UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HORSE SENSE STABLE SERVICES, INC.
(Name of small business issuer in its charter)
ARIZONA 115210 20-0878571
------- ------ ----------
(State or other jurisdiction of (North American Industry (IRS Employer
incorporation or organization) Classification System) Identification
Number)
7699 E. PARK VIEW DR
TUCSON AZ 85715
520-404-3182
(Address and telephone number
of principal executive offices)
---------------
Michael C. High
7699 E. Park View Dr.
Tucson AZ 85715
520-404-3182
(Name, address, including zip code, and telephone
number, of agent for service)
--------------
APPROXIMATE DATE OF PROPOSED SALE OF THE SECURITIES TO PUBLIC: From time to time
after the Registration Statement becomes effective as determined by market
conditions and the needs of the company.
If any securities being registered on this form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
============================ =================== ====================== ======================= ======================
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering price aggregate offering registration fee(2)
registered(1) per share(2) price (US$)
============================ =================== ====================== ======================= ======================
Common Stock to be offered 400,000 $1.00 $700,000 $100
for sale
============================ =================== ====================== ======================= ======================
(1) An indeterminate number of additional shares of common stock shall be
issuable pursuant to Rule 416 to prevent dilution resulting from stock splits,
stock dividends or similar transactions and in such an event the number of
shares registered shall automatically be increased to cover the additional
shares in accordance with Rule 416 under the Securities Act.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of computing
the amount of the registration fee based on a bona fide estimate of the maximum
offering price.
The Registrant hereby undertakes to amend this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended (the "Securities Act") or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
2
HORSE SENSE STABLE SERVICES, INC
200,000 UNITS, CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE A WARRANT
This prospectus is part of a registration statement that covers 200,000 shares
of our common stock and 200,000 shares of common stock underlying and issuable
upon exercise of the warrants offered herein. These units may be offered or sold
from time to time at the rate of $1.00 per unit until such time as an active
trading market develops in our common stock, then at prevailing market prices,
at negotiated prices or otherwise.
Each Unit offered herein consists of one share of common stock, $.001 par value
(the "Common Stock"), and one Class A Common Stock Purchase Warrant exercisable
to purchase one share of Common Stock at a price of $2.50 per share during the
twenty-four (24) month period following the termination of this offering. The
Warrants may be redeemed upon 15 days written notice at a price of $.01 per
Warrant if the closing bid prices of the Common Stock have averaged at least
125% of the exercise price of the Warrants for any 10 consecutive trading days
ending on the third day on which the Company gives notice.
Our common stock is not currently listed or quoted on any quotation medium.
There can be no assurance that our common stock will ever be quoted on any
quotation medium or that any trading market for our common stock will ever
develop.
Our principal executive offices are located at 7699 E. Park View Dr., Tucson,
AZ, 85715, and our telephone number is (520) 404-3182.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
RISKS RELATED TO AN INVESTMENT IN OUR COMMON STOCK.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date of this prospectus is , 2004
-------------
3
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY 6
RISK FACTORS AND INVESTMENT CONSIDERATIONS 9
If we do not obtain additional financing, our liquidity will not be sufficient
to enable us to conduct our business operations to the extent that we become
profitable
9
We believe there exists the potential of a lack of ability to continue as a
going concern, which, if true, could lead to a loss by our investors of their
investmentcapital
9
Because we have not yet commenced business operations, we expect to incur
operating losses for the foreseeable future.
9
Because Michael High and Sara High own 100% of our outstanding common stock,
they will control and make corporate decisions, which decisions may differ from
those that would have been made by other stockholders.
9
Because our officers have other business interests, they may not be able or
willing to devote a sufficient amount of time to the business operations causing
the business to never become financially viable.
9
If a market for our common stock does not develop, shareholders may be unable to
sell their shares.
9
Boarding stables throughout the country face common risks that not only increase
their costs of doing business but also affect their ability to continue
providing boarding services.
10
There is no active trading market for our common stock and if a market for our
common stock does not develop, our investors will be unable to sell their
shares.
10
Because we do not intend to pay any dividends on our common shares, investors
seeking dividend income or liquidity should not purchase shares in this
offering.
11
Our stock is a penny stock. Trading of our stock may be restricted by the SEC's
penny stock regulations which may limit a stockholder's ability to buy and sell
our stock.
11
4
NASD sales practice requirements may also limit a stockholder's ability to buy
and sell our stock.
12
Special note about forward-looking statements 12
USE OF PROCEEDS 14
DETERMINATION OF OFFERING PRICE 14
DILUTION 15
DIVIDEND POLICY 15
SELLING SECURITY HOLDERS 15
PLAN OF DISTRIBUTION 15
LEGAL PROCEEDINGS 17
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 18
DESCRIPTION OF SECURITIES 19
INTEREST OF NAMED EXPERTS AND COUNSEL 19
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES 19
DESCRIPTION OF BUSINESS 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 21
DESCRIPTION OF PROPERTY 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 22
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 22
EXECUTIVE COMPENSATION 23
REPORTS TO SECURITY HOLDERS 23
FINANCIAL STATEMENTS 24
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 31
PART II-INFORMATION NOT REQUIRED IN THE PROSPECTUS 31
5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements appearing elsewhere in and
incorporated by reference into this Prospectus. Unless the context otherwise
requires "we", "our", "us" or the "Company" refers to Horse Sense Stable
Services Inc. The shares offered hereby are speculative and involve a high
degree of risk. Each prospective investor should carefully review the entire
Prospectus, the financial statements and all exhibits and documents referred to
therein.
The Company
We were organized under the laws of the state of Arizona on April 7, 2004.
Our common stock is not listed on any recognized exchange or quoted on any
quotation medium. There are no plans, proposals, arrangements or understandings
with any persons concerning the development of a trading market in our common
stock.
Our principal executive offices are located at 7699 E. Park View Dr., Tucson,
AZ, 85715, and our telephone number is (520) 404-3182.
Summary of Our Business
We are a development stage company, and have generated no revenue to date.
Should our share offering be successful, we plan to use the proceeds as outlined
on page 13 to begin business operations. Building on our founder's experience
running a large boarding stable in Tucson, we intend to offer consulting and
business management services for the owners of commercial stables, and to own a
percentage of some or all of the stables for which we provide services.
6
SUMMARY OF THE OFFERING
THE OFFERING
We are offering 200,000 Units on a "best-efforts" basis.
Because the Units are offered on a "best efforts, all-or-none" basis with
respect to the Offering, there can be no assurance that any or all of the Units
offered will be sold.
If we fail to sell at least ten percent (10%) of the Offering, the offering will
terminate and each subscriber's funds will be returned without any interest on
them.
UNITS
Each Unit consists of one share of Common Stock and one A warrant which is
redeemable and exercisable to purchase one share of Common Stock at $2.50 per
share within the 24 months immediately following the closing of the offering.
OFFERING PRICE PER UNIT
$1.00
EXERCISE PRICE OF WARRANTS
INCLUDED IN UNITS
$2.50 per A Warrant for the 24-month period following the termination of the
offering. The Warrants may be redeemed upon 15 days written notice at a price
of $.01 per Warrant if the closing bid prices of the Common Stock have averaged
at least 125% of the exercise price of the Warrants for any 10 consecutive
trading days ending on the third day on which the Company gives notice.
CAPITAL STOCK OUTSTANDING
BEFORE OFFERING
200,000 shares of Common
Stock outstanding as of July
31, 2004 (1)
CAPITAL STOCK OUTSTANDING AFTER SALE OF THE OFFERING 400,000 shares of Common
Stock outstanding after the sale of the Minimum Offering and prior to the
exercise of any warrants issued in connection with this offering.
ESTIMATED NET PROCEEDS
$200,000 assuming sale of the
Offering.
