UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
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, 2000
[ ] 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 76-0458229
(State or other jurisdiction IRS Employer
of incorporation or organization) Identification No.)
505 North Belt, 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 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 CORPORATE ISSUERS
On August 10, 2000, there were 4,595,494 shares of common stock, $.01 par
value, outstanding.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
<PAGE>
RICK'S CABARET INTERNATIONAL, INC.
CONTENTS
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2000 (unaudited) and September
30, 1999 (audited)
Consolidated Statements of Operations for the three and nine months ended
June 30, 2000 and 1999 (unaudited)
Consolidated Statements of Cash Flows for the nine months ended June 30,
2000 and 1999 (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
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
-----------
6/30/2000 9/30/99
(UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 439,082 $ 378,161
Accounts receivable 342,112 225,565
Prepaid expenses 98,310 102,031
Inventories 135,862 115,773
Land held for sale 200,000 200,000
--------------- --------------
Total current assets 1,215,366 1,021,530
--------------- --------------
PROPERTY AND EQUIPMENT
Buildings, land and leasehold improvements 8,554,446 8,324,297
Furniture & equipment 1,690,105 1,569,767
--------------- --------------
10,244,551 9,894,064
Accumulated depreciation (1,622,889) (1,340,343)
--------------- --------------
8,621,662 8,553,721
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OTHER ASSETS
Goodwill less accumulated amortization 2,717,384 2,839,745
Other 177,896 223,141
--------------- --------------
2,895,280 3,062,886
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$ 12,732,308 $ 12,638,137
=============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
6/30/2000 9/30/99
(UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long term debt $ 331,561 $ 375,622
Accounts payable - trade 488,527 514,447
Accrued expenses 371,414 115,752
-------------- --------------
Total current liabilities 1,191,502 1,005,821
LONG TERM DEBT, LESS CURRENT PORTION
Long-term debt less current portion 3,896,797 4,282,777
-------------- --------------
Total Liabilities 5,088,299 5,288,598
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COMMITMENTS AND CONTINGENCIES --- ---
MINORITY INTERESTS 42,422 34,247
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par, authorized
1,000,000shares; none outstanding --- ---
Common stock - $.01 par, authorized
15,000,000 shares
issued 3,710,178 and 3,613,678 37,102 36,137
Additional paid in capital 9,968,814 9,727,309
Retained earnings (deficit) (2,404,329) (2,448,154)
-------------- --------------
Total stockholder's equity 7,601,587 7,315,292
-------------- --------------
$ 12,732,308 $ 12,638,137
============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 3,066,228 $ 2,025,907 $ 8,625,918 $ 8,440,359
------------- ------------- -------------- -------------
OPERATING EXPENSES
Cost of goods sold 439,399 274,966 1,270,857 1,165,671
Salaries and wages 1,109,908 785,678 3,008,121 2,756,267
Other general and administrative
Taxes and permits 443,625 330,446 1,284,282 1,122,497
Charge card fees 49,680 30,763 128,726 123,252
Rent 41,534 14,785 68,259 282,819
Legal and accounting 209,524 110,798 495,578 438,595
Advertising 204,971 127,320 613,113 437,974
Other 604,716 474,919 1,626,188 1,619,257
------------- ------------- -------------- -------------
3,103,357 2,149,674 8,495,124 7,946,332
------------- ------------- -------------- -------------
INCOME/(LOSS) FROM OPERATIONS (37,129) (123,766) 130,794 494,027
Interest Expense (102,811) (111,295) (316,322) (421,721)
Interest Income 6,311 10,207 22,646 10,863
Loss on Termination of Lease 0 0 0 (219,780)
Gain on Sale of Subsidiary 0 0 0 347,991
Other Income 206,707 0 206,707 0
------------- ------------- -------------- -------------
INCOME/(LOSS) BEFORE 73,078 (224,855) 43,825 211,380
EXTRAORDINARY ITEM
EXTRAORDINARY ITEM
Gain on Fire Damage 0 0 0 256,592
------------- ------------- -------------- -------------
NET INCOME/(LOSS) $ 73,078 $ (224,855) $ 43,825 $ 467,972
============= ============= ============== =============
BASIC NET INCOME (LOSS) PER COMMON SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 0.02 $ (0.07) $ 0.01 $ 0.06
EXTRAORDINARY ITEM 0.00 0.00 0.00 0.08
------------- ------------- -------------- -------------
NET INCOME (LOSS) $ 0.02 $ (0.07) $ 0.01 $ 0.14
============= ============= ============== =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,710,178 3,391,227 3,669,234 3,306,219
============= ============= ============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET INCOME $ 43,825 $ 467,972
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES:
Depreciation and amortization 404,907 344,345
Gain on fire damage and disposal of assets 0 (247,865)
Loss on termination of lease 0 219,780
