<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
AMENDMENT NO. 1
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:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
<S> <C>
---------------------------------- ---------------------------------
---------------------------------- ---------------------------------
</TABLE>
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)
1
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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
on Accounting and Financial Disclosure 19
Item 4 Recent Sales of Unregistered Securities 19
Item 5 Indemnification of Directors and Officers 20
SIGNATURE 22
</TABLE>
FINANCIAL STATEMENTS
See attached Financial Statements
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EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description of Exhibit
--- ----------------------
<S> <C>
3.1* Articles of Incorporation of Thoroughbred Interests, Inc., dated March
25, 1999
3.2* Bylaws of Thoroughbred Interests, Inc.
5.1* Tradeability Opinion.
10.1* Indemnification Agreement between James D. Tilton and Thoroughbred
Interests, Inc.
10.2* Promissory Note, Augustine Capital Management, Inc.
10.3* Stock Escrow Agreement by and between James D. Tilton, the August Fund,
and H. G. Bagwell
10.4* Pledge and Security Agreement; James D. Tilton and the Augustine Fund,
LP Guaranty Agreement
10.5* Employment Agreement between James D. Tilton and Thoroughbred
Interests, Inc.
10.6* Amendment to Employment Agreement between James D. Tilton and
Thoroughbred Interests, Inc.
10.7* Employment Stock Option Plan
</TABLE>
* Submitted in prior filing
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OFFICE
We currently maintain our principal office at 127 South 6th Street,
Louisville, Kentucky 40242, where our telephone number is (502)584-4434 and our
facsimile number is (502) 584-4850.
OUR COMPANY
We were organized as a business corporation under the laws of the State of
Nevada on March 25, 1999. Our main business objective is purchasing yearlings,
pinhooking them, and then selling them for profit at auction as two year olds.
We may also conduct operations in other areas of the horse and thoroughbred
industry, such as purchasing, training and reselling mares and weanlings;
purchasing and reselling stallion seasons; and racing of purchased
thoroughbreds.
BUSINESS
Thoroughbred Interests, Inc. was formed to engage in "pinhooking", with
possible expansion into other areas of the thoroughbred industry. Pinhooking
involves the following: First, there is a purchase of a yearling, either at
auction or in a private sale from an individual, partnership, or corporation.
Then yearling is broken and trained with the intent of reselling the yearling,
usually at auction, as a two-year old. A yearling is a horse that is between
the ages of one and two years old. A weanling is a horse that is less than one
year old. As of Jaunary 31, 2000 we held title to nine thoroughbreds. (See
"Description of Property")
Other areas in the thoroughbred industry which Thoroughbred Interests, Inc.
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will likely pursue include: purchasing and reselling weanlings; breeding and
reselling mares, and stallion seasons; and racing. The weanling practice is
similar to the pinhooking practice described above, with the exception that the
horse is normally purchased at nine to eleven months of age and is resold as a
yearling. "Stallion seasons" is the term used to describe the practice of
engaging in the purchase and resale of stud services. Traditionally, one may
contractually commit to breed horses a certain number of times, without a
guarantee of a foal, in exchange for a lower fee than if one purchased only one
breeding time. The purchase of a large number of breeding times enables one to
attempt to resell those breeding times for profit.
GENERAL BUSINESS PLAN OF THOROUGHBRED INTERESTS, INC.
Our business plan entails purchasing horses at auctions and in private sales,
and reselling those horses after six to eighteen months of training and
development. Our horses to date have been purchased primarily from Florida,
Kentucky, and Maryland with purchases of horses from California expected to
follow. We expect numerous purchases of horses from Florida.
We are using the services of horsemen and horsewomen with pinhooking experience
to break and develop the horses we purchase. Our initial pinhookers are Ciaran
Dunne and Amy Dunne and we may use other or additional pinhookers in the future.
The Dunnes presently own Wavertree Stables, Inc., which is located at the
Classic Mile Park training center in Ocala, Florida. The Dunnes' facilities
include a 48 stall barn on nearly 100 acres, including paddock areas. The
training center has a one-mile dirt track and a seven- furlong turf course that
the Dunnes are entitled to use. The track is worked and watered to achieve a
cushion to aid in the development of young horses as well as those in
rehabilitation. The track is rolled back and professionally inspected several
times each year in order to maintain a proper base. The Dunnes hold an annual
lease at the training center, with an option to renew. They also have the
ability to rent adjacent barn space and paddock areas as needed.
The Dunnes have been pinhooking and training horses as Wavertree Stables, Inc.
for the past four years. Ciaran Dunne oversees all aspects of training of the
horses. The Dunnes employ approximately one assistant horse trainer, five
riders and eight groomers to help care for the horses. The Dunnes have rented a
duplex house on the premises which is used by the assistant horse trainer and
a rider. Among the top class runners to emerge from the Dunnes' training
program are the following stakes winners:
- Witchful Thinking (graded stakes winner)
- Victorica (graded stakes winner)
- Watch This (champion two year old in Ohio in 1998)
- Bakushin Hero (Japanese stakes winner)
- Toyo Pector (Japanese stakes winner)
On the pinhooking front, major scores for Wavertree Stables and the Dunnes have
included a Meadowlake filly purchased for $30,000 as a yearling and resold for
$260,000 in 1997, a Saint Balido colt purchased for $50,000 and resold for
$270,000 in 1999 and the 1998 O.B.S. February sale topper: a Prospectors Gamble
colt purchased for $65,000 and resold for $430,000.
