As filed with the Securities and Exchange Commission on November 8, 1999
Registration No. _________________
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WHISPERING OAKS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
Texas 7948 75-2742601
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Organization) Classification Code Number) Identification Number)
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16910 Dallas Parkway, Suite 100, Dallas, Texas 75248 (972) 248-1922
(Address of principal executive offices) Telephone Number
Kevin B. Halter
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
(972) 248-1922
(Name, address and phone number for agent for service)
Copies to:
Dominic M. Federico, Esq.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
(972) 248-1922
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed maximum Proposed maximum Registration Fee
securities to be registered offering price aggregate offering
registered per share(1) price(1)
COMMON STOCK 600,000 shares $1.00 $600,000 $181.81
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Note (1) Estimated solely for calculating the registration fee.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PRELIMINARY PROSPECTUS
(subject to completion)
WHISPERING OAKS INTERNATIONAL, INC.
600,000 SHARES OF COMMON STOCK
This prospectus relates to the offer and sale from time to time of up to 600,000
shares of the common stock, with a par value of $.001 per share ("Shares"), of
Whispering Oaks International, Inc., a Texas corporation ("Company") by three
current shareholders ("Selling Shareholders). The registration of these
securities does not necessarily mean that any or all of these shares will, in
fact be sold. The Company will not receive any of the proceeds from the sale of
these shares. The Company however, will pay all of the expenses related to this
registration.
There is currently no public market for the common stock. The Company at a
future date and if it meets the requirements, will undertake to have its common
stock listed on the OTC Bulletin Board, maintained by members of the National
Association of Securities Dealers, Inc.
After the Shares are registered, the Selling Shareholders may, from time to
time, offer and sell the Shares directly or through agents or broker-dealers on
such terms as they in their individual discretion determine to be appropriate.
An investment in the securities offered hereby is speculative and involves a
high degree of risk. You should read "Risk Factors", beginning on page 3, which
describes certain factors which should be carefully considered before you
purchase any of the common stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding the Company, Risk Factors and the common stock covered by
this registration and the Company's financial statements and notes thereto
appearing elsewhere in this prospectus.
THE COMPANY
Whispering Oaks International, a Texas corporation ("Company"), was incorporated
under the laws of the State of Texas on December 8, 1997. The Company was formed
to engage in the acquisition and sale of thoroughbred racing stock of every age
from broodmares, weanlings and yearlings to racehorses and stallions. The
Company's principal office is located at 16910 Dallas Parkway, Suite 100,
Dallas, Texas 75248 and its telephone number is (972)248-1922.
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FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumption currently available to the Company or
management. When used in this document, the words such as "may", "expect",
"anticipate", "believe", "estimate", "intend" "continue" or similar words, as
they relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should the underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as may, expected, anticipated, believed, estimated, intended,
or continued. In each instance, forward-looking information should be considered
in light of the accompanying cautionary statements herein.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING THE COMPANY
AND ITS BUSINESS AND FUTURE PROSPECTS BEFORE PURCHASING ANY OF THE COMMON STOCK.
No History of Successful Operations
The Company has never operated any substantial business and has never generated
any substantial income; thus the Company has no history of successfully
operating any form of business and generating any profits.
Lack of Profitability
Although the Company was incorporated in 1997, it had a net loss from operations
through December 31, 1998 of ($76,000.) For the nine months ended September 30,
1999 the Company had a net income of $7,800.
The Company's operations are still subject to all of the risks inherent in the
establishment of a new business enterprise, including the lack of profitable
operating history and the inability to obtain capital from non-related parties.
The likelihood of success of the Company must be considered in light of the
problems, expenses, and difficulties, complications and delays frequently
encountered in connection with establishment of a new business. There can be no
assurance that future operations of the Company will be profitable. Future
revenues and profits, if any, will depend upon numerous factors, many of which
are beyond the control of the Company's management including general economic
conditions.
Additional Capital
In order to maintain liquidity, the Company has obtained non-interest-bearing
advances from entities related to the Company through common ownership and/or
control. These advances are payable on demand. As of December 31, 1998, the
Company owed approximately $70,000. These outstanding advances from affiliates
were reduced to approximately $38,000 as of September 30, 1999. Unless one or
more of the Company's shareholders continue to provide funds for continued
operations, the Company may have to cease operations rendering the stock
ownership in the Company possibly worthless.
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Highly Competitive Industry
The buying and selling of thoroughbred horses is highly competitive. A number of
companies and individuals with significantly greater resources than the Company
have greater ability to be the successful bidders for quality horses that the
Company might want to purchase.
Control of the Company by its Executive Officers and Directors
The Company's officers and directors currently beneficially own, directly or
indirectly, over 99% of the outstanding common stock. As a result, these
shareholders acting together control all decisions that will be made by
shareholders, including the election of directors.
Benefits of this Offering to the Selling Shareholders
The Selling Shareholders currently, directly or indirectly, own more than 99%
percent of the common stock, namely 2,500,000 shares. Of this number 600,000
shares are covered by this registration statement. The Selling Shareholders will
receive all of the proceeds of the sales of common stock and none will be
received by the Company. The Company however is paying the expenses incurred by
the filing of this offering.
No active Market for the Company's Securities
Until this time there has not been a public market for the Company's common
stock. There can be no assurance that an active public market will develop or be
sustained form the common stock even though the Company intends to file an
application with the National Association of Securities Dealers, Inc. ("NASD")
to list the common stock on the OTC Bulletin Board. If there is little demand on
the part of potential purchasers of the stock, sellers will have difficulty
selling any of their shares in the Company.
Anticipated Volatility of the Price of the Company's Stock
If a public market develops for the Company's Common Stock, it is likely to be
highly volatile. This can be caused because of general market conditions, as
well as factors related to the Company's performance and its ability to meet
market expectations. Such factors as investor perceptions of the Company,
variations in the Company's financial results, announcements regarding the
Company's plans and other developments affecting the Company's future could
cause significant fluctuations in the market price of the stock. In addition,
the stock market in general has recently experienced price and volume
fluctuations which appear to be unrelated to the operating performance of
individual companies. Broad market fluctuations may adversely affect the market
price of the stock.
Large Number of Shares Eligible for Sale in the Future
If the Selling Shareholders sell substantial amounts of the common stock in the
public market (if one develops) following this offering, the market price of the
common stock may suffer a depressing effect.
