U.S.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB
(Mark
One)
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x
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
Fiscal Year Ended: December 31, 2007
OR
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o
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from _______________ to
_______________
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Commission
file number:
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000─16665
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SCORES
HOLDING COMPANY, INC.
(Exact
name of small business issuer as specified in its charter)
Utah
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87-0426358
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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533-535
West 27
th
Street
New
York, NY
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10001
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(Address
of principal executive offices)
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(Zip
Code)
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(212)
868-4900
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(Registrant’s
telephone number, including area
code)
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Securities
registered under Section 12(b) of the Exchange Act:
None
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Name
of each Exchange on Which Registered:
None
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Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, $0.001 par value
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Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.
o
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has been subject
to
such filing requirements for the past 90 days. Yes
x
No
o
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of issuer’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to
this Form 10-KSB.
o
Indicate
by check mark whether the issuer is a shell company (as defined in Rule 12b-2
of
the Exchange Act)
Yes
o
No
x
State
issuer’s revenues for its most recent fiscal year. $487,542.
State
the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was
sold, or the average bid and asked price of such common equity as of a specified
date within the past 60 days.
As
of
March 31, 2008 there were 59,998,254 issued and outstanding shares of our common
stock, $0.001 par value, held by non-affiliates. The aggregate value of the
securities held by non-affiliates on March 31, 2008 was approximately $419,988
based on the closing bid price of our common stock on March 31, 2008, which
was
$0.007 per share.
State
the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: 165,186,124 shares of common stock, $0.001
par value, as of March 31, 2008.
Transitional
Small Business Disclosure Format (check one): Yes
o
No
x
DOCUMENTS
INCORPORATED BY REFERENCE
Not
Applicable
TABLE
OF CONTENTS
Item
Number and Caption
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Page
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Forward
Looking Statements
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3
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PART
1
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Item
1. Description of Business
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3
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Item
2. Description of Property
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8
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Item
3. Legal Proceedings
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8
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Item
4. Submission of Matters to Vote of Security Holders
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10
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PART
II
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Item
5. Market for Common Equity and Related Stockholders
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11
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Item
6. Management’s Discussion and Analysis of Financial
Condition
and
Results of Operations
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12
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Item
7. Financial Statements
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17
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Item
8. Changes in and Disagreements with Accountants on
Accounting
and
Financial Disclosure
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19
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Item
8A(T). Controls and Procedure
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19
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Item
8B. Other Information
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20
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PART
III
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Item
9. Directors, Executive Officers, Promoters, Control Persons and
Corporate
Governance; Compliance with Section 16(a) of the Exchange
Act
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20
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Item
10. Executive Compensation
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22
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Item
11. Security Ownership of Certain Beneficial Owners and
Management
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24
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Item
12. Certain Relationships and Related Transactions , and
Director
Independence
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25
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Item
13. Exhibits
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28
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Item
14. Principal Accountant Fees and Services
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34
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FORWARD-LOOKING
STATEMENTS
Except
for historical information, this report contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934 (the
“Exchange Act”). 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 include, among others, those statements including
the
words “expects,” “anticipates,” “intends,” “believes” and similar language. 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 sections
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and “Business”. You are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this report.
We
undertake no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances taking place after the date of
this document.
PART
I
ITEM
1.
DESCRIPTION
OF BUSINESS
We
were
incorporated in Utah on September 21, 1981 under the name Adonis Energy, Inc.
We
are now in the business of licensing the “Scores” trademarks and other
intellectual property to fine gentlemen’s nightclubs with adult entertainment in
the United States through our affiliate by common ownership, Entertainment
Management Services, Inc. ("EMS"). These clubs feature topless female
entertainers together with opportunities for watching sporting events,
celebrating business transactions and private parties. There are six such clubs
currently operating, two in New York City, and one in each of Baltimore,
Chicago, Las Vegas and New Orleans.
Our
trademarks and copyrights surrounding the Scores trade name are critical to
the
success and potential growth of all of our businesses.
We
are
affiliated through common ownership with two existing nightclubs in New
York, New York (“Scores East” and “Scores West”) which are owned, respectively,
by 333 East 60
th
Street,
Inc, and Go West Entertainment, Inc. (sometimes referred to herein as “Go
West”). We have sublicense agreements with each of these clubs pursuant to which
they use the Scores intellectual property. (Throughout this report, we refer
to
the New York clubs as our affiliated clubs. All other clubs are referred to
as
non-affiliated clubs or as sublicensees, a term that may include the affiliated
clubs when the context requires. See Item 12. Certain Relationships and Related
Transactions.)
We
are
also trying to capitalize on our intellectual property for “Scoreslive.com”, an
internet virtual gentlemen’s club. See Item 6. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
.
On
March
31, 2003, we granted an exclusive, worldwide license in our property to EMS,
an
entity owned by two former directors and employees of the Company to sublicense
the Scores trade name to nightclubs. The term of this license agreement is
for
20 years plus six 5-year renewals at the option of EMS. Under this agreement
as
currently in effect (See Item 12. Certain Relationships and Related
Transactions), EMS is required to pay us 100% of royalties received from
affiliated clubs and 50% of royalties received from non-affiliated clubs. This
agreement as it has been amended and restated is referred to herein as the
“EMS
Agreement”.
All
clubs, affiliated and non-affiliated, have license agreements with EMS pursuant
to which they pay typically EMS approximately 4.99% of gross revenues from
operations, including the sale of merchandise. $472,686 in earned and accrued
royalties were payable during 2007, $472,686 from non-affiliated clubs and
$0
from affiliated clubs. $577,149 in current and prior year royalties were paid
during 2007, $503,899 from non-affiliates and $73,250 from affiliates, leaving
outstanding balances of royalties owed at December 31, 2007 of $25,217 and
$1,450,959 for non-affiliates and affiliates, respectively. We depend on these
royalties to operate the business and as our principal source of revenue. See
Item 6. Management’s Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity.
Our
Sublicensed Nightclubs
Our
first
sublicensed nightclub was our affiliate, Scores East. This nightclub accounted
for 0% of our royalty revenue in 2007, as opposed to 28% in 2006. (See Item
6.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Bad Debt Expense.) In 2007, we did not collect any outstanding
royalties from this club.
On
March
31, 2003, EMS and Go West Entertainment, Inc. (“Go West”) licensed the Scores
trademarks for use at our other affiliated club, Scores West. This nightclub
accounted for 0% and 31% of our royalty revenues during 2007 and 2006,
respectively. (See Item 6. Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Bad Debt Expense.) In 2007, we collected
$73,250 in outstanding royalties from this club.
On
July
28, 2005, EMS licensed D.I. Food and Beverage of Las Vegas (“DIF&B”) to use
the Scores brand name for its nightclub in Las Vegas, Nevada. This nightclub
commenced operations in September, 2006. This club accounted for 58% and 26%
of
our total royalty revenues in 2007 and 2006, respectively. EMS’ sublicense
agreement with DIF&B calls for royalties of $9,000 per week and certain fees
of $1,500 per month to be payable to EMS.
On
June
13, 2003, EMS and Stone Park Entertainment, Inc. licensed the use of the "Scores
Chicago" name for its club in Chicago, Illinois. Royalties payable to EMS are
the greater of $2,500 per week or 4.99% of the gross revenues (less $25,000
per
week) earned at that location. This nightclub accounted for 18% and 8% of our
total royalty revenues during 2007 and 2006, respectively.
On
February 27, 2004, EMS licensed the use of "Scores Baltimore" to Club 2000
Eastern Avenue, Inc. for its nightclub in Baltimore, Maryland. Royalties payable
are the greater of $1,000 per week or 4.99% of gross revenues. This club
accounted for 15% and 4% of our total royalty revenues in 2007 and 2006,
respectively.
On
November 16, 2005, EMS licensed Bash Entertainment, LLC to use the Scores brand
name for a nightclub in Philadelphia, Pennsylvania. Royalties payable are equal
to the greater of 4.99% of weekly gross revenues or $1,000 per week. This club
awaits zoning approval and has not commenced operations.
On
July
27, 2004, EMS licensed DBD Management, Inc. (“DBD”) to use the Scores brand name
at its adult nightclub in Ft. Lauderdale, Florida. Royalties payable are equal
to 4.99% of revenues above $250,000 per month, with a minimum payment per month
of $4,000 beginning in February 2005. DBD terminated this license on April
20,
2006 in accordance with its terms.
On
January 3, 2005, EMS licensed our affiliate, SMG Entertainment, Inc. (“SMG”), to
use the Scores brand name for its nightclub in North Miami, Florida. Royalties
payable are equal to 4.99% of annual gross revenues above $1.5 million per
annum. Shortly after its filing for bankruptcy on December 11, 2006, SMG
terminated its agreement with EMS. As of December 31, 2007, we were owed $16,661
of unpaid royalties from SMG, which we have reserved as a bad debt as of
December 31, 2006.
On
November 24, 2006, EMS licensed DDL of Los Angeles LLC to use the Scores brand
name for a nightclub in Los Angeles, California. If the club is issued a liquor
license, royalties payable are 4.99% of gross revenues or $4,000 per week,
whichever is greater. Until such time, royalties payable equal 4.99% of gross
revenues or $2,000 per week, whichever is greater. This club awaits the approval
of a liquor license and has not commenced operations.
Effective
April 2, 2007, EMS licensed Silver Bourbon, Inc. to use the Scores brand name
for a night club in New Orleans, Louisiana. Royalties payable are capped at
the
greater of $4,000 per month or 4.99% of gross revenues. This club commenced
operations on April 27, 2007 and, for the fiscal year ended December 31, 2007,
accounted for less than 5% of our total revenues.
On
September 7, 2004, EMS entered into a Sublicense Agreement (the “Agreement”)
with Lake Geneva Entertainment, Inc. d/b/a. Sugar Schack. The Sublicense granted
under the Agreement authorized Sugar Schack to use the “SCORES” brand name at
its adult nightclub in Lake Geneva, Wisconsin. Sugar Schack paid minimum
royalties to EMS equal to $5,000 monthly during the peak season April thru
September and $3,000 monthly during the non-peak season October thru March.
Due
to unforeseeable differences within common management at Sugar Schack, proper
written notice was given to EMS of its termination of the agreement as of May
30, 2007, pursuant to the terms of the agreement. As of December 31, 2007,
we
were owed $16,892 of unpaid royalties which we have reserved as a bad debt.
Scoreslive.com
On
January 24, 2006, we licensed AYA International, Inc. (“AYA”) the right to use
our trademarks in connection with its online video chat website,
“Scoreslive.com”. Our license agreement with AYA provides for royalty payments
to be made directly to us of 4.99% of weekly gross revenues from all revenue
sources within the AYA website. The license continues for as long as the website
is operational. Scoreslive.com debuted in January 2007. This website accounted
for a minimal amount of our total royalty revenues in 2007.
Payment
to Richard Goldring
On
February 28, 2007, our then President, Chief Executive Officer and Director,
Richard Goldring resigned from each of those positions, and terminated his
employment with us under an employment agreement, dated March 31, 2003. The
terms of such agreement provided that if Mr. Goldring terminated his employment
without cause (which he did), we would become obligated to pay him $1 million.
Given our lack of cash to make such payment, we are negotiating with Mr.
Goldring regarding the amount and terms of payment to be made to him.
Competition
The
adult
nightclub entertainment business is highly competitive with respect to price,
service, location and professionalism of its entertainment. Sublicensed clubs
will compete with many locally-owned adult nightclubs. It is our belief,
however, that only a few of these nightclubs have names that enjoy recognition
and status that equal or approach that of Scores. For example, there are
approximately 25 adult entertainment cabaret night clubs located in New York
City and approximately six located in Manhattan. We believe that only three
of
these other venues in Manhattan directly compete with us, Ricks Cabaret, Hustler
and Penthouse. Of the 25, these three provide the most comparable adult
entertainment experience to our own. Other locales will have their own
competitive environments.
We
believe that the combination of our name recognition and our distinctive
entertainment environment allows the sublicensed clubs to effectively compete
within the industry, although we cannot assure you that this will prove to
be
the case. The ability of sublicensed clubs to compete and succeed will also
depend upon their ability to employ and retain top quality entertainers and
employees. Competition for adult entertainers is intense. The failure of
sublicensed clubs to retain quality entertainers or superior restaurant and
bar
employees could have a material or adverse impact on the ability of sublicensed
clubs to compete within the industry.
Competition
among online adult entertainment providers is intense for both content and
viewer spending. Scoreslive.com’s competition varies in both the type and
quality of the offerings, but consists primarily of other premium pay services.
The availability of, and price pressure from, more explicit content on the
Internet, frequently offered for free, also presents a significant competitive
challenge.
The
Internet is highly competitive, and Scoreslive.com will compete for visitors,
subscribers, shoppers and advertisers. We believe that the primary competitive
factors affecting AYA’s Internet operations include brand recognition, the
quality of content and products, pricing, ease of use, and sales and marketing
efforts. AYA and Scoreslive.com have the advantage of leveraging the power
of
our Scores brand across multiple media platforms.
Employees
At
the
present time, we have two (2) employees. None is covered by any collective
bargaining agreement. We believe that our relationship with our employees is
satisfactory.
Government
Regulation
Our
sublicensees are subject to a variety of governmental regulations depending
upon
the laws of the jurisdictions in which they operate. The most significant
governmental regulations are described below.
Liquor
License
Our
sublicensees are subject to state and local licensing regulation of the sale
of
alcoholic beverages. We expect sublicensees to obtain and maintain appropriate
licenses allowing them to sell liquor, beer and wine. Obtaining a liquor license
may be a time consuming procedure. In New York, for example, sublicensees make
an application to the State Liquor Authority (the "NYSLA") for a liquor license
regarding their nightclub. The NYSLA has the authority, in its discretion,
to
issue or deny such a license request. The NYSLA typically requires local
community board approval in connection with such grants. Approval is usually
granted or denied within 90-120 days from the initial application date, but
can
take longer in certain circumstances. Other jurisdictions have their own
procedures.
