2
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 June 30, 1999
[ ] 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 [ X ] No
[ ]
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
Item 1. Financial Statements
Balance Sheets - June 30, 1999 (unaudited)
and December 31, 1998 3
Statements of Operations - Three Months and
Six Months Ended June 31, 1999 and 1998, and
Inception to June 30, 1999 (unaudited) 4
Statements of Cash Flows - Three Months and
Six Months Ended June 30, 1999 and 1998, and
Inception to June 30.1999 (unaudited) 5
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition or Plan of Operation 11
PART II. Other Information
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
es
PART I.
Financial Information
Item 1. Financial Statements
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.
2
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
June 30, December 31,
1999 1998
(Unaudited)
CURRENT ASSETS
Cash $ 229,745 $ 232,359
Accounts receivable - related party 64 -
Total Current Assets 229,809 232,359
PROPERTY AND EQUIPMENT (Note 3) - 152
TOTAL ASSETS $ 229,809 $ 232,511
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 (193,999) (191,297)
Total Stockholders' Equity 229,809 232,511
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 229,809 $ 232,511
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the For the October 24,
Three Months Ended Six Months Ended 1986 Through
June 30, June 30, June 30,
1999 1998 1999 1998 1999
REVENUES $ - $ - $ - $ - $ -
EXPENSES
Bad debt expense - - - - 35,000
Outside services 165 - 1,361 740 10,018
Professional fees 1,532 3,731 3,443 4,196 74,098
Rent - - - - 6,545
Travel - - - - 18,336
Administrative expenses 156 10 2,241 118 27,677
Depreciation - 34 152 68 1,546
Amortization - - - - 472
Interest - - - - 377
Total Expenses 1,853 3,775 7,197 5,122 174,069
OTHER INCOME
Interest income 2,262 2,828 4,495 3,784 115,194
Total Other Income 2,262 2,828 4,495 3,784 115,194
Income (Loss) Before
Discontinued Operations 409 (947) (2,702) (1,338) (58,875)
Loss From Discontinued
Operations (Note 6) - - - - (911,314)
Gain on Disposal of
Discontinued Operations - - - - 776,190
NET INCOME (LOSS) $ 409 $ (947) $ (2,702) $ (1,338) $(193,999)
NET INCOME (LOSS)
PER SHARE $ 0.00 $ (0.00) $ (0.01) $ (0.00)
WEIGHTED AVERAGE
SHARES OUTSTANDING 455,073 455,073 455,073 455,073
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
Inception on
For the For the October 24,
Three Months Ended Six Months Ended 1986 Through
June 30, June 30, June 30,
1999 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $ 409 $ (947) $ (2,702) $ (1,338) $ (193,999)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Depreciation - 34 152 68 1,546
Amortization - - - - 472
Loss on disposal of
discontinued operations - - - - (776,190)
Changes in operating assets
and liabilities:
Increase in accounts receivable (64) - (64) - (64)
Decrease in accounts payable - - - (2,010) -
Increase in accrued expenses - - - - 286,334
Net Cash Provided (Used)
by Operating Activities 345 (913) (2,614) (3,280) (681,901)
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 issuanc - - - - 212,984
Sale warrants - - - - 100
Exercise of warrants - - - - 210,724
Net Cash Provided (Used)
by Financing Activities $ - $ - $ - $ - $2,173,808
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION> From
Inception on
For the For the October 24,
Three Months Ended Six Months Ended 1986 Through
June 30, June 30, June 30,
1999 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH $ 345 $ (913) $ (2,614) $ (3,280) $ 229,745
CASH AT BEGINNING OF
PERIOD 229,400 229,115 232,359 231,482 -
CASH AT END OF PERIOD $229,745 $ 228,202 $229,745 $228,202 $ 229,745
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for interest $ - $ - $ - $ - $ 2,133
Cash paid for taxes $ - $ - $ - $ - $ -
NON CASH INVESTING ACTIVITIES
Sale of subsidiary $ - $ - $ - $ - $2,023,767
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
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. Basic Loss Per Share
The computation of basic loss per share of common stock
is based on the weighted average number of shares
outstanding during the period of the financial
statements.
. c. Provision for Taxes
At June 30, 1999, the Company had net operating loss
carryforwards of approximately $194,000 that may be
offset against future taxable income through 2014. No
tax benefit has been reported in the financial statements
because the Company believes there is a 50% or greater
chance the carryforwards will expire unused.
