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: March 31, 2004
[ ] 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 May 21, 2004, there were 11,226,004 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 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
TAURUS ENTERTAINMENT COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
March 31, 2004
(Unaudited)
ASSETS
Current assets
Cash $ 2,416
------------
Total current assets 2,416
Vehicles, net 43,592
------------
Total assets $ 46,008
============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 75,553
Note payable 424,929
Advances from stockholders 224,368
------------
Total current liabilities 724,850
------------
Long-term debt, net of current portion 7,158
Stockholders' deficit:
Common stock, $.001 par value, 20,000,000 shares
authorized, 11,226,004 shares issued and outstanding 11,226
Additional paid in capital 762,069
Deficit accumulated during the development stage (1,459,295)
------------
Total stockholder's deficit (686,000)
------------
Total liabilities and stockholders' deficit $ 46,008
============
TAURUS ENTERTAINMENT COMPANIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(A DEVELOPMENT STAGE COMPANY)
Three and Six months ended March 31, 2004 and
Period from Inception (March 18, 2003) through March 31, 2003 and Inception (March 18, 2003)
through March 31, 2004
(Unaudited)
Three months Six months Inception Inception
ended ended through March through March
March 31, 2004 March 31, 2004 31, 2003 31, 2004
---------------- ---------------- -------------- ---------------
Revenues $ 11,604 $ 29,393 $ - $ 29,393
Operating expenses:
General and administrative 210,778 404,822 - 731,724
Impairment 11,250 482,981 - 482,981
Transaction Cost - - - 250,000
Interest expense 13,495 17,083 - 23,983
---------------- ---------------- -------------- ---------------
Total operating expenses 235,523 904,886 - 1,488,688
---------------- ---------------- -------------- ---------------
Net loss $ (223,919) $ (875,493) $ - $ (1,459,295)
================ ================ ============== ===============
Net loss per share:
Basic and diluted $ (0.02) $ (0.08)
================ ================
Weighted average shares outstanding:
Basic and diluted 11,197,301 11,197,301
================ ================
TAURUS ENTERTAINMENT COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended March 31, 2004 and Inception (March 18, 2003) through March 31, 2003
and Inception (March 18, 2003) through March 31, 2004
Six months Inception Inception
ended March 31, through March through March
2004 31, 2003 31, 2004
----------------- -------------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (875,493) $ - $ (1,459,295)
Adjustments to reconcile net loss to cash used
in activities:
Depreciation expense 2,345 - 3,908
Purchase price of Taurus financed by seller - - 130,000
Impairment 482,981 - 482,981
Stock issued for services 204,600 - 429,900
Changes in current assets and liabilities:
Accounts payable & accrued expenses 60,206 - 91,117
----------------- -------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (125,361) - (321,389)
----------------- -------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder 127,714 - 224,368
Issuance of common stock - - 160,895
Payments on note payable (1,478) - (61,458)
----------------- -------------- ---------------
126,236 - 323,805
----------------- -------------- ---------------
NET INCREASE IN CASH 875 - 2,416
Cash, beg. of period 1,541 2,416 -
----------------- -------------- ---------------
Cash, end of period $ 2,416 $ 2,416 $ 2,416
================= ============== ===============
Supplemental information:
Income taxes paid $ - $ - $ -
Interest paid $ - $ - $ -
TAURUS ENTERTAINMENT COMPANIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Taurus Entertainment
Companies, Inc., dba 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 March 31,2004, 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.
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 $482,981 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 482,981
-------------
Total assets acquired 530,481
-------------
Liabilities 347,981
-------------
Net assets acquired $ 182,500
=============
The consolidated statement of operations in the accompanying financial
statements for the quarter ended March 31, 2004 includes the operations of
Healthquest, Inc. from November 1, 2003 through March 31, 2004.
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 $482,981
during the six month period ended March 31, 2004.
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. This note is currently in
default and the default rate of interest on the note is 10%. This note is
due on demand due to its default status. The balance outstanding at March
31, 2004 was $311,250 and interest of $10,345.
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 March 31, 2004 was $24,257.
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 ability of the Company to respond to changes in
the physical therapy and wellness market, competition, the availability of
financing, and, if available, on terms and conditions acceptable to the Company,
and the availability of personnel in the future. 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 clinics nationwide.
The clinics will provide post-operative care and treatment for a variety of
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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 March 31, 2004, we have utilized funds contributed by our
majority stockholder. We have had minimal revenues and have incurred net losses
from operations totaling approximately $1,459,000 from inception through March
31, 2004.
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 March 31, 2004 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 six-month period and ended March 31, 2004 totaled
$875,493. General and administrative expenses consist of legal, accounting and
consulting.
During the six month period ended March 31, 2004, Bluestar recorded an
impairment charge of $482,981 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.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2004, we had a working capital deficit of $678,842 with net cash
used in operating activities in the six month period ended March 31, 2004
totaling $123,840.
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
$345,000.
During the month of May, management decided to close down the Wellness facility
and operate exclusively out of the mobile unit. This decision allows us to
materially reduce operations cost of rent and utilities.
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.
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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
During our quarter ended March 31, 2004, we completed the following
transactions in reliance upon exemptions from registration under the Securities
Act of 1933, as amended (the "Act") as provided in Section 4(2) thereof. Each
certificate issued for unregistered securities contained a legend stating that
the securities have not been registered under the Act and setting forth the
restrictions on the transferability and the sale of the securities. None of the
transactions involved a public offering. We believe that each person had
knowledge and experience in financial and business matters which allowed them to
evaluate the merits and risks of our securities. We believe that each person
was knowledgeable about our operations and financial condition.
30,000 shares of common stock were issued to a consultant for services
rendered.
Item 3. Defaults Upon Senior Securities
As part of our acquisition of HealthQuest on Oct. 31, 2003 we became liable for
a note payable to a individual bearing interest at 5%, with interest payable
monthly beginning Nov. 1, 2003, unsecured. Interest accrues monthly and is
payable on the 1st of the month through Dec. 1, 2007. Beginning Dec.1, 2007,
the unpaid principal balance will be amortized over 36 months beginning on Jan
1, 2008. The balance outstanding, including accrued interest at Dec 31, 2003
was $313,750.
Interest for the current quarter has not been paid to date, therefore the note
is in default. As of the current date there has not been a demand for payment.
In addition to the note becoming due, the interest rate increases from 5% to
10%.
Item 5. Other Information
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(a) 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.
(b) The Board has not adopted a formal policy with regard to the process
to be used for identifying and evaluating nominees for director. At
this time, the consideration of candidates for the Board of Directors
is in the Board's discretion, which we believe is adequate based on
the size of the Company and each current board member's
qualifications.
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
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: May 26 , 2004 By: /s/ Alfred Oglesby
---- ---------------------------------------
Alfred Oglesby
Chief Executive Officer
Chief Financial Officer
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