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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934; For the Quarterly Period Ended: June 30, 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.)
3113 Bering Drive
Houston, Texas 77057
(Address of principal executive offices, including zip code)
(713) 785-0444
(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 August 11, 1998, there were 4,305,012 shares of common stock, $.001 par
value, outstanding.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [x]
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
CONTENTS
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PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
Balance Sheet as of June 30, 1998 (unaudited) and September 30, 1997
(audited)
Statement of Operations --
Three and nine months ended June 30, 1998 and 1997
Statement of Changes in Stockholders Equity --
Nine months ended June 30, 1998
Statement of Cash Flow --
Nine months ended June 30, 1998 and 1997
Notes to Unaudited 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 - June 30, 1998
Statement of Operations -
Three Months and Nine Ended June 30, 1998 and 1997
Statement of Changes in Stockholders' Equity -
Nine Months Ended June 30, 1998
Statement of Cash Flows -
Nine Months Ended June 30, 1998 and 1997
Notes to Unaudited Financial Statements
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
BALANCE SHEET
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(UNAUDITED)
JUNE 30, 1998
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ASSETS
- -----------------------------------
June 30, September 30,
1998 1997
----------- --------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash. . . . . . . . . . . . . . . $ 9,300 $ 797
Trade receivables . . . . . . . . 63,275 --
Employee advances . . . . . . . . 1,706 --
Note receivable - related party . 80,010 --
Inventories . . . . . . . . . . . 14,120 --
----------- --------------
Total Current Assets. . . . . 168,411 797
----------- --------------
Property and Equipment:
Buildings . . . . . . . . . . . . 908,754 --
Furniture and fixtures. . . . . . 350,550 --
Leasehold improvements. . . . . . 695,699 --
Equipment . . . . . . . . . . . . 99,295 --
Accumulated depreciation. . . . . (220,291) --
----------- --------------
1,834,007 --
Land. . . . . . . . . . . . . . . 762,732 --
----------- --------------
Total Property and Equipment. 2,596,739 --
----------- --------------
Other Assets:
Other . . . . . . . . . . . . . . 142,483 --
----------- --------------
Total Other Assets. . . . . . 142,483 --
----------- --------------
Total Assets. . . . . . . . . $2,907,633 $ 797
=========== ==============
</TABLE>
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
BALANCE SHEET
-------------
(UNAUDITED)
JUNE 30, 1998
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------
June 30, September 30,
1998 1997
------------ ---------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued liabilities. . . $ 494,042 $ 26,573
Current portion of notes payable. . . . . . . 274,430 --
Account payable - related party . . . . . . . 51,397 14,880
Income taxes payable. . . . . . . . . . . . . 99,723 --
Note payable - related party. . . . . . . . . 90,050 --
------------ ---------------
Total Current Liabilities . . . . . . . . 1,009,642 41,453
------------ ---------------
Long-term portion of notes payable. . . . . . . 1,169,548 --
------------ ---------------
Stockholders' Equity:
Common stock, par value $.001; authorized
20,000,000 shares; 4,305,012 issued and
outstanding shares. . . . . . . . . . . . . 4,305 60,307
Additional paid-in capital. . . . . . . . . . 7,359,026 3,112,694
Accumulated deficit (since date of
reorganization in November 1994). . . . . . (6,552,277) (3,131,084)
Less treasury stock, 1,179 shares at cost . . . (82,611) (82,573)
------------ ---------------
Total Stockholders' Equity. . . . . . . . . 728,443 (40,506)
------------ ---------------
Total Liabilities and Stockholders' Equity. $ 2,907,633 $ 797
============ ===============
</TABLE>
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
STATEMENT OF OPERATIONS
------------------------
(UNAUDITED)
For the For the
Three Months Ended Nine Months Ended
June 30, March 31,
----------- ------------ ----------- ------------
1998 1997 1998 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Operating Revenue:
Cover charge revenue . . . . . 336,882 -- 880,255 --
Bar and food sales revenue . . 209,828 -- 626,638 --
Floor fee revenue. . . . . . . 66,793 -- 178,376 --
Rental revenue . . . . . . . . -- -- 66,839 --
Administrative overhead
& management fees. . . . . . -- -- -- 147
Other revenue. . . . . . . . . 48,926 -- 167,780 --
----------- ------------ ----------- ------------
Total operating revenues . . 662,428 -- 1,919,887 147
----------- ------------ ----------- ------------
Operating Expenses:
Costs of sales . . . . . . . . 65,023 -- 201,040 --
General and administrative . . 119,700 115 329,481 1,112
Salaries and wages . . . . . . 322,435 -- 699,123 --
Contract labor . . . . . . . . 14,756 -- 34,199 --
Rent and utilities . . . . . . 74,064 -- 179,513 --
Taxes and insurance. . . . . . 155,410 -- 261,625 --
Advertising. . . . . . . . . . 27,698 -- 95,537 --
Legal and professional . . . . 73,806 -- 195,732 --