The Dunnes have operated their own pinhooking venture for the last three years
for Wavertree Stables. In 1996 their venture invested $290,000 and had receipts
of $530,000 in 1997, (on the $290,000 invested) for a 64% return on investment
after deducting commissions and expenses. In 1997 their pinhooking venture
invested $440,000 and had receipts of $830,000 in 1998, (on the $440,000
invested) for a 69% return on investment after deducting commissions and
expenses. The 1998-1999 return on investment figure is much lower than that of
the prior years. In 1998 their pinhooking venture invested $604,000 and received
a return of $740,000 in 1999, before deducting commissions and expenses.
We have not yet finalized a contract with the Dunnes for purchasing our
thoroughbred horses for us, or a contract with Wavertree Stables for pinhooking
for us. We expect to reach such agreements in the immediate future. We expect
the basis of our agreement with the Dunnes to be that the Dunnes will receive a
fee of 5% of the purchase price of all horses we purchase, for providing advice
on which horses to purchase and for actually purchasing such horses for us. We
also expect to enter into an agreement with Wavertree Stables in which Wavertree
Stables will provide maintenance, care and training for each horse we purchase
and where Wavertree Stables will bill us for pre- and post-sale veterinary
services, shipping, routine veterinary charges, blacksmith, breaking and
training, sale nominations and entry fees, advertising and video production. We
anticipate the cost of such care to be in the range of $10,000 - $15,000 per
horse. Also, under such agreement with Wavertree Stables, we will make payment
of 5% of the sales price of each horse we sell, to Wavertree Stables.
We will incur nominal expenses in transporting horses. We will obtain a
mortality and surgical insurance policy for each horse purchased. This insurance
will cost approximately 2.5% of the purchase price of each horse. Additionally,
all horses sold at auction incur an 5% auction fee of purchase price, payable by
the seller to the auction house. The buyer at auctions does not pay any fee to
the auction house in addition to the purchase price.
We do not currently employ any workers other than Mr. Tilton.
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HISTORICAL BACKGROUND
Following is a detailed chronology of the steps we have taken in furtherance of
our business plan, beginning in 1997 with the efforts of our President, Mr.
Tilton, prior to our incorporation. Mr. Tilton has dedicated much of the past
three years to developing and building our Company.
a) 1997: Mr. Tilton spent much of 1997 studying and developing a plan
to (i) acquire young thoroughbreds, (ii) board and train
them as race horses, and (iii) resell them profitable at a
late date in the marketplace. Mr. Tilton's market research
came from several sources, including his personal experience
(e.g. by growing up in the heart of the thoroughbred
industry), his participation in horse ownership
partnerships, 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 of the company that he planned to form.
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, such
as Wavertree Stables, Bluegrass Thoroughbred Services and
Chris Baker Racing Stables. Mr. Tilton continued to own a
few race horses in partnership with other individuals. His
continued partnerships with other horse owners provided
additional market research, reinforcing the "Thoroughbred
Interests" concept. During this time, a solid business
relationship developed between Mr. Tilton and Wavertree
Stables and substantive discussions took place regarding a
future business alliance with Wavertree and the corporation
that Mr. Tilton planned to form. Mr. Tilton discussed his
business concept and plan with these contact extensively.
c) July-Dec.
of 1998: Mr. Tilton attended thoroughbred auctions around the country,
including, but not limited to the Fasig-Tipton Auction. 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 1999, and have been racing some of
the others successfully.
d) January 1999: At this time, Mr. Tilton formed Thoroughbred Interests, Inc.
Based upon his two years of research and planning, Mr.
Tilton's business plan for the our Company focused on
pinhooking yearlings (from newborn horses to up to two-year
old horses) and reselling them six to nine months later after
boarding and training them as race-horses. The buying and
selling would take place at major thoroughbred auctions.
e) March 1999: Thoroughbred Interests, Inc. issued 2,050,000 shares
of Common Stock to five (5) individuals and entities
in exchange for services. The issuer also made
Regulation D, Rule 504 Offering, where Mr. Tilton
personally solicited 43 individuals and entities and
issued 43,000 shares of Common Stock (1000 shares to
each individual or entity at $0.10 per share) raising
a total of $4,300. A Form D was inadvertently not
filed with the SEC. No offering document was utilized
since the individual investors in the 504 Offering
were personally known to the President of the Issuer,
Jim Tilton, and they were well informed of the
Offering through Mr. Tilton's live presentation and
subsequent telephone and personal interviews. All
investors signed subscription agreements
g) July 1999: The Company borrowed $50,000 from Mr. Tilton for the
purpose of acquiring our first horse at the Fasig
Tipton Auction (Lord at War/Sa Marche Filly). We
sold that horse at the OSB February 2000 Thoroughbred
Sale for $125,000 before expenses.
h) 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.
i) Sept. 1999: We purchased one horse for $75,000 at the Keeneland
sale. We also raised $300,000. (Augustine Debenture).
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j) October 1999: We purchased three horses at the Fasig Tipton auction
in Maryland for a total of $60,000, and two horses in
Kentucky for a total of $100,000.
k) November 1999-
January 2000: We raised an additional $100,000 to cover expenses.
l) Feb. 2000-
May 2000: We sold six of the eight horses acquired. Our original
purchase price for these horses totaled $318,000 and the
sale price was $560,000 before expenses.
m) June 2000: We sold two horses, acquired originally for $97,000, for
$200,000 before expenses.
