14
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
RED HORSE ENTERTAINMENT CORPORATION
(Name of Small Business Issuer in its charter)
Nevada 87-0450232
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
11828 La Grange Avenue, Los Angeles, CA 90025
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (310) 473-0213
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
<PAGE>
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION Page
Part I 3
1. Description of Business 3
2. Management's Discussion and Analysis or Plan of 6
Operations
3. Description of Properties 6
4. Security Ownership of Certain Beneficial Owners and 6
Management
5. Directors, Executive Officers, Promoters and Control 8
Persons
6. Executive Compensation 8
7. Certain Relationships and Related Transactions 9
8. Description of Securities 9
Part II 9
1. Market Price of and Dividends on the Registrant's 9
Common Equity and Related Stockholder Matters
2. Legal Proceedings 10
3. Changes in and Disagreements with Accountants 10
4. Recent Sales of Unregistered Securities 10
5. Indemnification of Directors and Officers 10
Part F/S 11
Financial Statements 11
Part III 11
1. Index to Exhibits 11
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
The Company was formed as a Nevada corporation in December 1987.
For the past three years the Company has had no active business
operations, and has been seeking to acquire an interest in a
business with long-term growth potential. The Company currently
has no commitment or arrangement to participate in a business and
cannot now predict what type of business it may enter into or
acquire. It is emphasized that the business objectives discussed
herein are extremely general and are not intended to be
restrictive on the discretion of the Company's management.
Management anticipates that it may be able to participate in only
one potential business venture, due primarily to the Company's
limited capital. This lack of diversification should be
considered a substantial risk of investing in the Company because
it will not permit the Company to offset potential losses from
one venture against gains from another.
Selection of a Business
The Company anticipates that businesses for possible acquisition
will be referred by various sources, including its officers and
directors, professional advisors, securities broker-dealers,
venture capitalists, members of the financial community, and
others who may present unsolicited proposals. The Company will
seek businesses from all known sources, but will rely principally
on personal contacts of its officers and directors and their
affiliates, as well as indirect associations between them and
other business and professional people. While it is not
presently anticipated that the Company will engage unaffiliated
professional firms specializing in business acquisitions or
reorganizations, such firms may be retained if management deems
it in the best interest of the Company.
Compensation to a finder or business acquisition firm may take
various forms, including one-time cash payments, payments based
on a percentage of revenues or product sales volume, payments
involving issuance of securities (including those of the
Company), or any combination of these or other compensation
arrangements. Consequently, the Company is currently unable to
predict the cost of utilizing such services.
The Company will not restrict its search to any particular
business, industry, or geographical location, and management
reserves the right to evaluate and enter into any type of
business in any location. The Company may participate in a newly
organized business venture or a more established company entering
a new phase of growth or in need of additional capital to
overcome existing financial problems. Participation in a new
business venture entails greater risks since in many instances
management of such a venture will not have proved its ability,
the eventual market of such venture's product or services will
likely not be established, and the profitability of the venture
will be unproved and cannot be predicted accurately. If the
Company participates in a more established firm with existing
financial problems, it may be subjected to risk because the
financial resources of the Company may not be adequate to
eliminate or reverse the circumstances leading to such financial
problems.
In seeking a business venture, the decision of management will
not be controlled by an attempt to take advantage of any
anticipated or perceived appeal of a specific industry,
management group, product, or industry, but will be based on the
business objective of seeking long-term capital appreciation in
the real value of the Company. The Company will not acquire or
merge with a business or corporation in which the Company's
officers, directors, or promoters, or their affiliates or
associates, have any direct or indirect ownership interest.
The analysis of new businesses will be undertaken by or under the
supervision of the officers and directors. In analyzing
prospective businesses, management will consider, to the extent
applicable, the available technical, financial, and managerial
resources; working capital and other prospects for the future;
the nature of present and expected competition; the quality and
experience of management services which may be available and the
depth of that management; the potential for further research,
development, or exploration; the potential for growth and
expansion; the potential for profit; the perceived public
recognition or acceptance of products, services, or trade or
service marks; name identification; and other relevant factors.
The decision to participate in a specific business may be based
on management's analysis of the quality of the other firm's
management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological
changes, and other factors which are difficult, if not
impossible, to analyze through any objective criteria. It is
anticipated that the results of operations of a specific firm may
not necessarily be indicative of the potential for the future
because of the requirement to substantially shift marketing
approaches, expand significantly, change product emphasis, change
or substantially augment management, and other factors.
The Company will analyze all available factors and make a
determination based on a composite of available facts, without
reliance on any single factor. The period within which the
Company may participate in a business cannot be predicted and
will depend on circumstances beyond the Company's control,
including the availability of businesses, the time required for
the Company to complete its investigation and analysis of
prospective businesses, the time required to prepare appropriate
documents and agreements providing for the Company's
participation, and other circumstances.
Acquisition of Business
In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, or other reorganization with another corporation
or entity; joint venture; license; purchase and sale of assets;
or purchase and sale of stock, the exact nature of which cannot
now be predicted. Notwithstanding the above, the Company does
not intend to participate in a business through the purchase of
minority stock positions. On the consummation of a transaction,
it is likely that the present management and shareholders of the
Company will not be in control of the Company. In addition, a
majority or all of the Company's directors may, as part of the
terms of the acquisition transaction, resign and be replaced by
new directors without a vote of the Company's shareholders.
In connection with the Company's acquisition of a business, the
present shareholders of the Company, including officers and
directors, may, as a negotiated element of the acquisition, sell
a portion or all of the Company's Common Stock held by them at a
significant premium over their original investment in the
Company. As a result of such sales, affiliates of the entity
participating in the business reorganization with the Company
would acquire a higher percentage of equity ownership in the
Company. Although the Company's present shareholders did not
acquire their shares of Common Stock with a view towards any
subsequent sale in connection with a business reorganization, it
is not unusual for affiliates of the entity participating in the
reorganization to negotiate to purchase shares held by the
present shareholders in order to reduce the number of "restricted
securities" held by persons no longer affiliated with the Company
and thereby reduce the potential adverse impact on the public
market in the Company's Common Stock that could result from
substantial sales of such shares after the restrictions no longer
apply. Public investors will not receive any portion of the
premium that may be paid in the foregoing circumstances.
Furthermore, the Company's shareholders may not be afforded an
opportunity to approve or consent to any particular stock buy-out
transaction.
It is anticipated that any securities issued in any such
reorganization would be issued in reliance on exemptions from
registration under applicable federal and state securities laws.
In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities
either at the time the transaction is consummated, under certain
conditions, or at specified times thereafter. Although the terms
of such registration rights and the number of securities, if any,
which may be registered cannot be predicted, it may be expected
that registration of securities by the Company in these
circumstances would entail substantial expense to the Company.
The issuance of substantial additional securities and their
potential sale into any trading market which may develop in the
Company's securities may have a depressive effect on such market.
While the actual terms of a transaction to which the Company may
be a party cannot be predicted, it may be expected that the
parties to the business transaction will find it desirable to
structure the acquisition as a so-called "tax-free" event under
sections 351 or 368(a) of the Internal Revenue Code of 1986, (the
"Code"). In order to obtain tax-free treatment under section 351
of the Code, it would be necessary for the owners of the acquired
business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company,
including investors in this offering, would retain less than 20%
of the issued and outstanding shares of the surviving entity.
Section 368(a)(1) of the Code provides for tax-free treatment of
certain business reorganizations between corporate entities where
one corporation is merged with or acquires the securities or
assets of another corporation. Generally, the Company will be
the acquiring corporation in such a business reorganization, and
the tax-free status of the transaction will not depend on the
issuance of any specific amount of the Company's voting
securities. It is not uncommon, however, that as a negotiated
element of a transaction completed in reliance on section 368,
the acquiring corporation issue securities in such an amount that
the shareholders of the acquired corporation will hold 50% or
more of the voting stock of the surviving entity. Consequently,
there is a substantial possibility that the shareholders of the
Company immediately prior to the transaction would retain less
than 50% of the issued and outstanding shares of the surviving
entity. Therefore, regardless of the form of the business
acquisition, it may be anticipated that stockholders immediately
prior to the transaction will experience a significant reduction
in their percentage of ownership in the Company.
Notwithstanding the fact that the Company is technically the
acquiring entity in the foregoing circumstances, generally
accepted accounting principles will ordinarily require that such
transaction be accounted for as if the Company had been acquired
by the other entity owning the business and, therefore, will not
permit a write-up in the carrying value of the assets of the
other company.
The manner in which the Company participates in a business will
depend on the nature of the business, the respective needs and
desires of the Company and other parties, the management of the
business, and the relative negotiating strength of the Company
and such other management.
The Company will participate in a business only after the
negotiation and execution of appropriate written agreements.
Although the terms of such agreements cannot be predicted,
generally such agreements will require specific representations
and warranties by all of the parties thereto, will specify
certain events of default, will detail the terms of closing and
the conditions which must be satisfied by each of the parties
prior to such closing, will outline the manner of bearing costs
if the transaction is not closed, will set forth remedies on
default, and will include miscellaneous other terms.
Operation of Business After Acquisition
The Company's operation following its acquisition of a business
will be dependent on the nature of the business and the interest
acquired. The Company is unable to predict whether the Company
will be in control of the business or whether present management
will be in control of the Company following the acquisition. It
may be expected that the business will present various risks,
which cannot be predicted at the present time.
Governmental Regulation
It is impossible to predict the government regulation, if any, to
which the Company may be subject until it has acquired an
interest in a business. The use of assets and/or conduct of
businesses which the Company may acquire could subject it to
environmental, public health and safety, land use, trade, or
other governmental regulations and state or local taxation. In
selecting a business in which to acquire an interest, management
will endeavor to ascertain, to the extent of the limited
resources of the Company, the effects of such government
regulation on the prospective business of the Company. In
certain circumstances, however, such as the acquisition of an
interest in a new or start-up business activity, it may not be
possible to predict with any degree of accuracy the impact of
government regulation. The inability to ascertain the effect of
government regulation on a prospective business activity will
make the acquisition of an interest in such business a higher
risk.
Competition
The Company will be involved in intense competition with other
business entities, many of which will have a competitive edge
over the Company by virtue of their stronger financial resources
and prior experience in business. There is no assurance that the
Company will be successful in obtaining suitable investments.
