-UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark
One)
x
QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September
30, 2011
Or
¨
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________
to ________________
Commission file number 000-16665
Scores Holding Company, Inc.
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(Exact name of small business issuer as specified in its charter)
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Utah
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87-
0426358
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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533-535 West 27
th
Street, New York, NY 10001
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(Address of principal executive offices)
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(212) 868-4900
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(Registrant’s telephone number, including area code)
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Indicate
whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate by check mark whether the Registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check One):
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
x
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(Do not check if a smaller
Reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2). Yes
¨
No
x
As of July 16, 2012 there were 165,186,124
shares of the issuer’s common stock, par value $0.001, issued and outstanding.
SCORES HOLDING COMPANY,
INC.
SEPTEMBER 30, 2011 QUARTERLY REPORT ON
FORM 10-Q
TABLE OF CONTENTS
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Page
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Statement Regarding Forward-Looking Information
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3
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Part I – Financial Information
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Item 1
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Financial Statements
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4
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Item 2
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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16
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Item 3
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Quantitative and Qualitative Disclosures About Market Risk
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19
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Item 4
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Controls and Procedures
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19
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Part II – Other Information
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Item 1
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Legal Proceedings
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21
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Item 1A
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Risk Factors
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24
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Item 2
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Unregistered Sales of Equity Securities and Use of Proceeds
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25
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Item 3
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Defaults Upon Senior Securities
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25
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Item 4
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Mine Safety Disclosure
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25
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Item 5
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Other Information
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25
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Item 6
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Exhibits
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25
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Signatures
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26
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Certificates
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Except for historical
information, this report contains forward-looking statements. 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 “Management’s Discussion and Analysis”. You should carefully review the risks described in
the documents we file from time to time with the Securities and Exchange Commission. 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 after the date of this document.
PART 1 – FINANCIAL
INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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PAGE
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Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and
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December 31, 2010 (Audited)
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5
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Consolidated Statements of Operations for the three and nine months
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Ended September 30, 2011 and 2010 (Unaudited)
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6
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Consolidated Statements of Cash Flows for the nine months
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Ended September 30, 2011 and 2010 (Unaudited)
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7
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Notes to Consolidated Financial Statements (Unaudited)
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8
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SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30,
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December 31,
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2011
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2010
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( Unaudited )
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ASSETS
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CURRENT ASSETS:
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Cash
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$
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36,426
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$
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23,748
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Licensee receivable - including affiliates- net
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73,219
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87,731
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Prepaid expenses
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13,769
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6,342
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Total Current Assets
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123,414
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117,821
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INTANGIBLE ASSETS,NET
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-
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88,725
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TOTAL ASSETS
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$
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123,414
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$
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206,546
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LIABILITIES AND STOCKHOLDERS'( DEFICIT)
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CURRENT LIABILITIES:
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Accounts payable and accrued expenses
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$
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490,310
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$
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502,353
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Related party payable
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276,866
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304,361
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Deferred revenue
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42,073
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18,000
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Total Current Liabilities
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809,249
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824,714
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STOCKHOLDERS' (DEFICIT)
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Preferred stock, $.0001 par value, 10,000,000 shares authorized, -0- issued and outstanding
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-
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-
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Common stock, $.001 par value; 500,000,000 shares authorized, 165,186,124 issued and 165,186,124 outstanding, respectively
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165,186
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165,186
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Additional paid-in capital
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5,998,117
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5,998,117
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Accumulated deficit
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(6,849,138
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)
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(6,781,471
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)
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Total Stockholder's (Deficit)
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(685,835
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)
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(618,168
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)
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TOTAL LIABILITIES AND STOCKHOLDERS' ( DEFICIT)
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$
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123,414
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$
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206,546
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See notes to consolidated financial
statements
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2011
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2010
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2011
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2010
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REVENUES
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Royalty Revenue
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$
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204,748
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$
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141,127
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$
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469,537
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$
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379,479
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EXPENSES:
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GENERAL AND ADMINISTRATIVE EXPENSES
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208,083
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187,171
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537,207
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473,736
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NET (LOSS) BEFORE INCOME TAXES
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(3,335
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)
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(46,044
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)
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(67,670
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)
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(94,257
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PROVISION FOR INCOME TAXES
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-
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-
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-
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-
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NET (LOSS)
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$
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(3,335
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)
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$
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(46,044
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)
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$
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(67,670
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)
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$
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(94,257
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NET (LOSS) PER SHARE-Basic and Diluted
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$
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(0.00
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)
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$
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(0.00
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$
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(0.00
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)
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$
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(0.00
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)
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WEIGHTED AVERAGE OF COMMOM SHARES
OUTSTANDING-Basic and Diluted
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165,186,124
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165,186,124
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165,186,124
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165,186,124
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See notes to consolidated financial statements
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended
September 30,
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2011
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2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$
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(67,670
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)
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$
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(94,257
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)
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Adjustments to reconcile net loss to net cash provided by (used) in operating activities:
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Amortization
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88,725
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94,528
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Changes in assets and liabilities:
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Licensee receivable
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14,512
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(51,730
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)
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Prepaid expenses
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(7,424
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)
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(15,370
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)
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Deferred revenue
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24,073
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36,000
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Accounts payable and accrued expenses
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(12,043
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)
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52,499
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NET CASH PROVIDED BY OPERATING ACTIVITIES
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40,173
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21,670
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Related party payable
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(27,495
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)
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53,778
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NET CASH(USED IN) PROVIDED BY FINANCING ACTIVITIES
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(27,495
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)
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53,778
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NET INCREASE IN CASH
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12,678
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75,448
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Cash and cash equivalents - beginning of year
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23,748
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31,694
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Cash and cash equivalents - end of period
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$
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36,426
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$
|
107,142
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Supplemental disclosures of cash flow information:
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Cash paid during the year for interest
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$
|
492
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$
|
-
|
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Cash paid for income taxes
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$
|
1,284
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|
$
|
-
|
|
See notes to the consolidated financial
statements
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Note 1. Organization
Basis for presentation
Scores Holding Company, Inc. and subsidiary
(the “Company”) is a Utah corporation, formed in September 1981 and is located in New York, NY. Formerly known as the
Internet Advisory Corporation, the Company is a licensing company that exploits the “SCORES” name and trademark for
franchising and other licensing options.
