-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lz1P1Omopg90wp5op4kAnWx40NwjR50heR+H/lbcBTBJuEnFt0/w7EXteoq+QOuq 2PVRLyNvCEaG4xaar8Vg0Q== 0000891554-01-503877.txt : 20010809 0000891554-01-503877.hdr.sgml : 20010809 ACCESSION NUMBER: 0000891554-01-503877 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20010808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILD HEART RANCH INC CENTRAL INDEX KEY: 0001156271 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-67064 FILM NUMBER: 1700713 BUSINESS ADDRESS: STREET 1: 145 TYEE DRIVE STREET 2: NO 1573 CITY: POINTS ROBERT STATE: WA ZIP: 98281-9602 BUSINESS PHONE: 8888899215 MAIL ADDRESS: STREET 1: 145 TYEE DRIVE STREET 2: NO 1573 CITY: POINTS ROBERT STATE: WA ZIP: 98281-9602 SB-2 1 d26395_sb-2.txt FORM SB-2 U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WILD HEART RANCH INC. (Name of small business issuer in its charter) Delaware 3944 1-133976938-001 (State or jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification No.)
145 Tyee Drive, No. 1573, Point Roberts, Washington 98281-9602, (888) 889-9215 (Address and telephone number of principal executive offices) 145 Tyee Drive, No. 1573, Point Roberts, Washington 98281-9602, (888) 889-9215 (Address of principal place of business or intended principal place of business) Dawn Van Zant, Chief Executive Officer, Wild Heart Ranch Inc., 145 Tyee Drive, No. 1573, Point Roberts, Washington 98281-9602, (888) 889-9215 (Name, address and telephone number of agent for service) Copy to: Richard G. Klein, Esq., Hofheimer Gartlir & Gross, LLP, 530 Fifth Avenue, New York, NY 10036 (212) 818-9000 Approximate date of proposed sale to the public: On, and from time to time after, the effective date of this Registration Statement. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /_/ _____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. /_/ ___________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. /_/ ___________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. /_/ ------------------------------ Calculation of Registration Fee
- --------------------------------------------------------------------------------------------------- Title of each Proposed Proposed class of maximum maximum securities to be Amount offering price per aggregate Amount of registered to be registered unit offering price registration fee - --------------------------------------------------------------------------------------------------- Common stock 5,518,024 $1.00 $5,518,024 $1,379.51 - --------------------------------------------------------------------------------------------------- Total Registration Fee $1,379.51 - ---------------------------------------------------------------------------------------------------
The Registrant hereby amends 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 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine. 2 PROSPECTUS for the sale of 5,518,024 shares of common stock of WILD HEART RANCH INC. Of the 5,518,024 shares of our common stock being offered for sale in this offering, 2,518,024 will be sold by the selling security holders named in the "Selling security holders" section on page 29 of this prospectus and 3,000,000 will be sold by us. - -------------------------------------------------------------------------------- Per share Total Price to the public for shares offered by us $ $ Proceeds to us $ $ - -------------------------------------------------------------------------------- We estimate that the initial offering price to the public of the shares being sold by us will be $____ per share. Investing in our common stock involves a high degree of risk. See "Risk Factors" on page seven. 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. The offering of 3,000,000 shares of common stock to be sold by us in this offering will be managed by us, without an underwriter, through our officers and directors, who will receive no sales commission or other compensation except for reimbursement of expenses actually incurred for such activities. While we do not plan to do so at this time, we may engage the services of broker-dealers to assist us in selling the shares. If we do, the maximum commission payable to any such broker-dealer will be 10% of the offering price. Our offering is being made on a "best efforts" basis. We are not required to sell a minimum amount of shares in this offering and all net proceeds will be available to us immediately following our acceptance of investor subscriptions. The offering will expire on , 2001. The date of this prospectus is _____________________, 2001. 3 TABLE OF CONTENTS Page ---- Summary....................................................................... 5 Forward looking statements.................................................... 6 Risk factors.................................................................. 7 Use of proceeds...............................................................14 Determination of offering price...............................................14 Dilution......................................................................14 Dividend policy...............................................................14 Management's discussion and analysis of financial condition and results of operations................................................15 Business......................................................................18 Properties....................................................................25 Legal proceedings.............................................................25 Management....................................................................25 Executive compensation........................................................26 Certain relationships and related transactions................................27 Market for common equity and related stockholder matters......................27 Principal shareholders........................................................28 Selling security holders......................................................29 Description of securities.....................................................31 Shares eligible for future sale...............................................32 Plan of distribution by Wild Heart............................................32 Plan of distribution by selling security holders..............................33 Experts.......................................................................34 Limited liability of directors................................................34 Financial statements..........................................................35 4 Summary Unless the context otherwise requires, all references in this registration statement to "us," "we," "our" or "Wild Heart" mean Wild Heart Ranch Inc. and its wholly-owned subsidiary Treasure Zone Limited. The company We are a content-driven toy company which creates and licenses non-violent toys and products for the boy's and girl's markets based on original ideas and characters. Our current product line consists of "plush" (i.e. stuffed animal) and "pvc" (i.e., plastic) collectible horses based on the children's story entitled The Legend - No More Night Mares(TM) written by Dawn Van Zant, our founder and chairman. With assistance from our new strategic partner, Mandalay Sports Entertainment, we plan to position Wild Heart as an innovator in new content. Our mission is to establish an environment to conceive, create, co-create, identify and produce new marketable content, toy designs, story franchises and product brands for entertainment, merchandising and promotional sales on a global basis. Our corporate address is 145 Tyee Drive, Number 1573, Point Roberts, Washington 98281-9602 and our telephone number is 888-889-9215. The offering (A) Common stock offered by the selling security holders...................... 2,518,024 shares (B) Common stock offered by us............ 3,000,000 shares (C) Common stock outstanding Before offering....................... 5,666,012 shares After offering........................ 8,966,012 shares (D) Use of proceeds....................... Assuming an aggregate offering price to the public of $_____________, we would have approximately $________ in net offering proceeds. We plan to use such net proceeds for: o product development; o manufacturing; o advertising; o content development; and o working capital. We are not required to sell a minimum amount of shares in this offering and all net proceeds from shares sold by us will be available to us immediately following our acceptance of investor subscriptions. We will not receive any of the proceeds of the shares sold by the selling security holders. 5 Summary financial information This summary financial information should be read in conjunction with the section of this prospectus entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with our financial statements and related notes appearing elsewhere in this prospectus. The historical results presented below are not necessarily indicative of future results.
Fiscal Year Ended Three Months Ended December 31, March 31, 1999 2000 2000 2001 ---------------------- ---------------------- (Unaudited) Statement of Operations Data: - ---------------------------- Net sales $149,355 $143,177 $20,767 $12,456 Total cost of sales 78,789 143,580 9,061 2,708 Gross profit (loss) 70,566 (403) 11,706 9,748 Total operating expenses 413,547 601,131 58,226 427,146 Loss from operations (342,981) (601,534) (46,520) (417,398) Net loss (344,514) (601,863) (46,245) (415,633) December 31, 2000 March 31, 2001 ----------------- -------------- (Unaudited) Balance Sheet Data: - ------------------ Working capital $116,908 $225,385 Total assets 436,682 505,986 Total liabilities 132,188 98,792 Total stockholders equity 304,494 407,194
FORWARD LOOKING STATEMENTS This prospectus contains forward-looking statements. We intend to identify forward- looking statements in this prospectus using words such as "believes," "intends," "expects," "may," "will," "should," "plan," "projected," "contemplates," "anticipates," or similar statements. These statements are based on our beliefs as well as assumptions we made using information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. Some, but not all, of the factors that may cause these differences include those discussed in the Risk factors section beginning on page seven of this prospectus. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. 6 * * * * * * * Risk factors Please carefully consider the following risk factors as well as the other information set forth in this prospectus, including our financial statements and the related notes, before deciding to invest in our common stock. Should any of the following risks occur, in addition to risks and uncertainties not presently known to us, the price of our stock, our financial condition, and the results of our operations could be materially impacted, and you could lose all or part of your investment in our common stock. Additional risks not listed below, known or unknown, may also affect the value of our shares. We have a limited operating history and our future financial results are uncertain. We were organized in Delaware in November 1997 and we have a limited operating history as sales commenced in July 1998. Since inception we have incurred significant losses, principally from consulting fees and selling, general and administrative costs. For the year ended December 31, 1999, we had a net loss of $344,514 and a net loss of $601,863 for the year ended December 31, 2000. For the quarter ended March 31, 2001 we had a net loss of $415,633 compared to a net loss of $46,245 for the quarter ended March 31, 2000. Our ability to attain and maintain profitability will depend principally on our ability to create and license new content and on the successful production, marketing and sales of our products. We cannot assure you that we will be able to accomplish our goals or achieve profitability or that profitability, if achieved, can be sustained. We need to obtain substantial additional funds to develop our products and our future access to capital is uncertain. Even though we believe our cash on hand, together with anticipated revenues from the sale of our products, should be sufficient to meet our projected operating and capital requirements for at least the next 12 months, within this time period we will require substantial additional funds to finance our business activities on an ongoing basis. We do not have any commitments or arrangements to obtain additional funds and we cannot assure you that any additional funds, whether through additional sales of securities or collaborative or other arrangements with corporate partners or from other sources, will be available to us when needed or upon terms acceptable to us. If we are unable to obtain additional financing when we need it, we likely will be required to delay, reduce or eliminate the production, sale and marketing of our products and otherwise limit our operations to those that can be financed from cash on hand, which could have a material adverse effect on us. If we raise additional funds by issuing equity securities, dilution to stockholders may result and new investors could have rights superior to holders of shares purchased in this offering. Additionally, to the extent that we incur indebtedness, we will be subject to certain related risks, including the risks that we may be required to pledge or relinquish material rights to our assets that we otherwise would not give up and that cash flow may be insufficient to pay principal and interest on such indebtedness. 7 All monies from subscriptions accepted by us will become immediately available to us. We have structured this offering to avoid requiring us to sell a minimum amount of common stock before we can gain access to the subscription proceeds. Accordingly, all monies from subscriptions accepted by us will become immediately available to us. However, the funds available to us from the proceeds of the offering will be reduced to the extent that less than the maximum amount of common stock is sold, and we cannot assure you that a sufficient amount of money will be raised in this offering to enable us to produce, market and sell new or existing products or otherwise to effect a meaningful commencement of our operations. Although we need to obtain the maximum net proceeds from this offering, in the event that only a small portion of the offering is raised we may not have the capital necessary to fund our operations, and the risk to subscribers of a total loss of their investment in us will be greatly increased and substantial. We cannot assure you that our products will be accepted. Although the horse industry in the US is a $25.3 billion business, and toy industry sales reached $23 billion in 2000, our Armadillo Cowboy Club product line will be a new concept and the No More Night Mare's product line is a relatively new concept. As is typically the case with new concepts, demand and market acceptance are subject to a high level of uncertainty. Our success depends on the interest of young girls in horses carrying over to equine-related toys. Achieving market acceptance for our products will require substantial marketing efforts and the expenditure of significant funds, the availability of which we cannot assure you, to create awareness and demand among retailers and young girls and boys, the primary market for our current and proposed products. Although we recently began working with a strategic partner, we have limited marketing experience, and after the completion of this offering we still will have extremely limited financial, personnel and other resources to undertake extensive marketing activities. Accordingly, no assurance can be given as to the acceptance of any of our products or our ability to generate the revenues necessary to remain in business. We depend on third parties for the manufacture of all of our products. We do not own or operate any manufacturing facilities and we are currently dependent on third-party manufacturers in Hong Kong, China. Therefore, we are and in the future will continue to be dependent upon our manufacturers to supply on a timely basis the quality and quantity of product we require, and to comply with applicable federal toy industry safety standards and state and local regulatory requirements, if any, at a price that is both commercially reasonable to and affordable by us. Should our current manufacturers be unable or unwilling in the future to meet our needs for any reason, we would have to find replacement manufacturers, and we cannot assure you that we would be able to do so, in default of which we likely would lose sales and marketing credibility, which would have a material adverse effect on our financial condition and prospects. 