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 September 30, 1997
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: October 28, 1997: 5,218,500
Transitional Small Business Disclosure Format (check one): YES NO X
MILLION DOLLAR SALOON, INC.
Form 10-QSB for the Quarter ended September 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
September 30, 1997 and December 31, 1996
ASSETS
(Unaudited) (Audited)
September 30, December 31,
1997 1996
-----------
CURRENT ASSETS
Cash on hand and in bank $ 266,738 $ 267,856
Note receivable - current portion 21,011 21,011
Inventory 10,743 11,169
Prepaid expenses 63,424 37,718
----------- -----------
Total current assets 361,916 337,754
----------- -----------
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
----------- -----------
2,764,971 2,784,234
Less accumulated depreciation (1,455,778) (1,381,016)
----------- -----------
1,309,193 1,403,218
Land 741,487 816,487
----------- -----------
Net property and equipment 2,050,680 2,219,705
----------- -----------
OTHER ASSETS
Note receivable - noncurrent portion 111,134 126,219
Accounts receivable from officers, shareholders and affiliates 795,542 764,576
Organization costs, net of accumulated amortization
of $33,162 and $19,673, respectively 41,766 55,255
Loan costs, net of accumulated amortization of
$12,642 and $7,902, respectively 18,965 23,705
Deferred tax asset 61,500 61,500
Other 23,475 23,475
----------- -----------
Total other assets 1,052,382 1,054,730
----------- -----------
TOTAL ASSETS $ 3,464,978 $ 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
September 30, 1997 and December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited) (Audited)
September 30, December 31,
1997 1996
------------ ------------
CURRENT LIABILITIES
Current portion of long-term debt $ 122,370 $ 158,960
Accounts payable - trade 20,120 15,948
Accrued liabilities 24,619 58,666
Dividends payable 78,280 150,303
Tenant deposits 13,325 6,500
----------- -----------
Total current liabilities 258,714 390,377
----------- -----------
LONG-TERM LIABILITIES
Long-term debt, net of current maturities 416,756 512,423
Deferred tax liability 94,569 94,569
----------- -----------
Total liabilities 770,039 997,369
----------- -----------
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. 5,218,500 and 5,010,084 issued
and outstanding, respectively 5,219 5,010
Additional paid-in capital 9,781 9,990
Retained earnings 2,691,186 2,599,820
----------- -----------
2,706,186 2,614,820
Treasury stock - at cost (11,247) --
----------- -----------
Total shareholders' equity 2,694,939 2,614,820
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,464,978 $ 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
Nine and Three months ended September 30, 1997 and 1996
(Unaudited)
Nine months Nine months Three month Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
REVENUES ----------- ----------- ----------- -----------
Bar and restaurant sales $ 2,605,627 $ 2,473,541 $ 832,859 $ 802,397
Rental income 330,417 313,029 109,805 106,861
----------- ----------- ----------- -----------
Total revenues 2,936,044 2,786,570 942,664 909,258
----------- ----------- ----------- -----------
COST OF SALES - BAR AND
RESTAURANT OPERATIONS 1,507,790 1,480,391 467,275 463,731
----------- ----------- ----------- -----------
GROSS PROFIT 1,428,254 1,306,179 475,389 445,527
----------- ----------- ----------- -----------
OPERATING EXPENSES
General and administrative expenses 782,376 732,812 262,046 252,844
Interest expense 49,976 73,664 15,637 15,545
Depreciation and amortization 87,110 85,651 28,328 31,481
----------- ----------- ----------- -----------
Total operating expenses 919,462 892,127 306,011 299,870
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 508,792 414,052 169,378 145,657
OTHER INCOME (EXPENSES)
Interest and other miscellaneous 38,035 48,167 18,016 22,857
Gain on sale of fixed assets 48,499 -- -- --
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES 595,326 462,219 187,394 168,514
INCOME TAX (EXPENSE) BENEFIT
Currently payable (125,000) -- (28,300) (5,105)
Deferred -- (70,900) -- --
----------- ----------- ----------- -----------
NET INCOME $ 470,326 $ 391,319 $ 159,094 $ 163,409
=========== =========== =========== ===========
Earnings per share of
common stock outstanding $ 0.09 $ 0.08 $ 0.03 $ 0.03
=========== =========== =========== ===========
Weighted-average number
of shares outstanding 5,018,406 5,010,084 5,034,780 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
Nine months ended September 30, 1997 and 1996
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 470,326 $ 391,319
