United States
Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
--------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
--------- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
--------- OF 1934
For the transition period from ____________ to ___________
--------------------------------------------------------------------------------
Commission File Number: 0-27006
-------
Million Dollar Saloon, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3428657
---------------------------- --------------------------
(State of incorporation) (IRS Employer ID Number)
6848 Greenville Avenue, Dallas, TX 75231
----------------------------------------
(Address of principal executive offices)
(214) 691-6757
--------------
(Issuer's telephone number)
--------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: YES X NO
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: October 27, 2000: 5,731,778
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Form 10-QSB for the Quarter ended September 30, 2000
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 15
Part II - Other Information
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
Signatures 16
2
<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
Item 1 - Part 1 - Financial Statements
Accountant's Review Report
--------------------------
Board of Directors and Shareholders
Million Dollar Saloon, Inc.
We have reviewed the accompanying consolidated balance sheets of Million Dollar
Saloon, Inc. (a Nevada corporation) and Subsidiaries as of September 30, 2000
and 1999 and the accompanying consolidated statements of income and
comprehensive income for the nine and three months ended September 30, 2000 and
1999 and the consolidated statements of cash flows for the nine months ended
September 30, 2000 and 1999. These consolidated financial statements are
prepared in accordance with the instructions for Form 10-QSB, as issued by the
U. S. Securities and Exchange Commission, and are the sole responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression on an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
October 27, 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]
3
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, 2000 and 1999
(Unaudited)
Assets
------
2000 1999
----------- -----------
<S> <C> <C>
Current Assets
Cash on hand and in bank $ 863,477 $ 705,012
Note receivable - current portion -- 24,480
Inventory 26,951 14,387
Prepaid expenses and other 99,471 34,870
----------- -----------
Total current assets 989,899 778,749
----------- -----------
Property and Equipment - At Cost
Buildings and related improvements 2,017,514 1,987,514
Furniture and equipment 856,566 822,149
----------- -----------
2,874,080 2,809,663
Less accumulated depreciation (1,690,424) (1,596,986)
----------- -----------
1,183,656 1,212,677
Land 741,487 741,487
----------- -----------
Net property and equipment 1,925,143 1,954,164
----------- -----------
Other Assets
Note receivable - noncurrent portion -- 63,772
Organization costs, net of accumulated amortization
of $74,928 and $60,884, respectively -- 14,044
Loan costs, net of accumulated amortization of
$31,607 and $25,285 respectively -- 6,322
Other 6,225 6,975
----------- -----------
Total other assets 6,225 91,113
----------- -----------
Total Assets $ 2,921,267 $ 2,824,026
=========== ===========
</TABLE>
- Continued -
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets - Continued
September 30, 2000 and 1999
(Unaudited)
Liabilities and Shareholders' Equity
------------------------------------
2000 1999
---------- ----------
<S> <C> <C>
Current Liabilities
Current portion of long-term debt $ -- $ 181,905
Accounts payable - trade 21,059 23,568
Accrued liabilities 80,629 59,194
Dividends payable -- 57,318
Federal income taxes payable 79,855 3,527
Tenant deposits 6,500 6,500
---------- ----------
Total current liabilities 188,043 332,012
---------- ----------
Long-Term Liabilities
Long-term debt, net of current maturities -- 2,513
Deferred tax liability 139,248 125,057
---------- ----------
Total Liabilities 327,291 459,582
---------- ----------
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 issued and outstanding, respectively 5,732 5,732
Retained earnings 2,588,244 2,358,712
---------- ----------
Total Shareholders' Equity 2,593,976 2,364,444
---------- ----------
Total Liabilities and Shareholders' Equity $2,921,267 $2,824,026
========== ==========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
Nine and Three months ended September 30, 2000 and 1999
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Bar and restaurant sales $ 2,991,784 $ 2,448,838 $ 1,015,371 $ 804,456
Rental income 515,075 514,961 174,525 174,525
----------- ----------- ----------- -----------
Total revenues 3,506,859 2,963,799 1,189,896 978,981
----------- ----------- ----------- -----------
Cost of Sales - Bar and
