- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-QSB
_________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934; For the Quarterly Period Ended: March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-08835
TAURUS ENTERTAINMENT COMPANIES, INC.
(Exact name of registrant as specified in its charter)
formerly TAURUS PETROLEUM, INC.
Colorado 84-0736215
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
16770 Hedgecroft, Suite 714
Houston, Texas 77060
(Address of principal executive offices, including zip code)
(281) 820-1181
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.Yes [x] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
At May 6, 1998 , there were 4,018,704 shares of common stock, $.001 par
value, outstanding.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [x]
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
CONTENTS
--------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
Balance Sheet as of September 30, 1997 (audited) and March 31, 1998
(unaudited)
Statement of Operations --
Six months ended March 31, 1998 and 1997
Statement of Changes in Stockholders Equity --
Six months ended March 31, 1998 and 19978
Statement of Cash Flow --
Six months ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
- ----------------------------
Item 2. Changes in Securities and Use of Proceeds
Item 5. Other Events
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- ----------
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
QUARTERLY REPORT ON FORM 10-QSB
INDEX
-----
PART I. FINANCIAL INFORMATION
Item I. Financial Statements (unaudited)
Balance Sheet - March 31, 1998
Statement of Operations -
Three Months and Six Ended March 31, 1998 and 1997
Statement of Changes in Stockholders' Equity
Six Months Ended March 31, 1998
Statement of Cash Flows -
Six Months Ended March 31, 1998 and 1997
Notes to Unaudited Financial Statements
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
BALANCE SHEET
-------------
(UNAUDITED)
MARCH 31, 1998
--------------
ASSETS
- ------
March 31, September 30,
1998 1997
----------- --------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash. . . . . . . . . . . . . . . $ 42,652 $ 797
Trade receivables . . . . . . . . 38,388 --
Employee advances . . . . . . . . 2,020 --
Note receivable - related party . 80,011 --
Inventories . . . . . . . . . . . 13,153 --
----------- --------------
Total Current Assets. . . . . 176,224 797
----------- --------------
Property and Equipment:
Buildings . . . . . . . . . . . . 908,753 --
Furniture and fixtures. . . . . . 336,759 --
Leasehold improvements. . . . . . 549,226 --
Equipment . . . . . . . . . . . . 88,629 --
Accumulated depreciation. . . . . (157,457) --
----------- --------------
1,725,910 --
Land. . . . . . . . . . . . . . . 762,732 --
----------- --------------
Total Property and Equipment. 2,488,642 --
----------- --------------
Other Assets:
Other . . . . . . . . . . . . . . 141,428 --
----------- --------------
Total Other Assets. . . . . . 141,428 --
----------- --------------
Total Assets. . . . . . . . . $2,806,294 $ 797
=========== ==============
<FN>
The following notes are an integral part of these unaudited financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
BALANCE SHEET
-------------
(UNAUDITED)
MARCH 31, 1998
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
March 31, September 30,
1998 1997
------------ ---------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued liabilities. . . $ 241,331 $ 26,573
Current portion of notes payable. . . . . . . 300,451 --
Account payable - related party . . . . . . . 10,770 14,880
Income taxes payable. . . . . . . . . . . . . 122,785 --
Note payable - related party. . . . . . . . . 167,326 --
------------ ---------------
Total Current Liabilities . . . . . . . . 842,663 41,453
------------ ---------------
Long-term portion of notes payable. . . . . . . 1,190,325 --
------------ ---------------
Stockholders' Equity:
Common stock, par value $.001; authorized
20,000,000 shares; 3,918,704 issued and
outstanding shares. . . . . . . . . . . . . 3,919 60,307
Additional paid-in capital. . . . . . . . . . 7,109,925 3,112,694
Accumulated deficit (since date of
reorganization in November 1994). . . . . . (6,257,965) (3,131,084)