8 We may not be able to successfully market our products to the mass retailers. Beginning in 2001, we shifted our marketing focus from specialty to mass retailers. Although we currently have several agreements with sales representatives for specialty retailers, we have only one agreement with a sales representative for the mass retailers. As we substantially depend on sales representatives for the sale of our products, our inability to enter into additional agreements with representatives for mass retailers could have a material adverse effect on our financial condition. Moreover, these agreements are terminable by either party upon short notice, and it is possible that upon any such termination we would be unable to obtain new sales representatives which would have a material adverse effect on our financial condition and prospects. There are risks associated with our intellectual property rights. Our original legend, "No More Night Mares - A Dream of Freedom" (the "Legend") has been copyrighted in the U.S., Canada the United Kingdom. In addition, we received a copyright in the U.S. on our "Armadillo Cowboy Club" story. While a copyright may prevent others from using an exact copy of the Legend or the Armadillo Cowboy Club, it may not deter others from creating similar works. On December 26, 2000, we received a U.S. Patent for our electroluminescent lamp technology entitled "Illuminated Toy for Night Use by Children" which is used to illuminate the lighted blaze in certain mares in our plush toy line. However, we cannot assure you that this patent will be enforceable or provide protection against competitive products or otherwise be commercially valuable. Moreover, enforcement of intellectual property rights typically requires time-consuming and costly litigation, and there can be no assurance that others will not independently develop substantially similar proprietary technology. We have also received a trademark in the U.S. on the names "Wild Heart Ranch" and "The No More Night Mares Legend". However, we cannot assure you that this will provide significant protection against competing marks or otherwise be commercially valuable. 9 The toy and entertainment businesses have no substantial barriers to entry and we expect intense competition in the marketing and sale of our products. We will compete with other toy companies as well as other forms of entertainment including video games and movies. All of our potential competitors have longer operating histories, greater name recognition, and overwhelmingly greater financial, technical and marketing resources than we do. This intense competition could materially adversely affect our business, operating results and financial condition. In addition, competition for the consuming public's disposable income dollars is extremely intense as the public has a limited number of dollars to spend on toys and other forms of entertainment. Our success depends in large part on our ability to convince the public to expend a portion of those funds on our products. We are exposed to product liability risks which are inherent in the sale of toys. We maintain product liability insurance coverage which we believe is adequate for our needs. However, we cannot assure you that such insurance will provide adequate coverage against potential liabilities. Our success is principally dependent upon the active participation of our chairman and chief executive officer Dawn Van Zant. We do not have an employment agreement with Ms. Van Zant, and therefore she will devote to our affairs only as much time as she, in the exercise of her sole discretion, deems appropriate and she is therefore free to terminate her employment with us at any time. In addition, we do not maintain any "key man" insurance on her life, and in the event we should lose her services for any reason whatsoever our business would suffer materially. We cannot assure you that we would be able to employ qualified person(s) on acceptable terms to replace her. Our success also will depend in large part upon our ability to attract and retain qualified management, marketing and sales personnel, and we cannot assure you that we will be successful in hiring or retaining such qualified personnel. Our inability to do so would have a material adverse effect on our business, financial condition and results of operations. After completion of this offering Dawn Van Zant will exercise effective control of us. As a result of her effective control after this offering, assuming all of the shares offered are sold, Ms. Van Zant will be able generally to direct our affairs and the use of all funds available to us, elect a majority of our directors and cause us to declare or refrain from declaring dividends, increase our authorized capital, issue additional shares of capital stock or other corporate securities and determine the outcome of all matters submitted to the stockholders for approval. This type of concentration of control may also have the effect of delaying, deferring or preventing a change of control of us. 10 Our growth is partly dependent upon our ability to develop our website and employ the most recent e-commerce technology. We have expended considerable resources in creating and enhancing our web site. Significant effort has been expended towards the development of web content and graphics, as well as web maintenance, to include timely product pricing and product availability information. Our inability to update our website, facilitate on-line shopping, and cater to changing tastes, trends and preferences could result in lost customers and sales. In order to remain competitive and improve our internet sell-through rates, we must continue to upgrade the functionality and features of our website. In addition, can't assure you that we'll be able to report or sustain sales growth to recover our capital investment. We cannot predict what regulations may be imposed on us as a provider of online products and services. We're subject to regulations applicable to businesses generally and laws or regulations directly applicable to access to online commerce. Although there are currently few laws and regulations directly applicable to the internet and commercial online services, it is possible that a number of laws and regulations may be adopted with respect to the internet or commercial online services covering issues such as user privacy, pricing, content, copyrights, distribution, antitrust and characteristics and quality of products and services. Furthermore, the growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on those companies conducting business online. The adoption of any additional laws or regulations may decrease the growth of the internet or commercial online services, which could, in turn, decrease the demand for our products and services and increase our cost of doing business, or otherwise have a material adverse effect on our business, financial condition and results of operations. Moreover, the applicability to the internet and commercial online services of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is uncertain and may take years to resolve. Any new legislation or regulations, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the internet and commercial online services, could have a material adverse effect on our business, financial condition and results of operations. We may face potential liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials that appear on our websites. Claims involving defamation, negligence, copyright, patent or trademark infringement, as well as claims based on the nature and content of the materials that appear on websites, have been brought, and sometimes successfully pressed, against online services. We presently do not carry general liability or directors and officers insurance therefore, any imposition of liability 11 could have a material adverse effect on our reputation and our business, financial condition and results of operations. We're dependent on the increased usage and stability of the internet and the web. The usage of the web for products and services such as those offered by us will depend in significant part on continued rapid growth in the number of households and commercial, educational and government institutions with access to the web, in the level of usage by individuals and in the number and quality of products and services designed for use on the web. Because usage of the web as a source for information, products and services is a relatively recent phenomenon, it is difficult to predict whether the number of users drawn to the web will continue to increase and whether any significant market for usage of the web for such purposes will continue to develop and expand. We cannot assure you that internet usage patterns will not decline as the novelty of the medium recedes or that the quality of products and services offered online will improve sufficiently to continue to support user interest. Failure of the web to stimulate user interest and be accessible to a broad audience at moderate costs would jeopardize the markets for our websites. Moreover, issues regarding the stability of the internet's infrastructure remain unresolved. The rapid rise in the number of internet users and increased transmission of audio, video, graphical and other multimedia content over the web has placed increasing strains on the internet's communications and transmission infrastructures. Continuation of such trends could lead to significant deterioration in transmission speeds and reliability of the web and could reduce the usage of the web by businesses and individuals. In addition, to the extent that the web continues to experience significant growth in the number of users and level of use without corresponding increases and improvements in the internet infrastructure, we cannot assure you that the internet will be able to support the demands placed upon it by such continued growth. Any failure of the internet to support an increasing number of users due to inadequate infrastructure or otherwise would seriously limit the development of the web as a viable source of e-commerce and e-commerce services, which could materially and adversely affect the acceptance of our products and services, which would, consequently, materially and adversely affect our business, financial condition and results of operations. Our websites are subject to capacity constraints and system disruptions. The satisfactory performance, reliability and availability of our websites and our network infrastructure are critical to attracting web users and maintaining relationships with consumers. System interruptions that result in the unavailability of our websites or slower response times for consumers would reduce the attractiveness of our websites to customers. Additionally, any substantial increase in traffic on our websites would require us to expand and adapt our network infrastructure. Our inability to add additional software and hardware to accommodate increased traffic on our websites may cause unanticipated system disruptions and result in slower response times. There can be no assurance that we would be able to expand our network infrastructure on a timely basis to meet increased demand. Any increase in system interruptions or slower 12 response times resulting from the above factors could have a material adverse effect on our business, financial condition and results of operations. Our websites are subject to security risks. Programmers or hackers may attempt to penetrate our network security. If successful, such actions could have a material adverse effect on our business, financial condition and results of operations. A party who is able to penetrate our network security could misappropriate proprietary information or cause interruptions in our websites. We may be required to expend significant capital and resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Concerns over the security of internet transactions and the privacy of users may also inhibit the growth of the internet generally, particularly as a means of conducting commercial transactions. Security breaches or the inadvertent transmission of computer viruses could expose us to a risk of loss or litigation and possible liability. We cannot assure you that contractual provisions attempting to limit our liability in these areas will be successful or enforceable, or that other parties will accept such contractual provisions as part of our agreements, any of which could have a material adverse effect on our business, results of operations and financial condition. There are risks associated with the use of our domain names. We currently hold three web domain names, "wildheartranch.com", "horsetoys.com", and "nomorenightmares.com". The regulation of domain names in the U.S. and in foreign countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we cannot assure you that we will be able to acquire or maintain relevant domain names in all countries in which we conduct business. Although we received a trademark on "Wild Hart Ranch" and "The No More Nightmares Legend", the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. Therefore, we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our proprietary rights. Any such inability could have a material adverse effect on our business, financial condition and results of operations. We haven't paid any dividends. We've never paid any dividends on our common stock and we don't intend to pay any in the foreseeable future. We could issue substantial amounts of additional shares without shareholder approval. We have a substantial number of shares of common stock unissued and not reserved for specific issuances which could be issued without any action or approval by our shareholders, thus substantially diluting the percentage ownership of Wild Heart held by purchasers of the securities and potentially adversely affecting the market price of our common stock. 13 Use of Proceeds We will not receive any of the proceeds from the sale of shares of common stock by the selling security holders. However we could receive up to $_________, net of offering expenses, from the sale of 3,000,000 shares by us, which we plan to use for: o product development; o manufacturing; o advertising; o content development; and o working capital. Determination of Offering Price The offering price of the 3,000,000 shares to be sold by us was determined arbitrarily by management and has no bearing to any criterion of value. Dilution The net tangible book value of our common stock at March 31, 2001 was $234,000 or $.04 per share. "Net tangible book value" per share represents our total tangible assets less our total liabilities, divided by the number of shares of our common stock outstanding. Without taking into account any changes in our net tangible book value after March 31, 2001, other than to give effect to the sale of shares of our common stock offered hereby at the assumed offering price and estimated offering expenses of $132,000, the net tangible book value of us at March 31, 2001 would have been $3,102,000 or $.36 per share. This represents an immediate increase in net tangible book value to the existing shareholders of $.32 per share and an immediate dilution of $.64 per share (or 64%) to the investors purchasing the shares offered hereby at the price to the public. The following table illustrates this per share dilution in net tangible book value to new investors. Assumed initial public offering price.................. $1.00 Net tangible book value as of March 31, 2001........... $.04 Increase attributable to new investors................. $.32 Net tangible book value adjusted for this offering..... $.36 Dilution to new investors in this offering............. $.64 ==== Dividend policy We currently intend to retain earnings for use in the operation and expansion of our business and therefore don't anticipate paying any cash dividends in the foreseeable future. Cash dividends, if any, that may be paid in the future to holders of our common stock will be payable when, as, and if declared by our board of directors, based upon our assessment of our financial condition, our earnings, need for funds, capital requirements and other factors. 