for income taxes (134,167)
Provision for income taxes - 0 -
-----------
Net income (loss) $ (134,167)
===========
weighted average number of shares of common stock 26,386,000
-----------
loss per common share from development stage operations $( .005)
=======
See accompanying notes to the financial statements.
F-3
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT INCURRED
COMMON STOCK ADDITIONAL PAID DURING DEVELOPMENT
SHARES AMOUNT IN CAPITAL STAGE
------ ------ --------------- ------------------
<S> <C> <C> <C> <C>
Balance - inception (March 25, 1999) - 0 - - 0 - - 0 - - 0 -
Common stock issued to founder and
others for services rendered in 1999 13,193,000 13,193 - 0 - - 0 -
Stock split two for one - July 23, 1999 13,193,000 13,193 - 0 - - 0 -
Deficit incurred during development
stage - December 31, 1999 - 0 - - 0 - - 0 - (134,167)
---------- ------- ------- ---------
Balance - December 31, 1999 26,386,000 $26,386 - 0 - $(134,167)
========== ======= ======= =========
</TABLE>
See accompanying notes to the financial statements
F-4
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD COMMENCING MARCH 25, 1999 (INCEPTION)
TO DECEMBER 31, 1999
Cash flows from operations:
Net income (loss) $(134,167)
Changes in operating assets and liabilities
(Increase) in Investment in thoroughbred horses (441,107)
Increase in accounts payable and accrued expenses 102,235
---------
Net cash used for operations (473,039)
---------
Cash flows from financing activities:
Proceeds from loan from stockholder 113,511
Proceeds from issuance of common stock 26,386
Increase in subscriptions receivable (125)
Proceeds of note payable 350,000
Increase in deferred registration costs ( 5,385)
---------
484,387
Net increase in cash 11,348
Cash - beginning - 0 -
---------
Cash - ending $ 11,348
=========
Supplemental disclosures:
Interest expense $ 39,500
=========
See accompanying notes to the financial statements.
F-5
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BUSINESS AND ORGANIZATION
The Company was organized under the laws of Nevada on March 25,
1999. The Company is a development stage company in that
substantially all of its efforts are currently devoted to
raising capital. The Company business plan calls for the
purchasing, training and sales of thoroughbred horses. Effective
January 1, 2000 the Company has emerged from its development
stage.
ORGANIZATION COSTS
The Company has incurred various expenditures in the formation
of its corporate and organizational structure. In accordance
with SOP 98-5 these costs will be expensed as incurred.
DEFERRED REGISTRATION COSTS
The Company has incurred various costs to prepare and file the
required documents for its forthcoming stock offering under
regulation 504. These costs will be offset against the proceeds
of a successful offering, or expensed if unsuccessful.
SUBSCRIPTION RECEIVABLE
Sales of common stock have occurred whereby the proceeds have
not been received, thus the balances have been reflected as an
offset to stockholders equity.
INVESTMENT IN THOROUGHBRED HORSES
The Company's investment in thoroughbred horses are stated at
the lower of cost or market plus applicable carrying costs.
MANAGEMENT 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
of assets and liabilities and revenues and expenses. The actual
outcome of the estimates could differ from the estimates made in
the preparation of the financial statements
F-6
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - PROPOSED STOCK OFFERING
The Company is currently implementing a proposed stock offering
under Regulation A in accordance with the rules and regulations
of the Securities Act of 1933. Under the terms of the offering
document, the Company will sell 2,500 units @ $ 1,000 per unit
which consists of 10,000 shares of common stock and 5,000 stock
purchase warrants. Each stock purchase warrant entitles the
holder to acquire one share of common stock at an exercise price
of $ .15. This offering has been subsequently withdrawn (See
Note 8).
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has issued 13,193,000 shares of common stock to its
founder and various other individuals at a par value of $ .001
for their time and effort in establishing the Company. An
substantial amount of these shares will be subject to a
restriction against transfer for a period of at least one year
pursuant to SEC rule 144.
The founder of the Company will assume the role of CEO and
Chairman of the Board of Directors at a salary and a stock
option plan subject to the approval by the Board of Directors.
Additionally, he has advanced funds to the company.
NOTE 4 - CAPITAL TRANSACTIONS
a.) The Company at its inception issued 13,181,500 shares of
common stock to various related parties.
b.) The Company by an unanimous consent in lieu of a special
meeting of Directors approved a two (2) for one (1) forward
stock split for all shares issued and outstanding effective
July 23, 1999. The authorized shares of common stock
increased from 50,000,000 to 100,000,000 and the par value
remained at $ .001 per share.
