UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 Or 15(d) of the Securities Exchange
Act of 1934; For the quarterly period ended: December 31, 2003
[ ] Transition report pursuant to 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.)
19901 Southwest Freeway, Suite 209
Sugar Land, Texas 77479
(Address of principal executive offices, including zip code)
(281) 207-5485
(Registrant's telephone number, including area code)
APPLICABLE ONLY TO CORPORATE ISSUERS
As of February 1, 2004, there were 10,768,004 shares of common stock, $.01
par value, 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
Item 2. Management's Discussion and Analysis or Plan of Operation
Item 3. Controls and procedures
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Small Business Issuer Purchases of
Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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TAURUS ENTERTAINMENT COMPANIES, INC.
CONSOLIDATED BALANCE SHEET
December 31, 2003
ASSETS
Current assets
Cash $ 1,541
------------
Total current assets 1,541
Vehicles, net 45,937
------------
Total assets $ 47,478
============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 44,483
Note payable 76,900
Advances from stockholders 153,396
Current portion, long-term debt 14,317
------------
Total current liabilities 289,096
------------
Long-term debt, net of current portion 319,663
Stockholders' deficit:
Common stock, $.001 par value, 20,000,000 shares
authorized, 11,118,004 shares issued and outstanding 11,118
Additional paid in capital 662,977
Deficit accumulated during the development stage (1,235,376)
------------
Total stockholder's deficit (561,281)
------------
Total liabilities and stockholders' deficit $ 47,478
============
F-1
TAURUS ENTERTAINMENT COMPANIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Month Period Ended December 31, 2003
Revenues $ 17,789
Operating expenses:
General and administrative 194,044
Impairment 471,731
Interest expense 3,588
------------
Total operating expenses 669,363
------------
Net loss $ (651,574)
============
Net loss per share:
Basic and diluted $ (.06)
============
Weighted average shares outstanding:
Basic and diluted 10,984,308
============
F-2
TAURUS ENTERTAINMENT COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Month Period Ended December 31, 2003
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(651,574)
Adjustments to reconcile net loss to cash used
in activities:
Impairment 471,731
Stock issued for services 105,400
Changes in current assets and liabilities:
Accounts payable & accrued expenses 17,812
----------
NET CASH USED IN OPERATING ACTIVITIES (56,631)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder 59,630
Payments on note payable (1,458)
----------
58,172
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NET INCREASE IN CASH 1,541
Cash, beg. of period -
----------
Cash, end of period $ 1,541
==========
Supplemental information:
Income taxes paid $ -
Interest paid $ -
F-3
TAURUS ENTERTAINMENT COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Taurus Entertainment
Companies, Inc., d/b/a Bluestar Physical Therapy ("Bluestar") have been prepared
in accordance with accounting principles generally accepted in the United States
of America and the rules of the Securities and Exchange Commission ("SEC"), and
should be read in conjunction with the audited financial statements and notes
thereto contained in the Form 8-K/A filed with the SEC. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected herein. The
results of operations for interim are not necessarily indicative of the results
to be expected for the full year. Notes to the financial statements which would
substantially duplicate the disclosure contained in the audited financial
statements in the Form 8-K/A have been omitted.
Vehicles
- --------
Vehicles are stated at cost. Depreciation is computed using the straight-line
method over the estimated economic lives of the assets that range between three
and seven years.
Stock Options:
- -------------
The Company accounts for its stock-based compensation plans under Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees. Statement of Financial Accounting Standard ("FAS") No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure, issued in
December 2002 requires pro forma net income (loss) and pro forma net income
(loss) per share to be disclosed in interim financial statements. For the period
ended June 30, 2003, Blue Star's pro form net loss and net loss per share are
equal to the net loss and net loss per share reported herein.
NOTE 2 - ACQUISITION
On October 31, 2003, Bluestar acquired all of the assets and assumed certain
liabilities of Healthquest, Inc. Pursuant to the transaction; Bluestar issued
250,000 shares of its common stock valued at $182,500, using an average price
for a period of fifteen days prior to and subsequent to the date of the merger.