Employees
The Company is a development stage company and currently has no
employees. Executive officers, who are not compensated for their
time contributed to the Company, will devote only such time to
the affairs of the Company as they deem appropriate. Management
of the Company expects to use consultants, attorneys, and
accountants as necessary, and does not anticipate a need to
engage any full-time employees so long as it is seeking and
evaluating businesses. The need for employees and their
availability will be addressed in connection with a decision
whether or not to acquire or participate in a specific business
industry.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
Management expects that the Company's capital is sufficient to
meet its estimated expenses for the coming year, since the
Company has nominal expenses while it is seeking a business
opportunity. It is anticipated that the investigation of specific
businesses and the negotiation, drafting, and execution of
relevant agreements, disclosure documents, and other instruments
will require substantial management time and attention and
additional costs for accountants, attorneys, and others. If a
decision is made not to participate in a specific business, the
costs theretofore incurred in the related investigation would not
be recoverable. Furthermore, even if an agreement is reached for
the participation in a specific business, the failure to
consummate that transaction may result in the loss to the Company
of the related costs incurred.
Should the Company locate and acquire a new business venture, it
cannot predict whether the Company's capital after the
acquisition will be adequate to meet operating expenses and
capital requirements for the new venture. It is possible that
the Company will not have sufficient capital to fully undertake
development, marketing, and manufacturing of products or services
which may be acquired. Accordingly, following an acquisition,
the Company may be required to either seek additional debt or
equity financing or obtain funding from third parties. There is
no assurance that the Company will be able either to obtain
additional financing or interest third parties in providing
funding for the further development, marketing, and manufacturing
of any product or service acquired.
ITEM 3. DESCRIPTION OF PROPERTIES
The Company utilizes office space at 11828 La Grange Avenue, Los
Angeles, CA 90025, provided by a private company owned by Wayne
M. Rogers, an officer, director and principal shareholder of the
Company. The Company does not pay rent for this office space.
The Company reimburses Mr. Rogers for clerical and office
expenses, such as telephone charges, copy charges, overnight
courier service, travel expenses, and similar costs incurred on
Company matters.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of July 31, 1997, the number
and percentage of the outstanding shares of common stock which,
according to the information supplied to the Company, were
beneficially owned by (i) each person who is currently a director
of the Company, (ii) each executive officer, (iii) all current
directors and executive officers of the Company as a group and
(iv) each person who, to the knowledge of the Company, is the
beneficial owner of more than 5% of the outstanding common stock.
Except as otherwise indicated, the persons named in the table
have sole voting and dispositive power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
Common Options(1) Percent
Shares of
Class(2)
Name and Address
Wayne M. Rogers (3)(4) 51,349 25,000 15.9
11828 La Grange Avenue
Los Angeles, CA 90025
Jack M. Gertino (3) 24,485 25,000 10.3
3374 Homestead Road
Park City, UT 84060
Bill Rogers (3) -0- -0- -0-
916 N. Beverly Drive
Beverly Hills, CA 90210
The Insight Fund, LP (5) 62,240 -0- 13.7
c/o Wayne M Rogers & Co.
11828 La Grange Avenue
Los Angeles, CA 90025
Susan Harris Family Trust 51,867 -0- 11.4
c/o Wayne M Rogers & Co.
11828 La Grange Avenue
Los Angeles, CA 90025
Daniel J. Sullivan, III 41,494 -0- 9.1
16830 Ventura Blvd., #300
Encino, CA 91436
C. Anthony Thomas 41,494 -0- 9.1
and Glenn Susan Thomas
1888 Century Park East, #400
Los Angeles, CA 90067
Paul Junger Witt Family Trust 51,867 -0- 11.4
c/o Wayne M Rogers & Co.
11828 La Grange Avenue
Los Angeles, CA 90025
All Executive officers and 138,074 50,000 37.2
Directors as a Group (6)
(1) These figures represent options and warrants that are vested
or will vest within 60 days from the date as of which information
is presented in the table.
(2) These figures represent the percentage of ownership of the
named individuals assuming each of them alone has exercised his
or her options, warrants, or conversion rights, and percentage
ownership of all officers and directors of a group assuming all
such purchase or conversion rights held by such individuals are
exercised.
(3) Messrs. Rogers, Gertino and Rogers are all of the officers
and directors of the Company.
(4) The share figure includes 44,087 shares held by the Wayne M.
Rogers Family Trust, in which Mr. Rogers is the trustee, and
3,631 shares held of record by Mr. Rogers' spouse.
(5) Wayne M. Rogers is the general partner of The Insight Fund
LP and, therefore, may be deemed to have voting and investment
control over the shares of stock owned by it.
(6) This figure includes the shares held by The Insight Fund LP,
because Wayne M. Rogers may be deemed to have voting and
investment control over such shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
Directors and Officers
The following table sets forth the names, ages, and positions
with the Company for each of the directors and officers of the
Company.
Name Age Positions (1) Since
Wayne M. Rogers 64 President and Director 1992
Bill Rogers 28 Vice President and Director 1994
Jack M. Gertino 59 Director 1992
All executive officers are elected by the Board and hold office
until the next Annual Meeting of stockholders and until their
successors are elected and qualify.
The following is information on the business experience of each
director and officer.
Wayne M. Rogers is a well-known professional actor who has been
involved in investment activities for over 15 years. Mr. Rogers
has been a director of several privately-held companies,
including Almaden Vineyards and the Pantry, Inc., since 1990. He
has also been a director of Global Intellicom, P.H.C., Inc.,
Electronic Data Controls, Inc., Extek Micro-Systems, and Wadell
Equipment Global. Currently, Mr. Rogers is the general partner
of Balanced Value Fund, LP, a limited partnership that advises
and invests in middle market companies. Mr. Rogers is also the
general partner of The Insight Fund, LP, and the sole stockholder
of the corporate general partner of The Pinnacle Fund, LP, and
Triangle Bridge Group, LP. The Insight Fund, LP is a stockholder
of the Company. Wayne M. Rogers is the father of Bill Rogers.
Bill Rogers has been a student and music composer for the past
five years. He has composed the music for a number of television
shows, a commercial, and television movie, and is involved in
development of musical scores and compositions for those uses.
Bill Rogers is the son of Wayne M. Rogers.
Jack M Gertino, has been a private investor and business
consultant in Salt Lake City, Utah, for the past five years.
From June 1995 through October 1996, Mr. Gertino was an owner of
a Tunex Service Center franchise in Layton, Utah, which offers
automotive Tune-up services. He is currently pursuing a number
of real estate projects, including the recent purchase and
operation of a commercial office building in Salt lake City.
ITEM 6. EXECUTIVE COMPENSATION
The Company has no agreement or understanding, express or
implied, with any officer, director, or principal stockholder, or
their affiliates or associates, regarding employment with the
Company or compensation for services. The Company has no plan,
agreement, or understanding, express or implied, with any
officer, director, or principal stockholder, or their affiliates
or associates, regarding the issuance to such persons of any
shares of the Company's authorized and unissued common stock.
There is no understanding between the Company and any of its
present stockholders regarding the sale of a portion or all of
the common stock currently held by them in connection with any
future participation by the Company in a business. There are no
other plans, understandings, or arrangements whereby any of the
Company's officers, directors, or principal stockholders, or any
of their affiliates or associates, would receive funds, stock, or
other assets in connection with the Company's participation in a
business. No advances have been made or contemplated by the
Company to any of its officers, directors, or principal
stockholders, or any of their affiliates or associates.
On acquisition of a business, it is possible that current
management will resign and be replaced by persons associated with
the business acquired, particularly if the Company participates
in a business by effecting a stock exchange, merger, or
consolidation as discussed under "BUSINESS." In the event that
any member of current management remains after effecting a
business acquisition, that member's time commitment and
compensation will likely be adjusted based on the nature and
location of such business and the services required, which cannot
now be foreseen.
On February 1, 1994, the Company granted to Wayne M. Rogers and
Jack Gertino options to purchase 25,000 shares of common stock
each at an exercise price of $0.50 per share, all of which expire
in February 1999. At no time during the past three years have
the options been in-the-money in relation to any market for the
Company's common stock.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no proposed transactions and no transactions during the
past two years to which the Company was a party and in which any
officer, director, or principal stockholder, or their affiliates
or associates, was also a party.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of common
stock, par value $0.001 per share, of which 455,073 shares are
issued and outstanding. Holders of common stock are entitled to
one vote per share on each matter submitted to a vote at any
meeting of stockholders. Shares of common stock do not carry
cumulative voting rights and, therefore, holders of a majority of
the outstanding shares of common stock will be able to elect the
entire board of directors, and, if they do so, minority
stockholders would not be able to elect any members to the board
of directors. The Company's board of directors has authority,
without action by the Company's stockholders, to issue all or any
portion of the authorized but unissued shares of common stock,
which would reduce the percentage ownership in the Company of its
stockholders and which may dilute the book value of the common
stock. Stockholders of the Company have no pre-emptive rights to
acquire additional shares of common stock. The common stock is
not subject to redemption and carries no subscription or
conversion rights. In the event of liquidation of the Company,
the shares of common stock are entitled to share equally in
corporate assets after satisfaction of all liabilities. Holders
of common stock are entitled to receive such dividends as the
board of directors may from time to time declare out of funds
legally available for the payment of dividends. The Company has
not paid dividends on its common stock and does not anticipate
that it will pay dividends in the foreseeable future.
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
Although quotations for the Company's common stock appear on the
OTC Bulletin Board, there is no established trading market for
the common stock. For the past two calendar years, and from
December 31, 1996, to the present, transactions in the common
stock can only be described as sporadic. Consequently, the
Company is of the opinion that any published prices cannot be
attributed to a liquid and active trading market and, therefore,
are not indicative of any meaningful market value.
There are outstanding options to purchase 50,000 shares of common
stock at an exercise price of $0.50 per share, which expire in
February 1999. All shares of common stock outstanding may be
sold without restriction under Rule 144(k) promulgated under the
Securities Act of 1933, except 241,808 shares which are held by
officers, directors, and controlling stockholders ("Control
Shares"). Control Shares may be sold subject to complying with
all of the terms and conditions of Rule 144, except the one-year
holding period which has been satisfied.
Since its inception, no dividends have been paid on the Company's
common stock. The Company intends to retain any earnings for use
in its business activities, so it is not expected that any
dividends on the common stock will be declared and paid in the
foreseeable future.