NOTE 5 - STOCK OPTION PLAN
On July 23, 1999, the Board of directors approved a performance
stock plan to compensate executives, key management personnel
and consultants of the Company. The plan document has authorized
a maximum of 10,000,000 shares of common stock to be optioned at
an exercise price of $.11 per share. The stock options are
exercisable within five years of their issuance and are not
transferable. The fair market value of common stock options
granted will be reflected as compensation issued. As of December
31, 1999, no options have been granted.
F-7
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6 - NOTE PAYABLE
On September 30, 1999 pursuant to a written promissory note the
Company was loaned $300,000 from Augustine Fund, L.P. . The note
has no stated interest but calls for the payment of $ 375,000 in
( 180 ) one hundred eighty days from September 30, 1999. The
Augustine Fund L.P. has the right to convert all or any portion
of the $ 375,000 into units under this offering at $ 1,000 per
unit. As security for this loan, the President of the company
has placed in escrow 6,000,000 restricted shares of common
stock. On March 22, 2000, The Augustine Fund, L.P. granted the
company an extension to May 29, 2000 to satisfy the note.
On December 15, 1999, pursuant to a convertible promissory note
the Company has borrowed $ 50,000 from an individual. The note
is unsecured and bears interest at 12% per annum payable
including interest on or before August 13, 2000. The promissory
note is convertible into fifty units each consisting of 10,000
shares of common stock and 5,000 common stock purchase warrants
exercisable at $ .15 per share. The due date has been extended
to March 31, 2001.
NOTE 7 - INCOME TAXES
The Company in accordance with FASB 109 , it has been determined
that a 100 % valuation allowance of 100% of the net operating
loss is deemed appropriate since future profitable operations
cannot be ascertained at this time.
NOTE 8 - SUBSEQUENT EVENTS
On November 7, 2000, the Company filed a request with the
Securities and Exchange Commission to withdraw its proposed
stock offering pursuant to Regulation A of the Securities
Act of 1933, as amended, which was discussed in Note 2.
The Company did not sell any securities under its
Regulation A filing.
F-8
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 2000
ASSETS
Current Assets
Cash in bank $ 255,447
Investment in thoroughbred horses ( note 1 ) 300,866
---------
556,313
Other assets
Deferred registration costs ( note 1 ) 18,983
---------
Total assets $ 575,296
=========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Note payable ( note 5 ) $ 400,000
Accounts payable and accrued expenses 322,266
---------
Total current liabilities 722,266
=========
Other liabilities
Loan payable to stockholder ( note 2 ) 30,673
---------
Total liabilities 752,939
--------
Stockholders' equity
Common stock, par value $.001,
100,000,000 shares authorized;
26,386,000 shares issued and outstanding 26,386
Preferred stock, par value $ .001, 10,000
shares authorized; no shares issued
Accumulated deficit during Development
Stage (203,904)
Less: subscription receivable (125)
----------
(177,643)
Total liabilities & stockholders equity $ 575,296
=========
See accompanying notes to the financial statements.
F-9
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND THE PERIOD COMMENCING
MARCH 25, 1999 ( INCEPTION ) TO SEPTEMBER 30, 1999
2000 1999
---- ----
Revenue from Horse Sales $ 669,975 $ - 0 -
Cost of Horses Sold 455,258 - 0 -
-------------- ---------------
Gross Profit 214,717 - 0 -
Operating Expenses
Operational costs 102,616 19,531
General & administrative 139,512 23,035
-------------- ---------------
Total operating expenses 242,128 (42,566)
-------------- ---------------
Net income (loss) before other income and
expense (27,411) (42,566)
Other income and expense
Interest expense (net) (42,326) -0-
-------------- ---------
Net income (loss) before provision for
income taxes - 0 - -0-
Net income (loss) $ (69,737) $ (42,566)
============== ==============
Net (loss) per common share-development stage $ (.002) $ (.001)
======== ========
Weighted average number of common shares
outstanding 26,386,000 26,386,000
============== ==============
See accompanying notes to the financial statements.
F-10
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND THE PERIOD
COMMENCING MARCH 25, 1999 ( INCEPTION ) TO SEPTEMBER 30, 1999
2000 1999
---- ----
Cash flows from operations:
Net income (loss) $ (69,737) $ (42,566)
Changes in operating assets and liabilities:
(Increase) in accounts receivable - trade -0- -0-
(Decrease) in Investment in thoroughbred
horses 140,241 (259,862)
(Increase) in prepaid expenses -0- (9,743)
(Increase) in accounts payable and
accrued expenses 220,001 195,751
---------- ----------
Net cash provided(used) from operations 290,535 (116,420)
---------- ----------
Cash flows from financing activities:
Proceeds of common issued -0- 26,386
(Increase) in deferred registration
costs (13,598) (5,385)
(Increase) in subscriptions
receivable -0- ( 125)
Increase(decrease) in stockholder loan (82,838) 95,679
Proceeds of note payable 50,000 -0-
---------- ----------
Net cash provided(used) from
financing activities (46,436) 116,555
---------- ----------
Net increase in cash 244,099 135
Cash - beginning 11,838 -0-
---------- ----------
Cash - ending $ 255,447 $ 135
========== ==========
Supplemental disclosures:
Interest expense $ 45,750 $ -0-
========== ==========
See accompanying notes to the financial statements.
