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, 2003
[ ] 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)
APPLICABLE ONLY TO CORPORATE ISSUERS
At May 8, 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
March 31, 2003 (unaudited) and September 30, 2002 (audited) . . . .1
Consolidated Statements of Operations for the three and
six months ended March 31, 2003 and 2002 (unaudited). . . . . . . .3
Consolidated Statements of Cash Flows for
the six months ended March 31, 2003 and 2002 (unaudited). . . . . .4
Notes to Consolidated Financial Statements. . . . . . . . . . . . .5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . .5
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . .8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . .9
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
i
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
3/31/2003 9/30/2002
(UNAUDITED) (AUDITED)
------------ -----------
CURRENT ASSETS
Cash $ 36,387 $ 50,656
Accounts receivable 342 3,757
Prepaid expenses 16,056 7,956
Inventories 566 566
------------ -----------
Total current assets 53,351 62,935
------------ -----------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 2,137,455 2,137,242
Furniture & equipment 254,356 281,160
------------ -----------
2,391,811 2,418,402
Accumulated depreciation (305,094) (282,912)
------------ -----------
Total property and equipment 2,086,717 2,135,490
------------ -----------
OTHER ASSETS
Other 55,866 55,966
------------ -----------
Total assets $ 2,195,934 $2,254,391
============ ===========
1
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
3/31/2003 9/30/2002
(UNAUDITED) (AUDITED)
------------ ------------
CURRENT LIABILITIES
Current portion of long term debt $ 10,489 $ 9,923
Payable to Parent 530,816 551,398
Accounts payable - trade 59,530 51,564
Accrued expenses 41,736 42,958
------------ ------------
Total current liabilities 642,571 655,843
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 447,924 453,358
------------ ------------
Total Liabilities 1,090,495 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,
4,310,012 shares issued and outstanding 4,310 4,310
Additional paid in capital 4,026,428 4,026,428
Retained earnings (deficit) (2,925,299) (2,885,548)
------------ ------------
Total stockholders' equity 1,105,439 1,145,190
------------ ------------
Total liabilities and stockholders' equity $ 2,195,934 $ 2,254,391
============ ============
2
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,
2003 2002 2003 2002
----------- ----------- ----------- -----------
REVENUES
Service revenues $ 285,146 $ 285,686 $ 519,939 $ 572,897
Other 46,643 50,275 85,977 100,101
----------- ----------- ----------- -----------
331,789 335,961 605,916 672,998
----------- ----------- ----------- -----------
OPERATING EXPENSES
Cost of goods sold 12,040 17,967 25,353 41,191
Salaries and wages 95,829 99,100 189,629 194,363
Other general and administrative
Taxes and permits 38,932 35,966 68,793 74,786
Charge card fees 586 673 1,340 1,327
Legal and accounting 17,017 9,748 27,264 12,696
Advertising 26,266 16,718 36,534 30,002
Other 137,765 130,433 276,672 260,794
----------- ----------- ----------- -----------
328,435 310,605 625,585 615,159
----------- ----------- ----------- -----------
INCOME/(LOSS) FROM OPERATIONS 3,354 25,356 (19,669) 57,839
Interest Expense (8,363) (11,021) (20,082) (23,054)
----------- ----------- ----------- -----------
NET INCOME/(LOSS) $ (5,009) $ 14,335 $ (39,751) $ 34,785
=========== =========== =========== ===========
BASIC NET INCOME/(LOSS) PER COMMON SHARE:
$ (0.00) $ 0.00 $ (0.01) $ 0.01
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES 4,310,012 4,310,012 4,310,012 4,310,012
OUTSTANDING =========== =========== =========== ===========
3
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2003 AND 2002
(Unaudited)
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $(39,751) $ 34,785
Depreciation and amortization 37,206 31,240
Changes in working capital (6,664) (11,696)
--------- ---------
Net cash provided/(used) by operating activities (9,209) 54,329
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
additions to property equipment (192) ---
--------- ---------
Net cash used in investing activities (192) ---
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (4,868) (81,641)
--------- ---------
Net cash used in financing activities (4,868) (81,641)
--------- ---------
NET DECREASE IN CASH (14,269) (27,312)
CASH AT BEGINNING OF PERIOD 50,656 94,660
--------- ---------
CASH AT END OF PERIOD $ 36,387 $ 67,348
========= =========
CASH PAID DURING PERIOD FOR:
Interest $ 20,082 $ 23,054
========= =========
Non cash transactions:
During the quarter ended march 31, 2003, the Company transferred property and
equipment with a net book value of $26,783 to its Parent.
