12-May-2016
Quarterly Report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Scores Holding Company, Inc. ("Scores," the "Company," "we," "us" or "our") was incorporated in Utah on September 21, 1981 under the name Adonis Energy, Inc. We adopted our current name in July 2002. Since 2003, we have been in the business of licensing the "Scores" trademarks and other intellectual property to fine gentlemen's nightclubs with adult entertainment in the United States. There are nineteen such clubs currently operating under the Scores name, in New York, New York; Atlantic City, New Jersey; Baltimore, Maryland; Chicago, Illinois; Tampa, Florida; New Orleans, Louisiana; Savannah, Georgia; Jacksonville, Florida; Houston, Texas; Harvey, Louisiana, Gary, Indiana; Mooresville, North Carolina; Greenville, South Carolina; Columbus, Ohio; New Haven, Connecticut; Queens, New York; Denver, Colorado; Palm Springs, Florida; and Raleigh, North Carolina. A club in Detroit, Michigan is no longer operating and is in default and breach of contract. (See the Notes to the Condensed Financial Statements, Note 9 for more information.) Clubs in Providence, Rhode Island; Buffalo, New York; Tonawanda, New York; and Wisconsin are not yet operating.
SO A TOTAL OF 26 CLUBS WILL BE OPERATING AT SOME DATE?
On January 27, 2009, Mitchell's East LLC, wholly owned by Robert M. Gans, acquired a majority interest in our outstanding capital stock. I.M. Operating LLC ("IMO"), which is partially owned by Robert M. Gans who is also our majority shareholder, has signed a licensing agreement with us and commenced operations in New York of a new club (the "New York Club") under the Scores name in May 2009. Throughout this report, we refer to the New York Club as our affiliate, because of the common ownership by Mr. Gans. All other clubs are referred to as non-affiliated clubs or as licensees, a term that may include the New York Club when the context requires.
On August 6, 2010, we appointed Robert M. Gans as our President and Chief Executive Officer and as a member of our Board. Robert Gans and Martin Gans, one of our existing Board members, are brothers. Also on August 6, 2010, we appointed Howard Rosenbluth as our Treasurer and Chief Financial Officer.
Results of Operations
Three Months Ended March 31, 2016 ("the 2016 three-month period") Compared to Three Months Ended March 31, 2015 ("the 2015 three-month period").
Revenues:
Revenues increased to $239,071 for the 2016 three-month period from $221,988 for the 2015 three-month period. This increase was primarily due to the launching of new clubs and 2 clubs paying royalties in arrears. Our licenses are structured such that we receive a percentage of revenues from our licensees, the foregoing increase or decreases are a direct result of revenues at the licensee level or structured with a flat monthly rate.
General and Administrative Expenses:
General and administrative expenses increased during the 2016 three-month period to $335,263 from $191,626 during the 2015 three-month period. General and administrative expenses increased approximately by $143,637 from 2016 to 2015, which can be attributed to the increase in taxes, payroll and an accounts receivable allowance. Legal expenses attributable to ongoing litigation amounted to $24,891 for the three-month period ended March 31, 2016 and $14,405 for the three-month period ended March 31, 2015.
Provision for Income Taxes
The provision for income taxes relates primarily to the greater of average assets and capital taxable income. The average assets and capital are not impacted by net operating losses.
Net Income (Loss):
Our net loss was $105,590 or ($.001) per share for the 2016 three-month period as compared to net income of $30,205 or $.000 per share for the 2015 three-month period. The decrease in net income for the 2016 three-month period from the 2015 three-month period was in part a result of increased general and administrative expenses discussed above.
Net income per share data for both the 2016 three-month period and the 2015 three-month period is based on net income available to common shareholders divided by the weighted average of the number of common shares outstanding.
Liquidity and Capital Resources
Cash:
At March 31, 2016, we had $375,466 in cash and cash equivalents compared to $515,994 in cash and cash equivalents at December 31, 2015.
Operating Activities:
Net cash used in operating activities for the three months ended March 31, 2016 was ($170,528) and net cash provided by operating activities for the three months ended March 31, 2015 was $33,791. The decrease in cash is related to the payment of accrued bonus.
Financing Activities:
As of March 31, 2016, we owed $7,500 in rent to our Westside Realty affiliate and $22,500 to our Metropolitan Lumber Hardware and Building Supplies, Inc. affiliate.
