UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
- --------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY EPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
- --------- OF 1934
For the transition period from __________ to __________
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Commission File Number: 0-27006
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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)
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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: July 31, 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 June 30, 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 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 16
2
Item 1 - Part 1 - Financial Statements
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2001 and 2000
(Unaudited)
Assets
------
June 30, June 30,
2001 2000
----------- -----------
Current Assets
Cash on hand and in bank $ 752,071 $ 724,421
Accounts receivable - other -- 900
Prepaid income taxes receivable 11,022 --
Inventory 22,923 24,948
Prepaid expenses 4,695 82,841
----------- -----------
Total current assets 790,711 833,110
----------- -----------
Property and Equipment - At Cost
Buildings and related improvements 2,017,514 1,987,514
Furniture and equipment 866,612 856,566
----------- -----------
2,884,126 2,844,080
Less accumulated depreciation (1,763,946) (1,670,833)
----------- -----------
1,120,180 1,173,247
Land 741,488 741,488
----------- -----------
Net property and equipment 1,861,668 1,914,735
----------- -----------
Other Assets
Organization costs, net of accumulated amortization
of $74,928 and $72,123, respectively -- 2,805
Other 5,475
-----------
6,225
Total other assets 5,475 9,030
----------- -----------
Total Assets $ 2,657,854 $ 2,756,875
=========== ===========
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
3
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets - Continued
June 30, 2001 and 2000
(Unaudited)
Liabilities and Shareholders' Equity
------------------------------------
June 30, June 30,
2001 2000
---------- ----------
Current Liabilities
Accounts payable - trade $ 18,265 $ 16,484
Accrued liabilities 55,329 81,315
Federal income taxes payable -- 41,843
Tenant deposits 6,500 6,500
---------- ----------
Total current liabilities 80,094 146,142
---------- ----------
Long-term Liabilities
Deferred tax liability 133,101 139,248
---------- ----------
Total liabilities 213,195 285,390
---------- ----------
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 issued and outstanding, respectively 5,732 5,732
Additional paid-in capital -- --
Retained earnings 2,438,927 2,465,753
---------- ----------
Total shareholders' equity 2,444,659 2,471,485
---------- ----------
Total Liabilities and Shareholders' Equity $2,657,854 $2,756,875
========== ==========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
4
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive
Income Six and Three months ended June 30, 2001
and 2000
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues
Bar and restaurant sales $ 1,701,277 $ 1,976,413 $ 826,708 $ 975,582
Rental income 261,671 340,550 125,775 174,525
------------ ------------ ------------ ------------
Total revenues 1,962,948 2,316,963 952,483 1,150,107
------------ ------------ ------------ ------------
Cost of Sales - Bar and
Restaurant Operations 1,186,897 1,192,441 582,199 575,015
------------ ------------ ------------ ------------
Gross Profit 776,051 1,124,522 370,284 575,015
------------ ------------ ------------ ------------
Operating Expenses
General and administrative 667,854 761,023 339,848 392,957
Interest -- 2,129 -- --
Depreciation and amortization 45,697 55,936 22,849 28,759
------------ ------------ ------------ ------------
Total operating expenses 713,551 819,088 362,697 421,716
------------ ------------ ------------ ------------
Income from Operations 62,500 305,434 7,587 153,376
Other Income (Expenses)
Interest and other miscellaneous 15,690 18,090 7,204 6,842
------------ ------------ ------------ ------------
Income before Income Taxes 78,190 323,524 14,791 160,218
Income tax (expense)
Currently payable (22,119) (100,000) (1,581) (49,425)
Deferred -- -- -- --
------------ ------------ ------------ ------------
Net Income 56,071 223,524 13,210 110,793
Other comprehensive income -- -- -- --
------------ ------------ ------------ ------------
Comprehensive Income $ 56,071 $ 223,524 $ 13,210 $ 110,793
============ ============ ============ ============
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
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, June 30, June 30, June 30,
2001 2000 2001 2000
------------ ------------ ----------- ------------
Net Income $ 56,071 $ 223,524 $ 13,210 $ 110,793
Other comprehensive income -- -- -- --
------------ ------------ ------------ ------------
Comprehensive Income $ 56,071 $ 223,524 $ 13,210 $ 110,793
============ ============ ============ ============
Earnings per share of common
stock outstanding computed
on net income - basic and
fully diluted $ 0.01 $ 0.04 nil $ 0.02
============ ============ =========== ============
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.
The accompanying notes are an integral part of these financial statements.
