UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
- -------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
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Commission File Number: 0-27006
MILLION DOLLAR SALOON, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3428657
(State of incorporation) (IRS Employer ID Number)
6848 Greenville Avenue, Dallas, Texas 75231
(Address of principal executive offices)
(214) 691-6757
(Issuer's telephone number)
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Check whether the issuer (1) 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
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: April 25, 1996: 5,010,084
Transitional Small Business Disclosure Format (check one): YES NO X
<PAGE>
MILLION DOLLAR SALOON, INC.
Form 10-QSB for the Quarter ended June 30, 1996
Table of Contents
Page
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 10
Part II - Other Information
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 3 Defaults Upon Senior Securities 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
ASSETS
(unaudited) (audited)
June 30, December 31,
1996 1995
-----------------------
Current assets
Cash on hand and in bank ....................... $ 699,656 $ 133,374
Note receivable - current portion .............. 19,660 19,660
Accounts receivable
Trade ........................................ 35,103 63,653
Prepaid Federal income taxes ................. -- 8,520
Inventory ...................................... 10,451 9,937
----------- -----------
Total current assets ......................... 764,870 235,144
----------- -----------
Property and equipment - at cost
Buildings and related improvements ............. 1,995,131 1,994,730
Vehicles ....................................... 52,727 --
Furniture and equipment ........................ 757,678 755,680
----------- -----------
2,805,536 2,750,410
Accumulated depreciation ....................... (1,357,612) (1,316,679)
----------- -----------
1,447,924 1,433,731
Land ........................................... 816,487 816,487
----------- -----------
Net property and equipment ................... 2,264,411 2,250,218
----------- -----------
Other assets
Note receivable - non-current portion .......... 135,842 145,423
Accounts receivable - officers, shareholders
and affiliates ............................... 750,456 715,525
Organization costs, net of accumulated
amortization of approximately $12,181
and $4,688, respectively ..................... 62,747 70,240
Loan costs, net of accumulated amortization
of approximately $4,742 and $1,580, respectively 26,865 30,026
Other .......................................... 19,485 85,385
----------- -----------
Total other assets ........................... 995,395 1,046,599
----------- -----------
Total assets ................................. $ 4,024,676 $ 3,531,961
=========== ===========
- Continued -
The financial information included herein has been prepared by management
without audit by independent certified public accountants.
See accompanying notes to financial statements.
3
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets - Continued
June 30, 1996 and December 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
(unaudited) (audited)
June 30, December 31,
1996 1995
-----------------------
Current liabilities
Note payable to a bank ........................... $ 500,000 $ --
Current maturities of long-term debt ............. 122,369 135,911
Accounts payable
Trade .......................................... 21,409 71,438
Affiliates and shareholders .................... -- 2,736
Accrued liabilities .............................. 22,918 50,859
Tenant deposits .................................. 6,500 6,500
---------- ----------
Total current liabilities ...................... 673,196 267,444
Long-term liabilities
Note payable, net of current maturities .......... 622,549 623,193
Deferred tax liability ........................... 90,213 90,213
---------- ----------
Total liabilities .............................. 1,385,958 980,850
---------- ----------
Shareholders' equity Preferred stock - $0.001 par value
5,000,000 shares authorized. None
issued and outstanding .......................... -- --
Common stock - $0.001 par value ...................
50,000,000 shares authorized .................... 5,010,084
and 5,000,084 issued and outstanding,
respectively .................................... 5,010 5,000
Additional paid-in capital ........................ 206,706 --
Retained earnings ................................. 2,427,002 2,546,111
---------- ----------
Total shareholders' equity ...................... 2,638,718 2,551,111
---------- ----------
Total liabilities and shareholders' equity ...... $4,024,676 $3,531,961
========== ==========
The financial information included herein has been prepared by management
without audit by independent certified public accountants.
See accompanying notes to financial statements.
4
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income
Three and six months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(unaudited)(unaudited)(unaudited)(unaudited)
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Sales - club operations ........ $ 794,866 $ 579,393 $ 1,671,144 $ 1,207,012
Rental income .................. 101,963 102,751 206,168 240,219
----------- ----------- ----------- -----------
Total revenues ............... 896,829 682,144 1,877,312 1,447,231
Cost of sales - club operations ... 520,418 341,153 1,016,660 685,072
----------- ----------- ----------- -----------
Gross profit ...................... 376,411 340,991 860,652 762,159
----------- ----------- ----------- -----------
Operating expenses
General and administrative
expenses ..................... 246,762 338,120 479,968 658,905
Interest expense ............... 39,480 10,612 58,119 21,835
Depreciation and amortization .. 27,085 21,153 54,170 42,297
----------- ----------- ----------- -----------
Total operating expenses ..... 313,327 369,885 592,257 723,037
----------- ----------- ----------- -----------
Income from operations ............ 63,084 (28,894) 268,395 39,122
Other income (expense) ............ 22,051 4,307 25,310 22,096
----------- ----------- ----------- -----------
Income before income taxes ........ 85,135 (24,587) 293,705 61,218
Income taxes
Current ........................ 5,105 -- 5,105 (2,706)
Deferred ....................... -- -- (70,900) 75,000
----------- ----------- ----------- -----------
NET INCOME ........................ $ 90,240 $ (24,587) $ 227,910 $ 133,512
=========== =========== =========== ===========
Earnings per weighted-average share
of common stock outstanding .... $ 0.02 nil $ 0.05 $ 0.03
=========== =========== =========== ===========
Weighted-average number of
shares outstanding ............. 5,010,084 5,000,084 5,010,084 5,000,084
=========== =========== =========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants.
