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 March 31, 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: May 8, 2000: 5,731,778
Transitional Small Business Disclosure Format (check one): YES NO X
---- ----
<PAGE>
Million Dollar Saloon, Inc.
Form 10-QSB for the Quarter ended March 31, 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 16
Part II - Other Information
Item 1 Legal Proceedings 17
Item 2 Changes in Securities 17
Item 3 Defaults Upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits and Reports on Form 8-K 17
Signatures 18
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 Shareholder
Million Dollar Saloon, Inc.
We have reviewed the accompanying consolidated balance sheets of Million Dollar
Saloon, Inc. (a Nevada corporation) and Subsidiaries as of March 31, 2000 and
1999 and the accompanying consolidated statements of operations and
comprehensive income and consolidated statements of cash flows for the three
months ended March 31, 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/ S.W. Hatfield, CPA
------------------
S. W. HATFIELD, CPA
Dallas, Texas
May 8, 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
March 31, 2000 and 1999
(Unaudited)
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash on hand and in bank $ 579,735 $ 675,690
Note receivable - current portion 28,354 24,480
Accounts receivable - other 900 --
Prepaid income taxes receivable -- 33,653
Inventory 22,436 18,560
Prepaid expenses 53,988 71,212
----------- -----------
Total current assets 685,412 823,595
----------- -----------
Property and Equipment - At Cost
Buildings and related improvements 1,987,514 1,987,514
Furniture and equipment 856,566 798,372
Vehicles -- 52,728
----------- -----------
2,844,080 2,838,614
Less accumulated depreciation (1,648,981) (1,591,391)
----------- -----------
1,195,099 1,247,223
Land 741,488 741,488
----------- -----------
Net property and equipment 1,936,587 1,988,711
----------- -----------
Other Assets
Note receivable - noncurrent portion -- 73,868
Organization costs, net of accumulated amortization
of $68,377 and $53,391, respectively 6,551 21,537
Loan costs, net of accumulated amortization of
$28,446 and $22,125 respectively 3,161 9,482
Other 6,225 6,975
----------- -----------
Total other assets 15,937 111,862
----------- -----------
Total Assets $ 2,637,936 $ 2,924,168
=========== ===========
</TABLE>
- Continued -
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
March 31, 2000 and 1999
(Unaudited)
March 31, March 31,
2000 1999
---------- ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ -- $ 181,905
Accounts payable - trade 25,871 27,803
Accrued liabilities 75,389 61,274
Dividends payable -- 56,418
Federal income taxes payable 30,236 --
Tenant deposits 6,500 6,500
---------- ----------
Total current liabilities 137,996 333,900
---------- ----------
Long-Term Liabilities
Long-term debt, net of current maturities -- 112,754
Deferred tax liability 139,248 125,057
---------- ----------
Total liabilities 277,244 571,711
---------- ----------
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 2,354,960 2,346,725
---------- ----------
Total shareholders' equity 2,360,692 2,352,457
---------- ----------
Total Liabilities and Shareholders' Equity $2,637,936 $2,924,168
========== ==========
</TABLE>
See Accountant's Review Report.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------- -----------
Revenues
Bar and restaurant sales $ 1,000,831 $ 855,208
Rental income 166,025 169,911
----------- -----------
Total revenues 1,166,856 1,025,119
----------- -----------
Cost of Sales - Bar and Restaurant Operations 617,426 486,098
----------- -----------
Gross Profit 549,430 539,021
----------- -----------
Operating Expenses
General and administrative expenses 368,066 332,940
Interest expense 2,129 8,779
Depreciation and amortization 27,177 28,817
----------- -----------
Total operating expenses 397,372 370,536
----------- -----------
Income from Operations 152,058 168,485
Other Income (Expenses)
Interest and other miscellaneous 11,248 4,906
----------- -----------
Income before Income Taxes 163,306 173,391
Income Tax (Expense) Benefit
Currently payable (50,575) (58,000)
Deferred -- --
----------- -----------
Net Income 112,731 115,391
Other Comprehensive Income -- --
----------- -----------
Comprehensive Income $ 112,731 $ 115,391
=========== ===========
Earnings per share of common stock outstanding,
computed on net income - basic and fully diluted $0.02 $0.02
===== =====
Weighted-average number of shares outstanding 5,731,778 5,731,778
=========== ===========
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
