UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June
30, 2015
or
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-16665
SCORES HOLDING COMPANY, INC.
(Exact name of registrant as specified in
its charter)
Utah |
|
87-0426358 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
533-535 West 27 th Street, New York, NY |
|
10001 |
(Address of principal executive offices) |
|
(Zip Code) |
|
212-246-9090 |
|
|
(Registrant’s telephone number, including area code) |
|
N/A
(Former Name, Former Address and Former
Fiscal Year, If Changed Since Last Report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 ¨
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes
x No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2
of the Exchange Act:
Large accelerated filer ¨ |
Accelerated filer ¨ |
|
|
Non-accelerated filer ¨ |
Smaller reporting company x |
(Do not check if a smaller reporting company) |
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
No x
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date:
As of August 14, 2015 there were 165,186,144 shares of common
stock, $0.001 par value per share, outstanding.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Except for historical information, this report contains “forward-looking
information” within the meaning of the Private Securities Litigation Reform Act of 1995, and Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended. Such forward-looking statements involve risks
and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs
and expenses. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may,”
“will,” “anticipates,” “intends,” “expects,” “projects,” “estimates,”
“believes,” “seeks,” “could,” “should,” the negative thereof or comparable terminology.
Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to, those discussed in the section “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”. You are cautioned not to place undue reliance on the forward-looking
statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the
forward-looking statements or reflect events or circumstances taking place after the date of this document.
PART I - FINANCIAL INFORMATION
SCORES HOLDING COMPANY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
June 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
CURRENT ASSETS: | |
| | | |
| | |
Cash | |
$ | 286,518 | | |
$ | 127,253 | |
Trade receivables - including affiliates, net | |
| 468,840 | | |
| 324,410 | |
Prepaid expenses | |
| 28,093 | | |
| 11,268 | |
Loan receivable | |
| - | | |
| 34,844 | |
Settlement receivable | |
| - | | |
| 23,781 | |
| |
| | | |
| | |
Total Current Assets | |
| 783,451 | | |
| 521,556 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 783,451 | | |
$ | 521,556 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 105,992 | | |
$ | 105,254 | |
Security deposit payable | |
| 50,000 | | |
| 37,500 | |
Note payable related party | |
| - | | |
| 34,844 | |
Related party payable | |
| 15,000 | | |
| - | |
Settlement payable due to related party | |
| - | | |
| 28,654 | |
| |
| | | |
| | |
Total Current Liabilities | |
| 170,992 | | |
| 206,252 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 170,992 | | |
| 206,252 | |
| |
| | | |
| | |
Commitments and Contingencies (Note 8) | |
| - | | |
| - | |
| |
| | | |
| | |
STOCKHOLDERS' EQUITY | |
| | | |
| | |
Preferred stock, $.0001 par value, 10,000,000 shares authorized, -0- issued and outstanding | |
| - | | |
| - | |
Common stock, $.001 par value; 500,000,000 shares authorized, 165,186,144 issued and outstanding | |
| 165,186 | | |
| 165,186 | |
Additional paid-in capital | |
| 6,058,117 | | |
| 6,058,117 | |
Accumulated deficit | |
| (5,610,844 | ) | |
| (5,907,999 | ) |
| |
| | | |
| | |
Total stockholders' Equity | |
| 612,459 | | |
| 315,304 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 783,451 | | |
$ | 521,556 | |
See notes to the condensed consolidated
financial statements.
SCORES HOLDING COMPANY, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
| |
Three Months Ended | | |
Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
REVENUES | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Royalty Revenue | |
$ | 392,279 | | |
$ | 166,405 | | |
$ | 614,267 | | |
$ | 370,758 | |
| |
| | | |
| | | |
| | | |
| | |
Total Revenue | |
| 392,279 | | |
| 166,405 | | |
| 614,267 | | |
| 370,758 | |
| |
| | | |
| | | |
| | | |
| | |
EXPENSES | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
General and Administrative Expenses | |
| 125,266 | | |
| 117,545 | | |
| 316,891 | | |
| 234,334 | |
| |
| | | |
| | | |
| | | |
| | |
INCOME FROM OPERATIONS | |
| 267,013 | | |
| 48,860 | | |
| 297,376 | | |
| 136,424 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME/(EXPENSE) | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Interest Income/(Expense), net | |
| (63 | ) | |
| (420 | ) | |
| (220 | ) | |
| (921 | ) |
Settlement | |
| - | | |
| 33,274 | | |
| - | | |
| 97,161 | |
| |
| | | |
| | | |
| | | |
| | |
TOTAL OTHER INCOME/(EXPENSE) | |
| (63 | ) | |
| 32,854 | | |
| (220 | ) | |
| 96,240 | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME BEFORE INCOME TAXES | |
| 266,950 | | |
| 81,714 | | |
| 297,156 | | |
| 232,664 | |
| |
| | | |
| | | |
| | | |
| | |
PROVISION FOR INCOME TAXES | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME | |
$ | 266,950 | | |
$ | 81,714 | | |
$ | 297,156 | | |
$ | 232,664 | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME PER SHARE-Basic and Diluted | |
| 0.002 | | |
| 0.000 | | |
| 0.002 | | |
| 0.001 | |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING-Basic and Diluted | |
| 165,186,144 | | |
| 165,186,124 | | |
| 165,186,144 | | |
| 165,186,124 | |
See notes to the condensed consolidated
financial statements.
