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 March 31, 1999
- ------- 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
(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: April 30, 1998: 5,731,778
Transitional Small Business Disclosure Format (check one): YES NO X
MILLION DOLLAR SALOON, INC.
Form 10-QSB for the Quarter ended March 31, 1999
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 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 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 12
2
Part 1 - Item 1 - Financial Statements
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and 1998
(Unaudited)
1999 1998
----------- -----------
ASSETS
Current Assets
Cash on hand and in bank $ 675,690 $ 785,680
Note receivable - current portion 24,480 22,604
Prepaid income taxes receivable 33,653 4,248
Inventory 18,560 13,339
Prepaid expenses 71,212 81,782
----------- -----------
Total current assets 823,595 907,653
----------- -----------
Property and Equipment - At Cost
Buildings and related improvements 1,987,514 1,955,132
Furniture and equipment 798,372 757,110
Vehicles 52,728 52,728
----------- -----------
2,838,614 2,764,970
Less accumulated depreciation (1,591,391) (1,497,934)
----------- -----------
1,247,223 1,267,036
Land 741,488 741,488
----------- -----------
Net property and equipment 1,988,711 2,008,524
----------- -----------
Other Assets
Note receivable - noncurrent portion 73,868 99,995
Accounts receivable from officers, shareholders and affiliates -- 815,824
Organization costs, net of accumulated amortization
of $53,391 and $38,406, respectively 21,537 36,522
Loan costs, net of accumulated amortization of
$22,125 and $15,804 respectively 9,482 15,803
Other 6,975 7,725
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Total other assets 111,862 975,869
----------- -----------
Total Assets $ 2,924,168 $ 3,892,046
=========== ===========
- 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
March 31, 1999 and 1998
(Unaudited)
---------
1999 1998
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Current portion of long-term debt $ 181,905 $ 163,288
Accounts payable - trade 27,803 24,393
Accrued liabilities 61,274 46,200
Dividends payable 56,418 61,445
Tenant deposits 6,500 7,510
---------- ----------
Total current liabilities 333,900 302,836
---------- ----------
Long-Term Liabilities
Long-term debt, net of current maturities 112,754 295,631
Deferred tax liability 125,057 98,936
---------- ----------
Total liabilities 571,711 697,403
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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. 5,731,778 and 6,144,451 issued
and outstanding, respectively 5,732 6,144
Additional paid-in capital -- 598,965
Retained earnings 2,346,725 2,589,534
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Total shareholders' equity 2,352,457 3,194,643
---------- ----------
Total Liabilities and Shareholders' Equity $2,924,168 $3,892,046
========== ==========
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
Three months ended March 31, 1999 and 1998
(Unaudited)
---------
1999 1998
----------- -----------
Revenues
Bar and restaurant sales $ 855,208 $ 829,942
Rental income 169,911 125,422
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Total revenues 1,025,119 955,364
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Cost of Sales - Bar and Restaurant Operations 486,098 464,553
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Gross Profit 539,021 490,811
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Operating Expenses
General and administrative expenses 332,940 366,187
Interest expense 8,779 13,202
Depreciation and amortization 28,817 27,691
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Total operating expenses 370,536 407,080
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Income from Operations 168,485 83,731
Other Income (Expenses)
Interest and other miscellaneous 4,906 13,048
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Income before Income Taxes 173,391 96,779
Income Tax (Expense) Benefit
Currently payable (58,000) (33,000)
Deferred -- --
----------- -----------
Net Income 115,391 63,779
Other Comprehensive Income -- --
----------- -----------
Comprehensive Income $ 115,391 $ 63,779
=========== ===========
Earnings per share of common stock outstanding,
computed on net income - basic and fully diluted $0.02 $0.01
==== ====
Weighted-average number of shares outstanding 5,731,778 5,515,618
=========== ===========
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
Three months ended March 31, 1999 and 1998
(Unaudited)
---------
1999 1998
--------- ---------
Cash Flows from Operating Activities
Net income $ 115,391 $ 63,779
