UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
- --------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --------- ACT OF 1934
For the quarterly period ended March 31, 2001
- --------- 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: May 8, 2001: 5,731,778
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
Million Dollar Saloon, Inc.
Form 10-QSB for the Quarter ended March 31, 2001
Table of Contents
Page
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 14
Part II - Other Information
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
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 Shareholder
Million Dollar Saloon, Inc.
We have reviewed the accompanying consolidated balance sheets of Million Dollar
Saloon, Inc. (a Nevada corporation) and Subsidiaries as of March 31, 2001 and
2000 and the accompanying consolidated statements of operations and
comprehensive income and consolidated statements of cash flows for the three
months ended March 31, 2001 and 2000. 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
May 8, 2001
Use our past to assist your future sm
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
March 31, 2001 and 2000
(Unaudited)
March 31, March 31,
2001 2000
--------- ---------
ASSETS
------
Current Assets
Cash on hand and in bank $ 739,663 $ 579,735
Note receivable - current portion -- 28,354
Accounts receivable - other -- 900
Prepaid Federal income taxes 12,603 --
Inventory 22,566 22,436
Prepaid expenses 3,675 53,988
--------- ---------
Total current assets 778,507 685,412
--------- ---------
Property and Equipment - At Cost
Buildings and related improvements 2,017,514 1,987,514
Furniture and equipment 865,596 856,566
--------- ---------
2,883,110 2,844,080
Less accumulated depreciation (1,741,098) (1,648,981)
--------- ---------
1,142,012 1,195,099
Land 741,488 741,488
--------- ---------
Net property and equipment 1,883,500 1,936,587
--------- ---------
Other Assets
Organization costs, net of accumulated amortization
of $74,928 and $68,377, respectively -- 6,551
Loan costs, net of accumulated amortization of
$31,607 and $28,446 respectively -- 3,161
Other 5,475 6,225
Total other assets 5,475 15,937
Total Assets $ 2,667,482 $ 2,637,936
=========== ===========
- Continued -
The consolidated 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
consolidated financial statements.
4
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets - Continued
March 31, 2001 and 2000
(Unaudited)
March 31, March 31,
2001 2000
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable - trade $ 29,190 25,871
Accrued liabilities 67,242 75,389
Federal income taxes payable -- 30,236
Tenant deposits 6,500 6,500
--------- ---------
Total current liabilities 102,932 137,996
--------- ---------
Long-Term Liabilities
Deferred tax liability 133,101 139,248
--------- ---------
Total liabilities 236,033 277,244
--------- ---------
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 shares issued and outstanding 5,732 5,732
Retained earnings 2,425,717 2,354,960
--------- ---------
Total shareholders' equity 2,431,449 2,360,692
--------- ---------
Total Liabilities and Shareholders' Equity $2,667,482 $2,637,936
========= =========
The consolidated 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
consolidated financial statements.
5
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income
Three months ended March 31, 2001 and 2000
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2001 2000
--------- ---------
Revenues
Bar and restaurant sales $ 874,569 $ 1,000,831
Rental income 135,896 166,025
--------- ---------
Total revenues 1,010,465 1,166,856
--------- ---------
Cost of Sales - Bar and Restaurant Operations 604,698 617,426
--------- ---------
Gross Profit 405,767 549,430
--------- ---------
Operating Expenses
General and administrative expenses 328,006 368,066
Interest expense -- 2,129
Depreciation and amortization 22,848 27,177
--------- ---------
Total operating expenses 350,854 297,372
--------- ---------
Income from Operations 54,913 152,058
Other Income (Expenses)
Interest and other miscellaneous 8,486 11,248
--------- ---------
Income before Income Taxes 63,399 163,306
Income Tax (Expense) Benefit
Currently payable (20,538) (50,575)
Deferred -- --
--------- ---------
Net Income 42,861 112,731
Other Comprehensive Income -- --
--------- ---------
Comprehensive Income $ 42,861 $ 112,731
========= =========
Earnings per share of common stock outstanding,
computed on net income - basic and fully diluted $ 0.01 $ 0.02
========= =========
Weighted-average number of shares outstanding 5,731,778 5,731,778
========= =========
The consolidated 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
consolidated financial statements.
