SCORES HOLDING CO INC - FORM 10-Q

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EX-31.1 - SCORES HOLDING CO INC	v194860_ex31-1.htm
EX-32.1 - SCORES HOLDING CO INC	v194860_ex32-1.htm
EX-31.2 - SCORES HOLDING CO INC	v194860_ex31-2.htm
EX-32.2 - SCORES HOLDING CO INC	v194860_ex32-2.htm

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 June 30, 2010

¨ 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.
(Exact name of small business issuer as specified in its charter)

Utah		87-0426358
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

533-535 West 27th Street, New York, NY 10001
(Address of principal executive offices)

(212) 868-4900
(Registrant’s telephone number, including area code)

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 ¨ 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):

Large accelerated filer ¨		Accelerated filer ¨		Non-accelerated filer ¨		Smaller reporting company þ
				(Do not check if a smaller Reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2). Yes ¨ No x

As of August 23, 2010 there were 165,186,124 shares of the issuer’s common stock, par value $0.001, issued and outstanding.

SCORES HOLDING COMPANY, INC.

JUNE 30, 2010 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		PAGE

	Special Note Regarding Forward Looking Information	3

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 4T.	Controls and Procedures	18

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 6.	Exhibits	23

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

		PAGE

Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and
December 31, 2009 (Audited)		5

Consolidated Statements of Operations for the three and six months
Ended June 30, 2010 and 2009 (Unaudited)		6

Consolidated Statements of Cash Flows for the six months
Ended June 30, 2010 and 2009 (Unaudited)		7

Notes to Consolidated Financial Statements (Unaudited)		8

SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2010			2009
	(Unaudited)			(Audited)
ASSETS

CURRENT ASSETS:
Cash	$	14,638		$	31,694
Licensee Receivable – including affiliates - net		93,176			26,732
Prepaid expenses		24,397			0
Total current Assets		132,211			58,426

INTANGIBLE ASSETS, NET		141,476			205,428

	$	273,687		$	263,854

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	51,354		$	22,091
Related party payable		237,366			208,583
Total Current Liabilities		288,720			230,674

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.0001 par value, 10,000,000 shares
authorized, -0- issued and outstanding		-			-
Common stock, $.001 par value; 500,000,000 shares authorized,
165,186,124 and 165,186,124 issued and outstanding,
respectively		165,186			165,186
Additional paid-in capital		5,998,117			5,998,117
Accumulated deficit		(6,178,336	)		(6,130,123	)
Total stockholder's equity (deficit)		(15,033	)		33,180
	$	273,687		$	263,854

See notes to consolidated financial statements

SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Six months ended June 30,						Three months ended June 30,
	2010			2009			2010			2009
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

REVENUES:
Royalty revenue	$	238,352		$	117,618		$	130,901			57,835


Total		238,352			117,618			130,901			57,835

EXPENSES:
BAD DEBT EXPENSE		—			30,000			—			30,000
GENERAL AND ADMINISTRATIVE EXPENSES		286,565			230,794			144,463			138,227

NET( LOSS) FROM OPERATIONS		(48,213	)		(143,176	)		(13,562	)		(110,392	)

OTHER INCOME DEBT FORGIVENESS		—			6,000			—			—

NET (LOSS) BEFORE INCOME TAXES		(48,213	)		(137,176	)		(13,562	)		(110,392	)

PROVISION FOR INCOME TAXES		—			—			—			—

NET LOSS	$	(48,213	)	$	(137,176	)		(13,562	)		(110,392	)

NET LOSS PER SHARE	$	(0.00	)	$	(0.00	)	$	(0.00	)		(0.00	)

WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING - Basic and Diluted		165,186,124			165,186,124			165,186,124			165,186,124

See notes to consolidated financial statements

SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30,
	2010			2009
	(Unaudited)			(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net( loss)	$	(48,213	)	$	(137,176	)

Adjustments to reconcile net loss to net cash provided
by operating activities:
Amortization		63,952			61,152
Bad debt expense		-			30,000
Debt forgiveness		-			(6,000	)
Changes in assets and liabilities:
Licensee receivable		(66,444	)		(40,857	)
Prepaid Expenses		(24,397	)		-
Deferred revenue		-			70,000
Accounts payable and accrued expenses		29,263			58,284

