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 ended: March 31, 2001
[ ] 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 May 7, 2001, 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
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2001 (unaudited) and September 30, 2000 (audited)
Consolidated Statements of Operations for the
three and six months ended March 31, 2001 and 2000 (unaudited)
Consolidated Statements of Cash Flows for the
six months ended March 31, 2001 and 2000 (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
-----------
3/31/2001 9/30/2000
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash $ 514,830 $ 374,532
Accounts receivable 354,565 297,761
Prepaid expenses 105,529 67,661
Inventories 195,640 200,471
Land held for sale 200,000 200,000
----------- -----------
Total current assets 1,370,564 1,140,425
----------- -----------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 8,438,437 8,360,090
Furniture & equipment 1,566,788 1,508,990
----------- -----------
10,005,225 9,869,080
Accumulated depreciation (1,496,991) (1,296,898)
----------- -----------
8,508,234 8,572,182
----------- -----------
OTHER ASSETS
Goodwill less accumulated amortization 3,481,176 3,412,827
Other 214,148 288,223
----------- -----------
3,695,324 3,701,050
----------- -----------
$13,574,122 $13,413,657
=========== ===========
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
3/31/2001 9/30/2000
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Current portion of long term debt $ 372,735 $ 456,749
Accounts payable - trade 332,695 437,083
Accrued expenses 453,174 380,279
---------- ----------
Total current liabilities 1,158,604 1,274,111
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 3,243,215 3,409,767
---------- ----------
Total Liabilities 4,401,819 4,683,878
---------- ----------
COMMITMENTS AND CONTINGENCIES --- ---
MINORITY INTERESTS 73,456 64,410
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par, authorized
1,000,000 shares; 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 10,891,794 10,867,449
Retained earnings (deficit) (1,836,434) (2,245,567)
---------- ----------
Total stockholder's equity 9,098,847 8,665,369
---------- ----------
$13,574,122 $13,413,657
========== ===========
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2001 2000 2001 2000
REVENUES
Sales of alcoholic beverages $ 1,458,119 $ 1,129,924 $ 2,798,161 $ 2,234,507
Sales of foods 212,391 163,030 404,336 313,406
Service revenues 1,361,437 1,229,004 2,634,153 2,441,236
Internet revenues 2,125,616 131,943 4,136,416 181,807
Others 240,708 187,614 476,618 388,734
----------- ----------- ----------- -----------
5,398,271 2,841,515 10,449,684 5,559,690
OPERATING EXPENSES
Cost of goods sold 2,339,866 467,679 4,173,895 831,458
Salaries and wages 1,188,951 988,057 2,414,953 1,898,213
Other general and administrative
Taxes and permits 442,258 435,156 922,146 840,657
Charge card fees 85,035 39,961 169,164 79,046
Rent 78,340 15,235 155,407 26,725
Legal and accounting 178,079 173,988 395,870 286,054
Advertising 131,864 210,737 264,137 408,142
Other 715,047 527,070 1,380,433 1,021,472
----------- ----------- ----------- -----------
5,159,440 2,857,883 9,876,005 5,391,767
----------- ----------- ----------- -----------
INCOME/(LOSS) FROM OPERATIONS 238,831 (16,368) 573,679 167,923
Interest Expense (88,305) (104,834) (181,118) (213,511)
Interest Income 7,842 7,924 16,572 16,336
----------- ----------- ----------- -----------
NET INCOME/(LOSS) $ 158,368 $ (113,278) $ 409,133 $ (29,252)
=========== =========== =========== ===========
BASIC NET INCOME (LOSS) PER COMMON SHARE:
NET INCOME (LOSS) $ 0.04 $ (0.03) $ 0.09 $ (0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,348,678 3,683,845 4,348,678 3,648,761
=========== =========== =========== ===========
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2001 AND 2000
2001 2000
(UNAUDITED) (UNAUDITED)
NET INCOME/(LOSS) $ 409,133 $ (29,252)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and amortization 382,762 260,057
Minority Interest 9,046 (7,469)
Changes in assets and liabilities:
Accounts receivable (56,804) (84,228)
Prepaid expenses (37,868) (56,833)
Inventories 4,831 (6,806)
Other assets (176,943) 38,401
Accounts payable and accrued expenses (31,493) 146,732
---------- ---------
Cash provided by operating expenses 502,664 260,602
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property equipment (136,145) (250,817)
---------- ---------
Cash used by investing activities (136,145) (250,817)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued, less offering costs 24,345 217,086
Payments on long-term debt (250,566) (214,386)
---------- ---------
Cash provided (used) by financing activities (226,221) 2,700
---------- ---------
NET INCREASE IN CASH 140,298 12,485
CASH AT BEGINNING OF PERIOD 374,532 378,161
---------- ---------
CASH AT END OF PERIOD $ 514,830 $ 390,646
========= ==========
CASH PAID DURING PERIOD FOR:
Interest $ 181,118 $ 213,511
========= ==========
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
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 six months ended March 31, 2001 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 SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2001 2000 2001 2000
REVENUES
Internet Web-sites $ 2,125,616 $ 133,267 $ 4,136,416 $ 183,131
Club operation 3,272,655 2,708,248 6,313,268 5,376,559
----------- ----------- ------------ ------------
$ 5,398,271 $ 2,841,515 $ 10,449,684 $ 5,559,690
NET INCOME/(LOSS)
Internet Web-sites $ (90,132) $ (194,724) $ 179,332 $ (270,392)