Accordingly, the potential tax benefits of the
carryforwards are offset by a valuation allowance of the
same amount.
7
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. 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.
e. 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.
f. 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.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
June 30, December 31,
1999 1998
Office equipment $ 1,071 $1,071
Less accumulated depreciation (1,071) (919)
Total Property and Equipment $ - $ 152
Equipment is being depreciated over eight years using the
straight line method. Depreciation expense for the
period ending and the year ending June 30, 1999 and
December 31, 1998 was $ 152 and $134, respectively.
NOTE 4 - PUBLIC OFFERING
In 1988, the Company sold 38,537 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.
8
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
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, which
has since expired.
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, 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.
9
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 1999 and December 31, 1998
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 options
expired in February 1999, and were replaced with two new
options to purchase 50,000 shares each at an exercise
price of $0.625 per share, which expire in May 2009.
NOTE 11 - CONCENTRATIONS OF RISK
The Company maintains a money market investment account
which accounts for $227,700 of the balance of cash. The
account is not insured by the FDIC, nor is it guaranteed
by the bank. The investment is subject to investment
risk, including potential principle loss.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition or Plan of Operation
Results of Operations - Six Month periods Ended June 30, 1999 and
1998
The Company had no revenue from continuing operations for
the six-month periods ended June 30, 1999 and 1998.
General and administrative expenses for the six month
periods ended March 31, 1999 and 1998, consisted of general
corporate administration, legal and professional expenses, and
accounting and auditing costs. These expenses were $7,197 and
$5,122 for the six-month periods ended June 30, 1999 and 1998,
respectively.
Interest income in the six-month periods ended June 30, 1999
and 1998, was $4,495 and $3,784, respectively, which resulted
from the investment of funds in short-term, liquid cash
equivalents.
As a result of the foregoing factors, the Company realized a
net loss of $2,702 for the six months ended June 30, 1999, as
compared to a net loss of $1,338 for the same period in 1998.
Liquidity and Capital Resources
At March 31, 1999, the Company had working capital of
approximately $229,809, as compared to $232,359 at December 31,
1998. Working capital as of both dates consisted substantially
of short-term investments, and cash and cash equivalents.
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 any business
venture it acquires.
Forward-Looking Statements
This Form 10-QSB includes, without limitation, certain
statements containing the words "believes", "anticipates",
"estimates", and words of a similar nature, constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. This Act provides a "safe harbor"
for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify
these statements as forward looking and provide meaningful,
cautionary statements identifying important factors that could
cause actual results to differ from the projected results. All
statements other than statements of historical fact made in this
Form 10-QSB are forward-looking. In particular, the statements
herein regarding industry prospects and future results of
operations or financial position are forward-looking statements.
Forward-looking statements reflect management's current
expectations and are inherently uncertain. The Company's actual
results may differ significantly from management's expectations.
11
<PAGE>
PART II.
Other Information
Item 5. Other Information
Wayne M. Rogers and Jack M. Gertino, both officers and
directors of the Company, have received no compensation over the
past six years from the Company for the services they have
rendered in evaluating prospective acquisitions for the Company.
Options which each of them held to purchase 25,000 shares of
common stock at an exercise price of $0.50 per share expired in
February 1999. As incentive to these officers to continue their
efforts on behalf of the Company, the board of directors approved
in May 1999, the issuance of new options to Messrs. Rogers and
Gertino. Each of them now hold options to purchase 50,000 shares
of common stock at an exercise price of $0.625 per share, which
expire in May 2009. The exercise price was determined on the
basis of the last sale price for the Company's common stock in
the public market prior to approval of the options, which was
also the bid price for the common stock on the date the options
were granted.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit SEC Ref. Title of Document Page
No. No.
1 (10) Option granted to Wayne M. Rogers E-1
2 (10) Option granted to Jack M. Gertino E-8
3 (27) Financial Data Schedules *
* The Financial Data Schedule is presented only in the
electronic filing with the Securities and Exchange Commission.