Restaurant Operations 1,811,941 1,479,889 619,500 463,252
----------- ----------- ----------- -----------
Gross Profit 1,694,918 1,483,910 570,396 515,729
----------- ----------- ----------- -----------
Operating Expenses
General and administrative expenses 1,139,501 1,063,030 378,478 390,124
Interest expense 2,129 19,645 -- 3,346
Depreciation and amortization 78,334 77,582 22,398 19,950
----------- ----------- ----------- -----------
Total operating expenses 1,219,964 1,160,257 400,876 413,420
----------- ----------- ----------- -----------
Income from Operations 474,954 323,653 169,520 102,309
Other Income (Expenses)
Interest and other miscellaneous 26,811 14,973 8,721 4,738
Gain on sale of fixed assets -- (691) -- (691)
----------- ----------- ----------- -----------
Income before Income Taxes 501,765 337,935 178,241 106,356
Income Tax (Expense)
Currently payable (155,750) (95,180) (55,750) (16,430)
Deferred -- -- -- --
----------- ----------- ----------- -----------
Net Income 346,015 242,755 122,491 89,926
Other comprehensive income -- -- -- --
----------- ----------- ----------- -----------
Comprehensive Income $ 346,015 $ 242,755 $ 122,491 $ 89,926
=========== =========== =========== ===========
Earnings per share of common
stock outstanding computed
on net income - basic and
fully diluted $ 0.06 $ 0.04 $ 0.02 $ 0.02
=========== =========== =========== ===========
Weighted-average number
of shares outstanding 5,731,778 5,731,778 5,731,778 5,731,778
=========== =========== =========== ===========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 346,015 $ 242,755
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 78,334 77,582
Loss on sale of fixed assets -- 691
(Increase) decrease in
Accounts receivable - trade 8,848 6,671
Federal income taxes receivable 20,339 91,653
Inventory 4,711 4,017
Prepaid expenses (98,571) 21,590
Increase (decrease) in
Accounts payable and other accrued liabilities 23,912 (3,432)
Income taxes payable 79,855 3,527
--------- ---------
Net cash provided by operating activities 463,443 445,054
--------- ---------
Cash Flows from Investing Activities
Principal collections on note receivable 35,179 15,995
Purchases of property and equipment (48,403) (26,615)
--------- ---------
Net cash used in investing activities (13,224) (10,620)
--------- ---------
Cash Flows from Financing Activities
Principal payments on notes payable (139,657) (131,544)
Dividends paid (57,318) (172,695)
--------- ---------
Net cash used in financing activities (196,975) (304,239)
--------- ---------
Increase in Cash and Cash Equivalents 253,244 130,195
Cash and cash equivalents at beginning of period 610,233 574,817
--------- ---------
Cash and cash equivalents at end of period $ 863,477 $ 705,012
========= =========
Supplemental Disclosures of Interest
and Income Taxes Paid
Interest paid during the period $ 2,129 $ 19,645
========= =========
Income taxes paid (refunded) $ 55,556 $ --
========= =========
Supplemental Schedule of Non-Cash
Investing and Financing Activities
Declaration of 1999 third quarter
dividend at $0.01 per share $ -- $ 57,318
========= =========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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 nine and three months ended September 30, 2000 and 1999, respectively. All
significant intercompany transactions have been eliminated in combination. The
consolidated entities are referred to as Company.
During interim periods, the Company follows the accounting policies set forth in
its Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934 on Form 10-KSB filed with the U. S. Securities and Exchange Commission.
The information presented herein may not include all disclosures required by
generally accepted accounting principles and the users of financial information
provided for interim periods should refer to the annual financial information
and footnotes contained in its Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 on Form 10-KSB when reviewing the interim
financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2000.
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.
8
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
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.
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.
9
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
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
------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of September 30, 2000 and 1999, 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 regulations, 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 nine months ended September 30, 2000 and 1999,
respectively, the various operating companies had deposits in a financial
institution with credit risk exposures in excess of statutory FDIC coverage. The
Company has incurred no losses during 2000 and 1999 as a result of any of these
unsecured situations.