SCORES HOLDING COMPANY INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
| |
Six Months Ended | |
| |
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net Income | |
$ | 297,156 | | |
$ | 232,664 | |
| |
| | | |
| | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| |
| | | |
| | |
Changes in assets and liabilities: | |
| | | |
| | |
Licensee receivable | |
| (144,430 | ) | |
| (48,138 | ) |
Prepaid expenses | |
| (16,825 | ) | |
| (16,352 | ) |
Security deposit payable | |
| 12,500 | | |
| 15,000 | |
Accounts payable and accrued expenses | |
| 737 | | |
| (12,688 | ) |
| |
| | | |
| | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | |
| 149,138 | | |
| 170,486 | |
| |
| | | |
| | |
CASH FLOW FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Related party payables | |
| 15,000 | | |
| (143,775 | ) |
Settlement receivable | |
| 23,781 | | |
| 68,440 | |
Loan receivable | |
| 34,844 | | |
| (838 | ) |
Settlement payable | |
| (28,654 | ) | |
| (97,172 | ) |
Loan payable | |
| (34,844 | ) | |
| 838 | |
| |
| | | |
| | |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | |
| 10,127 | | |
| (172,507 | ) |
| |
| | | |
| | |
NET INCREASE/(DECREASE) IN CASH | |
| 159,265 | | |
| (2,021 | ) |
Cash and cash equivalents - beginning of year | |
| 127,253 | | |
| 4,522 | |
Cash and cash equivalents - end of year | |
$ | 286,518 | | |
$ | 2,501 | |
| |
| | | |
| | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Cash paid during the year for interest | |
$ | 952 | | |
$ | 12,125 | |
Cash paid for income taxes | |
$ | 1,225 | | |
$ | 1,139 | |
See notes to condensed consolidated
financial statements.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Organization
BASIS OF PRESENTATION
Scores Holding Company, Inc. and subsidiary
(the “Company”) is a Utah corporation, formed in September 1981 and located in New York, NY. Originally incorporated
as Adonis Energy, Inc., the Company adopted its current name in July 2002. The Company is a licensing company that exploits the
“SCORES” name and trademark for licensing options.
The condensed consolidated financial statements
of the Company have been prepared in accordance with generally accepted accounting principles in the United States. The consolidated
financial statements of the Company include the accounts of Scores Licensing Corp. (“SLC”).
Our condensed consolidated financial statements
include our accounts, as well as those of our wholly-owned subsidiary. Certain prior period amounts have been reclassified
to conform to the current period presentation. Our accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnote disclosures required by U.S. GAAP for complete financial statements. The
condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the condensed
consolidated results of operations and financial position for the interim periods presented. All such adjustments are
of a normal recurring nature. These unaudited condensed interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes to the consolidated financial statements contained in
our Annual Report on Form 10-K for the year ended December 31, 2014.
The preparation of financial statements in
conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. The results of
operations for the six months ended June 30, 2015 are not necessarily indicative of the results to be expected for any other interim
period or for the year ending December 31, 2015.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 2. Summary of Significant Accounting
Principles
Concentration of Credit Risk
The Company earns predominately royalty revenues
and to a lesser extent merchandise sales from 14 licensees.
With regards to 2015, concentrations of sales
from 4 licensees range from 11% to 14%, totaling 52%. There are receivables from 3 licensees ranging from 15% to 25% on these licensees
for 2015 totaling 61%. Included in these amounts for 2015 were sales from 1 licensee considered a related party representing 11%
of sales. There are receivables from 3 licensees considered related parties of 15%, 21% and 25%.
With regards to 2014, concentrations of sales
from 5 licensees range from 16% to 20%, totaling 86%. There are receivables from 4 licensees ranging from 11% to 41% on these licensees
for 2014 totaling 87%.Included in these amounts for 2014 were sales from 1 licensee considered a related party representing 16%
of sales. There are receivables from 2 licensees considered related parties of 22% and 41%.
Revenue recognition
The Company records revenues earned as royalties
under its license agreements as they are earned over the term of the license agreements. The terms of the royalties earned under
these license agreements vary from a flat monthly fee to a percentage of the revenues of the licensee on a monthly basis. If a
license agreement is terminated then the remaining unearned balance of the deferred revenues are recorded as earned if applicable.
As
a result of the tenuous nature of the gentlemen’s club industry in general and the resulting financial instability of several
of our new licensees the company has implemented a policy of recognizing revenue for these specific entities as it is received
rather than when it is earned. Once our relationship with them has been more firmly established and payments have been made regularly
and on time we will report these revenues when earned.
Principles of consolidation
The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. Inter-company items and transactions have been eliminated in consolidation.
Cash and cash equivalents
The Company considers all highly liquid temporary
cash investments, with a maturity of three months or less when purchased, to be cash equivalents. There are times when cash may
exceed $250,000, the FDIC insured limit.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Income per Share
Net income per share data for both the six-month
periods ending June 30, 2015 and 2014 are based on net income available to common shareholders divided by the weighted
average of the number of common shares outstanding. As of June 30, 2015, there are no outstanding stock equivalents.
Fair Value of Financial Instruments
The carrying value of cash, trade receivables,
prepaid expenses, other receivables and accrued expenses, if applicable, approximate their fair values based on the short-term
maturity of these instruments. The carrying amounts of debt were also estimated to approximate fair value.
The Company utilizes the methods of fair value
measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, fair value is based on
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair
value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are
described below:
Level 1: Quoted prices (unadjusted) in active
markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority
to Level 1 inputs.
Level 2: Observable prices that are based on
inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when
little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
New Accounting Pronouncements
In June 2014, FASB issued Accounting Standards
Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”. The update gives entities a
single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide
goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or
services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance
throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic
605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses
in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users
of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition
practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements
by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning
after December 15, 2016, including interim periods within that reporting period. This updated guidance is not expected to have
a material impact on our results of operations, cash flows or financial condition.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
All new accounting
pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have
any impact once adopted.
Note 3. Related-Party Transactions
Transactions with Common ownership affiliates:
On January 24, 2006, the Company entered into
a licensing agreement with AYA International, Inc. (“AYA”) granting AYA the right to use our trademarks in connection
with its online video chat website, “Scoreslive.com.” The agreement with AYA provides for royalty payments to be made
directly to the Company at the rate of 4.99% of weekly gross revenues from all revenue sources within the AYA website. On December
21, 2009, AYA transferred all of its rights in Scoreslive.com and in its licensing agreement with us to Swan Media Group, Inc.,
a New York corporation whose majority owner (80%) is Robert M. Gans, who is also the majority shareholder and chief executive
officer of the Company. The Company is owed $117,189 and $111,279 in unpaid royalties and expenses as of June 30, 2015 and December
31, 2014, respectively.
