U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB/A
Amendment No. 1
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 7
Operations
3. Description of Properties 8
4. Security Ownership of Certain Beneficial Owners and 8
Management
5. Directors, Executive Officers, Promoters and Control 10
Persons
6. Executive Compensation 11
7. Certain Relationships and Related Transactions 12
8. Description of Securities 12
Part II 12
1. Market Price of and Dividends on the Registrant's 12
Common Equity and Related Stockholder Matters
2. Legal Proceedings 13
3. Changes in and Disagreements with Accountants 13
4. Recent Sales of Unregistered Securities 13
5. Indemnification of Directors and Officers 13
Part F/S 14
Financial Statements 14
Part III 15
1. Index to Exhibits 15
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
The Company was formed as a Nevada corporation in December 1987,
and subsequently conducted a public offering in 1988 pursuant to
a registration statement on Form S-18 of units consisting of
5,780,550 shares of common stock and warrants resulting in net
proceeds to the Company of $204,984. The warrants included in
the units have since expired without being exercised. Following
the completion of the offering, the Company sought a business
venture in which to participate. As a result of that search, the
Company acquired 127 Main Street Corporation ("127 Main"), as a
wholly-owned subsidiary in March 1992. In the acquisition, the
Company effected a one for five reverse stock split, thereby
reducing the issued and outstanding shares from 7,780,000 to
1,556,000, and issued 1,556,000 shares of post-split common stock
in exchange of all of the outstanding shares of 127 Main. In
addition, new directors of the Company were elected who were
nominees of 127 Main, including Wayne M Rogers and Jack M.
Gertino who currently serve as directors of the Company.
The purpose of 127 Main was to develop a casino operation in
Central City, Colorado. The Company and 127 Main committed
substantial financial and managerial resources to the development
of the casino throughout the spring and summer of 1992. The
casino was opened in early September 1992, but was closed on
September 17, 1992. At the time the casino opened, the revenue
realized was substantially lower than projected on the basis of
casino operations in Central City at the beginning of the year.
The lower revenues were, in the opinion of management, the result
of completion delays in renovation of the casino facility, which
caused the casino to miss its scheduled opening during the summer
when tourism is at its peak in Central City. In addition, the
casino experienced higher than expected costs as a result of cost
overruns on renovation of the casino and unanticipated city fees
and assessments.
In response to these conditions, 127 Main attempted to
renegotiate the lease for the casino facility to a lower rate
that would enable the casino to remain in operation. This
attempt was unsuccessful. Rather than continue to operate the
casino at a loss, 127 Main elected to terminate operations.
Furthermore, the Company ceased filing reports under the
Securities Exchange Act of 1934 at the end of 1992 in order to
eliminate expenses associated with the filing obligation.
At the end of 1992, liabilities of approximately $1,850,868 were
attributable to 127 Main. Furthermore, 127 Main was a party to
three lawsuits arising from the casino development. As a result
of these developments, management of the Company determined that
it would be in the best interests of the Company to divest itself
of 127 Main, recapitalize the Company, and seek a new business
venture in which to participate. On March 19, 1993, the Company
entered into a stock purchase agreement with Wayne M. Rogers and
Jack M. Gertino, both officers and directors of the Company,
pursuant to which they acquired all of the issued and outstanding
common stock of 127 Main from the Company for $500 in cash and
their agreement to indemnify the Company against any liability it
may incur as a result of the operations and activities of 127
Main.
Following this transaction, the Company effected a 30-to-1
reverse split in the Company's issued and outstanding Common
Stock, and sold 351,212 shares of post-reverse split common stock
in a private placement for $210,724 in cash.
The divestiture of 127 Main and the recapitalization of the
Company was effected to better position the Company for locating
and acquiring a new business venture in which to participate.
General
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.
There are no plans or arrangements proposed or under
consideration for the issuance or sale of additional securities
by the Company prior to the identification of an acquisition
candidate. Consequently, 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.
