Scores Holding Co Inc 10-Q for FY2021 Q2
Scores Holding Co Inc (SCRH)
About this 10-Q
Scores Holding Co Inc filed this 10-Q on May 19, 2023, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $61K
- up 577.8% from $9000 a year earlier
- Net loss
- $42.89K
- compared with a net loss of $59.67K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
For the quarterly period ended:
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For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
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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 ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of May 19, 2023 there were
TABLE OF CONTENTS
2
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, except as required by law.
PART I –FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
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Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficit | F-5 |
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Notes to Unaudited Condensed Consolidated Financial Statements | F-6 |
F-1
SCORES HOLDING COMPANY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents | | $ | | | $ | |
Trade receivables, net of allowance of $ | |
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Prepaid expenses | |
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Total Current Assets | |
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TOTAL ASSETS | | $ | | | $ | |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
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CURRENT LIABILITIES: | |
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Accounts payable and accrued expenses | | $ | | | $ | |
Accrued expenses, related party | |
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Related party loan payable | | | | | | |
Related party payable | |
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Total Current Liabilities | |
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Related party loan payable - long term | | | | | | |
Contract Liabilities | |
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TOTAL LIABILITIES | |
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Commitments and Contingencies (Note 7) | |
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STOCKHOLDERS’ DEFICIT | |
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Preferred stock, $ | |
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Common stock, $ | |
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Additional paid-in capital | |
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Accumulated deficit | |
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Total Stockholders’ Deficit | |
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | $ | | | $ | |
See notes to the unaudited condensed consolidated financial statements.
F-2
SCORES HOLDING COMPANY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended | | Six Months Ended | ||||||||
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REVENUES | | |
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Royalty Revenue | | $ | | | $ | | | $ | | | $ | |
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Total Revenue | | | | | | | | | | | | |
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OPERATING EXPENSES | |
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General and Administrative Expenses | |
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LOSS FROM OPERATIONS | |
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OTHER EXPENSE | |
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Interest Expense, net | |
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TOTAL OTHER EXPENSE | |
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NET LOSS BEFORE INCOME TAXES | | | ( | | | ( | | | ( | | | ( |
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INCOME TAXES | |
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NET LOSS | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
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NET LOSS PER SHARE-Basic and Diluted | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
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WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING-Basic and Diluted | | | | | | | | | | | | |
See notes to the unaudited condensed consolidated financial statements.
F-3
SCORES HOLDING COMPANY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net Loss | | $ | ( | | $ | ( |
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Adjustments to reconcile net loss to net cash provided by/(used in) operating activities: | |
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Recovery of bad debts | |
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Changes in operating assets and liabilities: | |
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Trade receivable | |
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Prepaid expenses | |
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Accounts payable and accrued expenses | | | | | | |
Accrued expenses, related party | |
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Accrued interest, related party | |
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Contract liabilities | | | | | | |
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES | |
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CASH FLOW FROM INVESTING ACTIVITES: | | | | | | |
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CASH FLOW FROM FINANCING ACTIVITIES: | |
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Payments to related party | |
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NET CASH USED IN FINANCING ACTIVITIES | |
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NET DECREASE IN CASH | |
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Cash and cash equivalents - beginning of period | |
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Cash and cash equivalents - end of period | | $ | | | $ | |
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Supplemental disclosures of cash flow information: | |
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Cash paid during the period for interest | | $ | | | $ | |
Cash paid for income taxes | | $ | | | $ | |
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Supplemental disclosure of cash flows from noncash investing and financing activities | | $ | | | $ | |
See notes to the unaudited condensed consolidated financial statements.
F-4
SCORES HOLDING COMPANY, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S DEFICIT
SIX MONTHS ENDED JUNE 30, 2021 AND 2020
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Balance as of December 31, 2019 | | | | $ | | | $ | | | $ | ( | | $ | ( |
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Net Income | | | | | | | | | | | | | | |
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Balance as of March 31, 2020 | | | | $ | | | $ | | | $ | ( | | $ | ( |
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Net Loss | | | | | | | | | | | ( | | | ( |
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Balance as of June 30, 2020 | | | $ | | | $ | | | $ | ( | | $ | ( | |
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Balance as of December 31, 2020 | | | | $ | | | $ | | | $ | ( | | $ | ( |
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Net Loss | | | | | | | | | | | ( | | | ( |
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Balance as of March 31, 2021 | | | $ | | | $ | | | $ | ( | | $ | ( | |
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Net Loss | | | | | | | | | | | ( | | | ( |
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Balance as of June 30, 2021 | | | | $ | | | $ | | | $ | ( | | $ | ( |
See notes to the unaudited condensed consolidated financial statements.
F-5
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1.Organization
BASIS OF PRESENTATION
Scores Holding Company, Inc. (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 utilizes the “SCORES” name and trademark for licensing options.
These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The consolidated financial statements of the Company include the accounts of Scores Licensing Corp. (“SLC”), its wholly-owned subsidiary.
