Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
AMENDMENT NUMBER 1
Current Report
Pursuant To Section 13 or 15(d) Of
The Securities Exchange Act of 1934
Date of Earliest Report Event: January 18, 2005
RICK'S CABARET INTERNATIONAL, INC.
(Exact Name of Registrant As Specified in Its Charter)
Texas 0-26958 76-0037324
(State Or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
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10959 Cutten Road
Houston, Texas 77066
(Address Of Principal Executive Offices, Including Zip Code)
(281) 397-6730
(Registrant's Telephone Number, Including Area Code)
505 North Belt, Suite 630
Houston, Texas 77060
(281) 820-1181
(Registrant's previous office/phone)
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
The financial statements and pro forma financial information contained in this Form 8-K Amendment Number 1 are in connection with our wholly owned subsidiary, RCI Entertainment (New York), Inc.'s acquisition of 100% of the stock of Peregrine Enterprises, Inc., a New York corporation, January 18, 2005, that we reported on Form 8-K dated January 24, 2005.
The financial statements and pro forma financial information required by Items 9.01(a) and 9.01(b) are attached hereto as Exhibits 99.1 and 99.2, respectively.
(c) Exhibits
Exhibit Number Description 99.1 Financial Statements of Peregrine Enterprises, Inc. 99.2 Unaudited Pro Forma Condensed Combined Financial Statements |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 8-K/A to be signed on its behalf by the undersigned hereunto duly authorized.
RICK'S CABARET INTERNATIONAL, INC.
/s/ Eric Langan
--------------------------------------------
By: Eric Langan
Date: May 3, 2005 Chairman, President, Chief Executive
Officer and Chief Financial Officer
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PEREGRINE ENTERPRISES, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
WITH REPORT OF INDEPENDENT AUDITORS
PEREGRINE ENTERPRISES, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
TABLE OF CONTENTS
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements:
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations. . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Changes in Stockholder's Equity . . . . . . . . . . . . . . 4
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 6
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REPORT OF INDEPENDENT AUDITORS
To the Stockholder of
Peregrine Enterprises, Inc.
We have audited the accompanying balance sheets of Peregrine Enterprises, Inc. as of December 31, 2004 and 2003, and the related statements of operations, changes in stockholder's equity, and cash flows for the years then ended. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Peregrine Enterprises, Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Whitley Penn Whitley Penn Dallas, Texas January 21, 2005 |
PEREGRINE ENTERPRISES, INC.
BALANCE SHEETS
DECEMBER 31,
2004 2003
---------- ----------
ASSETS
Current assets:
Cash $ 14,490 $ 14,490
Accounts receivable:
Trade 7,660 10,592
Other - 54,531
Inventories 1,740 1,740
Prepaid expenses 23,646 63,793
---------- ----------
Total current assets 47,536 145,146
Fixed assets, net 5,604 42,087
Other assets 77,035 77,035
---------- ----------
Total assets $ 130,175 $ 264,268
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank overdraft $ 206,380 $ 230,705
Accounts payable 130,774 212,111
Accrued liabilities 215,831 114,918
Line-of-credit 87,412 -
---------- ----------
Total current liabilities 640,397 557,734
Line-of-credit - 65,883
Deferred rent 228,769 94,820
Other non-current liabilities 6,149 9,503
---------- ----------
Total liabilities 875,315 727,940
Commitments and contingencies - -
Stockholder's equity:
Common stock, no par value, 200 shares
authorized and issued - -
Retained earnings 4,860 286,328
Treasury stock, 100 shares of common stock, at cost (750,000) (750,000)
---------- ----------
Total stockholder's equity (745,140) (463,672)
---------- ----------
Total liabilities and stockholder's equity $ 130,175 $ 264,268
========== ==========
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See accompanying notes to financial statements.