The Company has voluntarily filed this registration statement
on Form 10-SB to become subject to the reporting requirements
under the Securities Exchange Act of 1934, based on management's
belief that the Company's reporting status will enhance its
ability to locate and acquire a business opportunity. The
Company intends to continue to voluntarily file reports under the
Securities Exchange Act of 1934, regardless of whether its
obligation to do so is suspended by rule or statute.
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 not engage in any general solicitation or advertising for a
business opportunity, and will rely on personal contacts of its
officers and directors and their affiliates, as well as indirect
associations between them and other business and professional
people. By relying on "word of mouth", the Company may be
limited in the number of potential acquisitions it can identify.
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. Management of the
Company will not receive a finder's fee for locating a business
opportunity.
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 a 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. Management does not intend to actively negotiate for or
otherwise require the purchase of all or any portion of its stock
as a condition to or in connection with any proposed merger or
acquisition. 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.
In the event sales of shares by present shareholders of the
Company, including officers and directors, is a negotiated
element of a future acquisition, a conflict of interest may arise
because directors will be negotiating for the acquisition on
behalf of the Company and for sale of their shares for their own
respective accounts. Where a business opportunity is well suited
for acquisition by the Company, but affiliates of the business
opportunity impose a condition that management sell their shares
at a price which is unacceptable to them, management may not
sacrifice their financial interest for the Company to complete
the transaction. Where the business opportunity is not well
suited, but the price offered management for their shares is
high, Management will be tempted to effect the acquisition to
realize a substantial gain on their shares in the Company.
Management has not adopted any policy for resolving the foregoing
potential conflicts, should they arise, and does not intend to
obtain an independent appraisal to determine whether any price
that may be offered for their shares is fair. Stockholders must
rely, instead, on the obligation of management to fulfill its
fiduciary duty under state law to act in the best interests of
the Company and its stockholders.<R/>
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 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, which is
estimated to be approximately 20 hours per month per person.
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
Results of Operations
Three and Nine Month Periods Ended September 30, 1997 and 1996
The Company had no revenue from continuing operations for the
three and nine month periods ended September 30, 1997 and 1996.
General and administrative expenses for the three and nine month
periods ended September 30, 1997 and 1996, consisted of general
corporate administration, legal and professional expenses, and
accounting and auditing costs. These expenses were $2,829 and
$1,277 for the three month period ended September 30, 1997 and
1996, respectively; and $5,923 and $3,068 for the nine month
period ended September 30, 1997 and 1996, respectively. General
and administrative expenses in the nine month period ended
September 30, 1997 were greater than in the nine month period
ended September 30, 1996 primarily due to increases in
professional fees resulting from the Company's preparation and
filing of its registration statement on Form 10-SB under the
Securities Act of 1934. The Company made the filing to become a
reporting company based on management's belief that reporting
company status may help the Company to attract and acquire a more
substantial business venture.
The Company had no interest expense in the three and nine month
periods ending September 30, 1996 or 1997. Interest income in
the three and nine month periods ended September 30, 1997 and
1996, respectively, resulted from the investment of funds in
short-term, liquid cash equivalents. Interest income was $2,763
and $2,682 in the three month period ended September 30, 1997 and
1996, respectively; and $7,352 and $6,795 for the nine month
period ended September 30, 1997 and 1996, respectively. Interest
income has increased from period to period primarily because of
the additional interest earned on interest accumulated in prior
periods.
As a result of the foregoing factors, the Company realized a net
loss of $66 for the three months ended September 30, 1997, as
compared to a net gain of $1,405 for the same period in 1996, and
a net gain of only $1,429 for the nine month period ended
September 30, 1997, as compared to $3,727 for the comparable
period in 1996.
Calendar Years Ended December 31, 1996 and 1995
The Company had no revenue from continuing operations for the
years ended December 31, 1996 and 1995.
General and administrative expenses for the years ended December
31, 1996 and 1995, consisted primarily of general corporate
administration, legal and professional expenses, and accounting
and auditing costs. These expenses were $3,240 and $3,255 for
1996 and 1995, respectively, so there was no material change from
one period to the next.
The Company had no interest expense in 1996 or 1995. Interest
income for the years ended December 31, 1996 and 1995, resulted
from the investment of funds in short-term, liquid cash
equivalents. Interest income was $10,726 in 1996, and $11,477 in
1995. Interest income decreased slightly from 1995 to 1996 as a
result of lower interest rates.
