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Table of Contents

 

Report of Independent Registered Public Accounting Firm		1
Audited Combined Financial Statements:
Combined Balance Sheets		2
Combined Statements of Income		3
Combined Statements of Changes in Stockholders’ Equity		4
Combined Statements of Cash Flows		5
Notes to Combined Financial Statements		6

 

MIAMI GARDENS SQUARE ONE , INC. AND STELLAR MANAGEMENT CORPORATION

COMBINED BALANCE SHEETS

		September 30,				December 31,
		2007				2006
Assets
Current assets:
Cash and cash equivalents		$	673,971			$	403,366
Accounts receivable, trade			319,650				218,571
Inventories			328,728				287,731
Prepaid expenses			43,012				43,507
Total current assets			1,365,361				953,175
Property and equipment, net			4,312,888				4,808,237
Other assets -- deposits			96,085				63,465
Total assets		$	5,774,334			$	5,824,877
Liabilities and Stockholders ’ Equity
Current liabilities:
Accounts payable and accrued liabilities		$	325,306			$	341,036
Note s payable, related party			2,105,000				3,905,000
Notes payable			447 ,918				1, 094 ,459
Total current liabilities			2,878,224				5,340,495
Commitments and contingencies			-				-
Stockholders ’ equity:
C ommon stock , $.01 par value, 4,000 shares authorized, 2,050 shares issued			20				20
Additional paid - in capital			2,366,023				2,366,023
Retained e arnings (accumulated deficit)			530,067				( 1,881,66 1	)
Total stockholders ’ equity			2,896,110				484,382
Total liabilities and stockhol ders ’ equity		$	5,774,334			$	5,824,877

 

MIAMI GARDENS SQUARE ONE , INC. AND STELLAR MANAGEMENT CORPORATION

COMBINED STATEMENTS OF INCOME

 

		Nine Months
		En ded				Year Ended
		September 30,				December 31,
		2007				2006
Revenues:
Sales of  alcoholic beverages		$	12,441,539			$	13,275,533
Service revenues			1,232,040				998,950
Other			308,951				339,5 35
			13,982,530				14,614,018
Operating expenses :
Cost of goods sold			1,840,317				2,276,989
Salaries and wages			1,756,808				2,098,442
Other general and administrative:
Taxes an d permits			1,178,611				1,482,305
Charge card fees			186,932				400,726
Rent			684,668				675,008
Advertising and marketing			271,358				464,931
Depreciation			495,349				629,601
Other			2,422,978				3,0 74,684
			8,837,021				11, 102,686
Income from operations			5,145,509				3,511,332
Other income			34,000				58,216
Interest expense			( 327,748	)			( 559,866	)
Net income		$	4,851,761			$	3,009,682

E.	Notes Payable

 

Following is a summary of notes payable as of September 30, 2007 and December 31, 2006.  These notes were all paid off subsequent to September 30, 2007; therefore, all debt is shown as current.

	September 30,				December 31,
		2007				2006
$1,300,000 credit facility with a bank, interest at   prime plus 1.5% but not less than 10%, principal payable $27,083 monthly plus accrued interest, matures in June 2009, collateralized by certain real property owned by a Company stockholder and guaranteed by the Company ’ s two stockholders		$	322,918			$	769,4 59
Unsecured notes payable to individuals, interest payable monthly at r ates from 8%-13% , maturing at various dates from January 2007 to August 2008			125,000				325,000
Total		$	447,918			$	1,094,459

Leases

The Company leases a building and corporate office space under operating leases, of which rent expense was approximately $684,668 and $675,008 for the nine months ended September 30, 2007 and the year ended December 31, 2006, respectively.

 

Future minimum annual lease obligations as of September 30, 2007, approximate the following:

Years ended September 30:
2008		$	851,268
2009			851,268
2010			851,268
2011			851,268
2012			851,268
Thereafter			1,489,719
Total future minimum lease obligations		$	5,746,059

G.	Stockholders’ Equity

 

Following is a summary of the common stock of the Company:

	Par Value	Number of Shares Authorized	Number of Shares Issued
Miami Gardens Square One, Inc.	$.01	2,000	2,000
Stellar Management Corporation	$.01	2,000	50

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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 Miami Gardens Square One, Inc. and Stellar Management Corporation (collectively referred to herein as “MGSO”).  On November 30, 2007, we entered into a Stock Purchase Agreement for the acquisition of 100% of the issued and outstanding common stock of Stellar Management Corporation, a Florida corporation (the “Stellar Stock”) and 100% of the issued and outstanding common stock of Miami Gardens Square One, Inc., a Florida corporation (the “MGSO Stock”) which owns and operates an adult entertainment cabaret known as “Tootsies Cabaret” (“Tootsies”) located at 150 NW 183 rd Street, Miami Gardens, Florida  33169 (the “Transaction”).  Pursuant to the Stock Purchase Agreement, we acquired the Stellar Stock and the MGSO Stock from Norman Hickmore (“Hickmore”) and Richard Stanton (“Stanton”) for a total purchase price of $25,486,000 (which includes inventory and other assets), payable $15,486,000 in cash and payable $10,000,000 pursuant to two secured promissory notes in the amount of $5,000,000 each to Stanton and Hickmore (the “Notes”).  As part of the Transaction, Hickmore and Stanton entered into five-year covenants not to compete with us.  Additionally, as part of the Transaction, we entered into an Assignment to Lease Agreements with the landlord for the property where Tootsies is located.  The underlying Lease Agreements for the property provide for an original lease term through June 30, 2014, with two option periods which give us the right to lease the property through June 30, 2034.

The pro forma condensed balance sheet gives effect to the MGSO acquisition as if it had occurred on September 30, 2007, combining the balance sheets of Rick’s and MGSO as of that date. The pro forma condensed statements of operations for the year ended September 30, 2007 give effect to the acquisition as if it had occurred on October 1, 2006 combining the results of Rick’s for the fiscal year ended September 30, 2007 with those of MGSO for the twelve month period ended September 30, 2007 .

The pro forma statements of operations for the year ended September 30, 2007 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, 2006, as assumed, nor does it purport to present the results which may be obtained in the future.