U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1997, or
[ ] 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
(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 and Zip Code)
Issuer's Telephone Number: (310) 473-0213
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, Par Value $0.001
Check whether the issuer (1) filed all reports required to be
filed by sections 13 or 15(d) of the Exchange Act during the past
12 months (or 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 [X] No [ ]
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues (consisting only of interest income) for
its most recent fiscal year: $11,615.
The aggregate market value of voting stock held by non-affiliates
computed on the basis of the average bid and asked prices on
March 27, 1998, was $260,554.
As of December 31, 1997, the Registrant had outstanding 455,073
shares of Common Stock, par value $0.001.
Documents incorporated by reference: None.
<PAGE>
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION Page
Part I
1. Description of Business 3
2. Description of Properties 6
3. Legal Proceedings 6
4. Submission of Matters to a Vote of Security Holders 7
Part II
5. Market for Common Equity and Related Stockholder Matters 7
6. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
7. Financial Statements 8
8. Changes in and Disagreements with Accountants 8
on Accounting and Financial Disclosure
Part III
9. Directors, Executive Officers, Promoters and Control 8
Persons; Compliance with Section 16(a) of the
Exchange Act
10. Executive Compensation 9
11. Security Ownership of Certain Beneficial Owners and
Management 10
12. Certain Relationships and Related Transactions 12
13. Exhibits and Reports on Form 8-K 12
<PAGE>
FORWARD-LOOKING STATEMENT NOTICE
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27a of the Securities
Act of 1933 and Section 21e of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are
discussed under the headings "Item 1. Description of Business,"
and "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations," and also include general
economic factors and conditions that may directly or indirectly
impact the Company's financial condition or results of
operations.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
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 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
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.
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. 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 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings, and to the
best of its knowledge, no such proceedings by or against the
Company have been threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the
fourth quarter of 1997.
PART III
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED 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 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, 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 $0.625 $0.375
December 31, 1997 $0.500 $0.375
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 March 20, 1998, there were approximately 153 holders of record
of the Company's Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Years Ended December 31, 1997 and 1996
The Company had no revenue from continuing operations for the
years ended December 31, 1997 and 1996.
General and administrative expenses for the years ended December
31, 1997 and 1996, consisted of general corporate administration,
legal and professional expenses, and accounting and auditing
costs. These expenses were $12,298 and $3,240 for 1997 and 1996,
respectively. General and administrative expenses in 1997 were
greater than in the prior year 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 Exchange 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 1997 or 1996. Interest
income resulted from the investment of funds in short-term,
liquid cash equivalents. Interest income was $11,615 and $10,726
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 $683 in 1997, as compared to a net gain of $7,486 for
1996.
Liquidity and Capital Resources
At December 31, 1997, the Company had working capital of
approximately $229,758, 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
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.
ITEM 7. 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.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants
in the past three years.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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 10. 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. 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.
The following table sets forth certain information with respect
to unexercised options held by the Named Executive Officers as of
December 31, 1997. No outstanding options held by the Named
Executive Officers were exercised in 1997.
Name and Number of Securities Value of Unexercised
Principal Underlying Unexercised In-the-Money Options
Position Options at FY End ($) (1)
at FY End (#)
Exerciseable/Unexerciseable Exerciseable/Unexerciseable
Wayne M. Rogers 25,000/ -0- -0-/ -0-
President
Jack M. Gertino 25,000/ -0- -0-/ -0-
Director
(1) This value is determined on the basis of the difference
between the high bid price during the calendar quarter ended
December 31, 1997, of the securities underlying the options and
the exercise price.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of March 20, 1998, 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 12. 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 13.
EXHIBITS AND REPORTS ON FORM 8-K
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 Fm 10-SB
Page 37
2 (3)(ii) By-Laws Fm 10-SB
Page 41
3 (27) Financial Data Schedule This Filing
Page E-1
* 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.