The Company’s condensed consolidated financial statements include the Company’s accounts, as well as those of its wholly-owned subsidiary. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no impact on the reported results. The Company’s accompanying unaudited condensed consolidated financial statements have been prepared in accordance with 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The preparation of financial statements in conformity with U.S. GAAP requires the Company 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 three and six months ended June 30, 2021, are not necessarily indicative of the results to be expected for any other interim period or for the year ending December 31, 2021.
Note 2.Summary of Significant Accounting Principles
COVID-19
As a result of the COVID-19 virus, during the first quarter of 2020 and ongoing, state and local governments have required all but certain essential businesses to close, including all clubs operating under the Scores name.
Upon management’s evaluation of relevant hospitality industry conditions and events known as of the date that these financial statements are issued it is their belief the financial effects of the Covid 19 pandemic will not have a substantial or long term effect on the financial viability of the adult entertainment industry. There will be operational changes to be certain but not a consequentially detrimental impact on the industry.
That said it should be noted all royalty paying licensees have reopened and are current. In addition, cash collections increased from $
Although there are fewer licensees and some of the licensing fees have been re-negotiated management believes the worst of the effects the Covid 19 pandemic are over. The lifting of many, if not all, gathering restrictions imposed by local government has vastly improved the appeal of adult entertainment-oriented establishments. Consequently, the Company has seen a recent increase in the number of such establishments interested in utilizing the SCORES brand trademarks.
F-6
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Going Concern
As of June 30, 2021, the Company had an accumulated deficit totaling $
These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financials are issued. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Revenue Recognition
Under ASC 606, revenue from the initiation fees are recognizable at a point in time (first month of the contract) and royalty revenues are recognized over time for those contracts with probable collections.
The Company’s license fee revenue is generated from royalties earned through intellectual property licensing agreements which permit the licensee to use the recognition and status of the Scores brand in order to promote their businesses. Under ASC 606, revenue is recognized throughout the life of the executed licensing agreement. The Company measures revenue based on consideration specified in a contract with a customer. Furthermore, the Company recognizes revenue when it satisfies a performance obligation by transferring control over the service to its customer.
A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The Company’s customers typically receive the benefit of its services as they are performed. Substantially all customer contracts provide that the Company is compensated for services performed to date. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Nature of goods and services
The following is a description of the Company’s products and services from which it generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:
i. Licensing Revenue
Licensing fees represent the fees the Company receives from the licensing of the Company’s Scores trademark. 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. The licensing rights are transferred to the Company’s customers over time, and the Company recognizes licensing revenue over time because the customer will simultaneously receive and consume the benefit from the license as the performance occurs.
ii. Stand-Ready for Consulting and Club Set-up Services
The Company offers an initial set-up and consultation to new clubs in order to aid in the opening and operation. The services are provided within the first month of any licensing agreements, and sometimes are not requested by the licensee and therefore never provided.
F-7
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Concentration of Credit Risk
The Company earns royalty revenues from
With regards to June 30, 2021, concentrations of sales from
With regards to June 30, 2020, concentrations of sales from
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. 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 $
Income per Share
Under ASC 260-10-45, “Earnings Per Share”, basic income (loss) per common share is computed by dividing the income (loss) applicable to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted income (loss) per common share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. As of June 30, 2021, there are no outstanding stock equivalents. Accordingly, the weighted average number of common shares outstanding for the periods ended June 30, 2021 and 2020, respectively, is the same for purposes of computing both basic and diluted net income per share for such periods.
Fair Value of Financial Instruments
The carrying value of cash 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 identical 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 or quoted prices in active markets for similar assets or liabilities.
Level 3: Unobservable inputs are used when little or no market data is available including the Company’s own assumptions in determining the fair value. The fair value hierarchy gives the lowest priority to Level 3 inputs.
F-8
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Recently Issued Accounting Standards Update
Credit loss
In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendment to the initial guidance: ASU 2018-19 (collectively, Topic 326). ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact on the Company’s consolidated financial statements.
Note 3.Disaggregation of Revenue
Disaggregation of revenue
In the following table, revenue is disaggregated by major products/service lines, and timing of revenue recognition:
| | For the Three Months Ended | | For the Six Months Ended | ||||||||
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Major products/service lines |
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Licensing fees - royalty revenue | | $ | | | $ | | | $ | | | $ | |
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Total Revenue | | $ | | | $ | | | $ | | | $ | |
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Timing of revenue recognition | |
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Products transferred at a point in time | | $ | — | | $ | — | | $ | — | | $ | — |
Products and services transferred over time | | | | | | | | | | | | |
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Contract balances
The following table provides information about liabilities from contracts with customers:
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Liabilities | |
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Contract liabilities | | $ | | | $ | |
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Opening | | $ | | | $ | |
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Additions | |
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Transfer to revenue | |
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Ending | | $ | | | $ | |
Receivables are recorded at the invoiced amount and do not bear interest. Credit is extended based on the evaluation of a customer’s financial condition and collateral is not required.