14 Management's discussion and analysis of financial condition and results of operations Plan of Operations For the last three years the Company has positioned itself as a toy and publishing company based solely on content licensed to the Company by Dawn Van Zant, the Company's founder. The No More Night Mares line of products, based on the No More Night Mares Legend (the "Legend"), includes 14" plush horses with night lights with a patented electroluminescent lighting technology in three different characters, a story on audio cassette, art work illustrated by Kim McElroy, a set of twelve 5" mini plush horses with LED lights and a television pilot based on the Legend, which the Company to date has been unsuccessful in exploiting. The Company views 2001 as a year of positioning. Looking ahead, we expect Wild Heart to change dramatically in sales, operations and diversification of product lines. Proposed new product lines and the new entertainment industry opportunities possible through our strategic relationship with Mandalay Sports Entertainment, a division of Mandalay Entertainment ("Mandalay"), based in Los Angeles, make us optimistic about our potential for increased revenue, market penetration and brand awareness. The Company launched the No More Night Mares line of plush horses three years ago with initial sales and success in the specialty and equine market. Mass retail exposure was limited to QVC, where the line was featured and did relatively well in its first airing, selling out in six minutes. The Company was encouraged by first sales feedback, but could not break into the mass retail markets because of the price points of the products and the lack of advertising support necessary to convince mass retail buyers we could develop a name brand. Our sales stagnated, and the Company has lost money yearly since inception as the specialty market was a limited source of sales and growth. The Company's founder and some of the original investors funded the Company's operations, and all loans incurred have been repaid or converted to common shares at the same price as the shares sold to private placement investors ($1.00 per share). The Company realizes its survival is dependent on diversity and strength of lines in both the girls and boys markets. In July 2000, the Company engaged new consultants to implement a plan for breaking into mass retail markets, expanding the product lines and raising new working capital. In particular, the Company retained a toy development company to expand the No More Night Mares line to include products salable at the price points demanded by the mass retail marketers. The new product line and its prototypes have been featured at Toy Fair 2001, and at the Hong Kong and Dallas toy fairs. This consultant has also accelerated our development of a new boys line of toys based on the "The Armadillo Cowboys Club" story which was licensed to the Company by Ms. Van Zant. The toy industry is seasonal and the majority of sales are during the Christmas season, with orders commencing in June, and the Company is also trying to offset seasonality with spring and summer sales of a proposed new water/play product line. The Company also has leveraged its potential in the publishing and entertainment arena 15 by engaging Mandalay. Under our agreement, Mandalay provides consultation and introduction of relationships in the entertainment industry for existing content, new content and joint content to be developed, and Mandalay received a 5% equity interest in the Company. This agreement gives Wild Heart a presence in Los Angeles, with daily access to contacts, executives and expertise. With Mandalay's assistance our television pilot based on the No More Night Mares Legend is currently being repackaged to better suit the requirements of the entertainment industry. The Company will require additional funding as it moves forward with its new business model, principally to support new product development as well as an advertising budget to establish brand identity. The Company has registered the sale of the three million shares included in this prospectus as a means to obtain short term financing. The Company also has entered into a financial consulting agreement with Ascension Investment Management, LLC ("Ascension") under which, among other things, it agreed to provide us with an interim credit facility, and we have issued to it one million shares. Results of Operations We were organized in Delaware in November 1997 and we have a limited operating history as sales commenced in July 1998. Since inception, we have incurred significant losses, principally from consulting fees and selling, general and administrative costs. In light of our limited operating history and insignificant total net revenues to date, we believe that period-to- period comparisons of our revenues and operating results, including our gross profit and operating expenses as a percentage of total net revenues, are not necessarily meaningful and should not be relied upon as indications of future performance. For the year ended December 31, 1999, we had net sales of $149,355 and a net loss of $344,514, and net sales of $143,177 and a net loss of $601,863 for the year ended December 31, 2000. For the quarter ended March 31, 2001, we had net sales of $12,456 and a net loss of $415,633, compared to net sales of $20,767 and a net loss of $46,245 for the quarter ended March 31, 2000. Our ability to attain and maintain profitability will depend principally on our ability to create and license new content and on the successful production, marketing and sales of our products. We cannot assure you that we will be able to accomplish our goals or achieve profitability, or that profitability, if achieved, can be sustained. Liquidity and Capital Resources Since inception, we have financed our operations primarily through private sales of our common stock and shareholder loans. At December 2000, our stockholders equity was $304,494 and our working capital was $116,908. At March 31, 2001, our stockholders equity was $407,194 and our working capital was $225,385. Net cash used in operating activities increased to $261,516 for the year ended December 31, 2000 from $168,164 for the year ended December 31, 1999. Net cash used in operating 16 activities increased to $192,574 for the three months ended March 31, 2001 from $8,533 for the three months ended March 31, 2000. Net cash used in operating activities during the above periods was principally attributable to operating losses in each of the periods reduced by non-cash expenses. Net cash provided by financing activities increased to $448,019 for fiscal 2000, from $151,302 for fiscal 1999. Net cash provided by financing activities increased to $282,360 for the three months ended March 31, 2001 from $5,064 for the three months ended March 31, 2000. Net cash provided by financing activities during the above periods was principally attributable to loans from shareholders and proceeds from sales of common stock. Our capital requirements depend on numerous factors, including market acceptance of our products, the amount of resources we devote to investments in our products, the resources we devote to marketing and selling our products and other factors. Even though we believe our cash on hand, together with anticipated revenues from the sale of our products, should be sufficient to meet our projected operating and capital requirements for at least the next 12 months, within this time period we will require substantial additional funds to finance our business activities on an ongoing basis. We do not have any commitments or arrangements to obtain additional funds and we cannot assure you that any additional funds, whether through additional sales of securities or collaborative or other arrangements with corporate partners or from other sources, will be available to us when needed or upon terms acceptable to us. If we are unable to obtain additional financing when we need it, we likely will be required to delay, reduce or eliminate the production, sale and marketing of our products and otherwise limit our operations to those that can be financed from cash on hand, which could have a material adverse effect on us. If we raise additional funds by issuing equity securities, dilution to stockholders may result and new investors could have rights superior to holders of shares purchased in this offering. Additionally, to the extent that we incur indebtedness, we will be subject to certain related risks, including the risks that we may be required to pledge or relinquish material rights to our assets that we otherwise would not give up and that cash flow may be insufficient to pay principal and interest on such indebtedness. 17 Business Overview We were formed in the State of Delaware in November 1997 and are a content-driven toy company which creates and licenses non-violent toys and products for the boy's and girl's markets based on original ideas and characters. With the assistance of our new strategic partner, Mandalay Sports Entertainment, we plan to position Wild Heart as an innovator in new content. See "Sales and Marketing," below. Our mission is to establish an environment to conceive, create, co-create, identify and produce new marketable content, toy designs, story franchises and product brands for entertainment, merchandising and promotional sales on a global basis. Products (a) Toys 1. The Legend Our current product line consists of "plush" (i.e. stuffed animal) and "pvc" (i.e., plastic) collectible horses based on the children's story entitled The Legend - No More Night Mares(TM) (the "Legend") written by Dawn Van Zant, our founder and chairman. The Legend tells the original story of a mythical herd of wild horses and their three mares. The first story in the Legend series, No More Night Mares...A Dream of Freedom, has been copyrighted in Canada, the U.S. and the United Kingdom. The Legend and related products, including artwork based on the Legend by equine artist Kim McElroy, can be viewed on our website at www.wildheartranch.com . In 1998 we launched our first product line, which consists of 14" plush horses that replicate the three mares in the Legend: Moonbeam, a palomino; Comet, a pinto; and Lucky Stars, an appaloosa. Each mare has its own distinct lighted blaze, i.e., the broad white mark down the horse's face which extends over the bones of the nose, and which is lit using electroluminescent ("EL") lighting technology. In December 2000, we received a U.S. patent for our use of the EL light in toys. See "Intellectual Property - below." We designed and, in August 2000, had a third party manufacture 12,000 first edition and 20,000 second edition 14-inch mares. In the fall of 1999 we introduced our second product line, the Lucky Stars Collection, which consists of 12 different 5-inch plush mares which utilize LED lights and light bulbs, a less expensive alternative to our EL lighting technology. These toys are sold in sets of 4 and 12 mares, in each case with a nametag and poem depicting each horse's character and strength. 18 Both product lines, most of which have been sold, are distributed in specialty markets comprised of approximately 600 retail stores. In July 2000, we retained Scrambled Eggz Productions, a product development company, to expand our plush line of horses and reposition us with new products and designs suitable for the mass retail markets. We created new product line extensions of both our plush and plastic toys, all focusing on light, magic and horses. These products, which are also based on the Legend, have realistic horse colors and long, brushable hair and manes. All of the new products aim to empower children by teaching them not to be afraid of the dark. Many products include light sources such as LED lights and glow-in-the-dark paint. We believe that the light and sound elements of these products add interactive play value and enhance the characters of Comet, Moonbeam and Lucky Stars. In addition, we believe that the combinations of mare and foal (mom and baby) make the play value and appeal for little girls even stronger. The following is a list of our products planned for the fourth quarter of 2001: o 13" plush horse with light and sound; o 13" unicorn with light and sound; o 14" mare/foal interactive plush horse with light and sound; o glow-in-the-dark playset consisting of a plastic horse under a light-up dome designed to replicate the night sky; o 14" mare/foal interactive plastic horse with light (5 styles); o 33" plush floppy horse; and o 25" plush floppy horse. All products will include the new animated CD-Rom of the Legend. 2. The Armadillo Cowboy Club In August 2000, we acquired the exclusive license to the original story entitled "The Armadillo Cowboy Club", written by Dawn Van Zant. Currently, we are focusing on selling the content for cartoons, comic books and television shows. In the next one to two years, we plan to develop a related line of plastic toys aimed at boys aged 6 to 14. We have already completed the drawings for these toys, which consist of cowboys, coyotes, a rattlesnake and a tarantula, but we expect that the prototypes will not be ready until next year. We also plan to develop additional key characters which will be modeled after horses. Depending on the success of these products, we may introduce other products based on this story which will be interactive. Contingent upon the receipt of the necessary funding, as to which we cannot assure you, we plan to create a marketing and development group that will be responsible for expanding the Armadillo brand into other collectible boy areas. See "New Ventures Group" - below. (b) Artwork We sell a series of color prints designed exclusively for us by equine artist Kim McElroy, which depict the horses in the Legend. Each print is 18" x 24" and is sold unframed. In 19 November 1997 we entered into an agreement with Ms. McElroy to produce these prints, pursuant to which she is entitled to a royalty of 1% of net sales. She was paid an advance of $10,000 against royalties and to date, we do not owe her any additional money. (c) Audio Cassettes We sell a 20 minute audio cassette in which a narrator reads the Legend. (d) Proposed Television Series In April 1998, we entered into a two-phase creative development agreement with Wayne Chesler. In the first phase Mr. Chesler developed for us a pilot and treatment for a children's television series based on the Legend, for which he received $21,000 and 50,000 shares of our common stock. In the second phase, which began in November 1998, Mr. Chesler began presenting the project to television networks and production companies with the intent of selling, co-developing or funding the proposed television series. Effective April 6, 2001, our agreement with Wayne Chesler expired, however, in April 2001, we entered into a one-year agreement, with the possibility of a one-year extension, with Mandalay Sports Entertainment ("Mandalay") to assist us in pursuing new relationships in the entertainment industry to sell and develop the concept into a television series or movie. See "Sales and Marketing," below. (e) Line extensions and new product lines In the near future, we plan to develop greeting cards, t-shirts and other items based on the Legend. Although we cannot assure you, other sources of proprietary product that we plan to explore include the archives of major toy companies which have dropped successful brands that did not meet their minimum sales level criteria. Some of these brands represent immediate content opportunities. These companies also represent opportunities in licensing, joint ventures and category-swapping. Over the next 12 months, we plan to attend international trade shows in Japan, the United Kingdom, Nuremberg and other European markets to identify and obtain the rights to ideas that have the potential to be expanded to content. We also plan to use our relationship with Mandalay to contact and build relationships with Hollywood studios and licensing agents for potential new content and product. Finally, we may expand our relationship within the publishing community to develop licensing opportunities, joint ventures and strategic alliances. No assurance can be given that any future products or line extensions will be developed or, if developed, that they will be commercially successful. Industry According to statistics from the Toy Manufacturers of America, Inc., annual sales of traditional toys in the U.S. (excluding video games), increased steadily from 1996 to $23 billion 20 in 2000. Including video games, annual U.S. toy sales in 2000 were $29.4 billion. Sales of video games in the U.S. nearly doubled since 1996 from $3.6 billion to $6.4 billion. The market for "ride-on" toys, which includes tricycles, skates and skateboards, increased by 48.6% from 1999 to 2000 to $1.14 billion, the largest increase of any product category. During the same period, although "plush" toys and action figure (plastic) toys collectively account for a greater share of the toy market than ride-ons, the market for plush toys decreased 35% from 1999 to 2000, to $1.5 billion and the market for action figure (plastic) toys decreased 26.7% from 1999 to 2000 to $823 million. Competition Generally, the toy market is highly competitive and difficult to penetrate without substantial advertising prior to a new product launch, and we cannot assure you that we will be able to compete successfully. We will compete with other toy manufacturers, including Disney, Mattel, Tyco, Steiff, Gund, TY, 24K, Breyer Animal Creations and Peter Stone, all of which have longer operating histories, greater name recognition and vastly greater personnel, financial, marketing and other resources than we do. With the exception of Steiff, Gund, 24K, Breyer and Peter Stone, these manufacturers concentrate their distribution on the top 10 mass retail discount and toy chains, a market which we plan to begin exploiting. However, we will indirectly compete with Steiff, Gund, 24K, Breyer and Peter Stone since they target the same customers that we do. We were able to enter the toy industry by first establishing our products in the specialty markets. In the past, we had over 600 gift and specialty stores retailing our product lines, as well as over 70 internet retailers. We currently sell our product in over 200 equine outlets. We believe that utilizing the specialty markets enabled us to establish consumer loyalty to our product name and image and positioned our products to be expanded into the mass retail markets, although no assurances can be given. Hundreds of plush toys currently are marketed, ranging from $4.99 plush animals to $500 teddy bears from Boyd's, Gund and Steiff. In addition, many model horse (plastic) toys are marketed by companies like Breyer and Peter Stone. Although no assurances can be given, we believe that because the selection of plush horse toys is sparse, we will be able to capture an untapped audience of horse enthusiasts. According to statistics released in 1999 by the American Horse Council, the U.S. horse industry is a $25.3 billion business consisting of nearly seven million horses and more than seven million enthusiasts. We also will compete with other forms of entertainment, including video games and movies. Competition for the consuming public's disposable income dollars is extremely intense as the public has a limited number of dollars to spend on entertainment. Our success will depend in part on our ability to convince the public to expend a portion of those funds on our products. 