Additionally, the remaining shares that are owned by the Selling Shareholders
which are not being registered herewith, can also be sold in the future under
Rule 144. (See "Shares eligible for future sales".)
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Anti-Takeover Provisions
Certain provisions of Texas law and certain provisions of the Company's
Certificate of Incorporation and Bylaws could delay or impede the removal of
incumbent directors and could make it more difficult for a third party to
acquire, or could discourage third parties from attempting to acquire, control
of the Company. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Company's common stock.
The Certificate of Incorporation and Bylaws impose various procedural
requirements that could make it more difficult for shareholders to effect
certain corporate actions. The Company's Certificate of Incorporation gives the
Board of Directors (without any additional authorization from the shareholders)
authority to issue more than 122,000,000 additional shares of common stock for
various corporate purposes. Issuance of a substantial number of shares would
dilute the existing shareholders' percentage ownership of the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the registration or sale of the
shares of common stock covered by this prospectus
MARKET FOR THE COMPANY'S COMMON STOCK
There is currently, no public market for the Company's common stock. The Company
at a future date and if it meets the requirements, will undertake to have its
common stock listed on the OTC Bulletin Board maintained by members of the
National Association of Securities Dealers, Inc.
SHARES ELIGIBLE FOR FUTURE SALE
As of November 1, 1999, 2,525,000 shares of common stock were outstanding. All
of these shares are "restricted securities" as such term is defined under Rule
144, in that such shares were issued in private transactions not involving a
public offering and may not be sold in the absence of registration other than in
accordance with Rules 144, 144(k) or 701 promulgated under the Securities Act of
1933 or another exemption from registration.
In general, under Rule 144 as currently in effect, a person, including an
affiliate, who has beneficially owned shares for at least one year is entitled
to sell, within any three month period a number of shares that does not exceed
the greater of one percent of the then outstanding shares of our common stock or
the average weekly trading volume in our common stock during the four calendar
weeks preceding the date on which notice of such sales is filed, subject to
various restrictions. In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell those shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate, such person's holding period for the purpose of effecting a sale
under Rule 144 commences on the date of transfer from the affiliates. As of
November 1, 1999, 2,525,000 shares were eligible for sale under Rule 144.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time of the Shares by
the Selling Shareholders. The Company has registered the Shares for sale to
provide the Selling Shareholders with freely tradable securities, but
registration of such securities does not necessarily mean that any of such
Shares will be offered or sold by the Selling Shareholders. The Company will not
receive any proceeds from the sale of these shares by the Selling Shareholders.
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The Selling Shareholders and any of their pledges, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices.
LEGAL PROCEEDINGS
The Company is not a party to any pending litigation nor is it aware of any
threatened legal proceedings.
DESCRIPTION OF THE COMPANY'S SECURITIES
The authorized capital stock of the Company consists of 125,000,000 shares of
common stock with a par value of $0.001 per share. The holders of common stock:
(1) are entitled to one non-cumulative vote per share on all matters that the
stockholders may vote on at meetings of stockholders; (2) do not have
pre-emptive, subscription or conversion rights, and there are no redemption of
sinking fund provisions applicable thereto; and (3) are entitled to share
ratably in the assets of the Company, after the payment of all debts and
liabilities, available for distribution to holders of common stock upon the
liquidation, dissolution or winding up of affairs of the Company. The Company
has no preferred stock, debentures, warrants, options or other instruments
outstanding or that could be converted into common stock of the Company.
Holders of shares of the common stock do not have cumulative voting rights,
which means that the holders of more than 50% of such outstanding shares (the
"majority shareholders"), when voting for the election of directors, can elect
all of the directors and, in such situations, the holders of the remaining
shares will not be able to elect as the Company's directors anyone other than
those candidates supported by the majority shareholders. The majority
shareholders at the present time are Kevin B. Halter, Pam Halter and Kevin B.
Halter, Jr. Holders of shares of the common stock are entitled to receive
dividends if and when declared by the Board of Directors out of funds legally
available therefore. See "Dividend Policy".
On October 15, 1999, the company's Board of Directors amended the Company's
Articles of Incorporation to modify the company's capital structure to allow for
the issuance of 125,000,000 total equity shares consisting solely of common
stock with a par value of $0.001 per share and effected a five (5) for one (1)
forward stock split. The effects of these transactions are reflected in the
accompanying financial statements as of the first day of the first period
presented.
DIVIDEND POLICY
The Company has never paid or declared a cash dividend on its common stock and
does not intend to pay cash dividends in the foreseeable future. The payment by
the Company of dividends, if any, on its common stock in the future is subject
to the discretion of the Board of Directors and will depend on the Company's
earnings, financial condition, capital requirements and other relevant factors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
The Company began operations on January 19, 1998 with the purchase of eight (8)
broodmares for approximately $221,000. In December 1998, the Company sold all
but one broodmare and one foal for gross proceeds of approximately $238,000. The
Company sold its remaining foal in the second quarter of 1999 for gross proceeds
of approximately $26,000. The Company accounts for all purchased livestock at
its original cost and assigns no basis to foals delivered during the Company's
ownership. Gross profits from livestock ownership were approximately $110,000
for the year ended December 31, 1998 and approximately $26,000 for the nine
months ended September 30, 1999. As of September 30, 1999, the Company owns one
broodmare.
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Related to the Company's livestock ownership, the Company incurred direct
operating expenses of approximately $105,000 for the year ended December 31,
1998 and approximately $8,000 for the first nine months of 1999.
The Company adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all organization and
initial costs incurred with the incorporation and initial capitalization of the
Company were charged to operations as incurred. Accordingly, these costs are a
component of the Company's general and administrative expenses of approximately
$9,700 for the year ended December 31, 1998 and $2300 for the nine months ended
September 30, 1999.
The Company experienced net income (loss) of approximately $(76,000) for the
year ended December 31, 1998. The Company had a net income of approximately
$7,800 for the nine months ended September 30, 1999. These events generated net
earnings (loss) per share of approximately $(0.15) per share for the year ended
December 31, 1998 and approximately $0.02 per share for the nine months ended
September 30, 1999.
Liquidity and Capital Resources
The Company maintained liquidity during the year ended December 31, 1998 and the
nine months ended September 30, 1999 through the sale of common stock, subject
to an exemption from registration under Regulation D, Rule 504 of the US
Securities and Exchange Commission, the sale of common stock to the Company's
founders, the proceeds from sales of livestock and non-interest bearing advances
from entities related to the Company through common ownership and/or control. It
is the intent of the controlling shareholders of the Company to fund the
necessary expenses to sustain the corporate entity and/or future purchases of
livestock.