F-9
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The contract liabilities primarily relate to deferred revenue. Amounts billed in advance of performance obligations being satisfied are booked as deferred revenue.
Note 4.Related-Party Transactions
Transactions with Common ownership affiliates:
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 (
On August 31, 2017, IMO entered into an agreement to sell all of its assets to Club Azure LLC (“CA”). Effective September 1, 2017, IMO no longer operated Scores New York and terminated its licensing agreement with the Company. Mark Yackow, an unrelated party, is the sole owner (
The Company 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 (
Effective January 1, 2013, the Company entered into a management services agreement with Metropolitan Lumber Hardware and Building Supplies, Inc. (“Metropolitan”) pursuant to which Metropolitan 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 paid Metropolitan a fee in the amount of $
The Company has accrued expenses of $
It should be noted as outlined below the results of two separate events and their subsequent settlement agreements were offset against one another resulting in a third settlement agreement.
First, effective February 28, 2017 (the “Effective Date”), the Company entered into separate Settlement Agreements (a “Royalty Settlement Agreement”) each with three licensees, IMO, Star Light and Swan (are sometimes referred to individually as a “Licensee” and collectively as the “Licensees”) controlled by Robert M. Gans, the Company’s President, Chief Executive Officer and a member of its Board of Directors. Pursuant to the Royalty Settlement Agreements, the Company forgave the repayment of a certain portion of unpaid, past-due royalties in return for the respective Licensees’ agreements to pay the remainder (the “Royalty Settlement Amount”) of the unpaid royalties, plus interest, to the Company. The Royalty Settlement Amount for each Licensee was represented by a promissory note.
F-10
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
IMO, Star Light and Swan owed the Company an aggregate of $
Robert M. Gans is a majority owner of the equity of each of the Licensees and guaranteed the payment of each Licensee’s obligations under each of the 3 Settlement Documents. The Licensees were not current with respect to their obligations under the Settlement Documents and the Company did not call upon Mr. Gans to honor his Guaranties.
Second, on April 3, 2016,
In July 2018, the Company entered into a confidential settlement agreement (the “Settlement Agreement”) in the Voronina litigation, and on August 4, 2018, the Court entered an order dismissing the plaintiff’s claims against the Defendants with prejudice and settled the Plaintiffs claims in the Voronina matter for $
Third, the past due amounts including principal and interest under the Royalty Settlement Agreements were $
The total amounts due to the various related parties as of June 30, 2021 and December 31, 2020, was $
Note 5.Licensees
The Company has license agreements which were obtained between 2003 and 2021.
See Note 7 for litigation relating to a few of the Company’s license agreements.
Note 6.Contract liabilities
License agreements sometimes include Initiation/Inception Fees. Please see Note 3 for a detailed discussion of this matter.
Note 7.Commitments and Contingencies
The Company records $
F-11
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company ceased leasing office space on December 31.2020 from the Westside Realty of New York which is owned and operated by Robert Gans, the Company’s majority shareholder, for $
On October 8, 2018, the Company was served with a Summons and Complaint in the action entitled Luisa Santos de Oliveira v. Scores Holding Company, Inc.; Club Azure, LLC; Robert Gans; Mark S. Yackow; Howard Rosenbluth, Docket No. 1:18-cv-06769-GBD, in the United States District Court of the Southern District The case was assigned to a Magistrate Judge. There was a conference on March 2, 2021 and a Scheduling Order was entered. On March 26, 2021, a Stipulation of Discontinuance was so ordered by the Federal Court, discontinuing all claims against the Company, Robert Gans, Mark S. Yackow and Howard Rosenbluth. Pending Court approval on May 12, 2023, a Stipulation of Voluntary Dismissal Without Prejudice was signed discontinuing all claims against Club Azure LLC.
On September 14, 2018, the Company and its subsidiary SLC, filed an action against New 4125, LLC and Mike Taraska in the Supreme Court of the State of New York, County of New York. Defendants utilized the “Scores” name and trademark in connection with its ownership and operation of an adult entertainment club located in Phoenix, Arizona. In this action, the Company sought damages for breach of contract in the amount of $
On September 5, 2019, the Company together with its subsidiary SLC filed a civil action in Supreme Court of New York, New York County against Scores Alabama. A cease and desist letter was sent. The Company finally entered into a license agreement as of March 5, 2020 with Cheetah Club, LLC for a club located in Huntsville, Alabama. They agreed to pay the arrears and then cease using the Scores brand by March 31, 2023. On April 11, 2023, the Company agreed to terminate the licensing agreement and settle this matter for .
It should be noted as outlined below the results of two separate events and their subsequent settlement agreements were offset against one another resulting in a third settlement agreement.
