UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
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(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
---------- EXCHANGE ACT OF 1934
For the quarterly period ended September 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:
October 30, 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 September 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 16
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
September 30, 2001 and 2000
(Unaudited)
Assets
------
September 30, September 30,
2001 2000
------------- -------------
Current Assets
Cash on hand and in bank $ 865,869 $ 863,477
Inventory 26,987 26,951
Prepaid expenses 4,179 99,471
----------- -----------
Total current assets 897,035 989,899
----------- -----------
Property and Equipment - At Cost
Buildings and related improvements 2,017,514 2,017,514
Furniture and equipment 867,453 856,566
----------- -----------
2,884,967 2,874,080
Less accumulated depreciation (1,786,795) (1,690,424)
----------- -----------
1,098,172 1,183,656
Land 741,487 741,487
----------- -----------
Net property and equipment 1,839,659 1,925,143
----------- -----------
Other Assets
Other 5,475 6,225
----------- -----------
Total other assets 5,475 6,225
----------- -----------
Total Assets $ 2,742,169 $ 2,921,267
=========== ===========
- 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
September 30, 2001 and 2000
(Unaudited)
Liabilities and Shareholders' Equity
------------------------------------
September 30, September 30,
2001 2000
------------- -------------
Current Liabilities
Accounts payable - trade $ 23,565 $ 21,059
Accrued liabilities 63,209 80,629
Federal income taxes payable 33,489 79,855
Tenant deposits 6,500 6,500
---------- ----------
Total current liabilities 126,763 188,043
---------- ----------
Long-term Liabilities
Deferred tax liability 133,101 139,248
---------- ----------
Total liabilities 259,864 327,291
---------- ----------
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 2,476,573 2,588,244
---------- ----------
Total shareholders' equity 2,482,305 2,593,976
---------- ----------
Total Liabilities and Shareholders' Equity $2,742,169 $2,921,267
========== ==========
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
Nine and Three months ended September 30, 2001 and 2000
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Revenues
Bar and restaurant sales $ 2,463,931 $ 2,991,784 $ 762,654 $ 1,015,371
Rental income 387,446 515,075 125,775 174,525
----------- ----------- ----------- -----------
Total revenues 2,851,377 3,506,859 888,429 1,189,896
----------- ----------- ----------- -----------
Cost of Sales - Bar and
Restaurant Operations 1,647,296 1,811,941 460,399 619,500
----------- ----------- ----------- -----------
Gross Profit 1,204,081 1,694,918 428,030 570,396
----------- ----------- ----------- -----------
Operating Expenses
General and administrative 996,430 1,139,501 328,576 378,478
Interest -- 2,129 -- --
Depreciation and amortization 68,546 78,334 22,849 22,398
----------- ----------- ----------- -----------
Total operating expenses 1,064,976 1,219,964 351,425 400,876
----------- ----------- ----------- -----------
Income from Operations 139,105 474,954 76,605 169,520
Other Income (Expenses)
Interest and other miscellaneous 21,242 26,811 5,552 8,721
----------- ----------- ----------- -----------
Income before Income Taxes 160,347 501,765 82,157 178,241
Income tax (expense)
Currently payable (66,630) (155,750) (44,511) (55,750)
Deferred -- -- -- --
----------- ----------- ----------- -----------
Net Income 93,717 346,015 37,646 122,491
Other comprehensive income -- -- -- --
----------- ----------- ----------- -----------
Comprehensive Income $ 93,717 $ 346,015 $ 37,646 $ 122,491
=========== =========== =========== ===========
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
Nine and Three months ended September 30, 2001 and 2000
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Net Income $ 93,717 $ 346,015 $ 37,646 $ 122,491
Other comprehensive income -- -- -- --
---------- ---------- ---------- ----------
Comprehensive Income $ 93,717 $ 346,015 $ 37,646 $ 122,491
========== ========== ========== ==========
Earnings per share of common
stock outstanding computed
on net income - basic and
fully diluted $ 0.02 $ 0.06 $ 0.01 $ 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
Nine months ended September 30, 2001 and 2000
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2001 2000
------------- -------------
Cash Flows from Operating Activities
Net income $ 93,717 $ 346,015
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 68,546 78,334
(Increase) decrease in
Accounts receivable - trade and other 8,737 8,848
Federal income taxes receivable 33,141 20,339
Inventory (4,143) 4,711
Prepaid expenses (4,179) (98,571)
Increase (decrease) in
Accounts payable and other accrued liabilities (87,490) 23,912
Income taxes payable 33,489 79,855
--------- ---------
Net cash provided by operating activities 141,818 463,443
--------- ---------
Cash Flows from Investing Activities
Principal collections on note receivable -- 35,179
Purchases of property and equipment (2,992) (48,403)
--------- ---------
Net cash provided by investing activities (2,992) (13,224)
--------- ---------
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 138,826 253,244
Cash and cash equivalents at beginning of period 727,043 610,233
--------- ---------
Cash and cash equivalents at end of period $ 865,869 $ 863,477
========= =========
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ -- $ 2,129
========= =========
Income taxes paid $ -- $ 55,556
========= =========
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 nine months ended September 30, 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 September 30, 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 - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Note D - 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 nine and three months ended September 30, 2001 and 2000,
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 E - Property and Equipment
Property and equipment consists of the following at September 30, 2001 and 2000:
2001 2000 Estimated life
---------- ---------- --------------
Buildings and related improvements 2,017,514 2,017,514 15-40 years
Furniture and equipment 867,453 856,566 5-10 years
---------- ----------
2,884,967 2,874,080
Less accumulated depreciation (1,786,795) (1,690,424)
---------- ----------
1,098,172 1,183,656
Land 741,487 741,487
---------- ----------
Net property and equipment $1,839,659 $1,925,143
========== ==========
10
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note E - Property and Equipment - Continued
Depreciation expense for the nine months ended September 30, 2001 and 2000 was
$68,546 and $72,518, respectively.