Since 1997, Mr. Tilton has planned, researched and developed and
executed a business plan, which is and has been successfully carried forward by
the Company.
Cautionary Factors That May Affect Future Results
This registration statement contains some forward-looking statements.
"Forward-looking statements" describe our current expectations or forecasts of
future events. These statements do not relate strictly to historical or current
facts. In particular, these include statements relating to future actions,
prospective products, future performance or results of current and anticipated
products, sales, efforts, the outcome of contingencies and financial results.
Any or all of the forward-looking statements we make may turn out to be wrong.
They can be affected by inaccurate assumptions we might make or by known or
unknown risks and uncertainties. Many factors, such as product acceptance,
competition and marketing capabilities, are important in determining future
results. Consequently, no forward-looking statements can be guaranteed. Actual
future results may vary materially.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any future disclosures we make on related subjects
in our 10-QSB, 8-KSB, and 10-KSB reports to the SEC.
We provide the following cautionary discussion of risks, uncertainties and
possible inaccurate assumptions relevant to our business and our products. These
are factors that we think could cause our actual results to differ materially
from expected results. Other factors besides those listed here could adversely
affect us.
RISKS OF OUR COMPANY
NO OPERATING HISTORY. 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 and/or services 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. (See "Proposed
Business")
NEED FOR ADDITIONAL CAPITAL TO FINANCE GROWTH AND CAPITAL REQUIREMENTS.
Circumstances may occur which could compel us to seek additional funds. We may
be required to seek additional funds and to raise additional capital from public
or private equity or debt sources in order to: (i) fund our general and
administrative costs and expenses; (ii) pay off seed/startup loans; or (iii)
establish ourselves in other areas of the thoroughbred industry.
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. A loan will only be procured from a
lending institution under the following scenarios:
i) in the event that Mr. Tilton is unable or unwilling to lend the
amount required by the Company, and the Board of Directors has determined that
it would be a prudent business decision to borrow money from a lending
institution, or
ii) in the event that there exists a pressing need of the Company for
immediate capital, Mr. Tilton is unable or unwilling to lend the amount required
by the Company, and the Board of Directors has determined that it would be a
prudent business decision to borrow money from a lending institution.
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If we are required to obtain loan financing, the amount of our profits (if any)
will decrease or the amount of our debt 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 market for
the goods and/or services we provide 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.
On September 30, 1999 we signed a promissory note with The Augustine Fund, L.P.,
an Illinois Limited Partnership with offices at 141 West Jackson Street, Suite
2182, Chicago, Illinois 60604 in exchange for The Augustine Fund, L.P. agreeing
to provide us with a secured loan. The principal amount of the loan is
$300,000,payable on or before March 31, 2000, and extended to May 31, 2000.
There is a risk of management's fiduciary duties to its shareholders being
compromised any time there is a loan made to us by our officers and directors or
affiliates. This potential risk can be minimized, but cannot be eliminated if
such loans are made. If there are any loans made to us by our officers and
directors or affiliates, there will be an independent appraisal of the value of
the business or property except as stated below. There will be no independent
appraisal made of the value of the Company in the event that any of our officers
and directors or affiliates or lending institutions loan money to us due to the
fact that we received insufficient initial offering proceeds. Any such loans
made will be made at customary rates and terms and will not receive any
preference in repayment over other debts we may have, unless the loan is a
secured loan, with the possible exception of receiving higher priority in either
a bankruptcy proceeding or in an agreement between our creditors. There will be
no loans made from us to any of our officers, directors or affiliates, or any
financial institutions.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS. Our
officers and directors are required to exercise good faith and high integrity in
the management of our affairs. Our Articles of Incorporation provide, however,
that the officers and directors shall have no liability to the shareholders for
losses sustained or liabilities incurred which arise from any transaction in
their respective managerial capacities unless they violated their duty of
loyalty, did not act in good faith, engaged in intentional misconduct or
knowingly violated the law, approved an improper dividend or stock repurchase,
or derived an improper benefit from the transaction. As a result, a purchaser of
the Shares may have a more limited right to action than he would have had if
such provision were not present. (See "Indemnification Limitation on Liability")
Our Articles and By-Laws also provide for the indemnification by us of the
officers and directors against any losses or liabilities they may incur as a
result of the manner in which they operate our business or conduct the internal
affairs, provided that in connection with these activities they act in good
faith and in a manner which they reasonably believe to be in, or not opposed to,
the best interests of Thoroughbred Interests, and their conduct does not
constitute gross negligence, misconduct or breach of fiduciary obligations. (See
"Indemnification") To further implement the permitted indemnification, we have
entered into Indemnity Agreements with our current sole officer and director and
we will provide similar agreements for future officers and directors. (See
"Indemnification - Indemnity Agreements")
DEPENDENCE ON KEY PERSONNEL. Our future success will depend largely on the
efforts and abilities of our management, especially of our current sole
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officer and director, James "Jim" 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. Our inability to hire and/or loss of key management or
technical personnel could materially and adversely affect our business, results
of operations and financial condition.
INDUSTRY GROWTH. According to the January 2, 1999 edition of Auction Review,
published by Thoroughbred Times of Lexington, Kentucky, the 1998 North American
yearling market yielded one of the best returns of the decade for pinhookers,
and profit rates for resellers of yearlings purchased for $100,000 or more were
more than double than those in any other category. Those purchased for $100,000
or more brought a rate of return of 123.9% in 1998. From 1989-1998, the minimum
number of North American yearling sales, including those of pinhookers, was
7,459 sold in 1993, while the maximum number of North American yearling sales
during those years was 8,471 in 1990. There were 8,248 such sales in 1998.