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 28,817 27,691
Common stock issued for consulting fees -- 69,700
Interest income from shareholders capitalized as principal -- (10,140)
(Increase) decrease in
Accounts receivable - trade and other 6,671 --
Federal income taxes receivable 58,000 33,000
Inventory (156) 2,758
Prepaid expenses (14,752) (8,238)
Increase (decrease) in
Accounts payable and other accrued liabilities 2,883 12,402
Tenant deposits -- 1,010
--------- ---------
Net cash provided by operating activities 196,854 191,962
--------- ---------
Cash Flows from Investing Activities
Principal collections on note receivable 5,902 5,447
Purchases of property and equipment -- --
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Net cash used in investing activities 5,902 5,447
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Cash Flows from Financing Activities
Private placement of common stock -- 530,000
Principal payments on long-term notes payable (43,665) (39,241)
Dividends paid (58,218) (52,440)
--------- ---------
Net cash used in financing activities (101,883) 438,319
--------- ---------
Increase in Cash and Cash Equivalents 100,873 635,728
Cash and cash equivalents at beginning of period 574,817 149,952
--------- ---------
Cash and cash equivalents at end of period $ 675,690 $ 785,680
========= =========
Supplemental Disclosures of Interest
and Income Taxes Paid
Interest paid during the period $ 8,779 $ 13,202
========= =========
Income taxes paid (refunded) $ -- $ --
========= =========
Supplemental Disclosure of Non-Cash
Investing and Financing Activities
Declaration of first quarter dividend
of $0.01per share, respectively $ 57,318 $ 61,445
========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
6
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., Furrh, Inc., Tempo Tamers,
Inc., Corporation Lex and Don, Inc. for the periods ended March 31, 1999 and
1998, 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 does 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, 1999.
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.) Cash and cash equivalents
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.
Note 3 - 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. As of March 31, 1999, the individual has not complied with the
"second closing" portion of the Agreement.
7
MILLION DOLLAR SALOON, INC.
Notes to Financial Statements - Continued
Note 3 - Common stock transactions - Continued
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.
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.
Note 4 - 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 from operations in these
geographic areas. The Company has a relationship whereby rental revenues from
various entities under common control comprise approximately 16.6% and 13.1% of
total revenues for the three month period ended March 31, 1999 and 1998,
respectively.
Restaurant Rental General and
facility real estate administrative Total
---------- ----------- -------------- ----------
Three months ended March 31, 1999
- ----------------------------------
Revenue from external customers $855,208 $ 169,911 $ - $1,025,119
Revenue (expenses) from/to
intercompany sources - - - -
Interest income - 2,108 2,798 4,906
Interest expense 631 8,148 8,779
Depreciation and amortization 8,714 17,279 2,824 28,817
Income tax expense (benefit) 13,800 45,600 (1,400) 58,000
Segment assets 537,873 1,910,667 475,628 2,924,168
Fixed asset expenditures - - - -
8
MILLION DOLLAR SALOON, INC.
Notes to Financial Statements - Continued
Note 4 - Segment Information
Restaurant Rental General and
facility real estate administrative Total
---------- ----------- -------------- ---------
Three months ended March 31, 1998
---------------------------------
Revenue from external customers $829,942 $125,422 $ - $955,364
Revenue (expenses) from/to
intercompany sources (32,099) 32,099 - -
Interest income 2,552 10,148 348 13,048
Interest expense 871 12,331 - 13,202
Depreciation and amortization 7,843 17,024 2,824 27,691
Income tax expense (benefit) 18,200 39,800 (25,000) 33,000
Segment assets 628,998 2,738,224 557,824 3,925,046
Fixed asset expenditures - - - -
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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 remained relatively constant between the first
quarter of 1999 as compared to the first quarter of 1998. Total bar and
restaurant sales for the 1999 period were approximately $855,000 as compared to
approximately $830,000 for the 1998 period. The increase of approximately
$25,000 was due to 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 $45,000 for the same period from approximately $125,000 for the
first quarter of 1998 to approximately $170,000 for the first quarter of 1999.