As a result of the foregoing factors, the Company realized a net
gain of $7,486 in 1996 and a net gain of $8,222 in 1995.
Liquidity and Capital Resources
At September 30, 1997, the Company had working capital of
approximately $231,612 as compared to $230,021 at December 31,
1996. Working capital as of both dates consisted substantially
of short-term investments, and cash and cash equivalents.
Although the Company's most significant assets consist largely of
cash and cash equivalents, the Company has no intent to become,
or hold itself out to be, engaged primarily in the business of
investing, reinvesting, or trading in securities. Accordingly,
the Company does not anticipate being required to register
pursuant to the Investment Company Act of 1940 and expects to be
limited in its ability to invest in securities, other than cash
equivalents and government securities, in the aggregate amount of
over 40% of its assets. There can be no assurances that any
investment made by the Company will not result in losses.
Management believes that the Company has sufficient cash and
short-term investments to meet the anticipated needs of the
Company's operations through at least the next 12 months.
However, there can be no assurances to that effect, as the
Company has no significant revenues and the Company's need for
capital may change dramatically if it acquires an interest in a
business opportunity during that period. The Company's current
operating plan is to (i) handle the administrative and reporting
requirements of a public company; and (ii) search for potential
businesses, products, technologies and companies for acquisition.
At present, the Company has no understandings, commitments or
agreements with respect to the acquisition of any business,
product, technology or company and there can be no assurance that
the Company will identify any such business, product, technology
or company suitable for acquisition in the future. Further,
there can be no assurance that the Company would be successful in
consummating any acquisition on favorable terms or that it will
be able to profitably manage the business, product, technology or
company it acquires.
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 November 19, 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.
Other Shell Company Activities
Mr. Gertino is currently an officer and director of Comet
Technology, Inc., a non-reporting, publicly held shell
corporation seeking a business acquisition. The possibility
exists that one or more of the officers and directors of the
Company could become officers and/or directors of other shell
companies in the future, although they have no intention of doing
so at the present time. Certain conflicts of interest are
inherent in the participation of the Company's officers and
directors as management in other shell companies, which may be
difficult, if not impossible, to resolve in all cases in the best
interests of the Company. Failure by management to conduct the
Company's business in its best interests may result in liability
of management of the Company to the shareholders.
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.
There is no policy that prevents management from adopting a
plan or agreement in the future that would provide for cash or
stock based compensation for services rendered to the
Company.
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 $0.50 per share, all of which
expire in February 1999.
The following table sets forth certain information with
respect to unexercised options held by the Named Executive
Officers as of December 31, 1996. No outstanding options held by
the Named Executive Officers were exercised in 1996.
Number of Securities Value of
Name and Principal Underlying Unexercised Unexercised
Position Options In-the-Money
at FY End (#) Options
at FY End ($) (1)
Exerciseable/Unexerciseable Exerciseable/Unexerciseable
Wayne M. Rogers 25,000/ 25,000 12,500/ 12,500
President
Jack M. Gertino 25,000/ 25,000 12,500/ 12,500
Director
(1) This value is determined on the basis of the difference
between the high bid price during the calendar quarter ended
December 31, 1996, of the securities underlying the options and
the exercise price.
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.
On March 19, 1993, the Company entered into a stock purchase
agreement with Wayne M. Rogers and Jack M. Gertino, both officers
and directors of the Company, pursuant to which they acquired all
of the issued and outstanding common stock of 127 Main, the
subsidiary of the Company, for $500 in cash and their agreement
to indemnify the Company against any liability it may incur as a
result of the operations and activities of 127 Main. (See
"Business: History".)
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.
The following table sets forth for the respective periods
indicated the prices of the Company's Common Stock in the over-
the-counter market, as reported and summarized by the OTC
Bulletin Board. Such prices are based on inter-dealer bid and
asked prices, without markup, markdown, commissions, or
adjustments and may not represent actual transactions.