USE OF PROCEEDS The proceeds will be used to provide working capital and
provide cash for expansion activity.
RISK FACTORS
This offering involves a high
degree of risk. See "Risk
Factors and Investment
Considerations."
7
Summary Financial Data
The following table summarizes certain of our selected financial data and
audited data and is qualified in its entirety by the more detailed financial
statements contained elsewhere in this Prospectus. The summary financial
information contained in the following table is derived from and should be read
in conjunction with our audited financial statements and the notes thereto
elsewhere in this Prospectus.
HORSE SENSE STABLE SERVICES, INC.
BALANCE SHEET
July 31,2004
Assets:
Cash and cash equivalents $ 55
Total Current Assets 55
Total Assets $ 55
Liabilities:
Accounts payable $ 1,228
Accrued liabilities 30,500
Total Liabilities 31,728
Stockholders' Equity:
Preferred Stock, par value $.001, authorized
10,000,000 shares, issued 0 at July 31, 2004 --
Common Stock, par value $.001, authorized
100,000,000 shares, issued 200,000 at July 31, 2004 200
Paid-In Capital 1,895
Retained Earnings (Deficit) --
Deficit accumulated during the development stage (33,768)
Total Stockholders' Equity (31,673)
Total Liabilities and Stockholders' Equity $ 55
There are 200,000 common shares issued and outstanding at July 31, 2004
Statement of Operations Data:
Net Revenues $0
Net Loss Since Inception $33,768
8
RISK FACTORS
Investment in our common stock involves a number of risks. The
following material factors should be carefully considered by anyone purchasing
shares of our common stock. Any of the following risks would adversely affect
our business, financial condition and results of operation.
RISKS ASSOCIATED WITH OUR COMPANY
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR LIQUIDITY WILL NOT BE SUFFICIENT
TO ENABLE US TO CONDUCT OUR BUSINESS OPERATIONS TO THE EXTENT THAT WE BECOME
PROFITABLE.
As of July 31, 2004, we had cash in the amount of $55 which is insufficient to
maintain our corporation for any length of time without further Paid-in-Capital
from our founder. Our business plan calls for significant expenses in connection
with the development of our business. We will also incur significant legal and
accounting costs necessary to maintain a public corporation. We will require
additional financing in order to complete the development activities. In
addition, we will require additional financing to sustain our business
operations if we are not successful in earning revenues once our business
development is complete. We do not currently have any arrangements for financing
and we can provide no assurance to investors that we will be able to find such
financing if required. We believe the only realistic source of future funds
presently available to us is through a loan from our officer and the sale of
equity capital.
WE BELIEVE THERE EXISTS THE POTENTIAL OF A LACK OF ABILITY TO CONTINUE AS A
GOING CONCERN, WHICH IF TRUE, COULD LEAD TO A LOSS BY OUR INVESTORS OF THEIR
INVESTMENT CAPITAL.
As noted in our financial statements that are included with this prospectus, we
are a development stage company. Robison, Hill & Co., P.C., CPA's, in their
independent auditors' report, has expressed "substantial doubt" as to our
ability to continue as a going concern based on significant operating losses we
have incurred since inception. Our financial statements do not include any
adjustments that might result from the outcome of that uncertainty. We were
incorporated on April 7, 2004, and to date have been involved solely in
organizational and development activities and have had no revenues. Potential
investors should be aware of the difficulties normally encountered by a new
enterprise and the high rate of failure of such enterprises. The likelihood of
success must be considered in light of the problems, expenses, difficulties,
complications, and delays encountered in connection with the development of a
business in the area in which we intend to operate and in connection with the
formation and commencement of operations of a new business in general. These
include, but are not limited to, unanticipated problems relating to development
of our services, marketing and competition, and additional costs and expenses
that may exceed current estimates. There is limited history upon which to base
any assumption as to the likelihood that we will prove successful, and there can
be no assurance that we will generate any operating revenues or ever achieve
profitable operations. If we are unsuccessful in addressing these risks, our
business will most likely not be successful to the point that investors will
receive a return on their investments or a return of their investments.
BECAUSE WE HAVE NOT YET COMMENCED BUSINESS OPERATIONS, WE EXPECT TO INCUR
OPERATING LOSSES FOR THE FORESEEABLE FUTURE.
We have never earned revenues and we have never been profitable. Prior to
completion of our development stage, we anticipate that we will incur increased
operating expenses without realizing any revenues. We therefore expect to incur
significant losses into the foreseeable future. We recognize that if we are
unable to generate significant revenues from our business development, we will
not be able to achieve profitability or continue operations.
9
BECAUSE MICHAEL HIGH AND SARA HIGH OWN 100% OF OUR OUTSTANDING COMMON STOCK,
THEY WILL CONTROL AND MAKE CORPORATE DECISIONS, WHICH DECISIONS MAY DIFFER FROM
THOSE THAT WOULD HAVE BEEN MADE BY OTHER STOCKHOLDERS.
Michael High and Sara High own 100% of the outstanding shares of our common
stock prior to this offering. Accordingly, they will have a significant
influence in determining the outcome of all corporate transactions, including
mergers, consolidations and the sale of all or substantially all of our assets,
and also the power to prevent or cause a change in control. The interests of Mr.
High and Mrs. High may differ from the interests of the other stockholders and
thus result in corporate decisions that are disadvantageous to other
shareholders.
BECAUSE OUR OFFICERS HAVE OTHER BUSINESS INTERESTS, THEY MAY NOT BE ABLE OR
WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO THE BUSINESS OPERATIONS CAUSING
THE BUSINESS TO NEVER BECOME FINANCIALLY VIABLE.
Mr. Michael High, our director and president, and Mrs. Sara High, our director,
secretary, and treasurer are presently required to spend only about 10% of their
business time on business management services for our company and have agreed to
spend up to 20 hours per week each when the business operations of Horse Sense
Stable Services are more actively commenced in late 2004. While these officers
and directors presently possess adequate time to attend to our interests, it is
possible that the demands on their time from other obligations could increase
with the result that they would no longer be able to devote sufficient time to
the management of our business. In addition, they may not possess sufficient
time for our business if the demands of managing their other business interests
increase substantially beyond current levels.
IF A MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, SHAREHOLDERS MAY BE UNABLE TO
SELL THEIR SHARES.
There is currently no market for our common stock and we can provide no
assurance that a market will develop. If no market is ever developed for our
shares, it will be difficult for shareholders to sell their stock. In such a
case, shareholders may find that they are unable to achieve benefits from their
investment.
BOARDING STABLES THROUGHOUT THE COUNTRY FACE COMMON RISKS THAT NOT ONLY INCREASE
THEIR COSTS OF DOING BUSINESS BUT ALSO AFFECT THEIR ABILITY TO CONTINUE
PROVIDING BOARDING SERVICES.
According to statistics provided by the American Horse Council, the horse
industry has a total impact of $112.1 billion on U.S. Gross Domestic Product
(GDP), and there are 7.1 million Americans involved in the industry as horse
owners, service providers, employees and volunteers. Despite these statistics,
all boarding stables face obstacles that negatively impact their ability to
operate profitably. Boarding stables fall under the jurisdiction of several
government agencies at the local, state, and federal level. In addition to the
common small-business owner concerns of complying with tax and employment
regulations, boarding stable owners must contend with regulations prescribing
correct methods of manure removal and dust control. Most zoning restricts the
number of animals allowed per acre, in many instances to a number less than what
would be required for commercial success. Zoning waivers are frequently not
approved due to complaints from neighborhood activists who see no benefits in
having a boarding stable located nearby. Stable owners who want to increase
revenues by holding events such as horse shows or clinics may have their plans
scaled back or disapproved due to restrictions on parking, lighting, or noise
levels. Additionally, stable owners are often under pressure from neighbors and
community activists to go above and beyond regulations in keeping their
facilities safe and sanitary.