Depreciation and amortization. 62,832 -- 85,697 --
----------- ------------ ----------- ------------
Total operating expenses . . 915,725 115 2,081,948 1,112
----------- ------------ ----------- ------------
Income (loss) from operations. (253,297) (115) (162,061) (965)
Other income (expense):
Interest expense . . . . . . . 41,016 -- 80,669 --
----------- ------------ ----------- ------------
Total other income (expense) 41,016 -- 80,669 --
----------- ------------ ----------- ------------
Loss before income tax expense . (294,313) (115) (242,730) (965)
Income tax expense . . . . . . . (24,956) -- -- --
----------- ------------ ----------- ------------
Net loss . . . . . . . . . . . . $ (269,357) $ (115) $ (242,730) $ (965)
=========== ============ =========== ============
Net loss per common share:
Basic and diluted. . . . . . $ (0.07) $ (0.00) $ (0.09) $ (0.00)
=========== ============ =========== ============
Weighted average number of
common shares outstanding:
Basic and diluted. . . . . . 4,093,979 60,307,749 2,691,494 60,307,749
=========== ============ =========== ============
</TABLE>
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
--------------------------------------------
FOR THE NINE MONTHS ENDED JUNE 30, 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 -- -- --
Purchase of Treasury stocks . -- -- -- -- (38) (38)
Issuance of common shares . . 728,986 729 814,601 -- -- 795,693
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. . . . . . . . . . . -- -- -- 242,730 -- 242,730
------------ --------- ---------- ------------- ---------- ------------
Balance, March 31, 1998 . . . 4,305,012 $ 4,305 $7,359,026 $ (6,552,277) $ (82,611) $ 728,443
============ ========= ========== ============= ========== ============
</TABLE>
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
(UNAUDITED)
For the
Nine Months Ended
June 30,
------------------
1998 1997
---------- ------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss). . . . . . . . . . . . . . . . . . . $(242,730) $(965)
Adjustments to reconcile net income (loss) to
net cash used in operations:
Depreciation and amortization . . . . . . . . . . . 85,699 --
Increase in receivables . . . . . . . . . . . . . . (40,378) --
Decrease in prepaid expenses. . . . . . . . . . . . 4,500 --
Increase in other assets . . . . . . . . . . . . . . (88,087) --
Increase in inventory. . . . . . . . . . . . . . . . (7,620) --
Decrease in cash overdraft . . . . . . . . . . . . . (23,162) --
Increase in accounts payable . . . . . . . . . . . . 413,502 --
Increase in income taxes payable . . . . . . . . . . 29,196 --
---------- ------
Net cash provided by (used in) operating activities. 130,924 (965)
---------- ------
Cash Flows from Investing Activities:
Payments for notes receivable. . . . . . . . . . . . . (47,879) --
Acquisition of property and equipment. . . . . . . . . (752,769) --
---------- ------
Net cash provided by (used in) investing activities. (800,648) --
---------- ------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock . . . . . . . . 814,601 --
Proceeds from notes payable. . . . . . . . . . . . . . 90,049 --
Payments on notes payable. . . . . . . . . . . . . . . (226,385) --
Capital contributions. . . . . . . . . . . . . . . . . -- 850
Purchase of Treasury stock . . . . . . . . . . . . . . (38) --
---------- ------
Net cash from financing activities . . . . . . . . . 678,227 850
---------- ------
Net increase (decrease) in cash. . . . . . . . . . . 8,503 (115)
Cash and cash equivalents, beginning of period . . . . . 797 156
---------- ------
Cash and cash equivalents, end of period . . . . . . . . $ 9300 $ 41
========== ======
</TABLE>
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
<TABLE>
<CAPTION>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
STATEMENT OF CASH FLOWS (CONTINUED)
----------------------------------
(UNAUDITED)
For the
Nine Months Ended
June 30,
--------------
1998 1997
------- -----
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for interest. . . $80,669 $ --
======= =====
Cash paid during the period for income taxes. $ -- $ --
======= =====
</TABLE>
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
TAURUS ENTERTAINMENT COMPANIES, INC.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 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-KSB 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 June 30, 1998, and the results of operations and cash
flows for the three month periods ended June 30, 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. 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.
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
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.
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
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.
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
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.
The following notes are an integral part of these unaudited financial
statements.
<PAGE>
NOTE 4 - GOING CONCERN
- --------------------------
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. However, the re-opening date of
Broadstreets is projected to be mid-October, 1998.
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.
The following notes are an integral part of these unaudited financial
statements.