Present
law in Los Angeles, California prohibits all adult entertainment cabaret venues
from obtaining liquor licenses.
The
liquor license for Scores West was suspended by the NYSLA in February 2007
and
revoked in March 2008. The New York State Appellate Division, First Deparment
(the “Appellate Court”) has issued a temporary stay of the license revocation
pending a review by the full bench of the Appellate Court. If adverse action
is
taken with respect to the Scores West license, the license applicable to Scores
East may be examined and negatively affected as well, due to these clubs' common
ownership. The permanent revocation or suspension of one or both of these
licenses could have a material adverse effect on us. See Item 3. Legal
Proceedings.
We
cannot
assure you that our sublicensees will obtain liquor licenses or that, once
obtained, will be able to maintain their liquor licenses or assign or transfer
them if necessary. Licenses to sell alcoholic beverages must typically be
renewed annually and may be revoked or suspended for cause, including any
violation by the nightclub or its employees. If one of our sublicensees failed
to maintain a liquor license, this would have a material adverse effect on
us
and the sublicensee.
"Cabaret"
Licenses
Our
sublicensees typically request, although it may not be a requirement, a cabaret
license in regards to the operations of their nightclub. Although not a
requirement in all states, some mandate that adult entertainment licenses be
obtained prior to operation of a nightclub. For example, one New York city
affiliate requested and was granted a cabaret license regarding its nightclub
by
the City of New York’s’ Department of Consumer Affairs (the "DCA"). In making
its decision, the DCA determined that the proposed use met all zoning
requirements and that the building was fit to operate the business in accordance
with the codes and standards. Although we expect our sublicensees to have a
cabaret or adult entertainment licenses in place, there is no assurance that
they will remain effective or that such licenses could be assigned or
transferred if necessary. If one of our sublicensees failed to maintain a
required license, this would have a material adverse effect on our
business.
Zoning
Restrictions
Adult
entertainment establishments must comply with local zoning restrictions, and
these restrictions can often be stringent. Although we expect our
sublicensees to operate within "zoned" areas, we cannot issue any assurance
that
local zoning regulations will remain constant, or if changed, our sublicensees
will be able to continue operations under the brand name trademark. If zoning
regulations were to restrict the operations of one of our sublicensees, it
could
have a material adverse effect on our business.
ITEM
2. DESCRIPTION OF PROPERTY
In
July
2007, we began to lease from Go West, on a temporary, month-to-month basis,
approximately 700 square feet of office space located at 533-535 West 27th
Street, New York, NY. We pay $5,000 per month, including overhead costs, for
this office space. Monthly rents payable to Go West are offset by outstanding
royalties that Go West owes us.
As
of
July, 2007, we terminated our lease of approximately 500 square feet of office
space in White Plains, New York.
ITEM
3. LEGAL PROCEEDINGS
On
December 11, 2007, Francis Vargas, a former cocktail waitress at “Scores West
Side” located in New York, NY, filed a civil lawsuit against us and Go West
Entertainment, Inc. in the Supreme Court of the State of New York, County of
New
York, alleging violations of the New York State Human Rights Law, New York
Executive Law, New York City Human Rights Law, and the New York City
Administrative Code, based upon allegations of sexual discrimination and sexual
harassment. The lawsuit further alleges that at all material times both we
and
Go West were employers of Ms. Vargas, the plaintiff. The law suit seeks
unspecified compensatory damages for plaintiff’s alleged loss of past and future
earnings and benefits, emotional distress, humiliation and loss of reputation.
We dispute that we were an employer of the plaintiff and categorically deny
all
allegations of sexual discrimination and sexual harassment. We filed our
verified answer in the Supreme Court of the State of New York on February 12,
2008 to contest and defend against these accusations.
On
October 9, 2007, former Go West bartender Siri Diaz filed a purported class
action and collective action on behalf of all tipped employees against us and
other defendants alleging violations of federal and state wage/hour laws
(
Siri
Diaz et al. v. Scores Holding Company, Inc.; Go West Entertainment, Inc. a/k/a
Scores West Side; and Scores Entertainment, Inc., a/k/a Scores East
Side
,
Case
No. 07 Civ. 8718 (Southern District of New York, Judge Richard M. Berman)).
On
November 6, 2007, plaintiffs served an amended purported class action and
collective action complaint, naming dancers and servers as additional plaintiffs
and alleging the same violations of federal and state wage/hour laws. On or
about February 21, 2008, plaintiffs served a second amended complaint adding
two
additional party defendants, but limiting the action to persons employed in
the
New York Scores’ clubs. The amended complaint alleges that we and the other
defendants are “an integrated enterprise” and that we jointly employ the
plaintiffs, subjecting all of the defendants to liability for the alleged
wage/hour violations. We dispute that we violated the federal and state labor
laws, and further dispute that the dancers are “employees” subject to the
federal and state wage and hour laws. We intend to vigorously contest the
claimed liability as well as the violations alleged. We filed a motion to
dismiss the complaint, reply papers were submitted on March 14, 2008, and the
matter is now under judicial deliberation. At the same time plaintiffs moved
for
conditional certification of a class of the servers, bartenders and dancers;
we
opposed that motion and the matter is also under judicial deliberation.
Discovery into both the procedural and substantive issues is ongoing.
In
February 2007, the City of New York (the “City”) sought to close Scores West
claiming that it presented a public nuisance. The City alleged that this
nightclub was used for purposes of prostitution; the case was dismissed by
the
City of New York and no charges were sought against Scores West or us. In
February, 2007, the NYSLA began a review of the license held by Scores West
and
issued an Emergency Summary Order of Suspension of the Scores West liquor
license on February 21, 2007. Go West, the owner of Scores West, filed a
pleading with the NYSLA on behalf of Scores West and, after a temporary
adjournment and a series of hearings in front of an administrative law judge
who, on February 4, 2008, sustained all charges against Scores West, a NYSLA
hearing was held on March 6, 2008 and the NYSLA revoked the Scores West Liquor
license. On March 18, 2008, the Appellate Court granted an interim stay of
the
liquor license revocation pending a review by the full bench of the Appellate
Court. This full bench review has not yet taken place. If Scores West loses
its
liquor license and closes its business, we would no longer be entitled to
receive royalty revenues from that club, which in 2006, amounted to 31% of
our
royalties. Also, if Scores West were to close, its ability to make payments
under an outstanding note issued to us by Scores West would be impaired. The
note is currently in default. See Item 6. Management’s Discussion and Analysis
of Financial Condition and Results of Operations —Liquidity and Capital
Resources, and Item 12. Certain Relationships, Related Transactions and Director
Independence.
On
March
30, 2007, we, along with several of our affiliates, were named in a suit in
connection with an alleged assault by an employee of an affiliate and one of
our
stockholders and former officer and director.
We
have
recently answered a third amended complaint and participated in a Preliminary
Conference to establish the discovery schedule. Depositions are scheduled
for May, 2008.
We
will
vigorously defend ourselves in this litigation and do not expect the outcome
will be material.
On
December 11, 2006, our affiliated club in North Miami, Florida, SMG
Entertainment, Inc. (“SMG”), filed for bankruptcy with the United States
Bankruptcy Court for the Southern District of New York. In connection therewith,
it terminated its license agreement with EMS whereby it was authorized to use
our intellectual property. At the time of its filing, SMG owed us $16,611 for
unpaid merchandise, which we subsequently reserved as bad debt.
On
March
31, 2006, Richard K. Goldring, our former president, chief executive officer
and
principal shareholder pled guilty to one count of offering a False Instrument
for Filing in the First Degree pursuant to a plea agreement with the District
Attorney of the County of New York (the "DA"). In the event that within one
year
of the date of the entry of the guilty plea, Mr. Goldring resigns from all
"control management positions" that he holds in publicly traded companies,
including ours, and divests himself of all "control ownership positions" in
publicly traded companies, including ours, and satisfies certain other
conditions, the DA will recommend a sentence of probation. In this context,
a
“control management position” is a role, official or unofficial, by which he
substantially directs the decisions of a company, and a “control ownership
position” is a position in which he controls, directly or indirectly more than
9% of the voting stock or other securities of a company, or stock or securities
that have the capability of being converted into voting stock or other
securities of a company. The plea agreement resolves the DA's investigation
against Mr. Goldring and us. No charges were brought against us.
A
sentencing hearing has been set for April 17, 2008 by which time Mr. Goldring
will have to divest himself of a control ownership position in us.
In
June
2005, we, together with several of our affiliates, commenced litigation
regarding title to certain of our intellectual property. In February 2006,
counterclaims were asserted and other persons brought third party complaints.
In
September 2006, we and our affiliates reached a settlement resolving all claims
against us for a payment of $175,000 made in monthly installments. In return,
the other parties in the litigation disclaimed any right to our intellectual
property.
There
are
no other material legal proceedings pending to which we or any of our property
is subject, nor to our knowledge are any such proceedings
threatened.
ITEM
4.
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
No
matter
was submitted during the fourth quarter of the fiscal year covered by this
report to a vote of security holders.
PART
II
ITEM
5.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market
Information.
Our
common stock has been quoted on the OTC Bulletin Board under the symbol “SCRH”
since 2004. The following table sets forth, for the fiscal quarters indicated,
the high and low closing bid prices per share of our common stock, as derived
from quotations provided by Bloomberg L.P. Such quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.
Quarter
Ended
|
|
High
Bid
|
|
Low
Bid
|
|
March
31, 2006
|
|
|
.017
|
|
|
.0066
|
|
June
30, 2006
|
|
|
.019
|
|
|
.007
|
|
September
30, 2006
|
|
|
.018
|
|
|
.009
|
|
December
31, 2006
|
|
|
.012
|
|
|
.006
|
|
March
31, 2007
|
|
|
.027
|
|
|
.01
|
|
June
30, 2007
|
|
|
.023
|
|
|
.009
|
|
September
30, 2007
|
|
|
.011
|
|
|
.005
|
|
December
31, 2007
|
|
|
.00981
|
|
|
.004
|
|
Holders
As
of
April 7, 2008, there were approximately 573 record holders of our common
stock.
Dividends
We
have
never declared any cash dividends with respect to our common stock. Future
payment of dividends is within the discretion of our board of directors and
will
depend on our earnings, capital requirements, financial condition and other
relevant factors. Although there are no material restrictions limiting, or
that
are likely to limit, our ability to pay dividends on our common stock, we
presently intend to retain future earnings, if any, for use in our business
and
have no present intention to pay cash dividends on our common
stock.
Recent
Sales of Unregistered Securities
None.
Securities
Authorized For Issuance Under Equity Compensation Plans
None.
ITEM
6.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Cash
At
December 31, 2007, we had $173 in cash and cash equivalents compared to $231,332
in cash and cash equivalents at December 31, 2006.
Results
of Operations:
For
the
year ended December 31, 2007 (the “2007 period”) compared to the year ended
December 21, 2006 (the “2006 period”).
Revenues:
Revenues
decreased 75% to $487,542 for the 2007 period from $1,975,705 for the 2006
period.
This
decrease was attributable primarily to the following factors:
In
the
2006 period and in prior years, we retained 100 percent of all royalty revenues
generated by all sublicensees; however, beginning with the first quarter of
2007, fifty percent (50%) of royalty revenues generated by non-affiliate clubs,
approximately $480,000 for the 2007 period, were retained by EMS pursuant to
the
EMS Agreement. During the 2007 period, the Company recorded no royalty revenue
from our affiliated clubs (see Bad Debt Expense below). Royalty revenues for
the
2007 period for the non-affiliate clubs in Las Vegas, Chicago, Baltimore and
New
Orleans accounted for 58%, 18%, 15% and less than 5%, respectively. Revenue
generating operations at the New Orleans club commenced only in April 2007.
The
Los Angeles club has not begun operations due to its inability to obtain a
liquor license and the Philadelphia club has not begun operations due to zoning
issues which have not yet been resolved.
Merchandise
revenues decreased during the 2007 period to $14,856 from $106,876 during
the
2006 period. This decrease was primarily due to increases in our shipping
costs
and our sublicensees' purchasing our branded products from local manufacturers
at lower cost to them. In addition, merchandise sales to Scores East and
Scores
West decreased during the 2007 period as well.
In
January 2007, AYA’s website, Scoreslive.com, began operations and, for the 2007
period, generated gross revenues of more than $5,000 per month resulting in
minimal royalties to us. We believe that the Scoreslive.com website will remain
in development mode during 2008, continuing to generate minimal revenues.
We
recognize revenues as they are earned, not as they are collected.
Bad
Debt Expense
During
the fourth quarter 2006, the Company made significant provisions for bad debts
in the amount of $3,391,126 applicable to amounts owed us by the respective
owners of Scores East and Scores West. As of December 31, 2007, Scores East
and
Scores West owed us (indirectly, through EMS) $1,230,263 and $220,696,
respectively, in accrued and unpaid royalties. The owners of both of these
affiliated clubs have informed us that their ability to make payments on the
amounts owed is impaired due to increased legal costs incurred during
investigations by the City of New York and the NYSLA, together with revenue
shortfalls. We have concluded that if the Appellate Court determines to uphold
the NYSLA revocation of the Scores West liquor license, we will not be able
to
collect from either Scores West or Scores East any of the royalties currently
owed to us or that might be owed to us for future periods. In this case, common
ownership of the two affiliated clubs would negatively affect the Score East
liquor license and that club’s ability to pay us royalties.