Many stables are located in or near urban areas, often in areas where housing
developments are being built. Stables in developing areas face encroachment on
10
their off-site riding areas, as well as complaints from new neighbors who are
unwilling to accept the dust, sounds, and traffic associated with a horse
boarding facility. Even stables that have been established for decades face
pressure from neighbors and regulators, especially if they are located in areas
with growing populations. Since we anticipate owning stables, we will need to
deal with these issues. Significantly, we could be in a position where we buy
land for which the zoning allows stables, but face pressure from neighbors and
regulators that make it impractical or impossible to build the planned stable
facility.
Horses are large animals that have survived only through a herd mentality, plus
a strong instinct to flee in the face of perceived danger. For these reasons, a
boarding stable is a dangerous place, and liability insurance is expensive.
Despite equine limited liability laws in place in most states, stable owners
face the constant threat of lawsuit, not only from injured persons, but also
from horse owners whose horses have been injured. As the owner of boarding
facilities, we will need to ensure that our on-site managers comply with strict
risk management procedures.
The threat of medical problems that can cause the death or loss of the use of
horses is constant, not only from well-known viruses such as West Nile and
Equine Arteritis, but also from colic, many causes of lameness, and mishaps.
Stable owners must be knowledgeable about and take all reasonable precautions to
keep the horses in their care safe and healthy. A boarding facility with a
history of injuries, or with an outbreak of a disease, could easily face an
exodus of boarders and a precipitous drop in income.
RISKS ASSOCIATED WITH OUR COMMON STOCK
THERE IS NO ACTIVE TRADING MARKET FOR OUR COMMON STOCK AND IF A MARKET FOR OUR
COMMON STOCK DOES NOT DEVELOP, OUR INVESTORS WILL BE UNABLE TO SELL THEIR
SHARES.
There is currently no active trading market for our common stock and such a
market may not develop or be sustained. We currently plan to have our common
stock quoted on the National Association of Securities Dealers Inc.'s OTC
Bulletin Board upon the effectiveness of this registration statement of which
this prospectus forms a part. In order to do this, a market maker must file a
Form 15c-211 to allow the market maker to make a market in our shares of common
stock. At the date hereof, we are not aware that any market maker has any such
intention. However, we cannot provide our investors with any assurance that our
common stock will be traded on the OTC Bulletin Board or, if traded, that a
public market will materialize. Further, the OTC Bulletin Board is not a listing
service or exchange, but is instead a dealer quotation service for subscribing
members. If our common stock is not quoted on the OTC Bulletin Board or if a
public market for our common stock does not develop, then investors may not be
able to resell the shares of our common stock that they have purchased and may
lose all of their investment. If we establish a trading market for our common
stock, the market price of our common stock may be significantly affected by
factors such as actual or anticipated fluctuations in our operation results,
general market conditions and other factors. In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
have particularly affected the market prices for the shares of developmental
stage companies, which may materially adversely affect the market price of our
common stock.
BECAUSE WE DO NOT INTEND TO PAY ANY DIVIDENDS ON OUR COMMON SHARES, INVESTORS
SEEKING DIVIDEND INCOME OR LIQUIDITY SHOULD NOT PURCHASE SHARES IN THIS
OFFERING.
We do not currently anticipate declaring and paying dividends to our
shareholders in the near future. It is our current intention to apply net
earnings, if any, in the foreseeable future to increasing our working capital.
Prospective investors seeking or needing dividend income or liquidity should,
therefore, not purchase our common stock. We currently have no revenues and a
history of losses, so there can be no assurance that we will ever have
sufficient earnings to declare and pay dividends to the holders of our shares,
and in any event, a decision to declare and pay dividends is at the sole
discretion of our board of directors, who currently do not intend to pay any
dividends on our common shares for the foreseeable future.
11
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS THAT MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL
OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC that provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
NASD SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission (see above and the "Market for Common Equity and Related
Stockholder Matters" section at page 33 for discussions of penny stock rules),
the NASD has adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the NASD believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The NASD requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your
ability to buy and sell our stock and have an adverse effect on the market for
our shares.
Please read this prospectus carefully. You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with
different information. You should not assume that the information provided by
the prospectus is accurate as of any date other than the date on the front of
this prospectus.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus, including the
sections entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" that are based on our management's
beliefs and assumptions and on information currently available to our
management. Forward-looking statements include the information concerning our
12
possible or assumed future results of operations, business strategies, financing
plans, competitive position, industry environment, potential growth
opportunities, the effects of future regulation and the effects of competition.
Forward-looking statements include all statements that are not historical facts
and can be identified by the use of forward-looking terminology such as the
words "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar
expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual
results may differ materially from those expressed in the forward-looking
statements. We do not have any intention of or obligation to update
forward-looking statements after we distribute this prospectus.
You should understand that many important factors, in addition to those
discussed elsewhere in this prospectus, could cause our results to differ
materially from those expressed in the forward-looking statements. These factors
include, without limitation, the rapidly changing regulatory environment, our
limited operating history, our ability to implement our growth strategy, our
ability to integrate acquired companies and their assets and personnel into our
business, our fixed obligations, our dependence on new capital to fund our
growth strategy, our ability to attract and retain quality personnel, our
competitive environment, economic and other conditions in markets in which we
operate, increases in maintenance costs and insurance premiums and cyclical and
seasonal fluctuations in our operating results.
USE OF PROCEEDS
We will receive the proceeds from the sale of the proposed 200,000 shares of
common stock being offered by Horse Sense Stable Services, Inc. at the rate of
$1.00 per share. In the event that Horse Sense sells all of the proposed 200,000
shares of common stock, Horse Sense would receive $200,000. We may raise
significantly less than the full amount of $200,000. We will use the proceeds of
this offering to pay the costs of the offering, to develop a website, to
purchase advertising, and to purchase interests in three or more boarding
stables. Should we raise less than the full amount of $200,000, our first
priority will be to commence consulting and business management operations. Any
amount raised in excess of the amount needed to commence consulting and business
management operations will be used to purchase ownership interests in new or
existing boarding stables. We currently have entered into no agreements to
purchase any property, nor have we identified specific properties to target for
purchase. Based on our directors' knowledge of the market and industry trends,
we are confident we will be able to locate properties in which to invest, and
will do so only upon raising sufficient funds.
The chart on the next page further describes our intended use of proceeds
depending upon our level of funding.
13
PERCENT OF OFFERING 100% 75% 50% 25% 10%
---- --- --- --- ---
AMOUNT RAISED (1)
- -----------------
Gross Offering Proceeds $200,000 $150,000 $100,000 $50,000 $20,000
Offering Expenses 13,850 13,850 13,850 13,850 13,850
------ ------ ------ ------ ------
Net Proceeds $186,150 $136,150 $86,150 $36,150 $6,150
FIRST LEVEL PRIORITIES:
Website development and hosting 3,500 3,500 3,500 3,500 2,150
Advertising in trade publication,
"Stable Management" 6,000 6,000 6,000 6,000 4,000
Attend trade show(s) 3,300 3,300 3,300 3,300 --
Travel expenses for site selection and
initial consultations 5,000 5,000 5,000 5,000 --
SECOND LEVEL PRIORITIES:
Ownership interest in existing or new
boarding stables 168,350 118,350 68,350 18,350 --
Total Application of Proceeds $200,000 $150,000 $100,000 $50,000 $20,000
(1) The offering is made on a "best efforts" basis for a maximum offering
of up to 200,000 shares of common stock.
The following table shows the percentage of the proceeds to be used for each of
the categories above, assuming $200,000 raised by the offering.
