UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 Or 15(d) of the Securities
Exchange Act of 1934; For the quarterly period nded: December 31, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-26958
RICK'S CABARET INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Texas 76-0458229
(State or other jurisdiction IRS Employer
of incorporation or organization) Identification No.)
505 North Belt, Suite 630
Houston, Texas 77060
(Address of principal executive offices, including zip code)
(281) 820-1181
(Registrant's telephone number, including area code)
Check whether the issuer (1) has 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[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
On January 25, 2000, there were 4,595,494 shares of common stock, $.01 par
value, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
RICK'S CABARET INTERNATIONAL, INC.
TABLE OF CONTENTS
-----------------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 2000 (unaudited) and September 30, 2000 (audited)
Consolidated Statements of Operations for the
three months ended December 31, 2000 and 1999 (unaudited)
Consolidated Statements of Cash Flows for the
three months ended December 31, 2000 and 1999 (unaudited)
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
12/31/00 9/30/00
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash $ 359,303 $ 374,532
Accounts receivable 389,524 297,761
Prepaid expenses 25,615 67,661
Inventories 190,681 200,471
Land held for sale 200,000 200,000
---------------- ----------------
Total current assets 1,165,123 1,140,425
---------------- ----------------
PROPERTY AND EQUIPMENT
Buildings, lands and leasehold improvements 8,422,956 8,360,090
Furniture and equipment 1,553,548 1,508,990
---------------- ----------------
9,976,504 9,869,080
Accumulated depreciation (1,396,529) (1,296,898)
---------------- ----------------
8,579,975 8,572,182
---------------- ----------------
OTHER ASSETS
Goodwill less accumulated amortization 3,514,450 3,412,827
Other 259,501 288,223
---------------- ----------------
3,773,951 3,701,050
---------------- ----------------
$ 13,519,049 $13,413,657
================ ================
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
12/31/00 9/30/00
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Current portion of long term debt $ 397,542 $ 456,749
Accounts payable - trade 370,121 437,083
Accrued expenses 430,669 380,279
---------------- ----------------
Total current liabilities 1,198,332 1,274,111
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 3,336,964 3,409,767
---------------- ----------------
Total Liabilities 4,535,296 4,683,878
---------------- ----------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 67,569 64,410
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par, authorized
1,000,000shares; none outstanding --- ---
Common stock - $.01 par, authorized
15,000,000 shares
issued 4,348,678 and 4,348,678 43,487 43,487
Additional paid in capital 10,867,499 10,867,449
Retained earnings (deficit) (1,994,802) (2,245,567)
---------------- ----------------
Total stockholder's equity 8,916,184 8,665,369
---------------- ----------------
$ 13,519,049 $ 13,413,657
================ ================
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
(UNAUDITED) (UNAUDITED)
REVENUES
Sales of alcoholic beverages $ 1,340,042 $ 1,104,583
Sales of food 191,945 150,376
Service revenues 1,272,716 1,218,678
Internet revenues 2,010,800 49,864
Other 235,910 194,674
--------------- ---------------
5,051,413 2,718,175
--------------- ---------------
OPERATING EXPENSES
Cost of goods sold 1,834,029 363,779
Salaries and wages 1,226,002 910,156
Other general and administrative
Taxes and permits 479,888 405,501
Charge card fees 84,129 39,085
Rent 77,067 11,490
Legal and accounting 217,791 112,066
Advertising 132,273 197,405
Other 665,386 494,402
--------------- ---------------
4,716,565 2,533,884
--------------- ---------------
INCOME FROM OPERATIONS 334,848 184,291
Interest income 8,730 8,412
Interest Expense (92,813) (108,677)
--------------- ---------------
Net Income $ 250,765 $ 84,026
=============== ===============
NET INCOME PER COMMON SHARE $ 0.06 $ 0.03
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 4,348,678 3,613,678
=============== ===============
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 250,765 $ 84,026
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation 99,631 92,015
Amortization of goodwill 83,824 39,928
Minority interests 3,159 (6,604)
Changes in assets and liabilities:
Accounts receivable (91,763) (4,058)
Prepaid expenses 42,046 63,418
Inventories 9,790 (15,863)
Accounts payable and accrued expenses (16,572) 42,772
-------------- --------------
Cash provided by operating activities 380,880 295,634
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property equipment (107,424) (201,745)
Increase in other assets (156,725) 34,548
-------------- --------------
Cash used by investing activities (264,149) (167,197)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 50 ---
Payments on long term debt (132,010) (92,265)
-------------- --------------
Cash used by financing activities (131,960) (92,265)
-------------- --------------
NET INCREASE/(DECREASE) IN CASH (15,229) 36,172
CASH AT BEGINNING OF PERIOD 374,532 378,161
-------------- --------------
CASH AT END OF PERIOD $ 359,303 $ 414,333
============== ==============
CASH PAID DURING PERIOD FOR:
Interest $ 92,813 $ 108,677
============== ==============
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB of Regulation S-B. They do not include
all information and footnotes required by generally accepted accounting
principles for complete financial statements. However, except as disclosed
herein, there has been no material change in the information disclosed in the
notes to the financial statements for the year ended September 30, 2000 included
in the Company's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission. The interim unaudited financial statements should be read
in conjunction with those financial statements included in the Form 10-KSB. In
the opinion of Management, all adjustments considered necessary for a fair
presentation, consisting solely of normal recurring adjustments, have been made.