See accompanying notes to financial statements.
5
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(unaudited (unaudited)
Six months Six months
ended ended
June 30, June 30,
1996 1995
-----------------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) for the period .................................. $ 227,910 $ 133,512
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization ................................... 51,587 42,297
Fair market value of building given in
exchange for compensation ....................................... -- 3,247
Stock issued to pay consulting fees ............................. 10,000 --
(Increase) decrease in
Accounts receivable - trade ................................... 28,550 (4,087)
Prepaid Federal income taxes receivable ....................... 8,520 6,534
Inventory ..................................................... (514) 1,512
Deferred tax asset and other .................................. (5,000) 7
Increase (decrease) in
Accounts payable - trade and other accrued liabilities ........ (77,970) 3,915
Income taxes payable .......................................... 70,900 (74,794)
--------- ---------
Net cash provided by operating activities ............................ 313,983 112,143
--------- ---------
Cash flows from investing activities
Principal collections on note receivable .......................... 9,581 5,891
Purchases of property and equipment ............................... (2,399) --
--------- ---------
Net cash provided by investing activities ............................ 7,182 5,891
--------- ---------
Cash flows from financing activities
Principal advances on notes payable ............................... 500,000 --
Principal payments on notes payable ............................... (66,913) (64,420)
Funds advanced by affiliates and shareholders - net ............... (37,667) (35,028)
Cash paid in dividends ............................................ (150,303) (7,000)
Proceeds from sale of common stock ................................ -- 1,500
--------- ---------
Net cash provided by (used in) financing activities .................. 245,117 (104,948)
--------- ---------
Increase in cash ..................................................... 566,282 13,086
Cash at beginning of period .......................................... 133,374 123,143
--------- ---------
Cash at end of period ................................................ $ 699,656 $ 136,229
========= =========
Supplemental disclosure of interest and income taxes paid
Interest paid for the period ...................................... $ 60,702 $ 21,835
========= =========
Income taxes paid (refunded) for the period ....................... $ (8,520) $ (4,034)
========= =========
Supplemental disclosure of non-cash investing and financing activities
Acquisition of vehicle on lease payable ........................... $ 52,727 $ --
========= =========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants.
See accompanying notes to financial statements.
6
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BACKGROUND AND ORGANIZATION
Million Dollar Saloon, Inc. (formerly Goodheart Ventures, Inc.) (MDS-NV) was
incorporated under the laws of the State of Nevada on September 28, 1987. MDS-NV
completed a public sale of its securities on November 10, 1988 with the issuance
of 489,100 shares of its common stock. Additionally, MDS-NV issued 2,934,600
warrants to purchase one share of Class A common stock at $0.50 per share and
one share of Class B common stock at $0.75 per share. No warrants were exercised
by their holders and all issued and outstanding warrants have expired.
MDS-NV was formed for the purpose of seeking a suitable merger or acquisition
candidate. MDS-NV's activities have consisted principally of raising capital
and, as such, was a development stage company prior to the transactions
discussed in succeeding paragraphs.
In August 1995, MDS-NV experienced a change in control whereby members of
management of Furrh, Inc. and its wholly-owned subsidiary, Tempo Tamers, Inc.,
Corporation Lex and Don, Inc. became the controlling shareholders of MDS-NV. The
shareholders of all entities then reached an oral agreement with whereby these
companies would become wholly-owned subsidiaries of MDS-NV.
On September 7, 1995, the shareholders of Furrh, Inc., Corporation Lex and Don,
Inc. exchanged 100% of their issued and outstanding stock for a net aggregate
3,925,000 shares of Million Dollar Saloon, Inc., a dormant Texas corporation,
(MDS-TX) owned by the majority shareholders of the respective companies. The
purpose of this transaction was to consolidate the ownership of Furrh, Inc. and
Tempo Tamers, Inc., Corporation Lex and Don, Inc. into a single company to
facilitate the merger with MDS-NV.