Note F - Income Taxes
The deferred current tax asset and non-current deferred tax liability on
September 30, 2001 and 2000, respectively, balance sheet consists of the
following:
September 30, September 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 nine months ended
September 30, 2001 and 2000, respectively, are as follows:
Nine months Nine months
ended ended
September 30, September 30,
2001 2000
------------- -------------
Federal:
Current $ 66,630 $ 155,750
Deferred - -
--------- ---------
66,630 155,750
--------- ---------
State:
Current - -
Deferred - -
--------- ---------
- -
--------- ---------
Total $ 66,630 $ 155,750
========= =========
The Company's income tax expense (benefit) for the nine months ended September
30, 2001 and 2000, respectively, differed from the statutory federal rate of 34
percent as follows:
Nine months Nine months
ended ended
September 30, September 30,
2001 2000
------------- -------------
Statutory rate applied to earnings before income taxes $ 54,517 $ 170,600
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 12,113 (14,850)
--------- ---------
Income tax expense $ 66,630 $ 155,750
========= =========
11
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
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 September
30, 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
===========
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 13.59% and 14.69% of total revenues for the nine months ended
September 30, 2001 and 2000, respectively.
Restaurant Rental General and
facility real estate administrative Total
---------- ----------- -------------- ----------
Nine months ended September 30, 2001
------------------------------------
Revenue from external customers $2,463,931 $ - $ - $2,463,931
Revenue from related parties - 387,446 - 387,446
Revenue (expenses) from/to
intercompany sources (180,000) (213,100) 393,100 -
Interest income - 9,861 11,381 21,242
Interest expense - - - -
Depreciation and amortization 52,118 16,428 - 68,546
Income tax expense (benefit) (64,920) 41,069 90,481 66,630
Segment assets 339,782 2,512,543 110,156 2,742,169
Fixed asset expenditures 2,992 - - 2,992
12
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note I - Segment Information - Continued
Restaurant Rental General and
facility real estate administrative Total
---------- ----------- -------------- ----------
Nine months ended September 30, 2000
Revenue from external customers $2,991,784 $ - $ - $2,991,784
Revenue from related parties - 515,075 - 515,075
Revenue (expenses) from/to
intercompany sources (180,000) 180,000 - -
Interest income - 440 26,371 26,811
Interest expense - - 2,129 2,129
Depreciation and amortization 19,404 51,398 7,532 78,334
Income tax expense (benefit) (10,558) 163,345 2,963 155,750
Segment assets 260,504 2,310,434 350,329 2,921,267
Fixed asset expenditures 48,403 - - 48,403
(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 $528,000 between the
first nine months of 2001 as compared to the first nine months of 2000. Total
bar and restaurant sales for the nine months ended September 30, 2001 were
approximately $2,464,000 as compared to approximately $2,992,000 for the nine
months ended September 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 2001. 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 $1,647,000 for the first
nine month of 2001 as compared to approximately $1,812,000 for the first nine
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 42.53% ($1,204,000) for the first nine months of
2001 versus 48.33% ($1,695,000) for the first nine 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 $143,000 in the
first nine months of 2001 versus the first nine 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 $160,000 for the first nine
months of 2001 versus approximately $502,000 for the first nine months of 2000.
After-tax net income decreased by approximately $252,000 from approximately
$346,000 for the first nine months of 2000 to approximately $94,000 for the
first nine months of 2001. The Company experienced earnings per share of
approximately $0.02 and $0.06 per share for the first nine months of 2001 and
2000, respectively.
(2) Liquidity and Capital Resources
As of September 30, 2001, the Company has working capital of approximately
$770,272 as compared to approximately $611,001 at December 31, 2000 and
approximately $801,856 at September 30, 2000. The Company achieved positive cash
flows from operations of approximately $141,818 for the first nine months of
2001 versus approximately $463,443 for the first nine 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, if any, will not be known
such actions are taken by the City of Dallas.
Management anticipates that any actions, if any, are anticipated to occur
in Calendar 2002. 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.
15
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
--------------------------------------------------------------------------------
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.
October 30 , 2001 /s/ Dewanna Ross
-------- ---------------------------
Dewanna Ross
Chief Operating Officer
and Director
18