Operating results for the three months ended December 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2001.
2. SEGMENT INFORMATION
In October 1999, the Company launched its web-sites operation. This segment
derives revenues from membership fees, traffic sold, and sale of feeds to other
web-site operators. Below is the financial information on this segment.
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED DECEMBER 31, 2000 ENDED DECEMBER 31, 1999
REVENUES
Internet Web-sites $ 2,010,800 $ 49,864
Clubs operation 3,040,613 2,668,311
------------------------- -------------------------
$ 5,051,413 $ 2,718,175
========================= =========================
NET INCOME/(LOSS)
Internet Web-sites $ 269,464 $ (75,667)
Clubs operation 156,755 271,974
Corporate expenses (175,454) (112,281)
------------------------- -------------------------
$ 250,765 $ 84,026
========================= =========================
PROPERTY & EQUIPMENT, NET DEPRECIATION
Internet Web-sites $ 248,941 $ 210,350
Clubs operation 8,331,034 8,453,102
------------------------- -------------------------
$ 8,579,975 $ 8,663,452
========================= =========================
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the Company's
audited and unaudited consolidated financial statements and related notes
thereto included in this quarterly report.
FORWARD LOOKING STATEMENT AND INFORMATION
The Company is including the following cautionary statement in this Form
10-QSB to make applicable and take advantage of the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements, which are
other than statements of historical facts. Certain statements in this Form
10-QSB are forward-looking statements. Words such as "expects", "anticipates"
and "estimates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. Such risks and
uncertainties are set forth below. The Company's expectations, beliefs and
projections are expressed in good faith and are believed by the Company to have
a reasonable basis, including without limitation, management's examination of
historical operating trends, data contained in the Company's records and other
data available from third parties, but there can be no assurance that
management's expectation, beliefs or projections will result, be achieved, or be
accomplished. In addition to other factors and matters discussed elsewhere
herein, the following are important factors that, in the view of the Company,
could cause material adverse affects on the Company's financial condition and
results of operations: the risks and uncertainties relating to our Internet
operations, the impact and implementation of the sexually oriented business
ordinance in the City of Houston, competitive factors, the timing of the
openings of other clubs, the integration of operations of Taurus Entertainment
Companies, Inc. with our operations and management, the availability of
acceptable financing to fund corporate expansion efforts, competitive factors,
and the dependence on key personnel. The Company has no obligation to update or
revise these forward-looking statements to reflect the occurrence of future
events or circumstances.
GENERAL
We currently own and operate three adult Internet membership web sites at
www.dancerdorm.com, www.amateurdan.com, and www.xxxpassword.com.
We also own and operate adult nightclubs under the name "Rick's Cabaret"
and "XTC" which offer live adult entertainment, restaurant and bar operations.
We own and operate our Internet content production studio and web site
operations center, and three adult nightclubs in Houston, Texas. We also own
and operate adult nightclubs in Austin and San Antonio, Texas, and Minneapolis,
Minnesota.
Our revenues are derived from subscriptions to adult content internet web
sites and from the sale of liquor, beer, wine and food, cover charges and other
income. Our fiscal year end is September 30.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AS COMPARED
TO THE THREE MONTHS ENDED DECEMBER 31, 1999
For the three months ended December 31, 2000, the Company had consolidated
total revenues of $5,051,413 compared to consolidated total revenues of
$2,718,175 for the three months ended December 31, 1999, or an increase of
$2,333,238. The increase in total revenues was due to the increase in revenues
in the Company's existing and new locations of $372,302 and to the increase in
revenues generated by the Company's Internet businesses of $1,960,936.