According to the Auction Review, the following table indicates the 1998
pinhooking returns for yearlings:
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE NOT AVERAGE AVERAGE RATE OF
THRU RING NOT SOLD SOLD PROFITABLE PROFITABLE 1 YO. PRICE 2 YO. PRICE RETURN(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A 72 18 54 51% 24% $186,167 $439,254 123.9%
B 53 13 40 47% 28% 83,150 144,206 54.8%
C 93 25 68 41% 32% 58,441 90,412 32.1%
D 66 16 50 50% 26% 43,250 84,830 59.3%
E 109 19 90 50% 33% 32,444 59,784 40.9%
F 159 34 125 42% 36% 23,288 45,410 36.4%
G 205 58 147 34% 38% 13,733 28,915 21.8%
H 421 99 322 15% 61% 4,773 10,934 -26.0%
--------------------------------------------------------------------------------------------------------
1,178 282 896 33% 43% $ 32,257 $ 65,520 55.0%
</TABLE>
Legend
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Category A = $100,000 and up
Category B = $75,000 to $99,999
Category C = $50,000 to $74,999
Category D = $40,000 to $49,999
Category E = $30,000 to $39,999
Category F = $20,000 to $29,999
Category G = $10,000 to $19,999
Category H = Less than $10,000
As indicated on the table above, the overall average rate of return for
pinhookers was 55.0%, one of the best of the decade, with those purchasing
yearling and reselling them as two-year olds earning an average rate of return
of 123.9%. The overall rate of return for pinhookers of yearlings was 25.7% in
1997.
According to the Auction Review, the overall rate of return for yearling-to-
juvenile pinhookers was 28.6% in 1998 and the weanling-to-juvenile pinhookers
averaged only a 14.2% rate of return for 1998.
It is difficult to find statistics setting out average rates of return for
resale of stallion shares. However, one may find it useful to review the returns
by stud fee range for yearlings. According to the Auction Review, the table on
the following page indicates the rates of return by stud fee range for
yearlings. The ratio figure shows the multiple the yearlings received compared
to their stud fees.
----------------
(1) Rate of return is calculated after including average cost of upkeep;
estimated at $15,000.
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<TABLE>
<CAPTION>
PCT.
NO. NOT PCT. PCT. PCT. NOT AVG.
OFFERED SOLD SOLD PROFITABLE PROFITABLE STUD FEE AVG. PRICE RATIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A 100 24% 76% 56% 20% $123,000 $676,316 5.50
B 317 29% 71% 41% 30% 57,268 254,971 4.45
C 363 22% 78% 38% 40% 34,948 128,532 3.68
D 665 20% 80% 36% 44% 22,877 100,429 4.39
E 2,022 22% 78% 28% 51% 12,468 45,948 3.69
F 2,423 20% 80% 20% 60% 6,257 24,845 3.97
G 4,134 24% 76% 9% 67% 2,305 10,104 4.38
--------------------------------------------------------------------------------------------
10,024 22% 78% 20% 58% $ 10,800 $ 45,065 4.17
</TABLE>
Legend
------
STUD FEE RANGE
Category A = $100,000 and up
Category B = $50,000 to $99,999
Category C = $30,000 to $49,999
Category D = $20,000 to $29,999
Category E = $10,000 to $19,999
Category F = $5,000 to $9,999
Category G = Less than $5,000
There are no guarantees that the thoroughbred industry will meet or exceed its
rate of profit earned in years past, nor that we will be able to meet or exceed
the industry average rate of return.
Risks Associated With Management of Potential Growth. We anticipate that we will
have rapid growth, which will place a strain on our managerial, operational, and
financial resources. We will initially use outside consultants and specialists
to provide 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 and whether and to what degree we enter into areas of the thoroughbred
industry other than
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pinhooking. We expect to employ a bookkeeper/file clerk in the near future.
The bookkeeper/file clerk is the only person other than Mr. Tilton which we
currently anticipate employing.
Future Stock Option Exercise. Pursuant to our Performance Stock Option Plan
adopted November 1, 1999 and approved by unanimous consent, our CEO will receive
(if the book value reaches the following amounts) 3.0 million Common Stock
options, each good to purchase one share of our Common Stock at 11 cents. One
million five hundred thousand (1,500,000) of these options will be exercisable
to our CEO when our book value exceeds $750,000 and the remaining one million
five hundred thousand (1,500,000) options will be exercisable when our book
value exceeds $1,500,000.
We also intend to offer the Dunnes (whom we are negotiating with to be our
primary pinhookers) options under our Performance Stock Option Plan. We plan to
offer the Dunnes options under which they can receive up to 1,000,000 (depending
on the rate of return we achieve) Common Stock options per year for three years,
each option good to purchase one share of our Common Stock at 11 cents. We
intend to offer the Dunnes (i) 4,000 options for each 1% rate of return we
achieve, up to a maximum of 500,000 options each year, and (ii) an additional
bonus of 500,000 options for each year in which we achieve a 500% rate of
return.
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.
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.
Competition. 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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Uncertainty of Market Acceptance. Demand and market acceptance for our
thoroughbred horses is subject to a high level of uncertainty. The thoroughbred
industry is subject to fluctuations in profitability. Except for the high-end of
the market, a greater percentage of horses are not profitable for their
investors as opposed to the percentage that are profitable. This is offset by
the fact that on average, the horses which are profitable make more money for
their investors than the amount lost on the non profitable horses. We intend to
minimize these risks by concentrating on the higher end of the market and by
purchasing enough horses to spread our risk.
