UNITED STATES 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: December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26958
RICK'S CABARET INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Texas 76-0037324
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
505 North Belt Drive Suite 630
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 5(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 CORPORATE ISSUERS
On February 1, 2000, there were approximately 3,613,678 shares of common
stock, $.01 par value, outstanding.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [x]
RICK'S CABARET INTERNATIONAL, INC.
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CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1999 (unaudited) and September
30, 1999 (audited)
Consolidated Statements of Operations for the three months ended December 31,
1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows for the three months ended December 31,
1999 and 1998 (unaudited)
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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<CAPTION>
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - ASSETS
12/31/99 9/30/99
(AUDITED) (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 414,333 $ 378,161
Accounts receivable 229,623 225,565
Prepaid expenses 38,613 102,031
Inventories 131,636 115,773
Land held for sale 200,000 200,000
------------ ------------
Total current assets 1,014,205 1,021,530
------------ ------------
PROPERTY AND EQUIPMENT
Buildings, lands and leasehold improvements 8,475,244 8,324,297
Furniture and equipment 1,620,565 1,569,767
------------ ------------
10,095,809 9,894,064
Accumulated depreciation (1,432,357) (1,340,343)
------------ ------------
8,663,452 8,553,721
------------ ------------
OTHER ASSETS
Goodwill less accumulated amortization 2,797,239 2,839,745
Other 218,468 223,141
------------ ------------
3,015,707 3,062,886
------------ ------------
$12,693,364 $12,638,137
============ ============
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LIABILITIES AND STOCKHOLDERS' EQUITY
12/31/99 9/30/99
CURRENT LIABILITIES
Current portion of long term debt $ 376,306 $ 375,622
Accounts payable - trade 405,389 514,447
Accrued expenses 266,899 115,752
------------ ------------
Total current liabilities 1,048,594 1,005,821
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debts less current portion 4,190,512 4,282,777
------------ ------------
Total Liabilities 5,239,106 5,288,598
------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 27,643 34,247
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par, authorized
1,000,000 shares; none outstanding --- ---
Common stock - $.01 par, authorized
15,000,000 shares
issued 3,613,678 and 3,613,678 36,137 36,137
Additional paid in capital 9,754,606 9,727,309
Retained earnings (deficit) (2,364,128) (2,448,154)
------------ ------------
Total stockholder's equity 7,426,615 7,315,292
------------ ------------
$12,693,364 $12,638,137
============ ============
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RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1999 AND
1998
1999 1998
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
Sales of alcoholic beverages $ 1,104,583 $1,390,370
Sales of food 150,376 149,532
Service revenues 1,218,678 1,344,725
Other 244,538 433,342
------------ -----------
2,718,175 3,317,969
------------ -----------
OPERATING EXPENSES
Cost of goods sold 363,779 487,859
Salaries and wages 910,156 1,004,943
Other general and administrative
Taxes and permits 405,501 288,696
Charge card fees 39,085 57,507
Rent 11,490 135,155
Legal and accounting 112,066 142,108
Advertising 197,405 198,423
Other 494,402 577,471
------------ -----------
2,533,884 2,892,162
------------ -----------
INCOME (LOSS) FROM OPERATIONS 184,291 425,807
Interest income 8,412 511
Interest Expense (108,677) (143,244)
------------ -----------
Net Income $ 84,026 $ 283,074
============ ===========
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1999 1998
(UNAUDITED) (UNAUDITED)
NET INCOME (LOSS) PER COMMON SHARE $ 0.03 $ 0.09
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 3,613,678 3,253,702
============ ===========
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RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 84,026 $ 283,074
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation 92,015 94,708
Amortization of goodwill 39,928 62,360
Minority interests (6,604) (7,186)
Changes in assets and liabilities:
Accounts receivable (4,058) (52,229)
Prepaid expenses 63,418 (173,133)
Inventories (15,863) (1,541)
Accounts payable and accrued expenses 42,772 392,514
------------ ----------
Cash provided by operating activities 295,634 598,567
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property equipment (201,745) (330,490)
Increase in other assets 34,548 (12,946)
------------ ----------
Cash used by investing activities (167,197) (343,436)
------------ ----------
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<CAPTION>
12/31/99 9/30/99
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long term debt --- (96,703)
Payments on long term debt (92,265) (243,852)
----------- ----------
Cash used by financing activities (92,265) (340,555)
----------- ----------
NET (DECREASE) IN CASH 36,172 (85,424)
CASH AT BEGINNING OF PERIOD 378,161 597,644
=========== ==========
CASH AT END OF PERIOD $ 414,333 $ 512,220
=========== ==========
CASH PAID DURING PERIOD FOR:
Interest $ 108,677 $ 143,244
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RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB of Regulation S-B. They do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. However, except as disclosed
herein, there has been no material change in the information disclosed in the
notes to the financial statements for the year ended September 30, 1999 included
in the Company's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission. The interim unaudited financial statements should be read
in conjunction with those financial statements included in the Form 10-KSB. In
the opinion of Management, all adjustments considered necessary for a fair
presentation, consisting solely of normal recurring adjustments, have been made.