Less treasury stock, 1,179 shares at cost . . . (82,573) (82,573)
------------ ---------------
Total Stockholders' Equity. . . . . . . . . 773,306 (40,506)
------------ ---------------
Total Liabilities and Stockholders' Equity. $ 2,806,294 $ 797
============ ===============
<FN>
The following notes are an integral part of these unaudited financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
STATEMENT OF OPERATIONS
-----------------------
(UNAUDITED)
For the For the
Three Months Ended Six Months Ended
March 31, March 31,
------------------------- -------------------------
1998 1997 1998 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Operating Revenue:
Cover charge revenue . . . . . . . . . 543,374 -- 543,374 --
Bar and food sales revenue . . . . . . 404,423 -- 404,423 --
Floor fee revenue. . . . . . . . . . . 111,583 -- 111,583 --
Rental revenue . . . . . . . . . . . . 66,839 -- 66,839 --
Other revenue. . . . . . . . . . . . . 131,242 -- 131,242 147
----------- ------------ ----------- ------------
Total operating revenues . . . . . . 1,257,461 -- 1,257,461 147
----------- ------------ ----------- ------------
Operating Expenses:
Costs of sales . . . . . . . . . . . . 136,016 -- 136,016 --
General and administrative . . . . . . 98,064 115 113,427 1,112
Salaries and wages . . . . . . . . . . 376,688 -- 376,688 --
Contract labor . . . . . . . . . . . . 17,395 -- 17,395 --
Rent and utilities . . . . . . . . . . 176,852 -- 176,852 --
Taxes and insurance. . . . . . . . . . 106,215 -- 106,215 --
Advertising. . . . . . . . . . . . . . 67,838 -- 67,838 --
Legal and professional . . . . . . . . 88,957 -- 123,974 --
Depreciation and amortization. . . . . 22,865 -- 22,865 --
----------- ------------ ----------- ------------
Total operating expenses . . . . . . 1,090,890 115 1,141,270 1,112
----------- ------------ ----------- ------------
Income (loss) from operations. . . . . 166,571 (115) 116,191 (965)
Other income (expense):
Interest expense . . . . . . . . . . . (39,653) -- (39,653) --
----------- ------------ ----------- ------------
Total other income (expense) . . . . (39,653) -- (39,653) --
----------- ------------ ----------- ------------
Income (loss) before income tax expense. 126,918 (115) 76,538 (965)
Income tax expense . . . . . . . . . . . 24,956 -- 24,956 --
----------- ------------ ----------- ------------
Net income (loss). . . . . . . . . . . . $ 101,962 $ (115) $ 51,582 $ (965)
=========== ============ =========== ============
Net income (loss) per common share:
Basic and diluted. . . . . . . . . . $ 0.05 $ (0.00) $ 0.03 $ (0.00)
=========== ============ =========== ============
Weighted average number of
common shares outstanding:
Basic and diluted. . . . . . . . . . 1,980,694 60,307,749 1,980,694 60,307,749
=========== ============ =========== ============
<FN>
The following notes are an integral part of these unaudited financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
--------------------------------------------
FOR THE SIX MONTHS ENDED MARCH 31, 1998
---------------------------------------
(UNAUDITED)
Total
Additional Less Stockholders'
Common Stock Paid-In Accumulated Treasury (Deficit)
------------------------
Shares Amount Capital Deficit Stock Equity
------------- --------- -------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 . 60,307,749 $ 60,307 $ 3,112,694 $(3,131,084) $ (82,573) $ (40,656)
Reverse stock split . . . . . (60,106,723) (60,106) 60,106 -- -- --
Issuance of common shares . . 342,678 343 565,500 -- -- 565,843
Shares issued in exchange for
asset acquired. . . . . . . 3,375,000 3,375 3,371,625 -- -- 3,375,000
Deemed dividend . . . . . . . -- -- -- (3,178,463) -- (3,178,463)
Net loss. . . . . . . . . . . -- -- -- 51,582 -- 51,582
------------- --------- -------------- ------------ ---------- -------------
Balance, March 31, 1998 . . . 3,918,704 $ 3,919 $ 7,109,925 $(6,257,965) $ (82,573) $ 773,306
============= ========= ============== ============ ========== =============
<FN>
The following notes are an integral part of these unaudited financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
(UNAUDITED)
For the
Six Months Ended
March 31,
---------- ------