6
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three months ended March 31, 2001 and 2000
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2001 2000
--------- ---------
Cash Flows from Operating Activities
Net income $ 42,861 $ 112,731
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 22,848 27,177
(Increase) decrease in
Accounts receivable - trade and other 8,737 8,848
Federal income taxes receivable 20,538 50,575
Inventory 278 9,226
Prepaid expenses (3,675) (53,998)
Increase (decrease) in
Accounts payable and other accrued liabilities (77,832) 23,484
--------- ---------
Net cash provided by operating activities 13,755 178,053
--------- ---------
Cash Flows from Investing Activities
Principal collections on note receivable -- 6,825
Purchases of property and equipment (1,135) (18,402)
--------- ---------
Net cash used in investing activities (1,135) (11,577)
--------- ---------
Cash Flows from Financing Activities
Principal payments on long-term notes payable -- (139,657)
Dividends paid -- (57,318)
--------- ---------
Net cash used in financing activities -- (196,975)
--------- ---------
Increase in Cash and Cash Equivalents 12,620 (30,499)
Cash at beginning of period 727,043 610,233
--------- ---------
Cash at end of period $ 739,663 $ 579,734
========= =========
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ -- $ 2,129
========= =========
Income taxes paid (refunded) $ -- $ --
========= =========
The consolidated 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
consolidated financial statements.
7
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2001 and 2000
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 three months ended March 31, 2001 and 2000, 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, 2001.
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.
8
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2001 and 2000
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.
9
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2001 and 2000
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 March 31, 2001 and 2000, respectively,
the Company has no outstanding stock warrants, options or convertible
securities which could be considered as dilutive for purposes of the loss
per share calculation.
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 March 31, 2001 and 2000,
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 2001 or 2000 as a result of
any of these unsecured situations.
Note D - Note Receivable
Note receivable as of March 31, 2001 and 2000, respectively, is as follows:
2001 2000
-------- --------
$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 $ -- $ 28,354
-------- --------
Total notes receivable -- 28,354
Less current portion -- (28,354)
-------- --------
Noncurrent portion $ -- $ --
======== ========
10
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2001 and 2000
Note E - Property and Equipment
Property and equipment consists of the following at March 31, 2001 and 2000:
2001 2000 Estimated life
----------- ----------- --------------
Buildings and related improvements $ 2,017,514 $ 1,987,514 15-40 years
Furniture and equipment 865,596 856,566 5-10 years
----------- -----------
2,883,110 2,844,080
Less accumulated depreciation (1,741,098) (1,648,981)
----------- -----------
1,142,012 1,195,099
Land 741,488 741,488
----------- -----------
Net property and equipment $ 1,883,500 $ 1,936,587
=========== ===========
Depreciation expense for the three months ended March 31, 2001 and 2000 was
$22,848 and $21,851, respectively.
Note F - Income Taxes
The deferred current tax asset and non-current deferred tax liability on March
31, 2001 and 2000, respectively, balance sheet consists of the following:
March 31, March 31,
2001 2000
---------- ----------
Non-current deferred tax liability $(133,101) $(139,248)
======= =======
The non-current deferred tax liability results from the usage of statutory
accelerated tax depreciation and amortization methods.