The Company has identified no significant capital requirements for the current
annual period. Liquidity requirements mandated by future business expansions or
acquisitions, if any are specifically identified or undertaken, are not readily
determinable at this time as no substantive plans have been formulated by
management.
Additionally, management is of the opinion that there is additional potential
opportunity for the sale of additional common stock through either private
placements or secondary offerings.
DESCRIPTION OF THE BUSINESS
History of the Company
The Company was incorporated on December 8, 1997 under the laws of the State of
Texas. The Company's business plan involves the acquisition and sale of
thoroughbred racing stock of every age from broodmares, weanlings and yearlings
to racehorses and stallions. An area of particular concentration is the purchase
and sale of weanlings and yearlings at auctions, commonly referred to as
"Pinhooking". The Company's principal office is located at 16910 Dallas Parkway,
Suite 100, Dallas, Texas 75248. The telephone number is (972) 248-1922.
Industry Overview and Opportunity
Perhaps one of the most interesting investment opportunities available today,
pinhooking is essentially the purchase of thoroughbred weanlings and yearlings
at various horse auctions with a view to resell them a few months later at
similar auctions.
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To fully understanding pinhooking and the profit potential that can be gained,
one must understand some basic facts.
All horses have common birthdays on January 1, regardless when they are born.
Thoroughbred horses are bred to be born anywhere from January to June. So if a
horse is born in June, it is considered a late foal. If it is born in January,
it is considered an early foal. Obviously an early foal is preferred over a late
foal, since a horse born in June will officially be one year old on January 1
when in reality it is only six months old. Horses are called weanlings until
they reach the age of one, yearlings until they reach the age of two.
Thoroughbred racing is a high-risk investment, with limited returns for the
average horse owner. It is a high profile glamour sport, the so-called "Sport of
Kings". People dream of owning the "Big" horse, winning the Kentucky Derby etc.
Statistically, the great majority of owners lose money year after year, yet they
persist in chasing the dream.
In contrast, pinhooking is a relatively conservative investment tool that can
bring financial rewards under the right circumstances. The great majority of
racing stock is bought at various auctions throughout the United States. These
are referred to as "Sales". The major and best-attended sales are in Kentucky,
Florida and California. The granddaddy of them all is the September Keeneland
Yearling Sale, held in Lexington, Kentucky. It is attended by thousands of
buyers from around the world, and the statistics can be mind boggling.
The 1997 September Keeneland Yearling Sale broke all records. The 10-day auction
marathon produced the two highest-priced colts and the one highest-priced filly
in the 54-year history of the September Sale. It also produced the highest gross
revenue and highest average and median prices since the select sessions were
inaugurated in 1989. The sale-record was a $2.3 million Mr. Prospector colt. The
top price for a filly was $950,000 for a daughter of Danzig. The 10-day auction
showed record purchases of $152 million. In England, on November 29, 1997 at the
famous Tattersalls Weanling Sale someone paid a record $4.4 million for a
weanling who was a full brother to the 1991 Epsom Derby winner.
A number of horses at the Keeneland Sale were purchased by pinhookers who will
attempt to re-sell these one year olds as two year olds at various major Sales
during the months of January, February and March. The key to successful
pinhooking is to gauge the market, ascertain the most popular bloodlines, know
the best price ranges in which to re-sell the purchased horses, etc. Pinhooking
is an art, which demands continuous attention to the ever-changing market.
As in all investing, the risk ratio should be measured against the reward ratio.
The risk/reward ratio in Pinhooking is quite extraordinary. It is not unusual to
be able to purchase horses under $50,000 and resell them for six figures. On a
more modest scale (getting away from high priced horses) the well-known Ocala
(Florida) March 1997 Yearling Sale brought forth an overall 52% return on
investment for pinhookers. A total of 184 horses were offered for sale by
pinhookers who bought the horses as weanlings. Statistics show that the average
yearlings were purchased for $21,120 and were resold for an average of $47,315.
The 52% rate of return calculation includes $10,000 cost of upkeep per juvenile.
By comparison to other well-known sales, Ocala actually had the lowest returns.
The OBS Sale at Calder (Miami,FL.) achieved an 89.2% rate of return. The rate of
return at the Fasig-Tipton Calder Sale was 58.3% and Barretts (California) was
56.1%. The top pinhooker in Florida was a horsewoman who sold three pinhooked
horses for $447,000 after buying them as yearlings for $53,000.
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The risk/reward ratio is extraordinary as far as investments are concerned,
because on the downside, the worst case scenario will still return a portion of
the purchase price of a horse sold at a loss. This should be in the 10-20%
range, and such losses should be offset by gains made on profitable
transactions. Also, unlike horse racing, where racing careers can be terminated
rather swiftly due to permanent injury, the likelihood of an injury that would
keep the juvenile out of a sale is relatively small.
Business Plan
In general, it is the Company's intent to operate profitably in a number of
areas, all involving the purchase and sale of thoroughbred horses.
The primary operations and their criteria is as follows:
(1) Purchase of weanlings in the fall, to be resold as yearlings in the spring.
(2) Purchase of yearlings in the fall, to be resold as two-year olds in the
spring.
(3) Purchase of broodmares in foal in the spring. The offsprings (to be born
within 30-60 days from purchase date) would be sold as weanlings in the
fall. After giving birth, the broodmares would immediately be bred to
selected stallions, thus giving the Company the option to:
a. sell the broodmares in foal during the fall (current year) or spring
(following year).
b. sell the foals in the spring of the following year.
(4) Purchase quality stallions for breeding purposes. Revenues would consist of
breeding fees of $5,000 to $10,000 per broodmare covered.
All horses are insured for mortality.