At July 31, 1997, there were approximately 156 holders of record
of the Company's Common Stock.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings, and to the best of its knowledge, no such
proceedings by or against the Company have been threatened.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in or disagreements with accountants
in the past three years.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
There have been no sales of securities by the Company in the past
three years.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada Revised Statutes provides in
relevant part as follows:
(1) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending,
or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative except an action by or
in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other
enterprise, against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit,
or proceeding if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or on a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and that, with respect to
any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
(2) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending,
or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other
enterprise against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue, or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which
such action or suit was brought shall determine on application
that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall
deem proper.
(3) To the extent that a director, officer, employee, or agent
of a corporation has been successful on the merits or otherwise
in defense of any action, suit, or proceeding referred to in
subsections 1 and 2, or in defense of any claim, issue, or matter
therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection therewith.
The Company's articles of incorporation provide that the Company
may indemnify to the full extent of its power to do so under
Nevada law, all directors, officers, employees, and/or agents of
the Company for liabilities and expenses reasonably incurred in
connection with any action, suit, or proceeding to which such
person may be a party by reason of such person's position with
the Company. Consequently, the Company intends to indemnify its
officers, directors, employees, and agents to the full extent
permitted by the statute noted above.
PART F/S
FINANCIAL STATEMENTS
The financial statements of the Company appear at the end of
this report beginning with the Index to Financial Statements on
page F-1.
PART III
ITEM 1. INDEX TO EXHIBITS
Copies of the following documents are included as exhibits to
this report pursuant to Item 601 of Regulation S-B.
Exhibits
Exhibit SEC Ref. Title of Document Location
No. No.
1 (3)(i) Articles of Incorporation, as amended Page 37
2 (3)(ii) By-Laws Page 41
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.
RED HORSE ENTERTAINMENT CORPORATION
Date: August 19, 1997 By: (Signature)
Wayne M. Rogers, President
In accordance with the Exchange Act, this registration statement
has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: August 19, 1997 /s/ Wayne M. Rogers, Director
Dated: August 19, 1997 /s/ Bill Rogers, Director
Dated: August 19, 1997 /s/ Jack Gertino, Director
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Financial Statements
June 30, 1997 and December 31, 1996
<PAGE>
C O N T E N T S
Independent Auditors' Report 14
Balance Sheets 15
Statements of Operations 16
Statements of Stockholders' Equity 17
Statements of Cash Flows 19
Notes to the Financial Statements 21
<PAGE>
INDEPENDENT AUDITORS' REPORT
July 25, 1997
The Board of Directors
Red Horse Entertainment Corporation
(A Development Stage Company)
Salt Lake City, Utah
The accompanying balance sheet as of March 31, 1997, and the related
statements of operations, stockholders' equity, and cash flows for
the periods ended March 31, 1997 and 1996 and from inception on
December 4, 1987 through March 31, 1997 were not audited by us and,
accordingly, we do not express an opinion on them.
The accompanying balance sheet as of December 31, 1996 was audited by
us and we expressed an unqualified opinion on it in our report
dated July 15, 1997.
Jones, Jensen & Company
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
June 30, December 31,
1997 1996
CURRENT ASSETS
Cash $ 230,021 $ 231,624
Total Current Assets 230,021 231,624
PROPERTY AND EQUIPMENT (Note 3) 420 312
TOTAL ASSETS $ 230,441 $ 231,936
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - $ -
Total Current Liabilities - -
STOCKHOLDERS' EQUITY
Common stock 50,000,000 shares
authorized, at $0.001 par value;
455,073 shares issued and
outstanding 455 455
Additional paid-in capital 423,353 423,353
Deficit accumulated during the
development stage (193,367) (191,872)
Total Stockholders' Equity 230,441 231,936
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 230,441 $ 231,936
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
For the Period
From Inception
For the six For the three on December 4,
Months Ended Monthe Ended 1987 to
June 30, June 30, June 30,
1996 1997 1996 1997 1997
REVENUES $ 4,113 $ 4,589 $ 2,057 $ 2,294 $ 93,108
EXPENSES
Bad debt expense - - - - 35,000
Outside services 625 685 - - 7,850
Professional fees 191 2,301 191 2,301 56,239
Rent - - - - 6,545
Travel - - - - 18,336
Administrative expenses 905 - - - 23,803
Depreciation 69 108 35 54 1,234
Amortization - - - - 472
Interest - - - - 377
Total Expenses 1,790 3,094 226 2,355 149,856
Net Income (Loss) Before
Discontinued Operations 2,323 1,495 1,831 (61) ( 56,748)
Loss From Discontinued
Operations (Note 6) - - - - (911,314)
Gain on Disposal of
Discontinued Operations - - - - 776,190
NET INCOME (LOSS) $ 2,323 $ 1,495 $ 1,831 $ (61) $(191,872)
INCOME (LOSS) PER SHARE $ 0.01 $ 0.00 $ 0.01 $(0.00)
WEIGHTED AVERAGE
SHARES OUTSTANDING 455,073 455,073 455,073 455,073
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on December 4, 1987 through June 30, 1997
Deficit
Accumulated
Additional During The
Common Stock Paid-in Development
Shares Amount Capital Stage
Balances, December 4, 1987 - $ - $ - $ -
Shares issued to
incorporators for cash
$0.60 per share - restated 13,333 13 7,987 -
Net loss for period ended
December 31, 1987 - - - (690)
Balances, December 31, 1987 13,333 13 7,987 (690)
Shares issued at public offering
$7.50 per share restated 38,537 39 289,001 -
Cost of public offering - - (84,056) -
Sale of warrants - - 100 -
Net loss for year ended
December 31, 1988 - - - (4,538)
Balances, December 31, 1988 51,870 52 213,032 (5,228)
Net loss for year ended
December 31, 1989 - - - (5,073)
Balances, December 31, 1989 51,870 52 213,032 (10,301)
Net loss for year ended
December 31, 1990 - - - (46,921)
Balances, December 31, 1990 51,870 $ 52 $ 213,032 $ (57,222)
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on December 4, 1987 through June 30, 1997
Deficit
Accumulated
Additional During The
Common Stock Paid-in Development
Shares Amount Capital Stage
Balances, December 31, 1990 51,870 $ 52 $ 213,032 $ (57,222)
Net loss for year ended
December 31, 1991 - - - (8,472)
Balances, December 31, 1991 51,870 52 213,032 (65,694)
Shares issued to acquire 100%
of 127 Main Street, Inc. 51,869 52 (52) -
Net loss for year ended
December 31, 1992 - - - (1,877,973)
Balances, December 31, 1992 103,739 104 212,980 (1,943,667)
Adjustment for fractional
shares in 30-for-1
reverse split 122 - - -
Exercise of warrants 351,212 351 210,373 -
Net income for year ended
December 31, 1993 - - - 1,731,675
Balances, December 31, 1993 455,073 455 423,353 ( 211,992)
Net income for year ended
December 31, 1994 - - - 2,917
Balances, December 31, 1994 455,073 455 423,353 ( 209,075)
Net income for year ended
December 31, 1995 - - - 8,222
Balances, December 31, 1995 455,073 455 423,353 ( 200,853)
Net income for the year ended
December 31, 1996 - - - 7,486
Balances, December 31, 1996 455,073 455 423,353 ( 193,367)
Net income for the six months
ended June 30, 1997
(unaudited) - - - 1,495
Balances, June 30, 1997
(Unaudited) 455,073 $ 455 $ 423,353 $( 191,872)
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the Period
From Inception
For the six For the three on December 4,
Months Ended Months Endede 1987 to
June 30, June 30, June 30,
1996 1997 1996 1997 1997
OPERATING ACTIVITIES
Net income (loss) $2,323 $ 1,495 $ 1,831 $ (61) $ (191,872)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Depreciation 69 108 35 54 1,234
Amortization - - - - 472
Loss on disposal of
discontinued operations - - - - (776,190)
Changes in operating
assets and liabilities:
Increase in accrued
expenses - - - - 286,334
Net Cash Provided (Used)
by Operating Activities 2,392 1,603 1,866 (7) (680,022)
INVESTING ACTIVITIES
Organization expenses - - - - ( 10,925)
Sale of fixed assets - - - - 4,000
Purchase of equipment and
leasehold improvements - - - - (1,255,237)
Net Cash Provided (Used)
by Investing Activities - - - - (1,262,162)
FINANCING ACTIVITIES
Proceeds from debentures - - - - 1,750,000
Proceeds from stock
issuance - - - - 212,984
Sale warrants - - - - 100
Exercise of warrants - - - - 210,724
Net Cash Provided (Used)
by Financing Activities $ - $ - $ - $ - $2,173,808
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
For the Period
From Inception
For the Six For the Three on December 4,
Months Ended Months Ended 1987 to
June 30, June 30, June 30,
1996 1997 1996 1997 1997
INCREASE (DECREASE) IN CASH $ 2,392 $ 1,603 $ 1,866 $ (7) $231,634
CASH AT BEGINNING OF
PERIOD 222,401 230,021 222,927 231,631 -
CASH AT END OF PERIOD $224,793 $231,624 $224,793 $231,624 $231,624
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for interest $ - $ - $ - $ - $ 2,133
Cash paid for taxes $ - $ - $ - $ - $ -
NON CASH INVESTING
ACTIVITIES
Sale of subsidiary $ - $ - $ - $ - $2,023,767
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1997 and December 31, 1996
NOTE 1 - ORGANIZATION AND CORPORATE HISTORY
The Company was incorporated in the State of Nevada on
December 4, 1987, under the name of Quantus Capital, Inc.
Since its inception it has not engaged in a significant
business activity and is considered to be a development stage
company. The articles of incorporation of the Company state
that its purpose is to engage in the business of making
investments and acquisition of assets, properties and
businesses and to engage in any and all other lawful business.
Pursuant to a special meeting of shareholders held on March 9,
1992, the Company made the following changes: (1) To issue
1,556,000 shares of stock to acquire 100% of the outstanding
shares of 127 Main Street Corporation, (the former Subsidiary)
a Delaware Corporation. (2) Adopted a plan of
recapitalization whereby the issued and outstanding shares of
the Company were reverse split on a one for five basis. The
shares outstanding were reduced from 7,780,000 to 1,556,000.
(3) The articles of incorporation were amended changing the
name to Red Horse Entertainment Corporation. All references
to number of shares have been retroactively restated to
reflect the reverse stock split.