On January 27, 2009, the Company entered into
a licensing agreement with its affiliate through common ownership I.M. Operating LLC (“IMO”) for the use of the Scores
brand name “Scores New York”. Robert M. Gans is the majority owner (72%) of IMO and is also the Company’s
majority shareholder, and Howard Rosenbluth, the Company’s Treasurer and a Director, owns 2%. IMO owes the Company a royalty
receivable of $99,207 and $59,935 as of June 30, 2015 and December 31, 2014, respectively.
The Company also leases office space directly
from Westside Realty of New York, Inc. (WSR), the owner of the West 27th Street Building. The majority owner
of WSR (80%) is Robert M. Gans. Since April 1, 2009, the monthly rent has been $2,500 per month including overhead costs.
The Company owed WSR $0 and $0 in unpaid rents as of June 30, 2015 and December 31, 2014, respectively.
Effective January 1, 2013, the Company entered
into a management services agreement with Metropolitan Lumber Hardware and Building Supplies, Inc., pursuant to which Metropolitan
Lumber Hardware and Building Supplies, Inc. provides management and other services to the Company, including the services of Robert
M. Gans and Howard Rosenbluth to act as executive officers of the Company. In consideration of the services, the Company pays Metropolitan
Lumber Hardware and Building Supplies, Inc. a fee in the amount of $30,000 per year. The agreement may be terminated by either
party upon ten days’ written notice. Mr. Gans is the sole owner of Metropolitan Lumber Hardware and Building Supplies, Inc.
On May 5, 2015, we entered into an amendment, effective as of January 1,
2015, to our management services agreement with Metropolitan Lumber, Hardware
and Building Supplies, Inc. Pursuant to the amendment, the fee we pay MLH for the management
and other services it provides to us was increased from $30,000 per year to $90,000 per year, payable quarterly in arrears.
In addition, the agreement as amended provides that MLH will be eligible for a discretionary cash bonus based on (i) MLH’s
performance throughout the relevant fiscal year (or portion thereof) of the Company; and (ii) the Company’s performance throughout
such fiscal year (or portion thereof). The Board of Directors is responsible for establishing and implementing performance
goals and a performance-based bonus plan, and the amount of the bonus, if any, will be determined by the Board in accordance with
such plan. The agreement as amended does not guarantee MLH a bonus for any year (or portion thereof). The Company
owed Metropolitan Lumber Hardware and Building Supplies, Inc. $15,000 and $0 in unpaid management services as of June 30, 2015
and December 31, 2014, respectively.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Effective December 9, 2013, we granted an exclusive,
non-transferable license for the use of the “Scores Atlantic City” name to Star Light Events LLC (“Star Light”)
for its gentlemen’s club in Atlantic City, New Jersey. Royalties under this license are payable at the rate of $10,000 per
month, commencing in April 2014, and the license is for a term of five years, with five successive five year renewal terms. Pursuant
to the written agreement, we also granted Star Light a non-exclusive, non-transferable license to sell certain licensed products
bearing our trademarks. Starlight will purchase the licensed products from us or our affiliates at our cost plus 25%. Robert M.
Gans, our President, Chief Executive Officer and a director, is the majority owner (92.165%) of Star Light Events LLC and
Howard Rosenbluth, our Secretary, Treasurer and a Director, owns 1%. Starlight owes the Company a royalty receivable of $70,000
and $60,000 as of June 30, 2015 and December 31, 2014, respectively.
On December 9, 2013, the Company entered
into a license agreement with its subsidiary, SLC, granting SLC the exclusive right to use certain trademarks, including the
“Scores” stylized trademark, in connection with certain goods and services. The grant of license also
includes the right to issue sublicenses to third parties, subject to the approval of the Company. Pursuant to the
agreement, SLC shall pay to the Company a royalty, as determined by the Company, such as a percentage of net revenue or a
flat fee, received in connection with the provision of services and/or sale of goods using the trademarks. SLC may also
pay a percentage, as determined by the Company, of all royalties received by SLC under any sublicense agreements. SLC
and any sublicensees are to adhere to quality standards as set by the Company, and the Company has the right to inspect all
facilities and approve all promotional and marketing materials as well as any related packaging. The agreement
has a one-year term with automatic one-year renewals, subject to either party’s election to terminate the agreement at
least thirty days prior to such renewal. The Company also has the right to terminate the agreement, with immediate
effect, upon the occurrence of certain events. The license is subject to any pre-existing license agreements as of the
date of the agreement.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The total amounts due to the various related
parties as of June 30, 2015 and December 31, 2014 was $15,000 and $0 respectively and the total amounts due to the Company from
the various related parties as of June 30, 2015 and December 31, 2014 was $286,397 and $231,214, respectively.
Note 4. Intangible Assets
Trademark
The Company has been in the business of licensing
the “Scores” trademarks and other intellectual property to gentlemen’s nightclubs with adult entertainment in
the United States. In connection with the acquisition of Scores Licensing Company (“SLC”) during 2002, the Company
acquired the trademark to the name "SCORES". Through 2008 the trademark had accumulated a gross recorded value of $878,318
which was derived from the initial purchase of HEIR Holding Co., Inc. (subsequently renamed SLC) for $250,000, $175,000 as a result
of a settlement agreement entered into in September 2006 between the Company and now former affiliated parties and Scores Entertainment
Inc. ("SEI") and Irving Bilzinsky and $453,318 as a result of our purchase of the royalty rights and licensing rights
under the Master License Agreement from a former affiliate Entertainment Management Services, Inc.
in December 2008.. This trademark has been registered in the United States, Canada, Japan, Mexico and the European Community.
The Company's trademark having an infinite useful life by its definition is being amortized over ten years due to the difficult
New York legal environment for which the related showcase adult club is operating. As of June 30, 2015 and December 31, 2014 the
cost of the trademark has been fully amortized and or partially impaired in the prior years.