First, effective February 28, 2017 (the “Effective Date”), the Company entered into separate Settlement Agreements (a “Royalty Settlement Agreement”) each with three licensees, IMO, Star Light and Swan (are sometimes referred to individually as a “Licensee” and collectively as the “Licensees”) controlled by Robert M. Gans, the Company’s President, Chief Executive Officer and a member of its Board of Directors. Pursuant to the Royalty Settlement Agreements, the Company forgave the repayment of a certain portion of unpaid, past-due royalties in return for the respective Licensees’ agreements to pay the remainder (the “Royalty Settlement Amount”) of the unpaid royalties, plus interest, to the Company. The Royalty Settlement Amount for each Licensee was represented by a promissory note.
IMO, Star Light and Swan owed the Company an aggregate of $
Robert M. Gans is a majority owner of the equity of each of the Licensees and guaranteed the payment of each Licensee’s obligations under each of the 3 Settlement Documents. The Licensees were not current with respect to their obligations under the Settlement Documents and the Company did not call upon Mr. Gans to honor his Guaranties.
F-12
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Second, on April 3, 2016,
In July 2018, the Company entered into a confidential settlement agreement (the “Settlement Agreement”) in the Voronina litigation, and on August 4, 2018, the Court entered an order dismissing the plaintiff’s claims against the Defendants with prejudice and settled the Plaintiffs claims in the Voronina matter for $
Third, the past due amounts including principal and interest under the Royalty Settlement Agreements were $
On January 29, 2020, an individual referred to as Jane Doe, the Plaintiff, filed a civil suit in in the Circuit Court of the 13th Judicial Circuit, in the State of Florida, Hillsborough County, against the Company, its subsidiary, Scores Licensing Corp. (“SLC”), and several other defendants. Plaintiff’s Complaint details the somber circumstances surround the illegal actions of a non-party, who pled guilty to certain crimes against Plaintiff that were committed at a club known as Scores Tampa. Plaintiff now seeks to hold the Company and its subsidiary, among other defendants, liable in connection with the non-party’s illegal activity by asserting causes of action for negligence, vicarious liability and unjust enrichment. Initially, prior counsel moved to dismiss Plaintiff’s Complaint in lieu of filing Answers. A motion to dismiss was submitted because the Court lacks personal jurisdiction under Florida’s Long-Arm Statute and Due Process Requirements because neither the Company nor its subsidiary had minimum contacts with Florida; nor was there a benefited conferred upon them.
The Court denied the motion to dismiss. The Company and SLC then filed Amended Answers and Affirmative Defenses denying all allegations of the complaints against them. All paper discovery has been completed and depositions have been taken. The parties are attending a court ordered non-binding arbitration on May 30, 2023. The Company and SLC recently requested that Plaintiff set forth a demand to settle this matter prior to the non-binding arbitration. If the parties cannot reach a favorable settlement agreement, a trial is set for July 24, 2023, with a pretrial conference set for July 18, 2023.
On July 15, 2019, plaintiff Jeremy Green, a former consultant to Swan Media Group, Inc (“SMG”), commenced an action in U.S. District Court, Southern District of New York against Scores Holding Co., Inc., Scores Media Group LLC, Scores Digital Gaming LLC (“SDG”) and individual defendants Robert Gans and Charilaos Yioves seeking to recover from all defendants under various theories of breach of contract, unjust enrichment, promissory estoppels, fraudulent inducement and breach of implied duty of good faith and fair dealing.
On October 6, 2022 to avoid expense, inconvenience, and uncertainty of further litigation, the Company has agreed to settle this matter for $
F-13
SCORES HOLDING CO., Inc and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On April 17, 2021, in an action entitled Jessica Hall v. Scores Holding Company, Inc., et al, filed in Federal Court, Southern District of New York, the Plaintiff claims that, while she worked at an adult entertainment club located in New York, New York and commonly known as Scores NY, she was discriminated and retaliated against because of her race in violation of both Federal and State law. A motion for default judgment was denied and Plaintiff was granted permission to file and serve an Amended Complaint. Accordingly, on February 4, 2022, a First Amendment Complaint was filed. On March 4, 2022, an Answer to the First Amendment Complaint was filed on behalf of the Company asserting, inter alia, that Plaintiff’s Amended Complaint should be dismissed in its’ entirety because the Company, as simply the owner of the “Scores” brand and trademarks, did not own, operate or otherwise control Scores NY or employ, manage, or otherwise control Plaintiff’s employment.
After paper discovery was completed, a motion for summary judgment was fully submitted on behalf of the Company on June 24, 2022 seeking dismissal of all claims against the Company. Pending the Court’s decision, the parties conducted additional paper discovery and took depositions.
The Court finally rendered its’ decision on March 31, 2023. The Court denied the Company’s motion for summary judgment without prejudice because, when the motion was filed, the Plaintiff had not been afforded the opportunity to take any depositions.
On March 8, 2023, a conference was held in which Plaintiff was ordered to produce her tax returns and then file a letter by May 17, 2023 indicating whether she intends to serve any non-party subpoenas and whether the parties are willing to participate in a settlement conference with the Court in July. In the interim, the parties are attempting to settle this matter on their own. If the parties cannot reach a favorable settlement agreement, then another motion for summary judgment will be submitted on behalf of the Company. It is expected that the Company’s second motion for summary judgment will be granted given that both the documents and deposition testimony clearly show that the Company did not manage or otherwise control Plaintiff’s employment.