In
connection with Go West’s construction of Scores West, we loaned Go West
$1,636,264 in exchange for a promissory note from Go West (the “Note”). The Note
has not been repaid. As of December 31, 2007, $1,867,310 (including accrued
interest) remained due under the Note. As of December 31, 2006, we reserved
$1,636,264 of this amount as a bad debt expense and for the 2007 period, we
have
forgone interest on the Note.
Any
cash
received from these clubs (Scores East and Scores West) is applied as a reversal
of the bad debt expense when received. In 2007, we reversed bad debt expense
in
the amount of $73,250 for cash collected from Scores West and received no
payments from Scores East. We did not collect any cash on the Note during the
2007 period. We have temporarily suspended the recognition of royalties due
from
Scores West and Scores East and interest earned on the Note until financial
stability of these clubs has been reasonably assured.
Currently,
we are undertaking an examination of the books and records of Scores West and
Scores East to assist us in measuring our ability to collect on all outstanding
royalties and on the Note.
General
and Administrative Expenses:
General
and administrative expenses decreased during the 2007 period to $773,025
from $1,202,550 during the 2006 period. Because 50 percent of our 2007 period
revenues (approximately $480,000) were retained by EMS as a result
of changes in conditions under the EMS Agreement, we reduced our rent,
salaries, legal and business development costs by $400,000 in the 2007 period
from the 2006 period. This figure represents a 2007 period shift away from
administrative expenses as we continued our efforts to reach alterative markets
through increased spending for public relations and marketing.
Interest
Income (Expense) - Net:
Interest
income is presented net of interest expense for the 2007 period and the 2006
period, respectively. Interest income reflects actual cash collected and
interest paid on debt which amounted to $0 and $110,059 for 2007 period and
the
2006 period, respectively.
Interest
expense is due primarily from the issuance of long-term debentures and notes
payable. Interest expense decreased to $0 for the 2007 period from $281 for
the
2006 period. This decrease was due primarily to a repayment in the 2006 period
of $123,300 of our outstanding debentures which resulted in a $25,000 prepayment
penalty to us. We pre-payed these debentures to avoid having to issue additional
shares of our common stock as compensation for dilution in the value of our
common stock.
Provision
For Income Taxes:
The
provision for state income taxes relates primarily to average assets and capital
which were not impacted by net operating losses for the 2007 period.
Net
Income (Loss) (per share):
Net
income (loss) for the 2007 period was $(356,429) or $(0.00) per share versus
a
net (loss) of $(2,664,149) or $(0.02) per share for the 2006 period.
This decrease in net loss for the 2007 period can be attributed, primarily,
to the reduction by fifty percent (50%) of our non-affiliated clubs royalty
payments from EMS (approximately $480,000) reduced pursuant to and in accordance
with the EMS Agreement. Our administrative costs were significantly reduced
by
$430,000 in the 2007 period; however, we continued to incur significant cost
for
public relations and marketing as we explored new growth opportunities in
alternative markets. In the 2006 period, our bad debt expense of approximately
$3.4 million was partially offset by additional 2006 period revenue of
approximately $585,328 from one new sublicensed nightclub.
Net
income per share data for both the 2007 and 2006 period is based on net income
available to common shareholders divided by the weighted average of the common
shares.
Liquidity
and Capital Resources
On
February 28, 2007, our then President, Chief Executive Officer and Director,
Richard Goldring resigned from each of those positions, and terminated his
employment with us under an employment agreement, dated April 16, 2003. The
terms of such agreement provided that if Mr. Goldring terminated his employment
without cause (which he did), we would become obligated to pay him $1 million.
We had $173 in cash available at December 31, 2007. Given our lack of available
cash to make such payment, we are currently negotiating with Mr. Goldring
regarding the terms of our payment to him.
In
2006,
we reserved a bad debt expense of approximately $3.4 million in recognition
of
the impaired ability of Go West and 333 East 60th Street, Inc. to pay royalties
due us, indirectly, and Go West's impaired ability to make payments under the
Note. See - Bad Debt Expense.
Scores
West accounted for 0% of our royalty revenue in 2007, compared to 31% in 2006.
In March 2008, the NYSLA revoked the Scores West liquor license and that order
has been temporarily stayed by the Appellate Court pending further review.
See
Item 3. Legal Proceedings. As of December 31, 2007, Scores West owed us $220,696
in unpaid royalties. If Scores West loses its liquor license, it would not
be
able to pay us any royalty income.
In
connection with our divestiture of stock of Go West, we loaned Go West
$1,636,264 in return for the Note secured by Go West’s leasehold interest on a
building at 533-535 West 27th Street, New York, New York. The Note bears
interest at 7% and is scheduled for maturity on October 1, 2008. Go West is
currently in default under the Note, and as at December 31, 2007 owed us
$1,867,310 which includes accrued interest of $355,189. We did not receive
any
interest payments on the Note during the 2007 period. If Scores West were to
be
closed, its ability to make payments under the Note would be impaired.
Our
affiliated club, Scores East, accounted for 0% of our royalty revenue in 2007,
compared to 28% in 2006. At December 31, 2007, Scores East owed us $1,230,263
in
royalties. We did not receive any royalty payments from Scores East in the
2007
period.
We
have
incurred losses since the inception of our business. Since our inception, we
have been dependent on acquisitions and funding from private lenders and
investors to conduct operations. As of December 31, 2007 we had an accumulated
deficit of $(6,102,883). As of December 31, 2007, we had total current assets
of
$47,213 and total current liabilities of $207,743 or negative working capital
of
$160,530. As of December 31, 2006, we had total current assets of $394,538
and
total current liabilities of $238,360 or working capital of $156,178. The
decrease in the amount of our working capital was primarily attributable to
our
inability to collect on the outstanding receivables due from our Score East
and
Scores West affiliates due to the City of New York proceedings and the pending
NYSLA matter with Scores West. If the Appellate Court upholds the NYSLA
revocation of the Scores West liquor license and, thus, the Score East license,
due to the common ownership of both of these clubs, operations at both locations
will be limited and cash to extinguish the receivables balance will, most
likely, not be available for payment to us. Given our lack of cash, we were
able
to control our outstanding debt by making significant reductions in our
administrative costs.
.
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 our ongoing working capital needs, for a more rapid
business expansion, to develop new or enhanced services or products, to respond
to competitive pressures, or to take advantage of unanticipated opportunities.
Our future liquidity and capital requirements will depend upon numerous factors,
including the success of our adult entertainment licensing
business.
Compliance
with Sarbanes-Oxley
The
largest amount of royalties owed to us from affiliated nightclubs (Scores East,
Scores West and SMG) during 2007 was $1,540,476. The amount owed at December
31,
2007 was $1,467,226. Cash received as partial payment on these receivables
during the 2006 period and the 2007 period totaled $715,000 and $73,250,
respectively. No interest was paid on the Note during these
periods.
As
we and
they are under common control, we are mindful that those royalties’ receivables
may take on the appearance of a prohibited loan under Section 402 of the
Sarbanes-Oxley Act of 2002. We do not believe, however, that this is a
prohibited loan as we are seeking to reduce the amount due under these
receivables.
Critical
Accounting Policies
The
discussion and analysis of our financial condition and results of operations
are
based upon our consolidated financial statements, which have been prepared
in
accordance with accounting principles generally accepted in the United States
of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure on contingent assets
and liabilities at the date of our financial at the date of our financial
statements. Actual results may differ from these estimates under different
assumptions and conditions.
Critical
accounting policies are defined as those that are reflective of significant
judgments and uncertainties, and potentially result in materially different
results under different assumptions and conditions. We believe that our critical
accounting policies are limited to those described below. For a detailed
discussion on the application of these and other accounting policies see note
2
to our consolidated financial statements.
Revenue
Recognition
Revenues
for the 2007 period and the 2006 period were derived predominately from
royalties. We apply judgment to ensure that the criteria for recognizing
revenues are consistently applied and achieved for all recognized sales
transactions.
Long-Lived
Assets (including Tangible and Intangible Assets)
We
acquired the "Scores" trademark to market and conduct a global business
strategy. Such costs affected the amount of future period amortization expense
and impairment expense that we incur and record as cost of sales. The
determination of the value of such intangible assets requires management to
make
estimates and assumptions that affect our consolidated financial statements.
We
assess potential impairment to the intangible and tangible assets on a quarterly
basis or when evidence, events or changes in circumstances indicate that the
carrying amount of an asset may not be recovered. Our judgments regarding the
existence of impairment indicators and future cash flows related to these assets
are based on operational performance of our business, market conditions and
other factors. Future events could cause us conclude that impairment indicators
exist and that other tangible or intangible assets is impaired.
Accounting
for Income Taxes
As
part
of the process of preparing our consolidated financial statements we are
required to estimate our income taxes. Management judgment is required in
determining our provision of our deferred tax asset. We recorded a valuation
for
the full deferred tax asset from our net operating losses carried forward due
to
the Company not demonstrating any consistent profitable operations. In the
event
that the actual results differ from these estimates or we adjust these estimates
in future periods we may need to adjust such valuation recorded.
ITEM
7. FINANCIAL STATEMENTS
Index
to
Consolidated Financial Statements
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
18
|
|
|
|
|
|
|
Consolidated
Balance Sheet as of December 31, 2007
|
|
|
F-1
|
|
|
|
|
|
|
Consolidated
Statements of Operations for the years ended December 31, 2007
and
December 31, 2006
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Stockholders’ Equity for the years ended December 31, 2007
and December 31, 2006
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2007
and
December 31, 2006
|
|
|
|
|
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders
Scores
Holding Company, Inc. and subsidiaries
We
have
audited the accompanying consolidated balance sheet of Scores Holding Company,
Inc. and subsidiaries as of December 31, 2007, and the related consolidated
statement of operations, stockholders’ equity and cash flows for each of the
years ended December 31, 2007 and 2006. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Scores Holding Company,
Inc.
and subsidiaries as of December 31, 2007 and the results of its operations
and
its cash flows for each of the years ended December 31, 2007 and 2006 in
conformity with accounting principles generally accepted in the United States.
/s/
Sherb
& Co., LLP
Certified
Public Accountants
New
York,
New York
April
7,
2008
SCORES
HOLDING COMPANY, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEET
|
|
|
December
31,
|
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
|
|
$
|
173
|
|
Licensee
Receivable - including affiliates - net
|
|
|
25,217
|
|
Inventory
|
|
|
20,700
|
|
Prepaid
expenses
|
|
|
1,123
|
|
Total
Current Assets
|
|
|
47,213
|
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE
ASSETS, NET
|
|
|
220,950
|
|
|
|
|
|
|
|
|
$
|
268,163
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
126,965
|
|
Related
party payable
|
|
|
15,800
|
|
Due
to EMS - related party
|
|
|
44,978
|
|
Notes
Payable
|
|
|
20,000
|
|
Total
Current Liabilities
|
|
|
207,743
|
|
|
|
|
|
|
COMMITMENTS
& CONTINGENCIES
|
|
|
-
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
Preferred
stock, $.0001 par value, 10,000,000 shares
|
|
|
|
|
authorized,
-0- issued and outsatanding
|
|
|
-
|
|
Common
stock, $.001 par value; 500,000,000 shares authorized,
|
|
|
|
|
165,186,124
issued and outstanding
|
|
|
165,186
|
|
Additional
paid-in capital
|
|
|
5,998,117
|
|
Accumulated
deficit
|
|
|
(6,102,883
|
)
|
Total
stockholder's equity
|
|
|
60,420
|
|
|
|
$
|
268,163
|
|
See
notes
to consolidated financial statements.
SCORES
HOLDING COMPANY, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF
OPERATIONS
|
|
|
Year
Ended
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
REVENUES
|
|
|
|
|
|
|
|
Royalty
|
|
$
|
464,686
|
|
$
|
1,857,629
|
|
Merchandise
|
|
|
14,856
|
|
|
106,076
|
|
Public
relations
|
|
|
8,000
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
487,542
|
|
|
1,975,705
|
|
|
|
|
|
|
|
|
|
COST
OF MERCHANDISE SOLD
|
|
|
54,054
|
|
|
118,958
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
433,488
|
|
|
1,856,747
|
|
|
|
|
|
|
|
|
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
773,025
|
|
|
1,202,550
|
|
BAD
DEBT EXPENSE
|
|
|
16,892
|
|
|
3,413,051
|
|
|
|
|
|
|
|
|
|
NET
LOSS FROM OPERATIONS
|
|
|
(356,429
|
)
|
|
(2,758,854
|
)
|
|
|
|
|
|
|
|
|
INTEREST
INCOME - NET
|
|
|
-
|
|
|
110,059
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE INCOME TAXES
|
|
|
(356,429
|
)
|
|
(2,648,795
|
)
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
15,354
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(356,429
|
)
|
$
|
(2,664,149
|
)
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
$
|
0.00
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE OF COMMON SHARES
OUTSTANDING
- Basic and Diluted
|
|
|
165,186,124
|
|
|
132,636,194
|
|
See
notes to consolidated financial
statements.