Calendar Quarter High Bid Low Bid
Ended
March 31, 1995 $0.500 $0.500
June 30, 1995 $0.500 $0.500
September 30, 1995 $0.500 $0.500
December 31, 1995 $0.500 $0.500
March 31, 1996 $0.500 $0.500
June 30, 1996 $0.500 $0.500
September 30, 1996 $1.000 $0.500
December 31, 1996 $1.000 $0.625
March 31, 1997 $0.625 $0.625
June 30, 1997 $0.625 $0.625
September 30, 1997 $0.375 $0.625
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 November 19, 1997, there were approximately 153 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.
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. The options were issued in reliance
on the exemption from registration set forth in Section 4(2) of
the Securities Act of 1933 in consideration for their service to
the Company as directors and an incentive to locate and acquire a
business venture.
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 17.
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 Title of Document Location*
No. Ref. No.
1 (3)(i) Articles of Incorporation, as amended Fm 10-SB
Page 37
2 (3)(ii) By-Laws Fm 10-SB
Page 41
3 (2) Stock Purchase Agreement dated Fm 10-SB/A
March 19, 1993 Page 29
4 (27) Financial Data Schedules Fm 10-SB/A
Page 32
* Exhibit no.s 1 and 2 are incorporated herein by this reference
to the Company's Registration Statement on Form 10-SB filed with
the Securities and Exchange Commission on August 21, 1997.
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: December 8, 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: December 8, 1997 (Signature)
Wayne M. Rogers, Director
Dated: December 8, 1997 (Signature)
Bill Rogers, Director
Dated: December 8, 1997 (Signature)
Jack Gertino, Director
<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 18
Balance Sheets 19
Statements of Operations 20
Statements of Stockholders' Equity 21
Statements of Cash Flows 23
Notes to the Financial Statements 25
<PAGE>
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
Salt Lake City, Utah
July 15, 1997
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
December 31, September 30,
1996 1997
(Unaudited)
CURRENT ASSETS
Cash $230,021 $231,612
Total Current Assets 230,021 231,612
PROPERTY AND EQUIPMENT (Note 3) 420 258
TOTAL ASSETS $230,441 $231,870
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) (191,938)
Total Stockholders' Equity 230,441 231,870
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $230,441 $231,870
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
For the Nine Inception
Months For the Years on December 4,
Ended September 30, Ended September 30,
1997 1996 1996 1995 1987
(Unaudited) (Unaudited)
REVENUES $ - $ - $ - $ - $ -
EXPENSES
Bad debt expense - - - - 35,000
Outside services 685 651 651 565 7,850
Professionsal fees 4,180 1,380 1,438 1,673 58,118
Rent - - - - 6,545
Travel - - - - 18,336
Administrative expenses 896 933 1,017 801 24,699
Depreciation 162 104 134 134 1,288
Amortization - - - 82 472
Interest - - - - 377
Total Expenses 5,923 3,068 3,240 3,255 152,685
OTHER INCOME
Interest income 7,352 4,113 10,726 11,477 95,871
Total other income 7,352 4,113 10,726 11,477 95,871
Net Income (Loss)
Before Discontinued
Operations 1,429 1,045 7,486 8,222 (56,814)
Loss From Discontinued
Operation (Note 6) - - - - (911,314)
Gain on Disposal of
Discontinued Operations
(Note 6) - - - - 776,190
NET INCOME (LOSS) $ 1,429 $1,045 $7,468 $8,222 $(191,938)
INCOME (LOSS) PER SHARE $ 0.00 $ 0.00 $ 0.02 $ 0.02
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 September 30, 1997
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Balances, December 4, 1987 - $ - $ - $ -
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)
Net loss for year ended
December 31, 1991 - - - (8,472)
Balances, December 31, 1991 51,870 $ 52 $213,032 $(65,694)
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 September 30, 1997
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
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 (211,922)
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 year
ended December 31, 1996 - - - 7,468
Balances, December 31, 1996 455,073 455 423,353 (193,367)
Net income for nine months
ended September 30, 1997
(Unaudited) - - - 1,429
Balances, September 30, 1997
(Unaudited) 455,073 $ 455 $423,353 $(191,938)
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
For the Nine Inception
Months For the Years on December 4,
Ended September 30, Ended 1987 to
September 30,
1997 1996 1996 1995 1987
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net income (loss) $ 1,429 $ 1,045 $ 7,486 $ 8,222 $ (191,938)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Depreciation 162 104 134 134 1,288
Amortization - - - 82 472
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 1,591 1,149 7,620 8,438 (680,034)
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 of 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
For the Nine Inception
Months For the Years on December 4,
Ended September 30, Ended 1987 to
September 30,
1997 1996 1996 1995 1987
(Unaudited) (Unaudited)
INCREASE (DECREASE)
INCASH $ 1,591 $ 1,149 $ 7,620 $ 8,438 $ 231,612
CASH AT BEGINNING OF
PERIOD 230,021 222,401 222,401 213,963 -
CASH AT END OF PERIOD $231,612 $223,550 $230,021 $222,401 $ 231,612
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for interest $ - $ - $ - $ - $ 2,133
Cash paid for taxes $ - $ - $ - $ - $ -
NON CASH INVESTING
ACTIVITIES
Sale of subsidiary
(Note 6) $ - $ - $ - $ - $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.