Sunrise Stable South Training Center near Ocala, Florida is the home for most of
the Company's livestock. The training center is operated by Edward and Irene
Coletti and is located approximately 10 miles from the Ocala Breeders' Sales
Company auction grounds. The facility consists of 12 buildings and 6 barns with
130 box stalls, located on 160 acres. It has an irrigated 3/4 mile,
safe-training track with an electric starting gate. Mr. Coletti is a highly
regarded second-generation horseman. He and his wife have spent their entire
adult life working with thoroughbreds. Some of the nationally recognized
horsemen that regularly patronize the Sunrise Stable South facilities are
Eclipse Award winning trainer Bill Mott (trainer of "Cigar"), Hall of Fame
honorees John Nerud, P.G. Johnson, Nick Zito and Tom Amos. Many horses that have
achieved celebrity status have started their brake-in and training at Sunrise
Stable South, personally supervised by Mr. Coletti. These include "Blumin
Affair" purchased as a yearling for $20,000 who later went on to earn
approximately $1 million; 1996 Canadian Two-Year-Old Champion "Gumtuu", who was
born and trained at the center; "Unfinished Symph" earning approximately
$700,000 and "Forcing Bid" who was purchased as a yearling for $16,000 and who
later earned in excess of $700,000.
The Company seeks to acquire ownership of horses that, in the opinion of
management, have the greatest potential to represent profitable investment,
measured by the difference between the price paid for each animal at auction and
the sales price and the sales price subsequently received. Since beginning
operations, The Company has purchased 8 horses and sold 7 horses. The Company
has no contracts in place at this time to purchase any horse or horses. While
the Company's management is hopeful that purchases can be consummated in the
future on favorable terms, it can make no such representations.
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The Company has no employees. Kevin B. Halter and Pam Halter devote all the time
that is necessary to attend auctions and analyze the available horses, at no
cost to the Company.
Market Overview
The current state of the thoroughbred economy in North America can best be
described by using the word "boom", according to the January 3, 1998 issue of
The Blood Horse magazine, the industry bible. Combined gross revenue for all
types of horses reached its highest level ever in 1997, and average prices for
weanlings, 2 year-olds, and broodmares also set new records. Ample evidence is
available from year-end summaries of all auctions held across the continent in
1997 to indicate that the auction market was among the strongest ever. This
trend has continued through 1998 and through the first half of 1999.
Record money was spent for yearlings, weanlings, 2-year olds, and broodmares at
public auctions in 1997. Sales for the four main categories of thoroughbreds
sold at auctions exceeded $693 million, an increase of 13.5% from the 1996 total
of nearly $611 million. It also surpassed the previous annual record of $684
million attained in 1983.
Not only did combined gross revenue for all types of horses reach its highest
level ever in 1997, but the year's average prices for weanlings, 2 year-olds and
broodmares also set new records.
1997 marked the fifth straight year that total expenditures at public auctions
have increased, going back to 1992, when the Thoroughbred market bottomed out of
its recession of the late 1980s and early 1990s. Gross revenue at public
auctions has more than doubled over the past five years, rising from less than
$332 million in 1992 to more than $693 million in 1997. For the five-year period
as a whole, average prices have increased by 128.4% for 2 year-olds, by 101.3%
for weanlings, by 100.6% for broodmares, and by 68.4% for yearlings.
Competition
The buying and selling of thoroughbred horses is highly competitive. A number of
companies and individuals with significantly greater resources than the Company
have greater ability to be the successful bidders for quality horses that the
Company might want to purchase.
Environmental Matters
The Company is not aware of any environmental liability relating to its
facilities or operations that would have a material adverse affect on the
Company, its business, assets or results of operations.
Inflation
Inflation has not historically been a material effect on the Company's
operations and is not expected to have a material impact on the Company or its
operations in the future.
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YEAR 2000 CONSIDERATIONS
The Year 2000 (Y2K) date change is believed to affect virtually all computers
and organizations. The Company has undertaken a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems. The Company has no direct
electronic links with any customer or supplier. In addition, the Company has
held discussions with certain of its software suppliers with respect to the Y2K
date change. The Company has completed its detailed review, as a preliminary
assessment and the Company believes, as of the date of this filing, that it will
not be required to modify or replace significant portions of its computer
hardware or software and any such modifications or replacements are, or will be,
readily available. The Company has no known direct Y2K exposures and anticipates
that any costs associated with the Y2K date change compliance to have a material
effect on its financial position or its results of operations. There can be no
assurance until January 1, 2000, however, that all of the Company's systems, and
the systems of its suppliers, shippers, customers or other external business
partners will function adequately.
DESCRIPTION OF PROPERTY
The Company neither owns nor leases any physical properties.
LEGAL PROCEEDINGS
There are no legal proceedings of any kind pending involving the Company and, to
the knowledge of the management of the Company, no claims have been made nor any
litigation threatened against the Company.
MANAGEMENT
The directors and officers of the Company are listed below with information
about their respective backgrounds.
Name Age Position
- ---- --- --------
Kevin B. Halter 64 Chairman, President, CEO & Director
Pam Halter 44 Director
Kevin B. Halter, Jr. 39 Vice President, Secretary, Treasurer &
Director
Kevin B. Halter has served as Chairman, President, CEO and a director of The
Company since December 1997. Mr. Halter has served as Chairman of the Board and
Chief Executive Officer of Halter Capital Corporation, a privately-held
investment and consulting company, since 1987. Mr. Halter has served as Chairman
of the Board and President of Millennia, Inc. and Chairman of the Board of
Digital Communications Technology Corporation since 1994. Mr. Halter is the
husband of Pam Halter and the father of Kevin B. Halter, Jr.
Pam J. Halter has served as a director of the Company since December 1997. Ms.
Halter has been involved in various facets of horse racing since age sixteen,
culminating with her successful record as a trainer. Since her retirement from
training, she became a successful owner of a small stable of horses attaining
the highest win percentage (21.8%) at Louisiana Downs. Her well deserved
reputation in the industry combined with her exceptionally keen eye in
recognizing prime racing prospects based upon their physical attributes, makes
her an invaluable member of the management team. Ms. Halter is the wife of
Kevin B. Halter.
<PAGE>
Kevin B. Halter, Jr. has served as Vice President, Secretary, Treasurer and a
director of the Company since December 1997. Mr. Halter also serves as Vice
President and Secretary of Halter Capital Corporation. He is the President of
Securities Transfer Corporation, a stock transfer company registered with the
Securities and Exchange Commission, a position which he has held since 1987. Mr.
Halter has served as Vice President, Secretary and a director of Millennia, Inc.
and Digital Communications Technology Corporation since 1994. Kevin B. Halter,
Jr. is the son of Kevin B. Halter.
All directors hold office until the next annual meeting of the shareholders of
the Company or until their successors have been elected and qualified. Officers
serve at the discretion of the Board of Directors.
EXECUTIVE COMPENSATION
The Company pays no compensation to its officers and directors currently and has
paid no compensation in any amount or of any kind to its executive officers or
directors since inception.
