U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1999
Commission File Number: 0-27006
MILLION DOLLAR SALOON, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 13-3428657
(State of Incorporation) (IRS Employer
Identification No.)
6848 Greenville Avenue
Dallas, Texas 75231
(Address of Principal Executive Offices, including Zip Code)
(214) 691-6757
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on which Registered
------------------- -------------------
N/A N/A
Securities registered pursuant to 12(g) of the Exchange Act:
Title of Each Class
Common Stock, $.001 par value
Check whether the issuer (i) 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 issuer was required to file such reports), and (ii) has
been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]
The issuer's revenues for the fiscal year ended December 31, 1999 were
$3,645,571. The aggregate market value of common stock held by non-affiliates of
the issuer at March 1, 2000, based upon the closing bid price on The OTC
Electronic Bulletin Board on said date, was $1,163,939. As of March 1, 2000,
there were 5,731,778 shares of the issuer's common stock outstanding.
Documents Incorporated by Reference
No documents, other than certain exhibits, have been incorporated by
reference into this report.
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TABLE OF CONTENTS
PAGE
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PART I .....................................................................................3
ITEM 1. DESCRIPTION OF BUSINESS.....................................................3
ITEM 2. PROPERTIES..................................................................8
ITEM 3. LEGAL PROCEEDINGS...........................................................9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS........................10
PART II ....................................................................................10
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
..........................................................................10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..................11
ITEM 7. FINANCIAL STATEMENTS.......................................................14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...................................................14
PART III ....................................................................................14
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..........................14
ITEM 10. EXECUTIVE COMPENSATION....................................................15
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
..........................................................................16
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................19
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..........................................19
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PART I
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This annual report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
ITEM 1. DESCRIPTION OF BUSINESS
General
Million Dollar Saloon Inc. (the "Company") was incorporated under the
laws of the State of Nevada on September 28, 1987. The Company provides
management support and conducts its business operations through its wholly-owned
operating subsidiaries: Furrh, Inc., Tempo Tamers, Inc., Don, Inc. and
Corporation Lex.
Furrh, Inc. ("Furrh") was incorporated under the laws of the State of
Texas on February 25, 1974. Furrh provides management services to Tempo Tamers,
Inc. ("Tempo"), its wholly-owned subsidiary. Tempo was incorporated under the
laws of the State of Texas on July 3, 1978. Tempo operates an adult
entertainment lounge and restaurant facility, located in Dallas, Texas under the
registered trademark and trade name "Million Dollar Saloon(R)."
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.
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.
Unless otherwise indicated, the "Company" refers to the Company, each
of its wholly-owned subsidiaries and Tempo.
The Company is based in Dallas, Texas and currently conducts business
in two distinct areas:
o Owning and operating an adult cabaret.
o Owning and managing income producing commercial real estate.
Adult Cabaret
General. The Company, through Tempo, owns and operates an adult cabaret
under the name "The Million Dollar Saloon," which is its primary business
operation. The Million Dollar Saloon opened in 1982 with the intent of
establishing a sophisticated entertainment environment focused on attracting a
professional clientele. To enhance the club's appeal to its target market, The
Million Dollar Saloon offers restaurant and first-class bar service conducive to
attracting businessmen and out-of-town convention clientele. The Company
continues to explore the expansion of the adult cabaret segment of its business
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by establishing additional Million Dollar Saloons or acquiring and operating
similar facilities in selected cities. As of the date of this report, no
specific locations have been identified.
Female Entertainment. The entertainers at The Million Dollar Saloon
must follow management's policy of high personal appearance and personality
standards. A performer's physical appearance and her ability to present herself
attractively and to converse intelligently with customers is very important to
management. Management insists that the performers at The Million Dollar Saloon
be experienced dancers. The performers dance on the main stage or on small
stages throughout the club. While their performances include topless dancing,
management insists that performers wear elegant attire when not dancing, as
opposed to being scantily dressed as in many other adult cabarets. Management
never allows full nudity in the club. Management provides performers with
guidelines for the manner of dress, hairstyle, makeup and general demeanor.
Guidelines are imposed to maintain a high standard of professionalism among the
performers and to ensure that they always maintain a pleasant, congenial
demeanor. Further, management evaluates each performer's appearance and
performance on a nightly basis and advises them if their dress, makeup,
hairstyle, general appearance or demeanor does not meet the Company's standards.
Though these policies have the effect of limiting the number of performers who
are permitted to dance at The Million Dollar Saloon, the Company believes that
its policy of maintaining these high standards is in its best interest for
long-term market position. Entertainers who have performed at The Million Dollar
Saloon have been featured in various leading men's entertainment magazines.
Compliance Policies. The Company's management has a policy of ensuring
that its business is carried on in conformity with local, state and federal
laws. In particular, the Company's management has a "no tolerance" policy as to
illegal drug use in or around the premises. Posters placed throughout the
nightclub reinforce this policy as do periodic unannounced searches of the
entertainer's lockers. Entertainers and waitresses who arrive for work are not
allowed to leave the premises without the permission of management. Once an
entertainer does leave the premises, she is not allowed to return to work until
the next day. Management continually monitors the behavior of entertainers,
waitresses and customers to ensure that proper standards of behavior are
observed. The Company's management has the power to levy fines on entertainers
for breaches of the Company's rules. In the event an entertainer is fined three
times by management, the entertainer is barred from future performances at The
Million Dollar Saloon.
Management also reviews all credit card charges made by customers while
at The Million Dollar Saloon. Specifically, the Company's policy is that all
credit card charges must be approved, in writing, by management before any
charges are accepted. Management of the club is particularly trained to review
credit card charges to ensure that the only credit card charges approved for
payment are for food and drink at The Million Dollar Saloon.
Food and Drink. The Company believes a key to the success of a premier
adult cabaret is a quality, first-class bar and restaurant operation to
complement its adult entertainment. The Company's restaurant operation is a full
service operation which provides business lunch buffets and a full-scale lunch
and dinner menu service offering hot and cold appetizers, salads, seafood, steak
and other entrees. A variety of premier wines are offered to compliment any
customer's lunch or dinner selection. The Company employs a full-time Service
Manager who is in charge of recruiting and training a professional waitress
staff and ensuring that each customer receives prompt and courteous service. The
Company also employs a Chef and a Bar Manager. The Bar Manager is responsible
for stocking, inventory control, and scheduling of bar staff.
Controls. Operational and accounting controls are essential to the
successful operation of a cash intensive nightclub and bar business. The Company
separates management personnel from all cash handling. The Company uses a
combination of accounting and physical inventory control mechanisms to ensure a
high level of integrity in its accounting practices. Computers play a
significant role in capturing and analyzing a variety of information to provide
management with the information necessary to efficiently manage and control the
nightclub. Management personnel reconcile deposits of cash and credit card
receipts each day to a daily income report. Daily computer reports alert
management of any variances from expected financial results based on historical
norms.
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Atmosphere. The Million Dollar Saloon maintains an elegant European
atmosphere through its Italian decor and other customer related amenities. The
furniture and furnishings in The Million Dollar Saloon create the feeling of an
upscale restaurant. The club offers a gourmet menu, two cigar humidors and an
extensive champagne and wine list. The sound system design provides a quality
sound at levels so conversation can take place. The Million Dollar Saloon also
provides a state-of-the-art light show and employs a sound and light engineer to
upgrade, monitor, and maintain the sound and light systems. Management
constantly monitors the environment of The Million Dollar Saloon for music
selection, customer service, appearance, and ambience.
VIP Area. To emphasize service for the upper-end of the business
market, the Company maintains a VIP mezzanine encompassing the upstairs area of
The Million Dollar Saloon facility. The VIP area is opened to individuals who
pay an increased daily admission charge or purchase annual or lifetime
memberships. The VIP area provides a higher level of luxury in its decor and
more personalized services. The VIP area consists of approximately 1,800 square
feet for food and entertainment purposes and has an occupancy of 100 persons.
Catering to the upscale VIP customer, this area includes "The Champagne Room"
accessible for an additional fee. The downstairs club and dining area consists
of approximately 4,500 square feet for entertainment purposes and can
accommodate 250 persons. The lower level also offers "The Blue Room", an area
for bachelor and other private parties.
Advertising and Promotion. The Company's marketing philosophy is to
portray The Million Dollar Saloon as a premiere adult cabaret providing female
entertainment in a sophisticated, discreet environment for its patrons. Hotel
publications, local radio, cable television, newspapers, billboards, and a
variety of promotional campaigns ensure that the public recognizes The Million
Dollar Saloon name.
Future Expansion
The Company has not determined the precise locations or nature of its
future expansion, but it believes, based upon its experience, that opportunities
for expansion exist primarily in the Dallas/Fort Worth Metroplex and other
metropolitan areas in the Southwest United States. The Company may expand
through the acquisition of sports bars, casual clubs and adult cabarets that may
use the trademark "The Million Dollar Saloon." In determining which cities may
be suitable locations for expansion, a variety of factors will be considered,
including, but not limited to, the current regulatory environment, the
availability of sites located in high traffic commercial areas suitable for
conversion to The Million Dollar Saloon style cabarets or sports bars or casual
clubs, potential competition in the area, current market conditions and
profitability of other adult cabarets in the city.
Competition
The adult entertainment nightclub industry is highly competitive with
respect to price, service, location, and the professionalism of its
entertainment. The Million Dollar Saloon competes with many locally-owned adult
cabarets in Dallas, Texas, certain of which may enjoy recognition that equals
that of The Million Dollar Saloon. While there may be local governmental
restrictions on the location of a so-called "sexually oriented business", there
are no barriers to entry into the adult cabaret market. There are in excess of
30 adult cabarets located in the Dallas, Texas metropolitan area of which three
are in direct competition with the Million Dollar Saloon. The Company believes
that the combination of its existing name recognition and its distinctive and
unique entertainment environment will allow the Company to effectively compete
within this industry.
Governmental Regulations
The Company is subject to various federal, state and local laws
affecting its business activities. In Texas, the authority to issue a permit to
sell alcoholic beverages is governed by the Texas Alcoholic Beverage Commission
("TABC"). The TABC has the authority, in its discretion, to issue appropriate
permits. The Company, through a management agreement with an affiliated
corporation, operates its business under a Texas Mixed Beverage Permit and Late
Hours Permit (the "Permits"). These Permits are subject to annual renewal,
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provided the Company and its affiliated corporation have complied with all rules
and regulations governing the Permits. Renewal of a permit is subject to protest
by a law enforcement agency or by a member of the public. In case of protest,
the TABC may hold a hearing for interested parties to express their views. The
TABC has the authority after such hearing not to issue a renewal of the
protested alcoholic beverage permit. Neither the Company nor its affiliated
corporation have been the subject of a protest hearing against the renewal of
its Permits. Other states may have similar laws that may limit the availability
of a permit to sell alcoholic beverages or which may provide for suspension or
revocation of a permit to sell alcoholic beverages in certain circumstances.
Prior to expanding into any new market, the Company will take all steps
necessary to ensure compliance with all licensing and regulatory requirements.
Various groups have increasingly advocated certain restrictions on
"happy hour" and other promotions involving alcoholic beverages. The Company
believes its entertainment value, admittance charge beginning after normal
"happy hours" and its policies of not discounting drink prices are effective
tools in promoting its business. The Company cannot predict whether additional
restrictions on the promotion of sales of alcoholic beverages will be adopted,
or if adopted, the effect of such restrictions on its business.
Beyond various regulatory requirements affecting the sale of alcoholic
beverages, the location of an adult cabaret is subject to restriction by city
ordinance. In Dallas, the Company is subject to "The Sexually Oriented Business
Ordinance" (the "Ordinance") which contains prohibitions on the location of an
adult cabaret. The prohibitions deal generally with distance from schools,
churches, and other sexually oriented businesses and contain restrictions based
on the percentage of residences within the immediate vicinity of the sexually
oriented business. The granting of a Sexually Oriented Business Permit
("Business Permit") is not subject to discretion; the Business Permit must be
granted if the proposed operation satisfies the requirements of the Ordinance.
The Company has held a Business Permit since passage of the city ordinance. The
Business Permit is valid for a period of one year and is renewable by
application of the permit holder subject to a hearing. The Company has received
positive support at such hearings from business associations, nearby businesses,
and residential neighbors. The Company believes that it will be able to obtain
annual renewals of its Business Permit.
Employees and Independent Contractors
As of December 31, 1999, the Company had approximately 63 full-time
employees, of which 11 were in management positions, including corporate and
administrative operations and approximately 52 were engaged in food and beverage
service, including bartenders and waitresses. Entertainers numbered
approximately 115 full and part time. None of the Company's employees are
represented by a union and the Company considers its employee relations to be
good.
In contrast to prevailing industry treatment of entertainers as
independent contractors, the Company classifies its entertainers as employees
for both federal income tax purposes and compliance with the Fair Labor
Standards Act. By classifying its entertainers as employees subject to the
income tax withholding provisions of the Internal Revenue Code and under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, the
Company avoids the imposition of penalties for failure to comply with such
requirements.