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
December 31, 1996 and 1995
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 at
September 30, 1997 and December 31, 1996:
September 30, December 31,
1997 1996
Office equipment $ 1,071 $ 1,071
Less accumulated depreciation (813) (651)
Total Property andEquiopment $ 258 $ 420
Equipment is being depreciated over five years using the
straight line method.
NOTE 4 - PUBLIC OFFERING
In 1988, the Company sold 38,557 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. The Company received cash of $289,040
as a result of this public offering.
<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 wherein the Company has
received cash of $210,724.
NOTE 6 - DISCONTINUED OPERATIONS
On September 17, 1992 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. The following is a summary of
income (loss) from operations of 127 Main Street
Corporation:
Revenue - 1992 $ 40,029
Revenue - 1993 4,982
Total Revenue 45,011
Operating expenses - 1992 670,363
Operating expenses - 1993 285,962
Total Operating Expenses 956,325
Loss From Discontinued Operations $ (911,314)
Write off of assets - 1992 $(1,246,097)
Gain on assumption of debt - 1993 2,022,287
Gain on Disposal of Discontinued
Operations $ 776,190
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.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1996 and 1995
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.
29
Exhibit No. 3
Form 10-SB/A Amendment No. 1
Red Horse Entertainment Corporation
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into this 19th day of March, 1993, by and between RED
HORSE ENTERTAINMENT CORPORATION, a Nevada corporation (the
"Company"), and WAYNE M. ROGERS AND JACK M. GERTINO, individuals
(individually a "Buyer" and collectively the "Buyers"), on the
following premises.
Premises
A. 127 Main Street Corporation, a Delaware corporation and
wholly-owned subsidiary of the Company ("127 Main"), was
originally acquired by the Company in March 1992, so that through
127 Main the Company could pursue a casino business in the state
of Colorado.
B. The efforts of 127 Main to establish a casino business
have not succeeded, and 127 Main now has nominal assets,
substantial liabilities, and a negative net worth.
B. The Company has determined that it is in its best
interest to sell 127 Main, and Buyers desires to purchase 127
Main from the Company.
Agreement
NOW, THEREFORE, for and in consideration of the foregoing
premises and the terms and conditions hereinafter set forth, the
parties hereto agree as follows:
Section 1. Representations and Warranties of the
Company. As an inducement to, and to obtain the reliance of, the
Buyers, the Company represents and warrants as follows:
1.1 The Company is a corporation duly organized under the
laws of the state of Nevada and has all corporate power and is
duly authorized and qualified to own all of its properties and
assets and carry on its business in all material respects. The
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not,
violate any provision of the Company's articles of incorporation
or bylaws.
1.2 The consummation of the transactions contemplated
hereby will not result in a breach of any term or provision of,
or constitute an event of default under, any material loan
agreement, mortgage, deed of trust, security instrument, or other
material agreement or instrument to which the Company is a party
or to which any of its assets or operations are subject.