4
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
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 six months ended March 31, 2003 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
quarterly 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 impact and implementation of the sexually oriented
business ordinance in the City of
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Houston, competitive factors, the timing of 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 MARCH 31, 2003 AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 2002
For the quarter ended March 31, 2003, the Company had consolidated total
revenues of $331,789 compared to consolidated total revenues of $335,961 for the
fiscal quarter ended March 31, 2002, or a decrease of $4,172. The decrease in
revenues was due to a decrease in cover charges and merchandise sales at the
Company's location in Austin, Texas.
The cost of goods sold for the quarter ended March 31, 2003 was 3.63% of total
revenues compared to 5.35% for the quarter ended March 31, 2002. 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 March 31, 2003 were $95,829
compared to $99,100 for the quarter ended March 31, 2002. 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 appropriate.
Other selling, general and administrative expenses for the quarter ended March
31, 2003 were $220,566 compared to $193,538 for the quarter ended March 31,
2002. The increase in these expenses was primarily due to a increase in legal
and professional fees, property taxes, advertising fees, insurance, and
maintenance/repairs expenses.
Interest expense for the quarter ended March 31, 2003 was $8,363 compared to
$11,021 for the quarter ended March 31, 2002. This decrease was attributable to
the Company's efforts not to incur any new debts.
Net loss for the quarter ended March 31, 2003 was ($5,009) compared to a net
income of $14,335 for the quarter ended March 31, 2002. The decrease was
primarily due to the decrease in revenues and an increase in other general and
administrative expenses at the 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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RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2003 AS COMPARED TO THE
SIX MONTHS ENDED MARCH 31, 2002
For the six months ended March 31, 2003, the Company had consolidated total
revenues of $605,916 compared to consolidated total revenues of $672,998 for the
fiscal six months ended March 31, 2002, or a decrease of $67,082. The decrease
in revenues was due to a decrease in cover charges and merchandise sales at the
Company's location in Austin, Texas.
The cost of goods sold for the six months ended March 31, 2003 decreased from
the March 31, 2002 period by $15,838. As a percentage of revenues the cost of
goods sold for the six months ended March 31, 2003 was 4.19% compared to 6.12%
for the six months ended March 31, 2002. The percentage decrease was due to the
reduction in food costs.
Payroll and related costs for the six months ended March 31, 2003 were $189,629
compared to $194,363 for the six months ended March 31, 2002. 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
appropriate.
Other general and administrative expenses for the six months ended March 31,
2003 were $410,603 compared to $379,605 for the six months ended March 31, 2002.
The increase in these expenses was primarily due to the increase in legal and
professional fees, property taxes, advertising fees, insurance, and
maintenance/repairs expenses.
Interest expense for the six months ended March 31, 2003 was $20,082 compared to
$23,054 for the six months ended March 31, 2002. The decrease was attributable
to the Company's efforts to pay down debt and not to incur new debts.
Net income/(loss) for the six months ended March 31, 2003 was ($39,751) compared
to $34,785 for the six months ended March 31, 2002. The decrease was due to the
increase in other general and administrative expenses at the Company's location
in Austin, Texas.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2003, the Company had a working capital deficit of $589,220
compared to a working capital deficit of $592,908 at September 30, 2002. The
increase in working capital was due to the decrease in accounts payable to
Parent Company.
Net cash used by operating activities in the three months ended March 31, 2003
was $(9,209) compared to net cash provided of $54,329 for the three months ended
March 31, 2002. The decrease in cash provided by operating activities was due
principally to the decrease in net income.
Depreciation and Amortization for the three months ended March 31, 2003 were
$37,206 compared to $31,240 for the three months ended March 31, 2003.
7
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 accounts payable 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.
Item 3. Controls & Procedures
Within 90 days prior to the filing of this report, the Company carried out an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. This evaluation was carried out under the
supervision and with the participation of the Company's management, including
the Company's chief executive officer and chief financial officer. Based on that
evaluation, the Company's chief executive officer and chief financial officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information required to be included in the
Company's periodic reports to the Securities and Exchange Commission. There have
been no significant changes in the Company's internal controls or in other
factors, which could significantly affect internal controls subsequent to the
date the Company carried out its evaluation.
8
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.
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 13, 2003 By: /s/ Eric S. Langan
-------------------------------------
Eric S. Langan
Chief Executive Officer and Chief
Financial Officer
9
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Eric Langan, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Taurus Entertainment
Companies, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
By: /s/ Eric S. Langan
-------------------------
Eric S. Langan
Chief Executive Officer
10
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Eric Langan, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Taurus Entertainment
Companies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
By: /s/ Eric S. Langan
-----------------------
Eric S. Langan
Chief Financial Officer
11