NOTE 5 - SUBSEQUENT EVENT
- -----------------------------
On August 11, 1998, Rick's Cabaret International, Inc. ("Rick's") acquired
approximately 93% of the common stock (the "Shares") of Taurus Entertainment
Companies, Inc. ("Taurus"). Rick's acquired the Shares in a private transaction
(the "Exchange") with certain principal shareholders (the "Shareholders") of
Taurus. In connection with the Exchange, Rick's acquired approximately
4,000,000 shares of Taurus, in exchange for approximately 1,150,000 shares of
common stock of Rick's. Rick's now controls Taurus and the financial results of
Taurus will be consolidated into Rick's financial reports.
Rick's is a publicly owned company in the adult entertainment business trading
on NASDAQ under the symbol RICK, for Rick's common stock, and under they symbol
RICKW for Rick's warrants. Rick's operates adult entertainment businesses in
Houston, Texas, New Orleans, Louisiana and Minneapolis, Minnesota, and a dance
club in Houston.
In connection with the Exchange, the following Directors of Taurus resigned:
Stephen Fischer, Mitchell White, Michael Thurman and Chris Curnow. Remaining as
a Director is Eric Langan. Robert L. Watters, Chairman and President of Rick's,
was appointed as a new Director of Taurus.
<PAGE>
ITEM 2. MANAGEMENT'S 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 one topless cabaret in Houston,
Texas and one nude 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 operation.
RESULTS OF OPERATIONS
Three Months ended June 30, 1998 as compared to the Three Months ended June 30,
- --------------------------------------------------------------------------------
1997. Total operating revenues increased by $662,428 for the third quarter
- -----
ended June 30, 1998 compared to $0 in the third quarter ended June 30, 1997.
The increase in revenues arose primarily from the on-going operation of several
adult entertainment establishments.
Cost of sales was $65,023 for the third quarter ended June 30, 1998
compared with $0 for the third quarter ended June 30, 1997. The increase in
cost of goods sold is related to the on-going operation of several adult
entertainment facilities.
Other selling, general and administrative costs increased by $850,702 for
the third quarter of fiscal 1998 compared to $115 for the same fiscal period in
1997. The Company's new location in New Orleans, Louisiana, opened in April
1998. The increase is the result of the costs related to this opening as well
as the on-going operation of several adult entertainment establishments.
Net loss for the third quarter of fiscal 1998 was ($269,357) compared to
losses of ($115) for the third quarter of fiscal 1997.
Interest expense during the third quarter of fiscal 1998 increased to
$41,016 versus $0 for the same period in 1997. This increase is a result of the
acquisition and financing of several pieces of real estate associated with the
companies business operations.
Nine Months Ended June 30, 1998 compared to the Nine Months Ended June 30, 1997.
- --------------------------------------------------------------------------------
For the nine months ended June 30, 1998, the Company had consolidated total
operating revenues of $1,919,887 compared to $147 for the nine months ended June
30, 1997.
Cost of goods sold was $201,040 for the nine months ended June 30, 1998 and
$0 for the nine months ended June 31, 1997.
Other selling, general and administrative costs were $ 1,880,908 for the
nine months ended June 30, 1998 and $1,112 for the nine months ended June 30,
1997.
Net loss for the nine months ended June 30, 1998 was ($242,730). The
Company had a net loss of $965 for the nine months ended June 30, 1997.
Interest expenses were $80,669 for the nine months ended June 30, 1998 and
$0 for the nine months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company has a working capital deficit of $841,230
compared to working capital deficit of $41 at June 30, 1997. The decrease in
working capital is due primarily to the Company's investment in the acquisition
of property and equipment of the new location.
In the opinion of the management, working capital is not a true indicator
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 operating activities in the first nine months of
fiscal 1998 was $130,924 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 $ 800,648 which resulted from the
acquisition of property and equipment in December 1997. Cash provided by
financing activities was $ 678,227 due primarily to proceeds from issuance of
common stocks 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, service 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.
ANTICIPATED DECREASE IN REVENUES
On May 5, 1998, a fire damaged the adult entertainment facility known as
Broadstreets Cabaret. Earlier 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. Due to the delay in receiving funds from the insurance
company, the re-opening of Broadstreets is anticipated to be in mid October
1998. 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 recently closed its New Orleans club for renovation.
SPECIAL NOTE REGARDING FORWARD LOOKING INFORMATION
The Management Discussion and Analysis contains various "forward looking
statements" and information relating to the Company 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.
In addition, see Item 5., Other Events, included in this filing.
<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. 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 April, 1998, Winruss Investments ("Winruss") acquired 100,000 shares of
common stock of the Company for $60,000 in a private transaction. The Company
believes that Winruss was knowledgeable about the Company's operations and
financial condition, and that it had the knowledge and experience in financial
and business matters which allowed it to evaluate the merits and risk of the
purchase of the securities of the Company.
