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, 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 August 5, 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
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 2002 (unaudited) and September 30, 2001 (audited). . . . 2
Consolidated Statements of Operations for
the three and nine months ended
June 30, 2002 and 2001 (unaudited) . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
for the nine months ended June 30, 2002 and 2001 (unaudited). . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation . . . . . . . . . . . . . . . . . . . . . 5
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2002 September 30, 2001
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 81,514 $ 94,660
Accounts Receivable 39,877 37,637
Prepaid expenses 11,588 10,701
Inventory 566 566
Land held for sale 0 200,000
--------------- --------------------
Total current assets 133,545 343,564
--------------- --------------------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 1,892,820 1,686,696
Furniture & equipment 267,221 264,221
--------------- --------------------
2,160,041 1,950,917
Accumulated depreciation (264,835) (212,726)
--------------- --------------------
Total property and equipment, net 1,895,206 1,738,191
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OTHER ASSETS
Other 254,263 105,902
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Total assets $ 2,283,014 $ 2,187,657
=============== ====================
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Current portion of long term debt $ 30,322 $ 147,338
Payable to parent 525,742 333,214
Accounts payable-trade 49,004 75,334
Accrued expenses 39,127 42,544
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Total current liabilities 644,195 598,430
LONG TERM DEBT
Long-term debt less current portion 456,287 463,281
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Total liabilities 1,100,482 1,061,711
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STOCKHOLDERS' EQUITY
Preferred stock - $.10 par, authorized 1,000,000
shares; 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) (2,848,206) (2,904,792)
--------------- --------------------
Total stockholders' equity 1,182,532 1,125,946
--------------- --------------------
Total liabilities and stockholders' equity $ 2,283,014 $ 2,187,657
=============== ====================
2
Taurus Entertainment Companies and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For The Three Months Ended For The Nine Months Ended
June 30 June 30
2002 2001 2002 2001
--------------- -------------- -------------- --------------
REVENUES
Service revenues $ 279,757 $ 326,653 $ 891,800 $ 1,006,338
Other revenue 45,049 57,040 106,004 157,030
--------------- -------------- -------------- --------------
Total revenue 324,806 383,693 997,804 1,163,368
--------------- -------------- -------------- --------------
OPERATING EXPENSES
Cost of goods sold 11,390 24,582 52,581 67,940
Salaries and wages 89,857 88,746 284,220 227,806
Other general and administrative
Taxes and permits 32,079 41,883 106,865 110,475
Charge card fees 1,098 734 2,425 3,457
Legal and accounting 15,642 19,799 28,338 69,828
Advertising 8,812 15,166 38,814 46,845
Other 131,097 134,024 394,893 397,074
--------------- -------------- -------------- --------------
Total operating expenses 289,975 324,934 908,136 923,425
--------------- -------------- -------------- --------------
INCOME (LOSS) FROM OPERATIONS 34,831 58,759 89,669 239,943
OTHER INCOME (EXPENSE)
Interest Expense (13,029) (19,483) (33,082) (66,471)
--------------- -------------- -------------- --------------
NET INCOME (LOSS) $ 21,802 $ 39,276 $ 56,587 $ 173,472
=============== ============== ============== ==============
Basic Net Income (Loss) Per common Share:
Net Income (Loss) $ 0.01 $ 0.01 $ 0.01 $ 0.04
=============== ============== ============== ==============
Weighted Average Shares Outstanding 4,310,012 4,310,012 4,310,012 4,310,012
=============== ============== ============== ==============
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TAURUS ENTERTAINMENT COMPANIES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months ended June 30,
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 56,586 $ 173,472
Depreciation and amortization 52,109 47,999
Changes in working capital 208,291 127,828
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Net cash provided by operating activities 316,986 349,299
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (206,124) (36,563)
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Net cash used in investing activities (206,124) (36,563)
CASH FLOWS FROM FINANCIAG ACTIVITIES:
Payments on long-term debt (124,008) (296,584)
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Net cash used in financing activities (124,008) (296,584)
NET INCREASE (DECREASE) IN CASH (13,146) 16,152
CASH, at beginning of period 94,660 35,184
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CASH, at end of period $ 81,514 $ 51,336
========== ==========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 36,083 $ 66,471
========== ==========
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TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
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
accounting principles generally accepted in the United States of America 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 nine months ended June 30, 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.