1.3 The consummation by the Company of this Agreement and
the transactions herein contemplated have been duly authorized by
its board of directors of the Company.
1.4 The Company has good and marketable title to all of the
issued and outstanding capital stock of 127 Main to be conveyed
pursuant to this Agreement, free and clear of all liens, pledges,
charges, or encumbrances.
Section 2. Representations and Warranties of Buyers. As
an inducement to, and to obtain the reliance of, the Company,
each Buyer represents and warrants for himself as follows:
2.1 The consummation of the transactions contemplated
hereby will not result in a breach of any term or provision of,
or constitute an event of default under, any material loan
agreement, mortgage, deed of trust, security instrument, or other
material agreement or instrument to which the Buyer is a party or
to which any of his assets or operations are subject.
2.2 No consent, approval, or authorization of any third
party is required in order for the Buyer to lawfully and properly
consummate the transactions contemplated by this Agreement.
Section 3. Purchase of 127 Main Stock. Concurrently
with the execution of this Agreement, each Buyer hereby purchases
50% of all of the issued and outstanding capital stock of 127
Main ("127 Main Stock"), and the Company hereby sells such stock
to each Buyer for the amount of $250.00 in cash paid by each
Buyer to the Company.
Section 4. Special Covenants. In consideration of the
sale of the 127 Main Stock as provided in section 3, above, the
parties hereto hereby agree to be bound by the following special
covenants.
4.1 The Company hereby agrees to cancel and forever waive
and release any claim that it may have against 127 Main for any
and all intercompany advances, loans, investments, and accounts
owed by 127 Main to the Company as of the date of this Agreement,
it being the intention of the parties that all such liabilities,
be forgiven and released by the Company.
4.2 Buyers, jointly and severally, hereby agree to
indemnify the Company, and each of its officers, agents, and
directors as of the date of execution of this Agreement, against
any loss, liability, claim, damage, or expense (including, but
not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever), to
which it or they may become subject arising out of or based on
the operations and activities of 127 Main prior and subsequent to
the date of this Agreement. The indemnification provided for in
this paragraph shall survive the consummation of the transactions
contemplated by this Agreement.
4.3 Immediately following the date of this Agreement, the
Company will deliver to Buyers all of the books and records of
127 Main in its possession; provided, however, that the Buyers
hereby agrees and acknowledges that they shall cause 127 Main to
make available to the Company at all times its books and records
to the extent required by the Company to prepare, file, or
support any financial statement, report, or other document
required by any federal or state agency.
Section 5. Miscellaneous.
5.1 This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the state of
Nevada. The state and federal courts of the state of Nevada
shall have exclusive jurisdiction in any litigation arising under
or pertaining to this Agreement, and by the execution hereof the
Buyer irrevocably submits to the personal and subject matter
jurisdiction of such Nevada courts.
5.2 In the event any party institutes any action or suit to
enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall
reimburse the non-breaching party or parties for all costs,
including reasonable attorney's fees, incurred in connection
therewith and in enforcing or collecting any judgement rendered
therein.
5.3 This Agreement is solely between the Company and
Buyers, and no director, officer, stockholder, employee, agent,
independent contractor, or any other person or entity shall be
deemed to be a third party beneficiary of this Agreement, except
as specifically provided herein.
5.4 This Agreement represents the entire agreement between
the parties relating to the subject matter hereof, and all
previous negotiations, discussions, correspondence, memoranda,
and other communications are merged into this Agreement. This
Agreement alone fully and completely expresses the Agreement of
the parties relating to the subject matter hereof. There are no
other courses of dealing, understandings, agreements,
representations, or warranties, written or oral, except as set
forth herein.
5.5 Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently
herewith. No waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the
same or any other default then, theretofore, or thereafter
occurring or existing. This Agreement may be amended by a
writing signed by all parties hereto, with respect to any of the
terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance thereof may
be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
5.6 This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all
of which taken together shall be but a single instrument.
AGREED AND ENTERED INTO, as of the year and date first above
written.
RED HORSE ENTERTAINMENT CORPORATION
By (Signature)
Bill Rogers, Vice President
BUYERS
Wayne M. Rogers
Jack M. Gertino
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