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 June 30, 1998
- -------- 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
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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)
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: April 30, 1998: 6,144,451
Transitional Small Business Disclosure Format (check one): YES NO X
MILLION DOLLAR SALOON, INC.
Form 10-QSB for the Quarter ended June 30, 1998
Table of Contents
Page
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 11
Part II - Other Information
Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
2
Part 1 - Item 1 - Financial Statements
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
ASSETS
(Unaudited) (Audited)
June 30, December 31,
1998 1997
----------- -----------
CURRENT ASSETS
Cash on hand and in bank $ 719,685 $ 149,952
Note receivable - current portion 22,604 22,604
Prepaid income taxes receivable -- 37,248
Inventory 12,115 16,097
Prepaid expenses 80,828 73,544
----------- -----------
Total current assets 835,232 299,445
----------- -----------
PROPERTY AND EQUIPMENT
Buildings and related improvements 1,955,132 1,955,132
Furniture and equipment 788,706 757,110
Vehicles 52,728 52,728
----------- -----------
2,796,566 2,764,970
Less accumulated depreciation (1,520,298) (1,475,570)
----------- -----------
1,276,268 1,289,400
Land 741,488 741,488
----------- -----------
Net property and equipment 2,017,756 2,030,888
----------- -----------
OTHER ASSETS
Note receivable - noncurrent portion 93,094 105,442
Accounts receivable from officers, shareholders and affiliates 825,965 805,684
Organization costs, net of accumulated amortization
of $42,152 and $34,658, respectively 32,776 40,270
Loan costs, net of accumulated amortization of
$17,384 and $14,222 respectively 14,223 17,384
Other 7,725 7,725
----------- -----------
Total other assets 973,783 976,505
----------- -----------
TOTAL ASSETS $ 3,826,771 $ 3,306,838
=========== ===========
- 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, 1998 and December 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited) (Audited)
June 30, December 31,
1998 1997
------------ ------------
CURRENT LIABILITIES
Current portion of long-term debt $ 122,370 $ 163,288
Accounts payable - trade 32,462 22,571
Accrued liabilities 51,733 35,622
Dividends payable 61,445 54,095
Tenant deposits 6,500 6,500
----------- -----------
Total current liabilities 274,510 282,076
----------- -----------
LONG-TERM LIABILITIES
Long-term debt, net of current maturities 296,514 334,872
Deferred tax liability 98,936 98,936
----------- -----------
Total liabilities 669,960 715,884
----------- -----------
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. 6,144,451 and 5,409,451 issued
and outstanding, respectively 6,144 5,409
Additional paid-in capital 598,965 --
Retained earnings 2,581,702 2,585,545
----------- -----------
3,186,811 2,590,954
Treasury stock (30,000 shares at cost) (30,000) --
----------- -----------
Total shareholders= equity 3,156,811 2,590,954
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,826,771 $ 3,306,838
=========== ===========
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, 1998 and 1997
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
REVENUES
Bar and restaurant sales $ 1,648,655 $ 1,772,768 $ 818,713 $ 931,698
Rental income 239,055 220,612 113,633 109,807
----------- ----------- ----------- -----------
Total revenues 1,887,710 1,993,380 932,346 1,041,505
----------- ----------- ----------- -----------
COST OF SALES - BAR
AND RESTAURANT
OPERATIONS 986,748 1,040,515 522,195 567,957
----------- ----------- ----------- -----------
GROSS PROFIT 900,962 952,865 410,151 474,548
----------- ----------- ----------- -----------
OPERATING EXPENSES
General and administrative 672,652 520,330 306,465 263,200
Interest 25,610 34,339 19,438 17,048
Depreciation and amortization 55,382 58,782 27,691 29,330
----------- ----------- ----------- -----------
Total operating expenses 753,644 613,451 346,564 309,327
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 147,618 339,414 63,587 164,970
OTHER INCOME (EXPENSES)
Interest and other miscellaneous 29,163 20,019 16,115 10,453
Gain on sale of fixed assets -- 48,499 -- --
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES 176,481 407,932 79,702 175,423
INCOME TAX (EXPENSE)
BENEFIT
Currently payable (59,089) (96,700) (26,089) (42,700)
Deferred -- -- -- --
----------- ----------- ----------- -----------
NET INCOME $ 117,392 $ 311,232 $ 53,613 $ 132,723
=========== =========== =========== ===========
Earnings per share of
common stock outstanding $0.02 $0.06 $0.01 $0.03
===== ===== ===== =====
Weighted-average number
of shares outstanding 5,831,771 5,010,084 6,144,451 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, 1998 and 1997
(Unaudited)
1998 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 117,392 $ 311,232
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 55,382 58,782
Gain on sale of fixed assets -- (48,499)
Common stock issued for consulting fees 69,700 --
Interest income from shareholders capitalized as principal (20,281) (20,825)
(Increase) decrease in
Federal income taxes receivable 37,248 --
Inventory 3,982 (175)
Prepaid expenses (7,284) (12,240)
Increase (decrease) in
Accounts payable and other accrued liabilities 19,161 (26,932)