The estimated costs of the offering that will be paid by us are as follows: Amount Percent
------ --------
Securities and Exchange Commission registration fee $100 0.05%
Transfer Agent fees $550 0.28%
Printing and binding $700 0.35%
Accounting fees and expenses $5,000 2.5%
Legal fees and expenses $7,500 3.75%
Total estimated costs of the offering $13,850 6.9%
------- ----
Estimated costs of website development:
Site design, hosting, maintenance for one year $3,500 1.8%
Estimated cost of advertising:
Six months display ad in "STABLE MANAGEMENT" magazine $6,000 3.0%
Attend two trade shows $3,300 1.6%
Travel expenses for site selection and initial consultations $5,000 2.5%
Ownership interest in existing or new boarding stables $168,350 84.18%
Total use of proceeds $200,000 100%
========
14
DETERMINATION OF OFFERING PRICE
We have determined the offering price of the Units in this offering. Because no
underwriter or placement agent has sponsored this offering, the investors will
not have the benefit of an offering price that was determined by negotiations
between such party and us. The price of the Units does not necessarily bear any
relationship to our asset value, net worth, earnings or any other established
criteria of value. See "Plan of Placement."
This Prospectus may be used to offer the common stock registered under the
Registration Statement of which this Prospectus is a part. The common stock
offered will be offered at a fixed rate of $1.00 per share until such time as
the common stock is listed for quotation, and then from time to time in
transactions (which may include block transactions) on the OTC Bulletin Board or
other public market at the then prevailing prices. The exercise price of the A
warrants included in the Units is $2.50 per A Warrant for the 24-month period
following the termination of the offering. The Warrants may be redeemed upon 15
days written notice at a price of $.01 per Warrant if the closing bid prices of
the Common Stock have averaged at least 125% of the exercise price of the
Warrants for any 10 consecutive trading days ending on the third day on which
the Company gives notice.
DILUTION
At July 31, 2004, the net tangible book value of our Common Stock was ($31,673),
or ($0.16) per share. Net tangible book value per share is determined by
dividing the number of shares of Common Stock outstanding into tangible net
worth (tangible assets less liabilities). The pro forma net tangible book value
represents an immediate increase in net tangible book value of $0.50 per share
to existing shareholders and an immediate dilution of $0.50 per share to new
investors purchasing Common Stock in the Offering. The following table
illustrates this dilution:
OFFERING
Offering price per share of Common Stock $1.00
Net tangible book value per share as of July
31, 2004 ($nil)
---
Increase in net tangible book value per
share attributable to sale of shares to new
investors in this offering $0.50
Pro forma net tangible book value per share
after offering $0.50
Dilution per share to new investors $0.50
DIVIDEND POLICY
We have not declared or paid any cash dividends since inception. We intend to
retain future earnings, if any, for use in the operation and expansion of our
business and do not intend to pay any cash dividends in the foreseeable future.
Although there are no restrictions that limit our ability to pay dividends on
our common stock, we intend to retain future earnings for use in our operations
and the expansion of our business.
15
SELLING SECURITY HOLDERS
None.
PLAN OF DISTRIBUTION
The Company, through its directors and officers, is offering the Units on a
"best efforts" basis with respect to the 200,000 Units of Common Stock. The
Company will pay commissions of ten percent (10%) of the Offering Price per
share on any Units sold by participating broker-dealers. To the extent permitted
by law, the Company may pay third parties, including shareholders who are not
directors or officers, a fee of up to five percent (5%) of the Offering Price
per share of any Units sold as a result of their assistance.
The exercise price of the A warrants included in the Units is $2.50 per A
Warrant for the 24-month period following the termination of the offering. The
Warrants may be redeemed upon 15 days written notice at a price of $.01 per
Warrant if the closing bid prices of the Common Stock have averaged at least
125% of the exercise price of the Warrants for any 10 consecutive trading days
ending on the third day on which the Company gives notice.
Restricted Shares
Our officers and directors own 200,000 shares of our common stock. The common
stock held by our officers and directors are "restricted securities" as that
term is defined in Rule 144 promulgated under the Securities Act, and may be
sold only in compliance with Rule 144, pursuant to registration under the
Securities Act or pursuant to an exemption from such registration. Generally,
under Rule 144, each person holding restricted securities for a period of one
year may, every three months, sell in ordinary brokerage transactions or to
market makers an amount of shares up to (and including) the greater of 1% of a
company's then outstanding Common Stock or the average weekly trading volume for
the four weeks prior to the proposed sale. None of such restricted securities
were eligible for sale under Rule 144 as of July 31, 2004.
Following the closing of the offering, if successful, the stockholders may, from
time to time, sell all or a portion of the shares of common stock on any market
upon which the common stock may become quoted, in privately negotiated
transactions or otherwise. Our common stock is not currently listed on any
national exchange or electronic quotation system. To date, no actions have been
taken to list our shares on any national exchange or electronic quotation
system. The shares of common stock may be sold by the stockholders by one or
more of the following methods, without limitation:
(a) block trades in which the broker or dealer so engaged will attempt
to sell the shares of common stock as agent but may position and resell
a portion of the block as principal to facilitate the transaction;
(b) purchases by broker or dealer as principal and resale by the broker
or dealer for its account pursuant to this prospectus;
(c) an exchange distribution in accordance with the rules of the
exchange or quotation system;
(d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
(e) privately negotiated transactions; and
(f) a combination of any aforementioned methods of sale.
In effecting sales, brokers and dealers engaged by the stockholders may arrange
for other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from the stockholders or, if any of the broker-dealers
act as an agent for the purchaser of such shares, from the purchaser in amounts
to be negotiated which are not expected to exceed those customary in the types
16
of transactions involved. Broker-dealers may agree with the stockholders to sell
a specified number of the shares of common stock at a stipulated price per
share. Such an agreement may also require the broker-dealer to purchase as
principal any unsold shares of common stock at the price required to fulfill the
broker-dealer commitment to the stockholders if such broker-dealer is unable to
sell the shares on behalf of the stockholders. Broker-dealers who acquire shares
of common stock as principal may thereafter resell the shares of common stock
from time to time in transactions which may involve block transactions and sales
to and through other broker-dealers, including transactions of the nature
described above. Such sales by a broker-dealer could be at prices and on terms
then prevailing at the time of sale, at prices related to the then-current
market price or in negotiated transactions. In connection with such resales, the
broker-dealer may pay to or receive from the purchasers of the shares,
commissions as described above.
To the extent required under the Securities Act, a post effective amendment to
this registration statement will be filed, disclosing the name of any
broker-dealers, the number of shares of common stock involved, the price at
which the common stock is to be sold, the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, that such
broker-dealers did not conduct any investigation to verify the information set
out in this prospectus and other facts material to the transaction. In addition,
a post-effective amendment to this Registration Statement will be filed to
include any additional or changed material information with respect to the plan
of distribution not previously disclosed herein.
We will be subject to applicable provisions of the Exchange Act and the rules
and regulations under it, including, without limitation, Rule 10b-5 under
Regulation M.
All expenses of the registration statement including, but not limited to, legal,
accounting, printing and mailing fees are and will be borne by us.
LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our interest.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
All directors of our company hold office until the next annual meeting of the
stockholders or until their successors have been elected and qualified. The
officers of our company are appointed by our board of directors and hold office
until their death, resignation or removal from office. Our directors and
executive officers, their ages, positions held, and duration as such, are as
follows:
NAME POSITION HELD WITH THE COMPANY AGE DATE FIRST ELECTED
OR APPOINTED
MICHAEL HIGH PRESIDENT AND CHAIRMAN 44 April 7, 2004
SARA HIGH SECRETARY, TREASURER, AND DIRECTOR 69 April 7, 2004
Business Experience
The following is a brief account of the education and business experience of
each director and executive officer during at least the past five years,
indicating each person's business experience, principal occupation during the
period, and the name and principal business of the organization by which he was
employed. Officers are elected by the Board of Directors and their term of
office is at the discretion of the Board.