SELLING STOCK HOLDERS
This Prospectus relates to the offering by the selling stockholders for resale
of shares acquired by them upon as original investors in the Company. All of the
shares of common stock offered by this prospectus are being offered by the
selling shareholders for their own account.
The following table sets forth information with respect to the common stock
beneficially owned by the selling stockholders as of the date of this
prospectus.
<TABLE>
SELLING STOCKHOLDER NUMBER OF SHARES OWNED NUMBER OF SHARES NUMBER OF SHARES
PRIOR TO THE OFFERING REGISTERED TO BE SOLD OWNED AFTER
OFFERING (1)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pam Halter 250,000 100,000 150,000
Kevin B. Halter 1,000,000 200,000 800,000
Kevin B. Halter, Jr. 1,250,000 300,000 950,000
</TABLE>
- -----------
(1) Assumes the sale of all shares of common stock offered by this prospectus.
PRINCIPAL STOCKHOLDERS
The following information table sets forth certain information regarding the
Company's common stock owned on November 1, 1999 by (1) any person (including
any "group") who is known by the Company to own beneficially more than 5% of its
outstanding Common Stock, (2) each director and executive officer, and (3) all
executive officers and directors as a group.
Name and Address(a) Shares Owned Percentage
- --------------------------------------------------------------------------------
Kevin B. Halter 1,000,000 39.6%
Pam Halter 250,000 9.9%
Kevin B. Halter, Jr. 1,250,000 49.5%
Executive Officers and Directors as 2,500,000 99%
a group (three persons)
(a) The address for each person is 16910 Dallas Parkway, Suite 100, Dallas Texas
75248
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In order to maintain liquidity, the Company has obtained non-interest bearing
advances from entities related to the Company through common ownership and/or
control. These advances are payable on demand. At December 31, 1998 the Company
owed approximately $70,000. These outstanding advances from affiliates were
reduced to approximately $38,000 at September 30, 1999.
LEGAL MATTERS
The validity of the common stock covered by this registration statement will be
passed upon for the Company by Dominic M. Federico, attorney at law, Dallas,
Texas.
EXPERTS
The financial statements included in the registration statement on Form SB-2
have been audited by S.W. Hatfield, CPA, independent certified accountant, to
the extent and for the periods set forth in his report, and are included herein
in reliance upon the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Company is currently subject to the reporting requirements of the Securities
and Exchange Act of 1934, as amended, and has in the past filed, and will
continue in the future to file, periodic reports, proxy statements and other
information with the Securities and Exchange Commission ("Commission"). You may
read and copy any of these reports at the following public reference rooms
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, or at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, NY., or at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661.
You may obtain information on the operation of the public reference rooms by
calling the Commission at 1-800-SEC-0330. You may also obtain copies of this
information by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C., 20549. The Commission also maintains an
internet website that contains these reports and information about issuers, like
the Company, who file electronically with the Commission. The address of that
site is: http://www.sec.gov.
The Company has filed with the Commission a registration statement (including
exhibits and information which the Commission permits the registrant to omit
from the prospectus) on Form SB-2 under the Securities Act of 1933, as amended,
with respect to the common stock covered by this prospectus. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement. You may obtain copies of the registration
statement, including exhibits and other information about the Company, by
contacting the Commission in the manner and at the addresses referenced above.
You should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. Neither the Company nor the
Selling Shareholders have authorized anyone else to provide you with different
information. Neither the Company nor the Selling Shareholders are making an
offer to sell, nor soliciting an offer to buy, these securities in any
jurisdiction where that would not be permitted or legal. Neither the delivery of
this prospectus nor any sales made hereunder after the date of this prospectus
shall create an implication that the information contained herein or our affairs
have not changed since the date hereof.
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITES.
The Articles of Incorporation of the Company provide that no director or officer
of the Company shall be directly liable for damages incurred in connection with
legal proceedings brought about by reason of being an officer or director if the
person is not ultimately adjudged liable for negligence or misconduct in the
action.
The Texas Business Corporation Act contains provisions relating to
indemnification of officers and directors. Generally, this section provides that
corporation may indemnify any person who was or is a party to any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in right of the
corporation by reason of the fact that he was a irector, officer, employee or
agent of the corporation. It must be shown that he acted in good faith and in a
manner he reasonably believed to be in the best interest of the corporation.
Generally, no indemnification may be made where the person has been determined
to be negligent or guilty of misconduct in the performance of his duty to the
corporation.
As to indemnification for liabilities arising under the Securities Act of 1933
for directors, officers and controlling persons of the Company, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy and unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person in connection with the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant 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 and will be governed by the final adjudication of such issue.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
WHISPERING OAKS INTERNATIONAL, INC.
CONTENTS
Page
----
Report of Independent Certified Public Accountants F-2
Annual Financial Statements
Balance Sheets as of December 31, 1998 and 1997 F-3
Statements of Operations and Comprehensive Income for the year ended
December31, 1998 and for the period from December 8, 1997
(date of inception) through December 31, 1997 F-4
Statement of Changes in Stockholders' Equity
for the period from December 8, 1997 (date of inception)
through December 31, 1998 F-5
Statements of Cash Flows
for the year ended December 31, 1998 and
for the period from December 8, 1997 (date of inception)
through December 31, 1997 F-6
Notes to Financial Statements F-7
Interim Financial Statements
Balance Sheets as of September 30, 1999 and 1998 F-9
Statements of Operations and Comprehensive Income
for the nine and three months ended September 30, 1999 and 1998 F-10
Statements of Cash Flows
for the nine months ended September 30, 1999 and 1998 F-11
Notes to Financial Statements F-12
F-1
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Whispering Oaks International, Inc.
We have audited the accompanying balance sheets of Whispering Oaks
International, Inc. (a Texas corporation) as of December 31, 1998 and 1997 and
the related statements of operations and comprehensive income, changes in
stockholders' equity and cash flows for the year ended December 31, 1998 and for
the period from December 8, 1997 (date of inception) to December 31, 1997,
respectively. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whispering Oaks International,
Inc. as of December 31, 1998 and 1997 and the related statements of operations,
changes in stockholders' equity and cash flows for the year ended December 31,
1998 and the period from December 8, 1997 (date of inception) to December 31,
1997, in conformity with generally accepted accounting principles.
