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: June 30, 1999
[ ] 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)
formerly TAURUS PETROLEUM, INC.
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, including zip code)
(281) 820-1181
(Registrant'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
On July 30, 1999, there were 4,305,012 shares of common stock, $.01 par
value, outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999 (unaudited)
and September 30, 1998 (audited)
Consolidated Statements of Operations for the three and nine
months ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1999 and 1998 (unaudited)
Selected Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II _ OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8_K
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The information required hereunder is included in the Company's
Consolidated Financial Statements and the Notes thereto as set forth beginning
on page F-1.
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
6/30/99 9/30/98
(UNAUDITED (AUDITED)
CURRENT ASSETS
Cash $ 29,028 $ 243,346
Accounts receivable 69,875 2,343
Accounts receivable - related party 83,811 9,755
Prepaid expenses 424 1,600
Inventories --- 765
Land held for sale 569,069 569,069
------------ ------------
Total current assets 752,207 826,878
------------ ------------
PROPERTY AND EQUIPMENT
Buildings, lands and leasehold improvements 1,398,195 1,769,572
Furniture & equipment 181,401 169,671
------------ ------------
1,579,596 1,939,243
Accumulated depreciation (111,002) (69,751)
------------ ------------
1,468,594 1,869,492
------------ ------------
OTHER ASSETS
Other 69,315 108,705
------------ ------------
$ 2,290,116 $ 2,805,075
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ --- $ 25,000
Current portion of long term debt 168,848 220,527
Payable to Parent --- 79,851
Accounts payable - trade 86,673 185,644
Accrued expenses 75,420 203,677
Income tax payable --- 38,445
------------ ------------
Total current liabilities 330,942 753,144
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 1,731,973 1,932,967
------------ ------------
Total Liabilities 2,062,915 2,686,111
------------ ------------
COMMITMENTS AND CONTINGENCIES --- ---
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par, authorized
1,000,000shares; none outstanding --- ---
Common stock - $.001 par, authorized
15,000,000 shares
issued 4,305,012 and 4,305,012 4,305 4,305
Additional paid in capital 4,026,383 4,026,383
Retained earnings (deficit) (3,803,487) (3,911,724)
------------ ------------
Total stockholders' equity 227,201 118,964
------------ ------------
$ 2,290,116 $ 2,805,075
============ ============
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
REVENUES
Sales of alcoholic beverages $ --- $ 336,882 $ --- $ 880,255
Sales of food --- 209,828 --- 626,638
Service revenues 77,755 66,793 215,874 245,215
Other 318,065 48,925 1,081,256 167,779
----------- ----------- ----------- -----------
395,820 662,428 1,297,130 1,919,887
----------- ----------- ----------- -----------
OPERATING EXPENSES
Cost of goods sold 25,554 65,023 79,305 201,040
Salaries and wages 88,241 322,435 342,328 699,123
Other general and administrative
Taxes and permits 61,379 151,514 137,515 255,391
Charge card fees 1,497 10,009 5,909 27,875
Rent 4,112 52,538 125,790 137,556
Legal and accounting 7,045 76,806 56,366 216,143
Advertising 11,558 27,698 45,628 95,537
Other 118,986 209,701 314,924 449,283
----------- ----------- ----------- -----------
318,373 915,725 1,107,765 2,081,948
----------- ----------- ----------- -----------
INCOME/(LOSS) FROM OPERATIONS 77,448 (253,297) 189,365 (162,061)
Interest Expense (37,242) (41,016) (117,940) (80,669)
Loss on Termination of Lease --- --- (219,780) ---
----------- ----------- ----------- -----------
NET INCOME/(LOSS) BEFORE INCOME TAX 40,206 (294,313) (148,355) (242,730)
AND EXTRAORDINARY ITEM
INCOME TAXES --- 24,956 --- ---
----------- ----------- ----------- -----------
NET INCOME/(LOSS) BEFORE 40,206 (269,357) (148,355) (242,730)
EXTRAORDINARY ITEM
EXTRAORDINARY ITEM
Gain on Fire Damage --- --- 256,592 ---
----------- ----------- ----------- -----------
NET INCOME/(LOSS) $ 40,206 $ (269,357) $ 108,237 $ (242,730)
=========== =========== =========== ===========
BASIC NET INCOME/(LOSS) PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY ITEM $0.01 $ (0.07) $ (0.03) $ (0.09)
EXTRAORDINARY ITEM 0.00 0.00 0.06 0.00
$ 0.01 $ (0.07) $ 0.03 $ (0.09)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,305,012 4,093,979 4,305,012 2,691,494