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 CORPORATION
Date: August 12, 1999 By: /s/ Jack Gertino, Secretary
12
<PAGE>
E-1
Exhibit No. 1
Form 10-QSB
Red Horse Entertainment Corporation
File No. 0-23015
RED HORSE ENTERTAINMENT CORPORATION
Option for the Purchase of 50,000
Shares of Common Stock
Par Value $0.001
STOCK OPTION AGREEMENT
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON EXERCISE OF
THE OPTION, AGREES AND ACKNOWLEDGES THAT THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR OTHER
COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE
STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT THAT
THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, WAYNE M. ROGERS
(the "Optionee") is entitled to purchase from RED HORSE
ENTERTAINMENT CORPORATION (the "Company"), on the terms and
conditions hereinafter set forth, all or any part of 50,000
shares ("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $0.625 per
share ("Option Price"). Upon exercise of this option in whole or
in part, a certificate for the Option Shares so purchased shall
be issued and delivered to the Optionee. If less than the total
option is exercised, a new option of similar tenor shall be
issued for the unexercised portion of the options represented by
this Agreement.
This option is granted subject to the following further
terms and conditions:
1. This option shall vest and be exercisable immediately, and
shall expire at 5:00 p.m. Salt Lake City time on May 20, 2009.
In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after
Optionee's death, Optionee's executor, administrator, heir or
legatee, as the case may be) must take the following actions:
(a) Deliver to the Corporate Secretary of the
Corporation an executed notice of exercise in
substantially the form of attached to this Agreement
(the "Exercise Notice") in which there is specified the
number of Option Shares which are to be purchased under
the exercised option.
(b) Pay the aggregate Option Price for the purchased
shares through one or more of the following
alternatives:
E-1
<PAGE>
(i) full payment in cash or by check made payable to
the Corporation's order;
(ii) full payment in shares of Common Stock held for
the requisite period necessary to avoid a charge
to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
(iii) full payment through a combination of shares
of Common Stock held for the requisite period
necessary to avoid a charge to the Company's
earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date
and cash or check payable to the Company's order;
(iv) full payment effected through a broker-dealer sale and
remittance procedure pursuant to which Optionee shall provide
concurrent irrevocable written instructions (i) to a brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Option
Price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to
be withheld in connection with such purchase and (ii) to the
Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction; or
(v) full payment through conversion of the option to
purchase Option Shares into the number of fully
paid and nonassessable Option Shares calculated
pursuant to the following formula:
X = Y (A-B)
A
where:
X = the number of Option Shares to be issued to the Optionee;
Y = the number of Option Shares for which the conversion
right is being exercised;
A = the Fair Market Value per share as of the date of
exercise of such conversion right; and
B = the Option Price with respect to such Option Shares.
(c) Furnish to the Corporation appropriate
documentation that the person or persons exercising the
option (if other than Optionee) have the right to
exercise this option.
(d) For purposes of this Agreement, the Exercise Date
shall be the date on which the executed Exercise Notice
shall have been delivered to the Company. Except to
the extent the sale and remittance procedure specified
above is utilized in connection with the option
exercise, payment of the Option Price for the purchased
shares must accompany such Exercise Notice.
E-2
<PAGE>
(e) For all valuation purposes under this Agreement,
the Fair Market Value per share of Common Stock on any
relevant date shall be determined in accordance with
the following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any national securities
exchange but is traded on the Nasdaq National
Market, the Fair Market Value shall be the mean
between the highest "bid" and lowest "offered"
quotations of a share of Common Stock on such date
(or if none, on the most recent date on which
there were bid and offered quotations of a share
of Common Stock), as reported by the Nasdaq
National Market or any successor system.
(ii) If the Common Stock is at the time listed or
admitted to trading on any national securities
exchange, then the Fair Market Value shall be the
closing selling price per share on the date in
question on the securities exchange, as such price
is officially quoted in the composite tape of
transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on
the date in question, then the Fair Market Value
shall be the closing selling price on the exchange
on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is not listed on such
date on any national securities exchange nor
included in the Nasdaq National Market, but is
traded in the over-the-counter market, the highest
"bid" quotation of a share of Common Stock on such
date (or if none, on the most recent date on which
there were bid quotations of a share of Common
Stock), as reported on the Nasdaq Smallcap Market
or the NASD OTC Bulletin Board, as applicable.
(f) Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and
in any event within three business days of such
exercise) to or upon the written order of the Optionee
at its address, and in the name of the Optionee, a
certificate or certificates for the number of full
Option Shares issuable upon the exercise together with
such other property (including cash) and securities as
may then be deliverable upon such exercise. Such
certificate or certificates shall be deemed to have
been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of
the Exercise Date.