1998 1997
---------- ------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss). . . . . . . . . . . . . . . . . . . $ 51,582 $(965)
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation and amortization . . . . . . . . . . . 22,865 --
Increase in receivables . . . . . . . . . . . . . . (15,805) --
Decrease in prepaid expenses. . . . . . . . . . . . 4,500 --
Increase in other assets . . . . . . . . . . . . . . (87,028) --
Increase in inventory. . . . . . . . . . . . . . . . (6,653) --
Decrease in cash overdraft . . . . . . . . . . . . . (23,162) --
Increase in accounts payable . . . . . . . . . . . . 119,435 --
Increase in income taxes payable . . . . . . . . . . 52,258 --
---------- ------
Net cash provided by (used in) operating activities. 117,992 (965)
---------- ------
Cash Flows from Investing Activities:
Payments for notes receivable. . . . . . . . . . . . . (47,880) --
Acquisition of property and equipment. . . . . . . . . (581,838) --
---------- ------
Net cash provided by (used in) investing activities. (629,718) --
---------- ------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock . . . . . . . . 565,842 --
Proceeds from notes payable. . . . . . . . . . . . . . 167,325 --
Capital contributions. . . . . . . . . . . . . . . . . 0 850
Payment on notes payable . . . . . . . . . . . . . . . (179,586) 0
---------- ------
Net cash from financing activities . . . . . . . . . 553,581 850
---------- ------
Net increase (decrease) in cash. . . . . . . . . . . 41,855 (115)
Cash and cash equivalents, beginning of period . . . . . 797 156
---------- ------
Cash and cash equivalents, end of period . . . . . . . . $ 42,652 $ 41
========== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest . . . . . . $ 39,653 $ --
========== ======
Cash paid during the period for income taxes . . . . $ -- $ --
========== ======
<FN>
The following notes are an integral part of these unaudited financial statements.
</TABLE>
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1998
--------------
(UNAUDITED)
NOTE 1 - GENERAL
- -------------------
The accounting policies followed by Taurus Entertainment Companies, Inc. (the
"Company"), formerly named Taurus Petroleum, Inc., are set forth in the notes to
the Company's audited financial statements in the report on Form 10-K filed for
the year ended September 30, 1997, which is incorporated herein by reference.
Such policies have been continued without change. Also, refer to the notes with
those financial statements for additional details of the Company's financial
condition, results of operations and cash flows. All material items included in
those notes have not changed except as a result of normal transactions in the
interim, or as disclosed within this report. Any and all adjustments are of a
"normal recurring nature".
In the opinion of management, the accompanying interim unaudited financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of March 31, 1998, and the results of operations and cash
flows for the three month periods ended March 31, 1998 and 1997.
NOTE 2 - ACQUISITION OR DISPOSITION OF ASSETS
- ----------------------------------------------------
On December 31, 1997, Taurus Entertainment Companies, Inc. (the "Company"),
entered into an Asset Purchase Agreement (the "Enigma Agreement") with The
Enigma Group, Inc. ("Enigma") which provided for the acquisition by the Company
of substantially all of the assets of Enigma (the "Enigma Assets"). The Enigma
Assets consisted of: (i) certain real estate commonly known as 410 N. Sam
Houston Parkway E. Houston, Texas 77060 (the "Enigma Location") which is the
existing location of Broadstreets Cabaret, an adult entertainment cabaret
("Broadstreets Cabaret"); (ii) furniture, fixtures, equipment, goods, and other
personal property of Enigma as such existed on December 31, 1997, located at the
Enigma Location (the "Personal Property"); (iii) Enigma's lease interest as
lessor for the Enigma Location; and (iv) all right, title and interest in and to
any and all trademarks, trade names, trade dress, service marks, slogans, logos,
corporate or partnership names (and any existing or possible combination or
derivation of any or all of the same) and general intangibles.
