U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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
Financial Statements
Balance Sheets - March 31, 1999 and
December 31, 1998 3
Statements of Operations - Three Months
Ended March 31, 1999 and 1998, and
Inception to March 31, 1999 4
Statements of Cash Flows - Three Months
Ended March 31, 1999 and 1998,
and Inception to March 31, 1999 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of 11
Operations
PART II. Other Information 12
Signatures 12
PART I.
Financial Information
In the opinion of management, the accompanying unaudited
financial statements included in this Form 10-QSB reflect all
adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the results of operations
for the periods presented. The results of operations for the
periods presented are not necessarily indicative of the results
to be expected for the full year.
2
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
1999 1998
(Unaudited)
CURRENT ASSETS
Cash $ 229,400 $ 232,359
Total Current Assets 229,400 232,359
PROPERTY AND EQUIPMENT (Note 3) - 152
TOTAL ASSETS $ 229,400 $ 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 (194,408) (191,297)
Total Stockholders' Equity 229,400 232,511
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 229,400 $ 232,511
The accompanying notes are an integral part of these financial statements
3
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
December 4,
For the Three Months Ended 1987 to
Months Ended March 31, March 31,
1998 1999 1999
REVENUES $ - $ - $ -
EXPENSES
Bad debt expense - - 35,000
Outside services 740 1,196 9,853
Professional fees 465 1,911 72,566
Rent - - 6,545
Travel - - 18,336
Administrative expenses 108 2,085 27,521
Depreciation 34 152 1,546
Amortization - - 472
Interest - - 377
Total Expenses 1,347 5,344 172,216
OTHER INCOME
Interest income 956 2,233 112,932
Total Other Income 956 2,233 112,932
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS (391) (3,111) (59,284)
LOSS FROM DISCONTINUED
OPERATIONS (Note 6) - - (911,314)
GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS (Note 6) - - 776,190
NET INCOME (LOSS) $ (391) $ (3,111) $ (194,408)
BASIC INCOME (LOSS) PER SHARE $ (0.00) $ (0.01)
WEIGHTED AVERAGE SHARES
OUTSTANDING 455,073 455,073
The accompanying notes are an integral part of these financial statements
4
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
December 4,
For the Three Months Ended 1987 to
Months Ended March 31, March 31,
1998 1999 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (391) $ (3,111) $ (194,408)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation 34 152 1,546
Amortization - - 472
Loss on disposal of discontinued
operations - - (776,190)
Changes in operating assets ad
liabilities:
Increase (decrease) in accounts
payable (2,010) - -
Increase in accrued expenses - - 286,334
Net Cash Provided (Used) by
Operating Activities (2,367) (2,959) (682,246)
CASH FLOWS FROM 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)
CASH FLOWS FROM 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
INCREASE IN CASH AND CASH EQUIVALENTS (2,367) (2,959) 229,400
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 231,482 232,359 -
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 229,115 $ 229,400 $ 229,400
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
December 4,
For the Three Months Ended 1987 to
Months Ended March 31, March 31,
1998 1999 1999
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ - $ - $ 2,133
Cash paid for taxes $ - $ - $ -
NON-CASH INVESTING ACTIVITIES
Sale of subsidiary (Note 6) $ - $ - $ 2,023,767
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 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
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 $192,000 which expire in 2007
and 2008. The potential tax benefit of the loss
carryovers has been offset in full by a valuation
allowance.
7
<PAGE>
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
March 31, 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:
March 31, 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 years
ending December 31, 1998 and 1997 was $ 134 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
March 31, 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.
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
March 31, 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 option
is for a term of five years.
NOTE 11 - CONCENTRATIONS OF RISK
The Company maintains a money market investment account
which accounts for $225,450 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>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Month periods Ended March 31, 1999 and 1998
The Company had no revenue from continuing operations for the
three-month periods ended March 31, 1999 and 1998.
General and administrative expenses for the three 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 $5,344 and $1,347 for
the three-month periods ended March 31, 1999 and 1998,
respectively.
Interest income in the three-month periods ended March 31, 1999
and 1998, was $2,233 and $956, respectively, 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 $3,111 for the three months ended March 31, 1999, as
compared to a net loss of $391 for the same period in 1998.
Liquidity and Capital Resources
At March 31, 1999, the Company had working capital of
approximately $229,400, 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.
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 any business
venture it acquires.
12
<PAGE>
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS: Included only with the electronic filing of this
report is the Financial Data Schedule for the three-month period
ended March 31, 1999 (Exhibit Ref. No. 27).
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: May 14, 1999 By: /s/ Jack Gertino, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 229,400
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 229,400
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 229,400
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 455
<OTHER-SE> 228,945
<TOTAL-LIABILITY-AND-EQUITY> 229,400
<SALES> 0
<TOTAL-REVENUES> 2,233
<CGS> 0
<TOTAL-COSTS> 5,344
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,111)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,111)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,111)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