SCORES
HOLDING COMPANY INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENT OF STOCKHOLDER'S EQUITY
|
|
YEARS
ENDED DECEMBER 31, 2006 AND
2007
|
|
|
|
|
|
|
Additional
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
Paid
in
|
|
Accumulated
|
|
Stockholders
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
(Deficit)
Equity
|
|
Balance
as of December 31, 2005
|
|
|
78,642,180
|
|
$
|
78,642
|
|
$
|
5,875,310
|
|
$
|
(3,082,306
|
)
|
$
|
2,871,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of debentures
|
|
|
23,814,936
|
|
|
23,815
|
|
|
75,388
|
|
|
-
|
|
|
99,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares according to the anti-dilution agreement
|
|
|
55,176,008
|
|
|
55,176
|
|
|
(55,176
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
cancelled
|
|
|
(140,000
|
)
|
|
(140
|
)
|
|
(1,260
|
)
|
|
-
|
|
|
(1,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for services
|
|
|
7,693,000
|
|
|
7,693
|
|
|
103,855
|
|
|
-
|
|
|
111,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,664,149
|
)
|
|
(2,664,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2006
|
|
|
165,186,124
|
|
|
165,186
|
|
|
5,998,117
|
|
|
(5,746,455
|
)
|
|
416,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(356,429
|
)
|
|
(356,429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2007
|
|
|
165,186,124
|
|
$
|
165,186
|
|
$
|
5,998,117
|
|
$
|
(6,102,883
|
)
|
$
|
60,420
|
|
See
notes
to consolidated financial statements.
SCORES
HOLDING COMPANY, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
|
Year
Ended December 31,
|
|
|
|
2007
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
loss
|
|
$
|
(356,429
|
)
|
$
|
(2,664,149
|
)
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash provided
|
|
|
|
|
|
|
|
by
(used) in operating activites:
|
|
|
|
|
|
|
|
Depreciation
and Amortization
|
|
|
59,720
|
|
|
42,443
|
|
Common
stock and warrants issued for services
|
|
|
-
|
|
|
111,548
|
|
Royalty
receivable
|
|
|
5,572
|
|
|
1,214,099
|
|
Bad
debt on notes receivable
|
|
|
-
|
|
|
1,867,310
|
|
Prepaid
expenses
|
|
|
62,504
|
|
|
(29,142
|
)
|
Inventory
|
|
|
48,090
|
|
|
(31,912
|
)
|
Interest
receivable
|
|
|
-
|
|
|
(69,838
|
)
|
Due
to EMS
|
|
|
44,978
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
15,705
|
|
|
(212,147
|
)
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES
|
|
|
(119,860
|
)
|
|
228,212
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchase
of Trademark intangible
|
|
|
-
|
|
|
(173,600
|
)
|
Cash
collected on notes receivable
|
|
|
-
|
|
|
104,400
|
|
|
|
|
|
|
|
|
|
NET
CASH (USED) IN INVESTING ACTIVITIES
|
|
|
-
|
|
|
(69,200
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Related
party payable
|
|
|
6,200
|
|
|
(1,400
|
)
|
Repayment
of debentures
|
|
|
-
|
|
|
(66,000
|
)
|
Purchase
of Note payable Trademark intangible
|
|
|
-
|
|
|
175,000
|
|
Repayment
of notes payable
|
|
|
(117,500
|
)
|
|
(66,465
|
)
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES
|
|
|
(111,300
|
)
|
|
41,135
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
(231,159
|
)
|
|
200,147
|
|
|
|
|
|
|
|
|
|
CASH,
beginning of the period
|
|
|
231,332
|
|
|
31,185
|
|
|
|
|
|
|
|
|
|
CASH,
end of the period
|
|
$
|
173
|
|
$
|
231,332
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the year for interest
|
|
$
|
-
|
|
$
|
1,660
|
|
Cash
paid during the year for taxes
|
|
$
|
9,354
|
|
$
|
15,354
|
|
Non
cash financing activities:
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
$
|
-
|
|
$
|
111,548
|
|
Common
stock issued in connection with debenture conversions
|
|
$
|
-
|
|
$
|
96,900
|
|
See
notes
to consolidated financial statements.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
Note
1. Organization
Scores
Holding Company, Inc. and subsidiaries (the “Company”) is a Utah corporation,
formed in September 1981 and is located in New York, NY. Formerly, Internet
Advisory Corporation, the Company is a licensing company that intends to exploit
the “Scores” name and trademark for franchising and other licensing
options.
The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States.
The consolidated financial statements of the Company include the accounts of
Scores Licensing Corp.
Note
2. Summary of Significant Accounting Principles
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
where cash may exceed $100,000, the FDIC insured limit.
Inventory
Inventory
consists primarily of finished goods and is valued at the lower of cost or
market on a first-in first-out “FIFO” basis. In performing our cost valuation,
we consider the condition and salability of our inventory and may adjust the
valuation due to anticipated changes that may materially affect its
basis.
Leasehold
Improvements and Equipment
Leasehold
improvements and equipment are stated at cost. Maintenance and repairs are
charged to expenses as incurred. Depreciation is provided for over the estimated
useful lives of the individual assets using straight-line methods.
Accounting
for Long-Lived Assets
The
Company reviews long-lived assets, certain identifiable assets and any goodwill
related to those assets for impairment whenever circumstances and situations
change such that there is an indication that the carrying amounts may not be
recoverable. At December 31, 2007, the Company believes that there has been
no
impairment of long-lived assets.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
Fair
Value of Financial Instruments
The
carrying amounts reported in the balance sheet for cash, accounts payable,
accrued expenses, notes receivable and notes payable approximate fair value,
based on the short-term maturity of these instruments.
Royalty
and Notes Receivable and Reserves
Accounts
deemed uncollectible are applied against the allowance for doubtful accounts.
In
addition to reviewing any delinquent royalty or note receivable, we consider
many factors in estimating our reserve, including historical data, experience,
customer types, credit worthiness, financial distress and economic trends.
From
time to time, we may adjust our assumptions for anticipated changes in any
of
these or other factors expected to affect collectibility. Subsequent to year
end
2006, we were informed through common ownership, that our East and Westside
affiliates were undergoing financial distress and that pending matters with
the
NYSLA would have a material impact on cash flow and operations. As a result,
a
collection for royalties and notes receivable amounting to $1,540,870 and
$1,867,310 were deemed impaired as of December 31, 2006. Cash collected on
these
impaired royalties amounted to $73,250 from our Scores West affiliate and $0
from our Scores East affiliate for the year ended December 31, 2007. No cash
was
collected on the Score West note during 2007.
Advertising
Costs
The
costs
of advertising are expensed as incurred. Advertising expense for the years
ended
December 31, 2007 and 2006 were $16,731 and $13,325 respectively. These costs
are included in general and adminstrative expenses.
Stock
Based Compensation
The
Company adopted SFAS No. 123R, “Share Based Payments.” SFAS No. 123R
requires companies to expense the value of employee stock options and similar
awards and applies to all outstanding and vested stock-based awards.
In
computing the impact, the fair value of each option is estimated on the date
of
grant based on the Black-Scholes options-pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards. The assumptions used in calculating the fair value of
share-based payment awards represent management’s best estimates, but these
estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and the Company uses different
assumptions, the Company’s stock-based compensation expense could be materially
different in the future. In addition, the Company is required to estimate the
expected forfeiture rate and only recognize expense for those shares expected
to
vest. In estimating the Company’s forfeiture rate, the Company analyzed its
historical forfeiture rate, the remaining lives of unvested options, and the
amount of vested options as a percentage of total options outstanding. If the
Company’s actual forfeiture rate is materially different from its estimate, or
if the Company reevaluates the forfeiture rate in the future, the stock-based
compensation expense could be significantly different from what we have recorded
in the current period. The impact of applying SFAS No. 123R approximated $0
and $111,548 in compensation expense during the years ended December 31, 2007
and 2006, respectively. Such amount is included general and administrative
expenses on the statement of operations.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
Revenue
recognition
The
Company records revenues (royalties) from its license agreements on a straight
line basis over the term of the license agreements. If a license agreement
is
terminated then the remaining unearned balance of the deferred revenues is
recorded as earned if applicable. Merchandise revenue which may include shipping
and handling is recognized when products are delivered or services are provided
to customers. Shipping costs are included in cost of sales.
Revenues
earned under its royalty agreements are recorded as they are
earned.
Income
Taxes
The
Company utilizes the liability method of accounting for income taxes as set
forth in SFAS 109, “Accounting for Income Taxes.” Under the liability method,
deferred taxes are determined based on the difference between financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. The
Company has a net operating loss carryforward of approximately $2,600,000,
which
expire in the years 2015 and 2022. The related deferred tax asset of
approximately $2,601,000 has been offset by a valuation allowance. The Company’s
net operating loss carryforwards may have been limited, pursuant to the Internal
Revenue Code Section 382, as to the utilization of such net operating loss
carryforwards due to changes in ownership of the Company over the
years.
|
|
2007
|
|
2006
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
1,130,000
|
|
$
|
940,000
|
|
Receivables
allowance
|
|
|
1,471,000
|
|
|
1,516,000
|
|
Less
valuation allowance
|
|
|
(2,601,000
|
)
|
|
(2,456,000
|
)
|
Net
deferred tax asset
|
|
$
|
-
|
|
$
|
-
|
|
The
reconciliation of the Company’s effective tax rate differs from the Federal
income tax rate of 34% for the years ended December 31, 2007 and 2006, as a
result of the following:
|
|
2007
|
|
2006
|
|
Tax
(benefit) at statutory rate
|
|
$
|
(112,000
|
)
|
$
|
(901,000
|
)
|
State
and local taxes
|
|
|
(34,000
|
)
|
|
(273,000
|
)
|
|
|
|
|
|
|
|
|
Permanent
timing differences
|
|
|
-
|
|
|
17,800
|
|
Change
in valuation allowance
|
|
|
146,000
|
|
|
1,171,000
|
|
Tax
due
|
|
$
|
-
0 -
|
|
$
|
15,354
|
|
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
The
Company has adopted SFAS 128, "Earnings per Share." Loss per common share is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share are computed using weighted average number of common shares plus
dilutive common share equivalents outstanding during the period using the
treasury stock method. Common stock equivalents (common stock warrants) in
the
amount of 85,000 options were not included in the computation of loss per share
for the periods presented because their inclusion is anti-dilutive.
Accounting
Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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. During
the
year ended 2007, the NYSLA revoked the liquor license of Score West and as
a
result, the Company estimated that future collections on the Score West and
East
(common ownership) receivables would be impaired. Scores West has been granted
a
temporary stay of its liquor license revocation by the Appellate Court and
the
Company received in 2007 $73,250 in royalty payments from Scores West. The
Company also makes provisions for estimated taxes which may be adversely
affected by changes in tax laws and rates in future periods.
Concentration
of Credit Risk
The
Company earned royalties and merchandise revenues from seven sublicensees
in which, five (Chicago, Las Vegas, New Orleans, Lake Geneva and Baltimore)
are
unrelated from management of the Company and AYA. During the year ended December
31, 2007, revenues earned from royalties and merchandise sales from these
unrelated licensees amounted to $464,686, which there is $25,217 due and
outstanding as of December 31, 2007. Revenues from royalties and merchandise
sales from the two related licensees based in New York was temporarily foregone
due to the economic instability of the clubs.
$293,946
was due from our Scores West affiliate as of December 31, 2006 of which $73,250
of prior years royalties was collected during 2007. A note in the amount of
$1,867,310 which includes $355,189 of accrued interest from our Go West
affiliate that matures in October 2008 was in default at December 31, 2006.
No
payments were made on this note during 2007.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
$1,230,263
from Scores East was due and outstanding as of December 31, 2006 by which no
cash was collected during 2007. A reserve for the entire $1,540,870 and
$1,867,310 was provided for based on both the unstable financial conditions,
bankruptcy (Miami) and Government matters.
New
Accounting Pronouncements
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS 159), including an amendment
to FASB No. 115. FAS 159 gives entities the irrevocable option to measure
eligible financial assets, financial liabilities and firm commitments at fair
value, on an instrument-by-instrument basis, that are otherwise not permitted
to
be accounted for at fair value under other accounting standards. The election,
called the fair value option, will enable entities to achieve an offset
accounting effect for changes in fair value of certain related assets and
liabilities without having to apply complex hedge accounting provisions. SFAS
159 is effective as of the beginning of a company’s first fiscal year that
begins after November 15, 2007. We are currently evaluating the impact of
SFAS 159 on our consolidated financial statements.
In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
Combinations. This Statement replaces FASB Statement No. 141, Business
Combinations. This Statement retains the fundamental requirements in
Statement 141 that the acquisition method of accounting (which Statement
141 called the purchase method) be used for all business combinations and for
an
acquirer to be identified for each business combination. This Statement defines
the acquirer as the entity that obtains control of one or more businesses in
the
business combination and establishes the acquisition date as the date that
the
acquirer achieves control. This Statement’s scope is broader than that of
Statement 141, which applied only to business combinations in which control
was
obtained by transferring consideration. By applying the same method of
accounting—the acquisition method—to all transactions and other events in which
one entity obtains control over one or more other businesses, this Statement
improves the comparability of the information about business combinations
provided in financial reports.
This
Statement requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions
specified in the Statement. That replaces Statement 141’s cost-allocation
process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated
fair
values.
This
Statement applies to all transactions or other events in which an entity (the
acquirer) obtains control of one or more businesses (the acquirer), including
those sometimes referred to as “true mergers” or “mergers of equals” and
combinations achieved without the transfer of consideration, for example, by
contract alone or through the lapse of minority veto rights. This Statement
applies to all business entities, including mutual entities that previously
used
the pooling-of-interests method of accounting for some business combinations.
It
does not apply to: (a) The formation of a joint venture, (b) The acquisition
of
an asset or a group of assets that does not constitute a business, (c) A
combination between entities or businesses under common control, (d) A
combination between not-for-profit organizations or the acquisition of a
for-profit business by a not-for-profit organization.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. Management believes this Statement will have no impact on
the
financial statements of the Company once adopted.