PEREGRINE ENTERPRISES, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
--------------------------
2004 2003
------------ --------------
Revenues:
Sales of beverages $ 229,032 $ 293,159
Service revenues 2,006,902 2,199,496
------------ --------------
2,235,934 2,492,655
Operating expenses:
Cost of goods sold 113,802 115,154
Salaries and wages 647,391 697,305
Other general and administrative:
Taxes and permits 233,786 244,981
Charge card fees 3,266 2,637
Rent 534,116 458,181
Legal and professional 75,589 9,000
Advertising and marketing 152,655 245,520
Depreciation 36,482 69,593
Other 657,769 630,652
------------ --------------
2,454,856 2,473,023
------------ --------------
Income (loss) from operations (218,922) 19,632
Other income (expense):
Interest income 11 30
Interest expense (9,889) (6,803)
Other 332 -
------------ --------------
Total other expense (9,546) (6,773)
------------ --------------
Net income (loss) $ (228,468) $ 12,859
============ ==============
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See accompanying notes to financial statements.
PEREGRINE ENTERPRISES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 2004 AND 2003
COMMON STOCK TREASURY STOCK
----------------- --------------------- TOTAL
NUMBER RETAINED NUMBER STOCKHOLDER'S
OF SHARES AMOUNT EARNINGS OF SHARES AMOUNT EQUITY
--------- ------- ---------- --------- ---------- ---------------
Balance at December 31, 2002 200 $ - $ 275,963 100 $(750,000) $ (474,037)
Net income - - 12,859 - - 12,859
Stockholder distributions - - (2,494) - - (2,494)
--------- ------- ---------- --------- ---------- ---------------
Balance at December 31, 2003 200 - 286,328 100 (750,000) (463,672)
Net loss - - (228,468) - - (228,468)
Stockholder distributions - - (53,000) - - (53,000)
--------- ------- ---------- --------- ---------- ---------------
Balance at December 31, 2004 200 $ - $ 4,860 100 $(750,000) $ (745,140)
========= ======= ========== ========= ========== ===============
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See accompanying notes to financial statements.
PEREGRINE ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
2004 2003
------------ --------------
OPERATING ACTIVITIES
Net income (loss) $ (228,468) $ 12,859
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 36,482 69,593
Changes in operating assets and liabilities:
Accounts receivable 57,463 (49,530)
Inventories - (740)
Prepaid expenses 40,147 (24,710)
Other assets - (9,000)
Bank overdraft (24,325) 70,431
Accounts payable (81,337) (124,695)
Accrued liabilities 100,913 10,070
Deferred rent 133,949 94,820
Other non-current liabilities (3,354) (26,562)
------------ --------------
Net cash provided by operating activities 31,470 22,536
FINANCING ACTIVITIES
Proceeds from line-of-credit 52,020 10,000
Payments on line-of-credit (30,490) (30,042)
Stockholder distributions (53,000) (2,494)
------------ --------------
Net cash used in financing activities (31,470) (22,536)
------------ --------------
Net decrease in cash and cash equivalents - -
Cash and cash equivalents at beginning of year 14,490 14,490
------------ --------------
Cash and cash equivalents at end of year $ 14,490 $ 14,490
============ ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 6,345 $ 6,632
============ ==============
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See accompanying notes to financial statements.
PEREGRINE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
A. NATURE OF BUSINESS
Peregrine Enterprises, Inc. (the "Company") was incorporated in the state of New York as a Subchapter S Corporation in 1992. The Company currently owns and operates a nightclub that offers live adult entertainment. The nightclub and corporate office is located in New York City, New York.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:
BASIS OF ACCOUNTING
The accounts are maintained and the financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At December 31, 2004 and 2003, the Company had no such investments. The Company maintains deposits primarily in one financial institution, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC"). There were no uninsured deposits at December 31, 2004 and 2003. The Company has not incurred any losses related to its cash on deposit with financial institutions.
ACCOUNTS AND RECEIVABLE
Accounts receivable, trade is comprised of credit card charges, which are generally converted to cash in two to five days after a purchase is made. Accounts receivable, other is comprised of a worker's compensation refund received in 2004 relating to the 2003 policy period. The Company recognizes allowances for doubtful accounts when, based on management judgment, circumstances indicate that accounts receivable will not be collected. There is no allowance for doubtful accounts as of December 31, 2004 and 2003.