17
MICHAEL HIGH, PRESIDENT AND CHAIRMAN
Mr. High received a Bachelor of Science (Engineering) degree in Engineering
Science from the University of Michigan College of Engineering in 1982, and a
Master of Business Administration degree from the Graduate School of the
Mississippi State University in 1987. Since 1982, he has been an active duty
military officer, first in the United States Air Force and since 1997 with the
Arizona Air National Guard. He is currently an F-16 Instructor Pilot and
Lieutenant Colonel. Since 1999, he has, with his wife, owned and operated a
full-service horse boarding and training facility in Tucson, Arizona. Mr. High
devotes 10 to 20 hours a week to providing services to our company. He is not a
director of any other reporting companies.
SARA HIGH, SECRETARY, TREASURER AND DIRECTOR
Mrs. High attended Purdue University, majoring in Speech Therapy. For over
twenty years, she has owned and managed as many as fifteen apartment buildings
and single-family rental residences. Mrs. High currently spends 5 hours each
week providing services to our company, and is not a director of any other
reporting companies.
Committees of the Board
We do not have a separate audit committee at this time. Our entire board of
directors acts as our audit committee.
Family Relationships
Michael High is the son of Sara High.
Involvement in Certain Legal Proceedings
Our directors, executive officers and control persons have not been involved in
any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
4. being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 31, 2004, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current directors and executive officers. Each person has sole
voting and investment power with respect to the shares of common stock, except
as otherwise indicated. Beneficial ownership consists of a direct interest in
the shares of common stock, except as otherwise indicated.
18
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
Michael C. High 100,000 50%
7699 E. Park View Dr Direct Ownership
Tucson AZ 85715
Sara O. High 100,000 50%
7707 E. E. Park View Dr Direct Ownership
Tucson AZ 85715
(1) Based on 200,000 shares outstanding as of July 31 2004.
CHANGES IN CONTROL
We are unaware of any contract, or other arrangement or provision of our
Articles or by-laws, the operation of which may at a subsequent date result in a
change of control of our company.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 100,000,000 shares of Common Stock, $.001 par value
per share, of which 200,000 shares are issued and outstanding at the date of
this prospectus, and 10,000,000 shares of Preferred Stock, $.001 par value per
share, of which no shares are issued and outstanding as of the date of this
prospectus.
Holders of our common stock are entitled to one vote for each share owned for
all matters to be voted on by the shareholders, including the election of
directors. Holders of common stock are entitled to receive such dividends as may
be declared from time to time by our board of directors out of funds legally
available therefore and, in the event of liquidation, dissolution or winding up,
to share ratably in all assets remaining after payment of liabilities. The
holders of common stock have no preemptive or conversion rights. The holders of
common stock are not subject to further calls or assessments. There are no
redemption or sinking fund provisions applicable to the common stock.
DIVIDEND POLICY
Holders of common stock are entitled to receive such dividends as may be
declared by our board of directors. We have not declared or paid cash dividends
on our common stock and we do not anticipate that we will pay such dividends in
the foreseeable future. Rather, we intend to apply any earnings to the
development of our business. Any payment of future dividends on our common stock
and the amount of any dividends will be determined by our board of directors and
will depend, among other factors, upon our earnings, financial condition and
cash requirements, and any other factors our board of directors may deem
relevant.
There are no provisions in our articles of incorporation or our bylaws that
would delay, defer or prevent a change in control of our company.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency basis
19
or had, or is to receive, in connection with the offering, a substantial
interest, directly or indirectly, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of
its parents or subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer or employee.
DISCLOSURE OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide that no director or officer shall be
personally liable to our company or any of its stockholders for damages for
breach of fiduciary duty as a director or officer involving any act or omission
of such director or officer unless such acts or omissions involve:
(i) a breach of the director's duty of loyalty to our company and our
stock holders, (ii) bad faith, intentional misconduct or a knowing
violation of law, (iii) the payment of dividends in violation of the
Arizona Business Corporation Law, or (iv) any transaction from which
the director derived an improper personal benefit.
Our Bylaws provide we have the power to indemnify, to the greatest allowable
extent permitted under the General Corporate Laws of Arizona, directors or
officers of our company for any duties or obligations arising out of any acts or
conduct of the officer or director performed for or on behalf of our company. We
will reimburse each such person for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability, including power
to defend such persons from all suits or claims as provided for under the
provisions of the Arizona Business Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of our company under
Arizona law or otherwise, our company has been advised that the opinion of the
Securities and Exchange Commission is that such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
We were incorporated in the state of Arizona on 7 April, 2004. We have not been
a part of any predecessor companies, nor have we been a part of any bankruptcy,
receivership, or similar proceedings. Likewise, we have not been a party to any
material reclassification, merger, consolidation, or purchase or sale of a
significant amount of assets not in the ordinary course of business.
OUR CURRENT BUSINESS
Presently, our officers spend the majority of their time preparing the company
for immediate post-offering expansion and in the preparation of this SB-2
Registration Statement. Once operations commence, our business will function as
described below:
(1) PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS;
We plan to provide consulting and business management services to owners of new
and existing boarding stables. Specifically, we will assist stable owners in:
o developing a business plan for their operation
o securing debt funding, if required;
o locating a site for their stables (if a new business);
o navigating through the regulatory approvals necessary to gain
any permissions or zoning waivers;
o selecting the best value in barns, fencing, arena footing, and
equipment;
o hiring and managing employees;
o promoting their business and attracting boarders;
o fostering good relationships with neighbors and governing
authorities; and
20
o exploring additional revenue sources such as lessons,
training, horse shows, trailering, tack and feed sales, trail
rides, cart and sled rides, summer camps, pony rides,
therapeutic riding programs, equine-assisted healing programs,
horse sale brokering, etc.
Additionally, we plan to use some of the proceeds from the sale of the
securities registered herein to purchase equity in approximately three boarding
stables (see "Use of Proceeds" on page 12 of this Prospectus).
Many successful boarding stables are located on the periphery of large cities.
The cities and surrounding communities (many of which are not zoned to allow the
keeping of horses) provide the potential horse owners who could board at the
stables of our clients. In rapidly growing areas, the land around the stables is
often bought by developers and used for housing or other commercial purposes.
The increase in land value, plus the concurrent increase in unfavorable
regulations and complaints from new neighbors, could cause some stable owners to
sell their property. If we have an equity position in the stable, we plan to
share in the profits. Some stables have been built and sold in less than five
years, although typically the time frame is longer. Generally one does not start
a boarding stable business with the intent of selling the land at a profit;
rather, a real estate sale can be a viable exit strategy when the time is right.
(2) DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES;
After initial no-fee telephone and/or e-mail consultations, we will send an
employee (initially our president, Mr. High) to the site of the client stable to
provide the services desired by the client. Our company plans to invoice $700
per day for the consulting services, plus reimbursement for airfare or mileage.
After initial consultations, the client will receive ongoing assistance at the
rate of $100 per hour via telephone or e-mail. We plan to initially concentrate
our services in Arizona and the Southwest, but will take clients anywhere in the
nation. We believe that our clients will be primarily the owners of existing
boarding stables, with a lesser number of clients among those starting new
stables or considering doing so.
We also intend to, via our website, www.horsesense.biz, develop a
subscriber-only forum for stable owners to discuss problems and possible
solutions with, and provide referrals to, other stable owners across the
country. This service will be available to both our consultation clients and
non-clients.
(3) STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE;
To date, we have made no public announcement regarding our services.