There are no other material legal proceedings pending to which the Company or any of its property is subject, nor to the Company’s knowledge are any such proceedings threatened.
Note 8.SUBSEQUENT EVENTS
On January 21, 2022 the Company and “Scores Chicago” entered into a Settlement Agreement and Amendment to the Licensing Agreement agreeing to a one-time payment to settle arrears resulting from the Covid 19 pandemic and to change the monthly licensing fee to a flat rate. All other terms of the original agreement were to remain in effect.
On March 23, 2022 the Company and “Scores Las Vegas” entered into a First Amendment to the Scores Trademark Sublicense Agreement agreeing to a one-time payment to settle arrears resulting from the Covid 19 pandemic and to make a one-time payment for granting it an exclusive, non-transferable license for the use of certain Scores trademarks in its night club/restaurant for a period of
On March 28, 2022, the Company paid Metropolitan , the balance due on the Settlement and Offset Agreement.
On September 23, 2022, the Company and “Scores Sports Bar” entered into a First Amendment to Scores Sports Bar Service/Trademark License Agreement. Because of the impact the Covid 19 Pandemic had on the economy and the hospitality industry, certain benchmarks in the original licensing agreement became difficult to accomplish. Essentially the amendment extended the term of the original agreement, established a new timeframe for licensing fee payments and reduced the minimum number of new establishments to be opened to a more realistic amount given the economic effects of Covid 19.
Please see Note 7 for events concerning legal matters.
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 unaudited condensed consolidated financial statements.
F-14
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. As of September 30, 2020, there are nine such clubs operating under the Scores name, in New York, New York; Chicago, Illinois; Tampa, Florida; New Orleans, Louisiana; Mooresville, North Carolina; Palm Springs, Florida, Las Vegas, Nevada, and Huntsville Alabama.
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. Effective September 1, 2017, IMO no longer owned or operated the New York Club and terminated its licensing agreement with the Company. IMO sold the New York Club to Club Azure LLC (“CA”) which was owned by Mark Yackow who is the sole owner (100%) of CA and former Chief Operating Officer of IMO. Mr. Yackow passed away on October 12, 2020. Effective September 1, 2017, the Company granted an exclusive, non-transferable license for the use of the “Scores New York” to CA for the New York Club.
Impact of COVID-19
As a result of the COVID-19 virus, during the first quarter of 2020 and ongoing, state and local governments have required all but certain essential businesses to close, including all clubs operating under the Scores name.
Upon management’s evaluation of relevant hospitality industry conditions and events known as of the date that these financial statements are issued it is their belief the financial effects of the Covid 19 pandemic will not have a substantial or long term effect on the financial viability of the adult entertainment industry. There will be operational changes to be certain but not a consequentially detrimental impact on the industry.
That said it should be noted all royalty paying licensees have reopened and are current. In addition, cash collections increased from $235,000 during 2020 to $249,000 and $794,000 during 2021 and 2022 respectively.
Although there are fewer licensees and some of the licensing fees have been re-negotiated management believes the worst of the effects the Covid 19 pandemic are over. The lifting of many, if not all, gathering restrictions imposed by local government has vastly improved the appeal of adult entertainment-oriented establishments. Consequently, the Company has seen a recent increase in the number of such establishments interested in utilizing the SCORES brand trademarks.
Summary of Critical Accounting Policies and Estimates
There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2021 from our critical accounting policies and estimates disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K.
Results of Operations
Three Months Ended June 30, 2021 (“the 2021 three-month period”) Compared to Three Months Ended June 30, 2020 (“the 2020 three-month period”).
Revenues:
Revenues increased to $61,001 for the 2021 three-month period from $9,000 for the 2020 three-month period. Revenues decreased in 2020 due to COVID causing shutdowns.
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Our licenses are structured such that we receive royalty payments representing a percentage of revenues of the licensee, or structured with a flat monthly rate.
Other Expense
Total other expense increased to $(4,002) for the 2021 three-month period from $(3,816) from the 2020 three-month period. Total other expense for the 2021 three month-period and 2020 three month-period included interest expense of $4,002 and $3,816, respectively.
General and Administrative Expenses:
General and administrative expenses increased during the 2021 and 2020 three-month period to $99,887 from $64,849, respectively. Virtually all of the increase in operating expenses can be attributed to the reopening after the COVID shutdown. Legal expenses, which are reflected in general and administrative expenses, attributable to ongoing litigation amounted to $23,174 for 2021 and $5,773 for 2020.
Provision for Income Taxes
The provision for income taxes relates primarily to the greater of average assets and capital taxable income. The average assets and capital are not impacted by net operating losses.
Net Loss:
Our net loss ($42,888) or ($0.00) per share for the 2021 three-month period as compared to our net loss was ($59,665) or ($0.00) per share for the 2020 three-month period. This increase in our net loss was primarily due to COVID.