Note 5. Licensees
The Company has eighteen license agreements
which were obtained between 2003 and 2015; Stone Park Entertainment Group, Inc. known as “Scores Chicago”, Club 2000
Eastern Avenue Inc. known as “Scores Baltimore”, Silver Bourbon, Inc., I.M Operating LLC known as “IMO”,
Tampa Food and Entertainment Inc., Norm A Properties, LLC, Swan Media Group, Inc. (formerly AYA International, Inc.), South East
Clubs (which includes Savannah and Jacksonville), Starlight Events LLC known as “Scores Atlantic City”, Scores Licensing
Corp known as “SLC”, Houston KP LLC, Parallax Management Corporation known as “Scores Gary”, Manhattan
Fashion, L.L.C. known as “Scores Harvey”, TWDDD, Inc. known as “Scores Mooresville”, Greenville, South
Carolina, Columbus, Ohio, Providence, Rhode Island and New Haven, Connecticut. See Note 8 for litigation relating to a few
of these clubs.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
“IMO’s” members are our majority
shareholder, Robert M. Gans (72%), and Secretary and Director, Howard Rosenbluth (2%) hence making “IMO” a related
party. The building occupied by IMO is owned by Westside Realty of New York Inc., of which the majority owner is Robert M. Gans
(80%). The club accounted for 6% and 16% of our royalty revenues for the first six months of 2015 and 2014, respectively. Mr. Gans
is also the majority owner (80%) of Swan Media Group, Inc., which accounted for 1% and 8% of our royalty revenues for the first
six months of 2015 and 2014, respectively. Mr. Gans is also the majority owner (92.165%) of Scores Atlantic City, which accounted
for 10% and 8% of our royalty revenue for the first six months of 2015 and 2014, respectively.
Note 6. Settlement/Note Receivables
On September 26, 2011, the Company, Richard
Goldring and Elliot Osher (Goldring and Osher were formerly two of the Company’s principal shareholders) (collectively the
“Defendants”) and Sari Diaz et al. (the “Plaintiffs”) entered into a Court approved Joint Stipulation of
Settlement and Release (the “Settlement Agreement”) relating to a purported class action and collective action on behalf
of all tipped employees filed by Plaintiffs, pursuant to which Defendants agreed to make a settlement payment of $450,000 to resolve
and settle awards to Plaintiffs and related Plaintiffs’ attorneys’ fees. Additionally, the Defendants agreed to pay
the employer portion of payroll taxes on approximately $300,000 in distributions, approximately $15,600.
In a settlement payment agreement among the
Company, Goldring and Osher, the Company agreed to advance all of the Defendants’ obligations under the Settlement Agreement
and to pay $64,500 of Goldring’s and Osher’s legal fees to their designated attorney. In consideration for the Company’s
payment of these obligations, Goldring and Osher agreed, jointly and severally, to pay the Company $440,000 plus interest at the
rate of 5% per annum on the unpaid balance of such amount, in 40 equal monthly payments of $11,965 per month. To secure his obligations
under this agreement, Goldring agreed to assign to the Company a portion of his interests in a promissory note dated September
14, 2009 in the principal amount of $2,400,000 made by a third party to Goldring (the “Note”) and to grant the Company
a security interest in the Note, which will remain in effect until his obligations under this settlement payment agreement are
paid in full. As of June 30, 2015 and December 31, 2014 the settlement receivable balance is $0 and $23,781, respectively.
On December 29, 2011 the Company entered into
a Promissory Note with Goldring for $30,000 plus interest at the rate of 5% per annum on the unpaid balance. To secure his obligations
under this agreement, Goldring agreed to assign to the Company a portion of his interests in a promissory note dated September
14, 2009 in the principal amount of $2,400,000 made by a third party to Goldring (the “Note”) and to grant the Company
a security interest in the Note, which will remain in effect until his obligations under this settlement payment agreement are
paid in full. Three payments of $11,965 are due beginning March 2015. As of June 30, 2015 and December 31, 2014, this promissory
note balance is $0 and $34,844, respectively.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7. Settlement/Note Payable
As discussed in Note 6 regarding the settlement
receivable it should be noted that Mr. Gans (the Company’s Chief Executive Officer and majority stockholder) advanced $560,151
to settle the Sari Diaz et. al. litigation and fund the $30,000 loan to Mr. Goldring. As of June 30, 2015 and December 31, 2014,
$0 and $28,654 is outstanding, respectively.
Note 8. Commitments and Contingencies
The Company records $7,500 a month as
rent, overhead, and services due to Metropolitan Lumber Hardware Building Supplies, Inc. for services rendered by the
management of the Company. Mr. Gans is the sole owner of Metropolitan Lumber Hardware Building Supplies, Inc. A discretionary
$90,000 cash bonus has been rendered to Metropolitan Lumber Hardware Building Supplies, Inc. through the management services
agreement.
The Company currently leases office space from
the Westside Realty of New York which is owned and operated by Robert Gans our majority shareholder, for $2,500 a month.
On June 14, 2011, Christina Maldonado, a former
front door receptionist/coat checker at Scores New York, located in New York NY filed a civil lawsuit against the Company and IMO
alleging violations of Title VII of the Civil Rights Act, New York State Human Rights Law, New York Executive Law, New York City
Human Rights Law and the New York City Administrative Code, based on allegations of sexual discrimination and sexual harassment.
The lawsuit further alleged that both the Company and IMO were her employers. The lawsuit sought unspecified damages for alleged
loss of past and future earnings and emotional distress and humiliation. The Company disputed that that it was an employer of the
plaintiff and categorically denied all allegations of sexual discrimination and sexual harassment. The Company responded to the
complaint and later filed an amended complaint and asserted a cross claim against IMO. The parties settled the litigation with
no liability on the Company’s part, and a stipulation of discontinuance was filed on April 22, 2015. On June 14, 2013, Elizabeth
Shiflett, a former cocktail waitress, filed a civil lawsuit against the Company in the S.D.N.Y. alleging violations of Title VII
of the Civil Rights Act of 1964 (“Title VII”), as amended, the New York State Human Rights Law (“NYSHRL”)
and the New York City Human Rights Law (“NYCHRL”) based upon allegations of sexual discrimination, creating a hostile
work environment based upon plaintiff’s sex and race and unlawful retaliation against plaintiff. The lawsuit further alleges
that at all material times the Company was the employer of the plaintiff. The lawsuit had been preceded by a Determination of the
U.S. Equal Employment Opportunity Commission (the “EEOC”) on January 25, 2013 that there was reasonable cause to believe
that the Company had violated Title VII as a result of the complained-of conduct. The lawsuit seeks a declaratory judgment that
the practices complained of violated Title VII, the NYSHRL and the NYCHRL, an injunction enjoining the Company from engaging in
future unlawful acts of discrimination, harassment and retaliation, unspecified compensatory damages for plaintiff’s alleged
loss of past and future earnings, emotional distress, humiliation and loss of reputation, punitive damages as a result of the Company’s
alleged disregard of plaintiff’s protected civil rights, and attorneys’ fees and costs. The Company disputes that it
was an employer of the plaintiff and categorically denies all allegations of sexual discrimination, sexual and racial harassment
and retaliation. In an order dated April 10, 2014, the Court dismissed all federal claims. In May 2014, Ms. Shiflett filed an appeal.