F-11
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK DEFICIT DURING
------------------------- ADDITIONAL PAID DEVELOPMENT
SHARES AMOUNT IN CAPITAL STAGE
----------- --------- -------------- --------------
<S> <C> <C> <C> <C>
Balance - inception (March 25, 1999) -0- - 0 - - 0 - - 0 -
Common stock issued to founder and
others for services rendered in 1999 13,193,000 13,193 - 0 - - 0 -
Stock split two for one - July 23, 1999 13,193,000 13,193 - 0 - - 0 -
Deficit incurred during development
stage - December 31, 1999 - 0 - - 0 - - 0 - (134,167)
---------- ---------- --------- ---------
Balance - December 31, 1999 26,386,000 26,386 - 0 - (134,167)
Net loss - Nine months ended 9/30/00 - 0 - - 0 - - 0 - ( 69,737)
---------- ---------- --------- ---------
Balance - September 30, 2000 26,386,000 $26,386 - 0 - $(203,904)
========== ========== ========= ==========
</TABLE>
See accompanying notes to the financial statements
F-12
<PAGE>
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------
BUSINESS AND ORGANIZATION
The Company was organized under the laws of Nevada on March 25, 1999.
The Company business consists of purchasing, training and sales of
thoroughbred horses. The Company is in its development stage.
ORGANIZATION COSTS
The Company has incurred various expenditures in the formation of its
corporate and organizational structure. In accordance with SOP 98-5
these costs will be expensed as incurred.
DEFERRED REGISTRATION COSTS
The Company has incurred various costs to prepare and file the
required documents for any future stock offering. These costs
will be offset against the proceeds of a successful offering,
or expensed if unsuccessful.
SUBSCRIPTION RECEIVABLE
Sales of common stock have occurred whereby the proceeds have not
been received, thus the balances have been reflected as an offset to
stockholders equity.
INVESTMENT IN THOROUGHBRED HORSES
The Company's investment in thoroughbred horses are stated at the
lower of cost or market plus applicable carrying costs.
MANAGEMENT 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 of assets and
liabilities and revenues and expenses. The actual outcome of the
estimates could differ from the estimates made in the preparation of
the financial statements.
F-13
<PAGE>
THOROUGHBRED INTERESTS, INC.
( A DEVELOPMENT STAGE COMPANY )
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company has issued 13,193,000 shares of common stock to its
founder and various other individuals at a par value of $ .001 for
their time and effort in establishing the Company. An substantial
amount of these shares will be subject to a restriction against
transfer for a period of at least one year pursuant to SEC rule 144.
The founder of the Company has assumed the role of CEO and Chairman
of the Board of Directors at a salary and a stock option plan
approved by the Board of Directors. The financial statements reflect
$ 67,500 of accrued compensation in accordance with the agreement to
be paid upon. The employment agreement commenced on January 3, 2000
for a three year period ending December 31, 2002. The agreement in
addition to scheduled salary increases also provides for incentive
bonuses in accordance with prescribed performance levels of the
Company. In addition the CEO has received a grant of incentive stock
options pursuant to Company's Millennium Stock Option Plan of three
million shares of common stock.
The CEO has advanced funds as a interest free, unsecured loan to the
Company.
The Company commenced in April 2000 utilizing an office facility
leased by the CEO on a informal agreement at $ 1,352 per month to
conduct its business operations.
NOTE 3 - CAPITAL TRANSACTIONS
a) The Company at its inception issued 13,181,500 shares of common
stock to various related parties.
b) The Company by an unanimous consent in lieu of a special meeting
of Directors approved a two (2) for one (1) forward stock split for
all shares issued and outstanding effective July 23, 1999. The
authorized shares of common stock increased from 50,000,000 to
100,000,000 and the par value remained at $ .001 per share.
NOTE 4 - STOCK OPTION PLAN
The Board of directors has approved The Millennium Stock Option Plan
effective as of January 3, 2000 to compensate executives, key
management personnel and consultants of the Company. The plan
document has authorized a maximum of 10,000,000 shares of common
stock to be optioned at an exercise price to be determined by the
Company. In the case of incentive stock options. The exercise price
shall not be less than 100% of the fair market value of the shares on
the date the option is granted. The stock options are exercisable no
sooner than six months nor more than ten years from the date it is
granted. The fair market value of common stock options granted will
be reflected as compensation issued.