In May, 1998, Steve Wickersham ("Wickersham") acquired 13,000 shares of
common stock of the Company for $13,000 in a private transaction. The Company
believes that Wickersham was knowledgeable about the Company's operations and
financial condition, and that he had the knowledge and experience in financial
and business matters which allowed him to evaluate the merits and risk of the
purchase of the securities of the Company.
In May, 1998, Tim Winata, Mark Edwards, and Stephen C. Tovey each
respectively received 20,000, 3,000, and 3,000 shares of common stock of the
Company, for services rendered to the Company. The Company believes that
Messrs. Winata, Edwards and Tovey were each knowledgeable about the Company's
operations and financial condition, and that each of them had the knowledge and
experience in financial and business matters which allowed each of them to
evaluate the merits and risk of the receipt of the securities of the Company.
In May, 1998, Jimmy Holmes ("Holmes") acquired 67,308 shares of common
stock of the Company through the conversion of a promisory note in the amount of
$43,750. The Company believes that Holmes was knowledgeable about the Company's
operations and financial condition, and that he had the knowledge and experience
in financial and business matters which allowed him to evaluate the merits and
risk of the purchase of the securities of the Company.
In June, 1998, Stephen E. Fischer, a Director, received 180,000 shares of
common stock of the Company, for services rendered to the Company. The Company
believes that Mr. Fischer was knowledgeable about the Company's operations and
financial condition, and that he had the knowledge and experience in financial
and business matters which allowed him to evaluate the merits and risk of the
receipt of the securities of the Company.
<PAGE>
Item 5. OTHER EVENTS
On August 11, 1998, Rick's Cabaret International, Inc. ( "Rick's") acquired
approximately 93% of the common stock (the "Shares") of Taurus Entertainment
Companies, Inc. ("Taurus"). Rick's acquired the Shares in a private transaction
(the "Exchange") with certain principal shareholders (the "Shareholders") of
Taurus. In connection with the Exchange, Rick's acquired approximately
4,000,000 Shares of Taurus, in exchange for approximately 1,150,000 shares of
common stock of Rick's. Rick's now controls Taurus and the financial results of
Taurus will be consolidated into Rick's financial reports.
Rick's is a publicly owned company in the adult entertainment business
trading on NASDAQ under the symbol RICK, for Rick's common stock, and under the
symbol RICKW for Rick's warrants. Rick's operates adult entertainment
businesses in Houston, Texas, New Orleans, Louisiana and Minneapolis, Minnesota,
and a dance club in Houston.
In connection with the Exchange, the following Directors of Taurus
resigned: Stephen Fischer, Mitchell White, Michael Thurman and Chris Curnow.
Remaining as a Director is Eric Langan. Robert L. Watters, Chairman and
President of Rick's, was appointed as a new Director of Taurus.
Robert L. Watters, age 46, has been a director of the Ricks since 1986, and
has been president and chief executive officer of Rick's since 1991. He was
also a founder in 1989 and operator until 1993 of the Colorado Bar & Grill, an
adult cabaret located in Houston, Texas and in 1988 performed site selection,
negotiated the property purchase and oversaw the design and permitting for the
cabaret that became the Cabaret Royale in Dallas, Texas. Mr. Watters practiced
law as a solicitor in London, England and is qualified to practice law in New
York state. Mr. Watters worked in the international tax group of the accounting
firm of Touche, Ross & Co. (now succeeded by Deloitte & Touche) from 1979 to
1983 and was engaged in the private practice of law in Houston, Texas from 1983
to 1986, when he became involved in the full-time management of Rick's. Mr.
Watters graduated from the London School of Economics and Political Science,
University of London, in 1973 with a Bachelor of Laws (Honors) degree and in
1975 with a Master of Laws degree from Osgoode Hall Law School, York University.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation SB
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
On May 20, 1998 the Company filed a report on Form 8-K Amendment
No. 1 reporting financial statements and pro forma financial
information related to acquisitions which occurred on December 31,
1997.
On June 11, 1998, the Company filed a report on Form 8-K reporting
other events which occurred on June 5, 1998.
<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: August 14, 1998 By: /s/ Eric Langan
------------------------
Eric Langan, Chairman and
Chief Accounting Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------
27.1 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 63
<ALLOWANCES> 0
<INVENTORY> 14
<CURRENT-ASSETS> 168
<PP&E> 2817
<DEPRECIATION> 220
<TOTAL-ASSETS> 2908
<CURRENT-LIABILITIES> 1010
<BONDS> 0
<COMMON> 4
0
0
<OTHER-SE> 724
<TOTAL-LIABILITY-AND-EQUITY> 2908
<SALES> 1920
<TOTAL-REVENUES> 1920
<CGS> 201
<TOTAL-COSTS> 2082
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> (243)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (243)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
