UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended July 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number 333-141384
Aspen Racing Stables, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0517550
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
18 Spring Valley Terrace SW Calgary, Alberta, Canada T3H 5M1
(Address of principal executive offices)
(403) 370-1176
(Issuer's telephone number)
211 Misty Morning Drive Calgary, Alberta, Canada T3Z 2Z8
(Former Address)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes [X] No [ ].
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act: Yes [ ] No [X ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act: Yes [ ] No [X ].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of July 31, 2007: 5,000,000 shares of common stock.
Aspen Racing Stables Inc.
(A Development Stage Company)
July 31, 2007
Index
Balance Sheets...............................................................F-1
Statements of Operations.....................................................F-2
Statements of Cash Flows.....................................................F-3
Notes to the Financial Statements............................................F-4
Aspen Racing Stables Inc.
(A Development Stage Company)
Balance Sheets
(Expressed in US dollars)
(Unaudited)
July 31, October 31,
2007 2006
$ $
--------- ---------
ASSETS
Current Assets
Cash 96,059 47
Investment in Horses (Note 3) -- 118,608
Prepaid expenses 139 --
- ---------------------------------------------------------------------------------------
Total Assets 96,198 118,655
=======================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable 16,982 28,347
Due to related party (Note 4(b)) 197,103 100,200
- ---------------------------------------------------------------------------------------
Total Liabilities 214,085 128,547
- ---------------------------------------------------------------------------------------
Commitments and Contingencies (Note 1)
Stockholders' Deficit
Preferred Stock, 10,000,000 shares authorized, $0.001 par value
None issued and outstanding -- --
Common Stock, 100,000,000 shares authorized, $0.001 par value
5,000,000 shares issued and outstanding 5,000 5,000
Stock subscriptions receivable -- (5,000)
Donated Capital (Note 4(a)) 12,000 5,250
Deficit Accumulated During the Development Stage (134,887) (15,142)
- ---------------------------------------------------------------------------------------
Total Stockholders' Deficit (117,887) (9,892)
- ---------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit 96,198 118,655
=======================================================================================
(The accompanying notes are an integral part of these financial statements)
F-1
Aspen Racing Stables Inc.
(A Development Stage Company)
Statements of Operations
(Expressed in US dollars)
(Unaudited)
For the period
from
Accumulated from March 10, 2006
March 10, 2006 Three Months Three Months Nine Months (Date of
(Date of Inception) Ended Ended Ended Inception)
to July 31, July 31, July 31, July 31, to July 31,
2007 2007 2006 2007 2006
$ $ $ $ $
--------- --------- --------- --------- ---------
Revenue 100,000 100,000 -- 100,000 --
Cost of sales (100,929) (100,929) -- (100,929) --
- -------------------------------------------------------------------------------------------------------------------------------
Gross Profit (Loss) (929) (929) -- (929) --
- -------------------------------------------------------------------------------------------------------------------------------
Expenses
Donated rent (Note 4(a)) 4,000 750 750 2,250 1,000
Donated services (Note 4(a)) 8,000 1,500 1,500 4,500 3,000
General and administrative 1,683 434 -- 1,079 --
Investor relations 3,300 3,300 -- 3,300 --
Professional fees 38,297 12,914 -- 31,459 --
Stable fees 2,450 -- -- -- --
Writedown of investment in horses (Note 3) 76,228 -- -- 76,228 --
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses 133,958 18,898 2,250 118,816 3,000
-------------------------------------------------------------------------------------------------------------------------------
Net Loss For the Period (134,887) (19,827) (2,250) (119,745) (3,000)
- -------------------------------------------------------------------------------------------------------------------------------
Net Loss Per Share - Basic and Diluted -- -- -- --
===============================================================================================================================
Weighted Average Shares Outstanding 5,000,000 4,860,000 5,000,000 5,000,000
===============================================================================================================================
(The accompanying notes are an integral part of these financial statements)
F-2
Aspen Racing Stables Inc.