PEREGRINE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVENTORIES
Inventories include non-alcoholic beverages, bar supplies, and Company merchandise. Inventories are carried at the lower of average cost, which approximates actual cost determined on a first-in, first-out ("FIFO") basis, or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets for financial reporting purposes. Furniture, equipment, vehicles and leasehold improvements have estimated useful lives between three and ten years. Expenditures for major renewals and betterments that extend the useful lives are capitalized. Expenditures for normal maintenance and repairs are expensed as incurred. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are charged or credited in the accompanying statement of operations of the respective period.
REVENUE RECOGNITION
The Company recognizes revenue from the sale of non-alcoholic beverages, merchandise, cover charges and services at the point-of-sale upon receipt of cash, check, or credit card charge.
ADVERTISING AND MARKETING
Advertising and marketing expenses are primarily composed of costs related to public advertisements and are expensed as incurred.
INCOME TAXES
The Company is organized as an S Corporation for federal income tax purposes. As a result, income or losses are taxable or deductible to the stockholder rather than at the corporate level; accordingly, no provision has been made for federal income taxes in the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the reporting requirements of SFAS No. 107, Disclosures About Fair Value of Financial Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short maturity of these instruments. The carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest. None of these instruments are held for trading purposes.
PEREGRINE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
C. FIXED ASSETS
Fixed assets consisted of the following:
DECEMBER 31,
2004 2003
---------- ----------
Leasehold improvements $ 637,571 $ 637,571
Furniture and equipment 368,342 368,342
Other 53,792 53,792
---------- ----------
Total property and equipment 1,059,705 1,059,705
Less accumulated depreciation 1,054,101 1,017,618
---------- ----------
Fixed assets, net $ 5,604 $ 42,087
========== ==========
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D. LINE-OF-CREDIT
The Company has available a $100,000 unsecured line-of-credit with a bank. Interest is payable monthly on the outstanding balance at a floating rate of prime plus 1.5% (6.75% at December 31, 2004). This arrangement is subject to renewal in June 2005. The amount outstanding under this agreement at December 31, 2004 was $87,412.
E. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases a building under an operating lease, of which rent expense was approximately $534,000 and $458,000, net of subleasing income of $24,000 and $24,000, for the years ended December 31, 2004 and 2003, respectively. The sublease agreement has expired; however, the tenant is paying $2,000 to sublease space on a month-to-month basis.
The Company's building lease contains escalating lease payments over the lease term and, as a result, the Company is recording rent expense on a straight-line basis over the term of the lease. The Company has approximately $229,000 and $95,000 of deferred rent at December 31, 2004 and 2003, respectively.
PEREGRINE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
E. COMMITMENTS AND CONTINGENCIES - CONTINUED
Leases - continued
Future minimum annual lease obligations as of December 31, 2004, excluding future sublease income, approximates the following:
2005 $ 435,000
2006 448,000
2007 461,000
2008 475,000
2009 490,000
Thereafter 8,117,000
-----------
Total future minimum lease obligations $10,426,000
===========
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F. SUBSEQUENT EVENTS
Effective January 19, 2005, the Company was acquired by Rick's Cabaret International, Inc., which operates live adult entertainment nightclubs. Rick's Cabaret International, Inc. is a publicly traded company.
EXHIBIT 99.2
RICK'S CABARET INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements have been prepared to give effect to Rick's Cabaret International, Inc.'s ("Rick's") acquisition of Peregrine Enterprises, Inc., a New York corporation ("Peregrine"). On January 18, 2005, Rick's wholly owned subsidiary, RCI Entertainment (New York), Inc., a New York corporation ("RCI New York") completed the acquisition of Peregrine pursuant to a Stock Purchase Agreement with Peregrine's sole stockholder, Philip Eisenberg (the "Stock Purchase Agreement"). Under the terms of the Stock Purchase Agreement, RCI New York purchased all of the shares of common stock of Peregrine for a total purchase price of $7,775,000, payable $2,500,000 in cash at closing, $5,125,000 payable in a secured convertible promissory note bearing simple interest at the rate of 4.0% per annum (the "Secured Convertible Note"), part of which is convertible to restricted shares of Rick's common stock at prices ranging from $4.00 to $7.50 per share, and $150,000 of transaction costs. As part of the transaction, Mr. Eisenberg also entered into a five-year covenant not to compete with Peregrine, RCI New York or Rick's.