3. The Optionee acknowledges that the shares subject to
this option have not and will not be registered as of the date of
exercise of this option under the Securities Act or the
securities laws of any state. The Optionee acknowledges that this
option and the shares issuable on exercise of the option, when
and if issued, are and will be "restricted securities" as defined
in Rule 144 promulgated by the Securities and Exchange Commission
and must be held indefinitely unless subsequently registered
under the Securities Act and any other applicable state
registration requirements. Except as provided herein, the
Company is under no obligation to register the securities under
the Securities Act or under applicable state statutes. In the
absence of such a registration or an available exemption from
registration, sale of the Option Shares may be practicably
impossible. The Optionee shall confirm to the Company the
representations set forth above in connection with the exercise
of all or any portion of this option. The Company agrees to
register or qualify the Option Shares, but not this option, for
resale as follows:
E-3
<PAGE>
(a) If, at any time during the period in which the
rights represented by this Agreement are exercisable,
the Company proposes to file a registration statement
or notification under the Securities Act for the
primary or secondary sale of any debt or equity
security, it will give written notice at least 30 days
prior to the filing of such registration statement or
notification to the Optionee of its intention to do so.
The Company agrees that, after receiving written notice
from the Optionee of its desire to include its Option
Shares in such proposed registration statement or
notification, the Company shall afford the Optionee the
opportunity to have its Option Shares included therein.
Notwithstanding the provisions of this paragraph 3(b),
the Company shall have the right, at any time after it
shall have given written notice pursuant to this
paragraph (whether or not a written request for
inclusion of the Option Shares shall be made) to elect
not to file any such proposed registration statement or
notification or to withdraw the same after the filing
but prior to the effective date thereof. In no event
shall the Company be obligated to include the Option
Shares in any registration statement or notification
under this paragraph 3(b) if, in the opinion of the
underwriter, the inclusion of the Option Shares in such
registration statement or notification would be
materially detrimental to the proposed offering of debt
or equity securities pursuant to which the Company gave
notice to the holders under this paragraph; provided,
that the Option Shares shall not be excluded from any
such registration statement or notification if debt or
equity securities of the Company held by any other
persons are, or will be, included in such registration
statement or notification.
(b) In connection with the filing of a registration
statement, notification, or post-effective amendment
under this section 3, the Company covenants and agrees:
(i) to pay all expenses of such registration
statement, notification, or post-effective
amendment, including, without limitation, printing
charges, legal fees and disbursements of counsel
for the Company, blue sky expenses, accounting
fees and filing fees, but not including legal fees
and disbursements of counsel to the Optionee and
any sales commissions on Option Shares offered and
sold;
(ii) to take all necessary action which may reasonably
be required in qualifying or registering the
Option Shares included in a registration
statement, notification or post-effective
amendment for the offer and sale under the
securities or blue sky laws of such states as
requested by the Optionee; provided that the
Company shall not be obligated to execute or file
any general consent to service of process or to
qualify as a foreign corporation to do business
under the laws of any such jurisdiction; and
(iii) to utilize its best efforts to keep the same
effective on a continuous or shelf basis until all
registered Option Shares of the Optionee have been
sold.
(c) The Optionee shall cooperate with the Company and
shall furnish such information as the Company may
request in connection with any such registration
statement, notification or post-effective amendment
hereunder, on which the Company shall be entitled to
rely, and the Optionee shall indemnify and hold
harmless the Company (and all other persons who may be
subject to liability under the Securities Act or
otherwise) from and against any and all claims,
actions, suits, liabilities, losses, damages, and
expenses of every nature and character (including, but
without limitation, all attorneys' fees and amounts
E-4
<PAGE>
paid in settlement of any claim, action, or suit) which
arise or result directly or indirectly from any untrue
statement of a material fact furnished by the Optionee
in connection with such registration or qualification,
or from the failure of the Optionee to furnish material
information in connection with the facts required to be
included in such registration statement, notification
or post-effective amendment necessary to make the
statements therein not misleading.
4. The Company, during the term of this Agreement, will
obtain from the appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of shares of
its Common Stock as shall be sufficient to satisfy the
requirements of the Agreement.
5. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall be
subject to adjustment from time to time subject to the following
terms. If the outstanding shares of Common Stock of the Company
are increased, decreased, changed into or exchanged for a
different number or kind of shares of the Company through
reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, the Company or its
successors and assigns shall make an appropriate and
proportionate adjustment in the number or kind of shares, and the
per-share Option Price thereof, which may be issued to the
Optionee under this Agreement upon exercise of the options
granted under this Agreement. The purchase rights represented by
this option shall not be exercisable with respect to a fraction
of a share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the number
of shares subject to this option shall rounded up to the nearest
whole share.
