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: June 30, 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 August 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
-----------------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 2001 (unaudited) and September 30, 2000 (audited)
Consolidated Statements of Operations for the
three and nine months ended June 30, 2001 and 2000 (unaudited)
Consolidated Statements of Cash Flows for the
nine months ended June 30, 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
-------
6/30/2001 9/30/2000
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash $ 600,979 $ 374,532
Accounts receivable 379,795 297,761
Prepaid expenses 173,399 67,661
Inventories 208,445 200,471
Land held for sale 200,000 200,000
------------- ------------
Total current assets 1,562,618 1,140,425
------------- ------------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 8,483,918 8,360,090
Furniture & equipment 1,842,803 1,508,990
------------- ------------
10,326,721 9,869,080
Accumulated depreciation (1,603,586) (1,296,898)
------------- ------------
8,723,135 8,572,182
------------- ------------
OTHER ASSETS
Goodwill less accumulated amortization 3,670,287 3,412,827
Other 207,221 288,223
------------- ------------
3,877,508 3,701,050
------------- ------------
$ 14,163,261 $13,413,657
============= ============
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
6/30/2001 9/30/2000
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Current portion of long term debt $ 342,165 $ 456,749
Accounts payable - trade 292,171 437,083
Accrued expenses 466,036 380,279
-------------- ------------
Total current liabilities 1,100,372 1,274,111
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 3,327,719 3,409,767
-------------- ------------
Total Liabilities 4,428,091 4,683,878
-------------- ------------
COMMITMENTS AND CONTINGENCIES --- ---
MINORITY INTERESTS 76,205 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 shares 43,487 43,487
Additional paid in capital 10,891,794 10,867,449
Treasury stock (42,369) 0
Retained earnings (deficit) (1,233,947) (2,245,567)
-------------- ------------
Total stockholders' equity 9,658,965 8,665,369
-------------- ------------
$ 14,163,261 $13,413,657
============== ============
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2001 2000 2001 2000
REVENUES --------------- --------------- --------------- ---------------
Sales of alcoholic beverages $ 1,511,870 $ 1,208,668 $ 4,310,031 $ 3,443,175
Sales of foods 208,233 171,994 612,569 485,400
Service revenues 1,309,466 1,215,886 3,943,619 3,657,122
Internet revenues 1,807,618 246,525 5,944,034 429,656
Others 280,819 223,155 757,437 610,565
--------------- --------------- --------------- ---------------
5,118,006 3,066,228 15,567,690 8,625,918
OPERATING EXPENSES
Cost of goods sold 1,455,351 439,399 5,629,246 1,270,857
Salaries and wages 1,200,244 1,109,908 3,615,197 3,008,121
Other general and administrative
Taxes and permits 510,170 443,625 1,432,316 1,284,282
Charge card fees 71,064 49,680 240,228 128,726
Rent 51,167 41,534 206,574 68,259
Legal and accounting 186,857 209,524 582,727 495,578
Advertising 129,434 204,971 393,571 613,113
Other 830,515 604,716 2,210,948 1,626,188
--------------- --------------- --------------- ---------------
4,434,802 3,103,357 14,310,807 8,495,124
--------------- --------------- --------------- ---------------
INCOME/(LOSS) FROM OPERATIONS 683,204 (37,129) 1,256,883 130,794
Interest Expense (87,818) (102,811) (268,936) (316,322)
Interest Income 7,101 6,311 23,673 22,646
Other Income 206,707 206,707
--------------- --------------- --------------- ---------------
NET INCOME/(LOSS) $ 602,487 $ 73,078 $ 1,011,620 $ 43,825
=============== =============== =============== ===============
BASIC NET INCOME (LOSS) PER COMMON SHARE:
NET INCOME (LOSS) $ 0.14 $ 0.02 $ 0.23 $ 0.01
=============== =============== =============== ===============
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,348,678 3,710,178 4,348,678 3,669,234
=============== =============== =============== ===============
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2001 AND 2000
2001 2000
(UNAUDITED) (UNAUDITED)
NET INCOME/(LOSS) $ 1,011,620 $ 43,825
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and amortization 603,588 404,907
Minority Interest 11,795 8,175
Changes in assets and liabilities:
Accounts receivable (82,034) (116,547)
Prepaid expenses (105,738) 3,721
Inventories (7,974) (20,089)
Other assets (473,358) 45,245
Accounts payable and accrued expenses (59,155) 229,742
------------ ----------
Cash provided by operating expenses 898,744 598,979
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property equipment (457,641) (350,487)
------------ ----------
Cash used by investing activities (457,641) (350,487)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued, less offering costs 24,345 242,470
Treasury stocks acquired (42,369) 0
Proceeds from long-term debt 194,475 0
Payments on long-term debt (391,107) (430,041)
------------ ----------
Cash provided (used) by financing activities (214,656) (187,571)
------------ ----------
NET INCREASE IN CASH 226,447 60,921
CASH AT BEGINNING OF PERIOD 374,532 378,161
------------ ----------
CASH AT END OF PERIOD $ 600,979 $ 439,082
============ ==========
CASH PAID DURING PERIOD FOR:
Interest $ 268,936 $ 213,511
============ ==========
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 nine months ended June 30, 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 NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2001 2000 2001 2000
--------------- --------------- --------------- ---------------
REVENUES
Internet Web-sites $ 1,807,618 $ 246,525 $ 5,944,034 $ 429,656