The components of income tax expense (benefit) for the three months ended March
31, 2001 and 2000, respectively, are as follows:
2001 2000
------- -------
Federal:
Current $20,538 $50,575
Deferred -- --
20,538 50,575
State:
Current -- --
Deferred -- --
------- -------
Total $20,538 $50,575
======= =======
11
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2001 and 2000
Note F - Income Taxes - Continued
The Company's income tax expense (benefit) for the years ended March 31, 2001
and 2000, respectively, differed from the statutory federal rate of 34 percent
as follows:
2001 2000
-------- --------
Statutory rate applied to earnings before income taxes $ 21,556 $ 55,524
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 (1,018) (4,949)
-------- --------
Income tax expense $ 20,538 $ 50,575
======== ========
Note G - Capital Stock Transactions
On March 19, 1998, the Company entered into a Stock Purchase Agreement
(Agreement) with an unrelated individual. The Agreement contained a "second
closing" clause, as amended, whereby the individual may acquire an additional
400,000 shares of restricted, unregistered common stock at a price of $1.10 per
share on or before the close of business on October 18, 2004. As of March 31,
2001, no shares of common stock have been issued in accordance with the "second
closing" portion of the Agreement.
Note H - Commitments
The Company leases commercial real estate 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, 2000, future minimum non-cancellable lease revenues
are as follows:
Year ending
December 31, Amount
------------ ---------
2001 $ 689,000
2002 546,500
2003 280,500
Total $1,516,000
==========
12
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2001 and 2000
Note I - 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 three months ended March 31,
2001 and 2000, respectively.
Restaurant Rental General and
facility real estate administrative Total
------------ ------------- -------------- -----------
Three months ended March 31, 2001
Revenue from external customers $ 874,569 $ -- $ -- $ 874,569
Revenue from related parties -- 135,896 -- 135,896
Revenue (expenses) from/to
intercompany sources (60,000) (70,000) 130,000 --
Interest income -- 4,227 4,259 8,486
Interest expense -- -- -- --
Depreciation and amortization 8,096 14,752 -- 22,848
Income tax expense (benefit) (18,963) 38,121 1,380 20,538
Segment assets 207,417 2,087,845 359,617 2,654,879
Fixed asset expenditures 1,135 -- -- 1,135
Three months ended March 31, 2000
Revenue from external customers $ 1,000,831 $ -- $ -- $ 1,000,831
Revenue from related parties -- 166,025 -- 166,025
Revenue (expenses) from/to
intercompany sources (60,000) 220,000 (160,000) --
Interest income -- 10,110 1,139 11,248
Interest expense -- -- 2,129 2,129
Depreciation and amortization 7,098 5,476 14,543 27,117
Income tax expense (benefit) 9,156 46,945 (5,526) 50,575
Segment assets 331,334 1,961,834 344,768 2,637,936
Fixed asset expenditures 18,402 -- -- 18,402
13
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Results of Operations
Bar and restaurant operations decreased by approximately $126,000 between the
first quarter of 2001 as compared to the first quarter of 2000. Total bar and
restaurant sales for the three months ended March 31, 2001 were approximately
$875,000 as compared to approximately $1,001,000 for the three months ended
March 31, 2000.
As discussed in Part II - Legal Proceedings, the Company is a participant in
litigation against the City of Dallas, Texas where the Company and other
operators of adult cabarets within the City of Dallas are contesting the
constitutionality of certain provisions of the Dallas Sexually Oriented Business
Ordinance (the "Ordinance") which impacts the Company's and other operators'
license to do business as an adult cabaret in Dallas. The Company remains of the
opinion that it will prevail on its constitutional claims.
However, as an interim measure, the City of Dallas initiated various enforcement
actions and on-premises monitoring of conduct within the Company's and other
facilities which has negatively impacted both patronage and revenues in all
adult entertainment facilities within the City of Dallas during the first
quarter of 2001 and periods subsequent thereto. As of the date of this filing
and pending the ultimate outcome of the pending litigation, management is unable
to assess the long-term impact of these regulatory actions.
Management's continues to direct it's efforts towards customer service and
increasing sales through effective marketing and advertising methods to maintain
and increase its bar and restaurant patronage and comply with current regulatory
conditions and environment.
