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 June 30, 1997
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
MILLION DOLLAR SALOON, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3428657
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(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
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: August 1, 1997: 5,010,084
Transitional Small Business Disclosure Format (check one): YES NO X
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MILLION DOLLAR SALOON, INC.
Form 10-QSB for the Quarter ended June 30, 1997
Table of Contents
Page
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 10
Part II - Other Information
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 3 Defaults Upon Senior Securities 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 11
2
Part 1 - Item 1
Financial Statements
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
ASSETS
------
(Unaudited) (Audited)
June 30, December 31,
1997 1996
----------- ------------
CURRENT ASSETS
Cash on hand and in bank $ 280,208 $ 267,856
Note receivable - current portion 21,011 21,011
Inventory 11,344 11,169
Prepaid expenses 49,958 37,718
----------- -----------
Total current assets 362,521 337,754
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PROPERTY AND EQUIPMENT
Buildings and related improvements 1,955,132 1,969,411
Furniture and equipment 757,111 762,095
Vehicles 52,728 52,728
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2,764,971 2,784,234
Less accumulated depreciation (1,432,526) (1,381,016)
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1,332,445 1,403,218
Land 741,487 816,487
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Net property and equipment 2,073,932 2,219,705
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OTHER ASSETS
Note receivable - noncurrent portion 116,699 126,219
Accounts receivable from officers,
shareholders and affiliates 785,401 764,576
Organization costs, net of accumulated
amortization of $28,666 and $19,673
respectively 46,262 55,255
Loan costs, net of accumulated amortization
of $11,062 and $7,902, respectively 20,545 23,705
Deferred tax asset 61,500 61,500
Other 23,475 23,475
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Total other assets 1,053,882 1,054,730
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TOTAL ASSETS $3,490,335 $3,612,189
========= =========
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
3
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
June 30, 1997 and December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(Unaudited) (Audited)
June 30, December 31,
1997 1996
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CURRENT LIABILITIES
Current portion of long-term debt $ 122,370 $ 158,960
Accounts payable - trade 19,774 15,948
Accrued liabilities 27,908 58,666
Accrued income taxes payable 46,700 -
Dividends payable 100,276 150,303
Tenant deposits 11,050 6,500
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Total current liabilities 328,078 390,377
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LONG-TERM LIABILITIES
Long-term debt, net of current maturities 453,563 512,423
Deferred tax liability 94,569 94,569
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Total liabilities 876,210 997,369
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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. 5,010,084 issued and outstanding, respectively. 5,010 5,010
Additional paid-in capital 9,990 9,990
Retained earnings 2,610,372 2,599,820
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2,625,372 2,614,820
Treasury stock - at cost (11,247) -
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Total shareholders' equity 2,614,125 2,614,820
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,490,335 $3,612,189
========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
4
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Six and Three months ended June 30, 1997 and 1996
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
REVENUES
Bar and restaurant sales $1,772,768 $1,671,144 $ 931,698 $794,866
Rental income 220,612 206,168 109,807 101,963
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Total revenues 1,993,380 1,877,312 1,041,505 896,829
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COST OF SALES - BAR
AND RESTAURANT
OPERATIONS 1,040,515 1,016,660 567,957 520,418
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GROSS PROFIT 952,865 860,652 474,548 376,411
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OPERATING EXPENSES
General and
administrative expenses 520,330 479,968 263,200 246,762
Interest expense 34,339 58,119 17,048 39,480
Depreciation and amortization 58,782 54,170 29,330 27,085
----------- ---------- ---------- ---------
Total operating expenses 613,451 592,257 309,578 313,327
----------- ---------- ---------- ---------
INCOME FROM OPERATIONS 339,414 268,395 164,970 63,084
OTHER INCOME (EXPENSES)
Interest and other miscellaneous 20,019 25,310 10,453 22,051
Gain on sale of fixed assets 48,499 - - -
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INCOME BEFORE
INCOME TAXES 407,932 293,705 175,423 85,135
INCOME TAX (EXPENSE)
BENEFIT
Currently payable (96,700) 5,105 (42,700) 5,105
Deferred - (70,900) - -
----------- ---------- ---------- --------
NET INCOME $ 311,232 $ 227,910 $ 132,723 $ 90,240
========== ========== ========== ========
Earnings per share of
common stock outstanding $0.06 $0.05 $0.03 $0.02
==== ==== ==== ====
Weighted-average number
of shares outstanding 5,010,084 5,010,084 5,010,084 5,010,084
========= ========= ========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
5
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1997 and 1996
(Unaudited)
Six months Six months
ended ended
June 30, 1997 June 30, 1996
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $311,232 $227,910
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 58,782 51,587
Gain on sale of fixed assets (48,499) -
Common stock issued for consulting fees - 10,000
Interest income from shareholders capitalized as principal (20,825) -
(Increase) decrease in
Accounts receivable - trade - 28,550
Federal income taxes receivable - 8,520
Inventory (175) (514)
Prepaid expenses (12,240) -
Deferred tax asset and other - (5,000)
Increase (decrease) in
Accounts payable and other accrued liabilities (26,932) (77,970)
Tenant deposits 4,550 -
Income taxes payable 46,700 70,900
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Net cash provided by operating activities 312,593 313,983
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CASH FLOWS FROM INVESTING ACTIVITIES
Principal collections on note receivable 9,520 9,581
Net proceeds from sale of fixed assets 149,374 -
Purchases of property and equipment (1,731) (2,399)
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Net cash used in investing activities 157,163 7,182
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal advances on notes payable - 500,000
Principal payments on notes payable (95,450) (66,913)
Funds advanced to affiliated and shareholders - net - (37,667)
Purchase of treasury stock (11,247) -
Dividends paid (350,707) (150,303)
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Net cash used in financing activities (457,404) 245,117
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INCREASE IN CASH AND CASH EQUIVALENTS 12,352 566,282
Cash and cash equivalents at beginning of period 267,856 133,374
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Cash and cash equivalents at end of period $280,208 $699,656
======= =======
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
6
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Six months ended June 30, 1997 and 1996
(Unaudited)
Six months Six months
ended ended
June 30, 1997 June 30, 1996
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SUPPLEMENTAL DISCLOSURES OF
INTEREST AND INCOME TAXES PAID
Interest paid during the period $34,339 $60,702
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Income taxes paid (refunded) $50,000 $(8,520)
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SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Declaration of second quarter
dividend at $0.02 per share $100,276 $ -
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Acquisition of vehicle on lease payable $ - $ 52,727
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The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
7
MILLION DOLLAR SALOON, INC.