21 Sales and Marketing In the past, we sold our products to over 600 gift and specialty retailers in addition to over 70 on-line retailers. Beginning in 2001 we shifted our marketing efforts towards the mass retail markets, focusing on the top ten toy retailers, including Wal-Mart, Toys 'R Us, K-Mart, Target Stores, and J.C. Penney. In addition, we recently attended the three primary trade shows in the industry: the toy fairs in New York, Dallas, and Hong Kong, where our new product lines or their prototypes were presented. We intend to reach mass retailers through a national network of independent sales representatives on whose efforts we will substantially depend for the sale of our products, as well as through toy and horse industry trade shows and publications. Although we have several agreements with representatives for specialty retailers, we currently have only one agreement with a representative for the mass retailers, and we cannot assure you that we will be able to enter into any additional agreements. In addition to selling our product in over 200 equine outlets, we directly market our toys, artwork and related products through our website. See "Website" below. In June 2000, we entered into a consulting agreement with an individual to provide regulatory advice, agreement and contract consultation, financial and investment consultation and marketing services. In consideration for these services, he will receive an hourly fee with a minimum of $50,000 per year. In November 2000, we entered into a one-year agreement with Mancini Marketing for marketing and promotional consultant services. As consideration for Mancini's services, we will pay a fee of $2,500 per month plus 100,000 shares of our common stock to be issued at a rate of 25,000 shares per quarter, commencing the first quarter of 2001. None of these shares are being registered in this offering. Effective April 1, 2001, we entered into a one-year agreement with Mandalay Sports Entertainment, a division of the Los Angeles-based Mandalay Entertainment, to provide packaging and consulting services. Such services may include: o consultation related to the development of our literary projects; o participation in the development of our business model; o facilitation of relationships and alliances designed to improve our visibility, image and business; 22 o facilitation of new business opportunities designed to enhance and expand our core business and capabilities; and o providing introductions and access to Mandalay's sports and entertainment relationships and resources. In consideration for these services, we will pay Mandalay a fee of $150,000, payable in 12 equal monthly installments. In addition, Mandalay received from Dawn Van Zant, our founder and principal shareholder, shares of our common stock representing a 5% equity interest in Wild Heart. Although the agreement expires March 31, 2002, the parties have agreed, for the period from January 1, 2002 through March 1, 2002, to negotiate in good faith for a one-year extension of the agreement. Order fulfillment We fulfill some of our orders from warehouses in Tennessee and Point Roberts, Washington. The rest of our products are shipped directly from the manufacturer in Hong Kong. See "Properties," below. We build inventory on a per order basis and are paid via letter of credit and/or open account. Although no assurances can be given, we plan to relocate our shipping and fulfillment to a Los Angeles base later this year. Website Our website (www.wildheartranch.com) is aimed at parents of boys and girls ages three through twelve and is designed as a safe, non-violent entertainment and education destination site. The website provides a store locator which allows customers to find retailers in their area as well as an extensive list of internet retailers. The website also allows visitors to purchase products from us directly by providing a link to our wholly-owned domain, www.horsetoys.com. We recently produced and launched our first web episode (called a "webisode") which is accessible on the home page of our website. Created for us by Scrambled Eggz Productions, it is an animated feature which summarizes the story of the Legend and introduces the key horse characters. The feature is also available on CD-Rom and will be included as a bonus with the purchase of all 2001 toy lines. New Ventures Group and Strategy for Growth In furtherance of our growth strategy and contingent upon the receipt of the necessary funding, as to which we can give no assurances, we plan to hire a group of personnel, called the "New Ventures Group", who would be responsible for establishing a broad strategic vision for us for no less than the next three years. Both the existing No More Night Mares brand, inclusive of line extensions, as well the recently-acquired Armadillo Cowboy Club brand, would be managed by a brand and product director. Product and marketing directors outside of the New Ventures 23 Group would handle the day-to-day management of these brands. The Group would investigate the following areas: o the expansion of the No More Night Mares (TM) brand into other collectible areas; o the expansion of the girls' category to include interactive content and broadening of the target audience to include pre-teens, either through licensing or buying content that's fully developed; or developing products that utilize traditional play patterns, doll, fashion and role play; o the development of parent/child play patterns to include interactive content with or without a product purchase; o exploration of educational and "edutainment" products and the development of a brand/spokes-brand to leverage the capability of technology; e.g., an animal that wants to learn; o exploration of opportunities in the area of music; o expansion, investigation and application of new technology and interactive content in traditional boys' play patterns, e.g., vehicles, action figures, and sporting goods; and o expansion of the Armadillo Cowboy Club(TM) brand into other collectable boy areas, with a focus on selling content to drive product development. Manufacturing We do not have any manufacturing facilities. We have relied on third parties based in Hong Kong, China, to manufacture our products to our specifications, and we plan to continue to do so in the future. Intellectual Property On December 26, 2000, we received U.S. Patent No. 6,165,037 for our electroluminescent lamp technology entitled "Illuminated Toy for Night Use by Children." Our original legend "No More Night Mares . . . A Dream of Freedom" was copyrighted in the U.S. on January 21, 1998 under Registration No. TXu844-509 and in Canada on February 20, 1998 under Registration No. 467356. We also have received a copyright for this story in the United Kingdom. Our "Armadillo Cowboy Club" story was copyrighted in the U.S. on October 13, 1998 under Registration No. TXu879-460. We also have received a trademark in the U.S. on the names "Wild Heart Ranch" and "The No More Night Mares Legend", under Registration Nos. 2337508 and 2269076, respectively. 24 Properties We lease approximately 2,500 square feet of warehouse space located at 639 Pickwick, Savannah, Tennessee 38372, on a month-to-month basis, for $1,800 per month. We also lease a small warehouse space at 145 Tyee Drive, Point Roberts, Washington 98281-9602 for $100 per month pursuant to a one-year agreement which expires on July 14, 2001, at which point it will convert to a month-to-month lease. We also utilize office space at the house of Dawn Van Zant, our founder and chairman, free of charge. Employees As of August 1, 2001, we had five employees, of whom three are full-time and two are part-time. We also make extensive use of consultants. Legal proceedings We are not a party to any pending legal proceedings. Management (a) Officers and directors: The following table provides information concerning each of our officers and directors and their positions and ages as of August 1, 2001. All directors hold office until the next annual meeting of shareholders or until their successors have been elected and qualified, or until a director's death, resignation or removal. Name Age Position - ---- --- -------- Dawn Van Zant 42 chairman of the board and chief executive officer Robert L. Trow 55 director Guy McCarter 44 director Linda Mancuso 42 director - ---------- Dawn Van Zant: Ms. Van Zant is our founder, chairman and chief executive officer. She is also the president of ECON Investor Relations, Inc., an investor/public relations consulting 25 firm which she co-founded in 1996. From 1993 to 1996, Ms. Van Zant was a self-employed investor/public relations consultant whose clients included public companies listed on NASDAQ, among other exchanges. Ms. Van Zant has over 20 years of experience in the investment industry, including positions as a broker, trader and investor relations/corporate communications adviser. Robert L. Trow: Mr. Trow became a director in May 2001. Since September 1999, he has been the chairman and CEO of Seafood USA in Hunarock, Massachusetts. From March 1993 until September 1999, he was a corporate vice-president and president of the mid-atlantic division of UNICCO Service Company in Boston, Massachusetts. In addition, he has served as vice-president of several universities and colleges in Massachusetts, New Jersey and New York. He received a B.A. in history from Hartwick College, an M.S. in counseling psychology from Long Island University and an Ed.D. in administration, planning and social policy from Harvard University. Guy McCarter: Mr. McCarter became a director in July 2001. Since July 2000 he has been director of entertainment marketing at OMD USA, a media services company which handles media strategy and execution for the advertising agencies BBDO, DDB and TBWA/Chiat Day. From January 1984 until June 2000, Mr. McCarter worked at BBDO as a programming director where he was responsible for negotiating television sponsorships. Linda Mancuso: Ms. Mancuso became a director in July 2001. She is currently chief operating officer of Peter Engel Productions, a producer of teen-oriented television. Executive compensation The following table summarizes the compensation for the fiscal year ended December 31, 2000 and the prior two fiscal years earned by or paid to our chief executive officer. No other executive officer earned over $100,000 per year during those years. 26 Long term compensation Annual compensation Awards ------------------- securities Name and underlying principal position Year Salary Bonus Options(#)/SARS - ------------------ ---- ------ ----- --------------- Dawn Van Zant, 2000 0 0 0 chief executive officer 1999 0 0 0 1998 0 0 0 Certain relationships and related transactions On August 1, 2000, we entered into an exclusive license agreement with Dawn Van Zant, our chairman and founder, for the rights to her original story, "The Armadillo Cowboy Club." Pursuant to the agreement Ms. Van Zant received 200,000 shares of our common stock and she is eligible to receive 200,000 additional shares after the first sales in the product line and a further 500,000 shares after the first $5,000,000 in sales. In November 2000, we issued 230,219 shares of our common stock to ECON Corporate Relations, Inc. ("ECON"), a company owned by Dawn Van Zant, as repayment of an aggregate of $230,219 of working capital advances it made to us. All of these shares are being registered in this offering. In January 2001, we entered into a two-year financial consulting agreement with Ascension Investment Management, LLC ("Ascension") in which Ascension will assist us in raising capital as well as providing a line of credit as interim financing if necessary. Pursuant to the terms of the agreement, we issued to Ascension 1,000,000 shares of our common stock, which resulted in Ascension becoming a holder of greater than 5% of our outstanding shares of common stock. On June 21, June 29 and July 12, 2001, we granted to each of our outside directors Robert L. Trow, Linda Mancuso and Guy McCarter, respectively, options to purchase 100,000 shares of our common stock at $1.00 per share, which options are exercisable commencing one year from the date of grant. Market for common equity and related stockholder matters Currently, there is no trading market for our securities and we cannot assure you that any market will develop in the future. In addition, even if a trading market does develop, we cannot assure you that our common stock can be resold either at or near its original offering prices. We intend to arrange to list our common stock on the NASDAQ's Over the Counter Bulletin Board. However, we cannot assure you that we will qualify for such listing. Holders of Record As of August 1, 2001, there were 93 holders of record of our common stock. 27 Dividends Since our inception, we have not declared any dividends on our common stock and, since we currently intend to retain earnings for use in operations and the expansion of our business, we do not anticipate paying any cash dividends in the foreseeable future. Principal shareholders The following table contains information regarding ownership of our common stock, which are our only voting securities, as of August 1, 2001 for: o each person who beneficially owns more than 5% of our common stock, o each of our directors and executive officers, and o all of our directors and executive officers as a group. Unless otherwise indicated, we believe that the individuals listed below have the sole power to vote and dispose of the number of shares listed opposite their respective names. Shares beneficially owned
Percentage of class ------------------------- Before After Name and Address Office Shares owned Offering Offering - ---------------- ------ ------------ -------- -------- Dawn Van Zant chairman 1,681,713(1) 30% 15% 5134 Cliff Drive and chief Delta, BC V4M 2C6 executive Canada officer Robert L. Trow director 0 0 0 The Esplanade Suite West 1105 75-83 Cambridge Parkway Cambridge, MA 02142 Guy McCarter director 0 0 0 214 W. 17th Street New York, NY 10011 Linda Mancuso director 0 0 0 330 Bob Hope Dr. Burbank, CA 91523 All officers 1,681,713 30 15 and directors as a group (4 people)
28 J. Peter Lynch 360,522(3) 6 4 407 Pound Ridge Rd., Rte. 124 South Salem, NY 10590 Mandalay Sports Entertainment 283,301 5 3 4751 Wilshire Blvd., Third floor Los Angeles, CA 90010 Ascension Investment 1,085,000 19 0 Management, LLC 491 Kilvert Street Suite 200 Warwick, RI 02886
- ---------- (1) Includes 2 shares held by her minor children, 300,000 shares held in trust for her minor children, 9,471 shares owned by DCT Creations ("DCT"), a company which she controls, and 310,553 shares owned by ECON Investor Relations, Inc. ("ECON"), a company owned by Ms. Van Zant. This amount does not include an aggregate of 700,000 additional shares to which Ms. Van Zant may be entitled pursuant to our license agreement with her for rights to her original "Armadillo Cowboy Club" story. All of the shares owned by DCT and ECON are being registered in this offering. (2) Less than one percent. (3) Includes 50,000 shares held in trust for his minor daughter. Selling security holders The following table sets forth certain information, as of the date of this prospectus, with respect to the selling security holders and their shares of common stock covered by this prospectus. The table assumes that all shares which will be registered based on the filing of this prospectus will be sold. None of the selling security holders has had any position, office or other material relationship with us within the past three years other than as a result of the ownership of our shares of common stock, except that: o Ascension Investment Management, LLC acted as a finder in connection with one of our private placements and is performing consulting services for us; o DCT Creations and ECON Investor Relations, Inc. are controlled and owned, respectively, by our founder and CEO Dawn Van Zant; 29 o Dean M. DeNuccio and Chad Verdi are performing consulting services for us; o Jennifer Randle is our corporate secretary; o Belinda Burke and Valerie Sundahl are our employees; and o Tanglewood Marketing Group, Inc. is one of our sales representatives.