FORM 8-K FILINGS
No reports on Form 8-K were filed in the last calendar quarter of
1997.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
RED HORSE ENTERTAINMENT CORPORATION
Date: March 27, 1998 By: (Signature)
Wayne M. Rogers, President
In accordance with the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: March 27, 1998 (Signature)
Wayne M. Rogers, Director
Dated: March 27, 1998 (Signature)
Bill Rogers, Director
Dated: March 27, 1998 (Signature)
Jack Gertino, Director
<PAGE>
CONTENTS
Independent Auditors' Report F-2
Balance Sheet F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-7
Notes to the Financial Statements F-9
<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, 1997 and the related statements of operations,
stockholders' equity, and cash flows for the years ended December
31, 1997 and 1996, and from the date of inception on December 4,
1987 through December 31, 1997. 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, 1997 and the results of its
operations and its cash flows for the years ended December 31,
1997 and 1996 and from the date of inception on December 4, 1987
through December 31, 1997 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
March 3, 1998
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
December 31,
1997
CURRENT ASSETS
Cash $ 231,482
Total Current Assets 231,482
PROPERTY AND EQUIPMENT (Note 3) 286
TOTAL ASSETS $ 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
Additional paid-in capital 423,353
Deficit accumulated during the development stage (194,050)
Total Stockholders' Equity 229,758
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 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
From
Inception on
December 4,
For the Years Ended 1987 to
December 31, December 31,
1997 1996 1997
$ - $ - $ -
EXPENSES
Bad debt expense - - 35,000
Outside services 752 651 7,917
Professional fees 10,505 1,438 64,443
Rent - - 6,545
Travel - - 18,336
Administrative expenses 907 1,017 24,710
Depreciation 134 134 1,260
Amortization - - 472
Interest - - 377
Total Expenses 12,298 3,240 159,060
OTHER INCOME
Interest income 11,615 10,726 100,134
Total Other Income 11,615 10,726 100,134
Net Income (Loss) Before
Discontinued Operations (683) 7,486 (58,926)
Loss From Discontinued
Operations (Note 6) - - (911,314)
Gain on Disposal of
Discontinued Operations (Note 6) - - 776,190
NET INCOME (LOSS) $ (683) $ 7,486 $(194,050)
INCOME (LOSS) PER SHARE $ (0.00) $ 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
December 31, 1997 and 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)
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)
December 31, 1997 and 1996
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 (211,992)
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 loss for the year ended
December 31, 1997 - - - (683)
Balance, December 31, 1997 455,073 $ 455 $ 423,353 $ (194,050)
The accompanying notes are an integral part of the financial statements.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
December 4,
For the Years Ended 1987 to
December 31, December 31,
1997 1996 1997
OPERATING ACTIVITIES
Net (Loss) $ (683) $7,486 $ (194,050)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation 134 134 1,261
Amortization - - 472
Loss on disposal of discontinued operations - - (776,190)
Changes in operating assets and liabilities:
Increase in accounts payable 2,010 - 2,010
Increase in accrued expenses - - 286,333
Net Cash Provided (Used)
by Operating Activities 1,461 7,620 (680,164)
INVESTING ACTIVITIES
Organization expenses - - (10,925)
Sale of fixed assets - - 4,000
Purchase of equipment and
leasehold improvements - - (1,255,237)
Net Cash (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 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
From
Inception on
December 4,
For the Years Ended 1987 to
December 31, December 31,
1997 1996 1997
INCREASE IN CASH $ 1,461 $ 7,620 $ 231,482
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 230,021 222,401 -
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 231,482 $230,021 $ 231,482
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ - $ - $ 2,133
Cash paid for taxes $ 800 $ - $ 800
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, 1997 and 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. 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 $194,000 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.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1997 and 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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, 1997:
December 31,
1997
Office equipment $ 1,071
Less accumulated depreciation (785)
Total Property and Equipment $ 286
Equipment is being depreciated over eight years using the
straight line method. Depreciation expense for the year
ending December 31, 1997 was $134.
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.
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.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1997 and 1996
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. 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.
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.
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1997 and 1996
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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 231,482
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 231,482
<PP&E> 286
<DEPRECIATION> 0
<TOTAL-ASSETS> 231,768
<CURRENT-LIABILITIES> 2,010
<BONDS> 0
0
0
<COMMON> 455
<OTHER-SE> 229,303
<TOTAL-LIABILITY-AND-EQUITY> 231,768
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,298
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (683)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (683)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
