Page
----
Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001 5
Consolidated Statements of Operations for the three and six months
ended June 30, 2002 and June 30, 2001 6
Consolidated Statement of Stockholders' Deficiency for the six months
ended June 30, 2002 7
Consolidated Statements of Cash Flows for the six months ended
June 30, 2002 and June 30, 2001 8
Notes to Consolidated Financial Statements 9
4
SCORES HOLDING COMPANY INC
(FORMERLY INTERNET ADVISORY CORPORATION)
CONSOLIDATED BALANCE SHEET
June 30, December 31,
2002 2001
----------- ------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash $ 11,249 $ 18,626
Notes Receivable 10,000 10,000
Interest Receivable 674 -
----------- --------
Total Current Assets 21,923 28,626
FURNITURE AND EQUIPMENT, NET 114,352 48,763
REORGANIZATION VALUE IN EXCESS OF AMOUNTS
ALLOCABLE TO IDENTIFIABLE ASSETS 9,814 9,814
OTHER ASSETS:
Security Deposits 1,002,667 2,667
----------- --------
$ 1,148,756 $ 89,870
=========== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Current portion of prepetition debt $ 14,991 $ 14,991
Current portion of prepetition long term debt - related party 6,875 6,875
Post petition accrued expenses 41,276 -
Related party payable 35,000 35,000
Accounts payable and accrued expenses 143,919 94,125
Deposit payable - -
Loan payable - -
Loan payable - related party 1,210,077 -
----------- --------
Total Current Liabilities 1,452,138 150,991
PREPITITION LONG TERM DEBT 16,714 22,178
STOCKHOLDERS' DEFICIENCY
Common stock, $.001 par value; 50,000,000 shares authorized,
15,999,676 and 4,601,794 issued and outstanding, respectively 15,999 4,602
Additional paid-in capital 740,144 -
Deficit accumulated during development stage (1,076,239) (87,901)
----------- --------
Total Stockholder's deficiency (320,096) (83,299)
----------- --------
$ 1,148,756 $ 89,870
=========== ========
See notes to consolidated financial statements.
5
SCORES HOLDING COMPANY INC
(FORMERLY INTERNET ADVISORY CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, Three Months Ended June 30,
----------------------------- ----------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
NET SALES $ 56,250 $ 175,979 $ 6,250 $ 56,749
COST OF GOODS SOLD - 88,761 0 33,369
----------- ----------- ----------- -----------
GROSS PROFIT 56,250 87,218 6,250 23,380
GENERAL AND ADMINISTRATIVE EXPENSES 925,613 187,710 711,001 265
----------- ----------- ----------- -----------
NET PROFIT (LOSS) FROM OPERATIONS (869,363) (100,492) (704,751) 23,115
INTEREST INCOME (EXPENSE) 674 (257) 337 (106)
----------- ----------- ----------- -----------
NET LOSS BEFORE INCOME TAXES (868,689) (100,749) (704,414) 23,009
PROVISION FOR INCOME TAXES - - - -
----------- ----------- ----------- -----------
NET PROFIT (LOSS) $ (868,689) $ (100,749) (704,414) 23,009
=========== =========== =========== ===========
NET LOSS PER SHARE $ (0.05) $ (0.01) (0.04) 0.00
=========== =========== =========== ===========
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING 15,826,343 14,445,018 15,826,343 14,445,018
=========== =========== =========== ===========
See notes to consolidated financial statements.
6
SCORES HOLDING COMPANY INC
(FORMERLY INTERNET ADVISORY CORPORATION)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIENCY
Common Stock Additional Total
---------------------- Paid in Accumulated Stockholders
Shares Amount Capital Deficit Deficit
---------- ------- ---------- ------------ ------------
Balance as of December 31, 2001 (audited) 4,601,794 $ 4,602 $ - $ (87,901) $ (83,299)
Issuance of shares resulting from the acquisition 10,000,000 10,000 (10,000) - -
Recapitalization resulting from the acquisition - - 10,000 (119,649) (109,649)
Forward stock split 650,382 650 (650) -
Converted debt 15,000 15 14,985 - 15,000
Issuance of shares for services 732,500 732 725,809 726,541
Net loss - - - (868,689) (868,689)
---------- ------- -------- ----------- ---------
Balance as of June 30, 2002 (unaudited) 15,999,676 $15,999 $740,144 $(1,076,239) $(320,096)
========== ======= ======== =========== =========
See notes to consolidated financial statements.