The Company's rental income declined due to a renegotiated lease with entities
controlled by the Company's controlling shareholder during the first quarter. On
January 30, 2001, the Company's Board of Directors approved an amendment to the
lease agreement covering the property owned by Corporation Lex. The amendment
provides that effective January 1, 2001, the base rental will be reduced from
$4,750 per week to $1,000 per week. Additionally, the amended lease will provide
that the Company, as Landlord, shall receive 10% of the gross revenues generated
from the business located at the property, payable quarterly, until termination
of the lease in May 2002. The modification of the lease agreement was the result
of negotiations between the Company and representatives of the tenant, who is
affiliated with the Company's controlling shareholder. Such modifications were
requested by the tenant as a result of decreasing revenues of the tenant's adult
cabaret operation located on the property. The tenant had advised the Company
that if the lease was not modified, it may be compelled to close its business
operations. The tenant is owned by an affiliated corporation of Duncan Burch,
who is also an officer and director of the Company.
Cost of sales were relatively constant at approximately $605,000 for the first
three months of 2001 as compared to approximately $617,000 for the first three
months of 2000. Key areas of management focus are entertainer compensation, food
and beverage costs in the Company's Dallas Texas entertainment facility. Gross
profit percentages decreased to 40,16% ($406,000) for the first three months of
2001 versus 47.09% ($549,000) for the first three months of 2000. Increased cost
controls over purchasing, inventory management protocols and labor management
are continuously monitored to improve gross profit percentages.
General and administrative expenses declined by approximately $40,000 in the
first three months of 2001 versus the first three months of 2000. The Company
continues to experience relatively constant expenditure levels for general
operating expenses. Management continues to monitor its expenditure levels to
achieve optimum financial results.
Net income before income taxes was approximately $63,000 for the first three
months of 2001 versus approximately $163,000 for the first three months of 2000.
After-tax net income decreased by approximately $70,000 from approximately
$43,000 for the first three months of 2001 to approximately $113,000 for the
first three months of 2000. The Company experienced earnings per share of
approximately $0.01 and $0.02 per share for the first three months of 2001 and
2000, respectively.
14
(2) Liquidity
As of March 31, 2001, the Company has working capital of approximately $675,575
as compared to approximately $611,001 at December 31, 2000 and approximately
$547,416 at March 31, 2000. The Company achieved positive cash flows from
operations of approximately $13,755 for the first three months of 2001 versus
approximately $178,000 for the first three months of 2000. The Company's first
quarter 2000 working capital position was impacted by the payment in full of all
outstanding long-term debt during the first quarter of 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 the first quarter of 2000. 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.
Part II - Other Information
Item 1 - Legal Proceedings
Case No. 3-00-CV-2500-H; Adventure Plus, Inc., Millennium Restaurant Group,
Inc., D/B/A Cabaret Royale, et al. v. City of Dallas, Inc.; United States
District Court, Northern District of Texas, Dallas Division
This is an action where the Company and other operators of adult cabarets
within the City of Dallas are contesting the constitutionality of certain
provisions of the Dallas Sexually Oriented Business Ordinance (the
"Ordinance") which impacts the Company's and other operators' license to do
business as an adult cabaret in Dallas. The Company is of the opinion that
it will prevail on its constitutional claims. In January, 2001, as a result
of a trial setting, the City of Dallas has agreed to re-write the contested
provisions of the Ordinance, so any impact, if any, on the operations of
the Company, will not be known until June, 2001. However, the Company
reasonably believes that the Ordinance will be amended so as to have no
material adverse impact on the Company's future operations. There can be no
assurance that the City of Dallas will in fact amend the Ordinance to an
extent that the Ordinance will not have any material adverse effect on the
Company's business operations or that in the future the City of Dallas will
modify the Ordinance to such an extent that it will materially effect the
business of the Company.
The Company may from time to time be a party to various other legal actions
arising in the ordinary course of its business. The Company is not currently
involved in any such actions that it believes will have a material adverse
effect on its results of operations or financial condition.
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
Exhibits - None
Reports on Form 8-K - None
15
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.
May 9 , 2001 /s/ Dewanna Ross
---------------------------
Dewanna Ross
Chief Operating Officer
and Director
16