(4) COMPETITIVE BUSINESS CONDITIONS AND THE SMALL BUSINESS ISSUER'S COMPETITIVE
POSITION IN THE INDUSTRY AND METHODS OF COMPETITION;
The boarding stable industry is a major subset of the horse industry, which
generates $112 Billion annually to the GDP of the USA, according to statistics
available from the American Horse Council. All of the five-plus million horse
owners in the U.S. board their horses somewhere, but more than half board their
horse either at home or at another private residence, not a commercial stable
such as those we plan to service. A major consideration in deciding whether to
invest in a stable will be our assessment of the local situation with respect to
the prevalent attitude toward boarding at home or at a stable. We believe there
are several major advantages to boarding horses at a commercial stable rather
than at home, and much of our promotion effort will be oriented to attracting
home-boarders to the stables of our clients.
There are other stable consultants who provide similar services for a similar
fee. To our knowledge, none of our competitors operate as a public company. We
also have no knowledge of competitors who offer their services nationwide. We
believe we will be unique in our willingness to invest in the stables for which
we provide services. We also believe we will be the first stable consultant to
host an Internet forum.
(5) SOURCES AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF PRINCIPAL
SUPPLIERS;
21
For our services, we require few supplies. We are acquainted, however, with the
major national suppliers of many of the products our clients will require to
operate their boarding stables. Part of our service will be to introduce our
clients to these nationwide suppliers, and provide the possibility of
cooperative buying power. Additionally, we will assist our clients in locating
local sources for such services as hay delivery, bedding and footing purchase,
and manure removal.
(6) DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS;
We anticipate that we will generate enough revenue from on-site and remote
consulting and the Internet forum to continue operations. The major portion of
our revenue, we believe, will ultimately be through the equity position we hold
in the business of some of our clients. Due to the nature of our business, we do
not expect that we will need to spend an inordinate amount of time and resources
on one client at the expense of others. We anticipate that the majority of our
clients will operate stables catering to between 25 and 200 horses, and the
issues facing each of our clients will be similar.
(7) PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS
OR LABOR CONTRACTS, INCLUDING DURATION;
Our website will include a copyright statement, and we plan to apply for a
federal trademark for "Horse Sense Stable Services."
(8) NEED FOR ANY GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES. IF
GOVERNMENT APPROVAL IS NECESSARY AND THE SMALL BUSINESS ISSUER HAS NOT YET
RECEIVED THAT APPROVAL, DISCUSS THE STATUS OF THE APPROVAL WITHIN THE GOVERNMENT
APPROVAL PROCESS;
No federal approval is required for our intended service.
(9) EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE BUSINESS
Regulatory authorities at several levels regulate the horse industry, especially
boarding stables. A major reason stable owners could turn to us is to seek
assistance in complying with government regulations from the local to the
federal level in areas such as waste management, tax compliance, and employee
management.
(10) COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS (FEDERAL, STATE AND
LOCAL);
We will not bear costs of compliance directly. As is always the case, the cost
of compliance with regulations will ultimately be borne by the horse owners who
board at our clients' stables.
(11) NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL TIME EMPLOYEES.
As of July 31, 2004, we have one employee, our president, Michael High. He
handles all of the responsibilities in the area of corporate administration,
business development and research. We have no other employees. In the first six
months following a successful offering, we plan to hire one additional part-time
employee to assist in consulting services. We expect to pay our employee no more
than the consulting revenue he or she generates, and we may choose to compensate
or provide incentives to our employee further with consideration other than
cash, such as shares of our common stock or options to purchase shares of our
common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION Currently, we do not have enough cash on hand to continue
operations beyond this securities registration. After a successful stock
offering, we intend to commence operations immediately with the placement of a
6-month display ad in the major periodical of the boarding stable industry. We
will also attend the first available horse industry trade show to meet our
potential clients and to solidify contacts with industry suppliers. We intend to
develop our website as soon as funds are available, and register it with all the
equine and general search engines. Furthermore, we plan to investigate new or
22
existing boarding stables in which to purchase an ownership interest. Initially,
we will offer our consulting and business management services nationwide, but
will concentrate the search for boarding stables in which to invest to the
Southwest U.S. We plan to only participate as part-owners in properties on which
we can place a lien for the entire amount of our investment. We expect to hire
one part-time employee to assist with our stable consulting and business
management services.
After a successful offering, we do not anticipate the need to raise additional
funds within the next twelve months. Any later offerings will be made only if
funds are needed to purchase additional ownership interests in boarding stables.
OFF-BALANCE SHEET ARRANGEMENTS The Company has no significant off-balance-sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
RESULTS OF OPERATIONS
OVERVIEW APRIL 7, 2004 (DATE OF INCEPTION) TO JULY 31, 2004
From the date of our incorporation on April 7, 2004 to July 31, 2004, we had not
generated any revenue.
DESCRIPTION OF PROPERTY
Our executive and head offices are located at 7699 E Park View Dr, Tucson, AZ,
85715. The offices are rented from Mr. High at the rate of $400 per month and
are located in his residence. This operating facility functions as our main
operating facility. We believe our current premises are adequate for our current
operations, and will search for suitable and appropriate office space when
business conditions dictate the need.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have not been a party to any transaction, proposed transaction, or series of
transactions in which the amount involved exceeds $60,000, and in which, to our
knowledge, any of our directors, officers, five percent beneficial security
holder, or any member of the immediate family of the foregoing persons has had
or will have a direct or indirect material interest.
MARKET FOR THE SHARES AND RELATED STOCKHOLDER MATTERS
Our common stock is not listed or quoted at the present time, and there is no
public market for our common stock. There can be no assurance that a public
market for our common stock will ever develop. We intend to qualify our common
stock for trading on the OTC Bulletin Board or other public market after the
Registration Statement, of which this Prospectus is a part, becomes effective.
We have no options or warrants outstanding at the current time.
23
EXECUTIVE COMPENSATION
No executive officer of our company received an annual salary and bonus that
exceeded $100,000 during the period from inception (April 7, 2004) to July 31,
2004. The following table shows the compensation received by our president for
the period from inception (April 7, 2004) to July 31, 2004.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation (1)
Awards Payouts
Name and Year Salary Bonus Other Securities Restricted LTIP All Other
Principal Annual Underlying Shares or Payouts Compen-
Position Compen- Options/ Restricted sation
sation (1) SARs Share
Granted Units
Michael High 2004 $24,000 Nil Nil Nil Nil Nil Nil
President and
Chairman(2)
Sara High 2004 $8,000 Nil Nil Nil Nil Nil Nil
Secretary,
Treasurer
and Director(3)
(1) The value of perquisites and other personal benefits, securities and
property for the executive officers that do not exceed the lesser of $50,000 or
10% of the total of the annual salary and bonus is not reported herein.
(2) Michael High became our president and chairman on April 7, 2004.
(3) Sara High became our secretary, treasurer and director on April 7, 2004.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
From the date of inception (April 7, 2004) to July 31, 2004 we did not grant any
stock options or stock appreciation rights to any of our directors or officers.
24
COMPENSATION OF DIRECTORS
We plan to reimburse our directors for expenses incurred in connection with
attending board meetings. We did not pay any other director's fees or other cash
compensation for services rendered as a director for the period since our
inception.
We have no formal plan for compensating our directors for their service in their
capacity as directors, although such directors are expected in the future to
receive stock options to purchase common shares as awarded by our board of
directors or (as to future stock options) a compensation committee which may be
established. Directors are entitled to reimbursement for reasonable travel and
other out-of-pocket expenses incurred in connection with attendance at meetings
of our board of directors. Our board of directors may award special remuneration
to any director undertaking any special services on our behalf other than
services ordinarily required of a director. No director received and/or accrued
any compensation for their services as a director, including committee
participation and/or special assignments.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
We have not entered into any employment agreement or consulting agreement with
our directors and executive officers.