The Company purchased the assets and liabilities of Healthquest in order to
expand the development and operation of physical therapy and wellness service
facilities as part of its new business model within the health care industry.
The acquisition was accounted for using the purchase method of accounting
resulting in an excess purchase price over the fair value of net tangible assets
of $471,731 all of which was allocated to goodwill. The goodwill was impaired on
December 31, 2003, see note 3.
The following table summarizes the estimated fair value of the net assets
acquired and liabilities assumed at the acquisition dates.
Vehicles $ 47,500
Goodwill 471,731
--------
Total assets acquired 519,231
--------
Liabilities 336,731
--------
Net assets acquired $182,500
========
F-4
The consolidated statement of operations in the accompanying financial
statements for the year quarter December 31, 2003 includes the operations of
Healthquest, Inc. from November 1, 2003 through December 31, 2003.
NOTE 3 - IMPAIRMENT
Since the acquisition of Healthquest on October 31, 2003, the reportable unit
has been unable to generate positive cashflows from operations. In addition,
Healthquest incurred losses in 2002 and 2003 and the projected near-term future
revenue stream will not will not provide positive cashflows from operations.
Therefore, management determined the goodwill related to the acquisition is
impaired at December 31, 2003 and recorded an impairment charge of $471,731
during the quarter ended December 31, 2003.
NOTE 4 - LONG-TERM DEBT
Bluestar assumed two notes payable in the acquisition of Healthquest (see note
2). The following summarizes the notes:
Note payable to a individual bearing interest at 5%, with interest payable
monthly beginning November 1, 2003, unsecured. Interest accrues monthly and
is payable on the 1st of the month through December 1, 2007. Beginning
December 1, 2007, the unpaid principal balance will be amortized over 36
months beginning on January 1, 2008. The balance outstanding at December
31, 2003 was $300,000.
Term note payable to a bank bearing interest at 4.5%, with principal and
interest payable monthly at $1,193 per month, collateralized by a vehicle.
The balance outstanding at December 31, 2003 was $27,416.
F-5
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The information required by this Item 1 is included in this report beginning on
page F-1.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with our audited
consolidated financial statements and related notes thereto included in this
annual report.
FORWARD LOOKING STATEMENT AND INFORMATION
We are 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 us, or on behalf of us. 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. Our expectations, beliefs and projections are expressed in
good faith and are believed to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in our 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
our view, could cause material adverse affects on the our 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, Taurus Entertainment Companies, Inc., the
availability of acceptable financing to fund corporate expansion efforts,
competitive factors, and the dependence on key personnel. We have no obligation
to update or revise these forward-looking statements to reflect the occurrence
of future events or circumstances.
GENERAL
We are a development stage company with a limited operating history. In
June 2003, we merged with Bluestar Physical Therapy ("BlueStar") which was
accounted for as a recapitalization of Bluestar. Bluestar intends to acquire,
develop, and operate licensed outpatient physical therapy
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clinics nationwide. The clinics will provide post-operative care and treatment
for a variety of orthopedic related disorders and sports-related injuries only
on an outpatient basis. Bluestar's growth strategy is to acquire and develop
outpatient physical therapy clinics initially in Texas and the South and later
to expand on a national basis.
We have a limited operating history on which to base an evaluation of our
business and prospects. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stages of development, particularly companies in new and rapidly evolving
markets such as outpatient physical therapy. We will encounter various risks in
implementing and executing our business strategy. We can provide no assurance
that we will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on our business.
From inception through December 31, 2003, we have utilized funds contributed by
our majority stockholder. We have had minimal revenues and have incurred net
losses from operations totaling approximately $1,235,000 from inception through
December 31, 2003.