Additional Risk Factors that May Affect Future Results. This report contains
some forward-looking statements. "Forward-looking statements" describe our
current expectations or forecasts of future events. These statements do not
relate strictly to historical or current facts. In particular, these include
statements relating to future actions, prospective products, future performance
or results of current and anticipated products, sales efforts, the outcome of
contingencies and financial results. Any or all of the forward- looking
statements we make may turn out to be wrong. They can be affected by inaccurate
assumptions we might make or by known or unknown risks and uncertainties. Many
factors, such as product acceptance, competition and marketing capabilities are
important in determining future results. Consequently, no forward-looking
statements can be guaranteed. Actual future results may vary materially.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction with the
financial statements of the Company and summary of selected financial data for
Thoroughbred Interests, Inc. This discussion should not be construed to imply
that the results discussed herein will necessarily continue into the future, or
that any conclusion reached herein will necessarily be indicative of actual
operating results in the future. Such discussion represents only the best
present assessment of the management of the Company.
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. It is
our overall objective is to become a high-quality pinhooking operation while
returning a significant profit to our shareholders.
We wish to build our capital base so that we can (i) generate more revenues and
profits for the Company, and (ii) enter a higher end of the market to increase
our profit per horse.
11
<PAGE> 12
Cash Requirements
We require a minimum of $1,000,000 to operate for next 12 months from the date
of this Information Supplement. In August of 2000, we plan to convert our
present $300,000 Augustine debentures into equity. Additionally, we expect to
earn approximately $150,000-$300,000 in net profits from the sales of our 9
horses, after deducting all expenses and the initial purchase price of the
horses.
We project gross revenues from the sale of the nine (9) horses, purchased last
fall as yearlings, to be between $1,250,000-$1,500,000. This projection is
based upon the racing capabilities, overall results and the previous selling
prices of the horses' sires at 1998 two-year old training sales. This method of
projection by comparing a yearling to its sire is fairly standard in our
business. Management believes its projection is reasonable in light of the
improving state of the industry, and it is the opinion of Management that these
horses are well above average. Management also believes that many of the sires
of our horse are among those in favor with prospective buyers. Two in
particular, Belong to Me and Saint Ballado, are among a group of sires whose
stud fees have risen over the past 12 months. Additionally, one of our nine
horses are from the final two-year old crop for the pensioned Lord at War,
which will have considerable value to purchasers.
For any remaining cash requirements, we plan to focus on raising the capital
from large institutional investment equity funds, preferably funds of which our
management has a working relationship. Any money raised beyond the $1,000,000
will be used to purchase additional horses.
Expected Purchases
We plan to purchase as many yearlings as we can in the higher end of the market.
Our initial 9 horses were acquired in a range of $19,000-$87,000. Our projected
gross revenues from the sale of the 9 horses is somewhere between $850,000 and
$1,000,000. It is our plan to purchase up to 15 horses in September of 2000.
We expect to be able to obtain profitable returns whether we invest in ten or
forty horses. However, it must be noted that the greater the number of horses we
invest in, the more likely we are to be able to obtain a profitable return.
Change in Number of Employees
We may hire up to three additional employees over the course of the year,
finances permitted, in the areas of Marketing and Sales.
12
<PAGE> 13
ITEM 3. DESCRIPTION OF OUR 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. It has approximately 1865
square feet of office space consisting of three separate (3) offices, a
library, a conference room, a kitchen and a bathroom. The monthly rent is
$2,500 of which Thoroughbred Interests, Inc. pays 50% with the other 50%
covered 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 the
next 12 months and beyond. Our phone number is (502) 584-4434, and our
facsimile number is (502) 584-4850.
Our physical assets, in addition to our office equipment and furniture, are
limited to the following thoroughbreds to which we hold title:
<TABLE>
<CAPTION>
DATE
THOROUGHBRED 1 YR OLD PURCHASED COST
<S> <C> <C> <C>
LORD AT WAR/ SA MARCHE FILLY 7/29/99 52,800.00
BELONG TO ME/CAVETTA FILLY 8/15/99 40,381.00
BELONG TO ME/VIVA' S LADY COLT 8/15/99 87,631.00
FRENCH DEPUTY/SORTOFA LADY COLT 9/14/99 79,050.00
BEAU GENIUS/MISDANGER COLT 10/4/99 23,465.00
GO FOR GIN/BRIGHT OMEN COLT 10/6/99 19,265.00
TWO PUNCH/TRUTH & BEAUTY COLT 10/5/99 30,815.00
COZZENE/SHERRGO FILLY 10/25/99 42,300.00
SAINT BALLADO/WIFE BEGONE COLT 10/26/99 65,400.00
-----------
$441,107.00
</TABLE>
ITEM 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT PRINCIPAL SHAREHOLDERS
The following table sets forth the ownership of our securities as of November 1,
1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES OF % AS OF
BENEFICIAL OWNER COMMON STOCK NOVEMBER 1, 1999(1)
---------------- ------------ -------------------
<S> <C> <C>
James D. Tilton, Jr. 18,000,000 68.22%
8702 Twin Ridge Road
Louisville, KY 40242
James D. Tilton, Jr. 6,000,000(2) 22.74%
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C>
c/o H. Glen Bagwell
3005 Anderson Drive
Raleigh, NC 27609
All Officers and Directors as 24,000,000 90.96%
a Group (1 Person)
</TABLE>
---------------------------
(1) Based upon 26,386,000 shares issued and outstanding
(2) These shares are being held in escrow by H. Glen Bagwell, and will be
returned to James D. Tilton only upon satisfaction of the terms and conditions
as defined in the Stock Escrow Agreement between James D. Tilton and H. Glen
Bagwell.