Notes to Financial Statements
Note 1 - Basis of Presentation
Million Dollar Saloon, Inc. (Company) was incorporated under the laws of the
State of Nevada on September 28, 1987. These financial statements reflect the
books and records of Million Dollar Saloon, Inc. (Nevada), Million Dollar
Saloon, Inc. (Texas), Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don,
Inc. for the periods ended June 30, 1997 and 1996, 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 Securities and Exchange Commission. The
December 31, 1996 balance sheet data was derived from audited financial
statements of the Company, but does not include all disclosures required by
generally accepted accounting principles. 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, 1997.
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.
Note 2 - Summary of Significant Accounting Policies
a) Accounting principles adopted during the current period
During the first quarter of 1997, effective at the beginning of the quarter, the
Company adopted Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". In
accordance with the Standard, the Company adopted the policy of evaluating all
qualifying assets as of the end of each reporting quarter. No adjustments for
impairment were charged to operations during the first quarter of 1997.
8
MILLION DOLLAR SALOON, INC.
Notes to Financial Statements - Continued
Note 3 - Property and equipment
During the first quarter of 1997, the Company sold a rental property for
gross cash proceeds of approximately $149,474, net of closing costs, and
recognized a gain of approximately $48,499.
Note 4 - Contingencies
The Company remains the subject of asserted claims of employment
discrimination filed with the Equal Employment Opportunity Commission
("EEOC"). The Company has previously responded to the charges of
discrimination and replied to all EEOC requests for information. The
Company vigorously contested each claim of discrimination.
During the second quarter of 1997, the statutory period for filing of
administrative claims or litigation passed with no action instigated taken
by either the EEOC or the individuals making the employment discrimination
assertions. Accordingly, no further action may be taken against the Company
related to this matter.
(Remainder of this page left blank intentionally)
9
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(1) Results of Operations Bar and restaurant operations increased by
approximately $100,000 for the first six months of 1997 as compared to the six
months of 1996. During the second quarter, management instituted new controls
over bar inventories and the Company experienced increased traffic due to the
completion and opening of a new mass transit rail station near the Company's
adult entertainment operation. This increase was mitigated by lower convention
traffic in the Dallas-Ft. Worth Metroplex during this time period, which is one
of the key factors contributing to the Company's patronage factors.
Additionally, due to scheduled increases, the Company experienced higher rental
incomes of approximately $12,000 during this quarter as compared to the same
period in the prior year.
Cost of sales increased by approximately $24,000 during the first six months of
1997 as compared to the same expenses for the same period in 1996. This increase
is related to increased sales impacting variable costs related to consumable
inventories, supplies and related State excise taxes, principally during the
second quarter. Gross profit percentages increased slightly to 47.8% for the
first six months of 1997 versus 45.8% for the first six months of 1996. This
increase relates directly to the new management controls over bar inventories.
These cost versus sales relationships are anticipated by management to remain
stable for the remainder of 1997.
Operating expenses increased by approximately $21,000 in the first six months of
1997 versus the first six months of 1996. This increase of approximately 9.0%
relate to increases in advertising and marketing expenses to offset the decline
in convention and meeting driven traffic and increase locally derived patronage
and to other nonspecific increases in overall administrative and office
expenses. Management continues to monitor its expenditure levels to achieve
optimum financial results.
Net income before income taxes, excluding the gain on the sale of fixed assets
of approximately $48,000, was approximately $359,000 for the first six months of
1997 versus approximately $294,000 for the first six months of 1996. After-tax
net income has increased by approximately $83,000 yielding earnings per share of
approximately $0.06 per share for the first six months of 1997 as compared to
approximately $0.05 per share for the first six months of 1996.
(2) Liquidity
As of June 30, 1997, the Company has working capital of approximately $34,000 as
compared to $24,000 at June 30, 1996. The Company achieved positive cash flows
from operations of approximately $312,600 for the first six months of 1997
versus approximately $314,000 for the first six months of 1996.
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 anticipates the continuance of dividend payments and paid
approximately $350,000 in the first six months of 1997 and declared a dividend
of approximately $100,000 to be paid in the third quarter of 1997. Future
operating liquidity, debt service and dividend payments are expected to be
sustained from continuing operations. Additionally, management is of the opinion
that there is additional potential availability of incremental mortgage debt and
the opportunity for the sale of additional common stock through either private
placements or secondary offerings.
10
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MILLION DOLLAR SALOON, INC.
August 4, 1997 /s/ Nina J. Furrh
----------------------------
Nina J. Furrh
President and Director
August 4, 1997 /s/ Ronald W. Johnston
-----------------------------
Ronald W. Johnston
Chief Financial Officer and Director
12