Operating results for the three months ended December 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2000.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Company's
unaudited consolidated financial statements and related notes thereto included
in this quarterly report and in the audited consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 10-KSB for the year ended September 30,
1999.
FORWARD LOOKING STATEMENT AND INFORMATION
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The Company is including the following cautionary statement in this Form
10-QSB to make applicable and take advantage of the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements which are
other than statements of historical facts. Certain statements in this Form
10-QSB are forward-looking statements. Words such as "expects", "anticipates"
and "estimates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. Such risks and
uncertainties are set forth below. The Company's expectations, beliefs and
projections are expressed in good faith and are believed by the Company to have
a reasonable basis, including without limitation, management's examination of
historical operating trends, data contained in the Company's records and other
data available from third parties, but there can be no assurance that
management's expectation, beliefs or projections will result, be achieved, or be
accomplished. In addition to other factors and matters discussed elsewhere
herein, the following are important factors that, in the view of the Company,
could cause material adverse affects on the Company's financial condition and
results of operations: the risks and uncertainties relating to our Internet
operations, the impact and implementation of the sexually oriented business
ordinance in the City of Houston, competitive factors, the timing of the
openings of other clubs, the integration of operations of Taurus Entertainment
Companies, Inc with our operations and management, the availability of
acceptable financing to fund corporate expansion efforts, competitive factors,
and the dependence on key personnel. The Company has no obligation to update or
revise these forward-looking statements to reflect the occurrence of future
events or circumstances.
GENERAL
We currently own and operate two premiere Internet web sites at
www.DancerDorm.com and www.AmateurDan.com. These web sites were launched in
October, 1999. We also own and operate adult nightclubs under the name "Rick's
Cabaret" and "XTC" which offer live adult entertainment and restaurant and bar
operations. We own and operate our Internet content production studio and web
site operations center, and two adult nightclubs in Houston, Texas. We also
own and operate adult nightclubs in Austin and San Antonio, Texas, and
Minneapolis, Minnesota. We also operate another adult nightclub in Houston,
Texas through a management agreement.
In July, 1999, we opened a nightclub in San Antonio. In March, 1999,
we sold our New Orleans location and closed the location of XTC in Houston.
Our revenues are derived from the sale of liquor, beer, wine and food,
cover charges and other income. We anticipate significant revenue from Internet
operations to begin during fiscal 2000. Our fiscal year end is September 30.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31,1999 AS COMPARED TO
THE THREE MONTHS ENDED DECEMBER 31, 1998.
For the quarter ended December 31, 1999, the Company had consolidated total
revenues of $2,718,175 a decrease of $599,794 from the fiscal quarter ended
December 31, 1998 of $3,317,969. The decrease in revenues compared to the first
quarter ended December 31, 1998 was due to the sales of Company's location in
New Orleans, Louisiana.
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Cost of goods sold were 29.0% and 31.7% of sales of alcoholic beverages and
food for the first quarters of fiscal 2000 and 1999, respectively. The decrease
in fiscal 2000 was due primarily to the continuing efforts of management to
achieve reductions in cost of goods sold through improved inventory management.