All of the shares mentioned under this subheading were originally issued in
amounts one-half of those stated above. Pursuant to our stock split, the amount
of shares issued to all these individuals and/or companies and/or partnerships
were doubled.
We have not issued any non-voting securities.
We have no parent companies.
<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 Performance
Stock Option Plan. Each option issued under our Performance Stock Option Plan
allows the holder to purchase one share for eleven ($0.11) cents. One million
five hundred thousand (1,500,000) of the options will be exercisable when our
book value exceeds $750,000 and one million five hundred thousand (1,500,000) of
the options will be exercisable when our book value exceeds $1,500,000. Mr.
Tilton has sole investment power and sole voting power over the shares which may
be issued under these options.
We have not issued any warrants or rights or any options except those disclosed
above.
We have no parent companies.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PEOPLE
DIRECTORS AND EXECUTIVE OFFICERS. The position(s) held by each of our executive
officers and Directors as of November 1, 1999 is shown in the following table.
The Director was elected at a meeting held on December 31, 1998. Biographical
information for each is set forth following the table.
14
<PAGE> 15
Each Director serves for a one year term and until a successor is elected and
has 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 Chief Executive Officer
Chairman of the Board of Directors
</TABLE>
JAMES "JIM" D. TILTON, JR. has been Thoroughbred Interest's Chief Executive
Officer since March 25, 1999, the date on which he founded Thoroughbred
Interests. He is also Chairman of our Board of Directors. Mr. Tilton was
born and raised in Louisville, Kentucky. In 1982 he received a B.A in
Political Science with an emphasis in Accounting/Business from the University
of Louisville. Mr. Tilton holds a significant equity position.
From 1983-1986 he worked as a registered representative for Triad Systems
Corporation in Tampa, Florida. At the time of departing that position, he was
Triad Systems Corporation's top Florida salesperson.
From 1986-1991 he worked in the real estate areas of building, development and
sales in Atlanta, Georgia. Mr. Tilton was a founder and partner in a real estate
sales company, which was sold by the partners in 1991.
In 1991 he founded and was part owner of Louisville Pro Basketball, Inc. d/b/a
Louisville Shooters, a professional basketball team. This team ceased operations
after the start of the 1992-1993 season due to instability amongst the team's
owners.
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.
He has devoted time to the study of the thoroughbred industry for many years.
His extensive contacts in and knowledge of the industry will help us immensely.
He is proud to be a member of numerous groups including the Thoroughbred Owners
and Breeder Association, Kentucky Thoroughbred Owners and Breeders Association,
and Turf Club at Churchill Downs. Since 1997 he has been a partner in
thoroughbred horse owning partnerships. He has purchased and sold thoroughbred
horses privately and has also purchased thoroughbred horses for himself at
yearlings and two-year old sales.
Out of all our present shareholders, none of the corporations are officers or
directors of our Company, and no individuals from those corporations are
officers or directors of our Company.
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
15
<PAGE> 16
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. Under his
employment agreement, Mr. Tilton is to be paid a salary of $10,000 per month,
but, in fact, will not receive any compensation until such time as we have
operating revenues and then he will receive no more than 50% of such operating
revenues. To the extent that our operating revenues are insufficient to pay the
full salary, the difference will not be deferred or accrued; it will be
suspended. See "Employment Agreements", above.
Pursuant to our Performance Stock Option Plan made effective as of July 27,
1999 and approved by unanimous consent, our CEO will (if the book value reaches
the following amounts) receive three million (3,000,000) Common Stock options,
each good to purchase one share of our Common Stock at 11 cents. One million
five hundred thousand (1,500,000) of these options will be exercisable by our
CEO when our book value exceeds $750,000 and the remaining one million five
hundred thousand (1,500,000) options will be exercisable when our book value
exceeds $1,500,000.
President, Treasurer and Director:
Mr. Tilton will begin to receive $10,000 per month as salary as finances permit.
As of July 16, 2000, no salary has been taken. His salary will then remain at
$10,000 per month until, and if, the Board of Directors votes otherwise.
Pursuant to our Performance Stock Option Plan made effective as of July 27,
1999 and approved by unanimous consent, our CEO will receive (if the book value
reaches the following amounts) 3.0 million Common Stock options, each good to
purchase one share of our Common Stock at 11 cents. One million five hundred
thousand (1,500,000) of these options will be exercisable to our CEO when our
book value exceeds $750,000 and the remaining one million five hundred thousand
(1,500,000) options will be exercisable when our book value exceeds $1,500,000.
We also intend to offer the Dunnes (with whom we are negotiating to be our
primary pinhookers) options under our Performance Stock Option Plan. We plan to
offer the Dunnes options under which they can receive up to 1,000,000 (depending
on the rate of return we achieve) Common Stock options per year for three years,
each option good to purchase one share of our Common Stock at 11 cents. We
intend to offer the Dunnes i) 4,000 options for each 1% rate of
16
<PAGE> 17
return we achieve, up to a maximum of 500,000 options each year, and ii) an
additional bonus of 500,000 options for each year in which we achieve a 500%
rate of return.