The consolidated financial statements of
the Company have been prepared in accordance with generally accepted accounting principles in the United States. The consolidated
financial statements of the Company include the accounts of Scores Licensing Corp. (“SLC”).
Our consolidated financial statements include
our accounts, as well as those of our wholly-owned subsidiary. Certain prior period amounts have been reclassified to
conform to the current period presentation. Our accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnote disclosures required by U.S. GAAP for complete financial statements. The consolidated financial
statements reflect all adjustments considered necessary for a fair presentation of the consolidated results of operations and financial
position for the interim periods presented. All such adjustments are of a normal recurring nature. These
unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31,
2010.
The preparation of financial statements
in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. The results of
operations for the nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for any other
interim period or for the year ending December 31, 2011.
Note 2. Summary of Significant Accounting
Principles
Going
Concern
The Company has incurred cumulative losses
totaling $(6,849,138), a working capital deficit of $(685,835) and a net operating loss of $(67,670) for the nine months ended
September 30, 2011. Because of these conditions, the Company will require additional working capital to develop business
operations. The Company intends to raise additional working capital through the continued licensing of its brand with its
current and new operators and to take on operations in larger cities with greater demand for our product through acquisitions. There
are no assurances that the Company will be able to achieve the level of revenues adequate to generate sufficient cash flow from
operations to support the Company’s working capital requirements. To the extent that funds generated from any future use
of licensing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional
financing will be available, or if available, will be on terms acceptable to the Company. If adequate working
capital is not available, the Company may not increase its operations.
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Concentration of Credit Risk
The Company earned royalties and merchandise
revenues from four licensees who are unrelated to management of the Company. During the nine months ended September 30, 2011,
revenues earned from royalties from these unrelated licensees amounted to $338,600 and there was $73,219 due and outstanding as
of September 30, 2011. The Company’s related New York affiliate commenced operations in May 2009 and revenue amounted
to $130,937 during the nine month 2011 period; there was $-0- due and outstanding as of September 30, 2011.
During the nine month 2011 and 2010 periods
our Baltimore licensees accounted for 23% and 26% and our Chicago licensee accounted for 18% and 21% of our total revenues, respectively. Our
New Orleans licensee accounted for 19% and 12% and our Tampa licensee accounted for 12% and 7% of our total revenues for the nine
month periods ended 2011 and 2010 respectively. Our related New York licensee accounted for 28% and 30% of our total
revenues for the nine month periods ended 2011 and 2010 respectively. The Company’s Swan Media Group, Inc., Scoreslive.com
licensee website went live during 2011 and is presently operating in beta mode; it has accounted for -0- amount of our total royalty
revenues to date.
Income (Loss) Per Share
Net income (loss) per share data for both
the 2011 period and the 2010 period are based on net income (loss) available to common shareholders divided by the weighted
average of the number of common shares outstanding. Outstanding stock options are not part of this basis as they are
anti-dilutive.
Fair
Value of Financial Instruments
The Company follows the provisions of ASC
820-10,
Fair Value Measurements
, which defines fair values, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. The Company’s financial instruments include cash, licensee receivable, prepaid
expenses, accounts payable, accrued expenses and related party payable. Due to the short term maturity of these financial
instruments, the fair values were not materially different from their carrying values.
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
New Accounting Pronouncements
All newly issued but not yet effective
accounting pronouncements have been deemed to either be irrelevant or immaterial to the operations and reporting disclosures of
the Company.
Note 3. Related-Party Transactions
Transactions with Common ownership affiliates
On January 27, 2009, the Company entered
into a licensing agreement with its affiliate through common ownership I.M. Operating LLC (“IMO”) for the use of the
Scores brand name “Scores New York”. Robert M. Gans is the majority owner of IMO and is also the Company’s
majority shareholder. IMO paid approximately $236,866 in administrative costs related to accounting, business development,
insurance and legal services for the Company as of September 30, 2011. The Company also leases office space directly
from Westside Realty of New York, Inc. (WSR), the owner of the West 27
th
Street Building. The majority owner
of WSR is Robert M. Gans. Between January 1, and March 31, 2009, the monthly rent including overhead was $5,000, since
April 1, 2009, the monthly rent was reduced to $2,500 per month. The Company owed WSR $40,000 in unpaid rents as of
September 30, 2011.