Note D - Note Receivable
Note receivable as of September 30, 2000 and 1999, respectively, is as follows:
2000 1999
------- -------
$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. $ -- $88,252
10
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note D - Note Receivable - Continued
2000 1999
-------- --------
$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. Collateral-
ized by real estate and improvements located in
Dallas County, Texas. Paid in full in May 2000. -- --
-------- --------
Total notes receivable -- 88,252
Less current portion -- (24,480)
-------- --------
Noncurrent portion $ -- $ 63,772
======== ========
Note E - Property and Equipment
Property and equipment consists of the following at September 30, 2000 and 1999:
2000 1999 Estimated life
---------- ---------- --------------
Buildings and related improvements $2,017,514 $1,987,514 15-40 years
Furniture and equipment 856,566 822,149 5-10 years
---------- ----------
2,874,080 2,809,663
Less accumulated depreciation (1,690,424) (1,596,986)
---------- ----------
1,183,656 1,212,677
Land 741,487 741,487
---------- ----------
Net property and equipment $1,925,143 $1,954,164
========== ==========
Depreciation expense for the nine months ended September 30, 2000 and 1999 was
$72,518 and $61,601, respectively.
11
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note F -Long-Term Debt
Long-term debt consists of the following at September 30, 2000 and 1999,
respectively:
2000 1999
--------- ---------
$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. Paid in full
during the first quarter of 2000. $ - $ 184,418
--------- ---------
- 184,418
Less current portion - (181,905)
--------- ---------
Long-term portion $ - $ 2,513
========= =========
Note H - Income Taxes
The non-current deferred tax liability results from the usage of statutory
accelerated tax depreciation and amortization methods and consists of the
following:
September 30, September 30,
2000 1999
------------- -------------
Non-current deferred tax liability $(139,248) $(125,057)
========= =========
The components of income tax expense (benefit) for the nine months ended
September 30, 2000 and 1999, respectively, are as follows:
September 30, September 30,
2000 1999
------------- -------------
Federal:
Current $ 155,750 $ 95,180
Deferred - -
--------- ---------
155,750 95,180
--------- ---------
State:
Current - -
Deferred - -
--------- ---------
- -
--------- ---------
Total $ 155,750 $ 95,180
========= =========
12
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note H - Income Taxes - Continued
The Company's income tax expense (benefit) for the nine months ended September
30, 2000 and 1999, respectively, differed from the statutory federal rate of 34
percent as follows:
September 30, September 30,
2000 1999
------------ ------------
<S> <C> <C>
Statutory rate applied to earnings before income taxes $170,600 $114,898
Increase (decrease) in income taxes resulting from:
State income taxes - -
Deferred income taxes - -
Effect of incremental tax brackets and the
application of business tax credits (14,850) (19,718)
-------- --------
Income tax expense $155,750 $ 95,180
======== ========
</TABLE>
Note I - Capital Stock Transactions
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 would
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 extended the exercise period until the close of business on October 18,
2004. As of September 30, 2000, no shares of common stock have been sold by the
Company pursuant to the "second closing" portion of the Agreement.
Note J - Commitments
The Company leases commercial real estate to entities controlled by a
controlling shareholder 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
==========
13
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
Note K - 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 the common control of a controlling shareholder comprise
approximately 14.69% and 17.38% of total revenues for the nine months ended
September 30, 2000 and 1999, respectively.