Gain on sale of subsidiary 0 (347,991)
Minority Interest 8,175 11,204
Changes in assets and liabilities:
Accounts receivable (116,547) (251,850)
Prepaid expenses 3,721 (101,195)
Inventories (20,089) 12,218
Other assets 45,245 (182,861)
Accounts payable and accrued expenses 229,742 (1,001,696)
-------------- --------------
Cash provided (used) by operating expenses 598,979 (1,077,939)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property equipment (350,487) (741,117)
Proceeds from insurance on fire damage 0 504,457
Proceeds from sale of subsidiary 0 1,057,327
-------------- --------------
Cash provided (used) by investing activities (350,487) 820,667
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued, less offering costs 242,470 567,187
Payments on long-term debt (430,041) (294,231)
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Cash used by financing activities (187,571) 272,956
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NET INCREASE IN CASH 60,921 15,684
CASH AT BEGINNING OF PERIOD 378,161 597,644
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CASH AT END OF PERIOD $ 439,082 $ 613,328
============== ==============
CASH PAID DURING PERIOD FOR:
Interest $ 316,322 $ 421,721
============== ==============
</TABLE>
<PAGE>
RICK'S CABARET INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with 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 nine months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending September 30,
2000.
2. SEGMENT INFORMATION
In October 1999, the Company launched its web-sites operation. This
segment derives revenues from membership fees, traffic sold, and sale of feeds
to other web-site operators. Below is the financial information on this
segment. Since the web-sites operation started in October 1999, there is no
comparison to the previous year of operation.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JUNE 30, 2000 ENDED JUNE 30, 2000
<S> <C> <C>
REVENUES
Internet Web-sites $ 246,525 $ 429,656
Clubs operation 2,819,703 8,196,262
---------------------- ---------------------
$ 3,066,228 $ 8,625,918
====================== =====================
NET INCOME/(LOSS)
Internet Web-sites $ (57,169) $ (327,562)
Clubs operation 284,426 777,892
Corporate expenses (154,179) (406,505)
---------------------- ---------------------
$ 73,078 $ 43,825
====================== =====================
PROPERTY & EQUIPMENT, NET DEPRECIATION
Internet Web-sites $ 258,410
Clubs operation $ 8,363,252
---------------------
$ 8,621,662
=====================
</TABLE>
<PAGE>
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
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 three adult Internet membership web sites at
www.dancerdorm.com, www.amateurdan.com, www.smutdog.com, and
------------------ ---------------
www.xxxpassword.com.
We also own and operate adult nightclubs under the name "Rick's
Cabaret" and "XTC" which offer live adult entertainment, 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 have also entered into a letter of intent to purchase a third
location in Houston with a lease on the property.
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 in December
1998.
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.
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2000 AS
COMPARED TO THE THREE AND NINE MONTHS ENDED JUNE 30, 1999
For the quarter ended June 30, 2000, the Company had consolidated total
revenues of $3,066,228 compared to consolidated total revenues of $2,025,907 for
the fiscal quarter ended June 30, 1999, or an increase of $1,040,321. The
increase in total revenues was due to the increase in revenues in the Company's
existing locations of $220,665 and to the revenues generated in the Company's
new locations of $819,656.
The cost of goods sold for the quarter ended June 30, 2000 was 14.33% of
total revenues compared to 13.58% for the quarter ended June 30, 2000. The
increase was due primarily to the initial costs of our internet operations. The
cost of goods sold for the clubs operation for the quarter ended June 30, 2000
was 13.49%. The management continued its efforts to achieve reductions in cost
of goods sold of the club operations through improved inventory management. The
Company continues a program to improve margins from liquor and food sales and
food service efficiency.
Payroll and related costs for the quarter ended June 30, 2000 were
$1,109,908 compared to $785,678 for the quarter ended June 30, 1999. The
increase was a reflection of the additional personnel experienced by the Company
as it adds more locations and continues to increase the size and the scope of
its internet operation. The labor cost for the internet operation was $129,042
and for club operations was $980,866. Management currently believes that its
labor and management staff levels are of appropriate levels.
Other selling, general and administrative expenses for the quarter ended
June 30, 2000 were $1,554,050 compared to $1,089,030 for the quarter ended June
30, 1999. The increase was due to increased number of the Company's locations.