Note 4. Intangible
Assets
Trademark
In connection with the acquisition of SLC,
the Company acquired the trademark to the name “SCORES”. This trademark had a net recorded value at September 30, 2011
of $ -0-. This trademark has been registered in the United States, Canada, Japan and the European Community. The trademark is being
amortized by straight line methods 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 $88,725 and $94,528 of amortization expense, for the nine month
periods ended September 30, 2011 and 2010, respectively.
Note 5. Licensees
In 2003, the Company licensed the use of
the "Scores Chicago" name to Stone Park Entertainment, Inc. for a club in Chicago, Illinois. Royalties payable to the
Company are the greater of $2,500 per week or 4.99% of the gross revenues (less $25,000 per week) earned at that location. Chicago
accounted for 18% and 21% of our total royalty revenues during the nine month periods of 2011 and 2010, respectively. During
the 2011 nine month period, the Company collected $91,764 in royalties and is owed $10,462 in unpaid royalties.
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
In 2004, the Company licensed the use
of "Scores Baltimore" to Club 2000 Eastern Avenue, Inc. for its nightclub in Baltimore, Maryland. Royalties payable
to the Company are the greater of $1,000 per week or 4.99% of gross revenues. This club accounted for 23% and 26% of our total
royalty revenues during the first nine months of 2011 and 2010, respectively. For the 2011 nine month period, the Company
collected $108,453 in royalties and is owed $12,357 in unpaid royalties.
In April 2007, we licensed the use of
the Scores brand name to Silver Bourbon, Inc. for a night club in New Orleans, Louisiana. Royalties payable to the Company under
this license are capped at the greater of $8,000 per month or 4.99% of gross revenues. This club commenced operations in April
2007 and accounted for 19% and 12% of our total royalty revenues during first nine month periods of 2011 and 2010, respectively. During
the 2011 nine month period the Company collected $70,000 in royalties and is owed $49,000 in unpaid royalties.
On January 27, 2009, we entered into a
licensing agreement with I.M. Operating LLC (“IMO”) for the use of the Scores brand name which our majority shareholder
(Robert M. Gans) and Secretary and Board Director (Howard Rosenbluth) are members. IMOs’ operations commenced
in May 2009 and are located at the site of the former Scores West nightclub, 536 West 28th Street, New York, NY. The building occupied
by IMO is owned by Westside Realty of New York, Inc., of which the majority owner is Robert M. Gans. Royalties payable
to the Company under this license agreement are equal to 3% of gross revenues after deducting $200,000. For the first nine
months of the 2011 period, the Company collected $171,833 in royalties and is owed $-0- in unpaid royalties. The Company recorded
$42,073 of deferred revenue related to I.M. Operating LLC royalties collected at September 30, 2011.
On September 30, 2010, the Company entered
into a licensing agreement with Tampa Food & Entertainment, Inc. Upon signing the contract, the Company received a non-refundable
fee. For the next twelve months the Company will receive a flat fee of $6,000 per month with an advance payment made at
the signing of the contract. After the first twelve months, royalties payable to the Company under this license will be
capped at the greater of a certain dollar amount per month or a percentage of net revenues. For the first nine months of the 2011
period the Company collected $42,000 in royalties and is owed $12,000 in unpaid royalties.
Note 6.
Commitments and Contingencies
On March 22, 2010, Russell Whelchel, who
performed work as a hair and makeup stylist at the Scores West nightclub located at 536 West 28
th
Street, New York,
NY, filed a civil lawsuit against the Company in the S.D.N.Y. The plaintiff subsequently amended the complaint on July 30, 2010.
The plaintiff is seeking to recover under federal and New York labor laws minimum wages, unlawful deductions, misappropriated
gratuities and other wages for the period of his “employment” with Scores West between May 2009 and February 13, 2010.
Additionally, the plaintiff is seeking pre-judgment and post-judgment interest, liquidated damages and injunctive relief. The
Company disputes that it was an employer of the plaintiff; contends that the plaintiff was not an “employee” but rather
an independent contractor of Scores West and denies all allegations seeking damages under federal and state wage and hour laws.
The Company intends to vigorously defend against all claims in the plaintiff’s complaint. The Company is currently engaged
with the plaintiff in the exchange of discovery.
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
On March 16, 2010, Charles Braden, who
claims he performed work as a hair and makeup stylist at the Scores New York nightclub located at 536 West 28
th
Street,
New York, NY, filed a civil lawsuit against the Company in the S.D.N.Y. The plaintiff is seeking to recover under federal and
New York labor laws minimum wages, unlawful deductions, misappropriated gratuities and other wages for the period of his “employment”
with “Scores New York” between approximately January 2005 and September 2010. Additionally, the plaintiff is seeking
pre-judgment and post-judgment interest, liquidated damages, reasonable attorneys’ fees and costs of the action and other
relief as the S.D.N.Y. deems just and reasonable. The Company disputes that it was an employer of the plaintiff, contends that
the plaintiff was not an “employee” but rather an independent contractor of Scores West and denies all allegations
seeking damages under federal and state wage and hour laws. The Company intends to vigorously defend against all claims in the
plaintiff’s complaint.
In mid-March 2010, the Company was named
by Nichole Hughes in a complaint filed with the SCNY. Ms Hughes is suing the Company for an unspecified amount of damages in connection
with an alleged unauthorized use of her image in the Company’s advertising materials. On June 20, 2010, the Company filed
a pre-answer motion to dismiss the complaint, which was denied on December 17, 2010. The Company then filed an answer and affirmative
defenses and a third party complaint against IMO, owner and operator of the club where Ms. Hughes was employed. The case is now
in discovery. The Company will vigorously defend itself in this litigation and does not expect that the outcome will be material.