During September 1992 the former Subsidiary began operating a
casino in Central City, Colorado, however, two weeks later
operations were terminated. (Note 6)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.Recognition of Income
The Company recognizes income and expenses on the accrual
basis of accounting. The fiscal year of the Company ends on
December 31.
b. Organization Costs
The Company's organization costs were amortized over 60 months
using the straight-line method.
c. Loss Per Share
The computation of loss per share of common stock is based on
the weighted average number of shares outstanding during the
period of the financial statements.
d. Unaudited Financial Statements
The accompanying unaudited financial statements include all of
the adjustments which, in the opinion of management, are
necessary for a fair presentation. Such adjustments are of a
normal, recurring nature.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1997 and December 31, 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Provision for Taxes
No provision for taxes has been recorded due to operating
losses at December 31, 1994, 1993 and 1992. The Company has
net operating loss carryovers for both book and tax purposes
of approximately $193,000 which expire in 2007 and 2008. The
potential tax benefit of the loss carryovers has been offset
in full by a valuation allowance.
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
g. 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 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 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31, June 30,
1996 1997
Office equipment $ 1,071 $ 1,071
Less accumulated depreciation ( 651) ( 759)
Total Property and Equipment $ 420 $ 312
Equipment is being depreciated over five years using the
straight line method.
NOTE 4 - PUBLIC OFFERING
In 1988, the Company sold 1,156,000 units to the general
public. Each unit consisted of one share of common stock and
one "A" warrant that could be used to purchase one share of
common stock for $22.50 per share within two years of the
effective date of the offering, and one "B" warrant that could
have been used to purchase one share of common stock for
$37.50 per share, which expired November 8, 1993.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1997 and December 31, 1996
NOTE 5 - WARRANTS OUTSTANDING
As a result of the Company's public offering the underwriter
purchased a warrant that entitles him to purchase 3,853 units
at a price of $9.375 per unit.
In conjunction with the Company's acquisition of 127 Main
Street Corporation, the shareholders of 127 Main Street
Corporation were granted warrants or options to purchase an
aggregate of 453,093 shares of common stock of the parent
Company for a period of five years at a price of $9.00 per
share. As of December 31, 1996, 351,212 warrants have been
exercised.
NOTE 6 - DISCONTINUED OPERATIONS
On September 17, 1993 the Company decided to terminate the
operations of its former subsidiary, 127 Main Street
Corporation, and the casino operations located at 127 Main
Street, Central City, Colorado. Cost over runs resulting from
site conditions made it economically unfeasible to continue
operations. Consequently, the facility was abandoned and all
lease options and improvements were lost.
NOTE 7 - DISPOSAL OF SUBSIDIARY - RELATED PARTY TRANSACTION
On March 19, 1994, the Company entered into a stock purchase
agreement whereby two officers of the Company purchased all of
the outstanding shares of the Company's former subsidiary, 127
Main Street Corporation. The shares were sold for the nominal
amount of $500.
NOTE 8 - REVERSE STOCK SPLIT
On August 2, 1993, the shareholders of the Company approved a
30-for-1 reverse stock split. The financial statements have
been restated to reflect this change retroactively to the
beginning of the periods presented.
NOTE 9 - GOING CONCERN
The financial statements have been prepared on the assumption
that the Company is a going concern. The Company has no
revenues from operations and its continued existence depends
upon management's plans to locate a company with which to
merge.
NOTE 10 - STOCK OPTIONS
On February 1, 1994, the Company issued options to two of its
officers, for each one to purchase 25,000 shares of common
stock at a price of $0.50 per share. The option is for a term
of five years.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Financial Statements
December 31, 1996 and 1995
<PAGE>
C O N T E N T S
Independent Auditors' Report 26
Balance Sheets 27
Statements of Operations 28
Statements of Stockholders' Equity 29
Statements of Cash Flows 31
Notes to the Financial Statements 33
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Red Horse Entertainment Corporation
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of Red Horse
Entertainment Corporation (a development stage company) as of December
31, 1996 and the related statements of operations, stockholders'
equity, and cash flows for the years ended December 31, 1996 and 1995,
and from the date of inception on December 4, 1987 through December
31, 1996. 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 audits.
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 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 Red Horse
Entertainment Corporation (a development stage company) as of December
31, 1996 and the results of its operations and its cash flows for the
years ended December 31, 1996 and 1995 and from the date of inception
on December 4, 1987 through December 31, 1996 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 9
to the financial statements, the Company is a development stage
company with no significant operating results to date which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 9. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Jones, Jensen & Company
July 15, 1997
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
December 31,
1996
CURRENT ASSETS
Cash $ 230,021
Total Current Assets 230,021
PROPERTY AND EQUIPMENT (Note 3) 420
TOTAL ASSETS $ 230,441
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -
Total Current Liabilities $ -
STOCKHOLDERS' EQUITY
Common stock 50,000,000 shares authorized, at $0.001
par value; 455,073 shares issued and outstanding 455
Additional paid-in capital 423,353
Deficit accumulated during the development stage (193,367)
Total Stockholders' Equity 230,441
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 230,441
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Operations
For the Period
From Inception
on December 4,
For the Years Ended 1987 to
December 31, December 31,
1996 1995 1996
REVENUES $ 10,726 $ 11,477 $ 88,519
EXPENSES
Bad debt expense - - 35,000
Outside services 651 565 7,165
Professional fees 1,438 1,673 53,938
Rent - - 6,545
Travel - - 18,336
Administrative expenses 1,017 801 23,803
Depreciation 134 134 1,126
Amortization - 82 472
Interest - - 377
Total Expenses 3,240 3,255 146,762
Net Income (Loss) Before
Discontinued Operations 7,486 8,222 (58,243)
Loss From Discontinued
Operations (Note 6) - - (911,314)
Gain on Disposal of
Discontinued Operations - - 776,190
NET INCOME (LOSS) $ 7,486 $ 8,222 $ (193,367)
INCOME (LOSS) PER SHARE $ 0.02 $ 0.02
WEIGHTED AVERAGE
SHARES OUTSTANDING 455,073 455,073
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From Inception on December 4, 1987 through December 31, 1996
Deficit
Accumulated
Additional During The
Common Stock Paid-in Development
Shares Amount Capital Stage
Balances, December 4, 1987 - $ - $ - $ -
Shares issued to
incorporators for cash
$0.60 per share - restated 13,333 13 7,987 -
Net loss for period ended
December 31, 1987 - - - (690)
Balances, December 31, 1987 13,333 13 7,987 (690)
Shares issued at public offering
$7.50 per share restated 38,537 39 289,001 -
Cost of public offering - - (84,056) -
Sale of warrants - - 100 -
Net loss for year ended
December 31, 1988 - - - (4,538)
Balances, December 31, 1988 51,870 52 213,032 (5,228)
Net loss for year ended
December 31, 1989 - - - (5,073)
Balances, December 31, 1989 51,870 52 213,032 (10,301)
Net loss for year ended
December 31, 1990 - - - (46,921)
Balances, December 31, 1990 51,870 $ 52 $213,032 $ (57,222)
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
From Inception on December 4, 1987 through December 31, 1996
Deficit
Accumulated
Additional During The
Common Stock Paid-in Development
Shares Amount Capital Stage
Balances, December 31, 1990 51,870 $ 52 $213,032 $ (57,222)
Net loss for year ended
December 31, 1991 - - - (8,472)
Balances, December 31, 1991 51,870 52 213,032 (65,694)
Shares issued to acquire
100% of 127 Main
Street, Inc. 51,869 52 (52) -
Net loss for year ended
December 31, 1992 - - - (1,877,973)
Balances, December 31, 1992 103,739 104 212,980 (1,943,667)
Adjustment for fractional
shares in 30-for-1
reverse split 122 - - -
Exercise of warrants 351,212 351 210,373 -
Net income for year ended
December 31, 1993 - - - 1,731,675
Balances, December 31, 1993 455,073 455 423,353 (211,992)
Net income for year ended
December 31, 1994 - - - 2,917
Balances, December 31, 1994 455,073 455 423,353 (209,075)
Net income for year ended
December 31, 1995 - - - 8,222
Balances, December 31, 1995 455,073 455 423,353 (200,853)
Net income for the year ended
December 31, 1996 - - - 7,486
Balances, December 31, 1996 455,073 $ 455 $423,353 $ (193,367)
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
For the Period
From Inception
on December 4,
For the Years Ended 1987 to
December 31, December 31,
1996 1995 1996
OPERATING ACTIVITIES
Net Income (Loss) $ 7,486 $ 8,222 $ (193,367)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation 134 134 1,127
Amortization - 82 472
Loss on disposal of discontinued
operations - - (776,190)
Changes in operating assets
and liabilities:
Increase in accrued expenses - - 286,333
Net Cash Provided (Used)
by Operating Activities 7,620 8,438 (681,625)
INVESTING ACTIVITIES
Organization expenses - - (10,925)
Sale of fixed assets - - 4,000
Purchase of equipment and
leasehold improvements - - (1,255,237)
Net Cash Provided (Used)
by Investing Activities - - (1,262,162)
FINANCING ACTIVITIES
Proceeds from debentures - - 1,750,000
Proceeds from stock issuance - - 212,984
Sale warrants - - 100
Exercise of warrants - - 210,724
Net Cash Provided (Used)
by Financing Activities $ - $ - $2,173,808
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
For the Period
From Inception
on December 4,
For the Years Ended 1987 to
December 31, December 31,
1996 1995 1996
INCREASE (DECREASE) IN CASH $ 7,620 $ 8,438 $ 230,021
CASH AT BEGINNING OF
PERIOD 222,401 213,963 -
CASH AT END OF PERIOD $230,021 $222,401 $ 230,021
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for interest $ - $ - $ 2,133
Cash paid for taxes $ - $ - $ -
NON CASH INVESTING ACTIVITIES
Sale of subsidiary $ - $ - $ 2,023,767
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1996 and 1995
NOTE 1 - ORGANIZATION AND CORPORATE HISTORY
The Company was incorporated in the State of Nevada on
December 4, 1987, under the name of Quantus Capital, Inc.
Since its inception it has not engaged in a significant
business activity and is considered to be a development stage
company. The articles of incorporation of the Company state
that its purpose is to engage in the business of making
investments and acquisition of assets, properties and
businesses and to engage in any and all other lawful business.
Pursuant to a special meeting of shareholders held on March 9,
1992, the Company made the following changes: (1) To issue
1,556,000 shares of stock to acquire 100% of the outstanding
shares of 127 Main Street Corporation, (the former Subsidiary)
a Delaware Corporation. (2) Adopted a plan of
recapitalization whereby the issued and outstanding shares of
the Company were reverse split on a one for five basis. The
shares outstanding were reduced from 7,780,000 to 1,556,000.