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 112,731 $ 115,391
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 27,177 28,817
(Increase) decrease in
Accounts receivable - trade and other 8,848 6,671
Federal income taxes receivable/payable 50,575 58,000
Inventory 9,226 (156)
Prepaid expenses (53,988) (14,752)
Increase (decrease) in
Accounts payable and other accrued liabilities 23,484 2,883
Tenant deposits -- --
--------- ---------
Net cash provided by operating activities 178,053 196,854
--------- ---------
Cash Flows from Investing Activities
Principal collections on note receivable 6,825 5,902
Purchases of property and equipment (18,402) --
--------- ---------
Net cash used in investing activities (11,577) 5,902
--------- ---------
Cash Flows from Financing Activities
Principal payments on long-term notes payable (139,657) (43,665)
Dividends paid (57,318) (58,218)
--------- ---------
Net cash used in financing activities (196,975) (101,883)
--------- ---------
Increase in Cash and Cash Equivalents (30,499) 100,873
Cash and cash equivalents at beginning of period 610,233 574,817
--------- ---------
Cash and cash equivalents at end of period $ 579,734 $ 675,690
========= =========
Supplemental Disclosures of Interest
and Income Taxes Paid
Interest paid during the period $ 2,129 $ 8,779
========= =========
Income taxes paid (refunded) $ -- $ --
========= =========
Supplemental Disclosure of Non-Cash
Investing and Financing Activities
Declaration of first quarter dividend
of $0.01per share, respectively $ -- $ 57,318
========= =========
</TABLE>
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
March 31, 2000 and 1999
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 three months ended March 31, 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
March 31, 2000 and 1999
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
March 31, 2000 and 1999
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 March 31, 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 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 three months ended March 31, 2000 and 1999,
respectively, 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 1999 or 1998 as a result of
any of these unsecured situations.
Note D - Note Receivable
Note receivable as of March 31, 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 $ - $98,348
10
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2000 and 1999
Note D - Note Receivable - Continued
2000 1999
-------- --------
<S> <C> <C>
$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. 28,354 --
-------- --------
Total notes receivable 28,354 98,348
Less current portion (28,354) (24,480)
-------- --------
Noncurrent portion $ -- $73,868
======== ========
Future maturities of the note receivable are as follows:
Year ending
December 31, Amount
2000 $28,354
=======
Note E - Property and Equipment
Property and equipment consists of the following at March 31, 2000 and 1999:
2000 1999 Estimated life
------------ ------------ --------------
Buildings and related improvements $1,987,514 $1,987,514 15-40 years
Furniture and equipment 856,566 798,372 5-10 years
Vehicles -- 52,728 3 years
------------ ------------
2,844,080 2,838,614
Less accumulated depreciation (1,648,981) (1,591,391)
------------ ------------
1,195,099 1,247,223
Land 741,488 741,488
------------ ------------
Net property and equipment $1,936,587 $1,988,711
============ ============
</TABLE>
Depreciation expense for the three months ended March 31, 2000 and 1999 was
$21,851 and $18,045, respectively.
11
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2000 and 1999
Note F -Long-Term Debt
Long-term debt consists of the following at March 31, 2000 and 1999,
respectively:
2000 1999
------- -------
<S> <C> <C>
$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. $ - $269,543
$52,707 installment note payable to a finance
company. Payable in monthly installments of
approximately $1,111, including interest at
9.50%. Paid in full in July 1999.
Collateralized by a vehicle - 25,116
------- -------
- 294,659
Less current portion - (181,905)
------- -------
Long-term portion $ - $112,754
======= =======
Note H - Income Taxes
The deferred current tax asset and non-current deferred tax liability on March
31, 2000 and 1999, respectively, balance sheet consists of the following:
December 31, December 31,
1999 1998
------------ ------------
Non-current deferred tax liability $(139,248) $(125,057)
======== ========
</TABLE>
The non-current deferred tax liability results from the usage of statutory
accelerated tax depreciation and amortization methods.