6
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended June 30, 2001 and 2000
(Unaudited)
Six months Six months
ended ended
June 30, June 30,
2001 2000
---------- ----------
Cash Flows from Operating Activities
Net income $ 56,071 $ 223,524
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 45,697 55,936
(Increase) decrease in
Accounts receivable - trade and other 8,737 8,848
Federal income taxes receivable 22,119 20,339
Inventory (79) 6,714
Prepaid expenses (4,695) (82,841)
Increase (decrease) in
Accounts payable and other accrued liabilities (100,670) 20,023
Income taxes payable -- 41,843
---------- ----------
Net cash provided by operating activities 27,180 294,386
---------- ----------
Cash Flows from Investing Activities
Principal collections on note receivable -- 35,179
Purchases of property and equipment (2,152) (18,402)
---------- ----------
Net cash provided by investing activities (2,152) 16,777
---------- ----------
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 25,028 114,188
Cash and cash equivalents at beginning of period 727,043 610,233
---------- ----------
Cash and cash equivalents at end of period $ 752,071 $ 724,421
========== ==========
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ -- $ 2,129
========== ==========
Income taxes paid $ -- $ 37,818
========== ==========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
7
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 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
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
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 June 30, 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 - 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 866,612 856,566 5-10 years
----------- -----------
2,884,126 2,844,080
Less accumulated depreciation (1,763,946) (1,670,833)
----------- -----------
1,120,180 1,173,247
Land 741,488 741,488
----------- -----------
Net property and equipment $ 1,861,668 $ 1,914,735
=========== ===========
Depreciation expense for the six months ended June 30, 2001 and 2000 was $45,697
and $43,702, respectively.
10
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note E - Income Taxes
The deferred current tax asset and non-current deferred tax liability on June
30, 2001 and 2000, respectively, balance sheet consists of the following:
June 30, June 30,
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 six months ended June 30,
2001 and 2000, respectively, are as follows:
Six months Six months
ended ended
June 30, June 30,
2001 2000
---------- ----------
Federal:
Current $ 22,119 $ 100,000
Deferred -- --
---------- ----------
22,119 100,000
---------- ----------
State:
Current -- --
Deferred -- --
---------- ----------
-- --
---------- ----------
Total $ 22,119 $ 100,000
========== ==========
The Company's income tax expense (benefit) for the years ended June 30 , 2001
and 2000, respectively, differed from the statutory federal rate of 34 percent
as follows:
Six months Six months
ended ended
June 30, June 30,
2001 2000
---------- ----------
Statutory rate applied to earnings before income taxes $ 26,585 $ 109,998
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 (4,466) (9,998)
---------- ----------
Income tax expense $ 22,119 $ 100,000
========== ==========
11
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note F - 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 June 30,
2001, no shares of common stock have been issued in accordance with the "second
closing" portion of the Agreement.
Note G - 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
============
Note H - 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 13.33% and 14.70% of total revenues for the six months ended June
30, 2001 and 2000, respectively.
Restaurant Rental General and
facility real estate administrative Total
-------------- -------------- -------------- --------------
Six months ended March 31, 2001
Revenue from external customers $ 1,701,277 $ -- $ -- $ 1,701,277
Revenue from related parties -- 261,671 -- 261,671
Revenue (expenses) from/to
intercompany sources (120,000) (38,000) 158,000 --
Interest income -- 7,499 8,191 15,690
Interest expense -- -- -- --
Depreciation and amortization 34,746 10,951 -- 45,697
Income tax expense (benefit) (56,952) 76,286 2,785 22,119
Segment assets 300,735 1,993,571 363,548 2,657,854
Fixed asset expenditures 2,152 -- -- 2,152
12
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note H - Segment Information - Continued
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
(Remainder of this page left blank intentionally)
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 $275,000 between the
first six months of 2001 as compared to the first six months of 2000. Total bar
and restaurant sales for the six months ended June 30, 2001 were approximately
$1,701,000 as compared to approximately $1,976,000 for the six months ended June
30, 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 six
months 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 $1,187,000 for the first
six months of 2001 as compared to approximately $1,192,000 for the first six
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 increased to 39.53% ($776,000) for the first six months of
2001 versus 48.53% ($1,125,000) for the first six 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 $93,000 in the
first six months of 2001 versus the first six 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.
14
Net income before income taxes was approximately $78,000 for the first six
months of 2001 versus approximately $324,000 for the first six months of 2000.
After-tax net income decreased by approximately $168,000 from approximately
$78,000 for the first six months of 2001 to approximately $224,000 for the first
six months of 2000. The Company experienced earnings per share of approximately
$0.01 and $0.04 per share for the first six months of 2001 and 2000,
respectively.
(2) Liquidity and Capital Resources
As of June 30, 2001, the Company has working capital of approximately $710,617
as compared to approximately $611,001 at December 31, 2000 and approximately
$686,968 at June 30, 2000. The Company achieved positive cash flows from
operations of approximately $27,180 for the first six months of 2001 versus
approximately $294,386 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's
year-to-date working capital position and cash flow from operations has been
impacted by the decreased revenues from the restructured lease with an entity
controlled by the Company's controlling shareholder.
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 such actions are taken later
in Calendar 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
15
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
- --------------------------------------------------------------------------------
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.
July 31 , 2001 /s/ Dewanna Ross
-------- ---------------------------
Dewanna Ross
Chief Operating Officer
and Director
16