EMPLOYMENT AGREEMENTS. We have an employment agreement with our President, Mr.
Tilton. The contract has an initial term ending December 31, 2000 and may be
extended twice, for one year extension terms, at the option of the Board of
Directors. Mr. Tilton will receive a salary of not less than $10,000 per
month, except that:
(a) no salary is payable until, and unless, we have operating revenues
and then the salary actually paid cannot exceed 50% of those operating revenues;
and
(b) if the operating revenues are not sufficient to pay the entire
salary, the difference is suspended and is not accrued for future payment; and
(c) no remuneration will be paid to Mr. Tilton for his services in
selling our securities.
The contract provides standard fringe benefits. It does not contain any "Golden
Parachute" provisions. It contains certain protections for us, including
covenants against:
(i) disclosure of proprietary information; and
(ii) competition; and
(iii) post-employment solicitation of our employees.
The contract provides for disability payments under certain circumstances, but
the disability payments would be subject to the same limitations as described
above on the payment of regular salary. We may terminate the contract in the
event of Mr. Tilton's death, his being charged with a felony or crime involving
moral turpitude or unethical conduct, if he acts to our detriment, or if he
fails to perform his duties.
Mr. Tilton has an employment agreement with Internet Opportunities, of which
he is President, under the same terms.
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 and his agreement
to serve without salary until such time as we have operating revenues.
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.
ITEM 8. DESCRIPTION OF SECURITIES
Our authorized capital structure consists of Preferred Stock, par value $0.001,
and Common Stock, par value $0.001. The amount or number shares authorized and
outstanding as of the date of this Information Supplement, are as follows:
17
<PAGE> 18
<TABLE>
<CAPTION>
SECURITY AUTHORIZED OUTSTANDING
<S> <C> <C>
Preferred Stock 10,000,000 0
Common Stock 100,000,000 26,386,000
Stock Options 3,000,000 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 26,386,000 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 Performance 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 consultant s through the grant of Options to
purchase shares of our Common Stock. Presently, options are allocated as
follows:
18
<PAGE> 19
<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 Performance
Stock Option Plan. Each option issued under our Performance Stock Option Plan
allows the holder to purchase one share for eleven ($0.11) cents. One million
five hundred thousand (1,500,000) of the options will be exercisable when our
book value exceeds $750,000 and one million five hundred thousand (1,500,000) of
the options will be exercisable when our book value exceeds $1,500,000. 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
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
Except as described below we are not engaged in any pending 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> 20
as such.
ITEM 3. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
We have selected Baum & Company, P.A., located at 1515 N. University Drive,
Suite 209, Coral Springs, FL 33071, (954) 752-1712, as our auditor. We have
included our audited financial statements for the fiscal period from inception
to December, 1999, and audited interim statements March 31, 2000.
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 and his
agreement to serve without salary until such time as we have operating revenues.
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.
A Registration Statement pursuant to Regulation A was filed with the SEC on
November 1, 1999, which brings the effective date of registration to December
30, 1999. We are in the process of clearing Comments.
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> 21
indemnification or advancement of expenses of any of its directors, officers,
employees or agents.
Because neither the Articles of Incorporation, as amended, nor the By-Laws of
our Company otherwise provide, notwithstanding the failure of the Company to
provide indemnification and despite a contrary determination by the Board of
Directors or its shareholders in a specific case, a director, officer, employee
or agent of the Company who is or was a party to a proceeding may apply to a
court of competent jurisdiction for indemnification or advancement of expenses
or both, and the court may order indemnification and advancement of expenses,
including expenses incurred in seeking court-ordered indemnification or
advancement of expenses if it determines that the petitioner is entitled to
mandatory indemnification pursuant to Section 78.7502(3) because he has been
successful on the merits, or because the Company has the power to indemnify on a
discretionary basis pursuant to Section 78.7502 or because the court determines
that the petitioner is fairly and reasonably entitled indemnification or
advancement of expenses or both in view of all the relevant circumstances.
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 by, or in the name of, we. 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> 22
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.
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 April 26, 2000 /s/ James D. Tilton
----------------- -------------------------------------------
James D. Tilton, President
22
<PAGE> 23
THOROUGHBRED INTERESTS, INC.
FINANCIAL STATEMENTS
MARCH 31, 2000
<PAGE> 24
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report 1
Balance Sheet 2
Statement of Income and Accumulated Deficit 3
Statement of Cash Flows 4
Notes to Financial Statements 5-7
</TABLE>
<PAGE> 26
BAUM & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
1515 UNIVERSITY DRIVE - SUITE 209
CORAL SPRINGS, FLORIDA 33071
(954) 752-1712
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 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 and cash flows
for the period commencing March 25, 1999 (inception) to December 31, 1999 then
ended in conformity with generally accepted accounting principles.
Coral Springs, Florida
March 3, 2000 /s/ Baum & Company, P.A.
<PAGE> 27
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
<TABLE>
<CAPTION>
OPERATING DEVELOPMENTAL
STAGE STAGE
--------- ---------
<S> <C> <C>
Revenue $- 0 - - 0 -
Expenses
Operational costs 55,720 - 0 -
General & administrative 27,727 - 0 -
Startup and organizational costs - 0 - 11,220
--------- ---------
Total expenses 83,447 11,220
--------- ---------
Net income (loss) Before other expenses (68,345) (11,220)
Other expenses
Interest expense 39,500 - 0 -
--------- ---------
Net income before provision for income taxes (122,947) (11,220)
Provision for income taxes - 0 - - 0 -
--------- ---------
Net Income (loss) $(122,947) $ (11,220)
Accumulated deficit - beginning - 0 - - 0 -
--------- ---------
Accumulated deficit - ending $(122,947) $ (11,220)
========= =========
</TABLE>
See accountants report and notes to the financial statements.