6. The Company covenants and agrees that all Option Shares
which may be delivered upon the exercise of this option will,
upon delivery, be free from all taxes, liens, and charges with
respect to the purchase thereof; provided, that the Company shall
have no obligation with respect to any income tax liability of
the Optionee and the Company may, in its discretion, withhold
such amount or require the Optionee to make such provision of
funds or other consideration as the Company deems necessary to
satisfy any income tax withholding obligation under federal or
state law.
7. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to cover
the number of Option Shares issuable upon the exercise of this
and all other options of like tenor then outstanding.
8. This option shall not entitle the holder hereof to any
voting rights or other rights as a shareholder of the Company, or
to any other rights whatsoever, except the rights herein
expressed, and no dividends shall be payable or accrue in respect
of this option or the interest represented hereby or the Option
Shares purchasable hereunder until or unless, and except to the
extent that, this option shall be exercised..
9. The Company may deem and treat the registered owner of
this option as the absolute owner hereof for all purposes and
shall not be affected by any notice to the contrary.
10. In the event that any provision of this Agreement is
found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall not be
construed as rendering any other provisions contained herein
invalid or unenforceable, and all such other provisions shall be
given full force and effect to the same extent as though the
invalid or unenforceable provision were not contained herein.
E-5
<PAGE>
11. This Agreement shall be governed by and construed in
accordance with the internal laws of the state of Nevada, without
regard to the principles of conflicts of law thereof.
12. Except as otherwise provided herein, this Agreement
shall be binding on and inure to the benefit of the Company and
the person to whom an option is granted hereunder, and such
person's heirs, executors, administrators, legatees, personal
representatives, assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option to be
executed by the signature of its duly authorized officer,
effective this 24th day of June, 1999.
RED HORSE ENTERTAINMENT
CORPORATION
By /s/ Jack M. Gertino, Secretary
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to the
terms and conditions set forth in the option.
/s/ Wayne M. Rogers
E-6
<PAGE>
Exercise Notice
(to be signed only upon exercise of Option)
TO: Red Horse Entertainment Corporation
The Optionee, holder of the attached option, hereby
irrevocable elects to exercise the purchase rights represented by
the option for, and to purchase thereunder,
________________________________ shares of common stock of Red
Horse Entertainment Corporation, and herewith makes payment
therefor, and requests that the certificate(s) for such shares be
delivered to the Optionee at:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
If purchase is to be effected by conversion of the option to
Common Stock, the Optionee hereby converts option rights with
respect to __________________________________ Option Shares
represented by the option.
If acquired without registration under the Securities Act of
1933, as amended ("Securities Act"), the Optionee represents that
the Common Stock is being acquired without a view to, or for,
resale in connection with any distribution thereof without
registration or other compliance under the Securities Act and
applicable state statutes, and that the Optionee has no direct or
indirect participation in any such undertaking or in the
underwriting of such an undertaking. The Optionee understands
that the Common Stock has not been registered, but is being
acquired by reason of a specific exemption under the Securities
Act as well as under certain state statutes for transactions by
an issuer not involving any public offering and that any
disposition of the Common Stock may, under certain circumstances,
be inconsistent with these exemptions. The Optionee acknowledges
that the Common Stock must be held and may not be sold,
transferred, or otherwise disposed of for value unless
subsequently registered under the Securities Act or an exemption
from such registration is available. The Company is under no
obligation to register the Common Stock under the Securities Act,
except as provided in the Agreement for the option. The
certificates representing the Common Stock will bear a legend
restricting transfer, except in compliance with applicable
federal and state securities statutes.
The Optionee agrees and acknowledges that this purported
exercise of the option is conditioned on, and subject to, any
compliance with requirements of applicable federal and state
securities laws deemed necessary by the Company.
DATED this ________ day of __________________________,__________.
_______________________________________
Signature
E-7
<PAGE>
6
Exhibit No. 2
Form 10-QSB
Red Horse Entertainment Corporation
File No. 0-23015
RED HORSE ENTERTAINMENT CORPORATION
Option for the Purchase of 50,000
Shares of Common Stock
Par Value $0.001
STOCK OPTION AGREEMENT
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH
RESPECT TO THE OPTION AND COMMON STOCK ISSUABLE UPON EXERCISE OF
THE OPTION, AGREES AND ACKNOWLEDGES THAT THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR OTHER
COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS OF THE APPLICABLE
STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT THAT
THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received, JACK M. GERTINO
(the "Optionee") is entitled to purchase from RED HORSE
ENTERTAINMENT CORPORATION (the "Company"), on the terms and
conditions hereinafter set forth, all or any part of 50,000
shares ("Option Shares") of the Company's common stock, par value
$0.001 (the "Common Stock"), at the purchase price of $0.625 per
share ("Option Price"). Upon exercise of this option in whole or
in part, a certificate for the Option Shares so purchased shall
be issued and delivered to the Optionee. If less than the total
option is exercised, a new option of similar tenor shall be
issued for the unexercised portion of the options represented by
this Agreement.