In
December 2007, the FASB issued FASB Statement No. 160 - Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51. This
Statement applies to all entities that prepare consolidated financial
statements, except not-for-profit organizations, but will affect only those
entities that have an outstanding noncontrolling interest in one or more
subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations
should continue to apply the guidance in Accounting Research Bulletin No. 51,
Consolidated Financial Statements, before the amendments made by this Statement,
and any other applicable standards, until the Board issues interpretative
guidance.
This
Statement amends ARB 51 to establish accounting and reporting standards for
the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary is
an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this Statement was issued,
limited guidance existed for reporting non-controlling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities
or
in the mezzanine section between liabilities and equity. This Statement improves
comparability by eliminating that diversity.
A
non-controlling interest, sometimes called a minority interest, is the portion
of equity in a subsidiary not attributable, directly or indirectly, to a parent.
The objective of this Statement is to improve the relevance, comparability,
and
transparency of the financial information that a reporting entity provides
in
its consolidated financial statements by establishing accounting and reporting
standards that require: (a) The ownership interests in subsidiaries held by
parties other than the parent be clearly identified, labeled, and presented
in
the consolidated statement of financial position within equity, but separate
from the parent’s equity, (b) The amount of consolidated net income attributable
to the parent and to the non-controlling interest be clearly identified and
presented on the face of the consolidated statement of income, (c) Changes
in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently. A parent’s ownership
interest in a subsidiary changes if the parent purchases additional ownership
interests in its subsidiary or if the parent sells some of its ownership
interests in its subsidiary. It also changes if the subsidiary reacquires some
of its ownership interests or the subsidiary issues additional ownership
interests. All of those transactions are economically similar, and this
Statement requires that they be accounted for similarly, as equity transactions,
(d) When a subsidiary is deconsolidated, any retained non-controlling equity
investment in the former subsidiary be initially measured at fair value. The
gain or loss on the deconsolidation of the subsidiary is measured using the
fair
value of any non-controlling equity investment rather than the carrying amount
of that retained investment, (e) Entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the non-controlling owners.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
entities with calendar year-ends). Earlier adoption is prohibited. This
Statement shall be applied prospectively as of the beginning of the fiscal
year
in which this Statement is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure requirements shall
be
applied retrospectively for all periods presented. Management believes this
Statement will have no impact on the financial statements of the Company once
adopted.
Note
3. Furniture and Equipment
At
December 31, 2007, furniture and equipment consist of the
following:
Furniture
and Equipment
|
|
$
|
50,000
|
|
Less:
accumulated depreciation
|
|
|
(50,000
|
)
|
|
|
|
|
|
|
|
$
|
—
|
|
Furniture
and equipment are depreciated over 5 years. Depreciation expense for the year
ended December 31, 2007 and 2006 was $0 and $8,763 respectively.
Note
4. Related-Party Transactions
a.
Go
West Entertainment, Inc.
Since
2007, the Company has had a temporary month to month occupancy with Go West
Entertainment, Inc., “Go West”. The former President, Chief Executive Officer
and Director of the Company is also one of the two shareholders of Go West.
b.
"Unwinding" transaction and Master License Agreement
Immediately
after the closing of our transfer of Go West in 2003, we entered into a Master
License Agreement (the "Master License") with EMS. The Master License grants
to
EMS the exclusive worldwide license to use and to grant sublicensees to use
the
"SCORES" trademarks in connection with the ownership and operation of upscale,
adult-entertainment cabaret night clubs/restaurants and for the sale of
merchandise by such establishments. Merchandise must relate to the nightclub
that sells it, and may be sold at the nightclub, on an internet site maintained
by the nightclub, by mail order and by catalogue. The term of the Master License
is twenty year with the option to renew the Master License for six consecutive
five-year terms. Under the Master License, EMS is required to pay the Company
100% (one hundred) percent of all royalties earned and received from clubs
that
are under common ownership with us (affiliates) and 50% (fifty) percent of
royalties earned and received from those clubs which are not under
common ownership (non affiliates). Although the Master License requires
that EMS charge a royalty fee equal to 4.99% of a sub-licensee’s gross revenues,
the Company has agreed, however, that in certain situations, EMS can execute
an
agreement that may be less restrictive than the 4.99% minimum.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
During
the year ended 2007, the Company collected approximately $147,694 in royalties
directly from our non affiliate Scores Chicago. Pursuant to the Master License,
the Company was obligated to remit 50% (percent) $73,847 of the amount collected
to EMS but retained approximately $44,978 to help cover minor shortfalls in
cash
flow. We believe EMS, which commonly owns Scores East and Scores West, will
elect to have the balance due applied to either the Scores East or Scores
West outstanding royalties due to the Company as of December 31,
2007.
In
consideration of all payments made by us on behalf of Go West for the
construction of the club, Go West has given to us its Secured Promissory Note
in
the amount of $1,636,264. The principal of the Note is payable in sixty monthly
installments commencing on November 1, 2003 and ending on October 1, 2008.
The
first twelve monthly installments are $10,000 each. The next forty-eight
installments of principal are $31,289 each. Interest at the rate of 7% per
annum
will accrue on the unpaid balance of principal until maturity. Interest payments
are due monthly with each installment of principal commencing November 1, 2003.
The Note is secured by Go West's leased interest in its New York nightclub.
Interest receivable of $355,188 was due at December 31, 2007. Due to the pending
matter regarding the NYSLA and our affiliate Go West and due to unstable
financial conditions at our Go West affiliate, the Company believes that there
is a potential risk that collection of the $1,867,310 which includes accrued
interest of $355,189 balances could not be assured and, thus, required a reserve
for the full amount outstanding of $1,867,310 as of December 31,
2007.
Note
5. Intangible Assets
a.
Trademark
In
connection with the acquisition of HEIR Holding Co., Inc., the Company acquired
the trademark to the name "SCORES". This trademark had a recorded value of
$425,000. This trademark has been registered in the United States, Canada,
Japan, Mexico and the European Community. The trademark is being amortized
by
straight line method over an estimated useful life of ten years. The Company's
trademark having an infinite useful life by its definition is being amortized
over ten years due to the difficult New York legal environment for which the
related showcase adult club is operating. The Company recorded amortization
expenses of $59,720 in 2007 and $33,680 in 2006. Amortization of this intangible
will continue at $59,720 a year over its useful life.
Note
6. Notes Payable and Convertible Debenture
As
a
result of the settlement agreement entered into in September 2006 between the
Company and affiliated parties and Scores Entertainment Inc. ("SEI") and Irving
Bilzinsky ("Bilzinsky"), the Company is obligated to pay Bilzinsky, as sole
shareholder of SEI, $175,000 in 18 monthly installments, which commenced on
September 24, 2006, of $9,375 for each of the first 8 months and $10,000 for
each of the remaining 10 months. As of December 31, 2007 the Company paid
$117,500 and has a current balance due of $20,000.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
a.
Convertible Debenture
a.
On
December 16, 2003 the Company entered into a "Loan Agreement Modification"
whereby the remaining loan balance of $559,000 was forgiven for the issuance
of
20,000 warrants with an exercise price of 75% of the three lowest closing bid
prices per share of the Company’s common stock during the forty trading days
immediately preceding the date of the conversion for a term of three years.
The
20,000 warrants were valued at $7,000 using the Black-Scholes method. The
remaining balance of the $552,000 debt forgiven was allocated as a gain on
the
settlement of such debt net of the write off of the remaining $95,000 of related
capitalized financing costs.
b.
The
terms of the $230,000 convertible debentures "Debenture A", issued in August
2004, are as follows:
·
|
The
debentures mature on August 11, 2009 and bear interest at 1.5% per
annum
and accrue until paid.
|
·
|
The
debentures are convertible at the option of the holder into common
stock
at the lesser of (a) $0.10 or 100% of the average of the closing
bid
prices for the five trading days immediately prior to closing or
(b) 50%
of the average of the three lowest closing bid prices in the forty
days
immediately preceding the conversion
date.
|
·
|
The
Company may redeem the outstanding debentures at any time for 135%
of the
unconverted amount of the debenture plus accrued
interest.
|
The
terms
of the $20,000 convertible debenture "Second Debenture", issued in August 2004,
are as follows:
·
|
The
debenture can be converted into $.01 per
share.
|
The
terms
of the $250,000 contingent convertible debentures "Debenture B", issued in
August 2004, are as follows:
·
|
The
debentures mature on August 11, 2009 and bear interest at 1.5% per
annum
and accrue until paid.
|
·
|
The
debentures are convertible at the option of the holder into common
stock
at the lesser of $0.125 or 50% of the average of the closing bid
prices
for the three trading days immediately prior to
closing.
|
·
|
The
Company may redeem the outstanding debentures at any time for 135%
of the
unconverted amount of the debenture plus accrued
interest.
|
The
aforementioned convertible debentures contain certain anti-dilution provisions.
A $250,000 valuation of the beneficial conversion features of the Debenture
A
and the Second Debenture has been recorded as interest expense. The valuation
of
such beneficial conversion rights has been limited to the $250,000 pursuant
to
the applicable EITF. No evaluation of the beneficial conversion terms of
Debenture B has been performed since such monies have yet to be
received.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
Pursuant
to the terms of these debenture agreements approximately 60,000,000 shares
of
common stock has been placed in escrow as for the conversion of such
debentures.
On
January 27, 2006, the Company issued 3,841,700 shares of common stock in
exchange for the conversion of $12,850 of debenture principal and $281 of
interest, respectively.
On
February 8, 2006, the Company issued 15,029,118 shares of common stock in
exchange for the conversion of $50,000 of debenture principal and $1,099 of
interest, respectively.
On
June
2, 2006, the Company issued 4,995,000 shares of common stock in exchange for
the
conversion of $34,050 of Debenture principal and $922.14 of interest
respectively.
The
terms
of anti-dilution agreement with the major shareholders were extended as part
of
the execution of these debentures issued in August 2004. This extension has
been
terminated as of September 30, 2006. This is the date that all existing
debenture balances had been paid and yet deemed fully extinguished by the
Company. As a result, no additional anti-dilution shares will be
issued.
Note
7. Equity Transactions
On
November 16, 2007, the Company cancelled 7,920,000 shares of our common stock
that was held in escrow for the future conversion of debenture
principal.
Note
8. Stock Option
Stock-Based
Compensation
Effective
January 1, 2006, the beginning of the Company’s first fiscal quarter of 2006,
the Company adopted the fair value recognition provisions of SFAS 123R, using
the modified-prospective transition method. Under this transition method,
stock-based
compensation expense was recognized in the consolidated financial statements
for
granted, modified, or settled stock options. Compensation expense recognized
included the estimated expense for stock options granted on and subsequent
to
January 1, 2006, based on the grant date fair value estimated in accordance
with
the provisions of SFAS 123R, and the estimated expense for the portion vesting
in the period for options granted prior to, but not vested as of January 1,
2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS 123. Results for prior periods have not been
restated, as provided for under the modified-prospective
method.
Stock
option activity for the two years ended December 31, 2007 is summarized as
follows:
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
Exercise
Price
|
|
Outstanding
at December 31, 2005
|
|
|
85,000
|
|
$
|
2.80
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Expired
or cancelled
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2006
|
|
|
85,000
|
|
|
2.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Expired
or cancelled
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2007
|
|
|
85,000
|
|
$
|
2.80
|
|
All
options are vested and exercisable
Note
9. Commitments and Contingencies
Rent
expense for the year ended December 31, 2007 and 2006 was $101,163 and $240,000
respectively. In June 2007, the Company voluntarily terminated its one year
lease agreement with HQ Global services, Inc. to occupy an office in White
Plains and a satellite office on Park Ave in New York. Security deposits in
the
amount of $7,000 were offset by the July and August rents.
In
July
2007, the Company began to temporarily rent office space for $5,000 a month,
on
a month to month basis, from Go West Entertainment for office space located
at
533-535 West 27th Street, New York, NY. The occupancy covers approximately
700
square feet of office space which includes overhead cost. Monthly rents are
offset by any outstanding royalties due.
As
a
result of the settlement agreement entered into in September 2006 between the
Company and affiliated parties and Scores Entertainment Inc. ("SEI") and Irving
Bilzinsky ("Bilzinsky"), the Company is obligated to pay Bilzinsky, as sole
shareholder of SEI, $175,000 in 18 monthly installments, which commenced on
September 24, 2006, of $9,375 for each of the first 8 months and $10,000 for
each of the remaining 10 months. As of December 31, 2007 the Company had a
balance due to Bilzinsky of $20,000 of which all is current, having paid $37,500
during 2006 and $117,500 during 2007.
Litigation
On
December 11, 2007, Francis Vargas, a former cocktail waitress at “Scores West
Side” located in New York, NY, filed a civil lawsuit against us and Go West
Entertainment, Inc. in the Supreme Court of the State of New York, County of
New
York, alleging violations of the New York State Human Rights Law, New York
Executive Law, New York City Human Rights Law, and the New York City
Administrative Code, based upon allegations of sexual discrimination and sexual
harassment. The lawsuit further alleges that at all material times both we
and
Go West were employers of Ms. Vargas, the plaintiff. The law suit seeks
unspecified compensatory damages for plaintiff’s alleged loss of past and future
earnings and benefits, emotional distress, humiliation and loss of reputation.
We dispute that we were an employer of the plaintiff and categorically deny
all
allegations of sexual discrimination and sexual harassment. We filed our
verified answer in the Supreme Court of the State of New York on February 12,
2008 to contest and defend against these accusations.
Note
10. Subsequent Events
In
early
March 2008, we received notice that DIF&B, owner of the Las Vegas club,
would be cancelling its sublicense with EMS effective on or before May 6,
2008. We were notified that DIF&B would be making final royaltly
payments to EMS totaling $60,000 at the rate of $10,000 per week starting the
first week of March 2008. To date, EMS has received only one such $10,000
payment from DIF&B and is exploring its available remedies. We may not
receive all royalties due from EMS with resprect to the Las Vegas club
sublicense if EMS is not able to collect all payments due from DIF&B.