On February 19, 2015 the United States Court of Appeals Second Circuit, upheld the order from April 2014 and all federal claims
have been dismissed.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On or about March 7, 2014, Kiana Love, a former
entertainer and masseuse at The Penthouse Executive Club and Scores New York, both located in New York, NY, filed a civil lawsuit
in the SDNY against us, The Executive Club, LLC, Go West Entertainment, Inc., Scores Entertainment, Inc., Entertainment Management
Services, Inc., 333 East 60th Street., Inc., I.M. Operating, LLC, Richard Goldring, Elliot Osher, Robert Gans and Mark Yackow (collectively
“Defendants”), alleging, for the time during which she performed as a masseuse, violations of the state and federal
wage and hour laws, including the New York Labor Law and Fair Labor Standards Act, based upon allegations of failure to pay minimum
wage, uniform related expenses, and allegations of improper wage deductions and tip misappropriation as well as record keeping
violations. The lawsuit further alleged that at all material times Defendants were employers of Ms. Love, the plaintiff, while
she performed massage services at Scores New York as well as The Penthouse Executive Club. The lawsuit sought unspecified
compensatory damages for plaintiff’s alleged loss of past wages and reimbursement of allegedly unlawful deductions. Without
any party admitting liability, the parties settled the referenced litigation for approximately $21,403.65. The settlement was approved
by the Court on April 13, 2015 and the case has been marked closed.
On February 13, 2015 we, together with our
subsidiary SLC, filed an action against Southeast Show Clubs, LLC and Michael Tomkovich in the Supreme Court of the State of New
York for the County of New York. Defendants had utilized the “Scores” name and trademark in connection with their ownership
and operation of adult entertainment clubs in Jacksonville and Palm Beach, Florida and in Savannah, Georgia. In this action we
sought damages for breach of contract in the amount of $900,000 plus interest, damages due to defamation and tortious interference
in connection with the use of the “Scores” trademark in the amount of $500,000, issuance of a permanent injunction
prohibiting defendants from using the “Scores” name and trademark with respect to the adult entertainment clubs they
operate in Jacksonville and Palm Beach, Florida and Savannah, Georgia and all websites controlled by defendants, and an accounting
by defendants of all merchandise items sold by them containing the “Scores” trademark. As of April 17, 2015 the parties
settled this matter. Pursuant to the settlement, defendants agreed to pay us $150,000, payable in 13 installments. The first installment
of $50,000 was paid upon finalization of the settlement, with 12 subsequent monthly payments of $8,333.33 commencing on May 1,
2015. The defendants also executed consents to the entry of a permanent injunction against them prohibiting their continued use
of the name and trademark “Scores” at their clubs if either or both of the defendants default in their obligations
under the settlement. In connection with the settlement, the parties entered into an amendment of the July 18, 2013 License Agreement
between them. The amendment, among other things, (i) removes the Palm Beach club from the license agreement, (ii) provides that
the license agreement shall only apply to the Jacksonville and Savannah nightclubs, (iii) requires the licensees to pay us a fixed
royalty of $5,000 per month for each club, commencing May 1, 2015, and (iv) requires that the Savannah nightclub and any related
websites utilize the name “Scores Presents.” As of June 30, 2015 the defendants remain in compliance with this settlement.
SCORES HOLDING COMPANY and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On February 19, 2015 we, together with our
subsidiary SLC, filed an action against Norm A Properties LLC in the Supreme Court of the State of New York for the County of New
York. Defendant utilizes the “Scores” name and trademark in connection with its ownership and operation of and adult
entertainment club in Detroit, Michigan. In this action we sought damages for breach of contract in the amount of $110,000 plus
interest, and the issuance of a permanent injunction prohibiting defendant from using the “Scores” name and trademark
with respect to the Detroit club and all websites controlled by defendant. To date defendant has not filed its answer to our complaint.
There are no other material legal proceedings
pending to which the Company or any of its property is subject, nor to our knowledge are any such proceedings threatened.
Note 9. SUBSEQUENT EVENTS
Management evaluated subsequent events through
the date of this filing and determined that no additional events have occurred that would require adjustment to or disclosure in
the financial statements.
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 eleven such clubs currently operating under the
Scores name, in New York City, Atlantic City, Baltimore, Chicago, Tampa, New Orleans, Savannah, Jacksonville, Houston, Harvey,
LA and Gary, IN. A club in Detroit, Michigan is operating but is in default and breach of contract. Clubs in Mooresville, North
Carolina, Greenville, South Carolina, Columbus, Ohio, Providence, Rhode Island and New Haven, Connecticut are not yet
operating.
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
June 30, 2015 (“the 2015 three-month period”) Compared to Three Months Ended June 30, 2014 (“the 2014 three-month
period”).
Revenues:
Revenues increased
to $392,279 for the 2015 three-month period from $166,405 for the 2014 three-month period.
Revenues from the New
York Club decreased twelve percent (12%) to $22,003 as compared to $24,987 for the 2015 and 2014 three-month periods, respectively. Revenues
from our Chicago nightclub increased twenty-four percent (24%) to $43,867 for the 2015 three-month period from $35,489 from the
2014 three-month period, while revenues from our Baltimore club decreased three percent (3%) to $35,645 for the 2015 three-month
period from $36,645 for the 2014 three-month period and revenues from our New Orleans club remained the same at $30,000 for the
2015 and 2014 three-month period. Revenue from our Tampa club remained the same at $30,000 for the 2015 and 2014 three-month period.