This option is granted subject to the following further
terms and conditions:
1. This option shall vest and be exercisable immediately, and
shall expire at 5:00 p.m. Salt Lake City time on May 20, 2009.
In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after
Optionee's death, Optionee's executor, administrator, heir or
legatee, as the case may be) must take the following actions:
(a) Deliver to the Corporate Secretary of the
Corporation an executed notice of exercise in
substantially the form of attached to this Agreement
(the "Exercise Notice") in which there is specified the
number of Option Shares which are to be purchased under
the exercised option.
(b) Pay the aggregate Option Price for the purchased
shares through one or more of the following
alternatives:
E-8
<PAGE>
(i) full payment in cash or by check made payable to
the Corporation's order;
(ii) full payment in shares of Common Stock held for
the requisite period necessary to avoid a charge
to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
(iii) full payment through a combination of shares
of Common Stock held for the requisite period
necessary to avoid a charge to the Company's
earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date
and cash or check payable to the Company's order;
(iv) full payment effected through a broker-dealer sale and
remittance procedure pursuant to which Optionee shall provide
concurrent irrevocable written instructions (i) to a brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Option
Price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to
be withheld in connection with such purchase and (ii) to the
Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction; or
(v) full payment through conversion of the option to
purchase Option Shares into the number of fully
paid and nonassessable Option Shares calculated
pursuant to the following formula:
X = Y (A-B)
A
where:
X = the number of Option Shares to be issued
to the Optionee;
Y = the number of Option Shares for which
the conversion right is being exercised;
A = the Fair Market Value per share as of
the date of exercise of such conversion right; and
B = the Option Price with respect to such
Option Shares.
(c) Furnish to the Corporation appropriate
documentation that the person or persons exercising the
option (if other than Optionee) have the right to
exercise this option.
(d) For purposes of this Agreement, the Exercise Date
shall be the date on which the executed Exercise Notice
shall have been delivered to the Company. Except to
the extent the sale and remittance procedure specified
above is utilized in connection with the option
exercise, payment of the Option Price for the purchased
shares must accompany such Exercise Notice.
E-9
<PAGE>
(e) For all valuation purposes under this Agreement,
the Fair Market Value per share of Common Stock on any
relevant date shall be determined in accordance with
the following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any national securities
exchange but is traded on the Nasdaq National
Market, the Fair Market Value shall be the mean
between the highest "bid" and lowest "offered"
quotations of a share of Common Stock on such date
(or if none, on the most recent date on which
there were bid and offered quotations of a share
of Common Stock), as reported by the Nasdaq
National Market or any successor system.
(ii) If the Common Stock is at the time listed or
admitted to trading on any national securities
exchange, then the Fair Market Value shall be the
closing selling price per share on the date in
question on the securities exchange, as such price
is officially quoted in the composite tape of
transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on
the date in question, then the Fair Market Value
shall be the closing selling price on the exchange
on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is not listed on such
date on any national securities exchange nor
included in the Nasdaq National Market, but is
traded in the over-the-counter market, the highest
"bid" quotation of a share of Common Stock on such
date (or if none, on the most recent date on which
there were bid quotations of a share of Common
Stock), as reported on the Nasdaq Smallcap Market
or the NASD OTC Bulletin Board, as applicable.
(f) Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and
in any event within three business days of such
exercise) to or upon the written order of the Optionee
at its address, and in the name of the Optionee, a
certificate or certificates for the number of full
Option Shares issuable upon the exercise together with
such other property (including cash) and securities as
may then be deliverable upon such exercise. Such
certificate or certificates shall be deemed to have
been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of
the Exercise Date.