The Las Vegas club accounted for 58% and 26% of our total royalty revenues
in
2007 and 2006, respectively.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
On
October 9, 2007, former Go West bartender Siri Diaz filed a purported class
action and collective action on behalf of all tipped employees against us and
other defendants alleging violations of federal and state wage/hour laws
(
Siri
Diaz et al. v. Scores Holding Company, Inc.; Go West Entertainment, Inc. a/k/a
Scores West Side; and Scores Entertainment, Inc., a/k/a Scores East
Side
,
Case
No. 07 Civ. 8718 (Southern District of New York, Judge Richard M. Berman)).
On
November 6, 2007, plaintiffs served an amended purported class action and
collective action complaint, naming dancers and servers as additional plaintiffs
and alleging the same violations of federal and state wage/hour laws. On or
about February 21, 2008, plaintiffs served a second amended complaint adding
two
additional party defendants, but limiting the action to persons employed in
the
New York Scores’ clubs. The amended complaint alleges that we and the other
defendants are “an integrated enterprise” and that we jointly employ the
plaintiffs, subjecting all of the defendants to liability for the alleged
wage/hour violations. We dispute that we violated the federal and state labor
laws, and further dispute that the dancers are “employees” subject to the
federal and state wage and hour laws. We intend to vigorously contest the
claimed liability as well as the violations alleged. We filed a motion to
dismiss the complaint, reply papers were submitted on March 14, 2008, and the
matter is now under judicial deliberation. At the same time plaintiffs moved
for
conditional certification of a class of the servers, bartenders and dancers;
we
opposed that motion and the matter is also under judicial deliberation.
Discovery into both the procedural and substantive issues is ongoing.
In
February 2007, the City of New York (the “City”) sought to close Scores West
claiming that it presented a public nuisance. The City alleged that this
nightclub was used for purposes of prostitution; the case was dismissed by
the
City of New York and no charges were sought against Scores West or us. In
February, 2007, the NYSLA began a review of the license held by Scores West
and
issued an Emergency Summary Order of Suspension of the Scores West liquor
license on February 21, 2007. Go West, the owner of Scores West, filed a
pleading with the NYSLA on behalf of Scores West and, after a temporary
adjournment and a series of hearings in front of an administrative law judge
who, on February 4, 2008, sustained all charges against Scores West, a NYSLA
hearing was held on March 6, 2008 and the NYSLA revoked the Scores West Liquor
license. On March 18, 2008, the Appellate Court granted an interim stay of
the
liquor license revocation pending a review by the full bench of the Appellate
Court. This full bench review has not yet taken place. If Scores West loses
its
liquor license and closes its business, we would no longer be entitled to
receive royalty revenues from that club, which in 2006, amounted to 31% of
our
royalties. Also, if Scores West were to close, its ability to make payments
under an outstanding note issued to us by Scores West would be impaired. The
note is currently in default. See Item 6. Management’s Discussion and Analysis
of Financial Condition and Results of Operations —Liquidity and Capital
Resources, and Item 12. Certain Relationships, Related Transactions and Director
Independence.
SCORES
HOLDING COMPANY, INC. and SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
TWO
YEARS
ENDED DECEMBER 31, 2007
On
March
30, 2007, we, along with several of our affiliates, were named in a suit in
connection with an alleged assault by an employee of an affiliate and one of
our
stockholders and former directors.
We
have
recently answered a third amended complaint and participated in a Preliminary
Conference to establish the discovery schedule. Depositions are scheduled
for May, 2008.
We
will
vigorously defend ourselves in this litigation and do not expect the outcome
will be material.
On
December 11, 2006, our affiliated club in North Miami, Florida, SMG
Entertainment, Inc. (“SMG”), filed for bankruptcy with the United States
Bankruptcy Court for the Southern District of New York. In connection therewith,
it terminated its license agreement with EMS whereby it was authorized to use
our intellectual property. At the time of its filing, SMG owed us $16,611 for
unpaid merchandise, which we subsequently reserved as bad debt.
On
March
31, 2006, Richard K. Goldring, our former president, chief executive officer
and
principal shareholder pled guilty to one count of offering a False Instrument
for Filing in the First Degree pursuant to a plea agreement with the District
Attorney of the County of New York (the "DA"). In the event that within one
year
of the date of the entry of the guilty plea, Mr. Goldring resigns from all
"control management positions" that he holds in publicly traded companies,
including ours, and divests himself of all "control ownership positions" in
publicly traded companies, including ours, and satisfies certain other
conditions, the DA will recommend a sentence of probation. In this context,
a
“control management position” is a role, official or unofficial, by which he
substantially directs the decisions of a company, and a “control ownership
position” is a position in which he controls, directly or indirectly more than
9% of the voting stock or other securities of a company, or stock or securities
that have the capability of being converted into voting stock or other
securities of a company. The plea agreement resolves the DA's investigation
against Mr. Goldring and us. No charges were brought against us.
A
sentencing hearing has been set for April 17, 2008 by which time Mr. Goldring
will have to divest himself of a control ownership position in us.
In
June
2005, we, together with several of our affiliates, commenced litigation
regarding title to certain of our intellectual property. In February 2006,
counterclaims were asserted and other persons brought third party complaints.
In
September 2006, we and our affiliates reached a settlement resolving all claims
against us for a payment of $175,000 made in monthly installments. In return,
the other parties in the litigation disclaimed any right to our intellectual
property.
There
are
no other material legal proceedings pending to which we or any of our property
is subject, nor to our knowledge are any such proceedings
threatened.
ITEM
8.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not
applicable.
ITEM
8(T).
CONTROLS
AND PROCEDURES
(a)
Management’s
Annual Report on Internal Control Over Financial Reporting.
The
management of Scores Holding Company, Inc. is responsible for establishing
and
maintaining an adequate system of internal control over financial reporting
(as
defined in Exchange Act Rule 13a-15(f)). Under the supervision and with the
participation of our senior management, consisting of Curtis Smith, our acting
chief executive officer and chief financial officer, we conducted an evaluation
of the effectiveness of the design and operation of our disclosure controls
and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act,
as of the end of the period covered by this report (the “Evaluation Date”).
Based on this evaluation, our chief executive officer and chief financial
officer concluded, as of the Evaluation Date, that our disclosure controls
and
procedures are effective such that the information relating to us required
to be
disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms, and (ii) is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required
disclosure.
Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes of accounting
principles generally accepted in the United States. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance of achieving their control objectives. In
evaluating the effectiveness of our internal control over financial reporting,
our management used the criteria set forth by Generally Accepted Accounting
Principles (GAAP).
Based
on
this evaluation, our management concluded that, as of December 31, 2007, our
internal control over financial reporting was not effective based on those
criteria.
The
following material weaknesses were identified from our evaluation:
Due
to
the small size and limited financial resources, the Company’s CFO and Acting CEO
have been the only individual involved in the accounting and financial
reporting. As a result, there is no segregation of duties within the
accounting function, leaving all aspects of financial reporting and physical
control of cash in the hands of the same individual. Usually, this lack of
segregation of duties represents a material weakness; however, to remedy the
matter, the Company retained accounting personnel who perform high end monthly
accounting services. The CFO and members of the Board examine and approve all
cash transactions and make inquiries to variances with respects to our new
accounting personnel. We will continue to periodically review our disclosure
controls and procedures and internal control over financial reporting and make
modifications from time to time considered necessary or desirable.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management’s report in this annual report.
(b)
Changes
in Internal Control over Financial Reporting
.
There
were no changes in our internal control over financial reporting that occurred
during the last fiscal quarter of the period covered by this report that have
materially affected or are reasonably likely to materially affect our internal
control over financial reporting.
ITEM
8B.
OTHER
INFORMATION
In
early
March 2008, we received notice that DIF&B, owner of the Las Vegas club,
would be cancelling its sublicense with EMS effective on or before May 6,
2008. We were notified that DIF&B would be making final royaltly
payments to EMS totaling $60,000 at the rate of $10,000 per week starting the
first week of March 2008. To date, EMS has received only one such $10,000
payment from DIF&B and is exploring its available remedies. We may not
receive all royalties due from EMS with resprect to the Las Vegas club
sublicense if EMS is not able to collect all payments due from DIF&B.
The Las Vegas club accounted for 58% and 26% of our total royalty revenues
in
2007 and 2006, respectively.
On
April 15, 2008, John Neilson resigned as our Vice
President and director. His resignation was not the result of any disagreement
between him and us.
PART
III
ITEM
9.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT
Executive
Officers and Directors
The
following table sets forth certain information, as of March 31, 2008, with
respect to our directors and executive officers.
Directors
serve until the next annual meeting of the stockholders; until their successors
are elected or appointed and qualified, or until their prior resignation or
removal. Officers serve for such terms as determined by our board of directors.
Each officer holds office until such officer’s successor is elected or appointed
and qualified or until such officer’s earlier resignation or removal. No family
relationships exist between any of our present directors and
officers.
Name
|
|
Positions
Held
|
|
Age
|
|
Date
of Election or Appointment
as Director
|
Curtis
Smith
|
|
Chief
Financial Officer, Acting Chief Executive Officer and
Director
|
|
39
|
|
September
26, 2006
|
Elda
Auerbach
|
|
Secretary
and Director
|
|
44
|
|
September
26, 2006
|
John
Neilson
*
|
|
Vice
President and Director
|
|
48
|
|
June
5, 2007
|
*
Mr. Neilson resigned as our Vice President and director
on April 15, 2008.
The
following is a brief account of the business experience during the past five
years or more of each of our directors and executive officers.
Mr.
Smith
has served as our Chief Financial Officer (CFO) since September 2006. Mr. Smith
has been our Acting Chief Executive Officer since June 2007. Mr. Smith has
worked in public accounting for over 10 years and has a background in performing
SEC audits and assisting in mergers and acquisitions for many public companies.
Prior to serving as our CFO, he served as our controller for a year. He has
served many years working with various public accounting firms performing high
level audits of many public companies and offers a variety of solid SEC
experience within the licensing industry. Mr. Smith earned his Bachelors degree
in Science from Syracuse University and has been licensed as a public accountant
since 1996.
Elda
Auerbach has served as our Secretary since September 2006 and has worked for
us
in Marketing and Merchandising for over five years. Mrs. Auerbach has held
similar positions providing marketing and merchandising services and manages
operations at our 333 E. 60th Street licensee club for over ten years. She
also
has a background in investments after working as a broker assistant for
years.
Board
of Directors
None
of
our directors receives any remuneration for acting as such. Directors may
however be reimbursed their expenses, if any, for attendance at meetings of
the
Board of Directors. Our Board of Directors may designate from among its members
an executive committee and one or more other committees. No such committees
have
been appointed to date. Accordingly, we do not have an audit committee or an
audit committee financial expert. Similarly we do not have a nominating
committee or a committee performing similar functions. We have not implemented
procedures by which our security holders may recommend board nominees to us
but
expect to do so in the future.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires our executive officers and directors and
persons who own more than 10% of a registered class of our equity securities,
to
file with the SEC initial statements of beneficial ownership on Form 3, reports
of changes in ownership on Form 4 and annual reports concerning their ownership
on Form 5. Executive officers, directors and greater than 10% stockholders
are
required by the SEC regulations to furnish us with copies of all Section 16(a)
reports they file.
To
the
best of our knowledge, during the fiscal year ended December 31, 2007, three
of
our officers did not file the required reports in a timely manner. None of
these
persons owns more than 10% of a registered class of our equity securities.
Code
of Ethics
Due
to
the scope of our current operations, as of December 31, 2007, we have not
adopted a code of ethics for financial executives, which include our principal
executive officer, Chief Financial Officer or persons performing similar
functions. Our decision to not adopt such a code of ethics results from our
having only a limited number of officers and directors operating as management.
We believe that as a result of the limited interaction which occurs having
such
a small management structure eliminates the current need for such a code.
ITEM
10.
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the total compensation paid
or
accrued by us during the two fiscal years ended December 31, 2007 to
(i) all individuals that served as our chief executive officer or acted in
a similar capacity for us at any time during the fiscal year ended December
31,
2007 and (ii) all individuals that served as executive officers of ours at
any time during the fiscal year ended December 31, 2007 that received annual
compensation during the fiscal year ended December 31, 2007 in excess of
$100,000.
Summary
Compensation Table
Name
and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards ($)
|
|
Option
Awards ($)
|
|
Non-Equity
Incentive Plan Compen-sation ($)
|
|
Change
in Pension Value and Non-qualified Deferred Compen-sation Earnings
($)
|
|
All
Other Compensation ($)
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Richard
K. Goldring
|
|
|
2007
|
|
|
17,333
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
17,333
|
|
Chief
Executive Officer (1)
|
|
|
2006
|
|
|
104,000
|
|
$
|
31,990
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
135,990
|
|
Curtis
Smith, Acting
|
|
|
2007
|
|
|
120,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
120,000
|
|
Chief
Executive Officer, Chief Financial Officer (2)
|
|
|
2006
|
|
|
25,000
|
|
|
31,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
56,000
|
|
John
Neilson, Vice President (3)
|
|
|
2007
|
|
|
52,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
52,000
|
|
Alex
Amoriello Chief Executive Officer and Chief Operating Officer
(4)
|
|
|
2007
|
|
|
56,462
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
56,462
|
|
|
(1)
|
On
February 28, 2007, Richard K. Goldring resigned as our President,
Chief
Executive Officer and Director.
|
|
(2)
|
Curtis
Smith became our Chief Financial Officer on September 26, 2006 and
Acting
Chief Executive Officer on June 25, 2007.
|
|
(3)
|
John
Neilson became our Acting President and Chief Executive Officer on
June 5,
2007. He resigned from these positions on June 25, 2007 and was appointed
Vice President. Mr. Neilson resigned as our Vice President on April
15,
2008.
|
|
(4)
|
Alex
Amoriello commenced as our President and Chief Executive Officer
on March
1, 2007. He resigned these positions on June 5, 2007 at which time
he was
appointed our Chief Operating Officer. He resigned from this position
on
August 31, 2007.
|
We
have
not issued any stock options or maintained any stock option or other incentive
plans since our inception. We have no plans in place and have never maintained
any plans that provide for the payment of retirement benefits or benefits that
will be paid primarily following retirement including, but not limited to,
tax
qualified deferred benefit plans, supplemental executive retirement plans,
tax-qualified deferred contribution plans and nonqualified deferred contribution
plans. Similarly, we have no contracts, agreements, plans or arrangements,
whether written or unwritten, that provide for payments to the named executive
officers or any other persons following, or in connection with the resignation,
retirement or other termination of a named executive officer, or a change in
control of us or a change in a named executive officer’s responsibilities
following a change in control.