On January 14, 2010, the Company was named
in a complaint filed with the SCNY in connection with an alleged assault on the plaintiff by an agent of the Company’s New
York affiliated club. The Company filed a motion to dismiss this complaint and, on December 15, 2010, the plaintiff stipulated
to discontinue the case against the Company.
On June 23, 2009, the Company filed a
complaint with the SCNY against Silver Bourbon, Inc., its licensee in New Orleans and operator of Scores New Orleans, for breach
of contract. At the time of the filing, Silber Bourbon, Inc. owed the Company $70,000 in unpaid royalties. We have settled this
matter with Silver Bourban, Inc. and the court action has been discontinued.
On September 5, 2008, Ruth Fowler, a former
cocktail waitress at Scores West, filed a civil lawsuit against the Company in the Federal District Court for the Southern District
of New York (the “Court”). The plaintiff is seeking to recover damages for alleged illegal deductions take from her
salary and monies due her and for sexual harassment under the New York City and New York State Human Rights Laws. On May 7, 2009,
the Company filed a motion to dismiss the action against it but that motion was denied by the Court with possible leave to renew
the motion at a future date after the completion of discovery proceedings. In the meanwhile, counsel for plaintiff filed an amended
complaint on February 26, 2010 to add as additional parties to the action Go West and EMS. On March 1, 2010, the Company filed
affirmative defenses and an amended response asserting cross-claims for judgment against both Go West and EMS. On September 13,
2010, the SDNY denied plaintiff’s application for further discovery and on October 18, 2010, the Company filed a motion
to dismiss, which has yet to be decided on. Although the outcome of this action is uncertain, the Company believes that any outcome
will not have a material effect on it, since the plaintiff was only employed by Scores West for less than four months.
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
In early March 2008, the Company received
notice that DIF&B, owner of the Las Vegas club, would be canceling its sublicense with EMS effective on or before May 6, 2008.
The Company was notified that DIF&B would be making final royalty payments to EMS totaling $60,000 at the rate of $10,000
per week starting the first week of March 2008. The Las Vegas club ceased operating and, as of December 31, 2008, EMS had received
only one such $10,000 payment from DIF&B. EMS commenced an action against DIF&B and filed a complaint and affidavit of
service with the SCNY, on July 23, 2008. DIF&B was required to file an answer by August 23, 2008, but did not do so. As a
result, EMS filed an application for a default judgment and the SCNY appointed a referee to determine damages. The referee determined
that damages in the amount of $216,000, with interest, should be paid to EMS and a default judgment totaling $230,557 was entered
by the Clerk of the SCNY. The Company will attempt to collect on this judgment. The Company will be entitled to all monies so
collected, pursuant to the Assignment Agreement with EMS and 333.
On December 11, 2007, Francis Vargas,
a former cocktail waitress at Scores West located in New York, NY, filed a civil lawsuit against the Company and Go West in the
SCNY, 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 the Company 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. The Company disputes that it was an employer of the plaintiff and categorically denies all
allegations of sexual discrimination and sexual harassment. The Company filed its verified answer in the Supreme Court of the
State of New York on February 12, 2008 to contest and defend against these accusations and it is currently engaged in discovery.
On April 18, 2008, co-defendant Go West filed for bankruptcy and the case was stayed. On July 23, 2009, the bankruptcy petition
was dismissed and, as a result, the automatic stay was lifted. The Company subsequently filed an amended response asserting cross-claims
for judgment against both Go West and EMS and recently filed a motion to compel discovery which was approved. The Company is currently
preparing for the plaintiff’s deposition and a compliance conference which are scheduled for the end of April.
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
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 the Company 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 (the “Court”), 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 alleged that the Company and the other defendants were “an integrated enterprise” and that the Company jointly
employed the plaintiffs, subjecting all of the defendants to liability for the alleged wage/hour violations. On behalf of the
Company and the other defendants the Company filed a motion to dismiss that portion of the Complaint that asserted State law class
action allegations; the Company also moved to dismiss the claims of two of the named plaintiffs for failure to appear for depositions.
At the same time plaintiffs moved for conditional certification under the federal law for a class of the servers, bartenders and
dancers; the Company opposed that motion. On May 9, 2008, the Court issued its decision, denying the motion to dismiss and granting
conditional certification for a class of servers, cocktail waitresses, bartenders and dancers who have worked at Scores East since
October 2004. On May 29, 2008, the Company filed an answer to plaintiff's’ second amended complaint. On or about September
5, 2009, plaintiffs served their third amended complaint adding in two individual defendants who are alleged to be employers under
the state and federal wage claims. The Company disputes that it is a proper defendant in this action and it disputes that
it violated the federal and state labor laws, and further disputes that the dancers are “employees” subject to the
federal and state wage and hour laws. The Company has recorded a $450,000 estimate to settle this lawsuit, as the legal fees defending
the Company’s position during the year has amounted to approximately $80,000.
