UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB/A
- --------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
- --------- OF 1934
For the transition period from ____________ to ___________
- --------------------------------------------------------------------------------
Commission File Number: 0-27006
-------
Million Dollar Saloon, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3428657
- ---------------------------- ----------------------------
(State of incorporation) (IRS Employer ID Number)
6848 Greenville Avenue, Dallas, TX 75231
----------------------------------------
(Address of principal executive offices)
(214) 691-6757
--------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: August 5, 2000: 5,731,778
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
Million Dollar Saloon, Inc.
Form 10-QSB for the Quarter ended June 30, 2000
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 12
Part II - Other Information
Item 1 Legal Proceedings 14
Item 2 Changes in Securities 14
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
Signatures 16
2
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
Item 1 - Part 1 - Financial Statements
Accountant's Review Report
--------------------------
Board of Directors and Shareholders
Million Dollar Saloon, Inc.
We have reviewed the accompanying consolidated balance sheets of Million Dollar
Saloon, Inc. (a Nevada corporation) and Subsidiaries as of June 30, 2000 and
1999 and the accompanying consolidated statements of operations and
comprehensive income for the six and three months ended June 30, 2000 and 1999
and the consolidated statements of cash flows for the six months ended June 30,
2000 and 1999. These consolidated financial statements are prepared in
accordance with the instructions for Form 10-QSB, as issued by the U. S.
Securities and Exchange Commission, and are the sole responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression on an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
August 11, 2000
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 SWHCPA@aol.com
3
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2000 and 1999
(Unaudited)
Assets
------
2000 1999
----------- -----------
Current Assets
Cash on hand and in bank $ 724,421 $ 644,251
Note receivable - current portion -- 24,480
Accounts receivable - other 900 --
Prepaid income taxes receivable -- 12,903
Inventory 24,948 17,375
Prepaid expenses 82,841 65,872
----------- -----------
Total current assets 833,110 764,881
----------- -----------
Property and Equipment - At Cost
Buildings and related improvements 1,987,514 1,987,514
Furniture and equipment 856,566 805,087
Vehicles -- 52,728
----------- -----------
2,844,080 2,845,328
Less accumulated depreciation (1,670,833) (1,614,881)
----------- -----------
1,173,247 1,230,447
Land 741,488 741,488
----------- -----------
Net property and equipment 1,914,735 1,971,935
----------- -----------
Other Assets
Note receivable - noncurrent portion -- 67,850
Organization costs, net of accumulated amortization
of $72,123 and $57,137, respectively 2,805 17,791
Loan costs, net of accumulated amortization of
$31,607 and $23,705 respectively -- 7,902
Other 6,225 6,975
----------- -----------
Total other assets 9,030 100,518
----------- -----------
Total Assets $ 2,756,875 $ 2,837,334
=========== ===========
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
4
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets - Continued
June 30, 2000 and 1999
(Unaudited)
Liabilities and Shareholders' Equity
------------------------------------
2000 1999
---------- ----------
Current Liabilities
Current portion of long-term debt $ -- $ 181,905
Accounts payable - trade 16,484 23,510
Accrued liabilities 23,997 43,362
Dividends payable 57,318 57,318
Federal income taxes payable 41,843 --
Tenant deposits 6,500 6,500
---------- ----------
Total current liabilities 146,142 312,595
---------- ----------
Long-term Liabilities
Long-term debt, net of current maturities -- 67,832
Deferred tax liability 139,248 125,057
---------- ----------
Total liabilities 285,390 505,484
---------- ----------
Commitments and Contingencies
Shareholders' Equity
Preferred stock - $0.001 par value. 5,000,000 shares
authorized. None issued and outstanding -- --
Common stock - $0.001 par value. 50,000,000 shares
authorized. 5,731,778 and 5,731,778 issued
and outstanding, respectively 5,732 5,732
Additional paid-in capital -- --
Retained earnings 2,465,753 2,326,118
---------- ----------
Total shareholders' equity 2,471,485 2,331,850
---------- ----------
Total Liabilities and Shareholders' Equity $2,756,875 $2,837,334
========== ==========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