(A Development Stage Company)
Statements of Cash Flows
(Expressed in US dollars)
(Unaudited)
For the period
Accumulated From from
March 10, 2006 Nine Months March 10, 2006
(Date of Inception) Ended (Date of Inception)
to July 31, July 31, to July 31,
2007 2007 2006
$ $ $
--------- --------- ---------
Operating Activities
Net loss for the period (134,887) (119,745) (3,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Donated services 12,000 6,750 3,000
Changes in operating assets and liabilities:
Prepaid expenses (139) (139) --
Horse inventory -- 118,608 --
Accounts payable 16,982 (11,365) --
- --------------------------------------------------------------------------------------------------
Net Cash Flows Used In Operating Activities (106,044) (5,891) --
- --------------------------------------------------------------------------------------------------
Financing Activities
Advances from a related party 197,103 96,903 --
Proceeds from issuance of common shares 5,000 5,000 --
- --------------------------------------------------------------------------------------------------
Net Cash Flows Provided By Financing Activities 202,103 101,903 --
- --------------------------------------------------------------------------------------------------
Increase in Cash 96,059 96,012 --
Cash - Beginning of Period -- 47 --
- --------------------------------------------------------------------------------------------------
Cash - End of Period 96,059 96,059 --
==================================================================================================
Supplemental Disclosures
Interest paid -- -- --
Income taxes paid -- -- --
==================================================================================================
(The accompanying notes are an integral part of these financial statements)
F-3
Aspen Racing Stables Inc.
(A Development Stage Company)
Notes to the Financial Statements
(Expressed in US dollars)
1. Nature of Operations and Continuance of Business
Aspen Racing Stables Inc. (the "Company") was incorporated in the State of
Nevada on March 10, 2006. The Company is a Development Stage Company, as
defined by Statement of Financial Accounting Standard ("SFAS") No.7
"Accounting and Reporting by Development Stage Enterprises". The Company's
principal business is the purchase, breeding, training, and resale of
horses. During the year ended October 31, 2006, the Company purchased seven
foals and commenced breeding and training of the foals with the intention
of reselling the horses as yearlings. On May 25, 2007, the Company resold
the horses.
These financial statements have been prepared on a going concern basis,
which implies the Company will continue to realize its assets and discharge
its liabilities in the normal course of business. The Company has never
generated revenues since inception and has never paid any dividends and is
unlikely to pay dividends or generate earnings in the immediate or
foreseeable future. The continuation of the Company as a going concern is
dependent upon the continued financial support from its shareholders, the
ability of the Company to obtain necessary equity financing to continue
operations, and the attainment of profitable operations. As at July 31,
2007, the Company has never generated any revenues and has accumulated
losses of $134,887 since inception and a working capital deficit of
$117,887. These factors raise substantial doubt regarding the Company's
ability to continue as a going concern. These financial statements do not
include any adjustments to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
On March 16, 2007, the Company filed an SB-2 Registration Statement with
the United States Securities and Exchange Commission that was declared
effective on June 12, 2007, to issue 1,000,000 shares of common stock at
$0.30 per share for gross proceeds of $300,000.
2. Summary of Significant Accounting Policies
a) Basis of Presentation
These financial statements and related notes have been prepared by the
Company in accordance with accounting principles generally accepted in the
United States, and are expressed in US dollars. The Company's fiscal
year-end is October 31.
b) Interim Financial Statements
These interim unaudited financial statements have been prepared on the same
basis as the annual financial statements and in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the periods shown. The results of operations
for such periods are not necessarily indicative of the results expected for
a full year or for any future period.
c) Use of Estimates
The preparation of financial statements in conformity with US generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company regularly evaluates estimates and
assumptions related to useful life and recoverability of investment in
horses, donated expenses, and deferred income tax valuation allowances. The
Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other
sources. The actual results experienced by the Company may differ
materially and adversely from the Company's estimates. To the extent there
are material differences between the estimates and the actual results,
future results of operations will be affected.
F-4
Aspen Racing Stables Inc.
(A Development Stage Company)
Notes to the Financial Statements
(Expressed in US dollars)
2. Summary of Significant Accounting Policies (continued) d) Basic and Diluted
Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with SFAS
No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both
basic and diluted earnings per share (EPS) on the face of the income
statement. Basic EPS is computed by dividing net income (loss) available to
common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during the period using
the treasury stock method and convertible preferred stock using the
if-converted method. In computing. Diluted EPS, the average stock price for
the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted EPS
excludes all dilutive potential shares if their effect is anti dilutive. As
at July 31, 2007, and 2006 there are no dilutive potential common shares.
e) Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
the reporting and display of comprehensive loss and its components in the
financial statements. As at July 31, 2007, and October 31, 2006, the
Company has no items that represent a comprehensive loss and, therefore,
has not included a schedule of comprehensive loss in the financial
statements.
f) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three
months or less at the time of issuance to be cash equivalents.
g) Investment in Horses
The value of the horses include all direct acquisition costs incurred and
are recorded at the lower of cost or market until they are available for
sale. As the Company purchases the horses as foals with the intention of
breeding, training, and selling the horses as yearlings (one-year olds),
all costs associated with the acquisition, breeding, and training of the
horses are capitalized. During the nine month period ended July 31, 2007,
the Company recognized a writedown of the carrying costs of $76,228 as a
charge to operations, and sold the investment in horses for proceeds of
$100,000.
h) Financial Instruments
Financial instruments, which include cash, accounts payable, and amounts
due to a related party, were estimated to approximate their carrying values
due to the immediate or short-term maturity of these financial instruments.