On September 26, 2011, the Company, Goldring
and Osher (collectively the “Defendants”) and the Plaintiffs entered into a Court approved Joint Stipulation of Settlement
and Release (the “Settlement Agreement”), pursuant to which Defendants agreed to make a settlement payment of $450,000
to resolve and settle awards to Plaintiffs and related Plaintiffs’ attorneys’ fees. Additionally, Defendants agreed
to pay the employer portion of payroll taxes on approximately $300,000 in distributions, and to pay the costs of administering
the distribution of settlement payments (estimated at between $4,000 and $8,000).
In a separate settlement payment agreement
among the Company, Goldring and Osher, the Company agreed to advance all of the Defendants’ obligations under the Settlement
Agreement and to pay $64,500 of Goldring’s and Osher’s legal fees to their designated attorney. In consideration for
the Company’s payment of these obligations, Goldring and Osher agreed, jointly and severally, to pay the Company $440,000
plus interest at the rate of 5% per annum on the unpaid balance of such amount, in 40 equal monthly payments of $11,964.97 per
month. To secure his obligations under this agreement, Goldring agreed to assign to the Company a portion of his interests in
a promissory note dated September 14, 2009 in the principal amount of $2,400,000.00 made by a third party to Goldring (the “Note”)
and to grant the Company a security interest in the Note, which will remain in effect until his obligations under this settlement
payment agreement are paid in full. The $64,500 paid to Goldring’s and Osher’s attorney was advanced by Robert Gans,
the Company’s Chief Executive Officer and majority stockholder. The Company intends to repay that amount to Mr. Gans.
SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
On March 30, 2007, the Company, along
with several of its affiliates, were named in a suit in connection with an alleged assault by an employee of an affiliate and
one of the Company’s stockholders and former officer and director. The Company has answered a third amended complaint and
completed discovery. The Company has filed a note of issue with the court and is waiting for a court date on which the trial will
begin. The Company will vigorously defend itself in this litigation and does not expect that the outcome will be material.
There are no other material legal proceedings
pending to which the Company or any of its property is subject, nor to our knowledge are any such proceedings threatened.
Note 7. SUBSEQUENT EVENTS
Management evaluated subsequent events
through the date of this filing and determined that no such events have occurred that would require adjustment to or disclosure
in the financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Scores Holding Company,
Inc. (‘Scores,” the “Company,” “we,” “us” or “our”) was incorporated
in Utah on September 21, 1981 under the name Adonis Energy, Inc. Since 2003, we have been in the business of licensing the “Scores”
trademarks and other intellectual property to fine gentlemen’s nightclubs with adult entertainment in the United States.
There are five such clubs currently operating under the Scores name, in New York, Baltimore, Chicago, Tampa and New Orleans.
On January 27, 2009,
Mitchell’s East LLC, wholly owned by Robert M. Gans, acquired a majority interest in our outstanding capital stock. I.M.
Operating LLC (“IMO”), which is partially owned by Robert M. Gans who is also our majority shareholder, has signed
a licensing agreement with us and commenced operations in New York of a new club (the “New York Club”) under the Scores
name in May 2009. Throughout this report, we refer to the New York Club as our affiliate, because of the common ownership by Mr.
Gans. All other clubs are referred to as non-affiliated clubs or as licensees, a term that may include the New York Club when
the context requires.
On August 6, 2010,
we appointed Robert M. Gans as our President and Chief Executive Officer and as a member of our Board. Robert Gans and Martin
Gans, one of our existing Board members, are brothers. Also on August 6, 2010, we appointed Howard Rosenbluth as our Treasurer
and Chief Financial Officer.
Results of Operations
Three Months Ended September 30, 2011
(“the 2011 three month period”) Compared
to Three Months Ended September 30, 2010 (“the 2010 three month
period”).
Revenues:
Revenues increased
to $204,748 for the 2011 three month period from $141,127 for the 2010 three month period.
Revenues from the New
York Club amounted to $47,240 and $38,849 for the 2011 and 2010 three month periods, respectively. Revenues from our
Chicago nightclub increased twenty-one percent (21%) to $31,567 for the 2011 three month period from $26,182 for the 2010 three
month period, while revenues from our Baltimore club decreased one percent (1%) to $35,942 for the 2011 three month period from
$36,096 for the 2010 three month period. Revenues from our New Orleans club increased three-hundred percent (300%) to $60,000 for
the 2011 three month period from $15,000 for the 2010 three month period. Revenues from our Tampa club increased twenty (20%) percent
to $30,000 for the 2011 three month period from $25,000 for the 2010 three month period.
General and Administrative
Expenses:
General and administrative
expenses increased during the 2011 three month period to $208,083 from $187,171 during the 2010 three month period. Costs
related to administrative expenses increased approximately by $20,912 from 2011 to 2010. Legal expenses attributable to ongoing
litigation amounted to $65,611 during the 2011 three month period and $41,541 during the 2010 three month period.
Provision for Income
Taxes
The provision for
state income taxes relates primarily to the greater of average assets and capital taxable income. The average assets and capital
are not impacted by net operating losses.
Net loss:
Our net (loss) was
$(3,335) or $(0.00) per share for the 2011 three month period compared to a net (loss) of $(46,044) or $(0.00) per share for the
2010 three month period. The decrease in operating loss for the 2011 three month period was a result of an increase
in Royalty Revenue during the three month period.
Net loss per share
data for both the 2011 three month period and the 2010 three month period is based on net income available to common shareholders
divided by the weighted average of the number of common shares outstanding.