Insurance
The Company maintains insurance in amounts it considers adequate for
personal injury and property damage. The Company does maintain personal injury
liquor liability insurance because the Company may be exposed to potential
liabilities that may be imposed pursuant to the Texas "Dram Shop" statute or
similar "Dram Shop" statutes or common law theories of liability in other states
where the Company may expand. The Texas "Dram Shop" statute provides a person
injured by an intoxicated person the right to recover damages from an
establishment that wrongfully served alcoholic beverages to such person if it
was apparent to the server that the individual being sold, served or provided
with an alcoholic beverage was obviously intoxicated to the extent that he
presented a clear danger to himself and others. An employer is not liable for
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the actions of its employee who wrongfully serves an individual if (i) the
employer requires its employees to attend a seller training program approved by
the TABC; (ii) the employee has actually attended such a training program; and
(iii) the employer has not directly or indirectly encouraged the employee to
violate the law. It is the policy of the Company to require that all servers of
alcohol, including management, be certified every two years as servers under a
training program approved by the TABC. Certification gives statutory immunity to
the sellers of alcohol from damage caused to third parties by those who have
consumed alcoholic beverages at such establishment pursuant to the Texas
Alcoholic Beverage Code.
Income Producing Commercial Real Estate
The Company owns three income producing commercial properties, which
house adult entertainment nightclubs in the Dallas-Fort Worth geographic region.
One facility is Company operated, The Million Dollar Saloon, and the other two
are subject to long-term lease agreements and operated by affiliates of Duncan
Burch, an officer and director of the Company.
The Company-operated Million Dollar Saloon is located in North Dallas
and consists of a 9,750 square foot building located on an approximate 25,500
square foot tract of land fronting a major traffic artery. The property is owned
by Furrh and is subject to a lien also covering the other leased properties in
connection with a $750,000 long-term note payable to a bank dated September 22,
1995. See "Properties" and Note G -- Long- Term Debt to Consolidated Financial
Statements.
The remaining two properties are leased to affiliates of Duncan Burch,
an officer and director of the Company, which also operate adult entertainment
nightclubs in the facilities. All of the properties are stand-alone structures
and, accordingly, are 100% occupied with a single tenant and, at the present
time, are not subject to any plans for renovation, remodeling or other
significant improvement. All properties are physically located in geographic
areas suitable for their current use. There exist similar properties which could
be similarly used in the same geographic area as the subject properties. The
effective rentals vary between locations because of desirability and
attractiveness of locations. Management believes that all of its properties are
adequately covered by insurance. See "Properties."
Risk Factors
Certain of the statements contained in this Annual Report on Form
10-KSB are forward looking statements that involve risks and uncertainties. Such
statements are subject to important factors that could cause actual results to
differ materially, including the following risk factors:
Risk of Adult Cabaret Operations. The adult entertainment, restaurant
and bar industry is a volatile industry. The industry tends to be sensitive to
the general local economy. When local economic conditions are prosperous,
entertainment industry revenues increase, conversely, when local economic
conditions are unfavorable, entertainment industry revenues decline. Customers
who frequent adult cabarets generally follow trends in personal preferences. The
Company continuously monitors trends in its customers' tastes and entertainment
preferences so that, if necessary, it can change its operations and services to
accommodate the changes in trends. Any significant decline in general corporate
conditions or the economy that affect consumer spending could have a material
adverse effect on the Company's business and financial condition.
Risk of Inadequate Financial Controls. A significant part of the
revenues earned by the Company through its adult nightclub operations will be
collected in cash by full and part-time employees. Comprehensive financial
controls are required to minimize the potential loss of revenue through theft or
misappropriation of cash. To the extent that these controls are not structured
or executed properly, significant cash revenues could be lost and profitability
of the Company impaired. The Company believes that it has implemented
significant cash controls and is utilizing a combination of accounting and
physical inventory control devices to deter theft and to ensure a high level of
security within its accounting practices and procedures.
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Competition Within the Industry. The adult cabaret entertainment
business is highly competitive with respect to price, service, location and the
professionalism of entertainment. The Million Dollar Saloon competes in Dallas
with a number of locally-owned adult cabarets, some of whose names may enjoy
recognition that equals that of The Million Dollar Saloon. Although the Company
believes that due to its strategic location it will be able to compete
successfully with other local adult cabarets, there can be no assurance that the
Company will be able to maintain its high level of name recognition and prestige
within the marketplace. The Company's success depends on maintaining a high
quality of female entertainers and waitresses. Competition for female
entertainers in the adult entertainment business is intense. The lack of
availability of quality, personable, attractive entertainers or the Company's
inability to attract and retain other key employees, such as kitchen personnel
and bartenders, could adversely affect the business of the Company.
Management of Growth. For the Company to expand its business
operations, it must continue to improve and expand the expertise of its
personnel and must attract, train and manage qualified managers and employees to
oversee and manage the expanded operations. The Company intends to expand its
existing business operations by opening or acquiring additional adult cabarets
in the Dallas/Fort Worth Metroplex and other metropolitan areas. The opening of
additional cabarets will subject the Company to a variety of risks associated
with rapidly growing companies. In particular, the Company's growth may place a
significant strain on its accounting systems, internal controls, and oversight
of its day-to-day operations. Although management intends to ensure that its
internal controls remain adequate to meet the demands of further growth, there
can be no assurance that its systems, controls or personnel will be sufficient
to meet these demands. Inadequacies in these areas could have a material adverse
effect on the Company's business, financial condition and results of operations.
Permits Relating to the Sale of Alcohol and Operation of Sexually
Oriented Business. While the Company and its affiliate corporation have obtained
annual renewals of the TABC Permits and Dallas Business Permit, there can be no
assurance that the Permits will continue to be renewed. Other states may have
similar laws which may limit the availability of a permit to sell alcoholic
beverages or operate a sexually oriented business. The temporary or permanent
suspension or revocations of the TABC Permits or the Dallas Business Permit or
the inability to obtain permits in areas of expansion would have a material
adverse effect on the revenues, financial condition and results of operations of
the Company.
Limitations on Protection of Service Marks. Rights of the Company to
the trade name "The Million Dollar Saloon" were purchased. There is no assurance
that the Company will be able to protect its trade name to deter
misappropriation of its protected intellectual property rights. Litigation may
be necessary in the future to protect the Company's rights from infringement,
which may be costly and time consuming. The loss of the right to use the trade
name "Million Dollar Saloon" would have a material adverse effect on the Company
and its business operations.
ITEM 2. PROPERTIES
The Company maintains its corporate office at 6848 Greenville Avenue in
Dallas, Texas. The corporate office is comprised of approximately 2,700 square
feet and is subject to a monthly rental payment of approximately $3,600 under
the terms of a lease agreement which expires on August 31, 2001. Based on
current local market conditions and available information, management is of the
belief that it will either be able to renew the existing lease upon expiration
or relocate to a comparable location at a comparable cost.
The Company owns three facilities which operate as adult cabarets in
the Dallas-Fort Worth Metroplex. One facility, the Million Dollar Saloon, is
Company operated while the other two are subject to long-term lease agreements
and operated by affiliates of Duncan Burch, an officer and director of the
Company.
The Million Dollar Saloon is located in North Dallas and consists of a
9,750 square foot building located on an approximate 25,500 square foot tract of
land fronting a major traffic artery.
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The remaining two properties leased to affiliates of Duncan Burch, an
officer and director of the Company, also operate adult cabarets. All of the
properties are stand-alone structures and, accordingly, are 100% occupied with a
single tenant and, at the present time, are not subject to any plans for
renovation, remodeling or other significant improvement. All properties are
physically located in geographic areas suitable for their current use. The lease
rental amounts are based upon the location and physical condition of the
respective property.
The following is a summary of the terms, conditions and operating
parameters of the two properties being leased from the Company by affiliates of
Duncan Burch, an officer and director of the Company:
Location/Address
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3021 Northwest Highway 3601 State Highway 157
Dallas, Texas Fort Worth, Texas
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Square footage
Building 8,550 4,850
Real estate tract 37,162 60,398
Mortgages (1) (1)
Lease expiration May 2002 August 2003
Scheduled rentals $4,750 per week from $8,500 per week
5/26/99 through 5/23/02
Effective annual rental per square $24.33 $91.13
foot (total lease term)
Gross book basis (including land) $1,206,829 $160,447
Net book basis (including land) $934,344 $77,977
Federal income tax basis $153,060 $21,241
(excluding land)
Depreciation method and life SL-19 yrs. ACRS-15 yrs.
Ad valorem tax rate per $100 of $2.58 $3.14
valuation
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(1) Both properties are subject to a lien incurred in connection with a
$750,000 long-term note payable to a bank dated September 22, 1995. The
note bears interest at 11.0% and is payable in monthly installments of
approximately $16,369, including interest. The final payment is due in
September 2000. At December 31, 1999, the balance of this mortgage was
$139,657. See Note G -- Long-Term Debt to Consolidated Financial
Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company may from time to time be a party to various legal actions
arising in the ordinary course of its business. The Company is not currently
involved in any actions that it believes will have a material adverse effect on
its results of operations or financial condition.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On December 9, 1999, the Company held its annual shareholders meeting.
Of the Company's 5,731,778 shares of common stock entitled to vote at the
meeting, 4,153,051 shares were represented at the meeting, approximately 72% of
the outstanding shares entitled to vote. The following matters were submitted to
a vote of the shareholders through solicitation of proxies or otherwise:
For Against Abstain
----------- ---------- ----------
Election of Board of Directors
Dewanna Ross 4,143,766 6,185 3,100
Michael R. Garrett 4,140,236 9,685 3,100
Appointment of S.W. Hatfield, CPA as 4,130,704 22,296 51
Auditors for 1999
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of December 31, 1999, the Company had approximately 400 holders of
record of its Common Stock. Outstanding shares of the Company's Common Stock
totaled 5,731,778. The Company's transfer agent is Securities Transfer
Corporation, Dallas, Texas.
The Company's Common Stock began trading on The OTC Electronic Bulletin
Board under symbol "MLDS" on January 29, 1996. The following table sets forth
the quarterly average high and low closing bid prices per share for the Common
Stock.
Fiscal Year Ended Common Stock
December 31, 1999 High Low
----------------- ---- ---
First Quarter $0.75 $0.63
Second Quarter $0.66 $0.31
Third Quarter $0.63 $0.31
Fourth Quarter $0.50 $0.28
Fiscal Year Ended
December 31, 1999
-----------------
First Quarter $0.56 $0.38
Second Quarter $1.13 $0.41
Third Quarter $0.75 $0.53
Fourth Quarter $0.53 $0.41
First Quarter-- 2000 $0.97 $0.53
(through March 17, 2000)
The source for the high and low closing bids quotations is the National
Quotation Bureau, Inc. and does not reflect inter-dealer prices, such quotations
are without retail mark-ups, mark-downs or commissions, and may not represent
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actual transactions and have not been adjusted for stock dividends or splits.
The closing bid and ask prices of the Company's common stock on March 17, 2000
were $0.53 and $0.63 per share, respectively.
During each quarter of 1999 and 1998, the Company's Board of Directors
declared a per share cash dividend as follows:
Period 1999 1998
-------------------- ------- -------
First Quarter $0.010 $0.010
Second Quarter 0.010 0.010
Third Quarter 0.010 0.010
Fourth Quarter 0.010 0.010
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Total per share $0.040 $0.040
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Total dividends declared during 1999 and 1998 were approximately
$230,013 and $241,051, respectively. On February 28, 2000, the Board of
Directors approved the discontinuance of the payment of a quarterly dividend to
its common stock holders. The Company intends for the foreseeable future to
invest its available capital into the expansion of its business operations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
You should read the following discussion and analysis in conjunction
with audited consolidated financial statements included in this annual report.
The following information contains forward-looking statements. See "Caution
Regarding Forward-Looking Information" at the beginning of this annual report.
Results of Operations
Year ended December 31, 1999 as compared to year ended December 31,
1998. Bar and restaurant operations were relatively consistent at approximately
$2.95 million in 1999 compared to approximately $3.11 million in 1998.
Cost of sales decreased by approximately $20,000 from approximately
$1,806,000 in 1998 to $1,787,000 in 1999. The decrease is related to an
approximate $33,400 decrease in direct labor and was offset by an approximate
$13,000 increase in purchases of inventories, consumable supplies and related
State excise taxes. The Company experienced gross profit percentages of
approximately 50.7% in 1998 and 1999. The Company is exploring all possible
opportunities to return its gross profit percentages to those experienced in the
previous year.
General and administrative expenses were relatively consistent at
$1,604,000 in 1998 as compared to approximately $1,607,000 in 1999. Of this
change, the Company experienced a decrease of approximately $93,000 in
professional and consulting fees related to the acquisition of additional
capital and the exploration of possible business expansion opportunities.
Additionally, the Company experienced an increase of approximately $115,000 in
general and administrative compensation and payroll taxes for the Company's
entire operations. Further, the Company experienced an approximate $9,000
increase in general operating expenses which were a result of additional
advertising and general inflationary increases in the cost of goods and services
in the Dallas-Ft. Worth Metroplex. The Company monitors all expenses on a
monthly basis to control costs and optimize its operations.
Income from operations in 1999 was approximately $252,000 as compared
to approximately $254,000 in 1998. The Company realized income before income
- 11 -
<PAGE>
taxes of approximately $273,000 in 1999 and approximately $234,000 in 1998.
Interest income remained approximately $21,000 for 1998 and 1999. It is
anticipated that interest income in future periods will fluctuate depending on
the amount of surplus cash reserves that the Company may or may not have
available for investment.
The Company had earnings per share (both basic and fully diluted) of
approximately $0.02 in 1998 and approximately $0.03 in 1999.
As a general rule, the bar and restaurant operations decrease during
the summer months of June, July and August due to the lack of convention
activity in Dallas, Texas and the availability of other recreational and
vacation activity by the patronage. No significant financial impact on the
operations is caused by this repetitive seasonal decline.