- ------------------------------------------------------------------------------------------------------------------ Percentage Shares of shares beneficially Shares owned owned owned Registered following following Selling Stockholder prior to offering Shares offering offering - ------------------------------------------------------------------------------------------------------------------ Ascension Investment 1,085,000 Management, LLC - ------------------------------------------------------------------------------------------------------------------ Bacon, H. Robert 180,000 - ------------------------------------------------------------------------------------------------------------------ Burke, Belinda 10,000 - ------------------------------------------------------------------------------------------------------------------ Campbell, Harriet 20,000 - ------------------------------------------------------------------------------------------------------------------ Cavedon, Christopher 180,000 - ------------------------------------------------------------------------------------------------------------------ DCT Creations 9,471 - ------------------------------------------------------------------------------------------------------------------ Dellagrotta, Michael C. 25,000 - ------------------------------------------------------------------------------------------------------------------ DeNuccio, Dean M. 50,000 - ------------------------------------------------------------------------------------------------------------------ ECON Investor Relations, 310,553 Inc. - ------------------------------------------------------------------------------------------------------------------ Gulko, Peter 100,000 - ------------------------------------------------------------------------------------------------------------------ Gunas, Susan R. 50,000 - ------------------------------------------------------------------------------------------------------------------ Lary, Al 10,000 - ------------------------------------------------------------------------------------------------------------------ Posner, Robert I. 25,000 - ------------------------------------------------------------------------------------------------------------------ Randle, Jennifer 10,000 - ------------------------------------------------------------------------------------------------------------------ Readey, Jr., John H. 60,000 - ------------------------------------------------------------------------------------------------------------------ Sundahl, Valerie 10,000 - ------------------------------------------------------------------------------------------------------------------ Tanglewood Marketing 300,000 Group, Inc. - ------------------------------------------------------------------------------------------------------------------ Verdi, Chad 83,000 - ------------------------------------------------------------------------------------------------------------------
30 Description of securities Authorized stock Our authorized capital stock consists of 10 million shares of common stock, par value $.001. Common stock As of August 1, 2001, we have 5,666,012 shares of common stock outstanding. All outstanding shares of common stock are duly authorized, validly issued, fully paid and nonassessable. Holders of common stock are entitled to receive dividends, when and if declared by the board of directors, out of funds legally available for that purpose and to share ratably in our net assets upon liquidation, after provision has been made for each class of stock, if any, having preference over the common stock. Holders of common stock are entitled to one vote per share on all matters requiring a vote of shareholders. Since the common stock does not have cumulative voting rights in electing directors, the holders of more than a majority of the outstanding shares of common stock voting for the election of directors can elect all of the directors whose terms expire that year, if they choose to do so. Holders of common stock do not have preemptive or other rights to subscribe for additional shares. Transfer agent The transfer agent and registrar for our stock is Florida Atlantic Stock Transfer Co., Inc., Tamarac, Florida. 31 Shares eligible for future sale The future sale of a substantial number of shares of our common stock, or the perception that these sales could occur, could adversely affect prevailing market prices for the common stock, if any. In addition, any future sale or perception of a future sale could make it more difficult for us to sell equity, or equity-related, securities in the future at a time and price that we deem appropriate. Upon completion of this offering, we will have 8,966,012 shares of common stock outstanding. In addition, we have 500,000 shares of common stock reserved for issuance to induce individuals to become outside directors. Of these 500,000 shares, options to purchase an aggregate of 300,000 shares of common stock have been granted. Of the 8,966,012 shares to be outstanding after the offering, the 5,518,024 shares sold to the public in this offering will be freely tradeable without restriction or registration under the Securities Act of 1933, as amended (the "Act"), except that any shares purchased by an "affiliate" of us (as defined in the rules and regulations promulgated under the Act) will be subject to the resale limitations of Rule 144 under the Act. The remaining 3,447,988 shares will be "restricted" securities within the meaning of Rule 144 under the Securities Act. Of that amount, 2,948,021 shares will eligible for public sale under Rule 144 90 days after the effectiveness of the registration statement of which this prospectus is a part; 83,333 shares will be eligible for public sale in October 2001; 108,333 shares will be eligible in March 2002; 283,301 shares will be eligible in April 2002; and 25,000 shares will be eligible in June 2002. In general, under Rule 144, as currently in effect, a person, or persons whose sales are aggregated, who has beneficially owned restricted shares for at least a year is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then outstanding shares of our common stock or the average weekly trading volume in our common stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain manner-of-sale provisions, notice requirements and the availability of current public information about us. Although we can't predict the effect, if any, that future sales of restricted securities under Rule 144 will have on the market price of our common stock, we expect that these sales could depress the market price and, consequently, limit our ability to raise additional capital through an offering of our equity securities. Plan of distribution by Wild Heart The 3,000,000 shares of common stock that we are offering will be managed by us, without an underwriter, through our officers and directors, who will receive no sales commissions or other compensation except for reimbursement of expenses actually incurred for such activities. In connection with their efforts, they will rely on the "safe harbor" provisions of Rule 3a4-1 under the Securities and Exchange Act of 1934 (the "1934 Act"). Generally speaking, Rule 3a4-1 provides an exemption from the broker/dealer registration requirements of the 1934 Act for associated persons of an issuer. Our officers and directors will use their best efforts to find purchasers for the shares. 32 Because we are offering the shares without the participation of an underwriter, the offering price of the shares being sold by us has not been determined by negotiation with an underwriter, as is customary in most offerings. Investors are therefore subject to an increased risk that the price of the shares has been arrived at arbitrarily. Investors should be aware that while this offering is being conducted through our officers and directors, we retain the right to utilize the services of broker/dealers who are members of the National Association of Securities Dealers, Inc. ("NASD"). We reserve the right to pay commissions for sales made by participating broker/dealers in an amount not to exceed 10% of the sales price. Before the involvement of any broker/dealer in the offering, we must obtain a "no objection" position from the NASD for any compensation arrangements. Any broker/dealer that sells securities in this offering may be deemed an underwriter as defined in Section 2(11) of the Securities Act of 1933. We will amend the prospectus and the registration statement of which it is a part to identify any selected broker/dealer at such time as such broker/dealer sells 5% or more of the offering. Plan of distribution by selling security holders We have been advised by the selling security holders that they may sell their shares of common stock from time to time directly to purchasers in privately negotiated transactions or, from time to time, they may offer the shares for sale in the over-the-counter market through or to securities brokers or dealers that may receive compensation in the form of discounts, concessions or commissions from the selling security holders. We will not receive any of the proceeds from the sale of our common stock by the selling security holders. The selling security holders, and any dealers or brokers that participate in the distribution of the shares of common stock, may be deemed to be "underwriters" as that term is defined by the Securities Act, and any profit on the sale of shares of common stock by them, and any discounts, commissions, or concessions received by any such dealers or brokers, may be deemed to be underwriting discounts and commissions under the Securities Act. We are paying the costs, expenses and fees of registering the shares offered by the selling security holders, not including any brokerage commissions or similar selling expenses related to the sale of the shares of the common stock. The selling security holders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if they deem the purchase price to be unsatisfactory at any particular time. We can't assure you that all or any of the shares offered in this prospectus will be sold by the selling security holders. Legal Matters The legality of our common stock has been passed upon on our behalf by Hofheimer, Gartlir & Gross, LLP, 530 Fifth Avenue, New York, New York 10036. The firm and its individual partners own an aggregate of 50,000 shares of our common stock. 33 Experts The audited financial statements included in this prospectus and elsewhere in the registration statement have been audited by Grassi & Co., CPAs, P.C., 200 Madison Avenue, New York, New York 10016, our independent certified public accountants, and have been included in reliance on the reports of such independent accountants given on the authority of such firm as an expert in accounting and auditing. Limited liability of directors Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities - other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons 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, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 34 INDEX TO FINANCIAL STATEMENTS Page ---- Independent Auditors Report.................................................F-1 Balance Sheet at December 31, 2000..........................................F-2 Statements of Operations for the Years Ended December 31, 1999 and 2000.....F-3 Statement of Stockholders' Equity for the Years Ended December 31, 1999 and 2000.............................................F-4 Statements of Cash Flows for the Years Ended December 31, 1999 and 2000.....F-5 Notes to Financial Statements...............................................F-6 Balance Sheet at March 31, 2001 (unaudited).................................F-14 Statements of Operations for the Three Months Ended March 31, 2001 and 2000 (unaudited)...................................................F-15 Statements of Stockholders' Equity for the Three Months Ended March 31, 2001 and 2000 (unaudited)....................................F-16 Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (unaudited)...................................................F-17 Notes to Financial Statements (unaudited)...................................F-18 35 To the Stockholders Wild Heart Ranch Inc. We have audited the accompanying balance sheet of Wild Heart Ranch Inc. as of December 31, 2000, and the related statements of operations, stockholders' equity and cash flows for the years ended December 31, 1999 and 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wild Heart Ranch, Inc. as of December 31, 2000, and the statements of operations, stockholders' equity and cash flows for the years ended December 31, 1999 and 2000, in conformity with accounting principles generally accepted in the United States of America. GRASSI & CO., CPAs, P.C. New York, New York April 12, 2001 F-1 WILD HEART RANCH INC. BALANCE SHEET AT DECEMBER 31, 2000 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 195,244 Accounts receivable - net of allowances for doubtful accounts of $1,439 12,954 Inventories 25,859 Prepaid expenses 15,039 ----------- TOTAL CURRENT ASSETS 249,096 PROPERTY AND EQUIPMENT, net 4,253 LICENSE FEES, net 183,333 ----------- TOTAL ASSETS $ 436,682 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 89,309 Accrued expenses 41,450 Due to related party 1,429 ----------- TOTAL LIABILITIES 132,188 COMMITMENTS AND CONTINGENCIES (Notes 6, 9 and 10) STOCKHOLDERS' EQUITY Common stock - $0.001 par value; 10,000,000 shares authorized; 4,142,689 shares issued and outstanding 4,142 Additional paid-in capital 1,638,547 Accumulated deficit (1,338,195) ----------- TOTAL STOCKHOLDERS' EQUITY 304,494 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 436,682 =========== The accompanying notes are an integral part of these financial statements. F-2 WILD HEART RANCH INC. STATEMENTS OF OPERATIONS For the Years Ended December 31, ------------------------- 1999 2000 ----------- ----------- NET SALES $149,355 $143,177 ----------- ----------- COST OF SALES Inventories - beginning 199,463 169,439 Purchases 48,765 -- ----------- ----------- COST OF GOODS AVAILABLE FOR SALE 248,228 169,439 Less: Inventories - ending 169,439 25,859 ----------- ----------- TOTAL COST OF SALES 78,789 143,580 ----------- ----------- GROSS PROFIT 70,566 (403) ----------- ----------- OPERATING EXPENSES Shipping expense 20,810 20,722 Selling, general and administrative 254,737 391,725 Research and development expenses -- 105,351 Compensatory element of stock issuances for selling, general and administrative expenses 138,000 83,333 ----------- ----------- TOTAL OPERATING EXPENSES 413,547 601,131 ----------- ----------- LOSS FROM OPERATIONS (342,981) (601,534) ----------- ----------- OTHER INCOME (EXPENSES) Interest expense (3,169) -- Interest income 54 -- Gain (loss) on disposal of property -- (1,719) Miscellaneous income 1,582 1,390 ----------- ----------- TOTAL OTHER EXPENSES (1,533) (329) ----------- ----------- LOSS BEFORE PROVISION FOR INCOME TAXES (344,514) (601,863) PROVISION FOR INCOME TAXES -- -- ----------- ----------- NET LOSS $(344,514) $(601,863) =========== =========== BASIC AND DILUTED LOSS PER SHARE $(0.11) $(0.15) =========== =========== WEIGHTED AVERAGE COMMON SHARES USED IN BASIC AND DILUTED LOSS PER SHARE 3,219,137 4,061,022 =========== =========== The accompanying notes are an integral part of these financial statements. F-3 WILD HEART RANCH INC. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Common Stock Paid-in ------------------------- Capital Shares Amount Par Value --------- ------ ---------- Period Ended December 31, 1999: Balance - December 31, 1998 3,131,137 $3,131 $628,006 Shares issued for services at $1.00 per share 138,000 138 137,862 Net loss -- -- -- --------- ------ ---------- Balance - December 31, 1999 3,269,137 3,269 765,868 Period Ended December 31, 2000: Shares issued for cash at $1.00 per share 360,000 360 359,640 Shares issued for employment services at $1.00 per share 83,333 83 83,250 Shares issued for debt conversion at $1.00 per share 230,219 230 229,989 Shares issued for license agreement at $1.00 per share 200,000 200 199,800 Net loss -- -- -- --------- ------ ---------- Balance - December 31, 2000 4,142,689 $4,142 $1,638,547 ========= ====== ========== Accumulated Deficit Total ----------- --------- Period Ended December 31, 1999: Balance - December 31, 1998, as restated $(391,818) $239,319 Shares issued for services at $1.00 per share -- 138,000 Net loss (344,514) (344,514) ----------- --------- Balance - December 31, 1999 (736,332) 32,805 Period Ended December 31, 2000: Shares issued for cash at $1.00 per share -- 360,000 Shares issued for employment services at $1.00 per share -- 83,333 Shares issued for debt conversion at $1.00 per share -- 230,219 Shares issued for license agreement at $1.00 per share -- 200,000 Net loss (601,863) (601,863) ----------- --------- Balance - December 31, 2000 $(1,338,195) $304,494 =========== =========
The accompanying notes are an integral part of these financial statements. F-4 WILD HEART RANCH INC. STATEMENTS OF CASH FLOWS
For the Years Ended December 31, ------------------------- 1999 2000 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(344,514) $(601,863) Adjustments to reconcile net income to net cash used in operating activities: Compensatory element of stock issuances pursuant to consulting and employment agreement 138,000 83,333 Depreciation and amortization of property, plant and equipment 2,115 376 Amortization of intangible assets -- 16,667 Loss on disposal of property -- 1,719 Research and development expense -- -- Cash (used in) provided by the change in: Accounts receivable, net (10,701) 31,943 Inventories 26,721 143,580 Other current assets (4,868) (10,171) Accounts payable 10,205 46,330 Accrued expenses 14,878 26,570 --------- --------- NET CASH USED IN OPERATING ACTIVITIES (168,164) (261,516) --------- --------- CASH USED IN INVESTING ACTIVITIES Purchases of property and equipment -- (4,119) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Advances from related party 151,302 132,615 Repayments to related party -- (44,596) Proceeds from issuance of common stock -- 360,000 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 151,302 448,019 --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (16,862) 182,384 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 29,722 12,860 --------- --------- CASH AND CASH EQUIVALENTS - END OF YEAR $12,860 $195,244 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $3,169 $ -- ========= ========= Cash paid for income taxes $ -- $ -- ========= ========= Conversion of debt to common stock $ -- $230,219 ========= =========