F-14
<PAGE>
THOROUGHBRED INTERESTS, INC.
( A DEVELOPMENT STAGE COMPANY )
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE
On September 30, 1999 pursuant to a written promissory note the
Company was loaned $300,000 from Augustine Fund, L.P. . The note has
no stated interest but calls for the payment of $ 375,000 in ( 180 )
one hundred eighty days from September 30, 1999. The Augustine Fund
L.P. has the right to convert all or any portion of the $ 375,000
into shares of common stock (the "Converted Shares") at $.10 per
share and warrants exercisable into one-half the number of Converted
Shares at $.15 per share. As security for this loan, the President of
the company has placed in escrow 6,000,000 restricted shares of
common stock. The Augustine Fund, L.P. granted the company an
extension to March 31, 2001 for satisfaction of the note.
On December 15, 1999, pursuant to convertible promissory note the
Company was loaned $ 50,000 from an individual. The note is unsecured
and bears interest at 12% per annum payable including interest on or
before August 13, 2000. On February 10, 2000 the Company received an
additional $ 50,000 under the same terms. The promissory notes are
both convertible into shares of common stock (the "Converted Shares")
at $.10 per share and warrants exercisable into one-half the number
of Converted Shares at $.15 per share. The due date of the notes plus
accrued interest has been extended to March 31, 2001.
NOTE 6 - INCOME TAXES
The Company in accordance with FASB 109, it has been determined that
a 100 % valuation allowance of the entire net operating loss is
deemed appropriate since future profitable operations cannot be
ascertained at this time.
NOTE 7 - SUBSEQUENT EVENTS
On November 7, 2000, the Company filed a request with the Securities
and Exchange Commission to withdraw its proposed stock offering
pursuant to Regulation A of the Securities and Exchange Act of 1933,
as amended. The Company did not sell any common stock under its
Regulation A filing.
F-15
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Thoroughbred Interests, Inc.
-----------------------------
(Registrant)
Date November 27, 2000 /s/ James D. Tilton
------------------ ------------------------------
James D. Tilton, President
<PAGE>
PART III
Index to Exhibits
No. Description of Exhibit
--- ----------------------
3.1 Articles of Incorporation of Thoroughbred Interests, Inc., dated
March 25, 1999*
3.2 By-Laws of Thoroughbred Interests, Inc.*
4.1 Promissory Note dated September 30, 1999, between Thoroughbred
Interests, Inc. and Augustine Fund, L.P.*
4.2 Note Extension Agreement between Thoroughbred Interests, Inc. and
Augustine Fund, L.P. dated March 22, 2000
4.3 Note Extension Agreement between Thoroughbred Interests, Inc. and
Augustine Fund, L.P. dated October 3, 2000
4.4 Amended Promissory Note dated November 21, 2000, between Thoroughbred
Interests, Inc. and Augustine Fund, L.P.
4.5 Promissory Note dated December 15, 1999, between Thoroughbred
Interests, Inc. and Mr. Andrew Dyer
4.6 Promissory Note dated January 31, 2000, between Thoroughbred Interests,
Inc. and Mr. Andrew Dyer.
4.7 Note Extension Agreement between Thoroughbred Interests, Inc. and
Mr. Andrew Dyer, dated October 11, 2000
4.8 Amended Promissory Note dated November 21, 2000, between Thoroughbred
Interests, Inc. and Andrew Dyer
4.9 Amended Promissory Note dated November 21, 2000, between Thoroughbred
Interests, Inc. and Dyer
4.10 Secured Promissory Note dated October 31, 2000, between James D. Tilton
and Thoroughbred Interests, Inc.
5.1 Tradeability Opinion of Fox Law Offices, P.A., dated September 21,
1999.*
10.1 Indemnity Agreement dated September 27, 1999, between James D. Tilton
and Thoroughbred Interests, Inc.*
10.2 Stock Escrow Agreement dated September 30, 1999, by and between
James D. Tilton, The Augustine Fund, and H. G. Bagwell*
10.3 Pledge and Security Agreement dated September 30, 1999 between James D.
Tilton and the Augustine Fund, LP*
10.4 Thoroughbred Interests, Inc. Millennium Stock Option Plan
10.5 Internet Domain Name Purchase Agreement, dated September 30, 2000.
10.6 Employment Agreement dated January 3, 2000 between James D. Tilton
and Thoroughbred Interests, Inc.
10.7 Lease Agreement dated November 11, 1999 between Goodshape LLC and
Jim D. Tilton, Jr.
10.8 Pledge and Security Agreement dated October 31, 2000, between James D.
Tilton and Thoroughbred Interests, Inc.
* Incorporated by reference to the Company's Form 10-SB filed with the
Securities & Exchange Commission on July 5, 2000