Revenue from our Scoreslive.com licensee decreased seventy-six percent (76%) to $2,264 for the 2015 three-month period from $9,285
for the 2014 three-month period. Revenues from our Atlantic City nightclub licensee remained the same at $30,000 for the 2015 and
2014 three-month period. Revenues from our Houston Club increased one hundred percent (100%) to $11,500 as royalties commenced
in the fourth quarter of 2014. Revenues from our Harvey Club increased one hundred percent (100%) to $15,000 as royalties commenced
in the fourth quarter of 2014. Revenues from our Gary, Indiana Club increased one hundred percent (100%) to $2,000, as royalties
commenced in the first quarter of 2015. Revenues from our Savannah Club increased one hundred percent (100%) to $85,000 as the
Club has started to pay royalties including past due royalties. Revenues from our Jacksonville Club increased one hundred percent
(100%) to $85,000 as the Club has started to pay royalties including past due royalties. Since our licenses are mostly 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.
General and Administrative
Expenses:
General and administrative
expenses increased during the 2015 three-month period to $125,266 from $117,545 during the 2014 three-month period. General
and administrative expenses increased approximately by $7,721 from 2015 to 2014, which can be attributed mainly to the increase
in management services of $22,500 through the management services agreement along with the decrease in legal fees. Legal
expenses attributable to ongoing litigation amounted to $7,886 for the three-month period ended June 30, 2015 and $48,410 for the
three-month period ended June 30, 2014.
Provision for Income
Taxes
The provision for state
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:
Our net income was
$266,950 or $0.002 for the 2015 three-month period compared to net income of $81,714 or $0.000 per share for the 2014 three-month
period. The increase in net income for the 2015 three-month period from the 2014 three-month period was in part a result of
the Jacksonville and Savannah clubs paying past due royalties for the 2015 three-month period pursuant to an April 17, 2015 amendment
to our licensing agreement with the operator of these clubs.
Net income per share
data for both the 2015 three-month period and the 2014 three-month period is based on net income available to common shareholders
divided by the weighted average of the number of common shares outstanding.
Six Months Ended
June 30, 2015 (“the 2015 six-month period”) Compared to Six Months Ended June 30, 2014 (“the 2014 six-month
period”).
Revenues:
Revenues increased
to $614,267 for the 2015 six-month period from $370,758 for the 2014 six-month period.
Revenues from the New
York Club decreased thirty-three percent (33%) to $39,272 as compared to $58,463 for the 2015 and 2014 six-month periods, respectively. Revenues
from our Chicago nightclub increased nineteen percent (19%) to $77,764 for the 2015 six-month period from $65,314 from the 2014
six-month period, while revenues from our Baltimore club decreased three percent (3%) to $69,820 for the 2015 six-month period
from $72,342 for the 2014 six-month period and revenues from our New Orleans club remained the same at $60,000 for the 2015 and
2014 six-month period. Revenue from our Tampa club remained the same at $60,000 for 2015 and 2014 six month period. Revenue from
our Scoreslive.com licensee decreased seventy-six percent (76%) to $5,910 for the 2015 six-month period from $24,640 for the 2014
six-month period. Revenues from our Atlantic City nightclub licensee increased one hundred percent (100%) to $60,000 for the 2015
six month period from $30,000 for the 2014 six month period. Revenues from our Houston Club increased one hundred percent (100%)
to $33,500 for the 2015 six month period, as royalties commenced in the fourth quarter of 2014. Revenues from our Harvey Club increased
one hundred percent (100%) to $30,000 for the 2015 six month period, as royalties commenced in the fourth quarter 2014. Revenues
from our Gary Indiana Club increased one hundred percent (100%) to $8,000, for the 2015 six month period, as royalties commenced
in the first quarter of 2015. Revenues from our Savannah Club increased one hundred percent (100%) to $85,000 for the 2015 six
month period, as the Club has started to pay royalties including past due royalties. Revenues from our Jacksonville Club increased
one hundred percent (100%) to $85,000 for the 2015 six month period, as the Club has started to pay royalties including past due
royalties. Since our licenses are mostly 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.
General and Administrative
Expenses:
General and administrative
expenses increased during the 2015 six-month period to $316,891 from $234,334 during the 2014 six-month period. General
and administrative expenses increased approximately by $82,557 from 2015 to 2014, which increase can largely be attributed to the
discretionary bonus to the management services of $90,000 and the decrease in the Company’s legal fees. Legal
expenses attributable to ongoing litigation amounted from $22,291 in the 2015 six-month period to $91,828 in the 2014 six-month
period.
Provision for Income
Taxes:
The provision for state
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:
Our net income was
$297,156 or $0.002 per share for the 2015 six-month period compared to a net income of $232,664 or $0.001 per share for the 2014
six-month period. The increase in net operating income for the 2015 six-month period was a result of an increase in
royalty revenue.
Net income per share
data for both the 2015 six-month period and the 2014 six-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 June 30, 2015, we
had $286,518 in cash and cash equivalents compared to $127,253 in cash and cash equivalents at December 31, 2014.
Operating Activities:
Net cash provided by
operating activities for the six months ended June 30, 2015 was $149,138 and net cash provided by operating activities for the
six months ended June 30, 2014 was $170,486. The net increase in cash for the six months ended June 30, 2015 was $159,265 compared
to a net decrease in cash of $2,021 for the comparable 2014 period. The increase in cash is related to the collection of past due
royalties received in April/May 2015.
Financing Activities:
As of June 30, 2015,
we owed $0 in rent to our Westside Realty affiliate and $15,000 to our Metropolitan Lumber Hardware and Building Supplies, Inc.
affiliate.
Future Capital Requirements:
We have incurred losses
since the inception of our business. Since our inception, we have been dependent on funding from private lenders and investors
to conduct operations. As of June 30, 2015 we had an accumulated deficit of $(5,610,844). As of June 30, 2015, we had total current
assets of $783,451 and total current liabilities of $170,992 or working capital of $612,459. As of December 31, 2014, we had total
current assets of $521,556 and total current liabilities of $206,252 or working capital of $315,304. The increase in the amount
of working capital has been primarily attributable to the decrease in our related party payable.