The accompanying notes are an integral part of these financial statements. F-5 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - BUSINESS Wild Heart Ranch Inc. (the "Company") was incorporated under the laws of Delaware in November 1997. The Company is a publishing and toy company that designs, manufactures and markets products that are content driven. The Company creates original content that creates a venue for merchandising products including toys, books, posters, television and movies. The Company's focus is on introducing high quality content and products with meaning and purpose. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents The Company considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventories Inventories are stated at the lower of cost (determined on the first-in, first-out basis) or market. Property and Equipment Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful life of five years. License Fees Licensing fees are being amortized on a straight line basis over 5 years. F-6 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of Long-lived Assets In accordance with SFAS No. 121, "Accounting for the Impairment of Long Lived Assets and Long Lived Assets to be Disposed of", at each balance sheet date, the Company evaluates the propriety of the carrying amount of its long-lived assets. In the event that facts and circumstances indicate that the cost of long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation of impairment were required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value is required. The Company recorded no such write-downs during any of the periods presented. Fair Value of Financial Instruments The financial statements include various estimated fair value information at December 31, 1999 and 2000 as required by Statement of Financial Accounting Standards 107, "Disclosures about Fair Value of Financial Instruments". Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in that Statement and does not purport to represent the aggregate net fair value to the Company. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Cash Equivalents: The carrying amount approximates fair value because of the short-term maturity of those instruments. Receivables: The carrying amounts approximate fair value because of the short-term maturity of those instruments. All of the Company's financial instruments are held for purposes other than trading. F-7 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Company was not required to provide for a provision for income taxes for the years ended December 31, 1999 and 2000, as a result of net operating losses incurred during those years. As of December 31, 2000, the Company had available approximately $1,276,000 of net operating losses ("NOL") for income tax purposes that may be carried forward to offset future taxable income, if any. The NOL carryforwards from December 31, 1999 and 2000 expire in various years from 2012 through 2019. At December 31, 2000, the Company has a deferred tax asset of approximately $510,000, representing the benefits of its net operating loss for tax purposes. The Company's deferred tax asset has been fully reserved by a valuation allowance since realization of its benefit is uncertain. The difference between the statutory tax rate of 34% and the Company's effective tax rate (0%) is due to the increase in the valuation allowance of $240,000 (2000) and $152,000 (1999). The Company's ability to utilize its carryforwards may be subject to an annual limitation in future periods pursuant to Section 382 of the Internal Revenue Code of 1986, as amended. Revenue Recognition Revenue from product sale is recognized at the time of shipment to the customer. Advertising Costs Advertising and promotion costs are expensed as incurred. For the years ended December 31, 2000 and 1999, advertising expenses amounted to $24,560 and $24,997, respectively. Research and Development Research and development expenditures are charged to expense as incurred. F-8 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Loss Per Share During 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", which changed certain requirements for computing and disclosing earnings per share, retroactive for all periods presented. Adoption of this statement had no effect on the accompanying financial statements. Basic net loss per common stock has been computed based on the weighted average number of shares of common stock outstanding during the periods presented. The Company has potential dilutive securities related to its license agreement (Note 9), its employment agreement with its Chief Executive Officer (Note 9) and a financial consulting agreement (Note 10). Stock-Based Compensation The Company follows Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation". SFAS 123 establishes accounting and reporting standards for stock-based employee compensation plans. This statement allows companies to choose between the fair value based method of accounting, as defined in this statement, and the intrinsic value based method of accounting, as prescribed by Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees". The Company has elected to continue to follow the accounting guidance provided by APB 25, as permitted. Under the provisions of APB No. 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's common stock at the date of grant over the amount an employee must pay to acquire the stock. F-9 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impact of Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments -- Deferral of the Effective Date of SFAS Statement No.133 and in June 2000, the FASB issued SFAS 138, Accounting for Certain Derivative Instruments -- an amendment of SFAS 133, Accounting for Derivative Instruments and Hedging Activities. As a result of SFAS No. 137, SFAS No. 133 and SFAS No. 138 will be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company does not expect that the adoption of this standard will have a material impact on its financial position and results of operations. In June 2000, the Financial Accounting Standards Board issued Financial Accounting Standard No. 138 (FAS 138), Accounting for Certain Derivative Instruments -- an amendment of FAS 133, Accounting for Derivative Instruments and Hedging Activities. FAS 138 shall be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company does not expect this to have a material impact on its financial position and results of operations. In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue Recognition ("SAB 101"), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue and provides guidance on disclosure related to revenue recognition policies. The Company believes that it currently complies with SAB 101. NOTE 3 - INVENTORIES The Company does not own or operate any manufacturing facilities. The Company purchases its finished products from independent manufacturers. Inventories at December 31, 1999 and 2000 consisted of the following: 1999 2000 -------- -------- Finished goods $169,439 $ 25,859 ======== ======== F-10 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 4 - PROPERTY AND EQUIPMENT - NET Property and equipment consisted of the following: 1999 2000 ------ ------ Cost: Furniture and fixtures $2,131 $2,135 Computers 2,109 2,834 ------ ------ 4,240 4,969 Less: Accumulated Depreciation 2,010 716 ------ ------ $2,230 $4,253 ====== ====== Depreciation of property and equipment for the years ended December 31, 2000 and 1999 amounted to $376 and $2,115, respectively. NOTE 5 - LICENSE FEES - NET License fees, at December 31, 2000, related to the acquisition of an original story, consists of the following: (Note 6) License fee $200,000 Less: Accumulated amortization (16,667) -------- $183,333 ======== Amortization of licensing fee amounted to $16,667 for the year ended December 31, 2000. There was no amortization expense for the year ended December 31, 1999. F-11 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 6 - STOCKHOLDERS' EQUITY Common Stock Transactions - - December 31, 1999: During 1999, the Company issued 138,000 shares of common stock as consideration for consulting services through December 31, 1999. Shares issued under the agreement were valued at $138,000. - - December 31, 2000: In November 2000, the Company entered into a second private placement agreement, seeking to raise $1,000,000 from the sale of 1,000,000 shares of its "restricted" common stock priced at $1.00 per share. The Company made the offering only to "accredited investors". The Company offered the common stock in reliance on the exemption from registration provided by Section 4(2) and 4(6) of the Securities Act of 1933, and rule 506 of Regulation D promulgated thereunder. The offering expired on December 31, 2000 with $360,000 raised. During 2000, the Company recorded 83,333 shares of common stock which vested on December 31, 2000 under an employment agreement with its Chief Executive Officer (Note 9). The common stock valued at $83,333 was charged to operations in 2000. During 2000, a related party converted $230,219 of debt due from the Company into 230,219 shares of common stock (Note 8). During August 2000, the Company issued 200,000 shares of common stock, valued at $200,000, in accordance with the license agreement (Note 9), and such amount was capitalized as license fee on the accompanying balance sheet (Note 5). NOTE 7 - ACCUMULATED DEFICIT RESTATEMENT Accumulated deficit at the beginning of 1999 has been adjusted to correct an error made in 1998. The Company capitalized research and development costs totalling $35,140. The error had no effect on the net loss for 1999. NOTE 8 - RELATED PARTY TRANSACTIONS Due to related party, at December 31, 2000, amounted to $1,429 and consists of noninterest bearing short-term advances made to the Company from Econ Investor Relations ("Econ"), a company which is majority-owned by the same majority stockholder of the Company. During 2000, Econ converted $230,219 of advances into 230,219 shares of common stock. F-12 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS NOTE 9 - COMMITMENTS AND CONTINGENCIES Concentrations of Credit Risk At December 31, 2000, two customers accounted for approximately 38% of the accounts receivable balance. For the year ended December 31, 2000, one customer accounted for approximately 14% of the sales in excess of 10%. At December 31, 1999, two customers accounted for approximately 35% of the accounts receivable balance. For the year ended December 31, 1999, one customer accounted for approximately 12% of the sales in excess of 10%. License Agreement During August 2000, the Company entered into an exclusive license agreement with the Company's former CEO and founder for the rights to her original story, "The Armadillo Cowboy Club." The agreement provides for her to receive shares of the Company's Common stock according to the following milestones: 200,000 shares upon the signing of the agreement, 200,000 shares after the first sales in the product line and 500,000 shares after the first $5,000,000 in sales. Accordingly, only 200,000 have been issued upon signing of the license agreement. NOTE 9 - COMMITMENTS AND CONTINGENCIES Employment Agreement During October 2000, the Company entered into a three-year employment agreement with its new Chief Executive Officer. The agreement provides for an annual base salary of $120,000, and an aggregate of 1,000,000 shares of the Company's common stock to vest and be issued in equal quarterly installment at the end of each calendar quarter during the term, except for the quarter ending December 31, 2000, in respect of which the Company shall issue to Employee, and Employee shall be vested in, 83,333 shares immediately upon the execution of this Employment Agreement; (b)150,000 shares of Common stock upon the Company's first sale of products based upon the "Armadillo Cowboy Club" product line, and 250,000 shares of common stock after the Company shall generate $5,000,000 of sales from such product line. As of December 31, 2000, 83,333 shares of common stock were earned and have been vested under this agreement. NOTE 10 - SUBSEQUENT EVENTS During January 2001, the Company entered into a two-year financial consulting agreement with a consulting company to provide financial and investment services. The agreement requires the Company to issue 1,000,000 shares of the Company's common stock to the consulting company upon the completion of the Company's second private placement. F-13 WILD HEART RANCH INC. BALANCE SHEET (UNAUDITED) AT MARCH 31, 2001 ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 280,440 Accounts receivable - net of allowances for doubtful accounts of $1,439 11,695 Inventories 23,151 Prepaid expenses 7,680 Due from related party 1,211 ----------- TOTAL CURRENT ASSETS 324,177 PROPERTY AND EQUIPMENT, net 8,476 LICENSE FEES, net 173,333 ----------- TOTAL ASSETS $ 505,986 =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 53,592 Accrued expenses 45,200 ----------- TOTAL LIABILITIES 98,792 COMMITMENTS AND CONTINGENCIES (Notes 7, 8 and 9) STOCKHOLDERS' EQUITY: Common stock - $0.001 par value; 10,000,000 shares authorized; 5,536,022 shares issued and outstanding 5,535 Additional paid-in capital 3,030,487 Unearned consulting fee (875,000) Accumulated deficit (1,753,828) ----------- TOTAL STOCKHOLDERS' EQUITY 407,194 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 505,986 =========== See notes to financial statements. F-14 WILD HEART RANCH INC. STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
2001 2000 ---- ---- NET SALES $ 12,456 $ 20,767 ----------- ----------- COST OF SALES Inventories - beginning 25,859 169,439 Purchases -- -- ----------- ----------- COST OF GOODS AVAILABLE FOR SALE 25,859 169,439 Less: Inventories - ending 23,151 160,378 ----------- ----------- TOTAL COST OF SALES 2,708 9,061 ----------- ----------- GROSS PROFIT 9,748 11,706 ----------- ----------- OPERATING EXPENSES Shipping expense 3,205 8,129 Selling, general and administrative 174,025 50,097 Research and development expenses 16,583 -- Compensatory element of stock issuances for selling, general and administrative expenses 233,333 -- ----------- ----------- TOTAL OPERATING EXPENSES 427,146 58,226 LOSS FROM OPERATIONS (417,398) (46,520) ----------- ----------- OTHER INCOME Interest income 1,022 -- Miscellaneous income 743 275 ----------- ----------- TOTAL OTHER INCOME 1,765 275 ----------- ----------- LOSS BEFORE PROVISION FOR INCOME TAXES (415,633) (46,245) ----------- ----------- PROVISION FOR INCOME TAXES -- -- ----------- ----------- NET LOSS $ (415,633) $ (46,245) ----------- ----------- BASIC AND DILUTED LOSS PER SHARE $ (0.08) $ (0.01) ----------- ----------- WEIGHTED AVERAGE COMMON SHARES USED IN BASIC AND DILUTED LOSS PER SHARE 5,223,800 3,219,137 =========== ===========
See notes to financial statements. F-15 WILD HEART RANCH INC. STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
Common Stock Paid-in -------------------- Capital Shares Amount Par Value ----------- ----------- ----------- Period Ended March 31, 2000: - --------------------------- Balance - December 31, 1999 3,269,137 $ 3,269 $ 765,868 Net loss -- -- -- ----------- ----------- ----------- Balance - March 31, 2000 3,269,137 $ 3,269 $ 765,868 =========== =========== =========== Period Ended March 31, 2001: Balance - December 31, 2000 4,142,689 $ 4,142 $ 1,638,547 Shares issued for cash at $1.00 per share 285,000 285 284,715 Shares issued for employment services at $1.00 per share 83,333 83 83,250 Shares issued for consulting services at $1.00 per share 25,000 25 24,975 Shares issued for consulting services at $1.00 per share 1,000,000 1,000 999,000 Unearned consulting fee -- -- -- Amortization of unearned consulting fee -- -- -- Net loss -- -- -- ----------- ----------- ----------- Balance - March 31, 2001 5,536,022 $ 5,535 $ 3,030,487 =========== =========== =========== Unearned Accumulated Consulting Fee Deficit Total -------------- ----------- ----------- Period Ended March 31, 2000: - --------------------------- Balance - December 31, 1999 $ -- $ (736,332) $ 32,805 Net loss -- (46,245) (46,245) ----------- ----------- ----------- Balance - March 31, 2000 $ -- $ (782,577) $ (13,440) =========== =========== =========== Period Ended March 31, 2001: - --------------------------- Balance - December 31, 2000 $ -- $(1,338,195) $ 304,494 Shares issued for cash at $1.00 per share -- -- 285,000 Shares issued for employment services at $1.00 per share -- -- 83,333 Shares issued for consulting services at $1.00 per share -- -- 25,000 Shares issued for consulting services at $1.00 per share -- -- 1,000,000 Unearned consulting fee (1,000,000) -- (1,000,000) Amortization of unearned consulting fee 125,000 -- 125,000 Net loss -- (415,633) (415,633) ----------- ----------- ----------- Balance - March 31, 2001 $ (875,000) $(1,753,828) $ 407,194 =========== =========== ===========
See notes to financial statements. F-16 WILD HEART RANCH INC. STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
2001 2000 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(415,633) $(46,245) Adjustments to reconcile net income to net cash used in operating activities: Compensatory element of stock issuances pursuant to consulting and employment agreements 233,333 -- Depreciation 367 212 Amortization of intangible assets 10,000 -- Cash (used in) provided by the change in: Accounts receivable, net 1,259 26,575 Inventories 2,708 9,061 Other current assets 7,359 873 Accounts payable (35,717) (2,759) Accrued expenses 3,750 3,750 --------- -------- NET CASH USED IN OPERATING ACTIVITIES (192,574) (8,533) --------- -------- CASH USED IN INVESTING ACTIVITIES Purchases of property and equipment (4,590) -- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Advances from related party -- 5,064 Repayments to related party (2,640) -- Proceeds from issuance of common stock 285,000 -- --------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 282,360 5,064 --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 85,196 (3,469) --------- -------- CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 195,244 12,860 --------- -------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 280,440 $ 9,391 ========= ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ -- $ -- ========= ======== Cash paid for income taxes $ -- $ -- ========= ========