(3) The articles of incorporation were amended changing the
name to Red Horse Entertainment Corporation. All references
to number of shares have been retroactively restated to
reflect the reverse stock split.
During September 1992 the former Subsidiary began operating a
casino in Central City, Colorado, however, two weeks later
operations were terminated. (Note 6)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.Recognition of Income
The Company recognizes income and expenses on the
accrual basis of accounting. The fiscal year of the Company
ends on December 31.
B. Organization Costs
The Company's organization costs were amortized over 60
months using the straight-line method.
C. Loss Per Share
The computation of loss per share of common stock is
based on the weighted average number of shares outstanding
during the period of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1996 and 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Provision for Taxes
No provision for taxes has been recorded due to
operating losses at December 31, 1994, 1993 and 1992. The
Company has net operating loss carryovers for both book and
tax purposes of approximately $193,000 which expire in 2007
and 2008. The potential tax benefit of the loss carryovers
has been offset in full by a valuation allowance.
E. Cash and Cash Equivalents
The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash
equivalents.
F. 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 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 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December
31, 1996:
December 31,
1996
Office equipment $ 1,071
Less accumulated depreciation (651)
Total Property and Equipment $ 420
Equipment is being depreciated over five years using the
straight line method.
NOTE 4 - PUBLIC OFFERING
In 1988, the Company sold 1,156,000 units to the general
public. Each unit consisted of one share of common stock and
one "A" warrant that could be used to purchase one share of
common stock for $22.50 per share within two years of the
effective date of the offering, and one "B" warrant that could
have been used to purchase one share of common stock for
$37.50 per share, which expired November 8, 1993.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1996 and 1995
NOTE 5 - WARRANTS OUTSTANDING
As a result of the Company's public offering the underwriter
purchased a warrant that entitles him to purchase 3,853 units
at a price of $9.375 per unit.
In conjunction with the Company's acquisition of 127 Main
Street Corporation, the shareholders of 127 Main Street
Corporation were granted warrants or options to purchase an
aggregate of 453,093 shares of common stock of the parent
Company for a period of five years at a price of $9.00 per
share. As of December 31, 1996, 351,212 warrants have been
exercised.
NOTE 6 - DISCONTINUED OPERATIONS
On September 17, 1993 the Company decided to terminate the
operations of its former subsidiary, 127 Main Street
Corporation, and the casino operations located at 127 Main
Street, Central City, Colorado. Cost over runs resulting from
site conditions made it economically unfeasible to continue
operations. Consequently, the facility was abandoned and all
lease options and improvements were lost.
NOTE 7 - DISPOSAL OF SUBSIDIARY - RELATED PARTY TRANSACTION
On March 19, 1994, the Company entered into a stock purchase
agreement whereby two officers of the Company purchased all of
the outstanding shares of the Company's former subsidiary, 127
Main Street Corporation. The shares were sold for the nominal
amount of $500.
NOTE 8 - REVERSE STOCK SPLIT
On August 2, 1993, the shareholders of the Company approved a
30-for-1 reverse stock split. The financial statements have
been restated to reflect this change retroactively to the
beginning of the periods presented.
NOTE 9 - GOING CONCERN
The financial statements have been prepared on the assumption
that the Company is a going concern. The Company has no
revenues from operations and its continued existence depends
upon management's plans to locate a company with which to
merge.
NOTE 10 - STOCK OPTIONS
On February 1, 1994, the Company issued options to two of its
officers, for each one to purchase 25,000 shares of common
stock at a price of $0.50 per share. The option is for a term
of five years.
Exhibit No. 1
Form 10-SB
Red Horse Entertainment Corporation
ARTICLES OF INCORPORATION
OF
QUANTUS CAPITAL, INC.
WE, THE UNDERSIGNED, natural persons of the age of twenty-
one (21) years or more, acting as incorporators of a corporation
pursuant to the provisions of Nevada law, adopt the following
Articles of Incorporation for such corporation:
ARTICLE I - NAME
The name of the corporation (the "Corporation") is Quantus
Capital, Inc.
ARTICLE II - PRINCIPAL OFFICE AND REGISTERED AGENT
The address of the Corporation's principal office in the
State of Nevada, and the name of this initial registered agent at
such address, is as follows:
George T. Bochanis, Esq.
550 East Charleston Blvd., Suite B
Las Vegas, NV 89104
ARTICLE III - PURPOSES
A. The purposes for which the Corporation is organized are
to raise capital and to look for investments, business
opportunities and assets in any industry, and to engage, without
qualification, in any other lawful act or activity for which
corporations may be organized under the laws of the State of
Nevada.
B. The Corporation shall have all of the powers granted or
allowed by the laws of the State of Nevada, as may be amended
from time to time, and all of the powers necessary or convenient
to effect any or all of the purposes for which the Corporation is
organized.
C. The Corporation shall have power to acquire by
purchase, exchange, gift, bequest, and subscription or otherwise,
and to hold, own, mortgage, pledge, hypothecate, sell, assign,
transfer, exchange or otherwise dispose of or deal in or with its
own corporate securities or stock or other securities, including,
without limitation, any shares of stock, bond, debentures, notes
or mortgages, or other obligations, and any certificates,
receipts or other instruments representing rights or interest
therein or any property or assets created or issued by any
person, firm association, or corporation, or any government or
subdivisions, agencies or instrumentalities thereof; to make
payment therefore in any lawful manner or to issue in exchange
therefore its own securities or to use its unrestricted and
unreserved capital surplus of the purchase of its own shares, and
to exercise as owner or holder of any securities, and all rights,
powers and privileges in respect thereof.
D. The Corporation shall have power to act as fully and to
the same extent as a natural person might, or could do, in any
part of the world as principal, agent, partner, general or
limited, trustee or otherwise, either alone or in conjunction
with any person, firm or corporation.
ARTICLE IV - AUTHORIZED CAPITAL STOCK
The aggregate number of shares of common stock which the
Corporation shall have authority to issue is Fifty Million
(50,000,000) shares, $0.001 par value per share, without pre-
emptive rights. Each share of common stock issued and
outstanding shall be entitled to one vote on all matters
presented for consideration of the shareholders of the
Corporation.
ARTICLE V - DIRECTORS
Members of the governing board of the Corporation shall be
known as directors. The number of directors may from time to
time be increased or decreased in such manner as shall be
provided by the bylaws of the corporation, provided that the
number of directors shall not exceed nine (9) nor be reduced to
less than three (3). directors of the Corporation need not be
residents of the State of Nevada and need not own shares of the
Corporation's common stock. The number of directors constituting
the initial board of directors is three (3). The names and
addresses of persons who are to serve as directors until the
first annual meeting of shareholders, or until their successors
are elected and qualified, are:
Scott L. Allen 2795 Woodhollow Way
Bountiful, UT 84010
Gilbert Dale Freewald 11089 Susan Drive
Sandy, UT 84092
Holly M. Higbee 2495 East Cinnabar Lane
Salt Lake City, UT 84121
ARTICLE VI - NONASSESSABILITY OF CAPITAL STOCK
Shares of the Corporation's common stock may be issued for
such consideration and for such corporate purposes as the board
of directors of the Corporation may from time to time determine.
Any and all shares of common stock so issued by the Corporation,
the fixed consideration for which has been paid or delivered,
shall be deemed to be fully paid up and non-assessable.
ARTICLE VII - INCORPORATORS
The names and addresses of the incorporators are:
Scott L. Allen 2795 Woodhollow Way
Bountiful, UT 84010
Gilbert Dale Freewald 11089 Susan Drive
Sandy, UT 84092
Holly M. Higbee 2495 East Cinnabar Lane
Salt Lake City, UT 84121
ARTICLE VIII - DURATION
The duration of the Corporation is perpetual.
ARTICLE IX - INDEMNIFICATION
The Corporation shall indemnify all officers, directors and
agents of the Corporation to the fullest extent permitted by
Nevada law, as the same exists or may hereafter be amended. Such
indemnification shall include, but not be limited to,
indemnification against monetary damages for breach of fiduciary
duty.
ARTICLE X - POWERS OF DIRECTORS
In furtherance and not in limitation of the powers conferred
by statute, the board of directors of the Corporation shall have
such powers as enumerated in the Corporation's bylaws, as amended
from time to time.
ARTICLE XI - COMMON DIRECTORS
No contract or other transaction between the Corporation and
one or more of its directors or any other corporation, firm,
association or entity in which one or more of its directors are
directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest,
or because such director or directors are present at the meeting
of the board of directors, or a committee thereof, which
authorizes, approves or ratifies such contract or transaction, or
because his or their votes are counted for such purpose if: (a)
the fact of such relationship or interest is disclosed or known
to the board of directors or committee which authorizes, approves
or ratifies the contract or transaction by vote or consent
sufficient for the purpose without counting the vote or consent
of such interested director; or (b) the fact of such relationship
or interest is disclosed or known to the shareholders entitled to
vote and they authorize, approve or ratify such contract or
transaction by vote or written consent; or (c) the contract or
transaction is fair and reasonable to the Corporation. Common or
interested directors may be counted in determining the presence
of a quorum at a meeting of the board of directors or committee
thereof which authorized, approves or ratifies such contract or
transaction.
ARTICLE XII - MEETINGS AND RECORDS
Meetings of the shareholders may be held at such place,
within or without the State of Nevada, as the bylaws so provide.
The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Nevada
at such place or places as may be designated from time to time by
the board of directors or in the bylaws of the Corporation.
ARTICLE XIII - AMENDMENT
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in the Articles of
Incorporation, in the manner now or hereafter prescribed by the
laws of the State of Nevada, and all rights conferred upon
stockholders herein are granted subject to this reservation.
DATED this 9th day of November, 1987.
INCORPORATORS:
/s/ SCOTT L. ALLEN
/s/ GILBERT DALE FREEWALD
/s/ HOLLY M. HIGBEE
<PAGE>
AMENDMENT
TO ARTICLES OF INCORPORATION
OF QUANTUS CAPITAL, INC.
(Changed herein to "RED HORSE ENTERTAINMENT CORPORATION")
In accordance with Section 78.385 and 78.390 of the Nevada
Revised Statutes, Quantus Capital, Inc. (the "Corporation"), a
Nevada corporation, does hereby adopt the following amendment
(the "Amendment") to the Articles of Incorporation.