There are no arrangements or plans in which we provide pension, retirement or
similar benefits for directors or executive officers. Our directors and
executive officers may receive stock options at the discretion of our board of
directors in the future. We do not have any material bonus or profit sharing
plans pursuant to which cash or non-cash compensation is or may be paid to our
directors or executive officers, except that stock options may be granted at the
discretion of our board of directors.
We have no plans or arrangements in respect of remuneration received or that may
be received by our executive officers to compensate such officers in the event
of termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control, where
the value of such compensation exceeds $60,000 per executive officer.
PENSION, RETIREMENT OR SIMILAR BENEFIT PLANS
There are no arrangements or plans in which we provide pension, retirement or
similar benefits for directors or executive officers. We have no material bonus
or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officers, except that stock options
may be granted at the discretion of the Board of Directors or a committee
thereof.
REPORTS TO SECURITY HOLDERS
We are not required to deliver an annual report to our stockholders but plan to
voluntarily send an annual report, together with our annual audited financial
statements. We are required to file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
Our Securities and Exchange Commission filings are available to the public over
the Internet at the SEC's website at http://www.sec.gov.
The public may read and copy any materials filed by us with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, NW, Washington DC 20549. The public
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The
Internet address of the site is http://www.sec.gov.
25
FINANCIAL STATEMENTS
HORSE SENSE STABLE SERVICES, INC.
(A Development Stage Company)
BALANCE SHEET
July 31,2004
Assets:
Cash and cash equivalents $ 55
Total Current Assets 55
Total Assets $ 55
Liabilities:
Accounts payable $ 1,228
Accrued liabilities 30,500
Total Liabilities 31,728
Stockholders' Equity:
Preferred Stock, par value $.001, authorized
10,000,000 shares, issued 0 at July 31, 2004 --
Common Stock, par value $.001, authorized
100,000,000 shares, issued 200,000 at July 31, 2004 200
Paid-In Capital 1,895
Retained Earnings (Deficit) --
Deficit accumulated during the development stage (33,768)
Total Stockholders' Equity (31,673)
Total Liabilities and Stockholders' Equity $ 55
There are 200,000 common shares issued and outstanding at July 31, 2004
Statement of Operations Data:
Net Revenues $ 0
Net Loss Since Inception $ 33,768
The accompanying notes are an integral part of these
financial statements.
26
HORSE SENSE STABLE SERVICES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Period from Cumulative Since
April 7, 2004 April 7, 2004
To Inception of Development Stage
July 31, 2004
Revenues: $- $-
------------------------------- -------------------------------
Expenses:
General and Adminsitrative 33,768 33,768
Total expenses 33,768 33,768
------------------------------- -------------------------------
Net Loss $(33,768) $(33,768)
--------- ---------
------------------------------- -------------------------------
Earnings per Share, Basic & Diluted
Loss Per Share $(3.24)
-------------------------------
Weighted Average Shares Outstanding 10,435
-------------------------------
The accompanying notes are an integral part of these financial statements.
HORSE SENSE STABLE SERVICES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
SINCE APRIL 7, 2004 (INCEPTION) TO JULY 31, 2004
Common Stock
Deficit Accumulated
Par Paid-In Retained Since April 7, 2004
Shares Value Capital Earnings Inception
---------- --------- ---------- ------------ ----------------------
Balance at April 7, 2004 - $- $- $- $-
(inception)
July 26, 2004 Issuance of Stock
for payment of accounts payable
and consulting services 200,000 $200 $1800 - -
Contributed Capital - - $95 -
Net Loss - - - - $(33,768)
---------- --------- ---------- ------------ ----------------------
Balance at July 31, 2004 200,000 $200 $1,895 $- $(33,768)
---------- --------- ---------- ------------ ----------------------
The accompanying notes are an integral part of these financial statements.
27
HORSE SENSE STABLE SERVICES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period from Cumulative Since
April 7, 2004 April 7, 2004
To Inception of
July 31, 2004 Development Stage
----------------------- ------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the period $(33,768) $(33,768)
Adjustment to reconcile net loss to net cash
Provided by operating activities:
Changes in Operating Assets and Liabilities
Increase (Decrease) in accounts payable 1,228 1,228
Increase (Decrease) in accrued liabilities 30,500 30,500
Common Stock issued for Services 1,500 1,500
----------------------- ------------------------
Net Cash Used in operating activities (540) (540)
----------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - -
----------------------- ------------------------
Net cash provided by investing activities - -
----------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholders 595 595
----------------------- ------------------------
Net Cash Provided by Financing Activities 595 595
----------------------- ------------------------
Net (Decrease) Increase in cash 55 55
Cash at Beginning of Period - -
----------------------- ------------------------
Cash at End of Period $55 $55
----------------------- ------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $- $-
Franchise and income taxes $- $-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: None
The accompanying notes are an integral part of these financial statements.
28
HORSE SENSE STABLE SERVICES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a "going concern", which assume that the
Company will continue in operation for at least one year and will be able to
realize its assets and discharge its liabilities in the normal course of
operations.
Several conditions and events cast doubt about the Company's ability to continue
as a "going concern". The Company has incurred net losses of $33,768 for the
period from April 7, 2004 (inception) to July 31, 2004, has a liquidity problem,
and requires additional financing in order to finance its business activities on
an ongoing basis. The Company is actively pursuing alternative financing and has
had discussions with various third parties, although no firm commitments have
been obtained.
The Company's ability to survive will depend on numerous factors including, but
not limited to, the Company's receiving continued financial support, completing
public equity financing, or generating profitable operations in the future.
These financial statements do not reflect adjust ments that would be necessary
if the Company were unable to continue as a "going concern". While management
believes that the actions already taken or planned, will mitigate the adverse
conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then substantial
adjustments would be necessary to the carrying values of assets, the reported
amounts of its liabilities, the reported revenues and expenses, and the balance
sheet classifications used.
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Horse Sense Stable Services, Inc. is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation The Company was incorporated under the
laws of the State of Arizona on April 7, 2004. The Company has a July 31 year
end.
Nature of Business
The company has no products or services as of July 31, 2004. The Company intends
on providing consulting, bookkeeping, and management services for commercial
boarding stables, including stables owned by the Corporation, as well as,
stables owned by others, which in the opinion of management will provide a
profit to the Company.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
29
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.
Loss per Share
Basic loss per share has been computed by dividing the loss for the year
applicable to the common stockholders by the weighted average number of common
shares outstanding during the years. There were no common equivalent shares
outstanding at July 31, 2004.
Income Taxes
The Company has a net operating loss for income taxes. Due to the regulatory
limitations in utilizing the loss, it is uncertain whether the Company will be
able to realize a benefit from these losses. Therefore, a deferred tax asset has
not been recorded. There are no significant tax differences requiring deferral.
Concentrations of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk
such as foreign exchange contracts, options contracts or other foreign hedging
arrangements.
NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. Continuation of the Company as a going concern is dependent
upon obtaining the additional working capital necessary to be successful in its
planned activity, and the management of the Company has developed a strategy,
which it believes will accomplish this objective through additional equity
funding and long term financing, which will enable the Company to operate for
the coming year.
NOTE 4 - COMMITMENTS
The Company currently leases office space from a shareholder, at the rate of
$400 per month for 6 months or until such time that the Company locates suitable
and appropriate office space.
NOTE 5 - COMMON STOCK TRANSACTIONS
On July 26, 2004, the Company issued 200,000 shares of common stock for $0.01
per share for cash and consulting services.
30
NEW ACCOUNTING PRONOUNCEMENTS
In December 2003, the United States Securities and Exchange Commission issued
Staff Accounting Bulletin No. 104, "Revenue Recognition" (SAB 104), which
supercedes SAB 101, "Revenue Recognition in Financial Statements." The primary
purpose of SAB 104 is to rescind accounting guidance contained in SAB 101
related to multiple element revenue arrangements, which was superceded as a
result of the issuance of EITF 00-21, "Accounting for Revenue Arrangement with
Multiple Deliverables." While the wording of SAB 104 has changed to reflect the
issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain
largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not
have a material impact on our financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). The requirements of SFAS No.