5
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
Six and Three months ended June 30, 2000 and 1999
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
Revenues
Bar and restaurant sales $ 1,976,413 $ 1,644,382 $ 975,582 $ 789,174
Rental income 340,550 340,436 174,525 170,525
----------- ----------- ----------- -----------
Total revenues 2,316,963 1,984,818 1,150,107 959,699
----------- ----------- ----------- -----------
Cost of Sales - Bar and
Restaurant Operations 1,192,441 1,016,637 575,015 530,539
----------- ----------- ----------- -----------
Gross Profit 1,124,522 968,181 575,092 429,160
----------- ----------- ----------- -----------
Operating Expenses
General and administrative 761,023 672,906 392,957 339,966
Interest 2,129 16,299 -- 7,520
Depreciation and amortization 55,936 57,632 28,759 28,815
----------- ----------- ----------- -----------
Total operating expenses 819,088 746,837 421,716 376,301
----------- ----------- ----------- -----------
Income from Operations 305,434 221,344 153,376 52,859
Other Income (Expenses)
Interest and other miscellaneous 18,090 10,235 6,842 5,329
----------- ----------- ----------- -----------
Income before Income Taxes 323,524 231,579 160,218 58,188
Income tax (expense)
Currently payable (100,000) (78,750) (49,425) (20,750)
Deferred -- -- -- --
----------- ----------- ----------- -----------
Net Income 223,524 152,829 110,793 37,438
Other comprehensive income -- -- -- --
----------- ----------- ----------- -----------
Comprehensive Income $ 223,524 $ 152,829 $ 110,793 $ 37,438
=========== =========== =========== ===========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
6
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
Six and Three months ended June 30, 2000 and 1999
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
Net Income $ 223,524 $ 152,829 $ 110,793 $ 37,438
Other comprehensive income -- -- -- --
---------- ---------- ---------- ----------
Comprehensive Income $ 223,524 $ 152,829 $ 110,793 $ 37,438
========== ========== ========== ==========
Earnings per share of common
stock outstanding computed
on net income - basic and
fully diluted $ 0.04 $ 0.03 $ 0.02 $ 0.01
========== ========== ========== ==========
Weighted-average number
of shares outstanding -
basic and fully diluted 5,731,778 5,731,778 5,731,778 5,731,778
========== ========== ========== ==========
(Remainder of this page left blank intentionally)
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
7
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
Six months Six months
ended ended
June 30, June 30,
2000 1999
--------- ---------
Cash Flows from Operating Activities
Net income $ 223,524 $ 152,829
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 55,936 57,632
(Increase) decrease in
Accounts receivable - trade and other 8,848 6,671
Federal income taxes receivable 20,339 78,750
Inventory 6,714 1,029
Prepaid expenses (82,841) (9,412)
Increase (decrease) in
Accounts payable and other accrued liabilities 20,023 (19,321)
Income taxes payable 41,843 --
--------- ---------
Net cash provided by operating activities 294,386 268,178
--------- ---------
Cash Flows from Investing Activities
Principal collections on note receivable 35,179 11,920
Purchases of property and equipment (18,402) (6,714)
--------- ---------
Net cash provided by investing activities 16,777 5,206
--------- ---------
Cash Flows from Financing Activities
Principal payments on long-term notes payable (139,657) (88,587)
Funds advanced to affiliated and shareholders - net -- --
Purchase of treasury stock -- --
Dividends paid (57,318) (115,363)
--------- ---------
Net cash used in financing activities (196,975) (203,950)
--------- ---------
Increase in Cash and Cash Equivalents 114,188 69,434
Cash and cash equivalents at beginning of period 610,233 574,817
--------- ---------
Cash and cash equivalents at end of period $ 724,421 $ 644,251
========= =========
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ 2,129 $ 16,299
========= =========
Income taxes paid $ 37,818 $ --
========= =========
Supplemental Schedule of Non-Cash Investing and Financing Activities
Declaration of second quarter dividend,
payable in the third quarter at $-0-
and $0.01 per share, respectively $ -- $ 57,318
========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
8
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note A - Background and Organization
Million Dollar Saloon, Inc. (MDS) was incorporated under the laws of the State
of Nevada on September 28, 1987. MDS is a holding company providing management
support to its operating subsidiaries: Furrh, Inc., Tempo Tamers, Inc., Don,
Inc. and Corporation Lex.