Pursuant to the terms of the Enigma Agreement, as consideration for the Enigma
Assets, the Company paid to Enigma 350,000 shares of common stock of the Company
valued at $1.00 per share. Plus, the Company assumed approximately $578,000 of
debt associated with the real estate. The Enigma Agreement was the result of
negotiations between the Company and Enigma and was based on numerous factors
including the Company's estimate of the value of the Enigma Location and the
Personal Property. Eric Langan and Stephen E. Fischer, directors of the
Company, controlled Enigma. Mr. Langan and Mr. Fischer abstained from voting on
this transaction.
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1998
--------------
(UNAUDITED)
NOTE 2 - ACQUISITION OR DISPOSITION OF ASSETS (CONTINUED)
- ----------------------------------------------------------------
The lessee of the Enigma Location is Atcomm Services, Inc. ("Atcomm"), which
operates Broadstreets Cabaret. The Company, through its wholly owned subsidiary
Broadstreets Cabaret, Inc. ("Broadstreets"), entered into an Asset Purchase
Agreement with Atcomm which provided for the acquisition by the Company of
substantially all of the assets of Atcomm (the "Atcomm Agreement"). The assets
acquired by Broadstreets consisted of: (i) all right, title, interest and claim
to the permit to operate a sexually oriented business at the Enigma Location;
(ii) all inventory located at the Enigma Location; (iii) Atcomm's lease interest
as lessee for the Enigma Location; and (iv) all right, title and interest in and
to any and all trademarks, trade names, trade dress, service marks, slogans,
logos, corporate or partnership names (and any existing or possible combination
or derivation of any or all of the same) and general intangibles. The Company
intends to continue to operate the adult nightclub at this location.
Pursuant to the terms of the Asset Purchase Agreement with Atcomm, Broadstreets
agreed to pay, as consideration, $225,000 to Atcomm, payable pursuant to the
terms of a four year unsecured promissory note of Broadstreets, payable monthly,
in arrears and bearing interest at the rate of six percent (6%) per annum. The
Atcomm Agreement was the result of negotiations between the Company and Atcomm
and was based on numerous factors including the Company's estimate of the value
of the sexually oriented business permit owned by Atcomm, current revenues of
Atcomm and the leasehold rights held by Atcomm. Atcomm was owned by the son of
Stephen E. Fischer, a director of the Company. Mr. Fischer abstained on voting
on this transaction.
On December 31, 1997, the Company entered into an Exchange Agreement with the
members of Citation Land, L.L.C. (the "Citation Agreement") which provided for
the acquisition by the Company of all of the outstanding membership interests in
Citation Land, L.L.C. ("Citation"). Citation owns certain real estate in
Houston, Texas at which another company, XTC Cabaret, Inc. ("XTC") operates an
adult entertainment business (the "XTC Location"). As discussed below, the
Company has acquired all of the stock of XTC and intends to continue operating
an adult entertainment business at the XTC Location. Citation also owns
approximately 350 acres of ranch land in Brazoria County, Texas, 50 acres of raw
land in Wise County, Texas, and owns options to purchase real estate in Austin,
Texas and San Antonio, Texas, at which the Company contemplates operating adult
entertainment businesses.
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1998
--------------
(UNAUDITED)
NOTE 2 - ACQUISITION OR DISPOSITION OF ASSETS (CONTINUED)
- ----------------------------------------------------------------
Pursuant to the terms of the Citation Agreement, the Company paid to the
Citation Stockholders an aggregate of 2,500,000 shares of common stock of the
Company which the Company valued at $1.00 per share. The Citation Agreement was
the result of negotiations between the Company and the members of Citation and
was based on numerous factors including the Company's estimate of the value of
the assets of Citation which the Company estimated, based upon the existing
lease, the estimated value of the real estate and the options, to be
approximately $2,500,000. Eric Langan, Chairman of the Board of the Company
controlled Citation. Mr. Langan abstained on voting on this transaction.