See notes to financial statements. F-17 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying financial statements are unaudited. These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ( the "SEC"). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the consolidated financial statements reflect all adjustments necessary to state fairly the financial position and results of operations as of and for the periods indicated. These financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 2000. NOTE 2 - BUSINESS Wild Heart Ranch Inc. (the "Company") was incorporated under the laws of Delaware in November 1997. The Company is a publishing and toy company that designs, manufactures and markets products that are content driven. The Company creates original content that creates a venue for merchandising products including toys, books, posters, television and movies. The Company's focus is on introducing high quality content and products with meaning and purpose. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents The Company considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventories Inventories are stated at the lower of cost (determined on the first-in, first-out basis) or market. F-18 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment Property and equipment are recorded at cost. Depreciation is calculated using the straight line method over the estimated useful life of five years. License Fees Licensing fees are being amortized on a straight-line basis over 5 years. Impairment of Long-lived Assets In accordance with SFAS No. 121, "Accounting for the Impairment of Long Lived Assets and Long Lived Assets to be Disposed of", at each balance sheet date, the Company evaluates the propriety of the carrying amount of its long-lived assets. In the event that facts and circumstances indicate that the cost of long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation of impairment were required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value is required. The Company recorded no such write-downs during any of the periods presented. Fair Value of Financial Instruments The financial statements include various estimated fair value information at March 31, 2001 and March 31, 2000 as required by Statement of Financial Accounting Standards 107, "Disclosures about Fair Value of Financial Instruments". Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in that Statement and does not purport to represent the aggregate net fair value to the Company. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Cash Equivalents: The carrying amount approximates fair value because of the short-term maturity of those instruments. Receivables: The carrying amounts approximate fair value because of the short-term maturity of those instruments. All of the Company's financial instruments are held for purposes other than trading. F-19 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Company was not required to provide for a provision for income taxes for the three months ended March 31, 2001 and 2000, as a result of net operating losses incurred during those years. As of March 31, 2001, the Company had available approximately $1,459,000 of net operating losses ("NOL") available for income tax purposes that may be carried forward to offset future taxable income, if any. The NOL carryforwards from March 31, 2001 and 2000 expire in various years from 2012 through 2021. At March 31, 2001, the Company has a deferred tax asset of approximately $677,000, representing the benefits of its net operating loss carryforwards and certain stock-based compensation. The Company's deferred tax asset has been fully reserved by a valuation allowance since realization of its benefit is uncertain. The difference between the statutory tax rate of 40% and the Company's effective tax rate (0%) is due to the increase in the valuation allowance of $167,000 (2001) and $18,000 (2000). The Company's ability to utilize its carryforwards may be subject to an annual limitation in future periods pursuant to Section 382 of the Internal Revenue Code of 1986, as amended. Revenue Recognition Revenue from product sale is recognized at the time of shipment to the customer. Advertising Costs Advertising and promotion costs are expensed as incurred. For the three months ended March 31, 2001 and 2000, advertising expenses amounted to $1,708 and $2,716, respectively. Research and Development Research and development expenditures are charged to expense as incurred. F-20 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Loss Per Share During 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", which changed certain requirements for computing and disclosing earnings per share, retroactive for all periods presented. Adoption of this statement had no effect on the accompanying financial statements. Basic net loss per common stock has been computed based on the weighted average number of shares of common stock outstanding during the periods presented. The Company has potential dilutive securities related to its license agreement, employment agreement with its Chief Executive Officer and financial consulting agreements (Notes 8 and 9). Stock-Based Compensation The Company follows Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation". SFAS 123 establishes accounting and reporting standards for stock-based employee compensation plans. This statement allows companies to choose between the fair value based method of accounting, as defined in this statement, and the intrinsic value based method of accounting, as prescribed by Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees". The Company has elected to continue to follow the accounting guidance provided by APB 25, as permitted. Under the provisions of APB No. 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's common stock at the date of grant over the amount an employee must pay to acquire the stock. F-21 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impact of Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments -- Deferral of the Effective Date of SFAS Statement No.133 and in June 2000, the FASB issued SFAS 138, Accounting for Certain Derivative Instruments -- an amendment of SFAS 133, Accounting for Derivative Instruments and Hedging Activities. As a result of SFAS No. 137, SFAS No. 133 and SFAS No. 138 will be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company does not expect that the adoption of this standard will have a material impact on its financial position and results of operations. In June 2000, the Financial Accounting Standards Board issued Financial Accounting Standard No. 138 (FAS 138), Accounting for Certain Derivative Instruments -- an amendment of FAS 133, Accounting for Derivative Instruments and Hedging Activities. FAS 138 shall be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company does not expect this to have a material impact on its financial position and results of operations. In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue Recognition ("SAB 101"), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue and provides guidance on disclosure related to revenue recognition policies. The Company believes that it currently complies with SAB 101. NOTE 4 - INVENTORIES Inventories at March 31, 2001 and 2000 consisted of the following: 2001 2000 ---- ---- Finished goods $23,151 $160,378 ======= ======== F-22 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 5 - PROPERTY AND EQUIPMENT - NET Property and equipment consisted of the following:
2001 2000 ------- ------- Cost: Furniture and fixtures $ 6,725 $ 2,130 Computers 2,834 2,109 ------- ------- 9,559 4,239 Less: Accumulated Depreciation (1,083) (2,222) ------- ------- $ 8,476 $ 2,017 ======= =======
Depreciation of property and equipment for the three months ended March 31, 2001 and 2000 amounted to $367 and $212, respectively. NOTE 6 - LICENSE FEES - NET License fees, at March 31, 2001, related to the acquisition of an original story, consisted of the following: (Note 8) License fee $ 200,000 Less: Accumulated amortization (26,667) --------- $ 173,333
Amortization of licensing fee amounted to $10,000 for the three months ended March 31, 2001. There was no amortization expense for the three months ended March 31, 2000. F-23 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 7 - STOCKHOLDERS' EQUITY Common Stock Transactions During the three months ended March 31, 2001, the Company sold 285,000 shares of its restricted common stock priced at $1.00 per share for $285,000. During the three months ended March 31, 2001, the Company recorded 83,333 shares of common stock, which vested on March 31, 2001 under an employment agreement with its Chief Executive Officer (Note 8). The common stock valued at $83,333 was charged to operations for the three-month period ended March 31, 2001. During the three months ended March 31, 2001, the Company recorded 25,000 shares of common stock under a consulting agreement (Note 8). The common stock valued at $25,000 was charged to operations for the three-month period ended March 31, 2001. During the three months ended March 31, 2001, the Company recorded 1,000,000 shares of common stock under a two-year financial consulting agreement (Note 8). The common stock was valued at $1,000,000 and $125,000 was charged to operations for the three-month period ended March 31, 2001. NOTE 8 - COMMITMENTS AND CONTINGENCIES Concentrations of Credit Risk At March 31, 2001, two customers accounted for approximately 67% of the accounts receivable balance. For the three months ended March 31, 2001 and 2000, one customer accounted for approximately 46% and 12%, respectively, of the sales. Cash and Cash Equivalents At March 31, 2001, the Company had bank balances in excess of federally insured limits of approximately $173,000. License Agreement During August 2000, the Company entered into an exclusive license agreement with the Company's former CEO and founder for the rights to her original story, "The Armadillo Cowboy Club." The agreement provides for her to receive shares of the Company's Common stock according to the following milestones: 200,000 shares upon the signing of the agreement, 200,000 shares after the first sales in the product line and 500,000 shares after the first $5,000,000 in sales. Accordingly, only 200,000 have been issued upon signing of the license agreement. F-24 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued) Employment Agreement During October 2000, the Company entered into a three-year employment agreement with its then Chief Executive Officer. The agreement provides for an annual base salary of $120,000, and an aggregate of 1,000,000 shares of the Company's common stock to vest and be issued in equal quarterly installment at the end of each calendar quarter during the term, except for the quarter ending December 31, 2000, in respect of which the Company shall issue to Employee, and Employee shall be vested in, 83,333 shares immediately upon the execution of this Employment Agreement; (b)150,000 shares of Common stock upon the Company's first sale of products based upon the "Armadillo Cowboy Club" product line, and 250,000 shares of common stock after the Company shall generate $5,000,000 of sales from such product line. As of March 31, 2001, 166,666 shares of common stock were earned and have been vested under this agreement (Note 9). Consulting Agreement During 2001, the Company entered into a one-year agreement with an unrelated consulting company. The consultant will receive $2,500 per month, plus 100,000 shares of the Company's restricted common stock in equal quarterly installments of 25,000 shares. As of March 31, 2001, 25,000 shares of common stock were earned and have been charged to operations under this agreement, valued at $1.00 per share. During January 2001, the Company entered into a two-year financial consulting agreement with a consulting company to provide financial and investment services. The agreement requires the Company to issue 1,000,000 shares of the Company's common stock to the consulting company upon completion of the $1 million private placement closing. As of March 31, 2001, 125,000 shares of common stock were earned and have been charged to operations under this agreement valued at $1.00 per share. F-25 WILD HEART RANCH INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 9 - SUBSEQUENT EVENTS On April 1, 2001, the Company entered into a non-exclusive one-year packaging and consulting services agreement with an unrelated company, which may include assistance, consultation and creative services. The agreement requires the Company to pay $150,000 over a twelve-month period. In addition, the company acquired a 5% interest in Wild Heart Ranch Inc. In June 2001, the Company issued 25,000 shares of its common stock in connection with the consulting agreement (Note 8). In June and July 2001, the Company granted to three directors of the Company options to purchase 100,000 common shares each at the fair market value of $1.00 per share. In June 2001, the Company issued 105,000 shares of its restricted common stock priced at $1.00 per share. In June 2001, the Company entered into a one-year financial consulting agreement with a professional to provide legal, financial and accounting consulting services. In consideration for these services, the consultant will receive 25,000 shares of the Company's common stock. In July 2001, the Company terminated its employment agreement with its then Chief Executive Officer (Note 8). F-26 WILD HEART RANCH INC. 5,518,024 shares ------------------------ PROSPECTUS ------------------------ You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The information contained in this prospectus is current only to the date of this prospectus. This prospectus does not offer to sell any securities in any jurisdiction where to do so would be unlawful. ------------------------ Until , 2001, ___ days after the date of this prospectus, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters. _____________________, 2001 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 24. Indemnification of directors and officers. As permitted by Section 102(b)(7) of the General Corporation Law of the State of Delaware (the "DGCL"), article seventh of our certificate of incorporation provides that our directors can't be held liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director other than (i) for any breach of the director's duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) liability under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. Section 145 of the DGCL provides that a corporation may, under certain circumstances, indemnify its directors and officers against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, provided that these expenses have been actually and reasonably incurred by the directors and officers by reason of their capacity as such. Article seventh of our certificate of incorporation requires us to indemnify, to the fullest extent permitted by the DGCL, as amended from time to time, any person who is, was, or has agreed to become a director or officer of the company against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person. Item 25. Other expenses of issuance and distribution The expenses payable by us in connection with the issuance and distribution of the securities being registered are estimated as follows: SEC Registration Fee $ 1,379.51 Printing and duplication expenses 5,000.00 Legal fees and expenses 75,000.00 Accounting fees and expenses 30,000.00 State "blue sky" fees 15,000.00 Other 5,620.49 Total $132,000.00 =========== All expenses, except for the SEC registration fee, are estimates. The selling security holders will not bear any portion of the foregoing expenses, but will pay fees in connection with the resale of the shares of common stock effected to or through securities brokers and/or dealers in the form of markups, markdowns, or commissions, as well as the fees and disbursements of counsel and accountants, if any, retained by them and any other fees and expenses not expressly agreed to be borne by us. 34 Item 26. Recent sales of unregistered securities From March to September 1998, the Company sold 405,800 shares to 26 non-accredited and 19 accredited investors for an aggregate price of $405,800 ($1.00 per share) in a private placement made pursuant to the exemption from registration provided by Section 3(b) of the Securities Act ("Section 3(b)") and Rule 504 of Regulation D promulgated under the Securities Act ("Rule 504"). The investors paid cash for their shares. In addition, as part of that private placement, in November 1998, the Company issued 175,327 shares to four creditors as repayment of an aggregate of $175,326 of debt (approximately $1.00 per share). In November 1998, the Company issued to its founders 2,500,000 shares of common stock for an aggregate price of $2,500 ($0.001 per share) in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended ("Section 4(2)") for transactions not involving a public offering. In December 1998, the Company issued 50,000 shares to a consultant for services rendered valued at $50,000 in reliance on the exemption from registration provided by Rule 504. In November 1999, the Company issued an aggregate of 138,000 shares to five individuals as payment for services rendered and as interest on late payments valued at $138,000. Such issuance was made in reliance on the exemption from registration provided by Section 4(2). In August 2000, the Company issued to Dawn Van Zant, our founder and CEO, 200,000 shares as payment of license fees valued at $200,000 pursuant to a license agreement between the Company and Ms. Van Zant for the rights to her original story, "The Armadillo Cowboy Club". Such issuance was made in reliance on the exemption from registration provided by Section 4(2). In October 2000, the Company issued 230,219 shares to ECON Investor Relations, Inc. ("ECON") as repayment of $230,219 of debt in reliance on the exemption from registration provided by Section 4(2). In October 2000, the Company issued 83,333 shares to Frederick Shapiro, our then CEO, pursuant to his employment agreement. Such shares were valued at $83,333 and such issuance was made in reliance on the exemption from the registration provided by Section 4(2) . From November to December 2000, the Company sold 360,000 shares to three accredited investors for an aggregate price of $360,000 ($1.00 per share) in reliance on the exemption from registration provided by Section 4(2) and 4(6) of, and Rule 506 of Regulation D ("Rule 506") promulgated under, the Securities Act. In January 2001, the Company issued 1,000,000 shares to a consultant as payment for services rendered valued at $1.00, in reliance on the exemption from registration provided by Section 4(2) and/or 4(6). 