/s/ S. W. HATFIELD, CPA
------------------------
S. W. HATFIELD, CPA
Dallas, Texas
July 16, 1999 (except for
Note A as to which the
date is October 15, 1999)
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-2
<PAGE>
WHISPERING OAKS INTERNATIONAL, INC.
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
-------- --------
Current assets
Cash on hand and in bank $ 15,266 $ --
-------- --------
Livestock 32,000 --
Accumulated depreciation (10,225) --
-------- --------
Net livestock 21,775 --
-------- --------
TOTAL ASSETS $ 37,041 $ --
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable trade $ 12,231 $ --
Advances from affiliates 70,705 --
-------- --------
Total liabilities 82,936 --
-------- --------
Commitments and contingencies
Stockholders' equity Common stock - $0.001 par value
125,000,000 shares authorized
2,525,000 and -0- shares issued
and outstanding, respectively 2,525 --
Additional paid-in capital 27,475 --
Accumulated deficit (75,895) --
-------- --------
Total stockholders' equity (45,895) --
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,041 $ --
======== ========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
WHISPERING OAKS INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year ended December 31 0, 1998 and
Period from December 8, 1997 (date of inception) through December 31, 1997
Period from
December 8, 1997
Year ended (date of inception)
December 31, to December 31,
1998 1997
------------ ------------------
Revenues
Sales of livestock $ 238,347 $ --
Cost of Sales
Net capitalized cost of livestock 127,907 --
----------- ----------
Gross Profit 110,440 --
----------- ----------
Operating expenses
Livestock expenses 104,806 --
General and administrative expenses 9,711 --
Depreciation 71,818 --
----------- ----------
Total operating expenses 186,335 --
----------- ----------
Loss from operations (75,895) --
Other income (expense) -- --
----------- ----------
Loss before income taxes (75,895) --
Provision for income taxes -- --
----------- ----------
Net Loss (75,895) --
Other comprehensive income -- --
----------- ----------
Comprehensive Loss $ (75,895) $ --
=========== ==========
Loss per weighted-average share of common
stock outstanding, computed on net loss -
basic and fully diluted $(0.03) nil
==== ===
Weighted-average number of
common shares outstanding 2,525,000 --
=========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
WHISPERING OAKS INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year ended December 31, 1998 and
Period from December 8, 1997 (date of inception) through December 31, 1997
Common Stock Additional
--------------------- paid-in Accumulated
# shares amount capital deficit Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balances at
December 8, 1997 -- $ -- $ -- $ -- $ --
Net loss for the period -- -- -- -- --
--------- --------- --------- --------- ---------
Balances at
December 31, 1997 -- -- -- -- --
Shares issued to founders 500,000 500 4,500 -- 5,000
Effect of 5 for 1 forward
split on October 15, 1999 2,000,000 2,000 (2,000) -- --
Shares sold on Private
Placement Memorandum 5,000 5 24,995 -- 25,000
Effect of 5 for 1 forward
split on October 15, 1999 20,000 20 (20) -- --
Net loss for the year -- -- -- (75,895) (75,895)
--------- --------- --------- ---------
Balances at
December 31, 1998 2,525,000 $ 2,525 $ 29,495 $ (75,895) $ (45,895)
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
WHISPERING OAKS INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
Year ended December 31, 1998 and
Period from December 8, 1997 (date of inception) through December 31, 1997
Period from
December 8, 1997
Year ended (date of inception)
December 31, to December 31,
1998 1997
------------ -------------------
<S> <C> <C>
Cash flows from operating activities
Net loss for the year $ (75,895) $ --
Adjustments to reconcile net loss to net
cash provided by operating activities
Gain on sale of livestock (110,440) --
Depreciation 71,818 --
Increase in accounts payable 12,231 --
--------- -----------
Net cash used in operating activities (102,286) --
--------- -----------
Cash flows from investing activities
Proceeds from sales of livestock 238,347 --
Purchases of livestock (221,500) --
--------- -----------
Net cash provided by investing activities 16,847 --
--------- -----------
Cash flows from financing activities
Advances from affiliates 70,705
Proceeds from sale of common stock 30,000 --
--------- -----------
Net cash provided by financing activities 100,705 --
--------- -----------
INCREASE IN CASH 15,266 --
Cash at beginning of year -- --
--------- -----------
Cash at end of year $ 15,266 $ --
========= ===========
Supplemental disclosure of interest and income taxes paid
Interest paid for the period $ -- $ --
========= ===========
Income taxes paid for the period $ -- $ --
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
WHISPERING OAKS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note A - Organization and Description of Business
Whispering Oaks International, Inc. (Company) was incorporated on December 8,
1997 under the laws of the State of Texas. The Company was formed to engage in
the acquisition and sale of thoroughbred race horses of every age, from
broodmares and weanlings to mature racehorses and stallions. The Company
intends, initially, to focus in the area of purchasing and selling weanlings and
yearlings at various auctions in an activity commonly referred to as
"pinhooking".
Pinhooking is essentially the purchase of thoroughbred weanlings and yearlings
at auction and reselling them at a different, but similar, auction in the near
future. The Company projects an average historical holding period of five to six
months between purchase and resale.
The Company began operations in January 1998 with its initial capitalization and
its initial livestock purchase.
On October 15, 1999, the Company's Board of Directors amended the Company's
Articles of Incorporation to modify the Company's capital structure to allow for
the issuance of 125,000,000 total equity shares consisting solely of common
stock with a par value of $0.001 per share and effected a five (5) for one (1)
forward stock split. The effects of these transactions are reflected in the
accompanying financial statements as of the first day of the first period
presented.
The Company has elected a year-end of December 31 and uses the accrual method of
accounting.
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with
maturities of three months or less, when purchased, to be cash and cash
equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the
Company's cash management policies.
2. Livestock
Livestock is recorded at cost and are depreciated on a straight-line
basis, over their estimated useful lives (generally 3 years). Foals
delivered after the broodmare is purchased are capitalized by the Company
at a "zero cost" basis. At December 31, 1998, the Company had one
broodmare and one foal delivered by broodmares after acquisition by the
Company in its stable.
F-7
<PAGE>
WHISPERING OAKS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Note B - Summary of Significant Accounting Policies - continued
3. Organization costs
The Company has adopted the provisions of AICPA Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities" whereby all
organization and initial costs incurred with the incorporation and initial
capitalization of the Company were charged to operations as incurred.
4. Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 1998 and 1997, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition of assets
and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
As of December 31, 1998 and 1997, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. If these
carryforwards are not utilized, they will begin to expire in 2018.
5. Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of December 31, 1998 and 1997, the
Company had no warrants and/or options outstanding.
Note C - Equity Transactions
In January 1998, as revised in March 1998, the Company issued a Private
Placement Memorandum, utilizing an exemption from registration under Regulation
D, Rule 504 of the US Securities and Exchange Commission, to sell up to 200,000
shares of Common Stock at a price of $5.00 per share. As of December 31, 1998,
the Company had sold 5,000 shares of common stock yielding gross proceeds to the
Company of $25,000.
Note D - Subsequent Events
During the second quarter of Calendar 1999, the Company sold the foal from its
stable.
F-8
<PAGE>
<TABLE>
<CAPTION>
Whispering Oaks International, Inc.
Balance Sheets
September 30, 1999 and 1998
(Unaudited)
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
------
Current Assets
Cash on hand and in bank $ 286 $ 603
--------- ---------
Total current assets 286 603
--------- ---------
Livestock - At Cost 32,000 221,500
Less accumulated depreciation (18,225) (55,375)
--------- ---------
Net Livestock 13,775 166,125
--------- ---------
Total Assets $ 14,061 $ 166,728
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable - trade $ 14,567 $ 32,124
Due to affiliates 37,605 255,205
--------- ---------
Total current liabilities 52,172 287,329
--------- ---------
Commitments and Contingencies
Shareholders' Equity
Common stock - $0.001 par value. 125,000,000 shares
authorized. 2,525,000 issued and outstanding. 2,525 2,525
Additional paid-in capital 27,475 27,475
Accumulated deficit (68,111) (150,601)
--------- ---------
Total shareholders' equity (38,111) (120,601)
--------- ---------
Total Liabilities and Shareholders' Equity $ 14,061 $ 166,728
========= =========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
Whispering Oaks International, Inc.
Statements of Operations and Comprehensive Income
Nine and Three months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues
Sales of livestock $ 26,125 $ -- $ -- $ --
----------- ----------- ----------- -----------
Cost of Sales
Net capitalized cost of livestock -- -- -- --
----------- ----------- ----------- -----------
Gross profit 26,125 -- --
----------- ----------- ----------- -----------
Expenses
Livestock expenses 8,052 88,515 (105) 35,714
General and administrative 2,289 6,711 2,289 --
Depreciation 8,000 55,375 2,667 18,458
----------- ----------- ----------- -----------
Total expenses 18,341 150,601 4,851 54,172
----------- ----------- ----------- -----------
Income (Loss) from
operations before
provision for
income taxes 7,784 (150,601) (4,851) (54,172)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net Income (Loss) 7,784 (150,601) (4,851) (54,172)
Other Comprehensive Income -- -- -- --
----------- ----------- ----------- -----------
Comprehensive Income (Loss) $ 7,784 $ (150,601) $ (4,851) $ (54,172)
=========== =========== =========== ===========
Income (Loss) per weighted-
average share of common
stock outstanding, computed
on net loss - basic and fully diluted nil $(0.06) nil $(0.02)
=== ===== === ====
Weighted-average number of shares
of common stock outstanding -
basic and fully diluted 2,525,000 2,525,000 2,525,000 2,525,000
=========== =========== =========== ===========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
Whispering Oaks International, Inc.
Statements of Cash Flows
Nine months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1999 1998
------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (Loss) $ 7,784 $(150,601)
Adjustments to reconcile net income to net cash
provided by operating activities
Gain on sale of livestock (26,125) --
Depreciation 8,000 55,375
Increase (Decrease) in
Accounts payable 2,336 32,124
--------- ---------
Net cash provided by (used in) operating activities (8,005) (63,102)
--------- ---------
Cash Flows from Investing Activities
Proceeds from sale of livestock 26,125 --
Purchases of livestock -- (221,500)
--------- ---------
Net cash provided by investing activities 26,125 (221,500)
--------- ---------
Cash Flows from Financing Activities
Proceeds from sale of common stock -- 30,000
Net change in advances from affiliates (33,100) 255,205
--------- ---------
Net cash provided by financing activities (33,100) 285,205
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (14,980) 603
Cash and cash equivalents at beginning of period 15,266 --
--------- ---------
Cash and cash equivalents at end of period $ 286 $ 603
========= =========
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ -- $ --
========= =========
Income taxes paid (refunded) $ -- $ --
========= =========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
Whispering Oaks International, Inc.
Notes to Financial Statements
Note 1 - Basis of Presentation
Whispering Oaks International, Inc. (Company) was incorporated on December 8,
1997 under the laws of the State of Texas. The Company was formed to engage in
the acquisition and sale of thoroughbred race horses of every age, from
broodmares and weanlings to mature racehorses and stallions. The Company
intends, initially, to focus in the area of purchasing and selling weanlings and
yearlings at various auctions in an activity commonly referred to as
"pinhooking".
Pinhooking is essentially the purchase of thoroughbred weanlings and yearlings
at auction and reselling them at a different, but similar, auction in the near
future. The Company projects an average historical holding period of five to six
months between purchase and resale.
The Company began operations in January 1998 with its initial capitalization and
its initial livestock purchase.
On October 15, 1999, the Company's Board of Directors amended the Company's
Articles of Incorporation to modify the Company's capital structure to allow for
the issuance of 125,000,000 total equity shares consisting solely of common
stock with a par value of $0.01 per share and effected a five (5) for one (1)
forward stock split. The effects of these transactions are reflected in the
accompanying financial statements as of the first day of the first period
presented.
The Company has elected a year-end of December 31 and uses the accrual method of
accounting.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements contained herein. The information
presented herein does not include all disclosures required by generally accepted
accounting principles and the users of financial information provided for
interim periods should refer to the annual financial information and footnotes
contained in its annual audited financial statements contained elsewhere in this
document when reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 1999.
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-12
<PAGE>
Whispering Oaks International, Inc.
Notes to Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies
a.) Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the
Company's cash management policies.
b.) Livestock
---------
Livestock is recorded at cost and are depreciated on a straight-line
basis, over their estimated useful lives (generally 3 years). Foals
delivered after the broodmare is purchased are capitalized by the Company
at a "zero cost" basis. At September 30, 1999, the Company had one
broodmare in its stable.
c) Organization costs
------------------
The Company has adopted the provisions of AICPA Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities" whereby all
organization and initial costs incurred with the incorporation and initial
capitalization of the Company were charged to operations as incurred.
d.) Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At September 30, 1999 and 1998, respectively, the deferred tax
asset and deferred tax liability accounts, as recorded when material to
the financial statements, are entirely the result of temporary
differences. Temporary differences represent differences in the
recognition of assets and liabilities for tax and financial reporting
purposes, primarily accumulated depreciation and amortization, allowance
for doubtful accounts and vacation accruals.