Net loss per share data for both the 2021 three-month period and the 2020 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, 2021 (“the 2021 six-month period”) Compared to Six Months Ended June 30, 2020 (“the 2020 six-month period”).
Revenues:
Revenues decreased to $120,001 for the 2021 six-month period from $152,642 for the 2020 six-month period. Revenues decreased due to COVID causing shutdowns.
Our licenses are structured such that we receive royalty payments representing a percentage of revenues of the licensee, or structured with a flat monthly rate.
Other Expense
Total other expense increased to $(7,960) for the 2021 six-month period from $(7,560) from the 2020 six-month period. Total other expense for the 2021 six month-period and 2020 six month-period included interest expense of $7,960 and $7,560, respectively.
General and Administrative Expenses:
General and administrative expenses increased during the 2021 and 2020 six-month period to $192,240 from $176,311, respectively. Virtually all the increase in operating expenses can be attributed to the reopening after the COVID shutdown. Legal expenses, which are reflected in general and administrative expenses, attributable to ongoing litigation amounted to $44,850 for 2021 and $18,197 for 2020.
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Provision for Income Taxes
The provision for income taxes relates primarily to the greater of average assets and capital taxable income. The average assets and capital are not impacted by net operating losses.
Net Loss:
Our net loss ($80,199) or ($0.00) per share for the 2021 six-month period as compared to our net loss was ($31,229) or ($0.00) per share for the 2020 six-month period. This increase in our net loss was primarily due to the reopening from COVID.
Net loss per share data for both the 2021 six-month period and the 2020 six-month period is based on net loss available to common shareholders divided by the weighted average of the number of common shares outstanding.
Liquidity and Capital Resources
Going Concern:
Various conditions such as the accumulated losses, working capital deficit, significant debt, and the results of litigation raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Cash:
At June 30, 2021, we had $15,192 in cash and cash equivalents compared to $21,143 in cash and cash equivalents at December 31, 2020.
Operating Activities:
Net cash used in operating activities for the 2021 six-month period was $(5,951) and net cash provided by operating activities for the 2020 six-month period was $15,060. The decrease in cash provided by operating activities is related to COVID related closures.
As of June 30, 2021 and December 31, 2020, we owed $30,000 and $30,000, respectively in rent to our Westside Realty affiliate. As of June 30, 2021 and December 31, 2020, we owed to our Metropolitan Lumber Hardware and Building Supplies, Inc. affiliate $112,500 and $67,500 respectively for management fees and $366,946 and $359,692, respectively for a loan advanced to the Company to assist in paying litigation costs.
Financing Activities:
Net cash provided by financing activities for the 2021 six-month period was $0 and net cash used in financing activities for the 2020 six-month period was $22,500.
Future Capital Requirements:
We have incurred significant 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, 2021, we had an accumulated deficit of $(7,071,859). As of June 30, 2021, we had total current assets of $188,428 and total current liabilities of $774,484 or working capital deficit of $586,056. As of December 31, 2020, we had total current assets of $99,981 and total current liabilities of $273,646 or working capital deficit of $173,665. The increase in the amount of working capital deficit has been primarily attributable to the increase in payables.
We will continue to evaluate possible acquisitions of or investments in businesses, products and technologies that are complementary 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
5
future liquidity and capital requirements will depend upon numerous factors, including the success of our adult entertainment trademark licensing business.
Statement of Forward-Looking Information
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking”, including statements contained in this report and other filings with the Securities and Exchange Commission, reports to the Company’s shareholders. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and contingencies that are difficult to predict. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are qualified by the cautionary statements in this section. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements.
The forward-looking statements contained in this report include, but are not limited to, statements regarding (1) the Company’s ability to finance its future working capital.
The Company undertakes no obligation to update or publicly release any revisions to any forward-looking statement to reflect events, circumstances or changes in expectations after the date of such forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Recently Issued Accounting Pronouncements
See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021.
Impact of inflation and seasonality
We do not anticipate any changes due to inflation and/or seasonality.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4.CONTROLS AND PROCEDURES.
There have not been any changes in the Company’s internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
(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 June 30, 2021, the end of the period covered by this report, our CEO and Chief Financial Officer have concluded that our disclosure
6
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 not 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.
Management concluded that our disclosure controls and procedures were not effective as of June 30, 2021 because of the deficiencies in our internal control over financial reporting relating to the effectiveness and timeliness of our financial statement review process, including policies and procedures governing our financial statement close process, and control in the preparation, documentation, and review of journal entries and account reconciliations
A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The control deficiencies as of June 30, 2021, and subsequent reports should be considered material weaknesses in our internal control over financial reporting.
As set forth below, management has taken or will take steps to remediate the control deficiencies identified above. Notwithstanding the control deficiencies described above, we have performed additional analyses and other procedures to enable management to conclude that our condensed consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition and results of operations as of and for the six-month period ended June 30, 2021.