NET CASH (USED IN ) PROVIDED BY OPERATING ACTIVITIES		(45,839	)		35,403

CASH PROVIDED BY FINANCING ACTIVITIES:
Related party payable		28,783			-
Bank overdraft		-			(20,982	)

NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES		28,783			(20,982	)

NET (DECREASE) INCREASE IN CASH		(17,056	)		14,421

CASH, beginning of the period		31,694			173

CASH, end of the period	$	14,638		$	14,594

Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	-		$	-
Cash paid for income taxes		-			-

See Notes to the Consolidated Financial Statements

SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

(Unaudited)

Note 1. Organization

Basis for presentation

Scores Holding Company, Inc. (along with its subsidiaries, the “Company”) is a Utah corporation, formed in September 1981 and is located in New York, NY. Formerly, Internet Advisory Corporation, the Company is a licensing company that 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.

The Company’s consolidated financial statements include the Company’s accounts, as well as those of its wholly-owned subsidiaries. Certain prior period amounts have been reclassified to conform to the current period presentation. The Company’s 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

The preparation of financial statements in conformity with U.S. GAAP requires the Company 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 six months ended June 30, 2010 are not necessarily indicative of the results to be expected for any other interim period or for the year ending December 31, 2010.

Note 2. Summary of Significant Accounting Principles

Going Concern

The Company has incurred cumulative losses totaling $(6,178,336), a working capital deficit of $(156,509) and a net operating loss of $(48,213) at June 30, 2010. 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 the 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 FINANCIALSTATEMENTS

(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 six months ended June 30, 2010, revenues earned from royalties from these unrelated licensees amounted to $162,681 and there was $28,758 due and outstanding as of June 30, 2010. The Company’s New York affiliate commenced operations in May 2009 and revenue amounted to $75,671 during the six month 2010 period; there was $64,418 due and outstanding as of June 30, 2010.

During the six month 2010 and 2009 period the Company’s Baltimore licensees accounted for 27% and 33% and the Company’s Chicago licensee accounted for 23% and 28% of the Company’s total revenues, respectively. The Company’s New Orleans licensee accounted for 13% and 10% of the Company’s total revenues for the six months period ended 2010 and 2009, respectively. The Company’s AYA, Scoreslive.com licensee website, in the development stage since 2007, has accounted for a minimal amount of the Company’s total royalty revenues to date.

Loss Per Share

Net loss per share data for both the 2010 period and the 2009 period is based on net 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 FINANCIALSTATEMENTS

(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”. IMO is owned by Robert M. Gans, the Company’s President, Chief Executive Officer and a director. Mr. Gans also owns Mitchell’s East, LLC, the Company’s majority shareholder. IMO paid $174,866 in administrative cost related to accounting, business development, insurance and legal services for the Company as of June 30, 2010. The Company also leases office space directly from Westside Realty of New York (WSR), the owner of the West 27th 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. As of April 1, 2009, the monthly rent was reduced to $2,500 per month, including overhead costs. The Company owed WSR approximately $62,500 in unpaid rent as of June 30, 2010. The combined total of related party debts amounted to $237,366 and is recorded as related party payable.

Note 4. Intangible Assets

Trademark

In connection with the acquisition of HEIR (also known as, Scores Licensing Company) in 2002, the Company acquired the trademark to the name “SCORES”. This trademark had a net recorded value at June 30, 2010 of $141,476. This trademark has been registered in the United States, Canada, Japan, Mexico and the European Community. The trademark is being amortized by straight line method over an estimated useful life of ten years. The Company’s trademark having an infinite useful life by its definition is being amortized over ten years due to the difficult New York legal environment for which the related showcase adult club is operating. The Company recorded $63,952 and $61,152 of amortization expense, for the six months ended June 30, 2010 and 2009, respectively.

During the six months ended June 30, 2010 period, the Company believed that the carrying amount of the “Scores” trademark was equal to its fair or net present value and as a result, did not recognize any impairment loss.

SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

(Unaudited)

Note 5. - Licensees

In 2003, the Company licensed the use of the "Scores Chicago" name to Stone Park Entertainment, Inc. for its 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 23% and 28% of the Company’s total royalty revenues during the 2010 and 2009 six month periods, respectively. During the 2010 six month period, the Company collected $53,911 in royalties and was owed $8,912 in unpaid royalties at the end of the period.

In 2004, the Company licensed the use of name "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 27% and 33% of our total royalty revenues during the first six months of 2010 and 2009, respectively. For the 2010 six month period, the Company collected $61,998 in royalties and was owed $11,446 in unpaid royalties at the end of the period.

In April 2007, the Company 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 13% and 10% of the Company’s total royalty revenues during first six months of 2010 and 2009, respectively. As of June 30, 2010, the Company was owed $19,000 in unpaid royalties offset by a $14,000 reserve. For the first six months of the 2010 period, the Company collected $25,000 in royalties and was owed $5,000 net of the reserve at the end of the period. The Company subsequently collected the $5,000 receivable.

On January 27, 2009, the Company entered into a licensing agreement with IMO for the use of the Scores brand name. IMO is owned by Robert M. Gans, the Company’s President, Chief Executive Officer and a director. Mr. Gans also owns Mitchell’s East, LLC, the Company’s majority shareholder. IMOs’ operations are located at the site of the former Scores West nightclub, 533-535 West 27th Street, New York, New York, which is also owned by Westside Realty of New York, of which the majority owner is Robert M. Gans. Royalties payable to the Company under this license agreement are 3% of gross revenues. IMO acquired a liquor license, renovated the club and commenced operations at the West 28th street location in May 2009. For the 2010 six month period, the Company collected $16,000 in royalties and was owed $64,418 in unpaid royalties at the end of the period.

During the three months ended June 30, 2010, the Company received a $15,000 non-refundable payment in connection with a proposed licensing agreement with a potential licensee in Phoenix Arizona. The agreement was not consummated.

SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

(Unaudited)

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 28th Street, New York, NY, filed a civil lawsuit against the Company in the Federal District Court for the Southern District of New York (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, it contends that the plaintiff was not an “employee” but rather an independent contractor of Scores West and it 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 parties are currently engaged in the exchange of preliminary discovery.

In mid March 2010, we were named by Nichole Hughes in a complaint filed with the Supreme Court of the State of New York (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 motion to dismiss the complaint. We will vigorously defend ourselves in this litigation and do 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 has filed a motion to dismiss this complaint and will vigorously defend itself in this litigation. The Company does not expect that the outcome will be material.

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. The Company 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, one of the Company’s formerly affiliated New York clubs which is no longer in business, filed a civil lawsuit against the Company in the S.D.N.Y. The plaintiff is seeking to recover damages for alleged illegal deductions taken 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 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 our former affiliates Go West Entertainment, Inc. (“Go West”) and Entertainment Management Services, Inc. ("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. The case has been placed in the hands of a magistrate judge, the Company has served various discovery demands which have been responded to by counsel for the plaintiff and related discovery examinations are in progress. 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 FINANCIALSTATEMENTS

(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 (the former Scores Master license holder) 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. The Company will attempt to collect on the judgment and 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 has been lifted. The Company recently filed an amended response asserting cross-claims for judgment against both Go West and EMS.

On October 9, 2007, former Go West bartender Siri Diaz filed a purported class action and collective action on behalf of all tipped employees against us and other defendants alleging violations of federal and state wage/hour laws (Siri Diaz et al. v. Scores Holding Company, Inc.; Go West Entertainment, Inc. a/k/a Scores West Side; and Scores Entertainment, Inc., a/k/a Scores East Side, Case No. 07 Civ. 8718 (Southern District of New York (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 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 intends to vigorously contest the claimed liability as well as the violations alleged.

SCORES HOLDING COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

(Unaudited)

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.