Year ended December 31, 1998 as compared to year ended December 31,
1997. Bar and restaurant operations were relatively consistent at approximately
$3.12 million in 1998 compared to approximately $3.11 million in 1997. The
Company's adult entertainment lounge and restaurant continues to be a
destination of choice for visitors to the Dallas-Ft. Worth Metroplex in
conjunction with various convention and athletic events. Further, the Company
enjoys a quality reputation in the local market for local patronage.
In August 1998, the Company obtained a new five-year lease agreement on
the commercial rental property located on Highway 157 in Fort Worth, Texas. The
new lease provides that the weekly rental payment to the Company will increase
from $4,225 per week to $8,500 per week for the five-year term of the lease.
Cost of sales increased by approximately $90,000 from approximately
$1.71 million in 1997 to approximately $1.81 million in 1998. The increase is
related to an approximately $113,400 increase in direct labor as a result of
normal operating increases in these costs and was offset by an approximate
$19,000 cost savings in purchases of inventories, consumable supplies and
related State excise taxes. The Company experienced gross profit percentages of
approximately 52.1% in 1997 and approximately 50.7% in 1998. The Company is
exploring all possible opportunities to return its gross profit percentages to
those experienced in the previous year.
General and administrative expenses increased by approximately $304,000
from approximately $1.3 million in 1997 to approximately $1.6 million in 1998.
Of this increase, the Company experienced approximately $168,000 in professional
and consulting fees related to the acquisition of additional capital in 1998 and
the exploration of possible business expansion opportunities. Additionally, the
Company experienced an increase of approximately $62,000 in general and
administrative compensation and payroll taxes for the Company's entire
operations. Further, the Company experienced an approximate $79,000 increase in
general operating expenses which were a result of additional advertising and
general inflationary increases in the cost of goods and services in the
Dallas-Ft. Worth Metroplex. The Company monitors all expenses on a monthly basis
to control costs and optimize its operations.
Income from operations in 1998 was approximately $254,000 as compared
to approximately $559,000 in 1997. The Company realized income before income
taxes of approximately $234,000 in 1998 and approximately $660,000 in 1997.
Included in the Company's financial statements is a one-time gain from the sale
of real estate in Calendar 1997 of approximately $48,000 and a one-time charge
to operations of approximately $40,000 for the forgiveness of related party debt
in excess of the agreed upon value of the common stock taken for the retirement
of debt in 1998. Neither of these events are anticipated to recur in future
periods. In conjunction with the retirement of the related party debt, the
Company experienced a reduction of interest income of approximately $32,000
between 1998 and 1997. It is anticipated that interest income in future periods
will fluctuate depending on the amount of surplus cash reserves that the Company
may or may not have available for investment.
The Company had earnings per share (both basic and fully diluted) of
approximately $0.02 in 1998 and approximately $0.08 in 1997.
- 12 -
<PAGE>
As a general rule, the bar and restaurant operations decrease during
the summer months of June, July and August due to the lack of convention
activity in Dallas, Texas and the availability of other recreational and
vacation activity by the patronage. No significant financial impact on the
operations is caused by this repetitive seasonal decline.
Liquidity and Capital Resources
Year ended December 31, 1999 as compared to year ended December 31,
1998. As of December 31, 1999, the Company had working capital of approximately
$420,600 as compared to approximately $440,500 as of December 31, 1998. The
Company continues to experience positive cash flows from operations. Net cash
flow from operating activities was approximately $415,000 in 1999 as compared to
approximately $372,000 in 1998.
The Company has identified no significant capital requirements for
2000, other than normal repair and replacement activity at the Company's
commercial rental properties and the adult entertainment lounge and restaurant
facility. Liquidity requirements mandated by future business expansions or
acquisitions, if any are specifically identified or undertaken, are not readily
determinable at this time as no substantive plans have been formulated by
management.
On February 28, 2000, the Board of Directors of the Company approved
the discontinuance of the payment of quarterly dividends to its common stock
holders. The Company intends for the foreseeable future to invest its available
capital into the expansion of its business operations. In 1999, the Company paid
approximately $230,013 in dividend payments to its shareholders.
Future operating liquidity and debt service are expected to be
sustained from continuing 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 public offerings.
The Company treats and has consistently treated all entertainers as
employees whereas other similar facilities may or may have treated their
entertainers as independent contractors. Management believes that as a result of
its initial and continuing policies and procedures, there is an insignificant
risk to both future operations and profitability for any potential assessment of
payroll and related taxes in the future by regulatory authorities which would
have potentially a very significant financial and operational impact if the
Company treated all entertainers as independent contractors.
Year ended December 31, 1998 as compared to year ended December 31,
1997. As of December 31, 1998, the Company had working capital of approximately
$440,500 as compared to approximately $17,400 as of December 31, 1997. The
Company continues to experience positive cash flows from operations. Net cash
flow from operating activities was approximately $372,000 in 1998 as compared to
approximately $430,000 in 1997.
The Company did not have any significant capital expenditures in 1998,
other than normal repair and replacement activity at the Company's commercial
rental properties and the adult entertainment lounge and restaurant facility.
Liquidity requirements mandated by future business expansions or acquisitions,
if any are specifically identified or undertaken, are not readily determinable
at this time as no substantive plans have been formulated by management.
The Company paid approximately $238,000 in dividends during 1998,
including approximately $54,000 in dividends declared in the fourth quarter of
1997. Further, the Company declared a fourth quarter dividend in 1998 of
approximately $57,000 which was paid in January 1999.
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<PAGE>
Year 2000 Compliance
Many computer systems and software products were originally coded to
accept only two-digit entries in the date code field. Now that we have entered
the year 2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with these "Year 2000" requirements. Systems that do not properly recognize this
information could generate erroneous data or cause a system to fail.
As of the date of this annual report, neither we nor, to our knowledge,
any of our suppliers or service providers have experienced any significant
disruption in operations as a result of Year 2000 issues. We do not anticipate
any of these problems in the future. We estimate our total costs to address Year
2000 issues was less than $5,000.
ITEM 7. FINANCIAL STATEMENTS
The required items are presented as a separate section of this report
beginning on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants since 1995 nor have there
been any disagreements with accountants on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth certain information about the directors
and executive officers of the Company. All directors of the Company hold office
until the next annual meeting of stockholders or until their successors have
been elected and qualified. Executive officers of the Company are elected by the
Board of Directors to hold office until their respective successors are elected
and qualified.
Name Age Position(s)
- ---- --- -----------
Nick Mehmeti(1) 42 Chief Executive Officer, President and
Director
Duncan Burch(1) 42 Executive Vice President and Director
Dewanna Ross(2) 43 Chief Operating Officer, Vice President
of Operations,
Secretary, Treasurer and Director
Ronald W. Johnston 46 Chief Financial Officer and
Vice President of Finance
Sharon Furrh 50 Vice President of Public Relations and
Marketing
- -------------------
(1) On January 18, 2000, Messrs. Mehmeti and Burch were elected directors of
the Company. On January 19, 2000, Mr. Mehmeti was elected as the President
and Chief Executive Officer and Mr. Burch was elected as Executive Vice
President of the Company. See "Item 11-- Security Ownership and Certain
Beneficial Owners and Management-- Changes of Control."
(2) On January 19, 2000, Ms. Ross resigned as President and Chief Executive
Officer of the Company and was elected as Vice President of Operations and
Chief Operating Officer.
Nick Mehmeti has served as the Company's President, Chief Executive
Officer and a director since January 2000. For at least the last fifteen years
- 14 -
<PAGE>
Mr. Mehmeti and his affiliates have owned and operated restaurants and adult
cabarets in the Dallas-Fort Worth Metroplex. Mr. Mehmeti will devote as much of
his time as is necessary to perform his duties as Chief Executive Officer and a
director of the Company.
Duncan Burch has served as the Company's Executive Vice President and a
director since January 2000. Mr. Burch and his affiliates have owned and
operated restaurants and adult cabarets in the Dallas-Fort Worth Metroplex for
at least the past ten years. Mr. Burch will devote as much of his time as is
necessary to perform his duties as an officer and a director of the Company.
Dewanna Ross has served in various positions with the Company since
1995. Ms. Ross served as President and Chief Executive Officer of the Company
from July 1999 to January 2000. In January 2000, she was elected Vice President
of Operations and Chief Operating Officer of the Company. Ms. Ross is
responsible for the development of the corporate procedures, including the
hiring and training of corporate staff. Ms. Ross has also served as an officer
and operator of a private club and as an officer of other businesses.
Ronald W. Johnston, CPA, has served as Chief Financial Officer since
1996. Mr. Johnston has been a certified public accountant in private practice in
Dallas, Texas and a principal of his own firm since 1990. Mr. Johnston's current
firm serves a wide range of business and individual clients.
Sharon Furrh was elected as Vice President of Public Relations and
Marketing of the Company in December 1999. She has been involved as a design
consultant for The Million Dollar Saloon, in both its original construction and
in subsequent remodelings. Additionally, Sharon Furrh is responsible for
advertising, promotions and public relations for the Company. Mrs. Furrh has
been employed by the Company in various capacities since 1995.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities ("10% holders"), to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Directors, officers and 10% holders are required by SEC regulation
to furnish the Company with copies of all of the Section 16(a) reports they
file.
Based solely on a review of reports furnished to the Company or written
representatives from the Company's directors and executive officers during the
fiscal year ended December 31, 1999, all Section 16(a) filing requirements
applicable to its directors, officers and 10% holders for such year were
complied with.
ITEM 10. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, for the years
indicated, all cash compensation paid, distributed or accrued for services,
including salary and bonus amounts, rendered in all capacities for the Company
to its President and Chief Executive Officer. No executive officer of the
Company received remuneration in excess of $100,000 during the referenced
periods. All other compensation related tables required to be reported have been
omitted as there has been no applicable compensation awarded to, earned by or
paid to any of the Company's executive officers in any fiscal year to be covered
by such tables.
- 15 -
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------------ --------------------------
Awards Payouts
-------------------------- -------
Other Restricted Securities All
Salary/ Annual Stock Underlying LTIP Other
Name/Title Year Bonus Compensation Awards Options/SARs Payouts Compensation
- ---------- ---- ------- ------------ ------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dewanna Ross, President and 1999 $36,400 NA NA NA NA $ -0-
Chief Executive Officer(1)
Nina Furrh, President and 1999 $66,000 NA NA NA NA $ -0-
Chief Executive Officer(2) 1998 $ 9,000 NA NA NA NA $ -0-
1997 $ -0- NA NA NA NA $ -0-
Bjorn Heyerdahl, Chief 1998 $ -0- NA NA NA NA $13,340(3)
Executive Officer 1997 $ -0- NA NA NA NA $13,340(3)
</TABLE>
- -------------------
(1) Ms. Ross was elected President and Chief Executive Officer in July 1999 to
replace Nina Furrh. Subsequently, in January 2000 she resigned as President
and Chief Executive Officer and was elected as Vice President of Operations
and Chief Operating Officer. The $36,400 represents Ms. Ross's salary while
she served as President and Chief Executive Officer.
(2) Ms. Furrh became Chief Executive Officer in February 1998 upon the
resignation of Mr. Heyerdahl as Chief Executive Officer. In July 1999, Ms.
Furrh resigned as President and Chief Executive Officer.
(3) Represents payment of an auto lease by the Company for the benefit of Mr.
Heyerdahl.
Director Compensation
The Company does not currently pay a director fee for attending
scheduled and special meetings of the Board of Directors. The Company pays the
expenses of all of its directors in attending board meetings.
Indebtedness of Directors and Senior Officers
None of the directors or officers of the Company or their respective
associates or affiliates is indebted to the Company.
Committees of the Board of Directors and Meeting Attendance
There are no audit, compensation or other committees of the Board of
Directors of the Company.
Family Relationships
There are no family relationships among the Company's directors or
officers.
Employment Agreements
On July 9, 1999, Dewanna Ross, the Company's Chief Operating Officer,
Vice President of Operations, Secretary, Treasurer and a director, entered into
an Employment Agreement with the Company for a term of two years which provides
for a salary of $1,400 per week during the first year of employment and $1,500
per week during the second year of the Agreement. Ms. Ross served as the
Company's President and Chief Executive Officer from July 1999 to January 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 1999
relating to the beneficial ownership of shares of Common Stock by (i) each
- 16 -
<PAGE>
<TABLE>
<CAPTION>
person who owns beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) each executive officer of the
Company, and (iv) all executive officers and directors of the Company as a
group.
Number of Percentage of
Name(1) Shares Common Stock Owned
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nick Mehmeti(2)......................................................... 2,419,787(3) 39.5%
Duncan Burch(2)......................................................... 2,075,787(3) 33.9%
Dewanna Ross(4)......................................................... 34,350(5) *
Sharon Furrh, as Trustee for The Joshua Barrett Furrh Trust(6).......... 28,087 *
Ronald W. Johnston(7)................................................... 1,987 *
J.M. Tibbals as Trustee for The Irrevocable Equity Trust No. 1(8)....... 451,558 7.9%
Officers and Directors as a group (5 persons)........................... 4,159,998(9) 67.8%
</TABLE>
- -------------------
*Less than 1%
(1) Unless otherwise indicated, the persons listed have sole voting and
investment powers with respect to all such shares.
(2) Mr. Mehmeti is the President, Chief Executive Officer and a director of
the Company and Mr. Burch is the Executive Vice President and a
director of the Company. The mailing address for Messrs. Mehmeti and
Burch is c/o the Company, 6848 Greenville Ave., Dallas, Texas 75231.