7
SCORES HOLDING COMPANY INC
(FORMERLY INTERNET ADVISORY CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30,
---------------------------
2002 2001
----------- -----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (868,689) $(100,749)
Adjustments to reconcile net loss to net cash provided
by (used) in operating activities:
Depreciation 6,500 71,676
Converted debt 15,000 -
Accounts receivable - (73)
Interest receivable (674) -
Prepitition debt - -
Post petition accrued expenses 41,276 -
Accounts payable and accrued expenses 49,794 (791,475)
Deposit payable - -
Debt restructuring - 867,242
Deferred revenue - (14,912)
----------- ---------
NET CASH PROVIDED BY (USED) IN OPERATIONS (756,793) 31,709
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital expenditures (72,089) -
Security deposits (1,000,000) -
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES (1,072,089) -
----------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES:
Issuance of shares resulting from the acquisition 10,000 -
Issuance of shares 732
Additional paid in capital 725,809
Recapitalization resulting from the acquisition (119,649) -
Prepetition long term debt (5,464) -
Loan payable -
Loan payable - related party 1,210,077 -
Proceeds from officer loan - (30,500)
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,821,505 (30,500)
----------- ---------
NET DECREASE IN CASH (7,377) 1,209
CASH, beginning of the period 18,626 21,031
----------- ---------
CASH, end of the period $ 11,249 $ 22,240
=========== =========
Supplemental disclosures of cash flow information:
Interest paid $ - $ -
Taxes paid - -
Non cash financing activities:
Common stock issued for services $ 726,541 -
See notes to consolidated financial statements.
8
SCORES HOLDING COMPANY INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Note 1: Basis of Presentation
The accompanying unaudited consolidated financial statements of Scores Holding
Company Inc., formerly Internet Advisory Corporation, (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation (consisting of normal recurring accruals) have been
included. The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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. Operating
results expected for the six months ended June 30, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002. For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2001. Per share data for the periods are based upon the
weighted average number of shares of common stock outstanding during such
periods, plus net additional shares issued upon exercise of options and
warrants.
Note 2: Equity Transactions
During the first quarter the Company declared a forward 3 for 1 stock split for
shares not owned by a principal shareholder. The forward stock split resulted in
650,382 shares of common stock being issued.
In March 2002, the Company issued 15,000 shares of common stock at $1.00 per
share for an outstanding legal debt.
In April 2002, the Company issued 12,500 shares of common stock for an
outstanding consulting fee.
9
In April 2002, the Company issued 60,000 shares of common stock for an
outstanding legal debt.
In April 2002, the Company issued 400,000 shares of common stock for an
outstanding consulting fee.
In June 2002, the Company issued 60,000 shares of common stock for an
outstanding consulting fee.
In June 2002, the Company issued 200,000 shares of common stock for an
outstanding legal debt.
Note 3: Acquisition
On March 11, 2002 the Company exchanged 10,000,000 shares of capital stock for
all of the outstanding stock of Go West Entertainment, Inc. (Go West) whose
primary asset is a lease on New York City retail space with a deposit of
$750,000. Go West has had no operations. Due to related management and ownership
of both Internet Advisory and Go West, for accounting purposes the transaction
has been treated as a transaction between entities under common control as
described in paragraphs D11 to D18 of Financial Accounting Standard 141 -
Business Combinations. The acquisition has been recorded as of January 1, 2002
using the carrying values of the assets of each company as of that date. The
statements of operations and cash flows represent the operations of both
companies' from January 1, 2002.