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 87,110 103,433
Gain on sale of fixed assets (48,499) --
Common stock issued for consulting fees -- 10,000
Interest income from shareholders capitalized as principal (30,966) --
(Increase) decrease in
Federal income taxes receivable -- 8,520
Inventory 426 (903)
Prepaid expenses (25,706) 11,361
Deferred tax asset and other -- 65,900
Increase (decrease) in
Accounts payable and other accrued liabilities (29,875) (78,420)
Tenant deposits 6,825 --
Income taxes payable -- --
--------- ---------
Net cash provided by operating activities 429,641 511,210
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal collections on note receivable 15,085 12,857
Net proceeds from sale of fixed assets 150,374 --
Purchases of property and equipment (1,731) (3,981)
--------- ---------
Net cash used in investing activities 163,728 8,876
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal advances on notes payable -- 500,000
Principal payments on notes payable (132,257) (103,065)
Funds advanced to affiliated and shareholders - net -- (47,809)
Purchase of treasury stock (11,247) --
Dividends paid (450,983) (225,453)
--------- ---------
Net cash used in financing activities (594,487) 123,673
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS (1,118) 643,759
Cash and cash equivalents at beginning of period 267,856 133,374
--------- ---------
Cash and cash equivalents at end of period $ 266,738 $ 777,133
========= =========
- 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
Nine months ended September 30, 1997 and 1996
(Unaudited)
Nine months Nine months
ended ended
September 30 September 30,
1997 1996
SUPPLEMENTAL DISCLOSURES OF ------------ ------------
INTEREST AND INCOME TAXES PAID
Interest paid during the period $ 49,976 $ 48,167
======== ========
Income taxes paid (refunded) $125,000 $ (8,520)
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Declaration of third quarter
dividend at $0.015 per share $ 78,279 $ --
======== ========
Acquisition of vehicle on lease payable $ -- $ 52,727
======== ========
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 September 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 was previously 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 $132,000 for the first
nine months of 1997 as compared to the first nine months of 1996. During the
second quarter of 1997, 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 $17,000 during this quarter as compared to the same period in the
prior year.
Cost of sales increased by approximately $27,000 during the first nine 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 48.7% for the
first nine months of 1997 versus 46.9% for the first nine 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.
General and administrative expenses increased by approximately $50,000 in the
first nine months of 1997 versus the first nine months of 1996. This increase
relates to increases in advertising and marketing expenses to offset the decline
in convention and meeting driven traffic and increase locally derived patronage
and increased legal and accounting fees related to preliminary investigations of
potential merger and/or acquisition candidates. The Company has not identified
any suitable merger or acquisition candidates as a result of the preliminary
investigations. 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 $547,000 for the first nine months
of 1997 versus approximately $462,000 for the first nine months of 1996.
After-tax net income has increased by approximately $79,000 yielding earnings
per share of approximately $0.09 per share for the first nine months of 1997 as
compared to approximately $0.08 per share for the first nine months of 1996.
(2) Liquidity
As of September 30, 1997, the Company has working capital of approximately
$103,000 as compared to $112,000 at September 30, 1996. The Company achieved
positive cash flows from operations of approximately $430,000 for the first nine
months of 1997 versus approximately $511,000 for the first nine 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.
10
The Company anticipates the continuance of dividend payments and paid
approximately $451,000 through the first nine months of 1997 and declared a
dividend of approximately $78,000 to be paid in the fourth 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.
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.
October 28 , 1997 /s/ Nina J. Furrh
-------- -----------------------------------
Nina J. Furrh
President and Director
October 28 , 1997 /s/ Ronald W. Johnston
-------- ------------------------------------
Ronald W. Johnston
Chief Financial Officer and Director