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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 JUNE 30, 2002 AS COMPARED TO
THE THREE MONTHS ENDED JUNE 30, 2001
For the quarter ended June 30, 2002, the Company had consolidated total revenues
of $324,806 compared to consolidated total revenues of $383,693 for the fiscal
quarter ended June 30, 2001, or a decrease of $58,887. 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 June 30, 2002 decreased by $13,192
over the same period in 2001. Cost of goods sold for the quarter ended June 30,
2002 was 3.50% of total revenues compared to 6.40% for the quarter ended June
30, 2001. This decrease was due primarily to the reduction in food costs due to
the elimination of catered food services.
Payroll and related costs for the quarter ended June 30, 2002 were $89,857
compared to $88,746 for the quarter ended June 30, 2001. This increase is due to
the addition of maintenance personnel 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, 2002 were $188,728 compared to $211,606 for the quarter ended June 30, 2001.
Interest expense for the quarter ended June 30, 2002 was $13,029 compared to
$19,483 for the quarter ended June 30, 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 June 30, 2002 was $21,802 compared to $39,276
for the quarter ended June 30, 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 NINE MONTHS ENDED JUNE 30, 2002 AS COMPARED TO THE
NINE MONTHS ENDED JUNE 30, 2001
For the nine months ended June 30, 2002, the Company had consolidated total
revenues of $997,804 compared to consolidated total revenues of $1,163,368 for
the fiscal nine months ended June 30, 2001, or a decrease of $165,564. 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 nine months ended June 30, 2002 decreased from
the June 30, 2001 period by $15,359. As a percentage of revenues the cost of
goods sold for the nine months ended June 30, 2002 was 5.27% compared to 5.83%
for the nine months ended June 30, 2001. The decrease was due to the decrease in
food costs as a result of eliminating catered food services.
Payroll and related costs for the nine months ended June 30, 2002 were $284,220
compared to $227,806 for the nine months ended June 30, 2001. The increase is
due to the addition of maintenance personnel to the payroll expenses in the
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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, 2002 were $571,335 compared to $627,679 for the nine months ended June
30, 2001. The decrease in these expenses was primarily due to the decrease in
advertising expense, legal expense and general and administrative expenses.
Interest expense for the nine months ended June 30, 2002 was $33,082 compared to
$66,471 for the nine months ended June 30, 2001. The decrease was attributable
to the Company's efforts to pay down debt and not to incur new debts.
Net income for the nine months ended June 30, 2002 was $56,587 compared to
$173,472 for the nine months ended June 30, 2001. The decrease was due to the
decrease in revenues and to the increase in payroll costs at the Company's
location in Austin, Texas.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, the Company had working capital deficit of $510,650 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 to the
reclassification of land held for sale to fixed assets.
Net cash provided by operating activities in the nine months ended June 30, 2002
was $316,986 compared to $349,299 for the nine months ended June 30, 2001.
Depreciation and Amortization for the nine months ended June 30, 2002 were
$52,109 compared to $47,999 for the nine months ended June 30, 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.
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.
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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
The flowing exhibits are included with this report:
Exhibit
Number Description
------ -----------
99.1 Certification of Chief Executive Officer and Chief
Financial Officer of Taurus Entertainment Companies,
Inc.
b. Form 8-K
No reports on Form 8-k were filed during the quarter ended June
30, 2002.
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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, 2002 By: /s/ Eric Langan
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Eric Langan
President and Chief Accounting Officer
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