We will continue to
evaluate possible acquisitions of or investments in businesses, products and technologies that are complimentary to ours. These
may require the use of cash, which would require us to seek financing. We may sell equity or debt securities or seek credit facilities
to fund acquisition-related or other business costs. Sales of equity or convertible debt securities would result in additional
dilution to our stockholders. We may also need to raise additional funds in order to support more rapid expansion, develop new
or enhanced services or products, respond to competitive pressures, or take advantage of unanticipated opportunities. Our future
liquidity and capital requirements will depend upon numerous factors, including the success of our adult entertainment trademark
licensing business.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk.
Not applicable.
Item 4. Controls
and Procedures.
(a) Evaluation of Disclosure Controls
and Procedures
Based on management’s
evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer), as of the end of the period
covered by this report, our CEO and Chief Financial Officer have concluded that our disclosure of controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective
to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules
and forms and is accumulated and communicated to management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control
over Financial Reporting
There were no changes
in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange
Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On June 14, 2013, Elizabeth Shiflett, a
former cocktail waitress, filed a civil lawsuit against us in the S.D.N.Y. alleging violations of Title VII of the Civil Rights
Act of 1964 (“Title VII”), as amended, the New York State Human Rights Law (“NYSHRL”) and the New York
City Human Rights Law (“NYCHRL”) based upon allegations of sexual discrimination, creating a hostile work environment
based upon plaintiff’s sex and race and unlawful retaliation against plaintiff. The lawsuit further alleges that at all material
times we were the employer of the plaintiff. The lawsuit had been preceded by a Determination of the U.S. Equal Employment Opportunity
Commission (the “EEOC”) on January 25, 2013 that there was reasonable cause to believe that we had violated Title VII
as a result of the complained-of conduct. The lawsuit seeks a declaratory judgment that the practices complained of violated Title
VII, the NYSHRL and the NYCHRL, an injunction enjoining us from engaging in future unlawful acts of discrimination, harassment
and retaliation, unspecified compensatory damages for plaintiff’s alleged loss of past and future earnings, emotional distress,
humiliation and loss of reputation, punitive damages as a result of our alleged disregard of plaintiff’s protected civil
rights, and attorneys’ fees and costs. We dispute that we were an employer of the plaintiff and categorically deny all allegations
of sexual discrimination, sexual and racial harassment and retaliation. In an order dated April 10, 2014, the Court dismissed all
federal claims. In May, 2014, Ms. Shiflett filed an appeal. On February 19, 2015, the United States Court of Appeals for the Second
Circuit upheld the order from April 2014 and all federal claims have been dismissed.
On June 14, 2011, Christina
Maldonado, a former front door receptionist/coat checker at Scores New York, located in New York, NY filed a civil lawsuit in Supreme
Court of the State of New York (the “SCNY”) against us and IMO alleging violations of Title VII of the Civil Rights
Act, NYSHRL, New York Executive Law, NYCHRL and the New York City Administrative Code, based on allegations of sexual discrimination
and sexual harassment. The lawsuit further alleged that both we and IMO were her employers. The lawsuit sought unspecified damages
for alleged loss of past and future earnings and emotional distress and humiliation. We disputed that that we were an employer
of the plaintiff and categorically denied all allegations of sexual discrimination and sexual harassment. We responded to the complaint
and later filed an amended complaint and asserted a cross claim against IMO. The parties settled the litigation with no liability
on our part, and a stipulation of discontinuance was filed on April 22, 2015.
On or about March 7,
2014, Kiana Love, a former entertainer and masseuse at The Penthouse Executive Club and Scores New York, both located in New York,
NY, filed a civil lawsuit in the SDNY against us, The Executive Club, LLC, Go West Entertainment, Inc., Scores Entertainment, Inc.,
Entertainment Management Services, Inc., 333 East 60th Street., Inc., I.M. Operating, LLC, Richard Goldring, Elliot Osher, Robert
Gans and Mark Yackow (collectively “Defendants”), alleging, for the time during which she performed as a masseuse,
violations of the state and federal wage and hour laws, including the New York Labor Law and Fair Labor Standards Act, based upon
allegations of failure to pay minimum wage, uniform related expenses, and allegations of improper wage deductions and tip misappropriation
as well as record keeping violations. The lawsuit further alleged that at all material times Defendants were employers of Ms. Love,
the plaintiff, while she performed massage services at Scores New York as well as The Penthouse Executive Club. The lawsuit
sought unspecified compensatory damages for plaintiff’s alleged loss of past wages and reimbursement of allegedly unlawful
deductions. Without any party admitting liability, the parties settled the referenced litigation for approximately $21,403.65.
The settlement was approved by the Court on April 13, 2015 and the case has been marked closed.
On February 13, 2015
we, together with our subsidiary SLC, filed an action against Southeast Show Clubs, LLC and Michael Tomkovich in the SCNY. Defendants
had utilized the “Scores” name and trademark in connection with their ownership and operation of adult entertainment
clubs in Jacksonville and Palm Beach, Florida and in Savannah, Georgia. In this action we sought damages for breach of contract
in the amount of $900,000 plus interest, damages due to defamation and tortious interference in connection with the use of the
“Scores” trademark in the amount of $500,000, issuance of a permanent injunction prohibiting defendants from using
the “Scores” name and trademark with respect to the adult entertainment clubs they operate in Jacksonville and Palm
Beach, Florida and Savannah, Georgia and all websites controlled by defendants, and an accounting by defendants of all merchandise
items sold by them containing the “Scores” trademark. As of April 17, 2015 the parties settled this matter. Pursuant
to the settlement, defendants agreed to pay us $150,000, payable in 13 installments. The first installment of $50,000 was paid
upon finalization of the settlement, with 12 subsequent monthly payments of $8,333.33 commencing on May 1, 2015. The defendants
also executed consents to the entry of a permanent injunction against them prohibiting their continued use of the name and trademark
“Scores” at their clubs if either or both of the defendants default in their obligations under the settlement. In connection
with the settlement, the parties entered into an amendment of the July 18, 2013 License Agreement between them. The amendment,
among other things, (i) removes the Palm Beach club from the license agreement, (ii) provides that the license agreement shall
only apply to the Jacksonville and Savannah nightclubs, (iii) requires the licensees to pay us a fixed royalty of $5,000 per month
for each club, commencing May 1, 2015, and (iv) requires that the Savannah nightclub and any related websites utilize the name
“Scores Presents.”