Tenant deposits -- 4,550
Income taxes payable 6,841 46,700
--------- ---------
Net cash provided by operating activities 282,141 312,593
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal collections on note receivable 12,348 9,520
Net proceeds from sale of fixed assets -- 149,374
Purchases of property and equipment (31,596) (1,731)
--------- ---------
Net cash used in investing activities (19,248) 157,163
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Private placement of common stock 530,000 --
Principal payments on long-term notes payable (79,276) (95,450)
Funds advanced to affiliated and shareholders - net -- --
Purchase of treasury stock (30,000) (11,247)
Dividends paid (113,884) (350,707)
--------- ---------
Net cash used in financing activities 306,840 (457,404)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 569,733 12,352
Cash and cash equivalents at beginning of period 149,952 267,856
--------- ---------
Cash and cash equivalents at end of period $ 719,685 $ 280,208
========= =========
- 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, 1998 and 1997
(Unaudited)
1998 1997
-------- --------
SUPPLEMENTAL DISCLOSURES OF
INTEREST AND INCOME TAXES PAID
Interest paid during the period $ 25,610 $ 34,339
======== ========
Income taxes paid $ 15,000 $ 50,000
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Declaration of second quarter dividend,
payable in the third quarter at $0.01
and $0.02 per share, respectively $ 61,445 $100,276
======== ========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. 7
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
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, 1998 and 1997, 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, 1997 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, 1998.
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 and pending adoption
--------------------------------------------------
In June 1997, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income",
(SFAS130) which established standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general purpose financial statements. SFAS130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS130 was effective for periods beginning after December 15,
1997. The Company does not have any items which would be required to be
presented in this separate statement and experienced no material impact from
this change in presentation of its consolidated financial statements.
8
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
Notes to Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
a) Accounting principles adopted and pending adoption - continued
--------------------------------------------------------------
In June 1997, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information", (SFAS131) which establishes revised
standards for the method in which public business enterprises are to report
information about operating segments in their annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. This statement
also revises the related disclosures about products and services, geographic
areas and major customers. SFAS131 replaces the "industry segment" concept
established in Statement of Financial Accounting Standard No. 14 with a
"management approach" concept as the basis for identifying reportable
segments. SFAS131 is effective for financial statements for annual periods
beginning after December 31, 1997 and for interim periods presented after
December 31, 1998. The Company does not anticipate a material impact from
this change in disclosure presentation in its consolidated financial
statements upon adoption of this standard.
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 - Common stock transactions
On March 19, 1998, the Company sold 530,000 shares of restricted, unregistered
common stock to an individual under a Stock Purchase Agreement (Agreement) at a
price of $1.00 per share for total proceeds to the Company of $530,000. The
Agreement also contains a "second closing" clause whereby the individual will
acquire an additional 400,000 shares of equivalent restricted, unregistered
common stock at $1.10 per share for gross proceeds of $440,000, on or before
July 15, 1998.
Further, the Company has granted the individual the option to purchase an
additional 1,000,000 shares of restricted, unregistered common stock at a price
of $1.25 per share on or before February 28, 1999. The option expiration may be
accelerated if the Company's common stock is traded on the NASDAQ Small-Cap
Market or other national exchange and the closing bid price equals or exceeds
$1.75 per share for 10 consecutive trading days (Trading Period). In this event,
the expiration date of the option shall be the 90th day after the Trading Period
and the Company must notify the individual of the acceleration in writing.
9
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
Notes to Financial Statements - Continued
Note 4 - Common stock transactions - Continued
On March 19, 1998, concurrent with the Stock Purchase Agreement discussed above,
the Company entered into a Consulting Agreement with a separate individual for
consulting, advisory and management services to be performed as directed by the
Company's Board of Directors. The Consulting Agreement is for a term of one (1)
year and may be terminated by either party with ten (10) days written notice.