On December 31, 1997, the Company entered into a Stock Exchange Agreement with
the stockholders of XTC Cabaret, Inc. (the "XTC Agreement") which provided for
the acquisition by the Company of all of the outstanding stock of XTC Cabaret,
Inc. ("XTC"). XTC operates three adult entertainment businesses, two in Houston
and one in Austin. Citation is the landlord of one of XTC's adult nightclubs in
Houston, Texas and has an option to purchase the real estate in Austin. The
Company intends to continue operating XTC as an adult entertainment business.
Pursuant to the terms of the XTC Agreement, the Company paid the XTC
Stockholders an aggregate of 525,000 shares of common stock of the Company
valued at $1.00 per share. The XTC Agreement was the result of negotiations
between the Company and the XTC Stockholders and was based on numerous factors
including the Company's estimate of the value of the assets of XTC which the
Company estimated, based upon current operations and future revenues from its
three existing adult nightclubs to be approximately $525,000. Eric Langan,
Chairman of the Board of the Company and Mitchell White, director of the
Company, are the sole stockholders of XTC. Messrs. Langan and White abstained
on voting on this transaction.
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1998
--------------
(UNAUDITED)
NOTE 2 - ACQUISITION OR DISPOSITION OF ASSETS (CONTINUED)
- ----------------------------------------------------------------
Each of the aforementioned acquired businesses has common ownership with the
Company as noted. The transaction was accounted for using the purchase method
as follows:
<TABLE>
<CAPTION>
Atcomm
Services, Inc The
d/b/a Enigma Citation XTC
Broadstreets Group, Land, Cabaret,
Cabaret Inc. LLC Inc. Total
-------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Assets . . . . . . . . . . $ 6,500 $ 868,269 $ 1,123,943 $ 197,119 $ 2,195,831
Liabilities. . . . . . . . -- (578,665) (1,025,210) (170,419) (1,774,294)
-------------- ---------- ------------ ---------- ------------
Net tangible assets. . . 6,500 289,604 98,733 26,700 421,537
-------------- ---------- ------------ ---------- ------------
Consideration Paid:
Issuance of note payable 225,000 -- -- -- 225,000
Common stock issued
at $1 per share . . . -- 350,000 2,500,000 525,000 3,375,000
-------------- ---------- ------------ ---------- ------------
Total Consideration. . . 225,000 350,000 2,500,000 525,000 3,600,000
-------------- ---------- ------------ ---------- ------------
Dividend paid to
shareholders . . . . . . $ 218,500 $ 60,396 $ 2,401,267 $ 498,300 $ 3,178,463
============== ========== ============ ========== ============
</TABLE>
Treatment of the excess cash consideration paid for the acquired businesses is
accounted for as a deemed dividend in accordance with generally accepted
accounting principles. Goodwill was not recorded since this transaction was
consummated with related parties and this treatment would have constituted a
step-up in basis. The transaction is reflected in the financial statements on
the date the transaction occurred of December 31, 1997, in accordance with
generally accepted accounting principles.
NOTE 3 - STOCKHOLDERS' EQUITY
- ---------------------------------
In November 1997, the Company's stockholders' approved a 1 for 300 reverse
common stock split and the number of authorized shares of common stock was
reduced from 200,000,000 to 20,000,000. Additionally, the Company authorized
10,000,000 shares of preferred stock.
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1998
--------------
(UNAUDITED)
NOTE 4 - GOING CONCERN
- --------------------------
These financial statements have been prepared on the "going concern" basis,
which presumes that the Company will be able to realize its assets and discharge
its liabilities in the normal course of business for the foreseeable future.
The Company's continuation as a "going concern" is dependent on the
establishment of profitable operations, and upon either the continued financial
support of its principal shareholders or upon the ability of the Company to
raise additional capital. Management is pursuing various options to attract
capital, including infusions of cash and mergers. The outcome of these matters
cannot be predicted at this time. These financial statements do not include any
adjustments to the amounts and classification of assets and liabilities that
might be necessary should the Company be unable to continue in business.
