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: December 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 January 31, 2003, 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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PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 2002
(unaudited) and September 30, 2002 (audited) . . . . . . . . . . . .1
Consolidated Statements of Operations for the three
months ended December 31, 2002 and 2001 (unaudited). . . . . . . . .3
Consolidated Statements of Cash Flows for the three
months ended December 31, 2002 and 2001 (unaudited). . . . . . . . .4
Notes to Consolidated Financial Statements . . . . . . . . . . . . .5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . .6
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
12/31/2002 9/30/2002
(UNAUDITED) (AUDITED)
------------ ------------
CURRENT ASSETS
Cash $ 92,512 $ 50,656
Accounts receivable 400 3,757
Prepaid expenses 7,141 7,956
Inventories 566 566
------------ ------------
Total current assets 100,619 62,935
------------ ------------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 2,137,454 2,137,242
Furniture & equipment 254,357 281,160
------------ ------------
2,391,811 2,418,402
Accumulated depreciation (286,491) (282,912)
------------ ------------
Total property and equipment 2,105,320 2,135,490
------------ ------------
OTHER ASSETS
Other 56,020 55,966
------------ ------------
Total assets $ 2,261,959 $2,254,391
============ ============
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TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
12/31/2002 9/30/2002
(UNAUDITED) (AUDITED)
------------- -------------
CURRENT LIABILITIES
Current portion of long term debt $ 10,233 $ 9,923
Payable to Parent 563,487 551,398
Accounts payable - trade 67,484 51,564
Accrued expenses 59,662 42,958
------------- -------------
Total current liabilities 700,866 655,843
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 450,645 453,358
------------- -------------
Total Liabilities 1,151,511 1,109,201
------------- -------------
COMMITMENTS AND CONTINGENCIES --- ---
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 shares 4,310 4,310
Additional paid in capital 4,026,428 4,026,428
Retained earnings (deficit) (2,920,290) (2,885,548)
------------- -------------
Total stockholders' equity 1,110,448 1,145,190
------------- -------------
Total liabilities and stockholders' equity $ 2,261,959 $ 2,254,391
============= =============
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TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
(UNAUDITED) (UNAUDITED)
REVENUES
Service revenues $ 234,793 $ 287,211
Other 39,334 49,826
----------- -----------
Total revenues 274,127 337,037
----------- -----------
OPERATING EXPENSES
Cost of goods sold 13,313 23,224
Salaries and wages 93,800 95,263
Other general and administrative
Taxes and permits 29,861 38,820
Charge card fees 754 654
Legal and accounting 10,247 2,948
Advertising 10,268 13,284
Other 138,907 130,361
----------- -----------
Total operating expenses 297,150 304,554
----------- -----------
INCOME/(LOSS) FROM OPERATIONS (23,023) 32,483
Interest Expense (11,719) (12,033)
----------- -----------
NET INCOME/(LOSS) $ (34,742) $ 20,450
=========== ===========
BASIC NET INCOME/(LOSS) PER COMMON SHARE $ (0.01) $ 0.01
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,310,012 4,310,012
=========== ===========
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TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
2001 2000
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME/(LOSS) $ (34,742) $ 20,450
ADJUSTMENTS TO RECONCILE NET INCOME/(LOSS)
TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation 18,603 17,370
Changes in assets and liabilities:
Accounts receivable 3,357 (5,573)
Prepaid expenses 815 3,414
Inventories -- --
Other Assets (54) 8,581
Accounts payable and accrued expenses 56,472 (16,951)
---------- ---------
Net cash provided by operating activities 44,451 27,591
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property equipment (192) ---
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (2,403) (40,312)
---------- ---------
Net cash used by financing activities (2,403) (40,312)
---------- ---------
NET INCREASE/(DECREASE) IN CASH 41,856 (12,721)
CASH AT BEGINNING OF PERIOD 50,656 94,660
---------- ---------
CASH AT END OF PERIOD $ 92,512 $ 81,939
========== =========
CASH PAID DURING PERIOD FOR:
Interest $ 11,719 $ 12,033
========== =========
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TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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, 2002 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 three months ended December 31, 2002 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2003.
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
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the openings of other clubs, 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 MONTHS ENDED DECEMBER 31, 2002 AS COMPARED
TO THE THREE MONTHS ENDED DECEMBER 31, 2001
For the quarter ended December 31, 2002, the Company had consolidated total
revenues of $274,127 compared to consolidated total revenues of $337,037 for the
fiscal quarter ended December 31, 2001, or a decrease of $62,910. The decrease
in revenues was due to a decrease 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 December 31, 2002 was 4.86% of
total revenues compared to 6.89% for the quarter ended December 31, 2000. The
decrease was due primarily to the reduction in food costs. 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 December 31, 2002 were $93,800
compared to $95,263 for the quarter ended December 31, 2001. 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 quarter ended
December 31, 2002 were $190,037 compared to $186,067 for the quarter ended
December 31, 2001. The increase in these expenses was primarily due to a
increase in legal and accounting fees and maintenance/repairs expenses.
Interest expense for the quarter ended December 31, 2002 was $11,719 compared to
$12,033 for the quarter ended December 31, 2001. This decrease was attributable
to the Company's efforts not to incur any new debts.
Net loss for the quarter ended December 31, 2002 was $34,742 compared to a net
income of $20,450 for the quarter ended December 31, 2001. The decrease was
primarily due to the decrease of service revenues at Company's location in
Austin, Texas. Management currently believes that the Company is in the position
to be profitable for fiscal year 2003.
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LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2002, the Company had a working capital deficit of $600,247
compared to a working capital deficit of $592,908 at September 30, 2002. The
decrease in working capital was due to the increase in Accounts Payable and
accrued expenses.
Net cash provided by operating activities in the three months ended December 31,
2002 was $44,451 compared to net cash provided of $27,591 for the three months
ended December 31, 2001. The increase in cash provided by operating activities
was due principally to the increase in accounts payable and accrued expenses.
Depreciation and Amortization for the three months ended December 31, 2002 were
$18,603 compared to $17,370 for the three months ended December 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.
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.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 -- Certification of Chief Executive Officer and
Chief Financial Officer of Taurus Entertainment Companies, Inc.
(b) Reports on Form 8-K
None.
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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: February 11, 2003 By: /s/ Eric S. Langan
-------------------------------------
Eric S. Langan
President and Chief Financial Officer
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