12
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2000 and 1999
Note H - Income Taxes - Continued
The components of income tax expense (benefit) for the three months ended March
31, 2000 and 1999, respectively, are as follows:
2000 1999
------- -------
<S> <C> <C>
Federal:
Current $50,575 $58,000
Deferred - -
------- -------
50,575 58,000
------- -------
State:
Current - -
Deferred - -
------- -------
- -
------- -------
Total $50,575 $58,000
====== ======
The Company's income tax expense (benefit) for the years ended March 31, 2000
and 1999, respectively, differed from the statutory federal rate of 34 percent
as follows:
2000 1999
------- -------
Statutory rate applied to earnings before income taxes $55,524 $58,953
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 (4,949) 953
------- -------
Income tax expense $50,575 $58,000
====== ======
</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 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 March 31, 2000, the individual has not purchased any shares of
common stock in accordance with the "second closing" portion of the Agreement.
Further, the Company 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.
13
<PAGE>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2000 and 1999
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.
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
==========
14
<PAGE>
<TABLE>
<CAPTION>
Million Dollar Saloon, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 2000 and 1999
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 % and % of total revenues for the three months ended March 31,
2000 and 1999, respectively.
Restaurant Rental General and
facility real estate administrative Total
------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
Three months ended March 31, 2000
Revenue from external customers $ 1,000,831 $ -- $ -- $ 1,000,831
Revenue from related parties -- 166,025 -- 166,025
Revenue (expenses) from/to
intercompany sources (60,000) 220,000 (160,000) --
Interest income -- 10,110 1,139 11,248
Interest expense -- -- 2,129 2,129
Depreciation and amortization 7,098 5,476 14,543 27,117
Income tax expense (benefit) 9,156 46,945 (5,526) 50,575
Segment assets 331,334 1,961,834 344,768 2,637,936
Fixed asset expenditures 18,402 -- -- 18,402
Restaurant Rental General and
facility real estate administrative Total
------------ ------------ -------------- -----------
Three months ended March 31, 1999
Revenue from external customers $ 855,208 $ -- $ -- $ 855,208
Revenue from related parties -- 169,911 -- 169,911
Revenue (expenses) from/to
intercompany sources -- -- -- --
Interest income -- 2,108 2,798 4,906
Interest expense 631 8,148 8,779
Depreciation and amortization 8,714 17,279 2,824 28,817
Income tax expense (benefit) 13,800 45,600 (1,400) 58,000
Segment assets 537,873 1,910,667 475,628 2,924,168
Fixed asset expenditures -- -- -- --
</TABLE>
15
<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 $145,000 between the
first quarter of 2000 as compared to the first quarter of 1999. Total bar and
restaurant sales for the 2000 period were approximately $1,001,000 as compared
to approximately $855,000 for the 1999 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 $131,000 during the first three 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 $145,000 increase in revenues in the Company's
Dallas Texas entertainment facility. Gross profit percentages decreased to
47.09% for the first three months of 2000 versus 52.58% for the first three
months of 1998. 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 $35,000 in the
first three months of 2000 versus the first three months of 1999. This increase
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 $163,000 for the first three
months of 2000 versus approximately $173,000 for the first three months of 1999.
After-tax net income decreased by approximately $2,700 from approximately
$115,000 for the first three months of 1999 to approximately $113,000 for the
first three months of 2000. The Company experienced earnings per share of
approximately $0.02 per share for the first three months of 2000 and 1999,
respectively.
(2) Liquidity
As of March 31, 2000, the Company has working capital of approximately $547,416
as compared to approximately $420,643 at December 31, 1999 and approximately
$489,695 at March 31, 1999. The Company achieved positive cash flows from
operations of approximately $178,000 for the first three months of 2000 versus
approximately $197,000 for the first three 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.
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 announced the discontinuance of the payment of dividends after
December 31, 1999. The Company paid declared fourth quarter dividends of
approximately $57,000 during both the first quarter of 2000 and 1999,
respectively. 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.
16
<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
The Company was 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. This litigation was withdrawn by the
plaintiff during the first quarter of 2000 with no further exposure or financial
impact to the Company.
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
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MILLION DOLLAR SALOON, INC.
May 10 , 2000 /s/ Dewanna Ross
-------- --------------------------------------
Dewanna Ross
Chief Operating Officer
and Director
May 10 , 2000 /s/ Ronald W. Johnston
-------- --------------------------------------
Ronald W. Johnston
Chief Financial Officer
18
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