United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly report under to Section 13 Or 15(D) of the Securities Exchange
Act of 1934; For the quarterly period ended: June 30, 2001
[ ] Transition report under Section 13 Or 15(D) of the Securities Exchange
Act Of 1934
Commission File Number: 000-08835
Taurus Entertainment Companies, Inc.
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0736215
(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)
(281) 820-1181
(Issuer'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
At August 7, 2001, approximately 4,310,012 shares of common stock, $.001 par
value, were outstanding.
Transitional Small Business Disclosure Format (Check One); Yes [ ] No [X]
TAURUS ENTERTAINMENT COMPANIES, 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
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
6/30/2001 9/30/2000
(UNAUDITED) (AUDITED)
----------- -----------
CURRENT ASSETS
Cash $ 51,336 $ 35,184
Accounts receivable 37,757 36,413
Prepaid expenses 25,097 4,510
Inventories 566 2,276
Land held for sale 200,000 200,000
----------- -----------
Total current assets 314,756 278,383
----------- -----------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 1,682,696 1,678,915
Furniture & equipment 262,968 230,186
----------- -----------
1,945,684 1,909,101
Accumulated depreciation (194,739) (146,740)
----------- -----------
1,750,925 1,762,361
----------- -----------
OTHER ASSETS
Other 114,292 139,839
----------- -----------
$2,179,973 $2,180,583
=========== ===========
TAURUS ENTERTAINMENT COMPANIES, 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 $ 180,667 $ 335,955
Payable to Parent 349,511 197,324
Accounts payable - trade 68,994 75,173
Accrued expenses 22,884 46,391
------------ ------------
Total current liabilities 622,056 654,843
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 469,273 610,619
------------ ------------
Total Liabilities 1,091,329 1,265,462
------------ ------------
COMMITMENTS AND CONTINGENCIES --- ---
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par, authorized
1,000,000shares; none outstanding --- ---
Common stock - $.001 par, authorized
15,000,000 shares
issued 4,310,012 and 4,305,012 4,310 4,305
Additional paid in capital 4,026,428 4,026,383
Retained earnings (deficit) (2,942,094) (3,115,567)
------------ ------------
Total stockholders' equity 1,088,644 915,121
------------ ------------
$ 2,179,973 $ 2,180,583
============ ============
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2001 2000 2001 2000
----------- ----------- ----------- -----------
REVENUES
Service revenues $ 326,653 $ 337,622 $1,006,338 $1,001,414
Other 57,040 40,656 157,030 129,595
----------- ----------- ----------- -----------
383,693 378,278 1,163,368 1,131,009
----------- ----------- ----------- -----------
OPERATING EXPENSES
Cost of goods sold 24,582 24,100 67,940 75,577
Salaries and wages 88,746 82,955 227,806 230,026
Other general and administrative
Taxes and permits 41,883 38,648 110,475 125,574
Charge card fees 734 1,178 3,457 3,621
Legal and accounting 19,799 3,972 69,828 30,887
Advertising 15,166 37,083 46,845 104,074
Other 134,024 123,836 397,074 408,466
----------- ----------- ----------- -----------
324,934 311,772 923,425 978,225
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 58,759 66,506 239,943 152,784
Interest Expense (19,483) (33,477) (66,471) (103,083)
Other Income 0 206,707 206,707
----------- ----------- ----------- -----------
NET INCOME $ 39,276 $ 239,736 $ 173,472 $ 256,408
=========== =========== =========== ===========
BASIC NET INCOME PER COMMON SHARE:
$ 0.01 $ 0.06 $ 0.04 $ 0.06
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES 4,310,012 4,305,012 4,310,012 4,305,012
OUTSTANDING =========== =========== =========== ===========
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2001 AND 2000
2001 2000
(UNAUDITED) (UNAUDITED)
NET INCOME $ 173,472 $ 256,408
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and amortization 47,999 50,865
Changes in assets and liabilities:
Accounts receivable (1,344) (3,985)
Prepaid expenses (20,587) (962)
Inventories 1,710 (672)
Other assets 25,547 (1,475)
Accounts payable and accrued expenses 122,502 92,815
------------ ----------
Cash provided by operating activities 349,299 392,994
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (36,563) (97,764)
------------ ----------
Cash used by investing activities (36,563) (97,764)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (296,584) (257,288)
------------ ----------
Cash used by financing activities (296,584) (257,288)
------------ ----------
NET INCREASE IN CASH 16,152 37,942
CASH AT BEGINNING OF PERIOD 35,184 13,775
------------ ----------
CASH AT END OF PERIOD $ 51,336 $ 51,717
============ ==========
CASH PAID DURING PERIOD FOR:
Interest $ 66,471 $ 103,083
============ ==========
TAURUS ENTERTAINMENT COMPANIES, 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.