The Company's operations are in Canada which results in exposure to market
risks from changes in foreign currency rates. The financial risk is the
risk to the Company's operations that arise from fluctuations in foreign
exchange rates and the degree of volatility of these rates. Currently, the
Company does not use derivative instruments to reduce its exposure to
foreign currency risk.
i) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts
until realization is more likely than not. The Company has adopted SFAS No.
109 "Accounting for Income Taxes" as of its inception. Pursuant to SFAS No.
109 the Company is required to compute tax asset benefits for net operating
losses carried forward. Potential benefit of net operating losses have not
been recognized in these financial statements because the Company cannot be
assured it is more likely than not it will utilize the net operating losses
carried forward in future years.
j) Foreign Currency Translation
The Company's functional and reporting currency is the United States
dollar. Monetary assets and liabilities denominated in foreign currencies
are translated in accordance with SFAS No. 52 "Foreign Currency
Translation", using the exchange rate prevailing at the balance sheet date.
Gains and losses arising on settlement of foreign currency denominated
transactions or balances are included in the determination of income.
Foreign currency transactions are primarily undertaken in Canadian dollars.
The Company has not, to the date of these financials statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.
F-5
Aspen Racing Stables Inc.
(A Development Stage Company)
Notes to the Financial Statements
(Expressed in US dollars)
2. Summary of Significant Accounting Policies (continued)
k) Revenue Recognition
The Company recognizes revenue from the sale of its' horses in accordance
with Securities and Exchange Commission Staff Bulletin No. 104, "Revenue
Recognition in Financial Statements". Revenue is recognized only when the
price is fixed or determinable, persuasive evidence of an arrangement
exists, the horses are available for immediate delivery, and collectibility
is assured. On May 25, 2007, the Company disposed of its entire horse
inventory for total revenue of $100,000.
l) Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities - Including an Amendment of FASB Statement No. 115". This
statement permits entities to choose to measure many financial instruments
and certain other items at fair value. Most of the provisions of SFAS No.
159 apply only to entities that elect the fair value option. However, the
amendment to SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" applies to all entities with available-for-sale and
trading securities. SFAS No. 159 is effective as of the beginning of an
entity's first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, "Fair Value Measurements". The adoption of this
statement is not expected to have a material effect on the Company's
financial statements.
In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No.
108, "Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements." SAB No. 108 addresses
how the effects of prior year uncorrected misstatements should be
considered when quantifying misstatements in current year financial
statements. SAB No. 108 requires companies to quantify misstatements using
a balance sheet and income statement approach and to evaluate whether
either approach results in quantifying an error that is material in light
of relevant quantitative an qualitative factors. SAB No. 108 is effective
for fiscal years ending after November 15, 2006. The adoption of this
statement did not have a material effect on the Company's future reported
financial position or results of operations.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans - an amendment of
FASB Statements No. 87, 88, 106, and 132(R)". This statement requires
employers to recognize the overfunded or underfunded status of a defined
benefit postretirement plan (other than a multiemployer plan) as an asset
or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur
through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for-profit organization. This statement
also requires an employer to measure the funded status of a plan as of the
date of its year-end statement of financial position, with limited
exceptions. The provisions of SFAS No. 158 are effective for employers with
publicly traded equity securities as of the end of the fiscal year ending
after December 15, 2006. The adoption of this statement is not expected to
have a material effect on the Company's future reported financial position
or results of operations.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements".
The objective of SFAS No. 157 is to increase consistency and comparability
in fair value measurements and to expand disclosures about fair value
measurements. SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS No. 157 applies
under other accounting pronouncements that require or permit fair value
measurements and does not require any new fair value measurements. The
provisions of SFAS No. 157 are effective for fair value measurements made
in fiscal years beginning after November 15, 2007. The adoption of this
statement is not expected to have a material effect on the Company's future
reported financial position or results of operations.
In June 2006, the FASB issued FASB Integration No. 48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109"
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes
by prescribing a two-step method of first evaluating whether a tax position
has met a more likely than not recognition threshold and second, measuring
that tax position to determine the amount of benefit to be recognized in
the financial statements. FIN 48 provides guidance on the presentation of
such positions within a classified statement of financial position as well
as on derecognition, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The adoption of this standard is not expected to
have a material effect on the Company's results of operations or financial
position.