Nine Months Ended September 30, 2011
(“the 2011 nine month period”) Compared
to Nine Months Ended September 30, 2010 (“the 2010 nine month
period”).
Revenues:
Revenues increased
to $469,537 for the 2011 nine month period from $379,479 for the 2010 nine month period.
Revenues from the
New York Club amounted to $130,937 and $114,520 for the 2011 and 2010 nine month periods, respectively. Revenues from
our Chicago nightclub increased six percent (6%) to $85,179 for the 2011 nine month period from $80,005 for the 2010 nine month
period. Revenues from our Baltimore club increased nine percent (9%) to $109,421 for the 2011 nine month period from $99,954 for
the 2010 nine month period. Revenues from our New Orleans club increased one hundred percent (100%) to $90,000 for the 2011 nine
month period from $45,000 for the 2010 nine month period. Revenues from our Tampa club increased one hundred sixteen percent (116%)
to $54,000 for the 2011 nine month period from $25,000 for the 2010 nine month period.
General and Administrative
Expenses:
General and administrative
expenses increased during the 2011 nine month period to $537,207 from $473,736 during the 2010 nine month period. Costs
related to administrative expenses increased approximately by $63,471 from 2011 to 2010. This increase in cost was largely attributable
to an increase in legal expenditures. Legal expenses attributable to ongoing litigation amounted to $173,223 and $69,922 during
the nine month period.
Provision for Income
Taxes:
The provision for state income taxes relates
primarily to the greater of average assets and capital taxable income. The average assets and capital are not impacted by net
operating losses.
Net loss:
Our net (loss) was
$(67,670) or $(0.00) per share for the 2011 nine month period compared to a net (loss) of $(94,257) or $0.00 per share for the
2010 nine month period. The increase in operating loss for the 2011 nine month period was a result of an increase in
legal expense during the nine month period.
Net loss per share
data for both the 2011 nine month period and the 2010 nine month period is based on net income available to common shareholders
divided by the weighted average of the number of common shares outstanding.
Liquidity and Capital Resources
Cash:
At September 30, 2011,
we had $36,426 in cash and cash equivalents compared to $23,748 in cash and cash equivalents at December 31, 2010.
Operating Activities
:
Net cash provided by
operating activities for the nine months ended September 30, 2011 and September 30, 2010 was $40,173 and $21,670 respectively.
The increases in cash are related to decreases in licensee receivable and increases in the deferred revenue, between the 2011 and
2010 periods.
Financing Activities:
During the 2011 and
2010 nine month periods, our New York affiliate paid approximately $27,495 and $53,778, respectively, in cash for web development,
insurance premiums and consulting services for the Company. As of September 30, 2011, we owed $40,000 in rent to our
Westside Realty affiliate and $236,886 to our New York affiliate.
Future Capital
Requirements:
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 September 30, 2011 we had an accumulated deficit of $(6,849,138), with total current
assets of $123,414 and total current liabilities of $809,249 or negative working capital of $(685,835). As of December 31, 2010,
we had total current assets of $117,821 and total current liabilities of $824,714 or negative working capital of $(706,893). Our
accounts receivable and payables decreased during the 2011 nine month period; the effect had no significant impact on our negative
working capital.
We will continue to
evaluate possible acquisitions of or investments in businesses, products and technologies that are complimentary to ours. These
may require the use of cash, which would require us to seek financing. We may sell equity or debt securities or seek credit facilities
to fund acquisition-related or other business costs. Sales of equity or convertible debt securities would result in additional
dilution to our stockholders. We may also need to raise additional funds in order to support more rapid expansion, develop new
or enhanced services or products, respond to competitive pressures, or take advantage of unanticipated opportunities. Our future
liquidity and capital requirements will depend upon numerous factors, including the success of our adult entertainment trademark
licensing business.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, as defined
in Rule 12b-2 of the Exchange Act, we are not required to provide disclosure under this Item 3.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure
Controls and Procedures
. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management
recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls
and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions.
Our management, including
our Chief Executive Officer and our Chief Financial Officer (who serves as our principal financial and accounting officer), has
evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based
on such evaluation, and as discussed in greater detail below, our Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective:
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·
|
to
give reasonable assurance
that the information
required to be disclosed
by us in reports that
we file under the Securities
Exchange Act of 1934
is recorded, processed,
summarized and reported
within the time periods
specified in the Securities
and Exchange Commission’s
rules and forms, and
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|
·
|
to
ensure that information
required to be disclosed
in the reports that
we file or submit under
the Securities Exchange
Act of 1934 is accumulated
and communicated to
our management, including
our interim CEO and
our Treasurer, to allow
timely decisions regarding
required disclosure.
|
The
matters involving internal controls and procedures that our management considered to be material weaknesses under the standards
of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of
independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight
in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent
with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes primarily due
to limited financial accounting staff resources. The aforementioned material weaknesses were identified by our Chief Executive
Officer
and
Chief Financial Officer in connection with their review
of our financial statements as of September 30, 2011.
Management believes
that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that
the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in
ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in
a material misstatement in our financial statements in future periods.