Restaurant Rental General and
facility real estate administrative Total
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Nine months ended September 30, 2000
------------------------------------
Revenue from external customers $ 2,991,784 $ -- $ -- $ 2,991,784
Revenue from related parties -- 515,075 -- 515,075
Revenue (expenses) from/to
intercompany sources (180,000) 180,000 -- --
Interest income -- 440 26,371 26,811
Interest expense -- -- 2,129 2,129
Depreciation and amortization 19,404 51,398 7,532 78,334
Income tax expense (benefit) (10,558) 163,345 2,963 155,750
Segment assets 260,504 2,310,434 350,329 2,921,267
Fixed asset expenditures 48,403 -- -- 48,403
Nine months ended September 30, 1999
------------------------------------
Revenue from external customers $ 2,448,838 $ 514,961 $ -- $ 2,963,799
Revenue (expenses) from/to
intercompany sources -- -- -- --
Interest income -- 5,358 9,615 14,973
Interest expense (1,593) -- 21,238 19,645
Depreciation and amortization 24,680 44,429 8,473 77,582
Income tax expense (benefit) (16,790) 112,972 (1,002) 95,180
Segment assets 419,023 1,939,850 465,153 2,824,026
Fixed asset expenditures 19,901 6,714 -- 26,615
</TABLE>
(Remainder of this page left blank intentionally)
14
<PAGE>
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Results of Operations
Bar and restaurant operations increased by approximately $543,000 between the
first nine months of 2000 as compared to the first nine months of 1999. Total
bar and restaurant sales for the 2000 nine month period were approximately
$2,992,000 as compared to approximately $2,449,000 for the 1999 nine month
period. The increase was due to management's refocused efforts in customer
service and increasing sales subsequent to the 2000 change in control of the
Company. The Company continues to seek effective marketing and advertising
methods to maintain and increase its bar and restaurant patronage.
Cost of sales increased by approximately $332,000 during the first nine months
of 2000 as compared to the same expenses for the same period in 1999. This
increase is a result of increases in entertainer compensation and other direct
costs related to the approximate $543,000 increase in revenues in the Company's
Dallas Texas entertainment facility. Gross profit percentages decreased to
48.33% for the first nine months of 2000 versus 50.68% for the first nine months
of 1999. Increased cost controls over purchasing, inventory management protocols
and labor management are continuously monitored to improve gross profit
percentages.
General and administrative expenses increased by approximately $60,000 in the
first nine months of 2000 versus the first nine months of 1999. This increase
principally relates to increased advertising expenses and administrative
compensation caused by the 2000 change in control of the Company. The Company
continues to experience relatively constant expenditure levels for other general
operating expenses. Management continues to monitor its expenditure levels to
achieve optimum financial results.
Net income before income taxes was approximately $502,000 for the first nine
months of 2000 versus approximately $338,000 for the first nine months of 1999.
After-tax net income increased by approximately $103,000 from approximately
$243,000 for the first nine months of 1999 to approximately $346,000 for the
first nine months of 2000. The Company experienced earnings per share of
approximately $0.06 and $0.04 per share for the first nine months of 2000 and
1999, respectively.
(2) Liquidity
As of September 30, 2000, the Company has working capital of approximately
$802,000 as compared to approximately $421,000 at December 31, 1999 and
approximately $447,000 at September 30, 1999. The Company achieved positive cash
flows from operations of approximately $463,000 for the first nine months of
2000 versus approximately $445,000 for the first nine months of 1999. The
Company's working capital position was impacted by the payment in full of all
outstanding long-term debt during the first quarter of 2000 and the collection
of the outstanding note receivable in May 2000.
The Company has identified no significant capital requirements for the current
annual period. 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 discontinued the declaration and payment of dividends for periods
ending after December 31, 1999. The Company paid the declared dividend for the
fourth quarter of 1999 of approximately $57,000 during the first quarter of
2000. Future operating liquidity is expected to be provided by continuing
operations. Additionally, management is of the opinion that there is potential
availability of mortgage debt and the opportunity for the sale of additional
common stock through either private placements or secondary offerings.
15
<PAGE>
(3) Year 2000 Considerations
The Year 2000 (Y2K) date change was believed to affect virtually all computers
and organizations. The Company undertook a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems during 1999. The Company has no
direct electronic links with any customer or supplier.
The costs associated with the Y2K date change compliance did not have a material
effect on the Company's financial position or its results of operations.
However, as the Year 2000 progresses, there can be no assurance that all of the
Company's systems, and the systems of its suppliers, shippers, customers or
other external business partners will continue to function adequately.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
--------------------------------------------------------------------------------
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MILLION DOLLAR SALOON, INC.
October 27 , 2000 /s/ Dewanna Ross
-------- ---------------------------------------
Dewanna Ross
Chief Operating Officer and Director
October 27 , 2000 /s/ Ronald W. Johnston
-------- ---------------------------------------
Ronald W. Johnston
Chief Financial Officer
16