The Company continues to aggressively decrease costs throughout all of its
locations by improving menu offerings, reducing food inventory stocks and
spoilage, and by modifying buying procedures.
Payroll and related costs were $910,156 for the first quarter in 2000
compared to $1,004,943 for the same fiscal period in 1999. The decrease was a
reflection of the reduction in personnel experienced by the Company as it sold
its location in New Orleans, Louisiana. Management currently believes that its
labor and management staff levels are of appropriate levels.
Other selling, general and administrative expenses decreased 8.5% from the
first quarter of fiscal 1999 to the first quarter of fiscal 2000. The decrease
was due primarily to reductions in rent related to Company's location in New
Orleans, Louisiana and in credit card fees.
Interest expense in the first quarter of fiscal 2000 was $108,677.
Net income for the first quarter of fiscal 2000 was $84,026 compared to
income of $283,074 for the first quarter of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999 the Company has negative working capital of $(34,389)
compared to positive working capital of $15,709 at September 30, 1999. The
increase in working capital is due primarily to the expenditure of cash
resources in building and opening the company's newest location in North
Houston, which opened in mid-December, 1998.
Net cash provided by operating activities in the first quarter of fiscal
2000 was $309,283 compared to $598,567 for the same period in fiscal 1999. The
decrease in cash provided by operating activities was due primarily to the sale
of land in the FY 1998 quarter, which provided cash of $815,162.
Net cash used in investing activities was $(180,846), which resulted from
additions to property and equipment.
11
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The Company's new location in North Houston opened in December, 1998. The
Minneapolis, Minnesota location opened in March, 1998 and the increase in
revenues arose primarily from the sales for these new locations as well as
increased sales at the company s location in New Orleans. In August, 1998, the
Company acquired Taurus Entertainment Companies, Inc. The Company continues to
study potential acquisition candidates, which would contribute to overall
revenue growth and profitability.
Depreciation and Amortization was $166,614 for the quarter ended
December 31, 1999 compared to $157,068 for the comparable quarter in the
prior fiscal year.
In the opinion of management, working capital is not a true indicator of
the financial status. Typically, the Company carries current liabilities in
excess of current assets because the business receives substantially immediate
payment for sales, with nominal receivables, while inventories and other current
liabilities normally carry longer payment terms. Vendors and purveyors often
remain flexible with payment terms providing the Company with opportunities to
adjust to short term business down turns. The Company considers the primary
indicators of financial status to be the long term trend and mix of sales
revenues, overall cash flow and profitability from operations and the level of
long term debt.
During the three months ended December 31, 1998, the Company provided
$598,567 cash from operations. Amortization and depreciation expense recorded
during the period ended December 31, 1998 was $157,068. Management believes
that the cash provided by operation is a positive trend indicating the impact,
which an additional location can have on overall overhead coverage and operating
results. The Company continually reviews potential acquisition candidates for
suitability.
SEASONALITY
The Company is significantly affected by seasonal factors. Typically, the
Company has experienced reduced revenues from April through September with the
strongest operating results occurring during October through March.
Year 2000 Issues
We have not had any Year 2000 deficiencies internally or externally. We do
not expect to have any Year 2000 deficiencies internally or externally. If a
Year 2000 deficiency occurs internally or externally, we will shift our internal
and external resources to fix the deficiency. We do not expect any Year 2000
deficiency to require an expenditure of more than $10,000.
12
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 27.1 Financial Data Schedule
(B) Reports on Form 8-K
None.
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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.
RICK'S CABARET INTERNATIONAL, INC.
Date: February 10, 2000 By: /s/ Eric S. Langan
-----------------------------------
Eric S. Langan, Chairman, President
and Chief Accounting Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-2001
<CASH> 414333
<SECURITIES> 0
<RECEIVABLES> 229623
<ALLOWANCES> 0
<INVENTORY> 131636
<CURRENT-ASSETS> 1014205
<PP&E> 10095809
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<TOTAL-ASSETS> 12693364
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<BONDS> 4190512
0
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<COMMON> 31137
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<TOTAL-LIABILITY-AND-EQUITY> 12693364
<SALES> 2718175
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<INCOME-CONTINUING> 84026
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