(3) Includes an option to purchase 400,000 shares of the common stock of
the Company for $440,000 ($1.10 per share) which is jointly owned by
Messrs. Mehmeti and Burch and may be exercised in whole or in part at
any time until October 18, 2004 when the option expires. See "Changes
in Control" below.
(4) Dewanna Ross is the Chief Operating Officer, Vice President of
Operations, Secretary, Treasurer and a director of the Company.
(5) Includes 4,000 shares owned by Ms. Ross and 30,350 shares held in a
custodian account for the benefit of Solon Weaver. Ms. Ross disclaims
any ownership interest in the 30,350 shares held in the custodian
account, but she does have voting authority of such shares.
(6) Sharon Furrh is the Vice President of Public Relations and Marketing of
the Company and has the authority to vote the shares owned by The
Joshua Barrett Furrh Trust.
(7) Mr. Johnston is the Chief Financial Officer and Vice President of
Finance of the Company.
(8) The mailing address for The Irrevocable Equity Trust No. 1 is c/o J.M.
Tibbals, Arter & Hadden, 1717 Main Street, Suite 4100, Dallas, Texas
75201.
(9) Includes 400,000 shares which are subject to an option jointly held by
Messrs. Mehmeti and Burch which may be exercised at any time until
October 18, 2004, 28,087 shares owned by the Joshua Barrett Furrh Trust
over which Sharon Furrh has voting power and 30,350 shares held in a
custodian account over which Dewanna Ross has voting power.
Changes in Control
W-W Investments, L.L.P. Transaction. On July 9, 1999, W-W Investments,
L.L.P., a Texas registered limited liability partnership ("W-W Investments"),
acquired in a private transaction 460,001 shares of the common stock of the
Company from Bjorn Heyerdahl, a former officer and director of the Company, for
$299,000 ($.65 per share) and additionally acquired from Nina J. Furrh, a former
officer and director of the Company, 1,823,297 shares of the common stock of the
Company for $1,427,637 ($.7829975 per share). The 2,283,298 shares of the
Company's common stock acquired from the two shareholders represented
approximately 39.8% of the outstanding 5,731,778 shares of the Company's common
stock.
As part of the transaction, Nina J. Furrh, Sharon Furrh and Ronald W.
Johnston resigned as directors. Nina J. Furrh also resigned as President and
Chief Executive Officer of the Company. Nina Furrh continued with the Company
until August 31, 1999 as a salaried employee to assist management during the
transition period.
- 17 -
<PAGE>
With the acquisition of the 2,283,298 shares of the Company's common
stock, W-W Investments and its affiliates owned 3,351,574 shares or
approximately 58.5% of the Company's issued and outstanding shares of common
stock.
W-W Investments is an investment partnership in which Linda Weaver and
Steven Wheeler are partners. In addition to the shares acquired by W-W
Investments, Linda Weaver owned 500,000 shares of the common stock and owned an
option granted by the Company to purchase an additional 400,000 shares of common
stock for $440,000 or $1.10 per share, which expires October 18, 2004 (the
"Option"). As a result of the acquisition of the shares by W-W Investment, Linda
Weaver owned beneficially, directly or indirectly, 3,473,898 shares of common
stock which included the 2,283,298 shares owned by W-W Investments, 500,000
shares owned by Linda Weaver, 290,000 shares owned by Diamond Production of
Oklahoma, L.P., and 400,000 shares which may be acquired by Linda Weaver
pursuant to the Option.
As a result of the acquisition of the additional shares by W-W
Investments, Steven Wheeler beneficially owned, directly or indirectly,
2,851,574 shares of the Company's common stock which included the 2,283,298
shares acquired by W-W Investments, 218,000 shares owned by Steven Wheeler,
290,000 shares owned by Diamond Production of Oklahoma, L.P. and 59,676 shares
owned by Diamond Production Company L.L.C., which is owned by The Wheeler Trust
'89. Linda Weaver is a limited partner of Diamond Production of Oklahoma, L.P.
and Diamond Production Company L.L.C. is the General Partner.
Neither W-W Investments nor any of its partners borrowed the funds
necessary to make the purchase of the shares from the two shareholders nor did
W-W Investment nor any of its partners pledge any of the shares of the Company's
common stock owned by them to obtain any funds for this transaction.
W-W Investments was granted the right to elect up to three directors to
fill the vacancies created by the resignations of Nina J. Furrh, Sharon Furrh
and Ronald Johnston. On July 9, 1999, Michael R. Garrett was elected to the
Board of Directors to fill one of the vacancies created by the director
resignations and Dewanna Ross was elected President and Chief Executive Officer
to replace Nina Furrh.
Mehmeti and Burch Transaction. On January 18, 2000, Nick Mehmeti
("Mehmeti") and Duncan Burch ("Burch") acquired in a private transaction
3,351,574 shares of the common stock of the Company from W-W Investments, Linda
Weaver ("Weaver"), Steven Wheeler ("Wheeler"), Diamond Production, L.L.C., an
Oklahoma registered limited liability company ("Diamond LLC"), and Diamond
Production of Oklahoma, L.P., an Oklahoma limited partnership ("Diamond LP"),
for $3,854,310.10 ($1.15 per share). The 3,351,574 shares of the Company's
common stock acquired by Mehmeti and Burch represents approximately 58.5% of the
outstanding 5,731,778 shares of the Company's common stock. Mehmeti and Burch
will each hold 1,675,787 of these shares. In addition to the purchase of these
shares, Weaver assigned to Mehmeti and Burch, jointly, the Option.
As part of the transaction, the number of members on the board of
directors of the Company was increased to three. Michael R. Garrett then
resigned as a director and Mehmeti and Burch were elected to fill the vacancy
created by the resignation of Michael R. Garrett and the newly created third
directorship. On January 19, 2000, Dewanna Ross resigned as President and Chief
Executive officer and was replaced by Mehmeti who was elected to such positions.
Ms. Ross was elected as Vice President of Operations and Chief Operating
Officer. Mr. Burch was elected as Executive Vice President of the Company.
As a result of the acquisition of the 3,351,574 shares of the Company's
common stock, Mehmeti beneficially owns directly and indirectly 2,019,787 shares
or approximately 35.2% of the Company's issued and outstanding shares of common
stock. Additionally, Mehmeti jointly owns with Burch the Option to acquire at
any time until October 18, 2004 up to 400,000 shares of the Company's common
stock for $1.10 per share. Mehmeti had previously acquired 344,000 shares of
Company common stock in open market transactions. Burch beneficially owns
directly and indirectly 1,675,787 shares or approximately 29.2% of the Company's
issued and outstanding shares of common stock. Collectively, Mehmeti and Burch
beneficially own directly and indirectly
- 18 -
<PAGE>
3,695,574 shares or approximately 64.5% of the Company's issued and outstanding
shares of common stock and jointly own the Option to acquire up to 400,000
shares of common stock from the Company.
The purchase price of $3,854,310.10 was paid to W-W Investments,
Weaver, Wheeler, Diamond LLC and Diamond LP pro-rata based on each entity's
respective interest in the shares sold as follows. Weaver, Wheeler, Diamond LLC
and Diamond LP received a cash payment of $1,228,517.40. W-W Investments
received a cash payment of $1,787,899.20 and the remaining $837,893.50 of the
purchase price due to W-W Investments was financed by W-W Investments. Such
financing was evidenced by a promissory note executed by Mehmeti and Burch
collectively. The note shall be repaid over a five year term in sixty equal
monthly installments of principal and interest with the unpaid balance bearing
interest at a rate of 7 1/2% per annum. The note is secured by a stock pledge
agreement whereby Mehmeti and Burch have pledged 1,000,000 shares of the
Company's common stock as collateral for the repayment of the note. The cash
payments described herein were made out of Mehmeti's and Burch's personal funds.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999 there were no material transactions between the Company and
its officer, directors or shareholders owning 10% or more of the Company's
outstanding shares of Common Stock. Two of the Companies' properties are
currently leased to affiliates of Duncan Burch, who became an officer, director
and major shareholder of the Company in January 2000. See "Item 2. Properties"
and "Item 11. Security Ownership of Certain Beneficial Owners and Managements --
Changes in Control."
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Statements and Exhibits Page
--------------------------------- ----
1. Financial Statements. The following financial statements are
submitted as part of this report:
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets - December 31, 1999 and 1998 F-3
Consolidated Statements of Income and Comprehensive Income -
Years Ended December 31, 1999 and 1998 F-5
Consolidated Statements of Changes in Shareholders' Equity -
Years Ended December 31, 1999 and 1998 F-6
Consolidated Statement of Cash Flows -
Years Ended December 31, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-9
2. Exhibits
Exhibit
Number Description
------- -----------
2.1* Stock Purchase Agreement dated August 23, 1995 by and between
Art Beroff and Bjorn Heyerdahl.
2.2* Stock Purchase Agreement dated August 23, 1995 by and between
Joseph MacDonald, Goodheart Ventures, Inc., and Bjorn
Heyerdahl.
2.3* Stock Purchase Agreement dated September 7, 1995 by and among
Million Dollar Saloon, Inc., Goodheart Ventures, Inc., and
certain individuals.
- 19 -
<PAGE>
Exhibit
Number Description
------ -----------
2.4* Addendum and Modification to Stock Purchase Agreement dated
September 19, 1995, by and among Million Dollar Saloon, Inc.,
Goodheart Ventures, Inc., and certain individuals.
2.5* Stock Exchange Agreement dated September 7, 1995 by and among
Million Dollar Saloon, Inc., Goodheart Ventures, Inc., and
J.M. Tibbals, Trustee for Irrevocable Equity Trust No. 1.
2.6* Addendum and Modification to Stock Exchange Agreement dated
September 19, 1995, by and among Million Dollar Saloon, Inc.,
Goodheart Ventures, Inc., and J.M. Tibbals, Trustee for
Irrevocable Equity Trust No. 1.
2.7* Agreement and Plan of Merger dated October 5, 1995 by and
between Million Dollar Saloon, Inc., a Texas corporation, and
Goodheart Ventures, Inc., a Nevada corporation.
2.8** Addendum and Modification to Stock Purchase Agreement made and
entered into the 7th day of September 1995 by and among
Million Dollar Saloon, Inc., Goodheart Ventures, Inc., and
certain individuals dated October 31, 1995.
3(i)* Articles of Incorporation of The Company, as amended to date.
3(ii)* Bylaws of the Company.
3(iii) Amended and Restated Bylaws of the Company effective July 9,
1999.
4.1* Specimen Common Stock Certificate.
10.1* Leases of Properties.
10.2* Promissory Note for $750,000 with Abrams Centre National Bank
dated September 22, 1995.
21.1* Subsidiaries of the Company.
27.1 Financial Disclosure Schedule.
- -------------------
* Incorporated by reference to the Company's Form 10-SB filed December 26, 1995.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three month period ended
December 31, 1999.
- 20 -
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 23rd day of March, 2000.
MILLION DOLLAR SALOON, INC.
By: /s/ Nick Mehmeti
----------------------------------------
Nick Mehmeti, President, Chief Executive
Officer and Director
Pursuant to the requirements of the Exchange Act, this report has been
signed below by the following persons in the capacities and on the dates
indicated:
Signature Title Date
--------- ----- ----
<S> <C> <C> <C>
/s/ Nick Mehmeti President, Chief Executive Officer and March 23, 2000
- -------------------------------------------- Director
Nick Mehmeti
/s/ Duncan Burch Executive Vice President and Director March 23, 2000
- --------------------------------------------
Duncan Burch
/s/ Dewanna Ross Chief Operating Officer, Vice President of March 23, 2000
- -------------------------------------------- Operations, Secretary, Treasurer and Director
Dewanna Ross
/s/ Ronald W. Johnston Chief Financial Officer and Vice President of March 23, 2000
- -------------------------------------------- Finance
Ronald W. Johnston
</TABLE>
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<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- ------------------------------------------------------------
3(iii) Amended and Restated Bylaws of the Company effective
July 9, 1999
27.1 Financial Disclosure Schedule
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AMENDED AND RESTATED
BYLAWS
OF
MILLION DOLLAR SALOON, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I-- OFFICES
Section 1. Registered Office........................................1
Section 2. Other Offices............................................1
ARTICLE II-- SHAREHOLDERS
Section 1. Place of Meetings.......................................1
Section 2. Annual Meeting...........................................1
Section 3. List of Shareholders.....................................1
Section 4. Special Meetings.........................................2
Section 5. Notice...................................................2
Section 6. Quorum...................................................2
Section 7. Voting...................................................2
Section 8. Method of Voting.........................................2
Section 9. Record Date..............................................3
Section 10. Action by Consent.......................................3
Section 11. Shareholder Proposals...................................3
Section 12. Nomination of Directors.................................4
Section 13. Exclusion of NRS 78.378 to 78.3793......................5
ARTICLE III-- BOARD OF DIRECTORS
Section 1. Management...............................................5
Section 2. Qualification; Election; Term............................5
Section 3. Number...................................................5
Section 4. Removal..................................................5
Section 5. Vacancies................................................6
Section 6. Place of Meetings........................................6
Section 7. Annual Meeting...........................................6
Section 8. Regular Meetings.........................................6
Section 9. Special Meetings.........................................6
Section 10. Quorum..................................................6
Section 11. Interested Directors....................................6
Section 12. Committees..............................................7
Section 13. Action by Consent.......................................7
Section 14. Compensation of Directors...............................7
ARTICLE IV-- NOTICE
Section 1. Form of Notice...........................................7
Section 2. Waiver...................................................7
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<PAGE>
ARTICLE V-- OFFICERS AND AGENTS
Section 1. In General...............................................8
Section 2. Election.................................................8
Section 3. Other Officers and Agents................................8
Section 4. Compensation.............................................8
Section 5. Term of Office and Removal...............................8
Section 6. Employment and Other Contracts...........................8
Section 7. Chairman of the Board of Directors.......................8
Section 8. Chief Executive Officer..................................8
Section 9. President................................................9
Section 10. Chief Financial Officer.................................9
Section 11. Secretary...............................................9
Section 12. Bonding.................................................9
ARTICLE VI-- CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates.....................................9
Section 2. Lost Certificates.......................................10
Section 3. Transfer of Shares......................................10
Section 4. Registered Shareholders.................................10
ARTICLE VII-- GENERAL PROVISIONS
Section 1. Dividends...............................................10
Section 2. Reserves................................................11
Section 3. Telephone and Similar Meetings..........................11
Section 4. Books and Records.......................................11
Section 5. Fiscal Year.............................................11
Section 6. Seal....................................................11
Section 7. Advances of Expenses....................................11
Section 8. Indemnification.........................................12
Section 9. Insurance...............................................12
Section 10. Resignation............................................12
Section 11. Amendment of Bylaws....................................12
Section 12. Invalid Provisions.....................................12
Section 13. Relation to the Articles of Incorporation..............13
- iii -
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
MILLION DOLLAR SALOON, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office and registered
agent of Million Dollar Saloon, Inc. (the "Corporation") will be as from time to
time set forth in the Corporation's Articles of Incorporation (as may be amended
from time to time) or in any certificate filed with the Secretary of State of
the State of Nevada, and the appropriate county Recorder or Recorders, as the
case may be, to amend such information.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Nevada as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. All meetings of the shareholders for the
election of Directors will be held at such place, within or without the State of
Nevada, as may be fixed from time to time by the Board of Directors. Meetings of
shareholders for any other purpose may be held at such time and place, within or
without the State of Nevada, as may be stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of the shareholders will
be held at such time as may be determined by the Board of Directors, at which
meeting the shareholders will elect a Board of Directors, and transact such
other business as may properly be brought before the meeting.