Changes in Internal
Control over Financial Reporting
. There have been no changes in our internal control over financial reporting during the quarter
ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II
ITEM 1. LEGAL
PROCEEDINGS
On March 22, 2010, Russell Whelchel, who
performed work as a hair and makeup stylist at the Scores West nightclub located at 536 West 28
th
Street, New York,
NY, filed a civil lawsuit against us in the S.D.N.Y. The plaintiff subsequently amended the complaint on July 30, 2010. The plaintiff
is seeking to recover under federal and New York labor laws minimum wages, unlawful deductions, misappropriated gratuities and
other wages for the period of his “employment” with Scores West between May 2009 and February 13, 2010. Additionally,
the plaintiff is seeking pre-judgment and post-judgment interest, liquidated damages and injunctive relief. We dispute that we
were an employer of the plaintiff, we contend that the plaintiff was not an “employee” but rather an independent contractor
of Scores West and we deny all allegations seeking damages under federal and state wage and hour laws. We intend to vigorously
defend against all claims in the plaintiff’s complaint. We are currently engaged with the plaintiff in the exchange of discovery.
On March 16, 2010, Charles Braden, who
claims he performed work as a hair and makeup stylist at the Scores New York nightclub located at 536 West 28
th
Street,
New York, NY, filed a civil lawsuit against us in the S.D.N.Y. The plaintiff is seeking to recover under federal and New York
labor laws minimum wages, unlawful deductions, misappropriated gratuities and other wages for the period of his “employment”
with Scores New York between approximately January 2005 and September 2010. Additionally, the plaintiff is seeking pre-judgment
and post-judgment interest, liquidated damages, reasonable attorneys’ fees and costs of the action and other relief as the
S.D.N.Y. deems just and reasonable. We dispute that we were an employer of the plaintiff, we contend that the plaintiff was not
an “employee” but rather an independent contractor of Scores West and we deny all allegations seeking damages under
federal and state wage and hour laws. We intend to vigorously defend against all claims in the plaintiff’s complaint.
In mid-March 2010, we were named by Nichole
Hughes in a complaint filed with the SCNY. Ms. Hughes is suing us for an unspecified amount of damages in connection with an alleged
unauthorized use of her image in our advertising materials. On June 20, 2010, we filed a pre-answer motion to dismiss the complaint,
which was denied on December 17, 2010. We then filed an answer and affirmative defenses and a third party complaint against IMO,
owner and operator of the club where Ms. Hughes was employed. The case is now in discovery. We will vigorously defend ourselves
in this litigation and do not expect that the outcome will be material.
On January 14, 2010, we were named in
a complaint filed with the SCNY in connection with an alleged assault on the plaintiff by an agent of our New York affiliated
club. We filed a motion to dismiss this complaint and, on December 15, 2010, the plaintiff stipulated to discontinue the case
against us.
On June 23, 2009, we filed a complaint
with the SCNY against Silver Bourbon, Inc., our licensee in New Orleans and operator of Scores New Orleans, for breach of contract.
At the time of the filing, Silber Bourbon, Inc. owed us $70,000 in unpaid royalties. We have settled this matter with Silver Bourbon,
Inc. and the court action has been discontinued.
On September 5, 2008, Ruth Fowler, a former
cocktail waitress at Scores West, filed a civil lawsuit against us in the S.D.N.Y. The plaintiff is seeking to recover damages
for alleged illegal deductions take from her salary and monies due her and for sexual harassment under the New York City and New
York State Human Rights Laws. On May 7, 2009, we filed a motion to dismiss the action against us but that motion was denied by
the S.D.N.Y. with possible leave to renew the motion at a future date after the completion of discovery proceedings. In the meanwhile,
counsel for plaintiff filed an amended complaint on February 26, 2010 to add as additional parties to the action Go West and EMS.
On March 1, 2010, we filed affirmative defenses and an amended response asserting cross-claims for judgment against both Go West
and EMS. On September 13, 2010, the SDNY denied plaintiff’s application for further discovery and on October 18, 2010, we
filed a motion to dismiss, which has yet to be decided on. Although the outcome of this action is uncertain, we believe that any
outcome will not have a material effect on us, since the plaintiff was only employed by Scores West for less than four months.
In early March 2008, we received notice
that DIF&B, owner of the Las Vegas club, would be canceling its sublicense with EMS effective on or before May 6, 2008. We
were notified that DIF&B would be making final royalty payments to EMS totaling $60,000 at the rate of $10,000 per week starting
the first week of March 2008. The Las Vegas club ceased operating and, as of December 31, 2008, EMS had received only one such
$10,000 payment from DIF&B. EMS commenced an action against DIF&B and filed a complaint and affidavit of service with
the SCNY, on July 23, 2008. DIF&B was required to file an answer by August 23, 2008, but did not do so. As a result, EMS filed
an application for a default judgment and the SCNY appointed a referee to determine damages. The referee determined that damages
in the amount of $216,000, with interest, should be paid to EMS and a default judgment totaling $230,557 was entered by the Clerk
of the SCNY. We will attempt to collect on this judgment. We will be entitled to all monies so collected, pursuant to the Assignment
Agreement with EMS and 333.
On December 11, 2007, Francis Vargas,
a former cocktail waitress at Scores West located in New York, NY, filed a civil lawsuit against us and Go West in the SCNY, 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 and we are currently engaged in discovery. On April 18, 2008, co-defendant Go West filed
for bankruptcy and the case was stayed. On July 23, 2009, the bankruptcy petition was dismissed and, as a result, the automatic
stay was lifted. We subsequently filed an amended response asserting cross-claims for judgment against both Go West and EMS and
a motion to compel discovery. We are currently preparing for the plaintiff’s deposition and a compliance conference which
are scheduled for the end of April.