Interest expense for the quarter ended June 30, 2000 was $102,811 compared
to $111,295 for the quarter ended June 30, 1999. The decrease was primarily
due to the Company's position in not obtaining new debts, but to aggressively
reduce its debt burden.
Other Income for quarter ended June 30, 2000 of $206,707 was vendors'
concessions on Company's liabilities.
Net income for the quarter ended June 30, 2000 was $73,078 compared to a
net loss of ($224,855) for the quarter ended June 30, 1999. The increase was
due to the increase in net income in Company's locations and the vendors'
concessions on Company's liability. Management currently believes that the
Company is in the position to be profitable in fiscal 2000.
For the nine months ended June 30, 2000, the Company had consolidated total
revenues of $8,625,918 compared to consolidated total revenues of $8,440,359 for
the fiscal nine months ended June 30, 1999, or an increase of $185,559. The
increase in total revenues was due to both the increase in the number of
locations and in the revenues in each of the Company's location.
The cost of goods sold for the nine months ended June 30, 2000 was 14.74%
of total revenues compared to 13.81% for the nine months ended June 30, 1999.
The increase was due primarily to the initial costs of our internet operation.
The cost of goods sold for the club operation for the nine months ended June 30,
2000 was 13.10%. Management continued its efforts to achieve reductions in cost
of goods sold through improved inventory management. The Company continues a
program to improve margins from liquor and food sales and food service
efficiency.
Payroll and related costs for the nine months ended June 30, 2000 were
$3,008,121 compared to $2,756,267 for the nine months ended June 30, 1999. The
increase was a reflection of the additional personnel experienced by the Company
<PAGE>
as it adds more locations and continues to increase the size and the scope of
its internet operation. The labor cost for the internet operation was $266,137
and for club operations was $2,741,984. Management currently believes that its
labor and management staff levels are of appropriate levels.
Other selling, general and administrative expenses for the nine months
ended June 30, 2000 were $4,216,146 compared to $4,024,394 for the nine months
ended June 30, 1999. The increase was due to increase in marketing due to an
increased number of the Company's locations.
Interest expense for the nine months ended June 30, 2000 was $316,322
compared to $421,721 for the nine months ended June 30, 1999. The decrease was
primarily attributable to Company's aggressive effort to pay off its debt and
not acquiring a new debt.
Other Income for the nine months ended June 30, 2000 of $206,707 was
vendors' concessions on Company's liabilities.
Net income before extraordinary item for the nine months ended June 30,
2000 was $43,825 compared to a net income before extraordinary item of $211,380
for the nine months ended June 30, 1999. The decrease was due to the initial
costs in the Company's internet operations. Management currently believes that
the Company is in the position to be profitable in fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had working capital of $23,864 compared to a
working capital of $15,709 at September 30, 1999. The increase in working
capital was due primarily to the increase in accounts receivable.
Net cash provided by operating activities in the nine months ended June 30,
2000 was $598,979 compared to net cash used of $1,085,135 for the nine months
ended June 30, 1999. The increase in cash provided by operating activities was
due to and an increase in accounts payable and accrued expenses and significant
profit before depreciation in 2000.
Depreciation and Amortization for the nine months ended June 30, 2000 were
$404,907 compared to $344,345 for the nine months ended June 30, 1999.
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.
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.
<PAGE>
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 and 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.
PART II - OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Data Schedule - Exhibit 27.1
Report of Independent Auditor on Review of Unaudited Financial Statements -
Exhibit 99.1
(b) Reports on Form 8-K
Assets Purchase Agreement for acquisition of
www.xxxpassword.com -- incorporated by reference to Form 8-K filed on
-------------------
July 12, 2000.
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: August 7, 2000 By: /s/ Eric S. Langan
---------------------------
Eric S. Langan
President and Chief Accounting Officer
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Rick's Cabaret International, Inc. and Subsidiaries
We have reviewed the accompanying balance sheets of Rick's Cabaret
International, Inc. and Subsidiaries as of June 30, 2000, and the related
statements of income for the three month and nine month periods then ended and
the statement of cash flows for the nine month period then ended. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of analytical procedures applied to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Rick's Cabaret International, Inc. and
Subsidiaries as of September 30, 1999, and the related statements of earnings
and cash flows for the year then ended (not presented separately herein), and in
our report dated December 1, 1999, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of September 30, 1999, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
Jackson & Rhodes P.C.
Dallas, Texas
August 10, 2000
<PAGE>