1. The Articles of Incorporation of the Corporation are
hereby amended by deleting Article I in its entirety and
inserting the following in lieu thereof:
ARTICLE I
NAME
The name of the Corporation hereby created shall be:
RED HORSE ENTERTAINMENT CORPORATION
2. Except as specifically provided herein, the provisions
of the Corporation's Articles of Incorporation shall remain
unamended and shall continue in full force and effect.
3. By execution of this Amendment to the Articles of
Incorporation, the president and secretary of the Corporation do
hereby certify that the foregoing Amendment to the Articles of
Incorporation was adopted as an Amendment to the original
Articles of Incorporation of the Corporation by the shareholders
of said Corporation at a special meeting of the shareholders of
the Corporation held on March 9, 1992. As of February 21, 1992,
the record date for such meeting, there was a total of 7,780,000
shares of the Corporation's common stock issued and outstanding,
of which 3,948,650 shares voted for the adoption of the foregoing
Amendment to the Articles of Incorporation, and no shares were
voted against the Amendment.
DATED as of the 24th day of March, 1992.
ATTEST: QUANTUS CAPITAL, INC.
/s/ Jack M. Gertino, Secretary /s/ Jonathan A. Lewis, President
37
Exhibit No. 2
Form 10-SB
Red Horse Entertainment Corporation
BYLAWS
OF
RED HORSE ENTERTAINMENT CORPORATION
(Formerly Quantus Capital, Inc.)
ARTICLE I
NAME, REGISTERED OFFICE AND REGISTERED AGENT
Section 1. Name. The name of this corporation is Quantus
Capital, Inc.
Section 2. Registered Office and Registered Agent. The
address of the registered office of this corporation is 550 East
Charleston Blvd. , Suite Bl Las Vegas, Nevada 89104. The name of
the registered agent of this corporation at that address is
George T. Bochanis, Esq. The corporation shall at all times
maintain a registered office. The locations of the registered
office may be changed by the Board of Directors. The corporation
may also have offices in such other places as the Board may from
time to time designate.
ARTICLE II
SHAREHOLDERS MEETINGS
Section 1. Annual Meeting. The annual meeting of the
shareholders of the corporation shall be held at such place
within or without the State of Nevada and at such time as the
Board of Directors shall determine in compliance with these
Bylaws. If such day is a legal holiday, the meeting shall be on
the next business day. This meeting shall be for the election of
Directors and for the transaction of such other business as may
properly come before it.
Special Meetings. Special meetings of shareholders, other
than those regulated by statute, may be called at any time by the
Chairman of the Board, the President or by a majority of the
Directors, and must be called by the President upon written
request of the holders of forty-live percent- (45%) of the
outstanding shares entitled to vote at such special meeting.
Written notice of such meeting stating the place, the date and
hour of the - meeting, the purpose or purposes for which it is
called and the name of the person by whom or at whose direction
the meeting is called shall be given. Such notice shall be given
to each shareholder of record in the same manner as notice of the
annual meeting. No business other than that specified in the
notice of the meeting shall be transacted at any such special
meeting.
Section 3. Notice of Shareholders-Meetings. The Secretary
shall give written notice stating the place, the date,, and hour
of the meeting and, in the case of a special meeting, the
purpose(s) for which the meeting is called, which shall be
delivered not less than ten (10) nor more than fifty (50) days
prior to the date of the meeting, either personally or by mail to
each shareholder of record entitled to vote at such meeting. If
mailed,, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder
at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
Section 4. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of
Nevada, as the place of meeting for any annual meeting or for any
special meeting called by the Board of Directors. A waiver of
notice signed by all shareholders entitled to vote at a meeting
may designate any place, either within or without the State of
Nevada,, as the place for the holding of such meeting. if no
designation is made, or if a special meeting is called, the place
of meeting shall be the principal business office of the
corporation.
Section 5. Record Date. The Board of directors may fix a
date not less than ten (10) nor more than fifty (50) days prior
to any meeting as the record date for the purpose of determining
shareholders entitled to notice of and to vote at any such
meeting of the shareholders. The stock transfer books may be
closed by the Board of Directors for a stated period not to
exceed fifty (50) days for the purpose of determining
shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other
purpose.
Section 6. Quorum. A majority of the outstanding shares of
the corporation entitled to vote, represented in person or by
proxy, shall constitute a quorum at any meeting of shareholders.
if less than a majority of the outstanding shares are represented
at any such meeting, a majority of the shares so represented may
adjourn the, meeting from time to time.-without further notice. -
At a meeting resumed after any such adjournment at which a quorum
shall be present or represented, business may be transacted which
might have been transacted at the meeting as originally noticed.
The shareholders present at any duly assembled meeting at which a
quorum is in attendance may continue to transact business until
adjournment, notwithstanding the withdrawal of shareholders in
such number that less than a quorum remain.
Section 7. Voting. The holder of an outstanding share
entitled to vote at any meeting may vote at such meeting in
person or by proxy. Every shareholder shall be entitled to one
vote for each share standing in his name on the records of the
corporation upon each matter submitted to a vote at a meeting of
shareholders and all shareholder actions shall be determined by a
majority of the votes cast at any meeting of shareholders by the
holders or proxies of shares entitled to vote thereon.
Section 8. Proxies. At all meetings of shareholders, a
shareholder may vote in person or by proxy executed. in writing
by the shareholder or by his duly authorized attorney in-fact.
Such proxy shall be filed with the Secretary of the corporation
before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
corporation shall be managed by its Board of Directors. The
Board of Directors may adopt such rules and regulations for the
conduct of its meetings and the management of the corporation as
it deems proper.
Section 2. Number, Tenure and Qualifications. The number of
Directors to the corporation shall be not less than three (3) nor
more than nine (9). Each Director shall hold office until the
next annual meeting of shareholders and until hi-s successor
shall have been duly elected . and qualified. Directors need not
be residents of the State of Nevada or shareholders of the
corporation.
Section 3. Regular Meetings. A regular meeting of the Board
of Directors shall be held without other notice than by this -
Bylaw, immediately following after and at the same place as the
annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such
resolution.
Section 4. Special Meetings Special Meetings of the Board of
Directors may 'Fe-called by order of the Chairman of the Board,,
the President, or by a majority of the Directors. The Secretary
shall give notice of the time and-place of each special meeting
by mailing the same at least two (2) days before the meeting or
by telephoning or telegraphing the same at least one day before
the meeting to each Director.
Section 5. Meetings by Telephone. Any meeting of the Board
of Directors,, regular or special, may be held by conference
telephone call provided the Secretary of the corporation is also
present by telephone and records the conversations of the
Directors authorizing any action taken during the course of such
a meeting. Recordings of such action may be subsequently
destroyed upon the return receipt by the Secretary of the
Corporation of written minutes of such a meeting signed by all of
the Directors involved in the conference telephone call.
Section 6. Quorum. A majority of the members of the Board
of Directors shall constitute a quorum for the transaction of
business, but less than a quorum may adjourn any meeting from
time to time until a quorum shall be present, whereupon the
meeting may be held, as adjourned, without further notice. At
any meeting at which every director shall be present, even though
without any notice, any business may be transacted.
Section 7. Manner of Acting. At all meetings of the Board
of Directors, each director shall have one vote. The act of a
majority present at a meeting shall be the act of the Board of
Directors, provided a quorum is present.
Section 8. Vacancies. A vacancy in the Board of Directors
shall be deemed to exist in case of death, resignation, or
removal of any director, or if the authorized number of directors
be increased, or if the shareholders fail, at any meeting of
shareholders at which any director is to be elected, to elect the
full, authorized number to be elected at that meeting. If any
vacancy shall occur in the Board of Directors through death,
resignation, removal or other cause, or if it should appear
desirable to have additional directors serve on an interim basis
until the next annual meeting of shareholders, the remaining
directors may, by the vote of the majority of such remaining
directors, appoint such persons as substitute directors or new
interim directors who shall be directors during such absence,
disability or interim period or until the replaced director shall
return to duty or until the next annual meeting of shareholders.
The determination by the Board of Directors,, as shown on the
minutes, of the fact of such absence or disability or the
desirability of an interim director and the duration of the terms
for such directors shall be conclusive as to all persons and the
corporation.'
Section 9. Removals. Directors rectors may be removed at
any time without cause by vote of the shareholders holding a
majority of the shares outstanding and entitled to vote.
Notwithstanding anything contained herein to the contrary,
however, if less than the entire Board of Directors- is to be
removed, no one of the directors may be removed if the votes of
sufficient number of shares are cast against his removal which,
if then cumulatively voted at an elect-ion of the entire Board of
Directors, would be sufficient to elect him. Such vacancy shall
be filled by the directors then in office, though less than a
quorum, and any person so designated or appointed shall hold
office until the next annual meeting or until his successor is
duly elected and qualified; provided that any directorship to be
filled by reason of removal by the shareholders may be filled by
election by the shareholders at the meeting at which the director
is removed. No reduction of the authorized number of directors
shall have the effect of removing any director prior to the
expiration of his term of office.
Section .10. Resignations. A director may resign at any
time by delivering written notification thereof to the President
or Secretary of the corporation. Resignation shall become
effective upon its acceptance by the Board of Directors;
provided, however, that if the Board of Directors has not acted
thereon within ten (10) days after the date of its delivery, the
resignation shall be deemed accepted upon the tenth day.
Section 11. Presumption of Assent. A director of the
corporation who is present at a meeting of the Board of Directors
at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as
the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of
the corporation immediately after adjournment of the meeting.
Such right of dissent shall not apply to a director who voted in
favor of such action.
Section 12. Compensation. By resolution of the Board of
Director's, the directors may be paid their expenses, if any of
attendance at each meeting of the Board of Directors, and may be
paid a fixed sum for attendance at each such meeting or a stated
salary as director. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving
compensation therefor.
Section 13. Informal Action by Directors. Any action
required to be taken at a meeting of directors or any action
which may be taken at a meeting of directors may be taken without
a meeting by a written consent, setting forth the action so
taken, signed by all of the directors of the corporation.
Section 14. Chairman. The Board of Directors may elect from
its own number a Chairman of the Board, who shall preside at all
meetings of the Board of Directors,, and shall perform such other
duties as may be prescribed from time to time by the Board of
Directors.
ARTICLE IV
DIVISIONS OF THE CORPORATION
Section 1. Operation of Divisions. The Board of Directors
shall have power to establish one or more operating divisions of
the corporation. Each division of the corporation shall have
such authority, responsibilities, and duties as may be delegated
to it from time to time by the Board of Directors. Each division
of the corporation shall adopt Rules of Procedure for the conduct
of its affairs not inconsistent with the Articles of
Incorporation and Bylaws of the corporation. Such Rules of
Procedure shall become effective when approved by the Board of
Directors.