Section 3. List of Shareholders. At least ten days before each meeting
of shareholders, a complete list of the shareholders entitled to vote at said
meeting, arranged in alphabetical order, with the address of and the number of
voting shares registered in the name of each, will be prepared by the officer or
agent having charge of the stock transfer books. Such list will be open to the
examination of any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
will be specified in the notice of the meeting, or if not so specified at the
place where the meeting is to be held. Such list will be produced and kept open
at the time and place of the meeting during the whole time thereof, and will be
subject to the inspection of any shareholder who may be present.
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<PAGE>
Section 4. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by law, the Articles of
Incorporation or these Bylaws, may be called by the Chairman of the Board, the
Chief Executive Officer, the President or the Board of Directors.
Section 5. Notice. Written or printed notice stating the place, day and
hour of any meeting of the shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, will be delivered not less
than ten nor more than sixty days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board, the
Chief Executive Officer, the President, the Secretary, or the officer or person
calling the meeting, to each shareholder of record entitled to vote at the
meeting. If mailed, such notice will be deemed to be delivered when deposited in
the United States mail, addressed to the shareholder at his address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid.
Section 6. Quorum. At all meetings of the shareholders, the presence in
person or by proxy of the holders of a majority of the shares issued and
outstanding and entitled to vote will be necessary and sufficient to constitute
a quorum for the transaction of business except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws. If, however, such quorum is
not present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, will have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present or represented. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting will
be given to each shareholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
notified.
Section 7. Voting. When a quorum is present at any meeting of the
Corporation's shareholders, the vote of the holders of a majority of the shares
entitled to vote on, and voted for or against, any matter will decide any
questions brought before such meeting, unless the question is one upon which, by
express provision of law, the Articles of Incorporation or these Bylaws, a
different vote is required, in which case such express provision will govern and
control the decision of such question. The shareholders present in person or by
proxy at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 8. Method of Voting. Each outstanding share of the
Corporation's capital stock, regardless of class, will be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the Articles of Incorporation, as amended from time to time. At any
meeting of the shareholders, every shareholder having the right to vote will be
entitled to vote in person, or by proxy appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than three years
prior to such meeting, unless such instrument provides for a longer period. Each
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<PAGE>
proxy will be revocable unless expressly provided therein to be irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock itself
or an interest in the Corporation generally. Such proxy will be filed with the
Secretary of the Corporation prior to or at the time of the meeting. Voting on
any question or in any election, other than for directors, may be by voice vote
or show of hands unless the presiding officer orders, or any shareholder
demands, that voting be by written ballot.
Section 9. Record Date. The Board of Directors may fix in advance a
record date for the purpose of determining shareholders entitled to notice of or
to vote at a meeting of shareholders, which record date will not precede the
date upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date will not be less than ten nor more than sixty
days prior to such meeting. In the absence of any action by the Board of
Directors, the close of business on the date next preceding the day on which the
notice is given will be the record date, or, if notice is waived, the close of
business on the day next preceding the day on which the meeting is held will be
the record date.
Section 10. Action by Consent. Except as set forth below, any action
required or permitted by law, the Articles of Incorporation or these Bylaws to
be taken at a meeting of the shareholders of the Corporation may be taken
without a meeting if a consent or consents in writing, setting forth the action
so taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and will be delivered to the Corporation by delivery to its registered office in
Nevada, its principal place of business or an officer or agent of the
Corporation having custody of the minute book.
Section 11. Shareholder Proposals. No proposal by a shareholder made
pursuant to this Article II may be voted upon at a meeting of shareholders
unless such shareholder shall have delivered or mailed in a timely manner (as
set herein) and in writing to the Secretary of the Corporation (i) notice of
such proposal, (ii) the text of the proposed alteration, amendment or repeal, if
such proposal relates to a proposed change to the Corporation's Articles of
Incorporation or Bylaws, (iii) evidence reasonably satisfactory to the Secretary
of the Corporation of such shareholder's status as such and of the number of
shares of each class of capital stock of the Corporation of which such
shareholder is the beneficial owner, (iv) a list of the names and addresses of
other beneficial owners of shares of the capital stock of the Corporation, if
any, with whom such shareholder is acting in concert, and the number of shares
of each class of capital stock of the Corporation beneficially owned by each
such beneficial owner and (v) an opinion of counsel, which counsel and the form
and substance of which opinion shall be reasonably satisfactory to the Board of
Directors of the Corporation, to the effect that the Articles of Incorporation
or Bylaws resulting from the adoption of such proposal would not be in conflict
with the laws of the State of Nevada, if such proposal relates to a proposed
change to the Corporation's Articles of Incorporation or Bylaws. To be timely in
connection with an annual meeting of shareholders, a shareholder's notice and
other aforesaid items shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than ninety nor more
than 180 days prior to the earlier of the date of the meeting or the
corresponding date on which the immediately preceding year's annual meeting of
shareholders was held. To be timely in connection with the voting on any such
proposal at a special meeting of the shareholders, a shareholder's notice and
other
- 3 -
<PAGE>
aforesaid items shall be delivered to or mailed and received at the principal
executive offices of the Corporation not less than forty days nor more than
sixty days prior to the date of such meeting; provided, however, that in the
event that less than fifty days' notice or prior public disclosure of the date
of the special meeting of the shareholders is given or made to the shareholders,
such shareholder's notice and other aforesaid items to be timely must be so
received not later than the close of business on the seventh day following the
day on which such notice of date of the meeting was mailed or such public
disclosure was made. Within thirty days (or such shorter period that may exist
prior to the date of the meeting) after such shareholder shall have submitted
the aforesaid items, the Secretary and the Board of Directors of the Corporation
shall respectively determine whether the items to be ruled upon by them are
reasonably satisfactory and shall notify such shareholder in writing of their
respective determinations. If such shareholder fails to submit a required item
in the form or within the time indicated, or if the Secretary or the Board of
Directors of the Corporation determines that the items to be ruled upon by them
are not reasonably satisfactory, then such proposal by such shareholder may not
be voted upon by the shareholders of the Corporation at such meeting of
shareholders. The presiding person at each meeting of shareholders shall, if the
facts warrant, determine and declare to the meeting that a proposal was not made
in accordance with the procedure prescribed by these Bylaws, and if he should so
determine, he shall so declare to the meeting and the defective proposal shall
be disregarded. The requirements of this Section 11 shall be in addition to any
other requirements imposed by these Bylaws, by the Corporation's Articles of
Incorporation or the law.
Section 12. Nomination of Directors. Nominations for the election of
directors may be made by the Board of Directors or by any shareholder (a
"Nominator") entitled to vote in the election of directors. Such nominations,
other than those made by the Board of Directors, shall be made in writing
pursuant to timely notice delivered to or mailed and received by the Secretary
of the Corporation as set forth in this Section 10. To be timely in connection
with an annual meeting of shareholders, a Nominator's notice, setting forth the
name and address of the person to be nominated, shall be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
ninety days nor more than 180 days prior to the earlier of the date of the
meeting or the corresponding date on which the immediately preceding year's
annual meeting of shareholders was held. To be timely in connection with any
election of a director at a special meeting of the shareholders, a Nominator's
notice, setting forth the name and address of the person to be nominated, shall
be delivered to or mailed and received at the principal executive offices of the
Corporation not later than the close of business on the tenth day following the
day on which such notice of date of the meeting was mailed or such public
disclosure was made, whichever first occurs. At such time, the Nominator shall
also submit written evidence, reasonably satisfactory to the Secretary of the
Corporation, that the Nominator is a shareholder of the Corporation and shall
identify in writing (i) the name and address of the Nominator, (ii) the number
of shares of each class of capital stock of the Corporation of which the
Nominator is the beneficial owner, (iii) the name and address of each of the
persons with whom the Nominator is acting in concert and (iv) the number of
shares of capital stock of which each such person with whom the Nominator is
acting in concert is the beneficial owner pursuant to which the nomination or
nominations are to be made. At such time, the Nominator shall also submit in
writing (i) the information with respect to each such proposed nominee that
would be required to be provided in a proxy statement prepared in accordance
with Regulation 14A under the Securities Exchange Act of 1934, as amended, and
(ii) a notarized affidavit executed by each such proposed nominee to the effect
that, if elected as a member of the Board of Directors, he will serve and that
he is eligible for election as a member of the Board of Directors. Within thirty
days (or such
- 4 -
<PAGE>
shorter time period that may exist prior to the date of the meeting) after the
Nominator has submitted the aforesaid items to the Secretary of the Corporation,
the Secretary of the Corporation shall determine whether the evidence of the
Nominator's status as a shareholder submitted by the Nominator is reasonably
satisfactory and shall notify the Nominator in writing of his determination. If
the Secretary of the Corporation finds that such evidence is not reasonably
satisfactory, or if the Nominator fails to submit the requisite information in
the form or within the time indicated, such nomination shall be ineffective for
the election at the meeting at which such person is proposed to be nominated.
The presiding person at each meeting of shareholders shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by these bylaws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded. The requirements of this Section 12 shall be in addition to any
other requirements imposed by these bylaws, by the Articles of Incorporation or
by law.
Section 13. Exclusion of NRS 78.378 to 78.3793. The Corporation
expressly elects not to be governed by the provisions of NRS 78.378 to 78.3793,
inclusive of the Nevada General Corporation Law.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Management. The business and affairs of the Corporation will
be managed by or under the direction of its Board of Directors who may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law, by the Articles of Incorporation or by these Bylaws directed or
required to be exercised or done by the shareholders.
Section 2. Qualification; Election; Term. None of the Directors need be
a shareholder of the Corporation or a resident of the State of Nevada. Each
Director shall hold office until whichever of the following occurs first: his
successor is elected and qualified, his resignation, his removal from office by
the shareholders or his death. At each annual meeting of shareholders of the
Corporation, the successors to the directors whose term expires at the meeting
shall be elected to hold office for a term expiring at the annual meeting of
shareholders held in the following year of their election. Directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote on the election of Directors at any
annual or special meeting of shareholders. Such election shall be by written
ballot.
Section 3. Number. The number of Directors of the Corporation will be
at least one and not more than nine. The number of Directors authorized will be
fixed as the Board of Directors may from time to time designate, or if no such
designation has been made, the number of Directors will be the same as the
number of members of the initial Board of Directors as set forth in the Articles
of Incorporation.
Section 4. Removal. Any Director may be removed, only for cause, at any
special meeting of shareholders by the affirmative vote of the holders of a
majority of all outstanding voting stock entitled to vote; provided that notice
of the intention to act upon such matter has been given in the notice calling
such meeting.
- 5 -
<PAGE>
Section 5. Vacancies. Newly created directorships resulting from any
increase in the authorized number of Directors and any vacancies occurring in
the Board of Directors caused by death, resignation, retirement,
disqualification or removal from office of any Directors or otherwise, may be
filled by the vote of a majority of the Directors then in office, though less
than a quorum, or a successor or successors may be chosen at a special meeting
of the shareholders called for that purpose, and each successor Director so
chosen will hold office until the next election of Directors or until whichever
of the following occurs first: his successor is elected and qualified, his
resignation, his removal from office by the shareholders or his death.
Section 6. Place of Meetings. Meetings of the Board of Directors,
regular or special, may be held at such place within or without the State of
Nevada as may be fixed from time to time by the Board of Directors.