35 From January to June 2001, the Company sold 390,000 shares to seven accredited investors for an aggregate price of $390,000 ($1.00 per share) in reliance on the exemption from registration provided by Section 4(2) and Rule 506. In March 2001, we issued an additional 83,333 shares to Frederick Shapiro, valued at $83,333, pursuant to his employment agreement and in reliance on the exemption from the registration provided by Section 4(2). In March 2001, we issued 25,000 shares to Mancini marketing ("Mancini") for consulting services rendered valued at $25,000. Such issuance was made in reliance on the exemption from registration provided by Section 4(2). In June 2001 we issued to Mancini an additional 25,000 shares as payment for consulting services rendered valued at $25,000. Such issuance was made in reliance on the exemption from registration provided by Section 4(2). In June 2001, we granted to our director Robert L. Trow options entitling him to purchase 100,000 shares of our common stock at $1.00 per share, vesting on June 21, 2002. In June 2001, we granted to our director Linda Mancuso options entitling her to purchase 100,000 shares of our common stock at $1.00 per share, vesting on June 29, 2002. In July 2001, we granted to our director Guy McCarter options entitling him to purchase 100,000 shares of our common stock at $1.00 per share, vesting on July 12, 2002. Item 27. Exhibits Exhibit No. Description ----------- ----------- 3.1 Certificate of Incorporation 3.2 By-Laws 4 Specimen Common Stock Certificate 5.1 Opinion of Hofheimer Gartlir & Gross, LLP (1) 21 Subsidiaries 23.1 Consent of Hofheimer Gartlir & Gross, LLP (included in 5.1)(1) 36 23.2 Consent of Grassi & Co., CPAs, P.C. - ---------- (1) To be filed by amendment. Item 28. Undertakings Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant 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 Registrant 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 1933 Act and will be governed by the final adjudication of such issue. 37 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 of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Point Roberts, State of Washington on August 8, 2001. WILD HEART RANCH INC. By: /s/ Dawn Van Zant ---------------------------- Dawn Van Zant Chief Executive Officer In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated: By: /s/ Dawn Van Zant ---------------------------- Dawn Van Zant Director Date: August 8, 2001 By: /s/ Robert L. Trow ---------------------------- Robert L. Trow Director Date: August 8, 2001 By: /s/ Guy McCarter ---------------------------- Guy McCarter Date: August 8, 2001 By: /s/ Linda Mancuso ---------------------------- Linda Mancuso Date: August 8, 2001 38 EX-3.1 3 d26395_ex3-1.txt EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF WILD HEART RANCH INC. The undersigned, being of legal age, in order to form a corporation under and pursuant to the laws of the State of Delaware, does hereby set forth as follows: FIRST: The name of the corporation is: WILD HEART RANCH INC. SECOND: The address of the initial registered and principal office of this corporation in this state is c/o United Corporate Services, Inc., 15 East North Street, in the City of Dover, County of Kent, State of Delaware 19901 and the name of the registered agent at said address is United Corporate Services, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the corporation laws of the State of Delaware. FOURTH: The corporation shall be authorized to issue the following shares: Class Number of Shares Par Value ----- ---------------- --------- COMMON 10,000,000 $.001 FIFTH: The name and address of the incorporator are as follows: NAME ADDRESS ---- ------- Michael A. Barr 10 Bank Street White Plains, New York 10606 SIXTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the corporation, and for further definition, limitation and regulation of the powers of the corporation and of its directors and stockholders: (1) The number of directors of the corporation shall be such as from time to time shall be fixed by, or in the manner provided in the by-laws. Election of directors need not be by ballot unless the By-Laws so provide. (2) The Board of Directors shall have power without the assent or vote of the stockholders: (a) To make, alter, amend, change, add to or repeal the By-Laws of the corporation; to fix and vary the amount to be reserved for any proper purpose; to authorize and cause to be executed mortgages and liens upon all or any part of the property of the corporation; to determine the use and disposition of any surplus or net profits; and to fix the times for the declaration and payment of dividends. (b) To determine from time to time whether, and to what times and places, and under what conditions the -2- accounts and books of the corporation (other than the stock ledger) or any of them, shall be open to the inspection of the stockholders. (3) The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders, at any meeting of the stockholders called for the purpose of considering any such act or contract, or through a written consent in lieu of a meeting in accordance with the requirements of the General Corporation Law of Delaware as amended from time to time, and any contract or act that shall be so approved or be so ratified by the vote of the holders of a majority of the stock of the corporation which is represented in person or by proxy at such meeting, (or by written consent whether received directly or through a proxy) and entitled to vote thereon (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and as binding upon the corporation and upon all the stockholders as though it had been approved, ratified, or consented to by every stockholder of the corporation, whether or not the contract or act would otherwise be open to legal attack because of directors interest, or for any other reason. (4) In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this certificate, and to any by-laws from time to time made by the stockholders; provided, however, that no by-laws so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made. SEVENTH: No director shall be liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except with respect to (1) a breach of the director's duty of loyalty to the corporation or its -3- stockholders, (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) liability under Section 174 of the Delaware General Corporation Law or (4) a transaction from which the director derived an improper personal benefit, it being the intention of the foregoing provision to eliminate the liability of the corporation's directors to the corporation or its stockholders to the fullest extent permitted by Section 102(b)(7) of the Delaware General Corporation Law, as amended from time to time. The corporation shall indemnify to the fullest extent permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation Law, as amended from time to time, each person that such Sections grant the corporation the power to indemnify. EIGHTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware, may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or -4- of any receiver or receivers appointed for this corporation under the provisions of Section 279 Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. NINTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power. -5- IN WITNESS WHEREOF, the undersigned hereby executes this document and affirms that the facts set forth herein are true under the penalties of perjury this twelfth day of November, 1997. /s/ MICHAEL A. BARR ----------------------------- Michael A. Barr, Incorporator -6- EX-3.2 4 d26395_ex3-2.txt EXHIBIT 3.2 BY-LAWS OF WILD HEART RANCH INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. - The registered office shall be established and maintained at c/o United Corporate Services, Inc., 15 East North Street, Dover, Delaware 19901 and United Corporate Services, Inc. shall be the registered agent of this corporation in charge thereof. SECTION 2. OTHER OFFICES. - The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of meeting. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting. SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. SECTION 3. VOTING. - Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 4. QUORUM . - Except as otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of the stock of the corporation entitled to vote shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote the meeting. -2- SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders for any purpose or purposes may be called by the President or Secretary, or by resolution of the directors. SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than sixty days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat. SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 1. NUMBER AND TERM. - The number of directors shall be six (6). The directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. A director need not be a stockholder. SECTION 2. RESIGNATIONS. - Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. -3- SECTION 3. VACANCIES - If the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. SECTION 4. REMOVAL. - Any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the stockholders entitled to vote. SECTION 5. INCREASE OF NUMBER. - The number of directors may be increased by amendment of these By-Laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify. SECTION 6. POWERS. - The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders. SECTION 7. COMMITTEES. - The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member or such committee or committees, the member or members thereof present at any such meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. -4- Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power of authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By- Laws of the corporation; and unless the resolution, these By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 8. MEETINGS. - The newly elected Board of Directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent, in writing, of all the directors. Unless restricted by the incorporation document or elsewhere in these By-laws, members of the Board of Directors or any committee designated by such Board may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. Regular meetings of the Board of Directors may be scheduled by a resolution adopted by the Board. The Chairman of the Board or the President or Secretary may call, and if requested by any two directors, must call a special meeting of the Board and give five days' notice by mail, or two days' notice personally or by telegraph or cable to each director. The Board of Directors may hold an annual meeting, without notice, immediately after the annual meeting of shareholders. SECTION 9. QUORUM. - A majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time -5- until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. SECTION 10. COMPENSATION. - Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. SECTION 11. ACTION WITHOUT MEETING. - Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee therof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 1. OFFICERS. - The officers of the corporation shall be a President, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman, one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person. SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and he shall have and perform such other duties -6- as from time to time may be assigned to him by the Board of Directors. SECTION 4. PRESIDENT. - The President shall be the chief executive officer of the corporation and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall preside at all meetings of the stockholders if present thereat, and in the absence or non-election of the Chairman of the Board of Directors, at all meetings of the Board of Directors, and shall have general supervision, direction and control of the business of the corporation . Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts in behalf of the corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer. SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such powers and shall perform such duties as shall be assigned to him by the directors. SECTION 6. TREASURER. - The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the President, taking proper vouchers for such disbursements. He shall render to the President and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe. SECTION 7. SECRETARY. - The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by the law or by these By-Laws, and in case of his absence or refusal or neglect so to do, -7- any such notice may be given by any person thereunto directed by the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the President. He shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the President, and attest the same. SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors. ARTICLE V MISCELLANEOUS SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed by the Chairman or Vice-Chairman of the Board of Directors, if they be elected, President or Vice-President, and the Treasurer or an Assistant Treasurer, or Secretary or Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the corporation. When such certificates are countersigned (1) by a transfer agent other than the corporation or its employee, or, (2) by a registrar other than the corporation or its employee, the signatures of such officers may be facsimiles. SECTION 2. LOST CERTIFICATES. - A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate. SECTION 3. TRANSFER OF SHARES. - The shares of stock of the corporation shall be transferrable only upon its books -8- by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificate shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION 4. STOCKHOLDERS RECORD DATE. - (a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. (b) In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record is adopted by the board of directors. (c) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted. SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation. -9- SECTION 6. SEAL. - The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words "Corporate Seal, Delaware, 1997". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 7. FISCAL YEAR. - The fiscal year of the corporation shall be determined by resolution of the Board of Directors. SECTION 8. CHECKS. - All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors. SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage, prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute. Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VI AMENDMENTS These By-Laws may be altered or repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal of By-Law or By-Laws to be made be contained in the notice of such special meeting, by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, or by the -10- affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws to be made, be contained in the notice of such special meeting. ARTICLE VII INDEMNIFICATION No director shall be liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except with respect to (1) a breach of the director's duty of loyalty to the corporation or its stockholders, (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) liability which may be specifically defined by law or (4) a transaction from which the director derived an improper personal benefit, it being the intention of the foregoing provision to eliminate the liability of the corporation's directors to the corporation or its stockholders to the fullest extent permitted by law. The corporation shall indemnify to the fullest extent permitted by law each person that such law grants the corporation the power to indemnify. -11- EX-4 5 d26395_ex4.txt SPECIMEN COMMON STOCK CERTIFICATE Exhibit 4 Number Shares ----------- ------------ WILD HEART RANCH INC. Incorporated Under the Laws of the State of Delaware Common Stock CUSIP No. 96808A 10 9 THIS CERTIFIES THAT ____________________________ IS OWNER OF fully paid and non-assessable Shares of Common Stock of $.001 par value each of Wild Heart Ranch Inc. transferable on the books of the Corporation in person or by attorney upon surrender of this Certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the Certificate of Incorporation and Bylaws of the Corporation, as now or hereafter amended. This Certificate is not valid until countersigned by the Transfer Agent. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. COUNTERSIGNED: Dated: ___________________ FLORIDA ATLANTIC STOCK TRANSFER, INC. 7130 Nob Hill Rd., Tamarac, FL 33321 Transfer Agent By: [Corporate Seal] - ------------------------------ ------------------------------ SECRETARY CEO EX-21 6 d26395_ex21.txt SUBSIDIARIES SUBSIDIARIES 1. Treasure Zone Limited, a Hong Kong corporation. EX-23.2 7 d26395_ex23-2.txt INDEPENDENT AUDITORS' CONSENT [EXH. 23.2] INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Wild Heart Ranch Inc. on Form SB-2 of our report dated April 12, 2001 appearing in the Registration Statement. We also consent to the reference to us under the headings "Selected Financial Data" and "Experts" in such Registration Statement. GRASSI & CO., CPAs, P.C. New York, New York August 7, 2001 -----END PRIVACY-ENHANCED MESSAGE-----