Furrh, Inc. (Furrh) was incorporated under the laws of the State of Texas on
February 25, 1974. Furrh provides management services to Tempo Tamers, Inc, its
wholly-owned subsidiary. Tempo Tamers, Inc. (Tempo), was incorporated under the
laws of the State of Texas on July 3, 1978. Tempo operates an adult
entertainment lounge and restaurant facility, located in Dallas, Texas, under
the registered trademark and trade name "Million Dollar Saloon(R)".
Don, Inc. (Don) was incorporated under the laws of the State of Texas on
November 8, 1973. Don owns and manages commercial rental property located in
Tarrant County, Texas.
Corporation Lex (Lex) was incorporated under the laws of the State of Texas on
November 30, 1984. Lex owns and manages commercial rental property located in
Dallas County, Texas.
These financial statements reflect the books and records of Million Dollar
Saloon, Inc., Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don, Inc. for
the six and three months ended June 30, 2000 and 1999, respectively. All
significant intercompany transactions have been eliminated in combination. The
consolidated entities are referred to as Company.
During interim periods, the Company follows the accounting policies set forth in
its Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934 on Form 10-KSB filed with the U. S. Securities and Exchange Commission.
The information presented herein may not include all disclosures required by
generally accepted accounting principles and the users of financial information
provided for interim periods should refer to the annual financial information
and footnotes contained in its Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 on Form 10-KSB when reviewing the interim
financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2000.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
9
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note B - Summary of Significant Accounting Policies
1. Cash and Cash Equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
2. Accounts Receivable and Revenue Recognition
-------------------------------------------
In the normal course of business, the Company extends unsecured credit to
virtually all of its tenants related to rental property operations and
accepts national bankcards as payment for goods and services in its lounge
and entertainment facility. Bankcard charges are normally paid by the
clearing institution within three to fourteen days from the date of
presentation by the Company. All lease rental payments are either due on
the first day of the month in advance for the month or on the first day of
the week in arrears for the previous corresponding period. All revenue
sources are located either in Dallas or Tarrant County, Texas. Because of
the credit risk involved, management has provided an allowance for doubtful
accounts which reflects its opinion of amounts which will eventually become
uncollectible. In the event of complete non-performance, the maximum
exposure to the Company is the recorded amount of trade accounts receivable
shown on the balance sheet at the date of non-performance.
3. Inventory
---------
Inventory consists of food and liquor consumables necessary in the
operation of Tempo's adult lounge and entertainment facility. These items
are valued at the lower of cost or market using the first-in, first-out
method of accounting.
4. Property and Equipment
----------------------
Property and equipment is recorded at cost and is depreciated on a
straight-line basis, over the estimated useful lives (generally 5 to 40
years) of the respective asset. Major additions and betterments are
capitalized and depreciated over the estimated useful lives of the related
assets. Maintenance, repairs, and minor improvements are charged to expense
as incurred.
5. Trademark rights
----------------
Amounts paid in conjunction with the acquisition and retention of the
trademark "Million Dollar Saloon(R)" have been capitalized. The life of the
registration is twenty years from its affirmation in 1988 and may be
extended as allowed by applicable law at that point in time. This trademark
has been assigned Registration No. 1,509,636 by the U. S. Patent and
Trademark Office. The Company amortizes the trademark over a 10- year life
using the straight-line method.
10
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note B - Summary of Significant Accounting Policies - Continued
6. Income Taxes
------------
The Company files a consolidated Federal Income Tax return and utilizes the
asset and liability method of accounting for income taxes. The deferred tax
asset and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences. No
valuation allowance was provided against deferred tax assets. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization.
7. Earnings per share
------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of June 30, 2000 and 1999, the Company has
no issued and outstanding securities, options or warrants that would be
deemed potentially dilutive in the current and future periods.
Note C - Concentrations of Credit Risk
The Company maintains its cash accounts in a financial institution subject to
insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC).
Under FDIC rules, the Company and its subsidiaries are entitled to aggregate
coverage of $100,000 per account type per separate legal entity per financial
institution. During the three months ended June 30, 2000 and 1999, respectively,
respectively, the various operating companies had deposits in a financial
institution with credit risk exposures in excess of statutory FDIC coverage. The
Company has incurred no losses during 1999 or 1998 as a result of any of these
unsecured situations.