Note 7. SUBSEQUENT EVENTS

On August 5, 2010, the Company entered into a license agreement with Burhill LLC (“Burhill”) pursuant to which Burhill will license the Scores trademarks and create, distribute, advertise and promote programming content in all forms of media using the Scores trademarks and conducting business under the name “Scores.” Burhill has agreed to pay the Company a non-refundable royalty equal to five percent (5%) of the revenues of Burhill earned in connection with Burhill’s use of the Scores trademarks, net of actual local sales taxes paid and including any and all licensing fees charged to third parties for the use of the programming content owned and/or distributed by Burhill. Burhill is wholly owned by Robert M. Gans, the President and Chief Executive Officer of the Company and owner of Mitchell’s East LLC, the Company’s majority stockholder.

On August 6, 2010, the Board of Directors of the Company adopted the Scores Holding Company, Inc. 2010 Equity Incentive Plan (the “2010 Plan”). The 2010 Plan provides for the issuance of both non-statutory and incentive stock options and other awards to acquire up to 20,000,000 shares of the Company’s common stock. On August 6, 2010, the Company’s majority stockholder, Mitchell’s East LLC, owning 53.8% of the Company’s issued and outstanding capital stock executed a written consent in lieu of a meeting and approved the 2010 Plan. Robert M. Gans, the Company’s President and Chief Executive Officer and a director, is the sole owner of Mitchell’s East LLC.

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 four such clubs currently operating under the Scores name, in New York, Baltimore, Chicago, 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 June 30, 2010 (“the 2010 three month period”) Compared to Three Months Ended June 30, 2009 (“the 2009 three month period”).

Revenues:

Revenues increased to $130,901 for the 2010 three month period from $57,835 for the 2009 three month period. The increase was due to the additional revenues of $10,997 from Chicago, $22,992 from Baltimore, $15,000 from New Orleans, $9,077 from New York and a non-refundable fee from Arizona in the amount of $15,000 for a potential club. At this time that club has not commenced operations.

Revenues from the New York Club amounted to $39,077 and $30,000 for the 2010 and 2009 three month periods, respectively. Revenues from our Chicago nightclub increased Seventy One percent (71%) to $26,578 for the 2010 three month period from $15,581 from the 2009 three month period, while revenues from our Baltimore club increased One Hundred Eighty Eight percent (188%) to $35,246 for the 2010 three month period from $12,254 for the 2009 three month period and revenues from our New Orleans club increased One Hundred percent (100%) to $15,000 for the 2010 three month period from $0 in the 2009 three month period.

General and Administrative Expenses:

General and administrative expenses increased during the 2010 three month period to $144,463 from $138,227 during the 2009 three month period. Cost related to administrative expenses increased approximately by $6,200 from 2009 to 2010.

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 $(13,562) or $(0.00) per share for the 2010 three month period compared to a net (loss) of $(110,392) or $(0.00) per share for the 2009 three month period. The decrease in operating loss for the 2010 three month period was a result of (i) an increase in royalty revenues of $73,066, (ii) a small increase in operating cost and (iii) the absence of any bad debt expense during the period.

Net loss per share data for both the 2010 three month period and the 2009 three month period is based on net income available to common shareholders divided by the weighted average of the number of common shares outstanding.

Six Months Ended June 30, 2010 (“the 2010 six month period”) Compared to Six Months Ended June 30, 2009 (“the 2009 six month period”).

Revenues:

Revenues increased to $238,352 for the 2010 six month period from $117,618 for the 2009 six month period. The increase was due to increased revenues from the various clubs. Revenues from our New York Club amounted to $75,671 and $30,000 for the 2010 and 2009 six month periods, respectively.

Revenues from our Chicago nightclub increased Sixty Two percent (62%) to $53,823 for the 2010 six month period from $33,364 from the 2009 six month period, while revenues from our Baltimore club increased Sixty Three percent (63%) to $63,858 for the 2010 six month period from $39,254 for the 2009 six month period and revenues from our New Orleans club increased One Hundred Fifty percent (150%) to $30,000 for the 2010 six month period from $12,000 for the 2009 six month period. The Company, as previously disclosed, has received a non refundable fee in the amount of $15,000 for a potential royalty fee structure that has not at this time materialized.