Section 7. Annual Meeting. The first meeting of each newly elected
Board of Directors will be held without further notice immediately following the
annual meeting of shareholders and at the same place, unless by unanimous
consent, the Directors then elected and serving change such time or place.
Section 8. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as is from time to time
determined by resolution of the Board of Directors.
Section 9. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the Chief Executive Officer or the
President on oral or written notice to each Director, given either personally,
by telephone, by telegram or by mail; special meetings will be called by the
Chairman of the Board, Chief Executive Officer, President or Secretary in like
manner and on like notice on the written request of at least three Directors.
The purpose or purposes of any special meeting will be specified in the notice
relating thereto.
Section 10. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of Directors fixed by these Bylaws will be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the Directors present at any
meeting at which there is a quorum will be the act of the Board of Directors,
except as may be otherwise specifically provided by law, the Articles of
Incorporation or these Bylaws. If a quorum is not present at any meeting of the
Board of Directors, the Directors present thereat may adjourn the meeting from
time to time without notice other than announcement at the meeting, until a
quorum is present.
Section 11. Interested Directors. No contract or transaction between
the Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the Corporation's Directors or officers are
directors or officers or have a financial interest, will be void or voidable
solely for this reason, solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (i) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the
- 6 -
<PAGE>
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum, (ii)
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee that authorizes the contract
or transaction.
Section 12. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board, designate committees, each committee
to consist of two or more Directors of the Corporation, which committees will
have such power and authority and will perform such functions as may be provided
in such resolution. Such committee or committees will have such name or names as
may be designated by the Board and will keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
Section 13. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee of the Board of
Directors may be taken without such a meeting if a consent or consents in
writing, setting forth the action so taken, is signed by all the members of the
Board of Directors or such committee, as the case may be.
Section 14. Compensation of Directors. Directors will receive such
compensation for their services and reimbursement for their expenses as the
Board of Directors, by resolution, may establish; provided that nothing herein
contained will be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
NOTICE
Section 1. Form of Notice. Whenever by law, the Articles of
Incorporation or of these Bylaws, notice is to be given to any Director or
shareholder, and no provision is made as to how such notice will be given, such
notice may be given in writing, by mail, postage prepaid, addressed to such
Director or shareholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail will be deemed
to be given at the time the same is deposited in the United States mails.
Section 2. Waiver. Whenever any notice is required to be given to any
shareholder or Director of the Corporation as required by law, the Articles of
Incorporation or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated in
such notice, will be equivalent to the giving of such notice. Attendance of a
shareholder or Director at a meeting will constitute a waiver of notice of such
meeting, except where such shareholder or Director attends for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened.
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<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. In General. The officers of the Corporation will consist of
a Chief Executive Officer, President, Chief Financial Officer and Secretary and
such other officers as shall be elected by the Board of Directors or the Chief
Executive Officer. Any two or more offices may be held by the same person.
Section 2. Election. The Board of Directors, at its first meeting after
each annual meeting of shareholders, will elect the officers, none of whom need
be a member of the Board of Directors.
Section 3. Other Officers and Agents. The Board of Directors and Chief
Executive Officer may also elect and appoint such other officers and agents as
it or he deems necessary, who will be elected and appointed for such terms and
will exercise such powers and perform such duties as may be determined from time
to time by the Board or the Chief Executive Officer.
Section 4. Compensation. The compensation of all officers and agents of
the Corporation will be fixed by the Board of Directors or any committee of the
Board, if so authorized by the Board.
Section 5. Term of Office and Removal. Each officer of the Corporation
will hold office until his death, his resignation or removal from office, or the
election and qualification of his successor, whichever occurs first. Any officer
or agent elected or appointed by the Board of Directors or the Chief Executive
Officer may be removed at any time, for or without cause, by the affirmative
vote of a majority of the entire Board of Directors or at the discretion of the
Chief Executive Officer (without regard to how the agent or officer was
elected), but such removal will not prejudice the contract rights, if any, of
the person so removed. If the office of any officer becomes vacant for any
reason, the vacancy may be filled by the Board of Directors or, in the case of a
vacancy in the office of officer other than Chief Executive Officer and
President, such vacancy may be filled by the Chief Executive Officer.
Section 6. Employment and Other Contracts. The Board of Directors may
authorize any officer or officers or agent or agents to enter into any contract
or execute and deliver any instrument in the name or on behalf of the
Corporation, and such authority may be general or confined to specific
instances. The Board of Directors may, when it believes the interest of the
Corporation will best be served thereby, authorize executive employment
contracts that will have terms no longer than ten years and contain such other
terms and conditions as the Board of Directors deems appropriate. Nothing herein
will limit the authority of the Board of Directors to authorize employment
contracts for shorter terms.
Section 7. Chairman of the Board of Directors. If the Board of
Directors has elected a Chairman of the Board, he will preside at all meetings
of the shareholders and the Board of Directors.
Section 8. Chief Executive Officer. The Chief Executive Officer will
be the chief executive officer of the Corporation and, subject to the control of
the Board of Directors, will supervise and control all of the business and
affairs of the Corporation. The Chief Executive Officer shall have the authority
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<PAGE>
to elect any officer of the Corporation other than the Chief Executive Officer
or President. He will, in the absence of the Chairman of the Board, preside at
all meetings of the shareholders and the Board of Directors. The Chief Executive
Officer will have all powers and perform all duties incident to the office of
Chief Executive Officer and will have such other powers and perform such other
duties as the Board of Directors may from time to time prescribe. During the
absence or disability of the President, the Chief Executive Officer will
exercise the powers and perform the duties of President.
Section 9. President. The President will have responsibility for
oversight of the Corporation's operating and development activities. In the
absence or disability of the Chief Executive Officer and the Chairman of the
Board, the President will exercise the powers and perform the duties of the
Chief Executive Officer. The President will render to the Directors whenever
they may require it an account of the operating and development activities of
the Corporation and will have such other powers and perform such other duties as
the Board of Directors may from time to time prescribe or as the Chief Executive
Officer may from time to time delegate to him.
Section 10. Chief Financial Officer. The Chief Financial Officer will
have principal responsibility for the financial operations of the Corporation.
The Chief Financial Officer will render to the Directors whenever they may
require it an account of the operating results and financial condition of the
Corporation and will have such other powers and perform such other duties as the
Board of Directors may from time to time prescribe or as the Chief Executive
Officer may from time to time delegate to him.
Section 11. Secretary. The Secretary will attend all meetings of the
shareholders and record all votes and the minutes of all proceedings in a book
to be kept for that purpose. The Secretary will perform like duties for the
Board of Directors and committees thereof when required. The Secretary will
give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors. The Secretary will keep in safe
custody the seal of the Corporation. The Secretary will be under the supervision
of the Chief Executive Officer. The Secretary will have such other powers and
perform such other duties as the Board of Directors may from time to time
prescribe or as the Chief Executive Officer may from time to time delegate to
him.
Section 12. Bonding. The Corporation may secure a bond to protect the
Corporation from loss in the event of defalcation by any of the officers, which
bond may be in such form and amount and with such surety as the Board of
Directors may deem appropriate.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates. Certificates, in such form as may be
determined by the Board of Directors, representing shares to which shareholders
are entitled will be delivered to each shareholder. Such certificates will be
consecutively numbered and will be entered in the stock book of the Corporation
as they are issued. Each certificate will state on the face thereof the holder's
name, the number, class of shares, and the par value of such shares or a
statement that such shares are without par value. They will be signed by the
Chief Executive Officer or President and the Secretary or an
- 9 -
<PAGE>
Assistant Secretary, and may be sealed with the seal of the Corporation or a
facsimile thereof. If any certificate is countersigned by a transfer agent, or
an assistant transfer agent or registered by a registrar, either of which is
other than the Corporation or an employee of the Corporation, the signatures of
the Corporation's officers may be facsimiles. In case any officer or officers
who have signed, or whose facsimile signature or signatures have been used on
such certificate or certificates, ceases to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation or its
agents, such certificate or certificates may nevertheless be adopted by the
Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature or
signatures have been used thereon had not ceased to be such officer or officers
of the Corporation.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing such issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost or destroyed certificate, or his
legal representative, to advertise the same in such manner as it may require
and/or to give the Corporation a bond, in such form, in such sum, and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed. When a certificate has been lost, apparently destroyed
or wrongfully taken, and the holder of record fails to notify the Corporation
within a reasonable time after such holder has notice of it, and the Corporation
registers a transfer of the shares represented by the certificate before
receiving such notification, the holder of record is precluded from making any
claim against the Corporation for the transfer of a new certificate.
Section 3. Transfer of Shares. Shares of stock will be transferable
only on the books of the Corporation by the holder thereof in person or by such
holder's duly authorized attorney. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it will be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Shareholders. The Corporation will be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, will not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it has express or other notice thereof, except as otherwise
provided by law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the Articles of Incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting.
Dividends may be declared and paid in cash, in property, or in shares of the
Corporation, subject to the provisions of the General Corporation Law of the
State of Nevada and the Articles of Incorporation. The Board of Directors may
- 10 -
<PAGE>
fix in advance a record date for the purpose of determining shareholders
entitled to receive payment of any dividend, such record date will not precede
the date upon which the resolution fixing the record date is adopted, and such
record date will not be more than sixty days prior to the payment date of such
dividend. In the absence of any action by the Board of Directors, the close of
business on the date upon which the Board of Directors adopts the resolution
declaring such dividend will be the record date.
Section 2. Reserves. There may be created by resolution of the Board of
Directors out of the surplus of the Corporation such reserve or reserves as the
Directors from time to time, in their discretion, deem proper to provide for
contingencies, or to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the Directors may deem
beneficial to the Corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created. Surplus of the Corporation to the
extent so reserved will not be available for the payment of dividends or other
distributions by the Corporation.
Section 3. Telephone and Similar Meetings. Shareholders, directors and
committee members may participate in and hold meetings by means of conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other. Participation in such a meeting will
constitute presence in person at the meeting, except where a person participates
in the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
Section 4. Books and Records. The Corporation will keep correct and
complete books and records of account and minutes of the proceedings of its
shareholders and Board of Directors, and will keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of the shares held by each.
Section 5. Fiscal Year. The fiscal year of the Corporation will be
December 31 unless otherwise fixed by resolution of the Board of Directors.
Section 6. Seal. The Corporation may have a seal, and the seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. Any officer of the Corporation will have authority to
affix the seal to any document requiring it.
Section 7. Advances of Expenses. The Corporation will advance to its
directors and officers expenses incurred by them in connection with any
"Proceeding," which term includes any threatened, pending or completed action,
suit or proceeding, whether brought by or in the right of the Corporation or
otherwise and whether of a civil, criminal, administrative or investigative
nature (including all appeals therefrom), in which a director or officer may be
or may have been involved as a party or otherwise, by reason of the fact that he
is or was a director or officer of the Corporation, by reason of any action
taken by him or of any inaction on his part while acting as such, or by reason
of the fact that he is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
("Official," which term also includes directors and officers of the Corporation
in their capacities as directors and officers of the Corporation), whether or
- 11 -
<PAGE>
not he is serving in such capacity at the time any liability or expense is
incurred; provided that the Official undertakes to repay all amounts advanced
unless:
(i) in the case of all Proceedings other than a Proceeding by
or in the right of the Corporation, the Official establishes to the
satisfaction of the disinterested members of the Board of Directors
that he acted in good faith or in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation and, with
respect to any criminal proceeding, that he did not have reasonable
cause to believe his conduct was unlawful; provided that the
termination of any such Proceeding by judgment, order of court,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not by itself create a presumption as to whether the
Official acted in good faith or in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation and, with
respect to any criminal proceeding, as to whether he had reasonable
cause to believe his conduct was unlawful; or
(ii) in the case of a Proceeding by or in the right of the
Corporation, the Official establishes to the satisfaction of the
disinterested members of the Board of Directors that he acted in good
faith or in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation; provided that if in such a
Proceeding the Official is adjudged to be liable to the Corporation,
all amounts advanced to the Official for expenses must be repaid except
to the extent that the court in which such adjudication was made shall
determine upon application that despite such adjudication, in view of
all the circumstances, the Official is fairly and reasonably entitled
to indemnity for such expenses as the court may deem proper.
Section 8. Indemnification. The Corporation will indemnify its
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Nevada and may, if and to the extent authorized
by the Board of Directors, so indemnify such other persons whom it has the power
to indemnify against any liability, reasonable expense or other matter
whatsoever.
Section 9. Insurance. The Corporation may at the discretion of the
Board of Directors purchase and maintain insurance on behalf of the Corporation
and any person whom it has the power to indemnify pursuant to law, the Articles
of Incorporation, these Bylaws or otherwise.
Section 10. Resignation. Any director, officer or agent may resign by
giving written notice to the President or the Secretary. Such resignation will
take effect at the time specified therein or immediately if no time is specified
therein. Unless otherwise specified therein, the acceptance of such resignation
will not be necessary to make it effective.
Section 11. Amendment of Bylaws. Other than as set forth herein, these
Bylaws may be altered, amended, or repealed at any meeting of the Board of
Directors at which a quorum is present, by the affirmative vote of a majority of
the Directors present at such meeting.
Section 12. Invalid Provisions. If any part of these Bylaws is held
invalid or inoperative for any reason, the remaining parts, so far as possible
and reasonable, will be valid and operative.