Note D - Note Receivable
Note receivable as of June 30, 2000 and 1999, respectively, is as follows:
2000 1999
--------- ---------
$220,000 note receivable from an unrelated
individual for the sale of real estate. Interest
at 8.00%. Payable in monthly installments
of approximately $2,669, including interest.
Final payment due in July 2002. Collateralized
by real estate and improvements located in
Dallas County, Texas. $ - $ 92,330
11
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note D - Note Receivable - Continued
2000 1999
-------- --------
$35,179 note receivable from an unrelated
individual for the sale of real estate. Interest
at 9.50%. Payable in monthly installments
of approximately $2,665, including interest
Final payment due in February 2001. Collateral-
ized by real estate and improvements located in
Dallas County, Texas. Paid in full in May 2000 -- --
-------- --------
Total notes receivable -- 92,330
Less current portion -- (24,480)
-------- --------
Noncurrent portion $ -- $ 67,850
======== ========
Note E - Property and Equipment
Property and equipment consists of the following at June 30, 2000 and 1999:
2000 1999 Estimated life
---------- ---------- --------------
Buildings and related improvements $1,987,514 $1,987,514 15-40 years
Furniture and equipment 856,566 805,087 5-10 years
Vehicles - 52,728 3 years
---------- ----------
2,844,080 2,845,328
Less accumulated depreciation (1,670,833) (1,614,881)
---------- ----------
1,173,247 1,230,447
Land 741,488 741,488
---------- ----------
Net property and equipment $1,914,735 $1,971,935
========== ==========
Depreciation expense for the six months ended June 30, 2000 and 1999 was $43,702
and $46,980, respectively.
12
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note F -Long-Term Debt
Long-term debt consists of the following at June 30, 2000 and 1999,
respectively:
2000 1999
--------- ---------
$750,000 note payable to a bank. Interest
at 11.0%. Payable in monthly installments
of approximately $16,369, including
interest. Final payment due in September
2000. Collateralized by real estate and
improvements located in Dallas and
Tarrant Counties, Texas. Paid in full
during the first quarter of 2000 $ -- $ 227,579
$52,707 installment note payable to a finance
company. Payable in monthly installments of
approximately $1,111, including interest at
9.50%. Paid in full in July 1999
Collateralized by a vehicle -- 22,158
--------- ---------
-- 249,737
Less current portion -- (181,905)
--------- ---------
Long-term portion $ -- $ 67,832
========= =========
Note H - Income Taxes
The deferred current tax asset and non-current deferred tax liability on June
30, 2000 and 1999, respectively, balance sheet consists of the following:
June 30, June 30,
2000 1999
--------- ---------
Non-current deferred tax liability $(139,248) $(125,057)
========= =========
The non-current deferred tax liability results from the usage of statutory
accelerated tax depreciation and amortization methods.
13
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note H - Income Taxes - Continued
The components of income tax expense (benefit) for the three months ended June
30, 2000 and 1999, respectively, are as follows:
2000 1999
--------- ---------
Federal:
Current $ 100,000 $ 78,750
Deferred - -
--------- ---------
100,000 78,750
--------- ---------
State:
Current - -
Deferred - -
--------- ---------
- -
--------- ---------
Total $ 100,000 $ 78,750
========= =========
The Company's income tax expense (benefit) for the years ended June 30, 2000 and
1999, respectively, differed from the statutory federal rate of 34 percent as
follows:
2000 1999
--------- ---------
Statutory rate applied to earnings before income taxes $ 109,998 $ 78,737
Increase (decrease) in income taxes resulting from:
State income taxes - -
Deferred income taxes - -
Effect of incremental tax brackets and the
application of business tax credits (9,998) 13
--------- ---------
Income tax expense $ 100,000 $ 78,737
========= =========
Note I - Capital Stock Transactions
On March 19, 1998, the Company sold 530,000 shares of restricted, unregistered
common stock to an individual under a Stock Purchase Agreement (Agreement) at a
price of $1.00 per share for total proceeds to the Company of $530,000. The
Agreement also contains a "second closing" clause whereby the individual will
acquire an additional 400,000 shares of equivalent restricted, unregistered
common stock at $1.10 per share for gross proceeds of $440,000, on or before
July 15, 1998. On October 18, 1999, the Company's Board of Directors modified
and amended the "second closing" clause whereby the purchaser may purchase from
time to time any or all of the 400,000 shares of common stock at $1.10 per share
and to extend the exercise period until the close of business on October 18,
2004. As of June 30, 2000, the individual has not purchased any shares of common
stock in accordance with the "second closing" portion of the Agreement.
