10-K: Scores Holding Co. Reports FY2024 Results, Net Income Rises

Scores Holding Company, Inc. filed its annual report for the fiscal year ended December 31, 2024, detailing a rise in net income and a decrease in revenues.

Summary

• Scores Holding Company, Inc. reported its annual results for the fiscal year ended December 31, 2024.
• Total revenues decreased to $279,000 in 2024 from $350,000 in 2023, primarily due to the recognition of deferred revenue in the prior year and uncollectible revenue in the current year.
• General and administrative expenses decreased significantly to $231,735 in 2024 from $338,293 in 2023, largely due to lower legal, filing, and insurance costs.
• Net income increased to $47,265 in 2024 from $11,120 in 2023, attributed to reduced operating expenses and the elimination of certain insurance policies.
• The company continues to face substantial doubt regarding its ability to continue as a going concern due to accumulated losses and a working capital deficit, though it plans to raise capital through continued brand licensing.
• Cash and cash equivalents increased to $87,049 at the end of 2024 from $46,624 at the end of 2023.
• The company's common stock is quoted on OTC Pink under the symbol SCRH and is currently designated as a 'Pink No Information' company with a stop sign.
• The company has no employees and utilizes a management services agreement with Metropolitan Lumber Hardware and Building Supplies, Inc. for accounting, legal, and other services.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to the company's precarious financial position, ongoing going concern doubts, and low stock market visibility, despite a reported increase in net income.

Positives

• Net income increased to $47,265 in 2024, up from $11,120 in 2023.
• Cash and cash equivalents increased by $40,425 to $87,049 as of December 31, 2024.
• General and administrative expenses decreased by $106,558 to $231,735 in 2024.
• The working capital deficit improved, decreasing from $201,175 at the end of 2023 to $171,910 at the end of 2024.
• The company successfully settled a legal matter with Cheetah Club, LLC for $45,000.
• The company settled a legal matter with Jessica B Hall for $6,000.

Negatives

• Total revenues decreased by $71,000 to $279,000 in 2024.
• The company has accumulated losses of $6,818,213 as of December 31, 2024.
• The company has a working capital deficit of $171,910 as of December 31, 2024.
• Substantial doubt exists about the company's ability to continue as a going concern.
• The company's common stock is quoted on OTC Pink as a 'Pink No Information' company with a stop sign.
• The company has no employees and relies on a related party for essential services.
• The company owes $125,000 to Metropolitan Lumber Hardware and Building Supplies, Inc. for unpaid management services.

Risks

• The company's ability to continue as a going concern is subject to substantial doubt due to accumulated losses and a working capital deficit.
• The company's revenue stream is dependent on licensing agreements, and collectability of revenue is not always probable.
• Licensees are subject to various governmental regulations, including liquor and cabaret licenses, and zoning restrictions, which could impact operations and profitability.
• The company's intellectual property, including trademarks, is critical to its business, and any infringement or loss of these rights could be detrimental.
• The company's stock is quoted on OTC Pink as a 'Pink No Information' company with a stop sign, indicating potential issues with public information availability.
• The company has no formal processes for assessing, identifying, and managing cybersecurity risks, although management does not currently believe it to be a material risk due to limited operations.

Future Outlook

The company intends to raise additional working capital through continued licensing of its brand. However, there are no assurances that sufficient revenues will be generated or that additional financing will be available on acceptable terms. If adequate working capital is not obtained, the company may not be able to continue its operations.

Management Comments

• Management believes the Company has adequate processes and systems to maintain the confidentiality of its communications and records. However, given our current business plan and lack of significant operations and employees, management does not believe that cybersecurity threats constitute a material risk for the Company.
• Management does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met.
• The Board concluded that Mr. Gans should serve as a director of the Company because of his extensive experience in the management and operation of gentlemens clubs.
• The Board concluded that Mr. Gans should serve as a director of the Company because of his managerial experience and the knowledge and experience he has attained through his service as a director of the Company.
• The Board concluded that Mr. Rosenbluth should serve as a director of the Company because of his financial literacy and expertise, as well as his extensive experience in the management and operation of gentlemens clubs.

Industry Context

StockSavvy.ai notes that Scores Holding Company operates in the adult entertainment nightclub industry, a sector often subject to stringent local regulations and sensitive to economic downturns. The company's business model relies on licensing its brand, which insulates it from direct operational risks but makes it dependent on the success and compliance of its licensees. The "Pink No Information" status and stop sign on its OTC listing suggest significant transparency and liquidity concerns.

Corporate Governance

Legal Proceedings

• The company was involved in a legal proceeding (Luisa Santos de Oliveira v. Scores Holding Company, Inc., et al.) which was dismissed against the Company, Robert Gans, Mark S. Yackow, and Howard Rosenbluth.
• The company filed a civil action against Scores Alabama, which was settled for $45,000.
• A legal proceeding (Jane Doe v. Scores Holding Company, Inc., et al.) related to allegations of sex trafficking through Scores Tampa was filed, but the Company and SLC were ultimately not included as defendants in the Amended Complaint.
• A legal proceeding (Jessica Hall v. Scores Holding Company, Inc., et al.) alleging discrimination and retaliation was settled for $6,000, paid by SCRH and Harvey.
• Settlement agreements and amendments were entered into with Scores Chicago and Scores Las Vegas to address arrears resulting from the Covid-19 pandemic.
• An amendment to the Scores Sports Bar Service/Trademark License Agreement was made to extend the term and adjust payment timeframes due to the economic impact of Covid-19.

Related Party Transactions

• The company has a licensing agreement with its affiliate I.M. Operating LLC (IMO) for the Scores New York brand. Robert M. Gans is the majority owner of IMO.
• The company previously leased office space from Westside Realty of New York, Inc. (WSR), in which Robert M. Gans is the majority owner. This lease was terminated.
• The company has a management services agreement with Metropolitan Lumber Hardware and Building Supplies, Inc. (Metropolitan), of which Robert M. Gans is the sole owner. The company owes Metropolitan $125,000 in unpaid management services as of December 31, 2024.
• The company has a receivable of $5,250 due from Metropolitan as of December 31, 2024.

Stakeholder Impact

• Shareholders: The company's 'Pink No Information' status and stop sign on its OTC listing indicate significant risks and lack of transparency, potentially impacting share value and liquidity. The ongoing going concern doubt also poses a risk to shareholder investment.
• Employees: The company has no employees, relying entirely on a management services agreement with a related party.
• Creditors: The company's substantial accumulated deficit and working capital deficit raise concerns about its ability to meet its obligations.
• Licensees: Licensees are subject to various regulations and economic conditions that could impact their ability to pay royalties, directly affecting the company's revenue.

Next Steps

• The company intends to raise additional working capital through continued licensing of its brand.
• Management and the Board of Directors will continue to monitor remedial measures and the effectiveness of internal controls.

Key Dates

Recommendation

The company shows a slight increase in net income and improved cash position, but the persistent going concern issues, significant accumulated deficit, and lack of transparency (Pink No Information, stop sign) present substantial risks. While there's a path to continued operations via licensing, the uncertainty and limited growth prospects warrant a cautious 'hold' recommendation.

Keywords

Scores Holding Company, SEC Filing, 10-K, Annual Report, Licensing Revenue, Intellectual Property, Trademarks, Going Concern, Financial Results, Corporate Governance, Risk Factors, Related Party Transactions