Management’s Remediation Plan
In response to the deficiencies discussed above, we plan to continue efforts already underway to improve internal control over financial reporting, which include creating formal policies and procedures governing our financial statement close process, and control in the preparation, documentation, and review of journal entries and account reconciliations.
Management and our Board of Directors will continue to monitor these remedial measures and the effectiveness of our internal controls and procedures.
Changes in Internal Control over Financial Reporting
Other than as described above, there were no changes in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the Company’s quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
7
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
On October 8, 2018, the Company was served with a Summons and Complaint in the action entitled Luisa Santos de Oliveira v. Scores Holding Company, Inc.; Club Azure, LLC; Robert Gans; Mark S. Yackow; Howard Rosenbluth, Docket No. 1:18-cv-06769-GBD, in the United States District Court of the Southern District.. The case was assigned to a Magistrate Judge. There was a conference on March 2, 2021 and a Scheduling Order was entered. On March 26, 2021, a Stipulation of Discontinuance was so ordered by the Federal Court, discontinuing all claims against the Company, Robert Gans, Mark S. Yackow and Howard Rosenbluth. Pending Court approval on May 12, 2023, a Stipulation of Voluntary Dismissal Without Prejudice was signed discontinuing all claims against Club Azure LLC.
On September 14, 2018, the Company and its subsidiary SLC, filed an action against New 4125, LLC and Mike Taraska in the Supreme Court of the State of New York, County of New York. Defendants utilized the “Scores” name and trademark in connection with its ownership and operation of an adult entertainment club located in Phoenix, Arizona. In this action, the Company sought damages for breach of contract in the amount of $47,500. Defendants filed an Answer to the Complaint but it was not submitted by an attorney notwithstanding the fact that corporations must be represented by counsel. A motion to vacate the Answer based on the fact that the corporate defendant is not represented by counsel is pending. We are currently pursuing both the corporation and the individual defendant.
On September 5, 2019, the Company together with its subsidiary SLC filed a civil action in Supreme Court of New York, New York County against Scores Alabama. A cease and desist letter was sent. The Company finally entered into a license agreement as of March 5, 2020 with Cheetah Club, LLC for a club located in Huntsville, Alabama. They agreed to pay the arrears and then cease using the Scores brand by March 31, 2023. On April 11, 2023, the Company agreed to terminate the licensing agreement and settle this matter for $45,000.00.
In July 2018, the Company entered into a confidential settlement agreement (the “Settlement Agreement”) in the Voronina litigation, and in August 2018, the Court entered an order dismissing the plaintiff’s claims against the Defendants with prejudice. Metropolitan, loaned the Company an aggregate of $770,000 to enable the Company to make the payments called for by the Agreement.
As previously reported, in February 2017, the Company entered into settlement agreements (each, a “Royalty Settlement Agreement”) with Star Light, Swan, IMO and Robert M. Gans. Robert M. Gans is the owner of a majority of the equity of each of aforementioned Licensees. Pursuant to the Royalty Settlement Agreements, the Company forgave the repayment of a certain portion of unpaid, past-due royalties in return for the respective Licensees’ agreements to pay the remainder (the “Royalty Settlement Amount”) of the unpaid royalties, plus interest, to the Company. The Royalty Settlement Amount for each Licensee was represented by a promissory note, and Robert M. Gans guaranteed the payment of each Licensee’s obligations under the Settlement Agreement.
The Licensees did not remain current with respect to their obligations under the Royalty Settlement Agreements, and the Company did not call upon Robert M. Gans to honor his guarantees. The past due amounts under the Royalty Settlement Agreements aggregated $382,259 (the “Aggregate Royalty Amount”) as of December 1, 2018. As of such date, the Company, the Licensees, Metropolitan and Robert M. Gans entered into a Settlement and Offset Agreement (the “Offset Agreement”) pursuant to which the Aggregate Royalty Amount was offset against the Voronina Amount, thereby reducing the amount owed by the Company to Metropolitan to $408,546 (the “Net Voronina Amount”). The Net Voronina Amount is payable pursuant to a promissory note (the “Voronina Note”), which bears simple interest at the rate of 4% per annum, in 86 consecutive monthly installments of $5,000, and a final installment of $1,370, with the initial installment due and payable on January 1, 2022 (or the first business day thereafter). The Company may prepay the Voronina Note at any time, in whole or in part without premium or penalty. The Offset Agreement also provides for the immediate termination of the Royalty Settlement Agreements and the related promissory notes and guarantees.
On January 29, 2020, an individual referred to as Jane Doe, the Plaintiff, filed a civil suit in in the Circuit Court of the 13th Judicial Circuit, in the State of Florida, Hillsborough County, against the Company, its subsidiary, Scores Licensing Corp. (“SLC”), and several other defendants. Plaintiff’s Complaint details the somber circumstances surround the illegal actions of a non-party, who pled guilty to certain crimes against Plaintiff that were committed at a club known as Scores Tampa. Plaintiff now seeks to hold the Company and its subsidiary, among other defendants, liable in connection with the non-party’s illegal activity by asserting causes of action for negligence, vicarious liability and unjust enrichment. Initially, prior counsel moved to dismiss Plaintiff’s Complaint in lieu of filing Answers. A motion to dismiss was submitted because the Court lacks personal jurisdiction under Florida’s Long-Arm Statute and Due Process
8
Requirements because neither the Company nor its subsidiary had minimum contacts with Florida; nor was their a benefited conferred upon them.