Further, the Company granted the individual the option to purchase an additional
1,000,000 shares of restricted, unregistered common stock at a price of $1.25
per share on or before February 28, 1999. The option expiration may be
accelerated if the Company's common stock is traded on the NASDAQ Small-Cap
Market or other national exchange and the closing bid price equals or exceeds
$1.75 per share for 10 consecutive trading days (Trading Period). In this event,
the expiration date of the option shall be the 90th day after the Trading Period
and the Company must notify the individual of the acceleration in writing. This
option expired on February 28, 1999 with no shares being issued.
14
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note I - Capital Stock Transactions - Continued
On March 19, 1998, concurrent with the Stock Purchase Agreement discussed above,
the Company entered into a Consulting Agreement with a separate individual for
consulting, advisory and management services to be performed as directed by the
Company's Board of Directors. The Consulting Agreement is for a term of one (1)
year and may be terminated by either party with ten (10) days written notice.
The compensation for the Consulting Agreement was paid in restricted,
unregistered common stock of the Company as follows: 150,000 shares as payment
for consulting, advisory and management services to be performed as directed by
the Company's Board of Directors and an additional 55,000 shares upon receipt of
the $530,000 discussed above. An additional 45,000 shares will be issued to the
consultant upon receipt of the $440,000 which was due on or before July 15,
1998. This Consulting Agreement terminated of its own accord in July 1998 and
the termination was acknowledged in writing to the Company by the individual in
January 2000.
The Company, upon execution of the Consulting Agreement and receipt of the
$530,000 related to the Stock Purchase Agreement, issued the respective 150,000
and 55,000 shares due under the terms of the Consulting Agreement. These
transactions were valued at approximately $0.34 per share, or an aggregate
$69,700, which approximated the "fair value" of the Company's restricted stock
issued on the transaction date.
Note J - Commitments
The Company leases commercial real estate to entities controlled by a
controlling shareholder on long-term operating leases. The leases require
minimum weekly lease payments, plus reimbursement for annual property taxes. The
respective tenants are responsible for normal maintenance and repairs, insurance
and other direct operating expenses related to the property. As of December 31,
1999, future minimum non-cancellable lease revenues are as follows:
Year ending
December 31, Amount
------------ ----------
2000 $ 689,000
2001 689,000
2002 546,500
2003 280,500
----------
Total $2,205,000
==========
15
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note K - Segment Information
The Company operates with a centralized management structure and has two
identifiable operating segments: an adult entertainment lounge and restaurant
located in Dallas, Texas and commercial rental real estate located in Dallas and
Tarrant Counties, Texas. All revenues are generated operations in these
geographic areas. The Company has a relationship whereby rental revenues from
various entities under the common control of a controlling shareholder comprise
approximately % and % of total revenues for the six months ended June 30, 2000
and 1999, respectively.