The cost of goods sold for the three months ended December 31, 2000 was 36.31%
of
total revenues compared to 13.39% for the three months ended December 31,1999.
The increase was due primarily to the costs of maintaining our Internet
operations and the addition of logo merchandise to our sales mix. The cost of
goods sold for the club operation for the three months ended December 31, 2000
was 14.31% of the sales of alcoholic beverages and food compared to 13.03% for
the three months ended December 31, 1999. The increase was due primarily to the
increase in food costs and the addition of logo merchandise in our sales mix.
We continued our efforts to achieve reductions in cost of goods sold of the club
operations through improved inventory management. We continue a program to
improve margins from liquor and food sales and food service efficiency. The
cost of sales from our Internet operation for the three months ended December
31, 2000 was 69.58%.
Payroll and related costs for the three months ended December 31, 2000 were
$1,226,002 compared to $910,156 for the three months ended December 31, 1999.
The increase was a reflection of the additional personnel experienced by the
Company as it adds more locations and continues to increase the size and the
scope of our internet operation. Management currently believes that its labor
and management staff levels are of appropriate levels.
Other selling, general and administrative expenses for the three months
ended
December 31, 2000 were $1,656,484 compared to $1,259,949 for the three months
ended December 31, 1999. The increase was due to increased number of the
Company's locations and the expansion of our Internet business.
Interest expense for the three months ended December 31, 2000 was $92,813
compared to $ 108,677 for the three months ended December 31, 1999. The
decrease was primarily due to the Company's position in not obtaining new debts,
but to aggressively reduce its debt burden.
Net income for the three months ended December 31, 2000 was $250,765
compared to a net income of $84,026 for the three months ended December 31,
1999. The increase in net income was primarily due to the increase in revenues
in Company's locations and its internet business.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2000, the Company had working capital deficit of $33,209
compared to working capital deficit of $133,686 at September 30, 2000.
Net cash provided by operating activities in the three months ended
December 31, 2000 was $380,880 compared to net cash provided of $295,634 for the
three months ended December 31, 1999. The increase in cash provided by
operating activities was due to an increase in net income.
Depreciation and Amortization for the three months ended December 31, 2000
were $183,455 compared to $131,943 for the three months ended December 31, 1999.
In the opinion of management, working capital is not a true indicator of
the financial status. Typically, the Company carries current liabilities in
excess of current assets because the business receives substantially immediate
payment for sales, with nominal receivables, while inventories and other current
liabilities normally carry longer payment terms. Vendors and purveyors often
remain flexible with payment terms providing the Company with opportunities to
adjust to short-term business down turns. The Company considers the primary
indicators of financial status to be the long-term trend and mix of sales
revenues, overall cash flow and profitability from operations and the level of
long-term debt.
We have not established lines of credit other than the existing debt.
There can be no assurance that we will be able to obtain additional financing on
reasonable terms, if at all.
Because of the large volume of cash we handle, stringent cash controls have
been implemented. In the event the sexually oriented business industry is
required in all states to convert the entertainers who perform from independent
contractor to employee status, we have prepared alternative plans that we
believe will protect our profitability. We believe that the industry standard
of treating the entertainers as independent contractors provides sufficient safe
harbor protection to preclude any payroll tax assessment for prior years.
The sexually oriented business industry is highly competitive with respect
to price, service and location, as well as the professionalism of the
entertainment. Although we believe that we are well-positioned to compete
successfully in the future, there can be no assurance that we will be able to
maintain our high level of name recognition and prestige within the marketplace.
SEASONALITY
The Company is significantly affected by seasonal factors. Typically, the
Company has experienced reduced revenues from April through September with the
strongest operating results occurring during October through March.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 99.1 -- Report of Independent Auditor on
Review of Unaudited Financial Statements.
(b) Reports on Form 8-K
On November 29, 2000 we filed a report on Form
8-K dated November 27, 2000 reporting Item 2
Acquisition of Assets.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RICK'S CABARET INTERNATIONAL, INC.
_______________________________
Date: February 9, 2001 By: /s/ Eric S. Langan
Eric S. Langan
President and Chief Accounting Officer