On November 15 and 17, 2004, Rick's borrowed $590,000 and $1,042,000, respectively, from a financial institution at an annual interest rate of 10% over a 10 year term. On November 30, 2004, the Company borrowed $900,000 from an unrelated individual at an 11% annual interest rate over a 10 year term. On December 30, 2004, the Company borrowed $1,270,000 from a financial institution at an annual interest rate of 10% over a 10 year term. The money received from this financing is being used for the acquisition and renovation of the New York club (collectively referred to as "New York Club Debt").
The pro forma condensed balance sheet gives effect to the Peregrine acquisition as if it had occurred on December 31, 2004 combining the balance sheets of Rick's and Peregrine as of that date. The pro forma condensed statements of operations for the three months ended December 31, 2004 and for the year ended September 30, 2004 give effect to the acquisition as if it had occurred on October 1, 2003 combining the results of Rick's for the three months ended December 31, 2004 and the year ended September 30, 2004 with those of Peregrine for the three months ended December 31, 2004 and for the year ended December 31, 2004.
The pro forma statements of operations for the three months ended December 31, 2004 and for the year ended September 30, 2004 include appropriate adjustments for amortization, interest and other items related to the transaction. The pro forma adjustments are based on preliminary appraisal results, estimates, available information and certain assumptions that management deems appropriate. The pro forma financial information is unaudited and does not purport to represent the results that would have been obtained had the transactions occurred at October 1, 2003, as assumed, nor does it purport to present the results which may be obtained in the future.
RICK'S CABARET INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 2004
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
RICK'S PEREGRINE PRO FORMA PRO FORMA
ADJUSTMENT (A) COMBINED
-------- ----------- --------------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,438 $ 14 $ (2,500) $ 952
Accounts receivable, net 72 8 - 80
Other receivables, net 201 - - 201
Marketable securities 78 - - 78
Inventories 249 2 (2) 249
Prepaid expense and other current assets 1,029 23 28 1,080
-------- ----------- --------------- -----------
TOTAL CURRENT ASSETS 5,067 47 (2,474) 2,640
Property and equipment, net 9,261 6 (6) 9,261
Goodwill 1,983 - - 1,983
Other assets 448 77 - 525
Intangible assets - - 7,854 7,854
-------- ----------- --------------- -----------
TOTAL ASSETS $16,759 $ 130 $ 5,374 $ 22,263
======== =========== =============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 233 $ 131 $ (131) $ 233
Bank overdraft - 206 (206) -
Accrued expenses 505 216 (66) 655
Current portion of long-term debt 572 - - 572
Line-of-credit - 87 (87) -
-------- ----------- --------------- -----------
TOTAL CURRENT LIABILITIES 1,310 640 (490) 1,460
Deferred gain on sale of subsidiary 164 - - 164
Long-term debt less current portion 7,150 - 5,125 12,275
Deferred rent - 229 - 229
Other non-current liabilities - 6 (6) -
-------- ----------- --------------- -----------
TOTAL LIABILITIES 8,624 875 4,629 14,128
COMMITMENTS AND CONTINGENCIES - - - -
MINORITY INTERESTS 40 - - 40
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par, 1,000,000 shares
authorized; none outstanding - - - -
Common stock, $.01 par, 15,000,000 shares
authorized; 4,608,678 outstanding 46 - - 46
Additional paid-in capital 11,273 - - 11,273
Accumulated other comprehensive income 65 - - 65
Accumulated deficit (1,995) 5 (5) (1,995)
Less 908,530 shares of common stock held in
treasury, at cost (1,294) (750) 750 (1,294)
-------- ----------- --------------- -----------
TOTAL STOCKHOLDERS' EQUITY 8,095 (745) 745 8,095
-------- ----------- --------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,759 $ 130 $ 5,374 $ 22,263
======== =========== =============== ===========