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 increased by approximately $22,000 during the first three months
of 1999 as compared to the same expenses for the same period in 1998. This
increase is a result of an approximate $16,000 increase in entertainer
compensation and charges for upgrading and renovations to stage lighting and
sound systems in the Company's Dallas Texas entertainment facility. Gross profit
percentages increased slightly to 52.6% for the first three months of 1999
versus 51.4% for the first three months of 1998. Increased cost controls over
purchasing, inventory management protocols and labor management continue to
contribute to improving gross profit percentages.
General and administrative expenses decreased by approximately $36,500 in the
first three months of 1999 versus the first three months of 1998. This decrease
is principally related to a decrease in legal and professional fees incurred by
management related to preliminary investigations of potential merger and/or
acquisition candidates. As of this filing, management has not identified any
suitable merger or acquisition candidates as a result of their preliminary
investigations. The Company continues to experience relatively constant
expenditure levels for other general operating expenses. Management continues to
monitor its expenditure levels to achieve optimum financial results.
Net income before income taxes was approximately $173,000 for the first three
months of 1999 versus approximately $97,000 for the first three months of 1998.
After-tax net income also increased by approximately $51,000 from approximately
$64,000 for the first three months of 1998 to approximately $115,000 for the
first three months of 1999. The Company experienced earnings per share of
approximately $0.02 per share for the first three months of 1999 as compared to
approximately $0.01 per share for the first three months of 1998.
(2) Liquidity
As of March 31, 1999, the Company has working capital of approximately $489,695
as compared to approximately $440,568 at December 31, 1998 and approximately
$608,198 at March 31, 1998. The Company achieved positive cash flows from
operations of approximately $197,000 for the first three months of 1999 versus
approximately $192,000 for the first three months of 1998. The Company's working
capital position was impacted by the increased calculation of current maturities
of long-term debt for 1999 and the payment of income tax estimates during 1998
which were carried forward into 1999.
10
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 1997 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 expired and was renewed during
1998; 4) acquisition of treasury stock and 5) other corporate expenses related
to strategic planning. The Company completed the expansion and renovation of the
Dallas Texas facility and the leased facility during 1998. As of this filing,
the Company has no definitive agreements to acquire or expand any other
properties.
The Company anticipates the continuance of dividend payments and paid
approximately $58,000 and $52,000 during the first quarters of 1999 and 1998,
respectively and declared dividends of approximately $57,000 and $61,400 to be
paid in the second quarter of 1999 and 1998, respectively. 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.
(3) Year 2000 Considerations
The Year 2000 (Y2K) date change is believed to affect virtually all computers
and organizations. The Company has undertaken a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems. The Company has no direct
electronic links with any customer or supplier. In addition, the Company has
held discussions with certain of its software suppliers with respect to the Y2K
date change. The Company has completed its detailed review, as a preliminary
assessment and the Company believes, as of the date of this filing, that it will
not be required to modify or replace significant portions of its computer
hardware or software and any such modifications or replacements are, or will be,
readily available. The Company anticipates that it will complete its detailed
review by June 30, 1999 and complete any modifications, upgrades or replacements
during the third quarter of 1999.
The Company is also planning to hold discussions with its significant suppliers,
shippers, customers and other external business partners related to their
readiness for the Y2K date change.
The Company does not expect the costs associated with the Y2K date change
compliance to have a material effect on its financial position or its results of
operations. There can be no assurance until January 1, 2000, however, that all
of the Company's systems, and the systems of its suppliers, shippers, customers
or other external business partners will function adequately.
(Remainder of this page left blank intentionally)
11
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
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.
May 6 , 1999 /s/ Nina J. Furrh
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Nina J. Furrh
President and Director
May 6 , 1999 /s/ Ronald W. Johnston
------- --------------------------------------
Ronald W. Johnston
Chief Financial Officer and Director
12