3. The Optionee acknowledges that the shares subject to
this option have not and will not be registered as of the date of
exercise of this option under the Securities Act or the
securities laws of any state. The Optionee acknowledges that this
option and the shares issuable on exercise of the option, when
and if issued, are and will be "restricted securities" as defined
in Rule 144 promulgated by the Securities and Exchange Commission
and must be held indefinitely unless subsequently registered
under the Securities Act and any other applicable state
registration requirements. Except as provided herein, the
Company is under no obligation to register the securities under
the Securities Act or under applicable state statutes. In the
absence of such a registration or an available exemption from
registration, sale of the Option Shares may be practicably
impossible. The Optionee shall confirm to the Company the
representations set forth above in connection with the exercise
of all or any portion of this option. The Company agrees to
register or qualify the Option Shares, but not this option, for
resale as follows:
E-10
<PAGE>
(a) If, at any time during the period in which the
rights represented by this Agreement are exercisable,
the Company proposes to file a registration statement
or notification under the Securities Act for the
primary or secondary sale of any debt or equity
security, it will give written notice at least 30 days
prior to the filing of such registration statement or
notification to the Optionee of its intention to do so.
The Company agrees that, after receiving written notice
from the Optionee of its desire to include its Option
Shares in such proposed registration statement or
notification, the Company shall afford the Optionee the
opportunity to have its Option Shares included therein.
Notwithstanding the provisions of this paragraph 3(b),
the Company shall have the right, at any time after it
shall have given written notice pursuant to this
paragraph (whether or not a written request for
inclusion of the Option Shares shall be made) to elect
not to file any such proposed registration statement or
notification or to withdraw the same after the filing
but prior to the effective date thereof. In no event
shall the Company be obligated to include the Option
Shares in any registration statement or notification
under this paragraph 3(b) if, in the opinion of the
underwriter, the inclusion of the Option Shares in such
registration statement or notification would be
materially detrimental to the proposed offering of debt
or equity securities pursuant to which the Company gave
notice to the holders under this paragraph; provided,
that the Option Shares shall not be excluded from any
such registration statement or notification if debt or
equity securities of the Company held by any other
persons are, or will be, included in such registration
statement or notification.
(b) In connection with the filing of a registration
statement, notification, or post-effective amendment
under this section 3, the Company covenants and agrees:
(i) to pay all expenses of such registration
statement, notification, or post-effective
amendment, including, without limitation, printing
charges, legal fees and disbursements of counsel
for the Company, blue sky expenses, accounting
fees and filing fees, but not including legal fees
and disbursements of counsel to the Optionee and
any sales commissions on Option Shares offered and
sold;
(ii) to take all necessary action which may reasonably
be required in qualifying or registering the
Option Shares included in a registration
statement, notification or post-effective
amendment for the offer and sale under the
securities or blue sky laws of such states as
requested by the Optionee; provided that the
Company shall not be obligated to execute or file
any general consent to service of process or to
qualify as a foreign corporation to do business
under the laws of any such jurisdiction; and
(iii) to utilize its best efforts to keep the same
effective on a continuous or shelf basis until all
registered Option Shares of the Optionee have been
sold.
(c) The Optionee shall cooperate with the Company and
shall furnish such information as the Company may
request in connection with any such registration
statement, notification or post-effective amendment
hereunder, on which the Company shall be entitled to
rely, and the Optionee shall indemnify and hold
harmless the Company (and all other persons who may be
subject to liability under the Securities Act or
otherwise) from and against any and all claims,
actions, suits, liabilities, losses, damages, and
expenses of every nature and character (including, but
without limitation, all attorneys' fees and amounts
E-11
<PAGE>
paid in settlement of any claim, action, or suit) which
arise or result directly or indirectly from any untrue
statement of a material fact furnished by the Optionee
in connection with such registration or qualification,
or from the failure of the Optionee to furnish material
information in connection with the facts required to be
included in such registration statement, notification
or post-effective amendment necessary to make the
statements therein not misleading.
4. The Company, during the term of this Agreement, will
obtain from the appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of shares of
its Common Stock as shall be sufficient to satisfy the
requirements of the Agreement.
5. The number of Option Shares purchasable upon the
exercise of this option and the Option Price per share shall be
subject to adjustment from time to time subject to the following
terms. If the outstanding shares of Common Stock of the Company
are increased, decreased, changed into or exchanged for a
different number or kind of shares of the Company through
reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, the Company or its
successors and assigns shall make an appropriate and
proportionate adjustment in the number or kind of shares, and the
per-share Option Price thereof, which may be issued to the
Optionee under this Agreement upon exercise of the options
granted under this Agreement. The purchase rights represented by
this option shall not be exercisable with respect to a fraction
of a share of Common Stock. Any fractional shares of Common
Stock arising from the dilution or other adjustment in the number
of shares subject to this option shall rounded up to the nearest
whole share.