MDS-TX merged with and into MDS-NV, which was controlled by members of
management of MDS-TX, effective November 1, 1995. Goodheart Ventures, Inc. also
changed its corporate name to Million Dollar Saloon, Inc. (MDS-NV) on November
1, 1995. Furrh, Inc. and its wholly-owned subsidiary, Tempo Tamers, Inc.,
Corporation Lex and Don, Inc. remain as separate operating entities and are
wholly-owned subsidiaries of MDS- NV.
The combination of Furrh, Inc. and its wholly-owned subsidiary, Tempo Tamers,
Inc., Corporation Lex and Don, Inc. with MDS-TX and the concurrent merger of
MDS-TX with MDS-NV were separately accounted for in accordance with Accounting
Principles Board No. 16 - "Business Combinations", Interpretation #39 for
companies under common control on an "as if pooled" basis. The historical
financial statements of all involved entities have become the historical
consolidated financial statements of MDS-NV.
Furrh, Inc. (Furrh) was incorporated under the laws of the State of Texas on
February 25, 1974. Furrh owns and manages commercial rental property located in
Dallas County, Texas. Furrh's wholly-owned subsidiary, Tempo Tamers, Inc.
(Tempo), was incorporated under the laws of the State of Texas on July 3, 1978.
Tempo operates a lounge and entertainment facility, located in Dallas, Texas,
under the registered trademark and trade name "Million Dollar Saloon(R)".
Additionally, Furrh previously had two other wholly-owned subsidiaries, Don
Investments, Inc. and Tanfastic, Inc. All operations, assets and liabilities of
these two companies were closed and/or liquidated prior to January 1, 1993.
Furrh and Tempo had a February 28 year-end. Concurrent with the previously
discussed consolidation and merger, Furrh and Tempo changed their year-end to
December 31. The amounts utilized in the accompanying financial statements have
been restated to the new year end of December 31.
7
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - BACKGROUND AND ORGANIZATION - Continued
Corporation Lex (Lex) was incorporated under the laws of the State of Texas on
November 30, 1984. Lex owns and manages commercial rental property located in
Dallas County, Texas. Lex has a December 31 year end.
Don, Inc.(Don) was incorporated under the laws of the State of Texas on November
8, 1973. Don owns and manages commercial rental property located in Tarrant
County, Texas. Don has a December 31 year end.
MDS-NV originally had a year-end of August 31. Concurrent with the merger of
MDS-NV and MDS-TX, MDS- NV changed its year-end to December 31 to match that of
its acquired operating companies.
These financial statements reflect the books and records of Million Dollar
Saloon, Inc. (formerly Goodheart Ventures, Inc.) (Nevada), Million Dollar
Saloon, Inc. (Texas), Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don,
Inc. for the three months ended March 31, 1996 and 1995, respectively. All
significant intercompany transactions have been eliminated in combination. The
consolidated entities are referred to as Company.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
In the opinion of management, the accompanying consolidated financial statements
for the six and three months ended June 30, 1996 and 1995, respectively, reflect
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition, results of operations and cash flows of
Million Dollar Saloon, Inc. and Subsidiaries.
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The accompanying unaudited interim financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission for the year ended December 31, 1995. Certain
reclassifications and adjustments may have been made to the interim financial
statements for the comparative period(s) of the prior fiscal year to conform
with the current year presentation. The results of operations for interim
periods are not necessarily indicative of the results to be obtained for the
entire year.
NOTE B - CAPITAL STOCK TRANSACTIONS
In January 1996, the Company issued approximately 10,000 shares of unregistered,
restricted common stock, valued at approximately $10,000, for fees related to a
consulting agreement.
8
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - DIVIDENDS
During the first quarter of 1996, the Company's Board of Directors declared a
cash dividend payable of $0.03 per share for all issued and outstanding shares
of common stock as of the record date of April 1, 1996. The total dividend paid
during the second quarter was approximately $150,300.
NOTE D - NOTE PAYABLE TO A BANK
On April 5, 1996, the Company executed a $500,000 loan payable to a bank for
working capital purposes. The loan bears interest at 6.50%. The accrued interest
is payable monthly and all unpaid interest and the principal is due and payable
in October 1996. The loan is secured by certificates of deposit.
9
<PAGE>
Part I - Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(1) Results of Operations
Bar and restaurant revenues increased by approximately $215,000 for the quarter
ended June 30, 1996 compared to the quarter ended June 30, 1995 and
approximately $464,000 for the comparative six month periods ended June 30, 1996
and 1995, respectively. These increases relate to higher patronage of the
facility and to the changes in entertainer compensation methods. During 1995,
the Company and its competitors changed their method of entertainer
compensation. As a result of this change, the Company experienced increased
entertainment revenues which were partially offset by related increases in
direct labor costs. Costs of sales increased by approximately $179,000 in the
second quarter of 1996 compared to the same period in 1995 and an aggregate
$332,000 for the comparable six month periods of 1996 and 1995. Rental revenues
on leased real estate were relatively constant during the second quarter of 1996
as compared to the second quarter of 1995. Cumulative rental revenues have
decreased by approximately $34,000 for the six months ended June 30, 1996 as
compared to the same six months ended June 30, 1995. The cumulative decrease in
lease revenues is principally due to lease restructuring and other issues
related to one property.