Section 2. Advisory Board. The Board of Directors of the
corporation may appoint individuals who may, but need not, be
directors, officers or employees of the corporation, to serve as
members of an Advisory Board to one or more of the divisions of
the corporation. The members of any such Advisory Board shall
keep minutes of their meetings which shall be submitted to the
Board of Directors of the corporation. The term of office of any
member of the Advisory Board shall be at the pleasure of the
Board of Directors of the corporation. The function of such
Advisory Board shall be to advise with respect to the affairs of
the operating divisions of the corporation to which it is
appointed.
Section 3. Officers of the Divisions. The divisions of the
corporation shall each and such Vice Presidents as the Board of
Directors may appoint. The Secretary and Treasurer of the
corporation shall also be deemed the Secretary and Treasurer of
each division.
Section 4. Duties of Officers of Divisions. Any employee
designated as an officer of a divisions all have such authority,
responsibilities, and duties with respect to the applicable
division corresponding to those normally vested in the comparable
officer of the corporation by these Bylaws, subject to such
limitations as may be imposed by the Board of Directors, the
Articles of incorporation or by these Bylaws. The President of a
division may sign, execute and deliver in the name of such
division only such contracts, agreements or other documents as
may be prescribed from time to time by the President of the
corporation or the Board of Directors. The designation of any
individual as President or Vice-President of any division of the
corporation shall not be permitted to conflict in any way with
any executive or administrative authority of any officer of the
corporation established from time to time by the Board of
Directors of the corporation. The President of each division
shall report directly to the President and Chief Executive
Officer of the corporation. The President of a division, upon
written approval of the President of the corporation, may appoint
or remove such agents or employees of a division as may, from
time to time, become necessary or useful to the operation of 5u(-
- -h division.
Section 5. Term of Office, Resignation and Removal. Each
officer of a division shall hold office until his successor shall
have been duly appointed by the Board of Directors, or until- his
death, or until he shall resign. Any officer of a division may
resign at any time by delivery of a written resignation either to
the President of the corporation, the Secretary of the
corporation or to the Board of Directors. Such resignation shall
take effect upon delivery. Any officer of the division may be
removed from office only by the Board of Directors. Such officer
shall be removed when in the sole judgment of the Board of
Directors the best interests of the division or the corporation
will be served thereby. Any such removal shall require a
majority vote of the Board of Directors.
Section 6. Authorized Signatures and Checking Accounts. The
Board of Directors may authorize each division to have a separate
checking account. Any check issued by or for the benefit of any
division shall require at least two signatures. The corporate or
divisional off officers authorized to sign such checks of any
division shall be the President of such division, the President
of the corporation and the Secretary of the corporation.
ARTICLE V
OFFICERS
Section 1. Number. The corporate officers shall be a
President, no Vice-Presidents or one or more Vice-Presidents as
determined from time to time by the Board of Directors," a
Secretary, and a Treasurer, each of whom shall be elected by a
majority of the Board of Directors. Such other corporate
officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. In its
discretion,, the Board of - Directors may, leave unfilled for any
such period as it may determine any corporate office except those
of President and Secretary. Any two or more corporate of f ices
may be held by the same person, except the of f ices of President
and Secretary. Corporate officers need not be directors or
shareholders of the corporation.
Section 2. Election and Term of Office. The corporate
officers to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the
shareholders. If the election for corporate officers shall not
be held at such meeting, such election shall be held as soon
thereafter as convenient. Each corporate officer shall hold
office until his successor shall have been duly elected and shall
have qualified or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
Section 3. Resignations. Any corporate officer may resign
at any time by delivering a written resignation either to the
corporate President or to the corporate Secretary. Unless
otherwise specified therein, such resignation shall take effect
upon delivery.
Section 4. Removals. Any corporate officer or agent may be
removed by the Board of Directors, with or without cause,
whenever in its judgment the best interests of the corporation
will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so
removed. Election or appointment of a corporate officer or agent
shall not of itself create contract rights. Any such removal
shall require a majority vote of the Board of Directors,
exclusive of the corporate officer in question if he is also a
Director.
Section 5. Vacancies. A vacancy in any corporate office
because of death, resignation, removal, disqualification or
otherwise, or if a new corporate office shall be created, may be
filled by the Board of Directors for the unexpired portion of the
term.
Section 6. President. The corporate President shall be the
chief executive and administrative officer of the corporation.
He shall preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, -at meetings of the Board
of Directors. He shall exercise such duties as customarily
pertain to the office of President and shall have general and
active supervision of the property, business, offices and affairs
of the corporation and each division. He may appoint officers,
agents, or employees on the corporate or division level other
than those appointed by the Board of Directors. He may sign,
execute and deliver in the name of the corporation powers of
attorney, contracts, bonds and other obligations, and shall
perform such other duties as may be prescribed from time to time
by the Board of Directors or by these Bylaws.
Section 7. Executive Vice-President. The corporate
Executive Vice-President shall be the chief executive and
administrative officer of the corporation in the absence of the
President, and in such absence shall be vested with all rights,
powers, privileges and obligations of the President as more fully
set forth in Section 6 of this Article V. In addition, he may
sign, execute and deliver in the name of the corporation, powers
of attorney, contracts, bonds and other obligations when the
corporate president is present but unavailable for the execution
of such documents, and he shall perform such other duties as may
be prescribed from time to time by the Board of Directors, the
corporate President or the Bylaws.
Section 8. Vice-Presidents. Corporate Vice Presidents shall
have such powers and perform such duties as may be assigned to
them by the Board of Directors or by the corporate President. In
the absence or disability of the corporate President, the
corporate Vice-President designated by the Board or by the
corporate President shall perform the duties and exercise the
powers of the corporate President. A corporate Vice-President
may sign and execute contracts and other obligations pertaining
to the regular course of his duties.
Section 9. Secretary. The corporate Secretary shall also be deemed
the Secretary of each of the divisions. The corporate Secretary shall,
subject to the direction of the corporate President, Executive Vice-
President, or a designated Vice-President, keep the minutes of all meetings
of the shareholders and of the Board of Directors and, to the extent
ordered by the Board of Directors or the corporate President, the minutes
of meetings of all divisions and committees. He shall cause notice to be
given of meetings of shareholders, of the Board of Directors, and of any
committee appointed by the Board He shall have custody of the corporate
seal and general charge of the records, documents and papers of the
corporation and each division not pertaining to the performance of the
duties vested in other officers, which records, documents and papers shall
at all reasonable times be open to examination by any Director. He may
sign or execute contracts with the corporate President, Executive Vice-
President or Vice-Presidents thereunto authorized in the name of the
corporation and affix the seal of the corporation thereto, provided,
however, that he may not simultaneously act both in the capacity of
Secretary and that of corporate Executive Vice-President or vice-president
upon the execution of such documents. He shall perform such other duties
as maybe prescribed from time to time by the Board of Directors or by these
Bylaws. He shall be sworn to the faithful discharge of his duties. If
necessary, assistant Secretaries shall assist the corporate Secretary and
shall keep and record such minutes of meetings as shall be directed by the
Board of Directors.
Section 10. Treasurer. The corporate Treasurer shall.,
subject to the direction of the corporate President, Executive
Vice-President or a designated Vice-President ' have general
custody and control of the collection and disbursement of funds
of the corporation and each divisions He shall endorse on behalf
of the corporation and each division for collection checks, notes
and other obligations, and shall deposit the same to the credit
of the corporation or the division in such bank(s) or
depositories as the Board of Directors may designate. He may
sign, with the corporate President or such other persons as may
be designated for the purpose by the Board of Directors, all
bills of exchange or promissory notes of the corporation or any
divisions provided, however, that he may not simultaneously act
both in the capacity of corporate Treasurer and that of Executive
vice-president or Vice-President upon the execution of such
documents. He shall enter or cause to be entered regularly in
the books of the corporation or any division a full and accurate
account of all monies received and paid by him or under his
direction on account of the corporation or such division. He
shall at all reasonable times exhibit his books and accounts to
any Director of the corporation upon timely application at the
office of the corporation during business hours, and whenever
required by the Board of Directors or the corporate President, he
shall render a statement of his accounts. He shall perform such
other duties as may be prescribed from time to time by the Board
of Directors or by the By laws. if necessary, assistant
Treasurers shall assist the corporate Treasurer and shall perform
such duties as shall be directed by the Board of Directors. He
shall give bond for the faithful performance of his duties in
such sum and with or without such surety as shall be required by
the Board of Directors.
Section 11. Assistant Secretaries and Assistant Treasurers.
The Board of Directors may appoint such assistant Secretaries and
assistant Treasurers as may be necessary for the expedient
discharge of the affairs of the corporation or any division. The
assistant Secretaries and assistant Treasurers shall be
authorized to perform any of the duties of the corporate
Secretary or corporate Treasurer, respectively, in the absence of
the corporate Secretary or corporate Treasurer,, or in any
situation where the corporate Secretary or corporate Treasurer -
may be acting in another capacity such as corporate Executive
Vice-President or Vice-President.
Section 12. General Manager. The Board of Directors may
employ and appoint a General Manager who may or may not be one of
the officers or directors of the corporation. He shall be the
chief operating officer of the corporation, and subject to the
direction of the Board of Directors and of the President, shall
have general charge of the business operations of the corporation
and general supervision over its employees and agents. lie may be
given the exclusive management of the business of the corporation
in any or all of its dealings, but at all times he shall be
subject to the control of the Board of Directors or of the
Executive Committee. lie may employ all employees of the
corporation, or delegate such employment to subordinate officers
or division chiefs, and he may have the authority to discharge
any person so employed. He shall make a report to the President
and to the Directors quarterly, or more often if required to do
so, setting forth the result of the operations under his charge,
together with suggestions looking to the improvement and
betterment of the condition of the corporation. He may perform
such other duties as the Board of Directors shall require.
Section 13. Other Officers. other officers shall perform
such duties and have such powers as may be assigned to them by
the Board of Directors.
Section 14. Salaries. Salaries or other compensation of
the corporate officers and the officers of any division of the
corporation shall be fixed from time to time by the Board of
Directors, except that the Board of Directors may delegate to any
person or group of persons the power to fix the salaries or other
compensation of any such subordinate officers or agent. No
officer shall he prevented from receiving any such salary or
compensation because he is also a Director of the corporation.