Compensation
of Directors
None
of
our directors receive any compensation for serving as such, for serving on
committees of the board of directors or for special assignments. During the
fiscal years ended December 31, 2007 and 2006 there were no other arrangements
between us and our directors that resulted in our making payments to any of
our
directors for any services provided to us by them as directors.
ITEM
11.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership
of our common stock known by us as of April 15, 2008 by
|
·
|
each
person or entity known by us to be the beneficial owner of more than
5% of
our common stock,
|
|
·
|
each
of our executive officers, and
|
|
·
|
all
of our directors and executive officers as a group.
|
The
percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our common stock outstanding
on such date and all shares of our common stock issuable to such holder in
the
event of exercise of outstanding options, warrants, rights or conversion
privileges owned by such person at said date which are exercisable within
60 days of such date. Except as otherwise indicated, the persons listed
below have sole voting and investment power with respect to all shares of our
common stock owned by them, except to the extent such power may be shared with
a
spouse. The addresses for our executive officers and directors are c/o Scores
Holding Company, Inc., 533-535 West 27
th
Street,
New York, NY 10001.
Name
and Address
of
Beneficial Owner
|
|
Title
of Class
|
|
Amount
and Nature
of
Beneficial Ownership
|
|
Percent
of
Class
(1)
|
|
Richard
K. Goldring(2)
5
Fox Chase Drive
Watchung,
NJ 07060
|
|
|
Common
Stock; par value 0.001
|
|
|
76,082,558
|
(3)
|
|
46.1
|
|
Elliot
Osher
54
Prospect Drive
White
Plains, NY 10606
|
|
|
Common
Stock;
par
value $0.001
|
|
|
14,552,606
|
|
|
8.8
|
|
Estate
of William Osher (4)
2955
Shell Road
Brooklyn,
NY 1224
|
|
|
Common
Stock
Par
value $0.001
|
|
|
14,552,726
|
|
|
8.8
|
|
Curtis
Smith
|
|
|
|
|
|
|
|
|
|
|
Elda
Auerbach
|
|
|
|
|
|
|
|
|
|
|
All
directors and executive officers
as
a
group (2 persons)
(1)
|
Based
upon 165,186,124 shares issued and outstanding as at April 15,
2008.
|
(2)
|
On
February 28, 2007, Richard K. Goldring resigned as our President,
Chief
Executive Officer and Director.
|
(3)
|
Includes
1,600 shares owned by Irina Goldring, the wife of Richard K.
Goldring.
|
(4)
|
William
Osher passed away in August, 2007.
|
Changes
in Control
Not
Applicable.
Securities
Authorized for Issuance Under Equity Compensation Plans
We
do not
presently maintain any equity compensation plans and have not maintained any
such plans since our inception.
ITEM
12.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
,
AND DIRECTOR INDEPENDENCE
Richard
Goldring currently owns approximately 46% of our common stock. He resigned
as
our President, Chief Executive Officer and director on February 28, 2007. Elliot
Osher currently owns approximately 8.8% of our common stock. The estate of
William Osher currently owns approximately 8.8% of our common
stock.
Agreements
with EMS
EMS
is
one third owned by each of Richard Goldring, Elliot Osher and Harvey Osher.
On
March 13, 2003, we entered into the EMS Agreement granting it an exclusive
worldwide license to use and license the use of our intellectual property to
Scores nightclubs and to sell merchandise from those locations. The term of
the
EMS Agreement is for 20 years and is renewable for six 5-year periods at the
option of EMS. Under the EMS Agreement, EMS was required to pay over to us
100%
of royalties received from clubs under common control with us and 50% of
royalties received from those not under common control.
On
November 13, 2006, we amended and restated the EMS Agreement (the “Restated
Agreement”) to add a provision which stated that so long as a shareholder,
officer or director of EMS serves at the same time as an officer or director
of
ours, EMS would pay to us 100% of royalties received from non-affiliated clubs.
The Restated Agreement recited that this had always been the intention
and practice of the parties. On February 28, 2007, this condition ceased to
be fulfilled as Richard Goldring resigned as our President, Chief Executive
Officer and Director and, as a result, as of that date our receipt of royalties
generated from non-affiliated clubs reverted to the 50% level.
Transactions
with 333 East 60
th
Street, Inc.
333
East
60
th
Street,
Inc., operator of Scores East, is two thirds owned by Richard Goldring and
one
third owned by Elliot Osher. Both Richard Goldring and Elliot Osher are our
stockholders. Richard Goldring was our President, Chief Executive Officer and
director until his resignation on February 28, 2007. On October 1, 2003, EMS
and
333 East 60
th
Street,
Inc. entered into a sublicense agreement which permitted Scores East to use
our
tradename in connection with its operations. Royalties earned during 2006 and
2007 as a result of the Scores East sublicense were $549,363 and $0,
respectively. Royalties owned to us by EMS relating to the Scores East
sublicense as of December 31, 2006 and December 31, 2007 were $1,230,263 and
$1,230,263, respectively.
Sublicense
Agreement with SMG Entertainment Inc.
Richard Goldring
indirectly owns 90% of SMG Entertainment Inc. (“SMG”). On January 3, 2005, EMS
and SMG entered into a sublicense agreement which permitted a North Miami
nightclub to use the Score tradename in connection with its operations.
Royalties payable to EMS were 4.99% of its gross revenues. SMG filed for
bankruptcy in the Southern District of New York on December 11, 2006. At such
date, EMS owed us $16,661 of sublicensee revenues from SMG, which we wrote
off
as uncollectible, as of December 31, 2006.
Transactions
with Go West Entertainment, Inc. - “Go West”
Two
thirds of Go West is owned by Richard Goldring and one third by Elliot
Osher.
On
March
11, 2002, we entered into an acquisition agreement with Go West whereby it
became our wholly owned subsidiary in exchange for common stock paid to its
then stockholders, Richard Goldring, William Osher and Elliot Osher. On
March 31, 2003, we engaged in a series of transactions designed to reverse
this
acquisition (the “Unwinding”). We transferred all of the capital stock of Go
West to its former shareholders, who returned our stock to us. Immediately
thereafter, Richard Goldring and William Osher entered into an agreement with
EMS whereby they each exchanged their shares of Go West for shares of EMS
(the “EMS Acquisition Agreement”). As a result, EMS owned 66.7% and Elliot Osher
owned 33.3% of Go West's outstanding common stock. Richard Goldring and William
Osher each owned 50% of EMS's outstanding common stock. On April 7, 2003 the
EMS
Acquisition Agreement was undone. EMS transferred 2,500,000 shares of Go West
to
Mr. Richard Goldring and 2,500,000 shares of Go West to Mr. William Osher.
Also,
on
March 31, 2003, EMS and Go West entered into a sublicense agreement which
permitted Scores West, owned by Go West, to use the Scores tradename
in
connectio
n
with Scores West's operations. Royalties payable to EMS were
4.99% of its gross revenues. Royalties earned during 2006 and 2007 were $577,710
and $0, respectively. Royalties owned to us by EMS relating to the Scores West
sublicense at December 31, 2006 and December 31, 2007 were $293,946 and
$293,946, respectively.
Executive
Offices
Beginning
July 1, 2004, we leased 2,400 square feet of office space from Go West for
our
executive offices, paying $20,000 per month and offsetting it against royalties
owed. On March 1, 2007, we terminated this lease.
In
July
2007, we began to lease from Go West, on a temporary, month-to-month basis,
approximately 700 square feet of office space located at 533-535 West 27th
Street, New York, NY. We pay $5,000 per month, including overhead costs, for
this office space. Monthly rents payable to Go West are offset by outstanding
royalties that Go West owes us.
Go
West Construction Loan
In
consideration of payments made by us on behalf of Go West for construction
of
Scores West, on March 31, 2003, GoWest issued us a five year promissory note
for
$1,636,264.08 which bears simple interest at 7% and is scheduled for maturity
on
October 1, 2008. Go West is in default under the Note. As of December 31, 2007,
Go West owed us $1,867,310 which includes $355,189 in accrued and unpaid
interest. During 2006 and 2007, $104,400 and $0 were paid in principal and
interest, respectively. At the time, Go West’s primary asset was a 20-year lease
on the building at 533-535 West 27th Street, New York, New York which is where
it built its nightclub. It had an option to purchase the lot for $10,000,000
which it has exercised. The Note is secured by Go West’s leasehold interest
in the property which we believe is adequate security, despite being subordinate
to the underlying mortgage.
Director
Independence
We
are
not subject to listing requirements of any national securities exchange or
inter-dealer quotation system which has requirements that a majority of the
board of directors be “independent” and, as a result, we are not at this time
required to have our Board comprised of a majority of “Independent Directors.”
Our current directors are not independent as they also serve as our officers.
ITEM
13.
EXHIBITS
Exhibits
The
following Exhibits are being filed with this Annual Report on Form
10-KSB:
Exhibit
No.
|
|
SEC
Report Reference Number
|
|
Description
|
2.1
|
|
2
|
|
Agreement
and Plan of Reorganization dated June 22, 1998 between Olympus M.T.M.
Corporation and The Internet Advisory Corporation (1)
|
|
|
|
|
|
2.2
|
|
10
|
|
Reorganization
Agreement dated December 30, 1999 between The Internet Advisory
Corporation and Richard Goldring (2)
|
|
|
|
|
|
2.3
|
|
99
|
|
Plan
of Reorganization and Disclosure Statement dated November 14, 2001
filed
in Bankruptcy Court (3)
|
|
|
|
|
|
2.4
|
|
2.1
|
|
Acquisition
Agreement dated March 11, 2002 among the Registrant Go West Entertainment,
Inc., Richard Goldring, William Osher, and Elliott Osher
(4)
|
|
|
|
|
|
2.5
|
|
2.1
|
|
Agreement
and Plan of Merger dated August 7, 2002 among HEIR Holding Company,
Inc.,
Scores Acquisition Corp. and the Registrant (5)
|
|
|
|
|
|
2.6
|
|
2.1
|
|
Acquisition
Agreement, dated March 31, 2003 among the Registrant, Go West
Entertainment, Inc., Richard Goldring, William Osher, and Elliott
Osher
(6)
|
|
|
|
|
|
2.7
|
|
2.1
|
|
Agreement
and Plan of Merger, dated August 12, 2004, among the Registrant,
SCRH
Acquisition Corp. and Aciem Management, Inc (7)
|
|
|
|
|
|
2.8
|
|
2.2
|
|
Amendment
No. 1 to Acquisition Agreement, dated August 12, 2004, among the
Registrant, Go West Entertainment, Inc., Richard Goldring, William
Osher,
and Elliott Osher (7)
|
|
|
|
|
|
10.1
|
|
|
|
License
Agreement between HEIR Holding Company, Inc. and Go West Entertainment,
Inc.*
|
|
|
|
|
|
10.2
|
|
|
|
Amendment
to License Agreement dated August 15, 2001*
|
|
|
|
|
|
10.3
|
|
10.1
|
|
Convertible
Debenture Purchase Agreement dated August 7, 2002 between HEIR Holding
Company, Inc. and HEM Mutual Assurance Fund, Ltd (8)
|
|
|
|
|
|
10.4
|
|
10.1
|
|
$1,000,000
Convertible Debenture Issued to HEM Mutual Assurance Fund, Ltd by
HEIR
Holding Company, Inc. (8)
|
|
|
|
|
|
10.5
|
|
10.3
|
|
Loan
Agreement and Promissory Note dated August 7, 2002 between the Registrant
and HEM Mutual Assurance Fund, Ltd (8)
|
|
|
|
|
|
10.6
|
|
10.3
|
|
Promissory
Note dated August 7, 2002 issued to HEM Mutual Assurance Fund, Ltd
by the
Registrant (8)
|
Exhibit
No.
|
|
SEC
Report Reference Number
|
|
Description
|
10.7
|
|
10.2
|
|
Convertible
Debenture Purchase Agreement dated August 7, 2002 between the Registrant
and HEM Mutual Assurance, LLC (8)
|
|
|
|
|
|
10.8
|
|
10.2
|
|
Termination
Warrant dated August 7, 2002 issued to HEM Mutual Assurance, LLC
by the
Registrant, dated March 31, 2003 (8)
|
|
|
|
|
|
10.9
|
|
10.2
|
|
Special
Registration Rights Agreement dated August 7, 2002 between the Registrant
and HEM Mutual Assurance, LLC (8)
|
|
|
|
|
|
10.10
|
|
10.2
|
|
Modification
of Loan and Convertible Debenture Purchase Agreements and Related
Transaction Documents dated November 14, 2002 among the Registrant,
HEM
Mutual Assurance Fund, Ltd and HEM Mutual Assurance, LLC.