The compensation for the Consulting Agreement was paid in restricted,
unregistered common stock of the Company as follows: 150,000 shares as payment
for consulting, advisory and management services to be performed as directed by
the Company's Board of Directors and an additional 55,000 shares upon receipt of
the $530,000 discussed above. An additional 45,000 shares will be issued to the
consultant upon receipt of the $440,000 due on or before July 15, 1998.
The Company, upon execution of the Consulting Agreement and receipt of the
$530,000 related to the Stock Purchase Agreement, issued the respective 150,000
and 55,000 shares due under the terms of the Consulting Agreement. These
transactions were valued at approximately $0.34 per share, or an aggregate
$69,700, which approximated the "fair value" of the Company's restricted stock
issued on the transaction date.
(Remainder of this page left blank intentionally)
10
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations
Bar and restaurant operations declined by approximately $130,000 (or
approximately 7.0%) between the six months of 1998 and the first six months of
1997. The April to June quarter declined approximately $109,000 (or
approximately 10.48%) from the second quarter 1998 and 1997. Total bar and
restaurant sales for the year-to-date 1998 period were approximately $1,648,655
as compared to approximately $1,772,768 for the 1997 period. This decline was
due to seasonal fluctuations in patronage, which is dependent upon convention
and visitor activity and other uncontrollable factors in the Dallas-Ft. Worth
Metroplex geographic area. Additionally, rental income increased by
approximately $18,000 for the first six months in 1998 from approximately
$221,000 for the first six months of 1997 to approximately $239,000 for the
first six months of 1998. This is due to scheduled increases in weekly rental
income on the Company's properties.
The Company continues to seek effective marketing and advertising methods to
maintain and increase its bar and restaurant patronage.
Cost of sales decreased by approximately $54,000 during the first six months of
1998 as compared to the same expenses for the same period in 1997. This decrease
reflects the effect of the related declines in bar and restaurant revenues.
Gross profit percentages profiled relatively consistently at 47.73% for the
first six months of 1998 versus 47.80% for the first six months of 1997.
General and administrative expenses increased by approximately $150,000 in the
first six months of 1998 versus the first six months of 1997. Included in this
increase is a non-cash charge of $69,700 as compensation under the Consulting
Agreement to Steve Wheeler, increased legal and professional fees incurred by
management related to preliminary investigations of potential merger and/or
acquisition candidates and development of overall corporate operational
strategies and other broad based increases in general corporate overhead
expenses. As of this filing, management has not identified any suitable merger
or acquisition candidates as a result of their preliminary investigations.
Further, 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
1998 versus approximately $176,000 for the first six months of 1997. After-tax
net income has declined by approximately $193,840 yielding earnings per share of
approximately $0.01 per share for the first six months of 1998 as compared to
approximately $0.06 per share for the first six months of 1997.
11
(3) Liquidity
As of June 30, 1998, the Company has working capital of approximately $560,700
as compared to approximately $17,369 at December 31, 1997 and approximately
$34,400 at June 30, 1997. The Company achieved positive cash flows from
operations of approximately $282,141 for the first six months of 1998 versus
approximately $312,593 for the first six months of 1997. The Company's working
capital position was greatly enhanced by the receipt of approximately $530,000
in proceeds related to the sale of approximately 530,000 shares of restricted,
unregistered common stock on March 19, 1998. The overall decline in cash flows
from operating activities is directly related to the reduction in bar and
restaurant revenues, primarily during the second quarter of 1998.
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 Stock Purchase Agreement specifically details and limits the utilization of
the $530,000 received as follows: 1) potential acquisition of a similar bar and
restaurant operation in Denver, Colorado; 2) expansion and renovation of the
Company's existing Dallas, Texas bar and restaurant operation; 3) expansion and
renovation of property owned by the Company which is under lease to an unrelated
third party and which lease expires during 1998; 4) acquisition of treasury
stock and 5) other corporate expenses related to strategic planning. As of this
filing, the Company has no definitive agreements to acquire or expand any
properties.
The Company anticipates the continuance of dividend payments in future periods
and paid approximately $52,000 and $61,900 during the first and second quarters
of 1998, respectively, and declared a dividend of approximately $61,400 to be
paid in the third quarter of 1998. 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
12
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
(Remainder of this page left blank intentionally)
13
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 1 , 1998 /s/ Nina J. Furrh
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Nina J. Furrh
President and Director
August 1 , 1998 /s/ Ronald W. Johnston
------- ------------------------------------
Ronald W. Johnston
Chief Financial Officer and Director
14