As of September 30, 1999 and 1998, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. If these
carryforwards are not utilized, they will begin to expire in 2018.
e.) Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of September 30, 1999 and 1998,
respectively, the Company had no warrants and/or options outstanding.
F-13
<PAGE>
Whispering Oaks International, Inc.
Notes to Financial Statements - Continued
Note 3 - Equity Transactions
In January 1998, as revised in March 1998, the Company issued a Private
Placement Memorandum, utilizing an exemption from registration under Regulation
D, Rule 504 of the US Securities and Exchange Commission, to sell up to 200,000
shares of Common Stock at an initial price of $5.00 per pre-forward split share.
As of September 30, 1999 and 1998, respectively, the Company had sold 25,000
post-forward split shares of common stock yielding gross proceeds to the Company
of $25,000.
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Other Expenses of Issuance and Distribution.
The estimated expenses of the registration, all of which will be paid
by the Company, are as follows:
SEC Filing fee $ 181.81
Printing Expense 800.00
Accounting Fees and Expenses 2289.00
Legal Fees and Expenses 2700.00
Blue Sky Fees and Expenses 0
--------
TOTAL $4881.81
Exhibits.
3.1 Articles of Incorporation of Whispering Oaks International, Inc.*
3.2 Bylaws of Whispering Oaks International, Inc.*
4.1 Specimen Stock Certificate for Common Shares*
5.1 Opinion of Dominic M. Federico, Esq.**
23.1 Consent of S.W. Hatfield, C.P.A.**
23.2 Consent of Dominic M. Federico, Esq.**
27 Financial Data Schedule**
* previously filed
** filed herewith
Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the registration statement:
(a) To include any prospectus required under Section 10(a) (3) of
the Securities Act.
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set
forth in the registration statement.
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Whispering Oaks
International, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and had duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Dallas, State of Texas, on the 8th day of
November, 1999.
WHISPERING OAKS INTERNATIONAL, INC.
By: /s/ Kevin B. Halter November 8, 1999
---------------------
Kevin B. Halter, President
And Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
Whispering Oaks International, Inc. and each person whose signature appears
below hereby designates and appoints Kevin B. Halter as his attorney-in-fact
("Attorney-in-Fact") with full power to act alone, and to execute and in the
name and on behalf of Whispering Oaks International, Inc. and each person,
individually and in the capacity stated below, any amendments (including
post-effective amendments) to this Registration Statement, which amendments may
make such changes in this Registration Statement as the Attorney-in-Fact deems
appropriate, and to file each such amendment to this Registration Statement
together will all exhibits thereto and any and all documents in connection
therewith.
Pursuant to the requirements of the Securities Act of 1933, as amend, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Kevin B. Halter November 8, 1999
- -----------------------
Kevin B. Halter, Chairman, President,
Chief Executive Officer and Director
(Principal Executive, Financial and Accounting Officer)
/s/ Kevin B. Halter, Jr.
- ------------------------
Vice President, Secretary, Treasurer
and Director
DOMINIC M. FEDERICO
Attorney at Law
- --------------------------------------------------------------------------------
November 8, 1999
Whispering Oaks International, Inc.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Re: Form SB-2 Registration Statement
At your request, I have examined the Registration Statement under File No.
_____, which shall be filed with the Securities and Exchange Commission (the
"Registration Statement"), in connection with the registration under the
Securities and Exchange Act of 1933, of an aggregate of 600,000 shares of your
Common Stock (the "Stock").
In rendering the following opinion, I have examined and relied only upon the
documents and certificates of officers and directors of the Company as
specifically described below. In my examination, I have assumed the genuineness
of all signatures, the authenticity, accuracy and completeness of the documents
submitted to me as originals, and the conformity with the original documents of
all documents submitted to me as copies. My examination was limited to the
following documents:
1. Articles of Incorporation of the Company, as amended to date;
2. Bylaws of the Company, as amended to date;
3. Resolutions of the Company's Board of Directors relating to the
issuance of the Stock; and
4. The Form 10-SB Registration Statement.
I have not undertaken, nor do I intend to undertake, any independent
investigation beyond such documents and records.
Based on the foregoing, it is my opinion that the Stock has been legally
authorized and validly issued and is fully paid and non-assessable.
<PAGE>
I consent to the filing of this opinion as an exhibit to any filing made with
the Securities and Exchange Commission or under any state or other
jurisdiction's securities act for the purpose of registering, qualifying or
establishing eligibility for an exemption from registration or qualification of
the Stock described in the Registration Statement in connection with the
offering described therein. Nothing herein shall be deemed to relate to or
constitute an opinion concerning any matters not specifically set forth above.
By giving this opinion and consent, I do not admit that I am an expert with
respect to any part of the Registration Statement or Prospectus within the
meaning of that term "expert" as used in Section 11 of the Securities Act of
1933, as amended, or the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.
Yours very truly,
/s/ Dominic M. Federico
- -----------------------
Dominic M. Federico
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in form SB-2 Registration Statement under the Securities
Act of 1933 by Whispering Oaks International, Inc. (a Texas corporation) of our
report dated July 16, 1999 on the financial statements of Whispering Oaks
International, Inc. as of December 31, 1998, 1997 and for each of the years then
ended, accompanying the financial statements contained in such Form SB-2
Registration Statement under the Securities Act of 1933, and to the use of our
name and the statements with respect to us appearing under the heading
"Experts".
/s/ S. W. Hatfield, CPA
- ----------------------------
Dallas, Texas
November 8, 1999
CONSENT OF ATTORNEY FOR REGISTRANT
The undersigned, as attorney for the registrant, Whispering Oaks International,
Inc., hereby consents to the use in the Form SB-2 Registration Statement under
the Securities Act of 1933, as amended, by Whispering Oaks International of the
legal opinion rendered by the undersigned and referenced therein and filed as an
exhibit thereto and the use of his name in said registration statement.
/s/ Dominic M. Federico
- ----------------------------
Dominic M. Federico, Esq.
Dallas, Texas
November 8, 1999
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