NOTE 5 - SUBSEQUENT EVENT
- -----------------------------
On May 5, 1998, a fire damaged the adult entertainment facility known as
Broadstreets Cabaret. The Company anticipates that Broadstreets will remain
closed for at least 60 to 90 days during which time the Company plans to remodel
the club. The Company believes this event will result in a material decline in
revenues during the closure of Broadstreets and until it reopens and
re-establishes the business. The Company believes that it has adequate
insurance to cover this property damage.
<PAGE>
ITEM2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS.
GENERAL
In December 1997 the company entered into the Adult Entertainment Industry
through the acquisition of two nude cabarets and on topless cabaret in Houston,
Texas and one cabaret in Austin, , Texas. Prior to this period the Company had
divested all of its assets and was effectively a "shell company" with no
existing operations.
RESULTS OF OPERATIONS
Total Operating Revenues was $1,257,461 for the second quarter ended March 31,
1998 compared to $0 in the second quarter ended March 31, 1997. The increase in
revenues is a result of the on-going operation of several adult entertainment
establishments.
Cost of goods sold was $136,016 for the second quarter ended March 31, 1998
compared to $0 in the second quarter ended March 31, 1997. The increase in cost
of goods sold is a result of the on-going operation of several adult
entertainment establishments.
General and administrative cost were $954,874 for the second quarter of fiscal
1998 compared to $115 for the same fiscal period in 1997. The increase is due
to the ongoing operation of several adult entertainment establishments.
Interest expense during the second quarter of fiscal 1998 increased to $39,653
versus $0 for the same period in 1997. This increase is a result of the
acquisition and financing of several pieced of real estate associated with the
companies business operations.
Net Income after Provision for Income Tax for the second quarter of fiscal 1998
was $101,962 compared to losses of ($115) for the second quarter of fiscal 1997.
Six Months Ended March 31, 1998 compared to the Six Months Ended March 31, 1997.
For the six months ended March 31, 1998, the Company had consolidated total
operating revenues of $1,257,461 compared to $147 for the six months ended March
31, 1997.
Cost of Goods Sold were $136,016 for the six months ended March 31, 1998 and $0
for the six months ended March 31, 1997.
General and Administrative cost were $1,005,254 for the six months ended March
31, 1998 and $1,112 for the six months ended March 31, 1997.
Interest Expenses were $39,653 for the six months ended March 31, 1998 and $0
for the six months ended March 31, 1997.
Net Income after Provision for Income Taxes for the six months ended March 31,
1998 was $51,582. The Company had a net loss of $965 for the six months ended
March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 the Company has a working capital deficit of $666,439 compared
to working capital deficit of $29,959 at March 31, 1997. The decrease in
working capital is due primarily of the Company's investment in the acquisition
of property and equipment.
In the opinion of the management, working capital is not a true indication of
the status of the Company, due to the short cycle of liquidity, which results in
the realization of cash within no more than five (5) days after culmination of a
transaction.
Net cash provided by operation activities in the first six months of the fiscal
1998 was $117,992 compared to net cash used of $965 for the same period in
fiscal 1997. The improvement in cash provided by operating activities was due
primarily to income from operations.
Net cash used in investing activities was $629,718 which resulted from the
acquisition of property and equipment in December 1997. Cash provided by
financing activities was $553,581 due primarily to proceeds from issuance of
common stock and from notes payable.
The Company has not established lines of credit other than the existing debts,
therefore there can be no assurance that the Company will be able to obtain
additional financing on reasonable terms, if at all.
The adult entertainment business is highly competitive with respect to price,
services and location, as well as the professionalism of the entertainment. The
Company's clubs in Houston compete with a number of locally-owned adult cabaret,
some of whose names enjoy recognition that equals that of the Company's.
Although the Company believes that it is well positioned to compete successfully
in the future, there can be no assurance that the Company's clubs will be able
to maintain their high level of name recognition and prestige within the
marketplace.