Club operation 3,310,388 2,819,703 9,623,656 8,196,262
--------------- --------------- --------------- ---------------
$ 5,118,006 $ 3,066,228 $ 15,567,690 $ 8,625,918
NET INCOME/(LOSS)
Internet Web-sites $ 433,620 $ (57,169) $ 612,952 $ (327,562)
Club operation 390,306 284,426 1,015,681 777,892
Corporate expenses (221,439) (154,179) (617,013) (406,505)
--------------- --------------- --------------- ---------------
$ 602,487 $ 73,078 $ 1,011,620 $ 43,825
PROPERTY & EQUIPMENT =============== =============== =============== ===============
Internet Web-sites $ 235,050 $ 258,410
Clubs operation 8,488,085 8,393,252
--------------- ---------------
$ 8,723,135 $ 8,621,662
=============== ===============
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 NINE MONTHS ENDED JUNE 30, 2001 AS
COMPARED TO THE THREE AND NINE MONTHS ENDED JUNE30, 2000
For the quarter ended June 30, 2001, the Company had consolidated total
revenues of $5,118,006 compared to consolidated total revenues of $3,066,228 for
the quarter ended June 30, 2000, or an increase of $2,051,778. The increase in
total revenues was due to the increase in revenues in the Company's existing and
new club locations of $490,073 and to the increase in revenues generated by the
Company's Internet businesses of $1,561,705. The increase in the revenues
generated by the club operations were primarily due to increase in alcoholic
beverage sales, food sales, floor fees, and merchandise revenues.
The cost of goods sold for the quarter ended June 30, 2001 was 28.44% of
total revenues compared to 14.33% for the quarter ended June 30, 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 quarter ended June 30, 2001 was 13.94% of the
sales of alcoholic beverages and food compared to 13.49% for the quarter ended
June 30, 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 quarter ended June 30, 2001 was 54.96%.
Payroll and related costs for the quarter ended June 30, 2001 were
$1,200,244 compared to $1,109,908 for the quarter ended June 30, 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 quarter ended
June 30, 2001 were $1,779,207 compared to $1,554,050 for the quarter ended June
30, 2000. The increase was due to increased number of the Company's locations
and the expansion of our Internet business.
Interest expense for the quarter ended June 30, 2001 was $87,818 compared
to $102,811 for the quarter ended June 30, 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 quarter ended June 30, 2001 was $602,487 compared to a
net income of $73,078 for the quarter ended June 30, 2000. The increase in net
income was primarily due to the increase in revenues in the Company's club
locations and internet operations.
For the nine months ended June 30, 2001, the Company had consolidated total
revenues of $15,567,690 compared to consolidated total revenues of $8,625,918
for the fiscal nine months ended June 30, 2000, or an increase of $6,941,772.
The increase in total revenues was due to the increase in revenues in the
Company's existing and new club locations of $1,427,395 and to the increase in
revenues generated by the Company's Internet businesses of $5,514,377.
The cost of goods sold for the nine months ended June 30, 2001 was 36.16%
of total revenues compared to 14.74% for the nine months ended June 30, 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 nine
months ended June 30, 2001 was 14.14%. 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 nine months ended June 30, 2001 were
$3,615,197 compared to $3,008,121 for the nine months ended June 30, 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 $324,840 and for the clubs operation was $2,871,945.
Management currently believes that its labor and management staff levels are of
appropriate levels.
Other selling, general and administrative expenses for the nine months
ended June 30, 2001 were $5,066,364 compared to $4,216,146 for the nine months
ended June 30, 2000. The increase was due to increased number of the Company's
locations and the expansion of our Internet business.
Interest expense for the nine months ended June 30, 2001 was $268,936
compared to $316,322 for the nine months ended June 30, 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 nine months ended June 30, 2001 was $1,011,620 compared
to a net income before extraordinary item of $43,825 for the nine months ended
June 30, 2000. The increase in net income was primarily due to the increase in
revenues in Company's club locations and internet business. Management
currently believes that the Company is in the position to be profitable in
fiscal 2001.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, the Company had working capital of $462,246 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 nine months ended June 30,
2001 was $898,744 compared to $598,979 for the nine months ended June 30, 2000.
The increase in cash provided by operating activities was due principally to the
increase in net income from both club and internet operations.
Depreciation and Amortization for the nine months ended June 30, 2001 were
$603,588 compared to $404,907 for the nine months ended June 30, 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 4. Submission of Matters to a Vote of Security Holders
Our annual meeting of shareholders was held on June 11, 2001. A quorum was
present. The following persons were elected Directors: Eric Langan, Robert
Watters, Travis Reese, Alan Bergstrom, Ron Levi, Paul Lesser and Steven
Jenkins. Our shareholders ratified the selection of Jackson & Rhodes, P.C. as
our independent auditors for the fiscal year ending September 30, 2001.
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: August 8, 2001 By: /s/ Eric S. Langan
--------------------------------------
Eric S. Langan
President and Chief Accounting Officer