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: March 31, 2002
[ ] 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 May 7, 2002, 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
March 31, 2002 (unaudited) and September 30, 2001 (audited). . . . . 2
Consolidated Statements of Operations for
the three and six months ended March 31, 2002 and 2001 (unaudited). .4
Consolidated Statements of Cash Flows
for the six months ended March 31, 2002 and 2001 (unaudited). . . . .5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation. . . . . . . . . . . . . . . . . . . . . . . . .6
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
3/31/2001 9/30/2001
(UNAUDITED) (AUDITED)
------------ -----------
CURRENT ASSETS
Cash $ 67,348 $ 94,660
Accounts receivable 39,608 37,637
Prepaid expenses 19,817 10,701
Inventories 566 566
Land held for sale --- 200,000
------------ -----------
Total current assets 127,339 343,564
------------ -----------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 1,886,696 1,686,696
Furniture & equipment 264,221 264,221
------------ -----------
2,150,917 1,950,917
Accumulated depreciation (247,465) (212,726)
------------ -----------
1,903,452 1,738,191
------------ -----------
OTHER ASSETS
Other 107,646 105,902
------------ -----------
$ 2,138,437 $2,187,657
============ ===========
2
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
3/31/2001 9/30/2001
(UNAUDITED) (AUDITED)
------------ ------------
CURRENT LIABILITIES
Current portion of long term debt $ 68,485 $ 147,338
Payable to Parent 355,214 333,214
Accounts payable - trade 57,874 75,334
Accrued expenses 35,640 42,544
------------ ------------
Total current liabilities 517,213 598,430
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 460,493 463,281
------------ ------------
Total Liabilities 977,706 1,061,711
------------ ------------
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 4,310 4,310
Additional paid in capital 4,026,428 4,026,428
Retained earnings (deficit) (2,870,007) (2,904,792)
------------ ------------
Total stockholders' equity 1,160,731 1,125,946
------------ ------------
$ 2,138,437 $ 2,187,657
============ ============
3
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2002 2001 2002 2001
----------- ------------- ------------ -----------
REVENUES
Service revenues $ 285,686 $ 346,504 $ 572,897 $ 679,685
Other 50,275 53,93 100,101 99,990
----------- ------------- ------------ -----------
335,961 400,447 672,998 779,675
----------- ------------- ------------ -----------
OPERATING EXPENSES
Cost of goods sold 17,967 20,755 41,191 43,358
Salaries and wages 99,100 67,055 194,363 139,060
Other general and administrative
Taxes and permits 35,966 35,341 74,786 68,592
Charge card fees 673 1,799 1,327 2,723
Legal and accounting 9,748 20,246 12,696 50,029
Advertising 16,718 16,395 30,002 31,679
Other 130,434 132,583 260,795 263,050
----------- ------------- ------------ -----------
310,605 294,174 615,159 598,491
----------- ------------- ------------ -----------
INCOME FROM OPERATIONS 25,356 106,273 57,839 181,184
Interest Expense (11,021) (22,185) (23,054) (46,988)
----------- ------------- ------------ -----------
NET INCOME/(LOSS) $ 14,335 $ 84,088 $ 34,785 $ 134,196
============ ============ ============ ===========
BASIC NET INCOME/(LOSS) PER COMMON SHARE:
$ 0.003 $ 0.02 $ 0.01 $ 0.03
============ ============ ============ ===========
WEIGHTED AVERAGE SHARES 4,310,012 4,310,012 4,310,012 4,310,012
============ ============ ============ ===========
4
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,785 $ 134,196
Depreciation and amortization 31,240 33,649
Changes in working capital (11,696) 46,737
--------- ----------
Cash provided by operating activities 54,329 198,689
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property equipment --- (3,781)
--------- ----------
Cash used by investing activities --- (3,781)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (81,641) (189,458)
--------- ----------
Cash used by financing activities (81,641) (189,458)
--------- ----------
NET INCREASE (DECREASE) IN CASH (27,312) 18,934
CASH AT BEGINNING OF PERIOD 94,660 35,184
--------- ----------
CASH AT END OF PERIOD $ 67,348 $ 54,118
========= ==========
CASH PAID DURING PERIOD FOR:
Interest $ 23,054 $ 46,988
========= ==========
5
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
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, 2001 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, 2002 are not necessarily
indicative of the results that may be expected for the year ending September 30,
2002.