Club operation 468,620 221,491 625,375 493,466
Corporate expenses (220,120) (140,045) (395,574) (252,326)
----------- ----------- ------------ ------------
$ 158,368 $ (113,278) $ 409,133 $ (29,252)
PROPERTY & EQUIPMENT
Internet Web-sites $ 241,429 $ 233,882
Clubs operation 8,266,805 8,393,033
------------ ------------
$ 8,508,234 $ 8,626,915
============ ============
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 plus an auction
-------------------
site at www.naughtybids.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 AND SIX MONTHS ENDED MARCH 31, 2001 AS
COMPARED TO THE THREE AND SIX MONTHS ENDED MARCH 31, 2000
For the three months ended March 31, 2001, the Company had consolidated
total revenues of $5,398,271 compared to consolidated total revenues of
$2,841,515 for the three months ended March 31, 2000, or an increase of
$2,556,756. The increase in total revenues was due to the increase in revenues
in the Company's existing and new club locations of $563,083 and to the increase
in revenues generated by the Company's Internet businesses of $1,993,673. The
increase in the revenues generated by the club operations were primarily due to
increase in cover charges, floor fees, and merchandise revenues.
The cost of goods sold for the three months ended March 31, 2001 was 43.35%
of total revenues compared to 16.46% for the three months ended March 31, 2000.
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 March 31, 2001 was
14.19% of the sales of alcoholic beverages and food compared to 12.81% for the
three months ended March 31, 2000. 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 March 31,
2001 was 88.24%.
Payroll and related costs for the three months ended March 31, 2001 were
$1,188,951 compared to $988,057 for the three months ended March 31, 2000. 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 March 31, 2001 were $1,630,623 compared to $1,402,147 for the three months
ended March 31, 2000. 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 March 31, 2001 was $88,305
compared to $104,834 for the three months ended March 31, 2000. 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 March 31, 2001 was $158,368 compared
to a net loss of $113,278 for the three months ended March 31, 2000. The
increase in net income was primarily due to the increase in revenues in the
Company's club locations.
For the six months ended March 31, 2001, the Company had consolidated total
revenues of $10,449,684 compared to consolidated total revenues of $5,559,690
for the fiscal six months ended March 31, 2000, or an increase of $4,889,994.
The increase in total revenues was due to the increase in revenues in the
Company's existing and new club locations of $935,385 and to the increase in
revenues generated by the Company's Internet businesses of $3,954,609.
The cost of goods sold for the six months ended March 31, 2001 was 39.95%
of total revenues compared to 14.96% for the six months ended March 31, 2000.
The increase was due primarily to the initial and maintenance costs of our
internet operation. The cost of goods sold for the club operation for the six
months ended March 31, 2001 was 14.25%. Management continued its efforts to
achieve reductions in cost of goods sold through improved inventory management.
The Company continues a program to improve margins from liquor and food sales
and food service efficiency.
Payroll and related costs for the six months ended March 31, 2001 were
$2,414,953 compared to $1,898,213 for the six months ended March 31, 2000. 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. The labor cost for the
internet operation was $230,281 and for the clubs operation was $1,917,814.
Management currently believes that its labor and management staff levels are of
appropriate levels.
Other selling, general and administrative expenses for the six months ended
March 31, 2001 were $3,287,157 compared to $2,662,096 for the six months ended
March 31, 2000. The increase was due to increased number of the Company's
locations and the expansion of our Internet business.
Interest expense for the six months ended March 31, 2001 was $181,118
compared to $213,511 for the six months ended March 31, 2000. The decrease was
primarily attributable to Company's aggressive effort to pay off its debt and
not acquiring a new debt.
Net income for the six months ended March 31, 2001 was $409,133 compared to
a net loss of ($29,252) for the six months ended March 31, 2000. The increase
in net income was primarily due to the increase in revenues in Company's
locations and its internet business. Management currently believes that the
Company is in the position to be profitable in fiscal 2001.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company had working capital of $211,960 compared to
a working capital deficit of $133,686 at September 30, 2000. The increase in
working capital was due primarily to the increase in net income.
Net cash provided by operating activities in the six months ended March 31,
2001 was $502,664 compared to $260,602 for the six months ended March 31, 2000.
The increase in cash provided by operating activities was due principally to the
increase in net income from operation.
Depreciation and Amortization for the six months ended March 31, 2001 were
$382,762 compared to $260,057 for the six months ended March 31, 2000.
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
None
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: May 10, 2001 By: /s/ Eric S. Langan
Eric S. Langan
President and Chief Accounting
Officer