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 annual 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-QKSB 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 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 our operations and management
with our parent, Rick's Cabaret International, Inc., 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 one adult nightclub under the name "X.T.C. Cabaret
" in Austin, Texas. We own commercial income real estate and undeveloped real
estate. Our revenues are derived from cover charges, and the sale of
non-alcoholic beverages.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2001 AS
COMPARED TO THE THREE AND NINE MONTHS ENDED JUNE 30, 2000
For the quarter ended June 30, 2001, the Company had consolidated total revenues
of $383,693 compared to consolidated total revenues of $378,278 for the fiscal
quarter ended June 30, 2000, or an increase of $5,415. The increase in revenues
was due to the increase in non-alcoholic beverage sales, floor fees, and
merchandise revenues at the Company's location in Austin, Texas.
The cost of goods sold for the quarter ended June 30, 2001 was 6.41% of total
revenues compared to 6.37% for the quarter ended June 30, 2000. The increase
was due primarily to the addition of logo merchandise to our sales mix.
Management has developed and implemented a strategy to reduce the food cost
without reduction in food quality.
Payroll and related costs for the quarter ended June 30, 2001 were $88,746
compared to $82,955 for the quarter ended June 30, 2000. The increase was due
to the overall increase in payroll expenses in the Austin location. Management
currently believes that its labor and management staff levels are at appropriate
levels.
Other selling, general and administrative expenses for the quarter ended June
30, 2001 were $211,606 compared to $204,717 for the quarter ended June 30, 2000.
The increase in these expenses was primarily due to the increase in accounting
fees, investor relations expenses, and repair and maintenance expenses.
Interest expense for the quarter ended June 30, 2001 was $19,483 compared to
$33,477 for the quarter ended June 30, 2000. The decrease was attributable to
the Company's policy to pay its debts down and not to incur any new debts.
Net income for the quarter ended June 30, 2001 was $39,276 compared to a net
income of $239,736 for the quarter ended June 30, 2000. The decrease was
primarily due to the reduction of other income at Company's location in Austin,
Texas. Management currently believes that the Company is in the position to be
profitable for fiscal year 2001.
For the nine months ended June 30, 2001, the Company had consolidated total
revenues of $1,163,368 compared to consolidated total revenues of $1,131,009
for the fiscal nine months ended June 30, 2000, or an increase of $32,359. The
increase in revenues was due to the increase in cover charge, floor fees, and
merchandise revenues at the Company's location in Austin, Texas.
The cost of goods sold for the nine months ended June 30, 2001 was 5.84% of
total revenues compared to 6.69% for the nine months ended June 30, 2000. The
decrease was due to the decrease in the costs of providing complimentary food.
Management has developed and implemented a strategy to reduce the food cost
without reduction in food quality.
Payroll and related costs for the nine months ended June 30, 2001 were $227,806
compared to $230,026 for the nine months ended June 30, 2000. The decrease was
due to the overall decrease in payroll expenses in the Austin location.
Management currently believes that its labor and management staff levels are at
appropriate levels.
Other selling, general and administrative expenses for the nine months ended
June 30, 2001 were $627,679 compared to $672,622 for the nine months ended June
30, 2000. The decrease in these expenses was primarily due to the decrease in
advertising, administrative and general, and repair and maintenance expenses.
Interest expense for the nine months ended June 30, 2001 was $66,471 compared to
$103,083 for the nine months ended June 30, 2000. The decrease was attributable
to the Company's policy to pay its debts down and not to incur new debts.
Net income for the nine months ended June 30, 2001 was $173,472 compared to
$256,408 for the nine months ended June 30, 2000. The decrease was due to the
decrease in other income at Company's location in Austin, Texas. Management
currently believes that the Company is in the position to be profitable for
fiscal year 2001.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, the Company had working capital deficit of $307,300 compared
to a working capital deficit of $376,460 at September 30, 2000. The decrease in
working capital was due to the increase in net income and the payment of long
term debts.
Net cash provided by operating activities in the nine months ended June 30, 2001
was $349,299 compared to net cash provided of $392,994 for the nine months ended
June 30, 2000. The decrease in cash provided by operating activities was due
principally to the decrease in net income.
Depreciation and Amortization for the nine months ended June 30, 2001 were
$47,999 compared to $50,865 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, the 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.
Taurus Entertainment Companies, Inc.
Date: August 8, 2001 By: /s/ Eric Langan
------------------------
Eric Langan
President and Chief Accounting Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Taurus Entertainment Companies, Inc.
We have reviewed the accompanying balance sheets of Taurus Entertainment
Companies, Inc. as of June 30, 2001, and the related statements of income for
the three month and nine month periods ended June 30, 2001 and 2000, and the
statement of cash flows for the nine months period ended June 30, 2001 and 2000.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of analytical procedures applied to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Taurus Entertainment Companies, Inc. as of
September 30, 2000, and the related statements of earnings and cash flows for
the year then ended (not presented separately herein), and in our report dated
November 30, 2000, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
balance sheet as of September 30, 2000, is fairly stated, in all material
respects, in relation to the balance sheet from which it has been derived.
Jackson & Rhodes P.C.
Dallas, Texas
August 8, 2001