ANTICPATED DECREASE IN REVENUES
On May 5, 1998, a fire damaged the adult entertainment facility known as
Broadstreets Cabaret. The Company anticipates that Broadstreets will remain
closed for a least 60 to 90 days during which time the Company plans to remodel
the club. Eventhough there should be adequate insurance to cover the property
damage, the Company believes this event will result in a material decline in
revenues during the closure of Broadstreets and until it opens and reestablishes
the business. The Company, however, acquired and opened a new club in New
Orleans during the second quarter of 1998. The revenue from this new club is
anticipated to reduce part of the loss of revenues suffered due to the fire at
Broadstreets.
SPECIAL NOTE REGARDING FORWARD LOOKING INFORMATION
The Management Discussion and Analysis contains various "forwarding looking
statements" which represents the Company's expectations or beliefs concerning
future events and involves a number of risks and uncertainties Important factors
that could cause actual results to differ materially from those indicated
include risks and uncertainties relating to the continuation of operations
and/or the anticipated increase in future revenues.
<PAGE>
PART II
OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Information required pursuant to Item 701 of Regulation S-B:
The following transactions were effected on reliance upon exemptions from
registration under the Securities Act of 1933 as amended (the "Act") as provided
in Section 4(2) thereof or, upon exemptions from registration under the Act as
provided in Regulation D thereof. Each certificate issued for unregistered
securities contained a legend stating that the securities have not been
registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. No underwriter participated in,
nor did the Company pay any commissions or fees to any underwriter in connection
with any of these transactions.
In December, 1997, the Company issued 350,000 shares of common stock to The
Enigma Group, Inc. in connection with an Asset Purchase Agreement in a private
transaction not involving a public offering pursuant to and in reliance on
Section 4(2) of the Securities Act. The Enigma Group, Inc. and the Company
were under common control. In such a capacity, the Enigma Group, Inc. was
knowledgeable about the Company's operations and financial condition. The
Company believes that the Enigma Group, Inc. had the knowledge and experience in
financial and business matters which allowed it to evaluate the merits and risk
of receipt of the securities of the Company.
In December, 1997, the Company issued 2,500,000 shares of common stock to
shareholders of Citation Land, L.L.C. in connection with a Share Exchange
Agreement in a private transaction not involving a public offering pursuant to
and in reliance on Section 4(2) of the Securities Act. Citation Land, L.L.C.
and the Company were under common control. In such a capacity, Citation Land,
L.L.C. was knowledgeable about the Company's operations and financial condition.
The Company believes that Citation Land, L.L.C. had the knowledge and experience
in financial and business matters which allowed it to evaluate the merits and
risk of receipt of the securities of the Company.
In December, 1997, the Company issued 525,000 shares of common stock to
shareholders of XTC Cabaret, Inc. in connection with a Share Exchange Agreement
in a private transaction not involving a public offering pursuant to and in
reliance on Section 4(2) of the Securities Act. XTC Cabaret, Inc. and the
Company were under common control. In such a capacity, XTC Cabaret, Inc. was
knowledgeable about the Company's operations and financial condition. The
Company believes that XTC Cabaret, Inc. had the knowledge and experience in
financial and business matters which allowed it to evaluate the merits and risk
of receipt of the securities of the Company.
In January, 1998 the Company issued 10,000 shares of common stock to Chris
Curnow as an in-kind reimbursement of expenses and as an in-kind repayment of a
loan. Mr. Curnow is a director of the Company. This private transaction not
involving a public offering was made pursuant to and reliance on Section 4(2) of
the Securities Act. In such a capacity, Mr. Curnow was knowledgeable about the
Company's operations and financial condition. The Company believes that Mr.
Curnow had the knowledge and experience in financial and business matters which
allowed it to evaluate the merits and risk of receipt of the securities of the
Company.
II-1
<PAGE>
In January, 1998 the Company issued 10,000 shares of common stock to Darla
Gideon, an employee of the Company, 35,000 shares of common stock to William B.