Note 4. Real Estate Lease
Go West entered into on October 3, 2001 for the rental of a building in New York
City to be converted to an entertainment club. The term of the lease is for
twenty years commencing on June 1, 2002. Go West is entitled to 50% base rental
deferral in the first year or the period commencing on June 1, 2002 and ending
the day operations begin if no default occurs. The amount deferred shall be
payable as additional rent during the second year of operations.
The rental commitments for the next five years are as follows:
Year ended December 31,
2002 408,333
2003 728,000
2004 757,120
2005 787,405
2006 818,904
The Company has the option to acquire the building with a related party. The
Company paid $750,000 as security deposit through March 31, 2002 and remaining
$250,000 on May 15, 2002.
10
On July 10, 2002, the Company transferred its data center assets located at 2455
East Sunrise Blvd., Fort Lauderdale, Florida to Worldwide Connect, Inc.,
pursuant to an installment sale arrangement between the Company and Worldwide
Connect Inc., and Lonnie Divine, the principal of Worldwide Connect. The assets
consist of bay routers and computer hardware equipment previously utilized by
the Company in its Internet operations. In connection with the sale, Worldwide
Connect will make 24 monthly payments to the Company in the aggregate amount of
$200,000 followed by a nominal payment of $100 to complete the purchase. The
Company will pay the rental obligation to the landlord through the termination
of the lease, February 28, 2003. The rental obligation, including security
deposit of $666.67 per month is $6,184.43 per month. The security deposit will
be returned to the Company upon termination of the lease. The sale of the data
center assets concludes the Internet related business for the Company and allows
the Company to devote all of its resources to its proposed adult entertainment
business.
Note 5: Loan payable - related party
The Company borrowed $1,210,077 from six related party entities.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On March 11, 2002 we entered into an Acquisition Agreement with Go West
Entertainment Inc., a New York corporation ("Go West"), and the shareholders of
Go West. Pursuant to the Acquisition Agreement, we acquired all of the issued
and outstanding capital stock of Go West from the Go West Shareholders, making
Go West a wholly owned subsidiary of ours in exchange for 10,000,000 shares of
our restricted common stock. Our unaudited consolidated financial statements as
of June 30, 2002 and for the six-month period ended June 30, 2002 reflect such
acquisition.
RESULTS OF OPERATIONS
For the three-month period ended June 30, 2002 and June 30, 2001, we had
revenues of $6,250 and $56,749, respectively. For the six-month period ended
June 30, 2002 and June 30, 2001, we had revenues of $56,250 (all of which were
attributable to our month to month contract with Scores Entertainment, Inc., a
related party) and $175,979, respectively. The decrease in revenue was
attributable to the Internet operations being ceased in the beginning of the
second quarter. Our cost of goods sold was $0 for the three-month period ended
June 30, 2002 and $33,369 for the three-month period ended June 30, 2001,
respectively. Our cost of goods sold was $0 for the six-month period June 30,
2002 and $88,761 for the six-month period ended June 30, 2001. The decrease in
cost of goods sold was attributable to the Internet operations being ceased in
the beginning of the second quarter. We incurred general and administrative
expenses of $704,751 for the three-month period ended June 30, 2002 and $265 for
the three-month period ended June 30, 2001. We incurred general and
administrative expenses of $869,363 for the six-month period ended June 30, 2002
and $187,710 for the six-month period ended June 30, 2001. The increase in
general and administrative expenses was primarily attributable to legal and
consulting expenses incurred by Go West. For the three-month period ended June
30, 2002, we had a net loss of $704,414 or approximately $.04 per share as
compared to a net profit of $23,009, for the three-month period ended June 30,
2001. For the six-month period ended June 30, 2002, we had a net loss of
$868,689 or approximately $.05 per share as compared to a net loss of $100,749
or approximately $.01 per share for the six-month period ended June 30, 2001. We
recognize revenues as they are earned, not necessarily as they are collected.