General and Administrative Expenses:

General and administrative expenses increased during the 2010 six month period to $286,565 from $260,794 including bad debt expense amounting to $30,000 in the prior six month period. Cost related to salaries, business development, legal, web hosting and insurance increased approximately to $53,500 and cost for rent, bad debt expense and regulatory cost decreased approximately to $37,500 during the 2010 six month period compared to the 2009 six 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 $(48,213) or $(0.00) per share for the 2010 six month period compared to a net (loss) of $(137,176) or $(0.00) per share for the 2009 six month period. The decrease in operating loss for the 2010 six month period was a result of an increase in royalty revenues of $120,734 offset by an increase in operating cost related business development salaries and web development that amounted to $27,267 and a $3,500 reduction in non operating cost related taxes and regulatory filings over the 2009 six month period.

Net loss per share data for both the 2010 six month period and the 2009 six month period is based on net income available to common shareholders divided by the weighted average of the number of common shares outstanding.

Bad Debt Expense

As of June 30, 2010, our New Orleans licensees owed us $14,000 in accrued and unpaid royalties. During the 2010 three month period, management agreed to continue to reserve the amount owed by our New Orleans licensee. For the 2010 three and six month periods, we recorded approximately $15,000 and $30,000 in current royalties, respectively, of which $25,000 was received.

Liquidity and Capital Resources

Cash:

At June 30, 2010, we had $14,638 in cash and cash equivalents compared to $31,694 in cash and cash equivalents at December 31, 2009.

Operating Activities:

Net cash (used in) provided by operating activities for the six months ended June 30, 2010 and June 30, 2009 was $(45,839) and $35,403 respectively. The decreases in cash are related to increases in prepaid expenses, increases in licensee receivables and an increase in accounts payable between the 2010 and 2009 periods.

Financing Activities:

During the 2010 and 2009 six month periods, our New York affiliate paid approximately $28,783 and $0, respectively, in cash for web development, insurance premiums and consulting services for the Company. As of June 30, 2010, we owed $62,500 in rent to our Westside Realty affiliate and $174,866 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 June 30, 2010 we had an accumulated deficit of $(6,178,336), with total current assets of $132,211 and total current liabilities of $288,720 or negative working capital of $(156,509). As of December 31, 2009, we had total current assets of $58,426 and total current liabilities of $230,674 or negative working capital of $(172,248). Our accounts receivable and payables increased during the 2010 six month periods; 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 4T. 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:

·	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

·	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 June 30, 2010.

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 June 30, 2010 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 28th 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 preliminary discovery.

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 motion to dismiss the complaint. 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 have filed a motion to dismiss this complaint and will vigorously defend ourselves in this litigation. We do not expect that the outcome will be material.

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 taken 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. The case has been placed in the hands of a magistrate judge, we have served various discovery demands which have been responded to by counsel for the plaintiff and related discovery examinations are in progress. 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 has been lifted. We recently filed an amended response asserting cross-claims for judgment against both Go West and EMS.

On October 9, 2007, former Go West bartender Siri Diaz filed a purported class action and collective action on behalf of all tipped employees against us and other defendants alleging violations of federal and state wage/hour laws (Siri Diaz et al. v. Scores Holding Company, Inc.; Go West Entertainment, Inc. a/k/a Scores West Side; and Scores Entertainment, Inc., a/k/a Scores East Side, Case No. 07 Civ. 8718 (Southern District of New York (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. We intend to vigorously contest the claimed liability as well as the violations alleged.

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 participated in a Preliminary Conference to establish the discovery schedule. Examinations before trial of the parties have been completed and non-party depositions are now being taken. The plaintiff has not yet undergone the required physical examination. 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 6.

EXHIBITS

(a)

Exhibits.

Exhibit No.		Description

31.1		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
31.2		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
32.1		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*
32.2		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*

* 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.

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.

	SCORES HOLDING COMPANY, INC.

Dated: August 23, 2010	By:	/s/Robert M. Gans
	Robert M. Gans
	Chief Executive Officer

	By:	/s/Howard Rosenbluth
	Howard Rosenbluth
	Principal Financial Officer

SCORES HOLDING CO INC - FORM 10-Q - August 26, 2010

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SCORES HOLDING CO INC Reports