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, 2000
[ ] 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 Identification No.)
incorporation or organization)
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 June 30, 2000: 455,073 shares of
common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
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FORM 10-QSB
RED HORSE ENTERTAINMENT CORPORATION
INDEX
Page
PART I. Financial Information 3
Financial Statements 3
Management's Discussion And Analysis of
Financial Condition or Plan of Operation 11
PART II. Other Information 12
Signatures 12
2
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PART I.
Financial Information
RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
June 30, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash $ 234,861 $ 232,783
Total Current Assets 234,861 232,783
PROPERTY AND EQUIPMENT (Note 3) - -
TOTAL ASSETS $ 234,861 $ 232,783
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 500 $ 189
Total Current Liabilities 500 189
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 (189,447) (191,214)
Total Stockholders' Equity 234,361 232,594
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 234,361 $ 232,783
3
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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,
2000 1999 2000 1999 2000
REVENUES $ - $ - $ - $ - $ -
EXPENSES
Bad debt expense - - - - 35,000
Outside services - 165 505 1,361 9,923
Professional fees 863 1,532 3,615 3,443 80,440
Rent - - - - 6,545
Travel - - - - 18,336
Administrative expenses 49 156 95 2,241 28,122
Depreciation - - - 152 1,546
Amortization - - - - 472
Interest - - - - 418
Total Expenses 912 1,853 4,215 7,197 180,802
OTHER INCOME
Interest income 3,116 2,262 5,982 4,495 126,479
Total Other Income 3,116 2,262 5,982 4,495 126,479
Income (Loss) Before
Discontinued Operations 2,204 409 1,767 (2,702) (54,323)
Loss From Discontinued
Operations (Note 6) - - - - (911,314)
Gain on Disposal of
Discontinued Operations - - - - 776,190
NET INCOME (LOSS) $ 2,204 $ 409 $ 1,767 $ (2,702) $ (189,447)
NET INCOME (LOSS)
PER SHARE $ (0.00) $0.00 $ (0.00) $ (0.01)
WEIGHTED AVERAGE
SHARES OUTSTANDING 455,073 455,073 455,073 455,073
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
For the For the October 24,
Three Months Ended Six Months Ended 1986 Through
June 30, June 30, June 30,
2000 1999 2000 1999 2000
OPERATING ACTIVITIES
Net Income (Loss) $ 2,204 $ 409 $ 1,767 $ (2,702) $ (189,447)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation - - - 152 1,546
Amortization - - - - 472
Loss on disposal of discontinued
operations - - - - (776,190)
Changes in operating assets
and liabilities:
Increase in accounts receivable - (64) - (64) -
Increase (decrease) in
accounts payable (2,094) - 311 - 500
Increase in accrued expenses - - - - 286,334
Net Cash Provided (Used)
by Operating Activities 110 345 2,078 (2,614) (676,785)
INVESTING ACTIVITIES
Organization expenses - - - - (10,925)
Sale of fixed assets - - - - 4,000
Purchase of equipment and
leasehold improvements - - - - (1,255,237)
Net Cash Provided (Used)
by Investing Activities - - - - (1,262,162)
FINANCING ACTIVITIES
Proceeds from debentures - - - - 1,750,000
Proceeds from stock issuance - - - - 212,984
Sale warrants - - - - 100
Exercise of warrants - - - - 210,724
Net Cash Provided (Used)
by Financing Activities $ - $ - $ - $ - $ 2,173,808
5
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the For the October 24,
Three Months Ended Six Months Ended 1986 Through
June 30, June 30, June 30,
2000 1999 2000 1999 2000
INCREASE (DECREASE) IN
CASH $ 110 $ 345 $ 2,078 $ (2,614) $ 234,861
CASH AT BEGINNING OF
PERIOD 234,751 229,400 232,783 232,359 -
CASH AT END OF PERIOD $ 234,861 $ 229,745 $ 234,861 $ 229,745 $ 234,861
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for interest $ - $ - $ - $ - $ 2,133
Cash paid for taxes $ - $ - $ - $ - $ -
NON CASH INVESTING ACTIVITIES
Sale of subsidiary $ - $ - $ - $ - $2,023,767
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
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.
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Numerator - income
(loss) $ 2,204 $ 409 $ 1,767 $ (2,702)
Denominator - weighted
average number of
shares outstanding 455,073 455,073 455,073 455,073
Basic income (loss)
per share $ 0.00 $ 0.00 $ 0.00 $ (0.01)
7
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Provision for Taxes
At June 30, 2000, the Company had net operating loss
carryforwards of approximately $190,000 that may be
offset against future taxable income through 2020. 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.
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,
2000 1999
Office equipment $ 1,071 $ 1,071
Less accumulated depreciation (1,071) (1,071)
Total Property and Equipment $ - $ -
Equipment is being depreciated over eight years using the
straight line method. Depreciation expense for the
period ending and the year ending June 30, 2000 and
December 31, 1999 was $ -0- and $152, respectively.
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
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.
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
9
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RED HORSE ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
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 Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of
assets and liquidation of liabilities in the normal
course of business. However, the Company does not have
significant cash or other material assets, nor does it
have an established source of revenues sufficient to
cover its operating costs and to allow it to continue as
a going concern. It is the intent of the Company to seek
a merger with an existing, operating company. In the
interim, shareholders of the Company have committed to
meeting its minimal operating expenses.
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 on February 1, 1999.
NOTE 11 - CONCENTRATIONS OF RISK
The Company maintains a money market investment account
which accounts for $234,000 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
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATION
Six-Month Periods Ended June 30, 2000 and 1999
The Company had no revenue from continuing operations for the six-
month periods ended June 30, 2000 and 1999.
General and administrative expenses for the six-month periods
ended June 30, 2000 and 1999, consisted of general corporate
administration, legal and professional expenses, and accounting
and auditing costs. These expenses were $4,215 and $7,197 for
the six-month periods ended June 30, 2000 and 1999, respectively.
Interest income in the six-month periods ended June 30, 2000 and
1999, was $5,982 and $4,495, respectively. As a result of the
foregoing factors, the Company realized a net gain of $1,767 for
the six months ended June 30, 2000, as compared to a net loss of
$2,702 for the same period in 1999.
Liquidity and Capital Resources
At June 30, 2000, the Company had working capital of
approximately $234,361, as compared to $232,594 at December 31,
1999. 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.
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 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.
11
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PART II. OTHER INFORMATION
Exhibits and Reports on Form 8-K.
Reports on Form 8-K: No reports on Form 8-K were filed by
the Company during the quarter ended Marhc 31, 2000.
Exhibits: Included only with the electronic filing of this
report is the Financial Data Schedule for the six-month period
ended June 30, 2000 (Exhibit ref. No. 27).
SIGNATURES
In accordance with 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 8, 2000 By: /s/ Jack Gertino, Secretary
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