On February 19, 2015
we, together with our subsidiary SLC, filed an action against Norm A Properties LLC in the SCNY. Defendant utilizes the “Scores”
name and trademark in connection with its ownership and operation of an adult entertainment club in Detroit, Michigan. In this
action we sought damages for breach of contract in the amount of $110,000 plus interest, and the issuance of a permanent injunction
prohibiting defendant from using the “Scores” name and trademark with respect to the Detroit club and all websites
controlled by defendant. To date defendant has not filed its answer to our complaint.
There are no other
material legal proceedings pending to which we or any of our property are subject, nor to our knowledge are any such proceedings
threatened.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults
upon Senior Securities.
None.
Item 4. Mine Safety
Disclosure.
Not applicable.
Item 5. Other Information.
On April 20, 2015,
we (through our subsidiary Scores Licensing Corp.) entered into a trademark license agreement with High Five Management Inc., granting
it an exclusive, non-transferable license for the use of certain Scores Presents trademarks in its night club/restaurant in Greenville,
South Carolina. The license is for a term of five years, with five successive five year renewal terms. Upon the club becoming fully
operational, we will receive royalty payments of $1,250 per week. Pursuant to the agreement, SLC also granted the licensee a non-exclusive,
non-transferable license to sell certain licensed products bearing our trademarks.
On May 5, 2015, we
entered into an amendment, effective as of January 1, 2015, to our management services agreement with Metropolitan Lumber, Hardware
and Building Supplies, Inc. Pursuant to the amendment, the fee we pay MLH for the management and other services it provides to
us was increased from $30,000 per year to $90,000 per year, payable quarterly in arrears. In addition, the agreement as amended
provides that MLH will be eligible for a discretionary cash bonus based on (i) MLH’s performance throughout the relevant
fiscal year (or portion thereof) of the Company; and (ii) the Company’s performance throughout such fiscal year (or portion
thereof). The Board of Directors is responsible for establishing and implementing performance goals and a performance-based bonus
plan, and the amount of the bonus, if any, will be determined by the Board in accordance with such plan. The agreement as amended
does not guarantee MLH a bonus for any year (or portion thereof).
On June 17, 2015, we (through our
subsidiary Scores Licensing Corp.) entered into a trademark license agreement with Dick S. Shappy, granting it an exclusive, non-transferable
license for the use of certain Scores trademarks in its night club/restaurant in Providence, Rhode Island. The license is for a
term of five years, with two successive five year renewal terms. The license agreement provides for fixed royalties at the rate
of $10,000 per month. Pursuant to the agreement, SLC also granted the licensee a non-exclusive, non-transferable license to sell
certain licensed products bearing our trademarks.
Effective June 15,
2015, we (through our subsidiary Scores Licensing Corp.) entered into a trademark license agreement with CG Consulting
LLC, granting it an exclusive, non-transferable license for the use of certain Scores trademarks in its night club/restaurant
in Columbus, Ohio. The license is for a term of five years, with five successive five year renewal terms. Upon the earlier
of the club becoming fully operational or three months from the date of the agreement, we will receive royalty payments
of $1,250 per week. After the first two years of the term of the agreement, the licensee shall pay us royalties equal to
the greater of 4.99% of the licensee’s monthly revenue or $1,250 per week.
Effective July 24,
2015, we (through our subsidiary Scores Licensing Corp.) entered into a trademark license agreement with Funn House Productions LLC,
granting it an exclusive, non-transferable license for the use of certain Scores trademarks in its night club/restaurant in
New Haven, Connecticut. The license is for a term of five years, with five successive five year renewal terms. The license
agreement provides for fixed royalties at the rate of $5,000 per month for the first year of the agreement, increasing to $10,000 per month thereafter.
Item 6. Exhibits.
Exhibit No. |
|
Description |
31.1 |
|
*Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. |
31.2 |
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*Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002. |
32.1 |
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*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. |
32.2 |
|
*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. |
101.INS |
|
*XBRL Instance Document |
101.SCH |
|
*XBRL Taxonomy Schema Document |
101.CAL |
|
*XBRL Taxonomy Calculation Linkbase Document |
101.DEF |
|
*XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
*Taxonomy Extension Label Linkbase Document |
101.PRE |
|
*XBRL Taxonomy Extension Presentation Linkbase Document |
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 thereunto duly authorized.
|
SCORES HOLDING COMPANY, INC. |
|
|
|
Date: August 14, 2015 |
By: |
/s/ Robert M. Gans |
|
|
Robert M. Gans |
|
|
Chief Executive Officer and Director |
|
|
(Principal Executive Officer) |
|
|
|
Date: August 14, 2015 |
By: |
/s/ Howard Rosenbluth |
|
|
Howard Rosenbluth |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
Exhibit 31.1
I, Robert M. Gans, certify that:
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1. |
I have reviewed this Form 10-Q of Scores Holding Company, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 14, 2015 |
|
|
/s/ Robert M. Gans |
|
Robert M. Gans
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
I, Howard Rosenbluth, certify that:
|
1. |
I have reviewed this Form 10-Q of Scores Holding Company, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 14, 2015 |
|
|
/s/ Howard Rosenbluth |
|
Howard Rosenbluth
Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with this Quarterly Report
of Scores Company Holding, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert M. Gans, Chief Executive
Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
|
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company |
Date: August 14, 2015 |
|
|
/s/ Robert M. Gans |
|
Robert M. Gans |
|
Chief Executive Officer (Principal Executive Officer) |
A signed original of this written statement, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of
this written statement, has been provided to Scores Holding Company, Inc., and will be retained by Scores Holding Company, Inc.,
and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with this Quarterly Report
of Scores Holding Company, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Howard Rosenbluth, Chief Financial
Officer and Principal Accounting Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
|
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 14, 2015 |
|
|
/s/ Howard Rosenbluth |
|
Howard Rosenbluth |
|
Chief Financial Officer (Principal Financial Officer) |
A signed original of this written statement, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of
this written statement, has been provided to Scores Holding Company, Inc., and will be retained by Scores Holding Company, Inc.,
and furnished to the Securities and Exchange Commission or its staff upon request.
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