Operating expenses declined by approximately $56,000 in the second quarter of
1996 as compared to the second quarter of 1995. These expenses have experienced
cumulative decreases of approximately $131,000 for the first six months of 1996
as compared to the same period in 1995. The principal savings were experienced
in reduced management fees paid in 1995 which were discontinued in September
1995 as a result of the reverse merger and corporate restructuring transaction.
The Company has experienced expense increases in interest expense due to new
notes taken out in the second quarter of 1996 and the September 1995 corporate
restructuring. Further, the Company has increased depreciation and amortization
expenses as a result of the amortization of costs incurred for the reverse
merger and corporate restructuring in September 1995.
Net income increased by approximately $115,000 from approximately $(24,600) for
the quarter ended June 30, 1995 to approximately $90,240 for the quarter ended
June 30, 1996. Year to date net income has increased from approximately $134,000
for the six months ended June 30, 1995 to approximately $228,000 for the six
months ended June 30, 1996. The weighted-average number of shares of the
Company's common stock has remained relatively constant yielding a comparable
earnings per share of $0.05 for the six months ended June 30, 1996 as compared
to $0.03 per share for the six months ended June 30, 1995.
(2) Liquidity and capital resources
As of June 30, 1996, the Company had working capital of approximately $92,000 as
compared to approximately $(32,300) as of December 31, 1995 and $(21,000) at
June 30, 1995. The Company has achieved positive cash flows from operations of
approximately $313,000 for the six months ended June 30, 1996 as compared to
approximately $167,000 for the year ended December 31, 1995 and approximately
$112,000 for the six months ended June 30, 1995.
During April 1996, the Company executed a $500,000 note payable to a bank and
placed the proceeds into certificates of deposit as an additional working
capital reserve. The note is due in October 1996 and requires monthly payments
of interest only at an interest rate of 6.50%.
Management believes that working capital is not a true indicator of liquidity
due to the cash nature of the bar and restaurant operations whereby all direct
operating revenues and expenses are settled within five (5) working days after
recognition. The positive cash flows from operations has primarily been used, in
prior periods, for the retirement of debt and distributions to shareholders.
Acquisitions of property and equipment have been nominal during the six months
ended June 30, 1996 and totaled approximately $82,000 for Calendar 1995 and
$11,000 for
10
<PAGE>
Calendar 1994. It is anticipated that no significant future demands for capital
resources exist and only routine repairs and maintenance on the company-operated
facility will be necessary. During Calendar 1995, the majority of capital
expenditures directly related to the exterior and interior remodeling to
modernize and update the overall appearance and atmosphere of the facility to
maintain its quality and reputation within the marketplace. Due to major freeway
construction in the vicinity of the facility, management anticipates that the
remodeled facade will attract additional spontaneous patronage from increases in
traffic caused by freeway diversions. Liquidity requirements mandated by future
business acquisitions or expansions, if any are specifically identified or
undertaken, are not readily determinable at this time as no substantive plans
have been formulated by management. However, management believes that all
necessary cash liquidity will be obtained from existing operations.
Additionally, management is of the opinion that there is additional potential
availability of incremental mortgage debt and the opportunity for the sale of
additional common stock through either private placements or secondary
offerings.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None during the reporting period
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None filed during the reporting period
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MILLION DOLLAR SALOON, INC.
August 12 , 1996 s/s Nina J. Furrh
-------- ------------------------
Nina J. Furrh
President
August 12 , 1996 s/s Ronald W Johnston
-------- ----------------------------
Ronald W. Johnston
Chief Financial Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 699,656
<SECURITIES> 0
<RECEIVABLES> 54,763
<ALLOWANCES> 0
<INVENTORY> 10,451
<CURRENT-ASSETS> 764,870
<PP&E> 3,622,023
<DEPRECIATION> 1,357,612
<TOTAL-ASSETS> 4,024,676
<CURRENT-LIABILITIES> 673,196
<BONDS> 0
<COMMON> 5,010
0
0
<OTHER-SE> 206,706
<TOTAL-LIABILITY-AND-EQUITY> 4,024,676
<SALES> 1,877,312
<TOTAL-REVENUES> 1,877,312
<CGS> 1,016,660
<TOTAL-COSTS> 592,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,119
<INCOME-PRETAX> 293,705
<INCOME-TAX> (65,795)
<INCOME-CONTINUING> 227,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 227,910
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