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,
including Richard Goldring (“Goldring”) and Elliot Osher (“Osher”), 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 (the “Court”),
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 alleged 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. On behalf of ourselves and the other defendants we filed a motion to dismiss that portion
of the Complaint that asserted State law class action allegations; we also moved to dismiss the claims of two of the named plaintiffs
for failure to appear for depositions. At the same time plaintiffs moved for conditional certification under the federal law for
a class of the servers, bartenders and dancers; we opposed that motion. On May 9, 2008, the Court issued its decision, denying
the motion to dismiss and granting conditional certification for a class of servers, cocktail waitresses, bartenders and dancers
who have worked at Scores East since October 2004. On May 29, 2008, we filed an answer to plaintiff's’ second amended complaint.
On or about September 5, 2009, plaintiffs served their third amended complaint adding in two individual defendants who are alleged
to be employers under the state and federal wage claims. We dispute that we are a proper defendant in this action and
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. Two of the defendants have been dismissed without prejudice.
On September 26, 2011, we, Goldring and
Osher (collectively the “Defendants”) and the Plaintiffs entered into a Court approved Joint Stipulation of Settlement
and Release (the “Settlement Agreement”), pursuant to which Defendants agreed to make a settlement payment of $450,000
to resolve and settle awards to Plaintiffs and related Plaintiffs’ attorneys’ fees. Additionally, Defendants agreed
to pay the employer portion of payroll taxes on approximately $300,000 in distributions, and to pay the costs of administering
the distribution of settlement payments (estimated at between $4,000 and $8,000).
In a separate settlement payment agreement
with Goldring and Osher, we agreed to advance all of the Defendants’ obligations under the Settlement Agreement and to pay
$64,500 of Goldring’s and Osher’s legal fees to their designated attorney. In consideration for our payment of these
obligations, Goldring and Osher agreed, jointly and severally, to pay us $440,000 plus interest at the rate of 5% per annum on
the unpaid balance of such amount, in 40 equal monthly payments of $11,964.97 per month. To secure his obligations under this
agreement, Goldring agreed to assign to us a portion of his interests in a promissory note dated September 14, 2009 in the principal
amount of $2,400,000.00 made by a third party to Goldring (“Note”) and to grant us a security interest in the Note,
which will remain in effect until his obligations under this settlement payment agreement are paid in full. The $64,500 paid to
Goldring’s and Osher’s attorney was advanced by Robert Gans, our Chief Executive Officer and majority stockholder.
We intend to repay that amount to Mr. Gans.
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 answered a third amended complaint and completed discovery. We have filed a note of issue
with the court and are waiting for a court date on which the trial will begin. We will vigorously defend ourselves in this litigation
and do not expect that the outcome will be material.
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 resolved the DA's
investigation against Mr. Goldring and us. No charges were brought against us.
To comply with the plea agreement between
Richard Goldring and the District Attorney of the County of New York, on September 4, 2008, Mr. Goldring transferred his 76,080,958
shares of our common stock (the “Goldring Shares”) to Ira Altchek as trustee (the “Trustee”). According
to the terms of the Voting Trust Agreement by and between Mr. Goldring and the Trustee dated September 4, 2008, the Trustee had
the right to exercise all rights and powers of a shareholder of the Company with respect to the Goldring Shares, including, without
limitation, the sole and exclusive right to vote the Goldring Shares, while Mr. Goldring maintained the right to sell the Goldring
Shares at any time. The Goldring Shares represented approximately forty six percent (46%) of the outstanding capital stock of
the Company as of the December 31, 2008. On January 27, 2009, Mr. Goldring sold all of the Goldring Shares in a private transaction
with Buyer, as further discussed above.
There are no other material legal proceedings
pending to which we or any of our property are subject, nor to our knowledge are any such proceedings threatened.
Item
1A. Risk Factors
As a smaller reporting company, as defined
in Rule 12b-2 of the Exchange Act, we are not required to provide disclosure under this Item 1A.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults upon Senior Securities
None.
Item
4. Mine safety disclosure
Not applicable.
Item
5. Other Information
None.
ITEM 6. EXHIBITS
(a) Exhibits.
Exhibit No.
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Description
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31.1*
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Certification of Principal Executive Officer and Principal Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2*
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Certification of Principal Executive Officer and Principal Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1**
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Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
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32.2**
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Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
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101.INS***
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XBRL Instance Document
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101.SCH***
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XBRL Taxonomy Extension Schema
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101.CAL***
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XBRL Taxonomy Extension Calculation Linkbase
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101.LAB***
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XBRL Taxonomy Extension Label Linkbase
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101.PRE***
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XBRL Taxonomy Extension Presentation Linkbase
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101.DEF***
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XBRL Taxonomy Extension Definition Document
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____________________
* Filed herewith.
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**
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This certification is being furnished and shall not be
deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability
of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange
Act, except to the extent that the Registrant specifically incorporates it by reference.
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***
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The XBRL related information in Exhibit 101 shall not
be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to
the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
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SIGNATURES
In accordance with
Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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SCORES HOLDING COMPANY, INC.
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Dated: July 3, 2012
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By:
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/s/Robert M. Gans
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Robert M. Gans
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Chief Executive Officer
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By:
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/s/Howard Rosenbluth
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Howard Rosenbluth
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Principal Financial Officer
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