F-6
Aspen Racing Stables Inc.
(A Development Stage Company)
Notes to the Financial Statements
(Expressed in US dollars)
3. Investment in Horses
During the nine month period ended July 31, 2007, the Company incurred $nil
(2006 - $nil) of direct acquisition costs and $58,549 (2006 - $nil) of
indirect development costs related to breeding and training of seven
horses. In April, 2007, the Company recorded a writedown of the carrying
value of the horses by $76,228. On May 25, 2007, the Company sold the seven
horses for proceeds of $100,000.
4. Related Party Transactions
a) During the nine month period ended July 31, 2007, the Company
recognized a total of $2,250 (2006 - $1,000) of donated rent at $250
per month and $4,500 (2006 - $2,000) of donated management services at
$500 per month provided by the President of the Company.
b) In August 2006, a relative of a director of the Company advanced
$100,200 to the Company for working capital purposes. During the nine
month period ended July 31, 2007, a relative of a director of the
Company advanced a further $96,903 to the Company for working capital
purposes. At July 31, 2007, the Company owes $197,103 (2006 -
$100,200) for shareholder advances. These advances are unsecured,
non-interest bearing, and are due on demand.
F-7
Item 2. Management's Discussion and Analysis and Plan of Operations
General
The Company's principal business in the purchase, breeding, training and
resale of thoroughbred race horses. In 2006 we purchased seven horses with the
intention of reselling them as two year olds. As of July 31, 2007 we have
generated $100,000 in revenues from the sale of our horses.
Three Months and Nine Months Ended July 31, 2007 Compared to 2006.
Revenues. We have generated $100,000 in revenues for the three months ended
July 31, 2007, versus zero revenues since our incorporation on March 10, 2006.
Expenses. During the three-months ended July 31, 2007, we incurred $18,898
of expenses, consisting mainly of $12,914 of professional (legal and accounting)
fees, and $3,300 of investor relations fees. For the nine months ended April 30,
2007, our expenses were $118,816, consisting mainly of $76,628 in writedown of
carrying value of horses, and $31,459 of professional fees, and of donated
services and rent of $6,750.
Net Loss. For the three months ended July 31, 2007 our net loss was
$19,827. For the nine months ended July 31, 2007 our net loss was $119,745.
Proceeds From Initial Public Offering
The initial public offering of the Company's Common Stock closed on August
24, 2007, and has resulted in the sale of 1,000,000 shares at $0.30 per shares,
for gross proceeds of $300,000.
We will incur continued reporting costs to the SEC, and proceeds from the
offering will be used as required to pay for the legal and accounting costs
related to the filings.
Liquidity
As of July 31, 2007, our cash balance was $96,059 and we had a working
capital deficit of $117,887. We did generated $100,000 in revenues for the nine
months ended July 31, 2007. We had not previously generated any revenues since
our inception. All of our cash needs have been met from private debt financing
and the sale of our equity securities.
In May 2007, we sold our inventory of horses for $100,000. We will use the
proceeds of such sales and money from our initial public offering to acquire a
new inventory of horses at auctions during our fourth fiscal quarter.
With the completion of our initial public offering, we believe that, even
though our auditors have expressed substantial doubt about our ability to
continue as a going concern, we will have sufficient financial resources to meet
our obligations for at least the next twelve months and beyond. Assuming that we
do not increase our current capacity to provide services, our primary cash
requirements would be those associated with maintaining our horses and
maintaining our status as a reporting entity. We believe that on an annual basis
those costs would not exceed $100,000 Based on this belief, we believe we will
have adequate financial resources to meet our financial obligations as we
currently conduct business for at least 12 months.
Item 3. Controls and Procedures
(a) Within the 90-day period prior to the date of this report, we carried
out an evaluation, under the supervision and with the participation of
our management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that
evaluation, the Chief Executive officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company
required to be included in our Exchange Act filings. The Executive
Officer responsible for the financial reporting and disclosure are in
direct control of the books and records of the Company and are
involved first-hand in the decision making process for material
transactions.
9
(b) There have been no significant changes in our internal controls or in
other factors, which could significantly affect internal controls
subsequent to the date we carried out our evaluation.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits.
31.1 Certification by CEO/CFO pursuant to 18 USC Section 1350 as
adopted by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by CEO/CFO pursuant to 18 USC Section 1350 as
adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: September 19, 2007
ASPEN RACING STABLES, INC.
By: /s/ Dwight McLellan
--------------------------
Dwight McLellan, President
10