Weekley, a former director and officer of the Company, and 60,000 shares of
common stock to Michael Thurman a director and officer of the Company. The
shares were issued in a private transaction not involving a public offering as
in-kind payment for compensation pursuant to and in reliance on Section 4(2) of
the Securities Act. Each of them was knowledgeable about the Company's
operations and financial condition. The Company believes that each of them had
the knowledge and experience in financial and business matters which allowed
them to evaluate the merits and risk of receipt of the securities of the
Company.
In January, 1998 the Company issued 5,000 shares of common stock to Kurtis
Atkisson in a private transaction not involving a public offering as in-kind
payment for compensation pursuant to and in reliance on Section 4(2) of the
Securities Act. He was knowledgeable about the Company's operations and
financial condition. The Company believes that he had the knowledge and
experience in financial and business matters which allowed him to evaluate the
merits and risk of receipt of the securities of the Company.
In January, 1998 the Company issued 22,500 shares of common stock to Darryl
Connelly for cash, and 100,000 shares of common stock to Dave Ewer in private
transactions not involving a public offering for cash in private transactions
pursuant to and in reliance on Section 4(2) of the Securities Act. Each of them
was knowledgeable about the Company's operations and financial condition. The
Company believes that each of them had the knowledge and experience in financial
and business matters which allowed it to evaluate the merits and risk of receipt
of the securities of the Company.
In January, 1998 the Company issued 15,000 shares of common stock and
10,000 shares of common stock to Jimmy Holmes in a private transaction not
involving a public offering as an in-kind payment for compensation and as an
in-kind repayment of a loan, respectively, pursuant to and in reliance on
Section 4(2) of the Securities Act. He was knowledgeable about the Company's
operations and financial condition. The Company believes that he had the
knowledge and experience in financial and business matters which allowed him to
evaluate the merits and risk of receipt of the securities of the Company.
In January, February and March, 1998, the Company issued a total of 60,000
shares of common stock for cash to four investors in private transactions not
involving a public offering pursuant to and in reliance on Section 4(2) of the
Securities Act. Each of them was knowledgeable about the Company's operations
and financial condition. The Company believes that each of them had the
knowledge and experience in financial and business matters which allowed it to
evaluate the merits and risk of receipt of the securities of the Company.
II-2
<PAGE>
Item 5. OTHER EVENTS
Bourbon Street, which is New Orleans, Louisiana's world famous
entertainment center and tourist destination, is the location of Taurus
Entertainment Companies, Inc.'s (the "Company") newest topless adult
entertainment cabaret which is located at 735 Bourbon Street (the "Bourbon
Street Location"). In February, 1998, the Company entered into a Stock Purchase
Agreement with the sole stockholder of Lucky's of Bourbon Street, Inc.
("Lucky's") to acquire all of the outstanding common stock of Lucky's. Lucky's
was and is the lessee for the Bourbon Street Location. The Company opened the
Bourbon Street Location for business in April, 1998. The Company has the
necessary permits to serve alcoholic beverages and provide topless adult
entertainment. The Company's lease for the Bourbon Street Location provides
that the Company has an option to acquire the Bourbon Street Location under
certain conditions.
On May 5, 1998, a fire damaged one of the Company's adult entertainment
facilities known as Broadstreets Cabaret ("Broadstreets") located near the
George Bush Intercontinental Airport in Houston, Texas. While it is unknown how
long remodeling will take, the Company anticipates that Broadstreets will remain
closed for at least approximately 60 to 90 days during which time the Company
plans to remodel Broadstreets. The Company believes that it has adequate
insurance to cover any property damage. However, the Company does not maintain
business interruption insurance. Thus, the Company anticipates a reduction in
company-wide revenues due to the loss of revenue from Broadstreets while it
undergoes remodeling. The Company believes this event will result in a material
decline in revenues during the closure of Broadstreets and until Broadstreets
reopens and re-establishes its business.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation SB
(2) Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed an 8-K on January 15, 1998, reporting the
Acquisition or Disposition of Assets.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TAURUS ENTERTAINMENT COMPANIES, INC.
Date: May 28, 1998 By:/s/ Eric Langan
------------------------
Eric Langan, Chairman and
Chief Accounting Officer
II-4
<PAGE>
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