- 3 -
<PAGE> 28
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<TABLE>
<S> <C>
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 (11,220)
Accumulated deficit (122,947)
Less: subscription receivable (125)
---------
(107,906)
---------
Total liabilities & stockholders equity $ 457,840
=========
</TABLE>
See accountants report and notes to the financial statements.
- 2 -
<PAGE> 29
THOROUGHBRED INTERESTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD COMMENCING MARCH 25, 1999 (INCEPTION)
TO DECEMBER 31, 1999
<TABLE>
<S> <C>
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
=========
</TABLE>
See accountants report and notes to the financial statements.
- 4 -
<PAGE> 30
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 July 1999 the Company has emerged from
its development stage with the acquisition of thoroughbred horses.
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
- 5 -
<PAGE> 31
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 on or before May 31, 2000
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 October 31, 1999, no options have been
granted.
- 6 -
<PAGE> 32
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 a ( 60 ) sixty day extension
to May 29, 2000 for satisfaction of the note.
On December 15, 1999, pursuant to a 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. 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.
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.
- 7 -
<PAGE> 33
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report 1
Balance Sheet 2
Statement of Income and Accumulated Deficit 3
Statement of Cash Flows 4
Notes to Financial Statements 5-7
</TABLE>
<PAGE> 34
BAUM & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
1515 UNIVERSITY DRIVE - SUITE 209
CORAL SPRINGS, FLORIDA 33071
(954) 752-1712
INDEPENDENT AUDITORS REPORT
The Board of Directors
Thoroughbred Interests, Inc.
Louisville, Kentucky
We have audited the accompanying balance sheet of Thoroughbred Interests, Inc.
as of March 31, 2000 and the related statement of income and cash flows for the
three months 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. at March 31,
2000 and the statement of income and cash flows for the three months then ended
in conformity with generally accepted accounting principles.
Coral Springs, Florida
April 18, 2000 /s/ Baum & Company, P.A.
<PAGE> 35
THOROUGHBRED INTERESTS, INC.
BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash in bank $ 136,147
Accounts receivable - trade 38,000
Investment in thoroughbred horses( note 1 ) 251,722
Prepaid expenses 7,500
---------
433,369
---------
Other assets
Deferred registration costs( note 1 ) 5,385
---------
Total assets $ 438,754
=========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Note payable( note 6 ) $ 400,000
Accounts payable and accrued expenses 95,239
---------
Total current liabilities 495,239
Other liabilities
Loan payable - stockholder( note 3 ) 74,011
---------
Total liabilities 569,250
---------
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 (156,757)
Less: subscription receivable (125)
---------
(130,496)
---------
Total liabilities & stockholders equity $ 438,754
=========
</TABLE>
See accountants report and notes to the financial statements.
- 2 -
<PAGE> 36
THOROUGHBRED INTERESTS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<S> <C>
Revenue $ 297,500
Expenses
Operational costs 272,039
General & administrative 8,301
---------
Total expenses 280,340
---------
Net income (loss) before other income and expense 17,160
Other income and expense
Interest expense (39,750)
---------
Net income before provision for income taxes (22,590)
Provision for income taxes ( note 7 ) - 0 -
---------
Net income ( loss ) $ (22,590)
Accumulated deficit - beginning (134,167)
---------
Accumulated deficit - ending $(156,757)
=========
</TABLE>
See accountants report and notes to the financial statements.
- 3 -
<PAGE> 37
THOROUGHBRED INTERESTS, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<S> <C>
Cash flows from operations:
Net income (loss) $ (22,590)
Changes in operating assets and liabilities:
( Increase ) in accounts receivable - trade (38,000)
( Decrease ) in Investment in thoroughbred horses 189,385
( Increase) in prepaid expenses (7,500)
( Decrease ) in accounts payable and accrued expenses (6,996)
---------
Net cash provided from operations 114,299
---------
Cash flows from financing activities:
Reduction in stockholder loan (39,500)
Proceeds of note payable 50,000
---------
Net cash provided from financing activities 10,500
---------
Net increase in cash 124,799
Cash - beginning 11,348
---------
Cash - ending $ 136,147
=========
Supplemental disclosures:
Interest expense $ 39,750
</TABLE>
See accountants report and notes to the financial statements.
- 4 -
<PAGE> 38
THOROUGHBRED INTERESTS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
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 emerged from its development
stage in July, 1999 when it acquired thoroughbred horses.
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 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
- 5 -
<PAGE> 39
THOROUGHBRED INTERESTS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
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 on or before May 31, 2000
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 has assumed 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.
The salary will commence upon the availability of sufficient
cash flow to pay the required compensation. Additionally, the
CEO has advanced $74,011 as a interest free, unsecured loan
as of March 31, 2000 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 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 March 31, 2000, no options have
been granted.
- 6 -
<PAGE> 40
THOROUGHBRED INTERESTS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
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 a ( 60 ) sixty day extension to May 29,
2000 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 to be repaid in full including interest on August
13, 2000. The promissory notes are both 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.
NOTE 7 - 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.
- 7 -