=========== =========== =========== ===========
TAURUS ENTERTAINMENT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
1999 1998
(UNAUDITED) (UNAUDITED)
NET INCOME/(LOSS) $ 108,237 $(242,730)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES:
Depreciation 41,251 85,700
Gain on fire damage and disposal of assets (247,865) ---
Loss on termination of lease 219,780 ---
Changes in assets and liabilities:
Accounts receivable (141,588) (40,377)
Prepaid expenses 1,176 4,500
Inventories 765 (7,620)
Other Assets 39,390 (88,086)
Accounts payable and accrued expenses (370,523) 419,537
------------ ----------
Cash provided (used) by operating activities (349,377) 130,924
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for notes receivable --- (47,879)
Proceeds from insurance on fire damage 504,457 ---
Additions to property equipment 1,125 (752,769)
------------ ----------
Cash provided (used) by investing activities 505,582 (800,648)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued, less offering costs --- 814,601
Purchase of Treasury Stocks --- (38)
Increase in long term debt --- 90,049
Payments on long term debt (370,523) (226,385)
------------ ----------
Cash provided (used) by financing activities (370,523) 678,227
------------ ----------
NET INCREASE/(DECREASE) IN CASH (214,318) 8,503
CASH AT BEGINNING OF PERIOD 243,346 797
------------ ----------
CASH AT END OF PERIOD $ 29,028 $ 9,300
============ ==========
CASH PAID DURING PERIOD FOR:
Interest $ 117,940 $ 80,669
============ ==========
TAURUS ENTERTAIMENT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles 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 generally accepted accounting
principles 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, 1998 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, 1999 are not necessarily
indicative of the results that may be expected for the year ending September 30,
1999.
2. FIRE DAMAGE
On December 15, 1998, a fire damaged the adult entertainment facility known as
XTC Cabaret at Gulf Freeway located in Houston, Texas. The Company incurred a
material decline in revenues subsequent to the closure of XTC - Houston. The
insurance settlement resulted in an extraordinary gain of $256,592.
3. TERMINATION OF LEASE
On February 28, 1999, the Company and the Landlord agreed to terminate the lease
of one of the subsidiaries known as Lucky's located in New Orleans, Louisiana.
The transaction resulted in a Loss Company's of $219,780.
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
unaudited consolidated financial statements and related notes thereto included
in this quarterly report and in the audited consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contained in the Company's 10-KSB for the year ended
September 30, 1998.
Information Regarding and Factors Affecting Forward Looking Statements
The Company is including the following cautionary statement in this Report
on 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. Words
such as "expects", "anticipates", "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. Certain statements contained in this Report on Form
10-QSB are forward-looking statements and the matters discussed in these
forward-looking statements are subject to risks and uncertainties which could
cause actual results or outcomes to differ materially from those expressed in
the forward-looking statements. The Company's forward-looking statements are
expressed in good faith and are believed by the Company to have a reasonable
basis based on 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 any matter discussed in a forward-looking
statement will ultimately be achieved, or if achieved, will have the same impact
on the Company as discussed in the forward-looking statement. In addition to
those factors already mentioned, other factors which could effect
forward-looking statements are: the impact and implementation of the sexually
oriented business ordinance in the City of Houston; the execution of the
Company's Internet e-commerce strategy, and the availability of acceptable
financing to fund corporate expansion efforts. The Company has no obligation to
update or revise any forward-looking statements to reflect future events.
General
The Company entered into the adult entertainment business in 1997. In
1998, another public company, Rick's Cabaret International, Inc. ("Rick's"),
acquired 93% of the outstanding shares of the Company.
The Company's fiscal year end is September 30. Revenues are derived from
the sale of non-alcoholic beverages, as well as from dancer performances, cover
charges and other income.