Direct costs such as hosting expense, design cost and server expense are
classified as cost of goods sold. General and administrative expenses include
accounting, advertising, contract labor, bank charges, depreciation,
entertainment, equipment rental, insurance, legal, supplies, payroll taxes,
postage, professional fees, telephone and travel.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred losses since the inception of our business. Our net loss
of $868,689 for the six-month period is primarily due to the inclusion of Go
West operating expenses. Since our inception, we have been dependent on
acquisitions and funding from lenders and investors to conduct operations. As of
June 30, 2002 we had an accumulated deficit of $1,076,239. As of June 30, 2002,
we had total current assets of $21,923 and total current liabilities of
$1,452,138 or negative working capital of $1,430,215. At December 31, 2001, we
had total current assets of
12
$28,626 and total current liabilities of $150,991 or negative working capital of
$122,365. We currently have no material commitments for capital expenditures
other than those related to the renovation of our leased property at 533-535
West 27th Street, New York, New York, (the "Leased Property") at which we intend
to operate an adult entertainment nightclub commencing during the fourth quarter
of 2002. The increase in the amount of our negative working capital is primarily
attributable to payables incurred in connection with payment of the security
deposit on the Leased Property, including payables due to related parties. 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
nightclub business.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 3, 2002 we issued 12,500 shares of our restricted common stock to
Monte Weiner in consideration of $12,500 in consulting fees. The shares were
issued in reliance on the exemption from registration contained in Section 4(2)
of the Securities Act of 1933, as amended.
On April 16, 2002 we issued an aggregate of 400,000 shares of our
restricted common stock to 7 persons in consideration of $400,000 in consulting
fees. All of these issuances were made in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as
amended.
On April 3, 2002 we issued 10,000,000 shares of our restricted common stock
to Interauditing Srl pursuant to a Collateral Loan Agreement in which the shares
were issued to collateralize a loan. Due to an administrative problem that
prevented the loan from being made, on May 10, 2002 the shares were returned and
cancelled. The shares were issued in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act of 1933, as amended.
On May 10, 2002 we issued an aggregate of 10,000,00 shares of our
restricted common stock to Richard Goldring, Elliot Osher and William Osher, the
3 former shareholders of Go West Entertainment Inc. ("Go West"), pursuant to the
March 11, 2002 Acquisition Agreement among us, Go West and the Go West
shareholders, in consideration for all of the issued and outstanding capital
stock of Go West. The shares were issued in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as
amended.
13
On June 24, 2002 we issued 60,000 shares of our restricted common stock to
3rd Millenium Management, LLC, our financial public relations firm in
consideration of $60,000 in consulting fees. The shares were issued in reliance
on the exemption from registration contained in Section 4(2) of the Securities
Act of 1933, as amended.
No other restricted equity securities were sold by us during the period
covered by this Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 23, 2002, stockholders holding 10,891,668 (approximately 69.2%) of
our outstanding common shares consented in writing to amend our certificate of
incorporation to change our name to Scores Holding Company Inc. On July 9, 2002,
following the mailing of a Definitive Information Statement to shareholders of
recording as at May 23, 2002, the name change was effected by the filing of a
Certificate of Amendment to our Certificate of Incorporation with the Delaware
Secretary of State.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K
During the period covered by this Report on May 29, 2002, we filed a
Current Report on Form 8-K/A dated March 11, 2002. Item 7 of the Form 8-K/A
contained audited and pro forma financial statements respecting Go West
Entertainment Inc., a company acquired by us on March 11, 2002.
14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Scores Holding Company Inc.
Dated: August 14, 2002 By: /s/ Richard Goldring
------------------------------------
Richard Goldring
President, Chief Executive and
Financial Officer
The undersigned, the Chief Executive and Accounting Officer of the
Registrant, certifies that this Report complies with all of the requirements of
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, and
the information contained in this Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Dated: August 14, 2002 By: /s/ Richard Goldring
------------------------------------
Richard Goldring
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