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-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 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.
6
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 MONTHS ENDED MARCH 31, 2002 AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 2001
For the quarter ended March 31, 2002, the Company had consolidated total
revenues of $335,961 compared to consolidated total revenues of $400,447 for the
fiscal quarter ended March 31, 2001, or a decrease of $64,486. The decrease in
revenues was due to a decrease in revenues from cover charges and VIP
Memberships at the Company's location in Austin, Texas.
The cost of goods sold for the quarter ended March 31, 2002 decreased by $2,788
over the same period in 2001. Cost of goods sold for the quarter ended March
31, 2002 was 5.35% of total revenues compared to 5.18% for the quarter ended
March 31, 2001. This increase was due primarily to the decrease in the revenues
for the 2002 period.
Payroll and related costs for the quarter ended March 31, 2002 were $99,100
compared to $67,055 for the quarter ended March 31, 2001. This increase is due
to the addition of maintenance personnel to the 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 March
31, 2002 were $193,539 compared to $206,364 for the quarter ended March 31,
2001. The decrease in these expenses was primarily due to the decrease in
general and administrative and repair and maintenance expenses.
Interest expense for the quarter ended March 31, 2002 was $11,021 compared to
$22,185 for the quarter ended March 31, 2001. The decrease was attributable to
the Company's efforts to pay down debts and not incur any new debts.
Net income for the quarter ended March 31, 2002 was $14,335 compared to $84,088
for the quarter ended March 31, 2001. The decrease was primarily due to the
decrease in revenues and to the additional payroll expenses at Company's
location in Austin, Texas.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 2001
For the six months ended March 31, 2002, the Company had consolidated total
revenues of $672,998 compared to consolidated total revenues of $779,675 for
7
the fiscal six months ended March 31, 2001, or a decrease of $106,677. The
decrease in revenues was due to a decrease in cover charges and VIP Membership
fees at the Company's location in Austin, Texas.
The cost of goods sold for the six months ended March 31, 2002 decreased from
the March 31, 2001 period by $2,167. As a percentage of revenues the cost of
goods sold for the six months ended March 31, 2002 was 6.12% compared to 5.56%
for the six months ended March 31, 2001. The percentage increase was due to the
decrease in revenues without a similar decrease in cost of goods sold.
Payroll and related costs for the six months ended March 31, 2002 were $194,363
compared to $139,060 for the six months ended March 31, 2001. The increase is
due to the addition of maintenance personnel to the 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 six months ended
March 31, 2001 were $379,605 compared to $416,073 for the six months ended March
31, 2001. The decrease in these expenses was primarily due to the decrease in
advertising, general and administrative, and repair and maintenance expenses.
Interest expense for the six months ended March 31, 2002 was $23,054 compared to
$46,988 for the six months ended March 31, 2001. The decrease was attributable
to the Company's efforts to pay down debt and not to incur new debts.
Net income for the six months ended March 31, 2002 was $34,785 compared to
$134,196 for the six months ended March 31, 2001. The decrease was due to the
decrease in revenues and to the increase in payroll costs at Company's location
in Austin, Texas.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, the Company had working capital deficit of $389,874 compared
to a working capital deficit of $254,866 at September 30, 2001. The decrease in
working capital was due to the decrease in net income and the payment of
accounts payable.
Net cash provided by operating activities in the six months ended March 31, 2002
was $54,329 compared to $212,173 for the six months ended March 31, 2001.
Depreciation and Amortization for the six months ended March 31, 2002 were
$31,240 compared to $33,649 for the six months ended March 31, 2001.
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.
8
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 1. LEGAL PROCEDURES
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERRS
Not Applicable
Item 5. OTHER INFORMAITON
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Form 8-K
No reports on Form 8-k were filed during the quarter ended March
31, 2002.
9
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: May 14, 2002 By: /s/ Eric Langan
---------------------
Eric Langan
President and Chief Accounting Officer
10