The Court denied the motion to dismiss. The Company and SLC then filed Amended Answers and Affirmative Defenses denying all allegations of the complaints against them. All paper discovery has been completed and depositions have been taken. The parties are attending a court ordered non-binding arbitration on May 30, 2023. The Company and SLC recently requested that Plaintiff set forth a demand to settle this matter prior to the non-binding arbitration. If the parties cannot reach a favorable settlement agreement, a trial is set for July 24, 2023, with a pretrial conference set for July 18, 2023.
On July 15, 2019, plaintiff Jeremy Green, a former consultant to Swan Media Group, Inc (“SMG”), commenced an action in U.S. District Court, Southern District of New York against Scores Holding Co., Inc., Scores Media Group LLC, Scores Digital Gaming LLC (“SDG”) and individual defendants Robert Gans and Charilaos Yioves seeking to recover from all defendants under various theories of breach of contract, unjust enrichment, promissory estoppels, fraudulent inducement and breach of implied duty of good faith and fair dealing.
On October 6, 2022 to avoid expense, inconvenience, and uncertainty of further litigation, the Company has agreed to settle this matter for $10,000. Greene will receive the settlement sum in two payments of $5,000 each. The first settlement payment will be made upon execution of the settlement agreement and the second payment will be due thirty days after the first payment.
On April 17, 2021, in an action entitled Jessica Hall v. Scores Holding Company, Inc., et al, filed in Federal Court, Southern District of New York, the Plaintiff claims that, while she worked at an adult entertainment club located in New York, New York and commonly known as Scores NY, she was discriminated and retaliated against because of her race in violation of both Federal and State law. A motion for default judgment was denied and Plaintiff was granted permission to file and serve an Amended Complaint. Accordingly, on February 4, 2022, a First Amendment Complaint was filed. On March 4, 2022, an Answer to the First Amendment Complaint was filed on behalf of the Company asserting, inter alia, that Plaintiff’s Amended Complaint should be dismissed in its’ entirety because the Company, as simply the owner of the “Scores” brand and trademarks, did not own, operate or otherwise control Scores NY or employ, manage, or otherwise control Plaintiff’s employment.
After paper discovery was completed, a motion for summary judgment was fully submitted on behalf of the Company on June 24, 2022 seeking dismissal of all claims against the Company. Pending the Court’s decision, the parties conducted additional paper discovery and took depositions.
The Court finally rendered its’ decision on March 31, 2023. The Court denied the Company’s motion for summary judgment without prejudice because, when the motion was filed, the Plaintiff had not been afforded the opportunity to take any depositions.
On March 8, 2023, a conference was held in which Plaintiff was ordered to produce her tax returns and then file a letter by May 17, 2023 indicating whether she intends to serve any non-party subpoenas and whether the parties are willing to participate in a settlement conference with the Court in July. In the interim, the parties are attempting to settle this matter on their own. If the parties cannot reach a favorable settlement agreement, then another motion for summary judgment will be submitted on behalf of the Company. It is expected that the Company’s second motion for summary judgment will be granted given that both the documents and deposition testimony clearly show that the Company did not manage or otherwise control Plaintiff’s employment.
There are no other material legal proceedings pending to which the Company or any of its property is subject, nor to the Company’s knowledge are any such proceedings threatened.
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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.
None.
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ITEM 6.EXHIBITS.
Exhibit |
| Description |
31.1 |
| |
31.2 |
| |
32.1 |
| |
32.2 |
| |
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 |
| *XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| *XBRL Taxonomy Extension Presentation Linkbase Document |
104 | | Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
* | Filed herewith. |
±Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SCORES HOLDING COMPANY, INC. | |
|
|
|
Date: May 19, 2023 | By: | /s/ Robert M. Gans |
|
| Robert M. Gans |
|
| Chief Executive Officer and Director |
|
| (Principal Executive Officer) |
|
|
|
Date: May 19, 2023 | By: | /s/ Howard Rosenbluth |
|
| Howard Rosenbluth |
|
| Chief Financial Officer |
|
| (Principal Financial and Accounting Officer) |
12
Exhibit 31.1
I, Robert M. Gans, 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: May 19, 2023
| /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 May 19, 2023
| /s/ Howard Rosenbluth |
| Howard Rosenbluth |
| Chief Financial Officer (Principal Financial and Accounting 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, 2021, 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: May 19, 2023
| /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 endedjune 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Howard Rosenbluth, Chief Financial 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: May 19, 2023
| /s/ Howard Rosenbluth |
| Howard Rosenbluth |
| Chief Financial Officer (Principal Financial and Accounting 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.