Section 15. Surity Bonds. If the Board of Directors shall so
require, any corporate or division officer or agent shall execute
to the corporation a bond in such sums and with such surety or
sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to-the corporation or the
applicable division, including his responsibility for negligence
and the accounting for all property, monies or securities of the
corporation or a division which may come into his hands.
ARTICLE VI
COMMITTEES
Section 1. Executive Committee. The Board of Directors may
appoint from among its members an Executive Committee of not less
than 2 nor more than 5 members, one of whom shall be the
President, and shall designate one of such members as Chairman.
The Board may also designate one or more of its members as
alternates to serve as members on the Executive Committee in the
absence or disability of a regular member(s). The Board of
Directors reserves to itself alone the power to declare
dividends, issue stock, recommend to stockholders any action
requiring their approval, change the membership of any committee
at any time, fill vacancies therein, and disband any committee
either with or without cause at any time. Subject to the
foregoing limitations, the Executive Committee shall possess and
exercise all other powers of the Board of Directors during the
intervals between meetings.
Section 2. Other Committees. The Board of Directors may
also appoint from among its own members such other committees as
the Board of Directors may determine. Such committees shall in
each case consist of not less than 2 directors,, and shall have
such powers and duties and shall from time to time be prescribed
by the Board. The President shall be a member ex officio of each
committee appointed by the Board of Directors. A majority of the
members of any committee may fix its rules of procedure.
ARTICLE VII
CONTRACTS, LOANS, DEPOSITS AND CHECKS
Section 1. Contracts. The Board of Directors may authorize
any officer(s), or agent(s), to enter into any contract or
execute and deliver any instrument in the name and on behalf of
the corporation, and such authority may be either general or
confined to specific instances.
Section 2. Loans. No loan(s) or advance(s) shall be
contracted on behalf of the corporation, no negotiable paper or
other evidence of its obligation under any loan or advance shall
be issued in its name, and no property of the corporation shall
be mortgaged, pledged, hypothecated or transferred as security
for the payment of any loan, advance, indebtedness or liability
of the corporation unless and except as authorized by the Board
of Directors. Any such authorization may be either general or
confined to specific instances.
Section 3. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the
credit of the corporation in such banks, trust companies or other
depositories as the Board of Directors may select, or as may be
selected by any officer or agent so authorized by the Board of
Directors.
Section 4. Checks and Drafts. All notes, drafts,
acceptances, checks, endorsements and evidences of indebtedness
of the corporation shall be signed by such officer(s) or such
agent(s) of the corporation and in such manner as the Board of
Directors from time to time may determine. Endorsements for
deposit to the credit of the corporation in any of its duly
authorized depositories shall be made in such manner as the Board
of Directors from time to time may determine.
Section 5. Bonds and Debentures. Every bond or debenture
issued by the corporation shall be evidenced by an appropriate
instrument which shall be signed by the President or a Vice-
President and by the Treasurer or by the Secretary. The seal may
be a facsimile, engraved or printed. where such bond or debenture
is to be authenticated with the manual signature of an authorized
officer of the corporation or other trustee designated by the
indenture of trust or other agreement under which such security
is issued, the signature of any of the corporation's officers
named thereon may be facsimile. In case any officer who signed,
or whose facsimile signature has been used on any such bond or
debenture, shall cease to be an officer of the corporation, such
bond or debenture may nevertheless be adopted by the corporation
and issued and delivered as though the person who signed it or
whose facsimile signature has been used thereon had not ceased to
be such-officer.
ARTICLE- Vlll
CAPITAL STOCK
Section 1. Certificates of Shares. The shares of the
corporation shall be represented by certificates prepared by the
- -Board of Directors and signed by the President or the Vice-
President and by the Secretary, and sealed with the seal of the
corporation or a facsimile. The signatures of such officers upon
a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar
other than the corporation itself or one of its employees. All
certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom
the shares are issued, with the number of shares and the date of
issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for
transfer shall be canceled. No new certificates shall be issued
until the former certificate for a like number of shares shall
have been surrendered and canceled, except that in case of a
lost, destroyed or mutilated certificate, a new one may be issued
therefor upon such terms of indemnity to the corporation as the
Board of Directors may prescribe.
Section 2. Transfers of Shares. Transfers of shares of the
corporation shall be made only on the stock transfer books of the
corporation by the holder of record thereof or by his legal
representative, or by his attorney thereunto authorized by a
power of attorney duly executed and such representative or
attorney shall furnish proper evidence of his authority to so
transfer the shares to the Secretary of the Corporation upon the
surrender for cancellation of the certificate for such shares.
The person in whose name shares stand on the stock transfer books
of the corporation shall be deemed by the corporation to be the
owner thereof for all purposes.
Section 3. Transfer Agent and Registrar. The Board of
Directors shall have power to appoint one or more transfer agents
and registrars, who may also be employees of the corporation, for
the transfer and registration of certificates of stock of any
class, and may require that stock certificates shall be
countersigned and registered by one or more of such transfer
agents and registrars.
Section 4. Lost or Destroyed Certificates. The Board of
Directors may direct a new certificate to be issued to replace
any certificate theretofore issued by title corporation and
alleged to have been lost or destroyed if the new owner makes an
affidavit that the certificate is lost or destroyed. The Board
of Directors may, at its discretion, require the owner of such
certificate or his legal representative to give the corporation a
bond in such sum and with such sureties as the Board of Directors
may direct to indemnify the corporation and transfer agents and
registrars, if any, against claims that may be made on account of
the issuance of such new certificates. A new certificate may be
issued without requiring any bond.
Section 5. Consideration for Shares. The capital stock of
the corporation shall be issued for such consideration as shall
be fixed from time to time by the Board of Directors, but in no
event shall such value be less than the par value of such shares.
In the absence of fraud, the determination of the Board of
Directors as to the value of any property or services received in
full or partial payment for shares shall be conclusive.
Section 6. Registered Shareholders. The corporation shall
be entitled to treat the holder of record or any share or shares
of stock as the holder thereof in fact and shall not be bound to
recognize any equitable or other claim to or interest in the
shares.
ARTICLE IX
INDEMNIFICATION
Section 1. indemnification. No officer, Director, employee
or agent of the corporation shall be personally liable for any
obligations of the corporation or for any duties or obligations
arising out of any acts or conduct of said officer, Director,,
employee or agent performed for or on behalf of the corporation.
The corporation shall and does hereby indemnify and hold harmless
each person and his heirs and administrators who shall serve at
any time as a Director, officer, employee or agent of the
corporation from and against any and al-I claims, judgments and
liabilities to which such persons shall become subject by reason
of his having heretofore or hereafter been a Director, officer,
employee or agent of the corporation, or by reason of any action
alleged to have been heretofore or hereafter taken or omitted to
have been taken by him as such Director, officer, employee or
agent, and shall. reimburse any such person for all legal. and
other expenses reasonably incurred by him in connection with any
such claim or liability; provided that the corporation shall have
the 'power to defend such person from all suits or claims as
provided for under the provisions of the laws of the State of
Nevada; however, no such person shall be indemnified against, or
be reimbursed for, or be defended against any expense or
liability incurred in connection with any claim or action arising
out of his own negligence or willful misconduct. The rights
accruing to any person under the foregoing provisions of this
Section shall not exclude any other right to which he may
lawfully be entitled, nor shall anything herein contained
restrict the right of the corporation to indemnify or reimburse
such person in any proper case, even though not specifically
provided for herein or otherwise permitted. The corporation, its
Directors, officers, employees and agents shall be fully
protected in taking any action or making any payment, or in
refusing so to do in reliance upon the advice of counsel.
Section 2. Other Indemnification. The indemnification
herein provided shall not be deemed exclusive of any other right
to indemnification to which any person seeking indemnification
may be under any bylaw, agreement, vote of stockholders or
disinterested Directors, or otherwise, both as to action taken in
his official capacity and as to action taken in any other
capacity while holding such office. It is the intent hereof that
all Directors, officers, employees and agents of the corporation
be and hereby are indemnified to the fullest extent permitted by
the laws of the State of Nevada and these Bylaws, as the same now
exist or as may be hereafter amended. The indemnification herein
provided shall continue as to any person who has ceased to be a
Director, officer, employee or agent, and shall inure to the
benefit of the heirs, executors and administrators of any such
person. Notwithstanding any other provisions of this Article,
and in addition to any such provisions, to the fullest extent
permitted by the laws of the State of Nevada, as the same exist
or may hereafter be amended, a Director or officer of this
corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty
and shall be indemnified against any and all attorneys fees,
costs and expenses incurred in conjunction therewith.
Section 3. Insurance. The Board of Directors may, in its
discretion, direct that the corporation purchase and maintain
insurance on behalf of any person who is or was a Director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation
would have the power to indemnify him against liability under the
provisions of this Section.
Section 4. Settlement by Corporation. The right of any
person to be indemnified shall be subject always to the right of
the corporation by the Board of Directors, in lieu of such
indemnification,, to settle any such claim, action, suit or
proceeding at the expense of the corporation by the payment of
the amount of such settlement and the costs and expenses incurred
in connection therewith.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given, to any
shareholder or Director of the corporation under the provision of
these Bylaws or under the provisions of the Articles of
Incorporation or under the provisions of the laws of the State of
Nevada, a waiver thereof in writing signed by the person(s)
entitled to such notice, whether before or after the time stated
therein-n, shall be deemed equivalent to the giving of such
notice. Attendance at any meeting shall constitute a waiver of
notice of such meetings, except where attendance is for the
express purpose of objecting to the legality of that meeting.
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended, repealed, or new
bylaws adopted by a majority vote of the entire Board of
Directors at any regular or special meeting. Any bylaw adopted
by the Board of Directors may be repealed or changed by a
majority vote of the shareholders.
ARTICLE XII
FISCAL YEAR
The fiscal year end of the corporation shall be fixed and
may be varied by resolution of the Board of Directors.
ARTICLE XIII
DIVIDENDS
The Board of Directors may at any regular. or special
meeting, as it deems advisable, declare dividends payable out of
the surplus of the corporation.
ARTICLE XIV
CORPORATE SEAL
The corporation shall have an official seal which shall.
bear the name of the corporation and the state and year of
incorporation.
These Bylaws were adopted for the corporation by the Board
of Directors on the 4th day of December, 1987.
/s/ Gilbert Dale Freewald
Secretary/Treasurer
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