150 apply to issuers' classification and measurement of freestanding financial
instruments, including those that comprise more than one option or forward
contract. SFAS No. 150 does not apply to features that are embedded in a
financial instrument that is not a derivative in its entirety. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatory redeemable financial
instruments of nonpublic entities. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of SFAS No. 150 and still existing
at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of this standard is not expected to have a material
effect on our company's results of operations or financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which amends SFAS No. 123 to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 expands the disclosure requirements of SFAS No. 123 to require more
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The transition provisions of SFAS No. 148 are
effective for fiscal years ended after December 15, 2002. The transition
provisions do not currently have an impact on our company's financial position
and results of operations as our company has no stock-based employee
compensation. Our company will adopt the disclosure requirements of SFAS No. 148
if stock-based compensation is awarded to employees.
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities". The provisions of this Statement are effective for
exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Our company adopted SFAS No. 146 on
October 2, 2003. The effect of adoption of this standard does not currently have
an impact on our company's results of operations and financial position.
FASB has also issued SFAS No. 145, 147 and 149 but they will not have any
relationship to the operations of our company and therefore a description of
each and their respective impact on our company's operations have not been
disclosed.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles used in the United States. Preparing
financial statements requires management to make estimates and assumptions that
31
affect the reported amounts of assets, liabilities, revenue, and expenses. These
estimates and assumptions are affected by management's application of accounting
policies. We believe that understanding the basis and nature of the estimates
and assumptions involved with the following aspects of our consolidated
financial statements is critical to an understanding of our financials.
GOING CONCERN
The audited financial statements included with this prospectus have been
prepared on the going concern basis that assumes that adequate sources of
financing will be obtained as required and that our assets will be realized and
liabilities settled in the ordinary course of business. Accordingly, the audited
financial statements do not include any adjustments related to the
recoverability of assets and classification of assets and liabilities that might
be necessary should we be unable to continue as a going concern.
In order to continue as a going concern, we require additional financing. There
can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to continue as a going concern, we would likely be
unable to realize the carrying value of our assets reflected in the balances set
out in the preparation of the financial statements.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
We engaged the firm of Robison, Hill &Co. Accountants, in August, 2004 to audit
our financial statements for the period ended July 31, 2004. There has been no
change in the accountants and no disagreements with Robison, Hill &Co.
Accountants, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope procedure.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Arizona Revised Statutes (Title 10, Chapter 8, Article 5) permits the
inclusion in the articles of incorporation, provisions limiting or eliminating
the personal monetary liability of directors to a corporation or its
shareholders by reason of their conduct as directors. The Articles of
Incorporation of Horse Sense Stable Services, Inc, contain the provision that no
director or officer of the Corporation shall be personally liable to the
Corporation or any of its stockholders for damages for breach of fiduciary duty
as a director or officer involving any act or omission of any such director or
officer; provided, however, that the foregoing provision shall not eliminate or
limit the liability of a director or officer (i) for acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law, or (ii) the
payment of dividends in violation of Title 10-640 of the Arizona Revised
Statutes.
Our bylaws allow for the elimination of personal monetary liability on the part
of a director to the fullest extent permitted by Arizona law.
ARTICLE XI of the Bylaws of the Registrant provide as follows:
INDEMNIFICATION
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a.) Directors Officers. The corporation shall indemnify its directors and
officers to the fullest extent not prohibited by the Arizona General Corporation
Law; provided, however, that the corporation may modify the extent of such
indemnification by individual contracts with its directors and officers; and,
32
provided, further, that the corporation shall not be required to indemnify any
director or officer in connection with any proceeding (or part thereof)
initiated by such person unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the corporation, (iii) such indemnification is provided by the corporation,
in its sole discretion, pursuant to the powers vested in the corporation under
the Arizona General Corporation Law or (iv) such indemnification is required to
be made under subsection (d).
(b.) Employees and Other Agents. The corporation shall have power to
indemnify its employees and other agents as set forth in the Arizona General
Corporation Law.
(c.) Expense. The corporation shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said mounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise. Notwithstanding the foregoing, unless otherwise
determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by
the corporation to an officer of the corporation (except by reason of the fact
that such officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d.) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standard of conduct that make it permissible under the Arizona General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such officer is or was a director of
the corporation) for advances, the corporation shall be entitled to raise a
defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed in the best interests of the corporation, or with respect to any
criminal action or proceeding that such person acted without reasonable cause to
believe that his conduct was lawful. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Arizona
General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
officer to enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not entitled to
33
be indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the corporation.
(e.) Non-Exclusivity of Rights. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Articles of Incorporation,
Bylaws, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding office. The corporation is specifically authorized to enter into
individual contracts with any or all of its directors, officers, employees or
agents respecting indemnification and advances, to the fullest extent not
prohibited by the Arizona General Corporation Law.
(f.) Survival of Rights. The rights conferred on any person by this Bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g.) Insurance. To the fullest extent permitted by the Arizona General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(h.) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i.) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Bylaw that shall not
have been invalidated, or by any other applicable law.
(j.) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply: (i.) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving of
testimony in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative. (ii.) The term
"expenses" shall be broadly construed and shall include, without limitation,
court costs, attorneys' fees, witness fees, fines, amounts paid in settlement or
judgment and any other costs and expenses of any nature or kind incurred in
connection with any proceeding. (iii.) The term the "corporation" shall include,
in addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent or another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued. (iv.) References to a "director," "executive
officer," "officer," "employee," or "agent" of the corporation shall include,
without limitation, situations where such person is serving at the request of
the corporation as, respectively, a director, executive officer, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise. (v.) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
34
ITEM 25 OTHER EXPENSE OF ISSUANCE AND DISTRIBUTION
The following table lists our estimated expenses of issuance and distribution:
Securities and Exchange Commission registration fee $100
Transfer Agent fees $550
Printing and binding $700
Accounting fees and expenses $5,000
Legal fees and expenses $7,500
Total estimated costs of the offering $13,850
-------
ITEM 26 RECENT SALES OF UNREGISTERED SECURITIES
On July 26, 2004, Horse Sense Stable Services, Inc., issued a total of 200,000
shares to the directors in reliance on Section 4(2) of the Securities Act as no
public offering was involved.
ITEM 27 EXHIBITS
EXHIBIT
NUMBER DESCRIPTION REFERENCE
-------------- ------------------------------------------------------------------------------- --------------
3.1 Articles of Incorporation of Registrant, dated March 29, 2004 *
3.2 By-laws of Registrant *
4.1 Form of Common Stock Certificate *
5.1 Opinion of Kevin M. Sherlock, Esq. as to the legality of securities being *
registered (includes consent).
23.1 Consent of legal counsel *
23.2 Consent of Auditors. *
- ----------
* Filed herewith
ITEM 28. UNDERTAKINGS
(a) Rule 415 Offering. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the forgoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
(2) For determining any liability under the Securities Act of 1933
(the "Securities Act"), to treat each such post-effective
amendment as a new registration statement of the securities
offered, and the offering of the securities at the time to be
the initial bona fide offering.
35
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Imdemnification:
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the small business
issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Tucson, AZ, on October 6, 2004.
HORSE SENSE STABLE SERVICES, INC., an Arizona
Corporation
/s/ Michael C. High
Michael C. High, Chairman of the Board, and
President
/s/ Sara J. High
Sara J. High, Treasurer and Director
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature and Title Date
/s/ Michael C. High October 6, 2004
- ----------------------------------------------------
Michael C. High, Chairman of the Board and President
/s/ Sara J. High October 6, 2004
Sara J. High, Treasurer and Director
36