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RICK'S CABARET INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2004
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA PRO FORMA
RICK'S PEREGRINE ADJUSTMENTS COMBINED
-------- ----------- --------------- -----------
TOTAL REVENUE $ 3,669 $ 486 $ - $ 4,155
Operating expenses:
Cost of goods sold 472 20 - 492
Salaries and wages 1,344 155 - 1,499
Other general and administrative 1,774 461 11 B 2,246
-------- ----------- --------------- -----------
TOTAL OPERATING EXPENSES 3,590 636 11 4,237
-------- ----------- --------------- -----------
Operating income (loss) 79 (150) (11) (82)
Other expense, net (85) (6) (51) C (210)
(68) D
-------- ----------- --------------- -----------
Net loss $ (6) $ (156) $ (130) $ (292)
======== =========== =============== ===========
Net loss per share:
Basic and diluted $ (0.00) $ (0.08)
======== ===========
Weighted average shares outstanding: 3,700 3,700
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RICK'S CABARET INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2004 *
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA PRO FORMA
RICK'S PEREGRINE * ADJUSTMENTS COMBINED
-------- ------------- ------------- -----------
TOTAL REVENUE $15,960 $ 2,236 $ - $ 18,196
Operating expenses:
Cost of goods sold 1,983 114 - 2,097
Salaries and wages 5,491 647 - 6,138
Other general and administrative 7,420 1,694 45 B 9,159
-------- ------------- ------------- -----------
TOTAL OPERATING EXPENSES 14,894 2,455 45 17,394
-------- ------------- ------------- -----------
Operating income (loss) 1,066 (219) (45) 802
Other expense, net (291) (9) (205) C (894)
(389) D
-------- ------------- ------------- -----------
Net income (loss) $ 775 $ (228) $ (639) $ (92)
======== ============= ============= ===========
Net income (loss) per share:
Basic and diluted $ 0.21 $ (0.02)
======== ===========
Weighted average shares outstanding: 3,700 3,700
======== ===========
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* Amounts for Peregrine are for the year ended December 31, 2004
RICK'S CABARET INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET ADJUSTMENT
(A) Records the Peregrine acquisition, including: (1) payment of $2,500,000 in cash and Secured Convertible Note issued of $5,125,000 in exchange for the Common Stock, (2) transaction costs of $150,000 (3) removal of Peregrine stockholder's equity. For pro forma purposes the total consideration is estimated at $7,775,000.
This acquisition was accounted for as a purchase with the total consideration preliminarily allocated to the assets and liabilities assumed as follows:
AMOUNT
DESCRIPTION (IN THOUSANDS)
Total consideration:
Cash $ 2,500
Issuance of Secured Convertible Note 5,125
Estimated transaction costs 150
---------------
$ 7,775
===============
Allocation:
Current asset $ 73
Non-current assets 77
Discounted lease 446
Non-compete agreement 100
Sexually oriented business license 7,308
Current Liabilities (229)
---------------
$ 7,775
===============
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The foregoing allocations are based on estimated fair values and are subject to adjustment. Fair values of assets acquired were determined based on management's valuation.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
(B) Records adjustment to amortization expense to reflect increase for new basis of identifiable intangible assets including discounted lease, non-compete agreement and sexually oriented business license. Discounted lease is amortized straight-line over an 18-year life. Non-compete agreement is amortized straight-line over a five-year life. Sexually oriented business license is considered to have an indefinite life and is not amortized.
(C) Records adjustment to interest expense to reflect the payment of interest for Rick's $5,125,000 Secured Convertible Note arising from the Peregrine acquisition.
(D) Records adjustment to interest expense to reflect the payment of interest of Rick's $3,802,000 New York Club Debt arising related to the Peregrine acquisition.