- 12 -
<PAGE>
Section 13. Relation to the Articles of Incorporation. These Bylaws are
subject to, and governed by, the Articles of Incorporation of the Corporation as
amended from time to time.
Adopted by the Board of Directors and
Effective June 4, 1999
--------------------------------------
Secretary
Article III, Section 4, Removal, was amended in its entirety, the 9th day of
July, 1999 by the Board of Directors. Article III, Section 4, as amended has
been restated herein.
Nina J. Furrh, President
- 13 -
<PAGE>
MILLION DOLLAR SALOON, INC.
AND SUBSIDIARIES
Financial Statements
and
Auditor's Report
December 31, 1999 and 1998
S. W. HATFIELD , CPA
certified public accountants
Use our past to assist your future sm
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements
Consolidated Balance Sheets
as of December 31, 1999 and 1998 F-3
Consolidated Statements of Income and Comprehensive Income
for the years ended December 31, 1999 and 1998 F-5
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1999 and 1998 F-6
Consolidated Statements of Cash Flows
for the years ended December 31, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-9
F-1
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Million Dollar Saloon, Inc.
We have audited the consolidated balance sheets of Million Dollar Saloon, Inc.
and Subsidiaries (a Nevada corporation and Texas corporations, respectively) as
of December 31, 1999 and 1998, and the related consolidated statements of income
and comprehensive income, changes in shareholders' equity, and cash flows for
each of the years then ended, respectively. These consolidated financial
statements are the responsibility of Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Million
Dollar Saloon, Inc. and Subsidiaries as of December 31, 1999 and 1998 and the
results of its operations and its cash flows for the years then ended,
respectively, in conformity with generally accepted accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
January 13, 2000
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-2
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
----------- -----------
Current Assets
Cash on hand and in bank $ 610,233 $ 574,817
Note receivable - current portion 29,912 24,480
Accounts receivable - trade and other 9,748 6,671
Prepaid Federal income taxes receivable 20,339 91,653
Inventory 31,662 18,404
Prepaid expenses -- 56,460
----------- -----------
Total current assets 701,894 772,485
----------- -----------
Property and Equipment - At Cost
Buildings and related improvements 1,987,515 1,987,515
Furniture and equipment 838,160 798,371
Vehicles -- 52,728
----------- -----------
2,825,675 2,838,614
Less accumulated depreciation (1,627,129) (1,567,899)
----------- -----------
1,198,546 1,270,715
Land 741,488 741,488
----------- -----------
Net property and equipment 1,940,034 2,012,203
----------- -----------
Other Assets
Note receivable - noncurrent portion 5,267 79,767
Organization costs, net of accumulated
amortization of $64.630 and $49,644,
respectively 10,299 25,284
Loan costs, net of accumulated amortization
of $26,866 and $20,545, respectively 4,741 11,062
Other 6,225 6,975
----------- -----------
Total other assets 26,532 123,088
----------- -----------
Total Assets $ 2,668,460 $ 2,907,776
=========== ===========
- Continued -
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
December 31, 1999 and 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
---------- ----------
<S> <C> <C>
Current Liabilities
Current portion of long-term debt $ 139,657 $ 181,905
Accounts payable - trade 10,351 22,443
Accrued liabilities 67,425 63,751
Dividends payable 57,318 57,318
Tenant deposits 6,500 6,500
---------- ----------
Total current liabilities 281,251 331,917
---------- ----------
Long-Term Liabilities
Long-term debt, net of current maturities -- 156,419
Deferred tax liability 139,248 125,056
---------- ----------
Total liabilities 420,499 613,392
---------- ----------
Commitments and Contingencies
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. 5,731,778 and 5,731,778 issued and
outstanding, respectively 5,732 5,732
Additional paid-in capital -- --
Retained earnings 2,442,229 2,288,652
---------- ----------
Total shareholders' equity 2,247,961 2,294,384
---------- ----------
Total Liabilities and Shareholders' Equity $2,668,460 $2,907,776
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years ended December 31, 1999 and 1998
1999 1998
----------- -----------
<S> <C> <C>
Revenues
Bar and restaurant sales $ 2,947,585 $ 3,111,513
Rental income 697,986 552,675
----------- -----------
Total revenues 3,645,571 3,664,188
----------- -----------
Cost of Sales - Bar and Restaurant Operations
Direct labor 1,244,177 1,277,734
Purchases 542,469 528,338
----------- -----------
Total cost of sales 1,786,646 1,806,072
----------- -----------
Gross Profit 1,858,925 1,858,116
----------- -----------
Operating Expenses
Salaries, wages and related expenses 499,753 384,878
Consulting, management and other professional fees 218,652 311,691
Rental expenses, principally taxes 65,325 60,354
Interest expense 23,993 55,938
Other operating expenses 685,650 676,407
Depreciation and amortization 113,802 114,385
----------- -----------
Total operating expenses 1,607,175 1,603,653
----------- -----------
Income from Operations 251,750 254,463
Other Income (Expenses)
Gain on sale of property and equipment (654) --
Forgiveness of related party debt, principally
accrued interest, in excess of agreed upon
value of common stock taken for repayment -- (40,337)
Interest income 21,525 20,360
----------- -----------
Income before Income Taxes 272,621 234,486
Provision for Income Taxes
Currently payable (74,840) (68,239)
Deferred (14,191) (26,120)
----------- -----------
Net Income 183,590 140,127
Other Comprehensive Income -- --
----------- -----------
Comprehensive Income $ 183,590 $ 140,127
=========== ===========
Earnings per share of common stock
outstanding, computed on net income -
basic and fully diluted $0.03 $0.02
===== =====
Weighted-average number of shares outstanding 5,731,778 5,901,401
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
Common Stock Additional Total
------------------------- paid-in Retained shareholders'
# shares Amount capital earnings equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1998 5,409,451 $ 5,409 $ -- $ 2,585,545 $ 2,590,954
Shares sold under
private placement 530,000 530 529,470 -- 530,000
Shares issued for
consulting fees 205,000 205 69,495 -- 69,700
Purchase and retirement of
treasury stock (30,000) (30) (29,970) -- (30,000)
Acquisition of common
stock into treasury as
payment for amounts
due from related parties
and retirement thereof (382,673) (382) (568,995) (195,969) (765,346)
Dividends declared -- -- -- (241,051) (241,051)
Net income for the year -- -- -- 140,127 140,127
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1998 5,731,778 5,732 -- 2,288,652 2,294,384
Dividends declared -- -- -- (230,013) (230,013)
Net income for the year -- -- -- 183,590 183,590
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1999 5,731,778 $ 5,732 $ -- $ 2,242,229 $ 2,247,961
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 183,590 $ 140,127
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 113,802 114,385
Gain on sale of property and equipment 654 --
Common stock issued for consulting fees -- 69,700
Forgiveness of related party debt, principally
accrued interest, in excess of agreed upon
value of common stock taken for repayment -- 40,337
Deferred income taxes 14,192 26,120
(Increase) decrease in
Accounts receivable - trade (3,077) (6,671)
Prepaid income taxes 71,314 (54,405)
Inventory (13,258) (2,307)
Prepaid expenses 56,460 17,084
Increase (decrease) in
Accounts payable and other accrued liabilities (8,416) 28,001
--------- ---------
Net cash provided by operating activities 415,261 372,371
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal collections on note receivable 69,068 23,799
Proceeds from sale of property and equipment 19,558 --
Purchases of property and equipment (39,789) (73,641)
Cash advances to shareholders and affiliates -- --
--------- ---------
Net cash used in investing activities 48,837 (49,842)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (198,667) (159,836)
Proceeds from sale of common stock -- 530,000
Purchase of treasury stock -- (30,000)
Dividends paid (230,015) (237,828)
--------- ---------
Net cash provided by (used in) financing activities (428,682) 102,336
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 35,416 424,865
Cash and cash equivalents at beginning of year 574,817 149,952
--------- ---------
Cash and cash equivalents at end of year $ 610,233 $ 574,817
========= =========
</TABLE>
- Continued -
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended December 31, 1999 and 1998
1999 1998
-------- --------
SUPPLEMENTAL DISCLOSURES OF
INTEREST AND INCOME TAXES PAID
Interest paid on borrowings $ 23,993 $ 55,938
======== ========
Income taxes paid $ 3,526 $122,644
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Declaration of fourth quarter dividend of $0.01
and $0.01 per share, respectively $ 57,318 $ 57,318
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - BACKGROUND AND ORGANIZATION
Million Dollar Saloon, Inc. (MDS) was incorporated under the laws of the State
of Nevada on September 28, 1987. MDS is a holding company providing management
support to its operating subsidiaries: Furrh, Inc., Tempo Tamers, Inc., Don,
Inc. and Corporation Lex.
Furrh, Inc. (Furrh) was incorporated under the laws of the State of Texas on
February 25, 1974. Furrh provides management services to Tempo Tamers, Inc, its
wholly-owned subsidiary. Tempo Tamers, Inc. (Tempo), was incorporated under the
laws of the State of Texas on July 3, 1978. Tempo operates an adult
entertainment lounge and restaurant facility, located in Dallas, Texas, under
the registered trademark and trade name "Million Dollar Saloon(R)".
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.
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.
These financial statements reflect the books and records of Million Dollar
Saloon, Inc., Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don, Inc. for
the years ended December 31, 1999 and 1998, 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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and Cash Equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on hand
and in banks, including accounts in book overdraft positions, certificates of
deposit and other highly-liquid investments with maturities of three months
or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
F-9
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
2. Accounts Receivable and Revenue Recognition
-------------------------------------------
In the normal course of business, the Company extends unsecured credit to
virtually all of its tenants related to rental property operations and
accepts national bankcards as payment for goods and services in its lounge
and entertainment facility. Bankcard charges are normally paid by the
clearing institution within three to fourteen days from the date of
presentation by the Company. All lease rental payments are either due on the
first day of the month in advance for the month or on the first day of the
week in arrears for the previous corresponding period. All revenue sources
are located either in Dallas or Tarrant County, Texas. Because of the credit
risk involved, management has provided an allowance for doubtful accounts
which reflects its opinion of amounts which will eventually become
uncollectible. In the event of complete non-performance, the maximum exposure
to the Company is the recorded amount of trade accounts receivable shown on
the balance sheet at the date of non-performance.
3. Inventory
---------
Inventory consists of food and liquor consumables necessary in the operation
of Tempo's adult lounge and entertainment facility. These items are valued at
the lower of cost or market using the first-in, first-out method of
accounting.
4. Property and Equipment
----------------------
Property and equipment is recorded at cost and is depreciated on a
straight-line basis, over the estimated useful lives (generally 5 to 40
years) of the respective asset. Major additions and betterments are
capitalized and depreciated over the estimated useful lives of the related
assets. Maintenance, repairs, and minor improvements are charged to expense
as incurred.
5. Trademark rights
----------------
Amounts paid in conjunction with the acquisition and retention of the
trademark "Million Dollar Saloon(R)" have been capitalized. The life of the
registration is twenty years from its affirmation in 1988 and may be
extended as allowed by applicable law at that point in time. This trademark
has been assigned Registration No. 1,509,636 by the U. S. Patent and
Trademark Office. The Company amortizes the trademark over a 10-year life
using the straight-line method.
F-10
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Income Taxes
------------
The Company files a consolidated Federal Income Tax return and utilizes the
asset and liability method of accounting for income taxes. The deferred tax
asset and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences. No
valuation allowance was provided against deferred tax assets. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization.
7. Earnings per share
------------------
Earnings per share is computed by dividing consolidated net income by the
composite weighted-average number of shares of common stock outstanding
during the year. As of December 31, 1999 and 1998, the Company has no issued
and outstanding securities, options or warrants that would be deemed
potentially dilutive in the current and future periods.
NOTE C - CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash accounts in a financial institution subject to
insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC).
Under FDIC rules, the Company and its subsidiaries are entitled to aggregate
coverage of $100,000 per account type per separate legal entity per financial
institution. During the years ended December 31, 1999 and 1998, respectively,
the entity listed below had credit risk exposures in excess of statutory FDIC
coverage as described below. No other entities had any credit risk exposures
during the years ended December 31, 1999 or 1998.
<TABLE>
<CAPTION>
Highest Low Number of
exposure exposure days with exposure
-------- -------- ------------------
<S> <C> <C> <C>
Year ended December 31, 1999
- ----------------------------
Million Dollar Saloon, Inc. $364,077 $18,760 365
Year ended December 31, 1998
- ----------------------------
Million Dollar Saloon, Inc. $430,537 $350,523 284
</TABLE>
The Company has incurred no losses during 1999 or 1998 as a result of any of
these unsecured situations.
NOTE D - NOTE RECEIVABLE
1999 1998
-------- --------
$220,000 note receivable from an unrelated
individual for the sale of real estate. Interest
at 8.00%. Payable in monthly installments
of approximately $2,669, including interest.
Final payment due in July 2002. Collateralized
by real estate and improvements located in
Dallas County, Texas $ - $104,247
F-11
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE D - NOTE RECEIVABLE - Continued
1999 1998
$35,179 note receivable from an unrelated --------- ---------
individual for the sale of real estate. Interest
at 9.50%. Payable in monthly installments
of approximately $2,665, including interest.
Final payment due in February 2001.