Results of Operations
The Three Months Ended June 30, 1999
Compared to the Three Months Ended June 30, 1998
For the three months ended June 30, 1999, the Company had consolidated
total revenues of $ 395,820 compared to consolidated total revenues of $ 662,428
for the three months ended June 30, 1998, or a decrease of $ 266,608. The
decrease in total revenues was due to the closings of Company's locations known
as Broadstreets and XTC due to fire.
The cost of goods sold for the three months ended June 30, 1999 was 6 % of
total revenues compared to 10 % for the three months ended June 30, 1998. The
decrease was due primarily to the continuing efforts of management to achieve
reductions in cost of goods sold through improved inventory management and the
saving for not having to purchase alcoholic beverages. The Company continues a
program to improve margins from liquor and food sales and food service
efficiency.
Payroll and related costs for the three months ended June 30, 1999 were $
88,241 compared to $ 322,435 for the three months ended June 30, 1998. The
decrease was a reflection of the reduction in personnel experienced by the
company due to the closings of the Company's two locations. Management
currently believes that its labor and management staff levels are of appropriate
levels.
Other selling, general and administrative expenses for the three months
ended June 30, 1999 were $ 204,578 compared to $ 528,267 for the three months
ended June 30, 1998. The decrease was due to the decreased number of the
Company's locations.
Interest expense for the three months ended June 30, 1999 was $ 37,242
compared to
$ 41,016 for the three months ended June 30, 1998. The decrease was
attributable to the reductions in the notes payable.
Net income for the three months ended June 30, 1999 was $ 40,206 compared
to a net loss of $ 269,357 for the three months ended June 30, 1998. The
increase was due to drastic reduction in overall costs resulting in positive
income from operations. Management currently believes that the Company is in
the position to be profitable for fiscal 1999.
The Nine Months Ended June 30, 1999
Compared to the Nine Months Ended June 30, 1998
For the nine months ended June 30, 1999, the Company had consolidated total
revenues of $ 1,297,130 compared to consolidated total revenues of $ 1,919,887
for the nine months ended June 30, 1998, or a decrease of $ 622,757. The
decrease in total revenues was due to the closings of Company's locations known
as Broadstreets and XTC due to fire.
The cost of goods sold for the nine months ended June 30, 1999 was 6 % of
total revenues compared to 10 % for the nine months ended June 30, 1998. The
increase was due primarily to the continuing efforts of management to achieve
reductions in cost of goods sold through improved inventory management and the
savings realized from not having to purchase alcoholic beverages. The Company
continues a program to improve margins from liquor and food sales and food
service efficiency.
Payroll and related costs for the nine months ended June 30, 1999 were $
342,328 compared to $699,123 for the nine months ended June 30, 1998. The
decrease was a reflection of the reduction in personnel experienced by the
company as it closed two of its locations. Management currently believes that
its labor and management staff levels are of appropriate levels.
Other selling, general and administrative expenses for the nine months
ended June 30, 1999 were $ 686,132 compared to $ 1,181,785 for the nine months
ended June 30, 1998. The decrease was due to decreased number of the Company's
locations,
Interest expense for the nine months ended June 30, 1999 was $ 117,940
compared to $80,669 for the nine months ended June 30, 1998. The increase was
attributable to interest expenses arising from the increased number of Company's
owned real estate.
Net income for the nine months ended June 30, 1999 was $ 108,237 compared
to a net loss of $ 242,730 for the nine months ended June 30, 1998. The
increase was due to gain on fire damage.
Liquidity and Capital Resources
At June 30, 1999, the Company had positive working capital of $ 421,265
compared to positive working capital of $73,734 at September 30, 1998. The
increase in working capital was primarily due to positive income from
operations.
Net cash used by operating activities in the nine months ended June 30,
1999 was $349,377 compared to net cash provided of $ 130,924 for the nine months
ended June 30, 1998. The decrease in cash provided by operating activities was
primarily due to a decrease in accounts payable and accrued expenses.
Depreciation and Amortization for the nine months ended June 30, 1999 were
$ 41,251 compared to $ 85,700 for the nine months ended June 30, 1998.
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 conditions. The Company considers the primary
indicators of financial status to be the long term trend, the mix of sales
revenues, overall cash flow, profitability from operations and the level of long
term debt.
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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Data Schedule - Exhibit 27.1
(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.
August 16, 1999 By: /s/ Eric Langan
----------------------------
Eric Langan
Director, President
and Chief Financial Officer