U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-23015
RED HORSE ENTERTAINMENT CORPORATION
(Exact name of small business issuer as specified 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)
(310) 473-0213
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the Exchange
Act subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
455,073 shares of common stock.
<PAGE>
FORM 10-QSB
RED HORSE ENTERTAINMENT CORPORATION
INDEX
Page
PART I. Financial Information
Financial Statements
Balance Sheets - March 31, 1998 and
December 31, 1997 3
Statements of Operations - Three Months
Ended March 31, 1998 and 1997, and 5
Inception to March 31, 1998
Statements of Cash Flows
Three Months Ended March 31, 1998 and 6
1997, and Inception to March 31, 1998
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. Other Information 12
Signatures 12
<PAGE>
PART I.
Financial Information
In the opinion of management, the accompanying unaudited
financial statements included in this Form 10-QSB reflect all
adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the results of operations
for the periods presented. The results of operations for the
periods presented are not necessarily indicative of the results
to be expected for the full year.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash $ 229,115 $ 231,482
Total Current Assets 229,115 231,482
PROPERTY AND EQUIPMENT (Note 3) 252 286
TOTAL ASSETS $ 229,367 $ 231,768
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - $ 2,010
Total Current Liabilities - 2,010
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 (194,441) (194,050)
Total Stockholders' Equity 229,367 229,758
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 229,367 $ 231,768
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
December 4,
For the Three 1987 to
Months Ended March 31, March 31,
1998 1997 1998
REVENUES $ 956 $ 2,295 $ 101,090
EXPENSES
Bad debt expense - - 35,000
Outside services 740 685 8,657
Professional fees 465 - 64,908
Rent - - 6,545
Travel - - 18,336
Administrative expenses 108 - 24,818
Depreciation 34 54 1,294
Amortization - - 472
Interest - - 377
Total Expenses 1,347 739 160,407
Income (Loss) Before
Discontinued Operations (391) 1,556 (59,317)
Loss From Discontinued
Operations (Note 6) - - (911,314)
Gain on Disposal of
Discontinued Operations - - 776,190
NET INCOME (LOSS) $ (391) $ 1,556 $ (194,441)
NET INCOME (LOSS) PER SHARE $ 0.00 $ 0.00
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 Cash Flows
(Unaudited)
From
Inception on
December 4,
For the Three 1987 to
Months Ended March 31, March 31,
1998 1997 1998
OPERATING ACTIVITIES
Net Income (Loss) $ (391) $ 1,556 $ (194,441)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation 34 54 1,295
Amortization - - 472
Loss on disposal of discontinued
operations - - (776,190)
Changes in operating assets
and liabilities:
Decrease in accounts payable (2,010) - -
Increase in accrued expenses - - 286,333
Net Cash Provided (Used)
by Operating Activities (2,367) 1,610 (682,531)
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)
From
Inception on
December 4,
For the Three 1987 to
Months Ended March 31, March 31,
1998 1997 1998
INCREASE (DECREASE) IN CASH $ (2,367) $ 1,610 $ 229,115
CASH AT BEGINNING OF
PERIOD 231,482 230,021 -
CASH AT END OF PERIOD $ 229,115 $ 231,631 $ 229,115
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
March 31, 1998 and December 31, 1997
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
March 31, 1998 and December 31, 1997
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, March 31,
1997 1998
Office equipment $ 1,071 $ 1,071
Less accumulated depreciation (785) (819)
Total Property and Equipment $ 286 $ 252
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
March 31, 1998 and December 31, 1997
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>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Month periods Ended March 31, 1998 and 1997
The Company had no revenue from continuing operations for the
three month periods ended March 31, 1998 and 1997.
General and administrative expenses for the three month periods
ended March 31, 1998 and 1997, consisted of general corporate
administration, legal and professional expenses, and accounting
and auditing costs. These expenses were $1,347 and $739 for the
three month period ended September 30, 1998 and 1997,
respectively. Management believes the increase in costs is
attributable to the Company's status as a reporting company under
the Securities Exchange Act of 1934, which the Company obtained
in the Fall of 1997.
The Company had no interest expense in the three month periods
ending March 31, 1998 or 1997. Interest income in these periods
of $956 and $2,295, respectively, resulted from the investment of
the funds in short-term, liquid cash equivalents.
As a result of the foregoing factors, the Company realized a net
loass of $391 for the three months ended March 31, 1998, as
compared to a net gain of $1,556 for the same period in 1997.
Liquidity and Capital Resources
Liquidity and Capital Resources
At March 31, 1998, the Company had working capital of
approximately $229,115, as compared to $229,472 at December 31,
1997. 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
venture, and there can be no assurance that the Company will
identify a business venture 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
venture it acquires.
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS: Attached only to the electronic filing by the Company with
the Securities and Exchange Commission is the Financial Data
Schedule, Exhibit Reference Number 27, in accordance with
Item 601(c) of Regulation S-K.
REPORTS ON FORM 8-K: None
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RED HORSE ENTERTAINMENT, INC.
Date: May 13, 1998 By: /s/ Wayne M. Rogers, President
(Duly Authorized and Principal
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 229,115
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 229,115
<PP&E> 252
<DEPRECIATION> 0
<TOTAL-ASSETS> 229,367
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 455
<OTHER-SE> 228,912
<TOTAL-LIABILITY-AND-EQUITY> 229,367
<SALES> 0
<TOTAL-REVENUES> 956
<CGS> 0
<TOTAL-COSTS> 1,347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (391)
<INCOME-TAX> 0
<INCOME-CONTINUING> (391)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (391)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