Collateralized by real estate and improvements
located in Dallas County, Texas $ 35,179 $ --
--------- ---------
35,179 104,247
Less current portion (29,912) (24,480)
--------- ---------
Noncurrent portion $ 5,267 $ 79,767
========= =========
Future maturities of the note receivable are as follows:
Year ending
December 31, Amount
------------ --------
2000 $29,912
2001 5,267
------
Total $35,179
======
NOTE E - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1999 and 1998:
1999 1998 Estimated life
----------- ----------- --------------
Buildings and related improvements $ 1,987,515 $ 1,987,515 15-40 years
Furniture and equipment 838,160 798,371 5-10 years
Vehicles -- 52,728 3 years
----------- -----------
2,825,675 2,838,614
Less accumulated depreciation (1,627,129) (1,567,899)
----------- -----------
1,198,546 1,270,715
Land 741,488 741,488
----------- -----------
Net property and equipment $ 1,940,034 $ 2,012,203
=========== ===========
Depreciation expense for the years ended December 31, 1999 and 1998 was $91,746
and $92,331, respectively.
F-12
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE F - ADVANCES TO/FROM OFFICERS, SHAREHOLDERS AND AFFILIATES
The Company, in prior years, made loans to various affiliates aggregating
approximately $805,680 through December 31, 1997, including accrued interest. In
September 1995, the balances due from these affiliates were converted to formal
notes receivable bearing interest at 5.65%. These notes matured in September
1998 and were called by the Company in October 1998. All accrued interest and
principal was payable at maturity. The notes bore interest at the statutory
interest rate set by the Internal Revenue Service for related party loans. Due
to the nature of the respective receivables, these amounts were classified in
the financial statements as non-current.
During 1998, management discontinued the accrual of interest on these advances
when it became apparent that the shareholders were not going to repay the
obligations in cash at the maturity date. The shareholders were unable to
liquidate their holdings at a satisfactory market price and tendered their
holdings of an aggregate 382,673 shares of the Company's common stock in
settlement of the outstanding debts. The Company experienced a charge to
operations approximately equivalent to the 1997 accrued interest income, or
approximately $40,000, for the differential between the agreed upon value of the
shares tendered for payment and the gross carrying value of the debts at
retirement.
NOTE G - LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1999 and 1998,
respectively:
1999 1998
------- -------
$750,000 note payable to a bank. Interest
at 11.0%. Payable in monthly installments
of approximately $16,369, including
interest. Final payment due in September
2000. Collateralized by real estate and
improvements located in Dallas and
Tarrant Counties, Texas. $139,657 $310,504
$52,707 installment note payable to a finance
company. Payable in monthlyinstallments of
approximately $1,111, including interest at
9.50%. Paid in full in July 1999.
Collateralized by a vehicle -- 27,820
------- -------
139,657 338,324
Less current portion (139,657) (181,905)
------- -------
Long-term portion $ -- $156,419
======= =======
F-13
<PAGE>
<TABLE>
<CAPTION>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE G - LONG-TERM DEBT - Continued
Current maturities of long-term maturities as of December 31, 1999 are as
follows:
<S> <C> <C>
Year ending
December 31, Amount
------------ --------
2000 $139,657
-------
Total $139,657
=======
NOTE H - INCOME TAXES
The deferred current tax asset and non-current deferred tax liability on the
December 31, 1999 and 1998, respectively, balance sheet consists of the
following:
December 31, December 31,
1999 1998
------------ ------------
Non-current deferred tax liability $(139,248) $(125,056)
======= =======
The non-current deferred tax liability results from the usage of statutory
accelerated tax depreciation and amortization methods.
The components of income tax expense (benefit) for the years ended December 31,
1999 and 1998, respectively, are as follows:
1999 1998
--------- ---------
Federal:
Current $74,840 $68,239
Deferred 14,191 26,120
-------- -------
89,031 94,359
-------- -------
State:
Current -- --
Deferred -- --
-------- -------
-- --
-------- -------
Total $89,031 $94,359
====== ======
The Company's income tax expense (benefit) for the years ended December 31, 1999
and 1998, respectively, differed from the statutory federal rate of 34 percent
as follows:
1999 1998
--------- ---------
Statutory rate applied to earnings before income taxes $92,691 $79,725
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Deferred income taxes 14,191 26,120
Effect of incremental tax brackets and the
application of business tax credits (17,851) (11,486)
------ ------
Income tax expense $89,031 $94,359
====== ======
</TABLE>
F-14
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE H - INCOME TAXES - Continued
Deferred income tax expense as of December 31, 1999 and 1998, respectively,
consists of the following components:
1999 1998
------- -------
Changes in deferred tax assets
Effect of utilization of net operating loss
and business tax credit carryforwards $ -- $ --
Changes in deferred tax liabilities
Effect of differences in book and
statutory tax depreciation methods 14,191 26,120
------ ------
Changes in deferred income tax accounts $14,191 $26,120
====== ======
NOTE I - CAPITAL STOCK TRANSACTIONS
In April 1998, the Company purchased and retired approximately 30,000 shares of
issued and outstanding common stock for approximately $30,000. The retirement
was accounted for as a reduction in the carrying value of issued and outstanding
common stock at its respective par value, a reduction of additional paid-in
capital and a reduction of retained earnings, where appropriate, in accordance
with the tenets of Accounting Principles Board Opinion No. 6.
On March 19, 1998, the Company sold 530,000 shares of restricted, unregistered
common stock to an individual under a Stock Purchase Agreement (Agreement) at a
price of $1.00 per share for total proceeds to the Company of $530,000. The
Agreement also contains a "second closing" clause whereby the individual will
acquire an additional 400,000 shares of equivalent restricted, unregistered
common stock at $1.10 per share for gross proceeds of $440,000, on or before
July 15, 1998. On October 18, 1999, the Company's Board of Directors modified
and amended the ":second closing" clause whereby the purchaser may purchase from
time to time any or all of the 400,000 shares of common stock at $1.10 per share
and to extend the exercise period until the close of business on October 18,
2004. As of December 31, 1999, the individual has not purchased any shares of
common stock in accordance with the "second closing" portion of the Agreement.
Further, the Company has granted the individual the option to purchase an
additional 1,000,000 shares of restricted, unregistered common stock at a price
of $1.25 per share on or before February 28, 1999. The option expiration may be
accelerated if the Company's common stock is traded on the NASDAQ Small-Cap
Market or other national exchange and the closing bid price equals or exceeds
$1.75 per share for 10 consecutive trading days (Trading Period). In this event,
the expiration date of the option shall be the 90th day after the Trading Period
and the Company must notify the individual of the acceleration in writing. This
option expired on February 28, 1999 with no shares being issued.
F-15
<PAGE>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE I - CAPITAL STOCK TRANSACTIONS - Continued
On March 19, 1998, concurrent with the Stock Purchase Agreement discussed above,
the Company entered into a Consulting Agreement with a separate individual for
consulting, advisory and management services to be performed as directed by the
Company's Board of Directors. The Consulting Agreement is for a term of one (1)
year and may be terminated by either party with ten (10) days written notice.
The compensation for the Consulting Agreement was paid in restricted,
unregistered common stock of the Company as follows: 150,000 shares as payment
for consulting, advisory and management services to be performed as directed by
the Company's Board of Directors and an additional 55,000 shares upon receipt of
the $530,000 discussed above. An additional 45,000 shares will be issued to the
consultant upon receipt of the $440,000 which was due on or before July 15,
1998. This Consulting Agreement terminated of its own accord in July 1998 and
the termination was acknowledged in writing to the Company by the individual in
January 2000.
The Company, upon execution of the Consulting Agreement and receipt of the
$530,000 related to the Stock Purchase Agreement, issued the respective 150,000
and 55,000 shares due under the terms of the Consulting Agreement. These
transactions were valued at approximately $0.34 per share, or an aggregate
$69,700, which approximated the "fair value" of the Company's restricted stock
issued on the transaction date.
On October 31, 1998, the Company took an aggregate 382,673 shares of issued and
outstanding common stock from two shareholders, who were former employees,
affiliates and/or management, at an agreed-upon value of approximately $765,000
in satisfaction of notes receivable aggregating approximately $805,000,
including accrued interest through December 31, 1997. The Company discontinued,
during the first quarter of 1998, the accrual of interest due to uncertainties
in the ultimate settlement of this situation at the scheduled maturity date. The
Company experienced a charge to operations approximately equivalent to the 1997
accrued interest income, or approximately $40,000, for the differential between
the agreed upon value of the shares tendered for payment and the gross carrying
value of the debts at retirement. The shares obtained by the Company were
returned to treasury stock status and were concurrently retired by the Company.
This treasury stock retirement was accounted for as a reduction in the carrying
value of issued and outstanding common stock at approximately $383, which equals
the par value of the shares, a reduction of additional paid-in capital of
approximately $569,995 and a reduction of retained earnings of $195,969, in
accordance with the tenets of Accounting Principles Board Opinion No. 6.
NOTE J - COMMITMENTS
The Company leases commercial real estate on long-term operating leases. The
leases require minimum weekly lease payments, plus reimbursement for annual
property taxes. The respective tenants are responsible for normal maintenance
and repairs, insurance and other direct operating expenses related to the
property. As of December 31, 1999, future minimum non-cancellable lease revenues
are as follows:
Year ending
December 31, Amount
------------ -----------
2000 $ 689,000
2001 689,000
2002 546,500
2003 280,500
---------
Total $ 2,205,000
=========
F-16
<PAGE>
<TABLE>
<CAPTION>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE K - LITIGATION
The Company is one of several defendants in Cause No. DV99-02585-L; Roy D.
Stedham v. The Million Dollar Saloon, et al.; 193rd District Court, Dallas
County, Texas which is alleged to be a class action seeking monetary damages for
violation of the Texas Finance Code concerning overcharges for purchases of
certain items by the use of a credit card. The Company has denied the
allegations and intends to vigorously contest the claims asserted. The Company
does not believe that the plaintiff/class will prevail on their claims. The
monetary damages sought, plus attorneys' fees, in management's opinion does not
constitute an amount that is material to the Company.
NOTE L - SEGMENT INFORMATION
The Company operates with a centralized management structure and has two
identifiable operating segments: an adult entertainment lounge and restaurant
located in Dallas, Texas and commercial rental real estate located in Dallas and
Tarrant Counties, Texas. All revenues are generated operations in these
geographic areas. The Company has a relationship whereby rental revenues from
various entities under common control comprise approximately 19.1% and 15.0% of
total revenues for 1999 and 1998, respectively.
Restaurant Rental General and
facility real estate administrative Total
------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1999
Revenue from external customers $ 2,947,585 $ 697,986 $ -- $ 3,645,571
Revenue (expenses) from/to
intercompany sources (240,000) 350,000 (110,000) --
Interest income -- 8,036 13,489 21,525
Interest expense (1,593) -- 25,586 23,993
Depreciation and amortization 33,390 22,000 58,412 113,802
Income tax expense (benefit) (47,413) 43,703 99,473 95,763
Segment assets 286,847 2,152,465 222,416 2,661,728
Fixed asset expenditures 39,789 -- -- 39,789
Year ended December 31, 1998
Revenue from external customers $ 3,111,513 $ 552,675 $ -- $ 3,664,188
Revenue (expenses) from/to
intercompany sources (240,000) (360,000) 600,000 --
Interest income -- 9,577 10,783 20,360
Interest expense 5,863 -- 50,075 55,938
Depreciation and amortization 34,505 21,469 58,411 114,385
Income tax expense (benefit) (21,867) 34,428 81,798 94,359
Segment assets 501,838 2,036,551 369,387 2,907,776
Fixed asset expenditures 51,627 22,014 -- 73,641
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE M - SELECTED FINANCIAL DATA (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1999 and 1998, respectively.
Quarter ended Quarter ended Quarter ended Quarter ended Year ended
March 31, June 30, September 30, December 31, December 31,
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1999
- ----
Restaurant sales $ 855,208 $ 789,174 $ 804,456 $ 498,744 $ 2,947,582
Rental income 169,911 170,525 174,525 183,025 697,986
Gross profit 539,021 429,160 515,729 375,015 1,858,925
Net earnings 115,391 37,438 89,926 (59,165) 183,590
Basic and fully
diluted earnings
per share 0.02 0.01 0.02 (0.01) 0.03
Weighted-average
number of shares
issued and outstanding 5,731,788 5,731,778 5,731,778 5,731,778 5,731,778
1998
- ----
Restaurant sales $ 829,942 $ 818,713 $ 900,525 $ 562,333 $ 3,111,513
Rental income 125,422 113,633 139,524 174,096 552,675
Gross profit 490,811 410,151 522,555 434,599 1,858,116
Net earnings 63,779 53,613 130,513 (107,778) 140,127
Basic and fully
diluted earnings
per share 0.01 0.01 0.02 (0.02) 0.02
Weighted average
number of shares
issued and outstanding 5,515,618 6,144,451 6,144,451 5,852,403 5,901,401
</TABLE>
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0001002396
<NAME> Million Dollar Saloon, Inc.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 610233
<SECURITIES> 0
<RECEIVABLES> 39660
<ALLOWANCES> 0
<INVENTORY> 31662
<CURRENT-ASSETS> 701894
<PP&E> 3567163
<DEPRECIATION> 1627129
<TOTAL-ASSETS> 2668460
<CURRENT-LIABILITIES> 281251
<BONDS> 0
0
0
<COMMON> 5732
<OTHER-SE> 2442229
<TOTAL-LIABILITY-AND-EQUITY> 2668460
<SALES> 3645571
<TOTAL-REVENUES> 3645571
<CGS> 1786646
<TOTAL-COSTS> 1607175
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23993
<INCOME-PRETAX> 272621
<INCOME-TAX> 89031
<INCOME-CONTINUING> 183590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183590
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