Our current cash forecast indicates that there will be negative cash flow from
operations for the foreseeable future. As reflected in the Going Concern
opinion, it is critical as discussed hereunder that we obtain additional working
capital so that we can continue to meet current cash obligations while we
continue to improve cash flow from operations. The financial statement
footnotes and auditor's opinion reflects that we have a significant accumulated
deficit and working capital deficiency at December 31, 2003 and we are unable to
meet our obligations as they come due; all of which raise substantial doubt
about our ability to continue as a going concern. Should no additional capital
be raised we could possibly not have the necessary resources to continue as a
viable company. If we are able to obtain additional debt or equity financing, we
will be able to generate the necessary funds to operate at a minimum requirement
level, thus enabling us to focus on raising additional capital, either through
private or public equity financing or debt financing, to fund the acquisition of
additional clinics. We are currently seeking short-term and long-term debt or
equity financing sufficient to fund working capital and acquisitions of physical
therapy clinics. However, we can provide no assurance that we will be successful
in raising funds, that the amount and terms of any financing will be acceptable.
RESULTS OF OPERATIONS
The Company's loss for the three-month period ended December 31, 2003 totaled
$651,574. General and administrative expenses consist of legal, accounting and
consulting.
During the three month period ended December 31, 2003, Bluestar recorded an
impairment charge related to the goodwill created in the acquisition of
Healthquest. Estimated future cashflows from operations for the near term were
negative, resulting in the impairment of the intangible asset.
LIQUIDITY AND CAPITAL RESOURCES
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At December 31, 2003, we had a working capital deficit of $287,555 with net cash
used in operating activities in the three month period ended December 31, 2003
totaling $56,631.
We are currently seeking additional capital so we may increase our operations
and execute our business plan as intended. Although we have no current
commitments for capital, we may raise additional funds through: public offerings
of equity, securities convertible into equity or debt, private offerings of
securities or debt, or other sources.
Our investors should assume that any additional funding will cause substantial
dilution to current stockholders. In addition, we may not be able to raise
additional funds on favorable terms, if at all.
RECENT EVENTS
As disclosed in the Company's November 14, 2003 Form 8-K, our subsidiary,
Bluestar, acquired HealthQuest, Inc., a Florida based health management services
and consulting company, effective October 31, 2003. HealthQuest is now a
wholly-owned subsidiary of Bluestar. Terms of the sale include 250,000 shares
of Taurus common stock and the assumption of liabilities of approximately
$330,000.
ITEM 3. CONTROLS AND PROCEDURES
Alfred S. Oglesby, our Chief Executive Officer and Chief Financial Officer,
has concluded that our disclosure controls and procedures are appropriate and
effective. He has evaluated these controls and procedures as of the end of the
period covered by this report on Form 10-QSB. There were no significant changes
in our internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses except as follows:
Most of the Company's expenses are being paid directly by the Chief
Executive Officer from personal funds.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In November 2003, a lawsuit was filed by R. Dean Ayers against the
Company's subsidiary, Bluestar Physical Therapy, Inc. alleging breach of
contract in the amount of $16,773.66. The Company filed a general denial and
intends to contest this litigation.
Item 2. Changes in Securities and Small Business Issuer Purchases of Securities
None.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
During the period covered by this report, there were no matters submitted
to a vote of the Security Holders, through solicitation of proxies or otherwise.
Item 5. Other Information
In connection with the acquisition of HealthQuest, Inc. by BlueStar
effective October 31, 2003, we were obligated to file an amended Form 8-K
related to Item 7 on or about January 14, 2004. The Company is presently
compiling information in order to file the amended Form 8-K.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 31.1 - Certification of Chief Executive Officer and Chief Financial
Officer of Taurus Entertainment Companies, Inc. required by Rule 13a - 14(1) or
Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 -- Certification of Chief Executive Officer and Chief
Financial Officer of Taurus Entertainment Companies, Inc. pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.
(b) Reports on Form 8-K
On November 14, 2003, we filed Form 8-K relating to Items 2 and 5 regarding
the acquisition of HealthQuest, Inc. by BlueStar Physical Therapy, Inc.
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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: March 1, 2004 By: /s/ Alfred Oglesby
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Alfred Oglesby
Chief Executive Officer Chief
Financial Officer
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