(9)
|
|
|
|
|
|
10.11
|
|
10.3
|
|
Intellectual
Property Assignment Agreement dated July 1, 2002 between the Registrant
and Scores Entertainment, Inc. (9)
|
|
|
|
|
|
10.12
|
|
10.4
|
|
Warrant
dated July 1, 2002 to Purchase 70,000 Shares of Common Stock of the
Registrant(9)
|
|
|
|
|
|
10.13
|
|
10.1
|
|
Second
Modification of Loan and Convertible Debenture Purchase Agreements
and
Related Transaction Documents, dated February 25, 2003, among the
Registrant, HEM Mutual Assurance Fund, Ltd and HEM Mutual Assurance,
LLC.(10)
|
|
|
|
|
|
10.14
|
|
10.1
|
|
Collateral
Loan Agreement dated April 1, 2002 between the Registrant and
Interauditing, Srl (11)
|
|
|
|
|
|
10.15
|
|
10.18
|
|
Advisory
Agreement dated March 2003 among Maximum Ventures, Inc., Jackson
Steinem,
Inc. and the Registrant (12)
|
|
|
|
|
|
10.16
|
|
10.1
|
|
Employment
Agreement dated July 1, 2002 between the Registrant and Richard Goldring
(9)
|
|
|
|
|
|
10.17
|
|
10.20
|
|
Stock
Option Agreement dated October 22, 2002 between the Registrant and
Richard
Goldring (12)
|
|
|
|
|
|
10.18
|
|
10.21
|
|
Stock
Option Agreement dated October 22, 2002 between the Registrant and
Elda
Auerback (12)
|
|
|
|
|
|
10.19
|
|
|
|
Promissory
Note for $250,000 issued by the Registrant to Arnold Feldman
*
|
|
|
|
|
|
10.20
|
|
10.1
|
|
Secured
Promissory Note issued by Go West Entertainment, Inc. to the Registrant
(6)
|
|
|
|
|
|
10.21
|
|
10.2
|
|
Master
License Agreement, dated March 31, 2003 between the Registrant and
Entertainment Management Services, Inc.
(6)
|
Exhibit
No.
|
|
SEC
Report Reference Number
|
|
Description
|
10.22
|
|
10.3
|
|
Sublicense
Agreement, dated March 31, 2003, between Entertainment Management
Services, Inc. and Go West Entertainment, Inc. (6)
|
|
|
|
|
|
10.23
|
|
10.4
|
|
Employment
Agreement, dated March 31, 2003, between the Registrant and Richard
Goldring (6)
|
|
|
|
|
|
10.24
|
|
10.5
|
|
Amendment
to Intellectual Property Agreement, dated March 31, 2003, between
the
Registrant and Scores Entertainment, Inc. (6)
|
|
|
|
|
|
10.25
|
|
10.28
|
|
Loan
Modification Agreement, dated December 16, 2003, between the Registrant
and HEM Mutual Assurance Fund Limited (13)
|
|
|
|
|
|
10.26
|
|
2.1
|
|
Agreement
and Plan of Merger, dated August 12, 2004, between the Registrant,
SCRH
Acquisition Corp. and Aciem Management, Inc. (14)
|
|
|
|
|
|
10.27
|
|
10.32
|
|
Sublicense
Agreement, dated March 31, 2003, between Entertainment Management
Services, Inc. and Go West Entertainment, Inc. (15)
|
|
|
|
|
|
10.28
|
|
10.28
|
|
Sublicense
Agreement, dated June 13, 2003, between Entertainment Management
Services,
Inc. and Stone Park Entertainment (15)
|
|
|
|
|
|
10.29
|
|
10.29
|
|
Sublicense
Agreement, dated February 27, 2004, between Entertainment Management
Services, Inc. and Club 2000 Eastern Avenue, Inc. (15)
|
|
|
|
|
|
10.30
|
|
10.31
|
|
Sublicense
Agreement, dated July 27, 2004, between Entertainment Management
Services,
Inc. and DBD Management, Inc. (15)
|
|
|
|
|
|
10.31
|
|
10.30
|
|
Sublicense
Agreement, dated January 3, 2005, between Entertainment Management
Services, Inc. and SMG Entertainment, Inc. (15)
|
|
|
|
|
|
10.32
|
|
|
|
Sublicense
Agreement, dated July 28, 2005, between Entertainment Management
Services,
Inc. and DDII, LLC. (22)
|
|
|
|
|
|
10.33
|
|
10.33
|
|
Sublicense
Agreement, dated October 27, 2005, between the Registrant and D.I.
Food
& Beverage of Las Vegas (16)
|
Exhibit
No.
|
|
SEC
Report Reference Number
|
|
Description
|
10.34
|
|
10.34
|
|
Sublicense
Agreement, dated November 16, 2005, between Entertainment Management
Services, Inc. and DDL of Los Angeles LLC (16)
|
|
|
|
|
|
10.35
|
|
10.35
|
|
Sublicense
Agreement, dated November 16, 2005, between Entertainment Management
Services, Inc. and Bash Entertainment, LLC (16)
|
|
|
|
|
|
10.36
|
|
10.1
|
|
Employment
Agreement, dated January 1, 2006, between the Registrant and Richard
Goldring (17)
|
|
|
|
|
|
10.37
|
|
10.1
|
|
Recission
Agreement, dated September 25, 2006, between the Registrant and Richard
Goldring (18)
|
|
|
|
|
|
10.38
|
|
10.38
|
|
Sublicense
Agreement, dated January 24, 2006, between the Registrant and AYA
Entertainment, Inc. (16)
|
|
|
|
|
|
10.39
|
|
10.1
|
|
Amended
and Restated Master License Agreement, dated November 13, 2006, between
the Registrant and Entertainment Services, Inc. (19)
|
|
|
|
|
|
10.40
|
|
10.1
|
|
Employment
Agreement, dated March 1, 2007, with Alex Amoriello
(20)
|
|
|
|
|
|
10.41
|
|
10.41
|
|
Lease,
dated March 6, 2007, between the Registrant and HQ Global Work Places
(16)
|
|
|
|
|
|
10.42
|
|
10.42
|
|
Sublicense
Agreement, dated April 2, 2007, between Entertainment Management
Services,
Inc. and Silver Bourbon, Inc. (16)
|
|
|
|
|
|
10.43
|
|
10.43
|
|
Amendment
to Employment Agreement, dated May 7, 2007, between the Registrant
and
Alex Amoriello (16)
|
|
|
|
|
|
16
|
|
16.1
|
|
Letter,
dated February 28, 2005, from Radin, Glass &Co., LLP
(21)
|
|
|
|
|
|
21
|
|
21
|
|
Subsidiaries
- As of March 31, 2008, we had one subsidiary: Scores Licensing
Corp.
|
|
|
|
|
|
31.1
|
|
|
|
Rule
13(a)-14(a)/15(d)-14(a) Certification of Principal Executive
Officer**
|
|
|
|
|
|
31.2
|
|
|
|
Rule
13(a)-14(a)/15(d)-14(a) Certification of Principal Financial Officer
(23)
|
|
|
|
|
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32.1
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Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002**
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32.2
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Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (24)
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*
previously filed.
**
filed
herewith.
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(1)
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Filed
with the Securities and Exchange Commission on July 2, 1998 as an
exhibit,
numbered as indicated above, to the Registrant’s Current Report on Form
8-K dated June 22, 1998, which exhibit is incorporated herein by
reference.
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(2)
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Filed
with the Securities and Exchange Commission on January 18, 2000 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated December 30, 1999, which exhibit is incorporated
herein
by reference.
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(3)
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Filed
with the Securities and Exchange Commission on November 29, 2001
as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated November 14, 2001, which exhibit is incorporated
herein
by reference.
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(4)
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Filed
with the Securities and Exchange Commission on March 27, 2002 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated March 11, 2002, which exhibit is incorporated herein
by
reference.
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(5)
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Filed
with the Securities and Exchange Commission on August 28, 2002 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated August 13, 2002, which exhibit is incorporated
herein by
reference.
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(6)
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Filed
with the Securities and Exchange Commission on April 16, 2003 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated March 31, 2003, which exhibit is incorporated herein
by
reference.
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(7)
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Filed
with the Securities and Exchange Commission on August 25, 2004 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated August 12, 2004, which exhibit is incorporated
herein by
reference.
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(8)
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Filed
with the Securities and Exchange Commission on August 28, 2002 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated August 13, 2002, which exhibit is incorporated
herein by
reference.
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(9)
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Filed
with the Securities and Exchange Commission on November 20, 2002
as an
exhibit, numbered as indicated above, to the Registrant’s Quarterly Report
on Form 10-QSB for the quarter ended September 30, 2002, which exhibit
is
incorporated herein by reference.
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(10)
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Filed
with the Securities and Exchange Commission on March 11, 2003 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated February 25, 2003, which exhibit is incorporated
herein
by reference.
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(11)
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Filed
with the Securities and Exchange Commission on April 15, 2002 as
an
exhibit, numbered as indicated above, to the Registrant’s Annual Report on
Form 10-KSB for the year ended December 31, 2001, which exhibit is
incorporated herein by reference.
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(12)
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Filed
with the Securities and Exchange Commission on April 23, 2003 as
an
exhibit, numbered as indicated above, to the Registrant’s Annual Report on
Form 10-KSB for the year ended December 31, 2002, which exhibit is
incorporated herein by reference.
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(13)
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Filed
with the Securities and Exchange Commission on March 30, 2004 as
an
exhibit, numbered as indicated above, to the Registrant’s Annual Report on
Form 10-KSB for the year ended December 31, 2003, which exhibit is
incorporated herein by reference.
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(14)
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Filed
with the Securities and Exchange Commission on August 25, 2004 as
an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated August 12, 2004, which exhibit is incorporated
herein by
reference.
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(15)
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Filed
with the Securities and Exchange Commission on April 15, 2005 as
an
exhibit, numbered as indicated above, to the Registrant’s Annual Report on
Form 10-KSB for the year ended December 31, 2004, which exhibit is
incorporated herein by reference.
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(16)
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Filed
with the Securities and Exchange Commission on May 17, 2007 as an
exhibit,
numbered as indicated above, to the Registrant’s Annual Report on Form
10-KSB for the year ended December 31, 2006, which exhibit is incorporated
herein by reference.
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(17)
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Filed
with the Securities and Exchange Commission on September 13, 2006
as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated September 12, 2006, which exhibit is incorporated
herein
by reference.
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(18)
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Filed
with the Securities and Exchange Commission on September 28, 2006
as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated September 25, 2006, which exhibit is incorporated
herein
by reference.
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(19)
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Filed
with the Securities and Exchange Commission on November 15, 2006
as an
exhibit, numbered as indicated above, to the Registrant’s Quarterly Report
on Form 10-QSB for the quarter ended September 30, 2006, which exhibit
is
incorporated herein by reference.
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(20)
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Filed
with the Securities and Exchange Commission on March 8, 2007 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated February 28, 2007, which exhibit is incorporated
herein
by reference.
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(21)
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Filed
with the Securities and Exchange Commission on February 28, 2005
as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated February 28, 2005, which exhibit is incorporated
herein
by reference.
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(22)
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Filed
with the Securities and Exchange Commission on May 17, 2007 as an
exhibit,
numbered as indicated above, to the Registrant’s Annual Report on Form
10-KSB for the year ended December 31, 2006, which exhibit is incorporated
herein by reference.
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(23)
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Included
in Exhibit 31.1.
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(24)
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Included
in Exhibit 32.1.
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ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit
Fees
.
The
aggregate fees billed to us by our principal accountant for services rendered
during the fiscal years ended December 31, 2007 and 2006 are set forth in the
table below:
Fee
Category
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Fiscal
year ended December 31, 2007
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Fiscal
year ended December 31, 2006
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Audit
fees (1)
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$
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25,000
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$
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34,000
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Audit-related
fees (2)
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15,000
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25,000
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Tax
fees (3)
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4,000
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4,000
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All
other fees (4)
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Total
fees
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$
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44,000
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$
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63,000
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(1)
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Audit
fees consists of fees incurred for professional services rendered
for the
audit of consolidated financial statements, for reviews of our interim
consolidated financial statements included in our quarterly reports
on
Form 10-QSB and for services that are normally provided in connection
with
statutory or regulatory filings or
engagements.
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(2)
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Audit-related
fees consists of fees billed for professional services that are reasonably
related to the performance of the audit or review of our consolidated
financial statements, but are not reported under “Audit fees.”
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(3)
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Tax
fees consists of fees billed for professional services relating to
tax
compliance, tax planning, and tax
advice.
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(4)
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All
other fees consists of fees billed for all other
services.
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Audit
Committee’s Pre-Approval Practice
.
Insomuch
as we do not have an audit committee, our board of directors performs the
functions of an audit committee. Section 10A(i) of the Exchange prohibits our
auditors from performing audit services for us as well as any services not
considered to be “audit services” unless such services are pre-approved by the
board of directors (in lieu of the audit committee) or unless the services
meet
certain de minimis standards.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date:
April 15, 2008
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SCORES
HOLDING
COMPANY, INC.
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By:
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/
s/
Curtis R. Smith
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Curtis
R. Smith
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Acting
Chief Executive Officer and
Chief Financial
Officer
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In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
SIGNATURE
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TITLE
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DATE
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/
s/
Curtis R. Smith
Curtis
R. Smith
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Acting
Chief Executive Officer, Chief Financial and Accounting
Officer
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April
15, 2008
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/s/
Elda Auerbach
Elda
Auerbach
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Director
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April
15, 2008
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