Restaurant Rental General and
facility real estate administrative Total
----------- ----------- ----------- -----------
Three months ended March 31, 2000
- ---------------------------------
Revenue from external customers $ 1,976,413 $ -- $ -- $ 1,976,413
Revenue from related parties -- 340,550 -- 340,550
Revenue (expenses) from/to
intercompany sources (120,000) 381,000 (261,000) --
Interest income -- 440 17,650 18,090
Interest expense -- -- 2,129 2,129
Depreciation and amortization 14,197 10,951 30,788 55,936
Income tax expense (benefit) 831 107,374 (8,205) 100,000
Segment assets 290,113 2,119,874 346,888 2,756,875
Fixed asset expenditures 18,402 -- -- 18,402
Restaurant Rental General and
facility real estate administrative Total
----------- ----------- ----------- -----------
Six months ended June 30, 1999
- ------------------------------
Revenue from external customers $ 1,644,382 $ 340,436 $ -- $ 1,984,818
Revenue (expenses) from/to
intercompany sources -- -- -- --
Interest income -- 4,098 6,137 10,235
Interest expense 1,008 15,291 16,299
Depreciation and amortization 17,427 34,557 5,648 57,632
Income tax expense (benefit) (22,265) 102,235 (1,220) 78,750
Segment assets 420,369 1,940,851 476,114 2,837,334
Fixed asset expenditures -- 6,714 -- 6,714
16
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Results of Operations
Bar and restaurant operations increased by approximately $332,000 between the
first six months of 2000 as compared to the first six months of 1999. Total bar
and restaurant sales for the 2000 period were approximately $1,976,000 as
compared to approximately $1,644,000 for the 1999 period. The increase was due
to management's refocused efforts in customer service and increasing sales
subsequent to the 2000 change in control of the Company. The Company continues
to seek effective marketing and advertising methods to maintain and increase its
bar and restaurant patronage.
Cost of sales increased by approximately $176,000 during the first six months of
2000 as compared to the same expenses for the same period in 1999. This increase
is a result of increases in entertainer compensation and other direct costs
related to the approximate $332,000 increase in revenues in the Company's Dallas
Texas entertainment facility. Gross profit percentages decreased to 44.53% for
the first six months of 2000 versus 48.78% for the first six months of 1998.
Increased cost controls over purchasing, inventory management protocols and
labor management are continuously monitored to improve gross profit percentages.
General and administrative expenses increased by approximately $88,000 in the
first six months of 2000 versus the first six months of 1999. This increase
relates to increased advertising expenses and administrative compensation caused
by the 2000 change in control of the Company. The Company continues to
experience relatively constant expenditure levels for other general operating
expenses. Management continues to monitor its expenditure levels to achieve
optimum financial results.
Net income before income taxes was approximately $323,500 for the first six
months of 2000 versus approximately $231,500 for the first six months of 1999.
After-tax net income increased by approximately $70,500 from approximately
$153,000 for the first six months of 1999 to approximately $223,500 for the
first six months of 2000. The Company experienced earnings per share of
approximately $0.04 and $0.03 per share for the first six months of 2000 and
1999, respectively.
(2) Liquidity
As of June 30, 2000, the Company has working capital of approximately $687,000
as compared to approximately $421,000 at December 31, 1999 and approximately
$452,000 at June 30 , 1999. The Company achieved positive cash flows from
operations of approximately $294,000 for the first six months of 2000 versus
approximately $268,000 for the first six months of 1999. The Company's working
capital position was impacted by the payment in full of all outstanding
long-term debt during the first quarter of 2000 and the collection of the
outstanding note receivable in May 2000.
The Company has identified no significant capital requirements for the current
annual period. Liquidity requirements mandated by future business expansions or
acquisitions, if any are specifically identified or undertaken, are not readily
determinable at this time as no substantive plans have been formulated by
management.
The Company announced the discontinuance of the payment of dividends after
December 31, 1999. The Company paid declared fourth quarter dividends of
approximately $57,000 during both the first quarter of 2000 and 1999,
respectively. Future operating liquidity is expected to be provided by
continuing operations. Additionally, management is of the opinion that there is
potential availability of mortgage debt and the opportunity for the sale of
additional common stock through either private placements or secondary
offerings.
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(3) Year 2000 Considerations
The Year 2000 (Y2K) date change was believed to affect virtually all computers
and organizations. The Company undertook a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems during 1999. The Company has no
direct electronic links with any customer or supplier.
The costs associated with the Y2K date change compliance did not have a material
effect on the Company's financial position or its results of operations.
However, as the Year 2000 progresses, there can be no assurance that all of the
Company's systems, and the systems of its suppliers, shippers, customers or
other external business partners will continue to function adequately.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MILLION DOLLAR SALOON, INC.
August 11 , 2000 /s/ Dewanna Ross
-------- ---------------------------
Dewanna Ross
Chief Operating Officer
and Director
August 11 , 2000 /s/ Ronald W. Johnston
-------- ---------------------------
Ronald W. Johnston
Chief Financial Officer
19