6. The Company covenants and agrees that all Option Shares
which may be delivered upon the exercise of this option will,
upon delivery, be free from all taxes, liens, and charges with
respect to the purchase thereof; provided, that the Company shall
have no obligation with respect to any income tax liability of
the Optionee and the Company may, in its discretion, withhold
such amount or require the Optionee to make such provision of
funds or other consideration as the Company deems necessary to
satisfy any income tax withholding obligation under federal or
state law.
7. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to cover
the number of Option Shares issuable upon the exercise of this
and all other options of like tenor then outstanding.
8. This option shall not entitle the holder hereof to any
voting rights or other rights as a shareholder of the Company, or
to any other rights whatsoever, except the rights herein
expressed, and no dividends shall be payable or accrue in respect
of this option or the interest represented hereby or the Option
Shares purchasable hereunder until or unless, and except to the
extent that, this option shall be exercised..
9. The Company may deem and treat the registered owner of
this option as the absolute owner hereof for all purposes and
shall not be affected by any notice to the contrary.
10. In the event that any provision of this Agreement is
found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall not be
construed as rendering any other provisions contained herein
invalid or unenforceable, and all such other provisions shall be
given full force and effect to the same extent as though the
invalid or unenforceable provision were not contained herein.
E-12
<PAGE>
11. This Agreement shall be governed by and construed in
accordance with the internal laws of the state of Nevada, without
regard to the principles of conflicts of law thereof.
12. Except as otherwise provided herein, this Agreement
shall be binding on and inure to the benefit of the Company and
the person to whom an option is granted hereunder, and such
person's heirs, executors, administrators, legatees, personal
representatives, assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option to be
executed by the signature of its duly authorized officer,
effective this 24th day of June, 1999.
RED HORSE ENTERTAINMENT
CORPORATION
/s/ Wayne M. Rogers, President
The undersigned Optionee hereby acknowledges receipt of a
copy of the foregoing option and acknowledges and agrees to the
terms and conditions set forth in the option.
/s/ Jack M. Gertino
E-13
<PAGE>
Exercise Notice
(to be signed only upon exercise of Option)
TO: Red Horse Entertainment Corporation
The Optionee, holder of the attached option, hereby
irrevocable elects to exercise the purchase rights represented by
the option for, and to purchase thereunder,
________________________________ shares of common stock of Red
Horse Entertainment Corporation, and herewith makes payment
therefor, and requests that the certificate(s) for such shares be
delivered to the Optionee at:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
If purchase is to be effected by conversion of the option to
Common Stock, the Optionee hereby converts option rights with
respect to __________________________________ Option Shares
represented by the option.
If acquired without registration under the Securities Act of
1933, as amended ("Securities Act"), the Optionee represents that
the Common Stock is being acquired without a view to, or for,
resale in connection with any distribution thereof without
registration or other compliance under the Securities Act and
applicable state statutes, and that the Optionee has no direct or
indirect participation in any such undertaking or in the
underwriting of such an undertaking. The Optionee understands
that the Common Stock has not been registered, but is being
acquired by reason of a specific exemption under the Securities
Act as well as under certain state statutes for transactions by
an issuer not involving any public offering and that any
disposition of the Common Stock may, under certain circumstances,
be inconsistent with these exemptions. The Optionee acknowledges
that the Common Stock must be held and may not be sold,
transferred, or otherwise disposed of for value unless
subsequently registered under the Securities Act or an exemption
from such registration is available. The Company is under no
obligation to register the Common Stock under the Securities Act,
except as provided in the Agreement for the option. The
certificates representing the Common Stock will bear a legend
restricting transfer, except in compliance with applicable
federal and state securities statutes.
The Optionee agrees and acknowledges that this purported
exercise of the option is conditioned on, and subject to, any
compliance with requirements of applicable federal and state
securities laws deemed necessary by the Company.
DATED this ________ day of __________________________,__________.
_______________________________________
Signature
E-14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 229,745
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 229,809
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 229,809
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 455
<OTHER-SE> 229,354
<TOTAL-LIABILITY-AND-EQUITY> 229,809
<SALES> 0
<TOTAL-REVENUES> 4,495
<CGS> 0
<TOTAL-COSTS> 7,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,702)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,702)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,702)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
