Scores Holding Co. Swings to Profit on Royalty Surge, But Going Concern Looms

TL;DR

**Scores Holding Co. is a high-risk bet: Q2 profit looks good, but the 'going concern' warning and massive accumulated deficit make it a speculative play at best.**

AI Summary

SCORES HOLDING CO INC reported a significant turnaround in net income for the three months ended June 30, 2023, reaching $51,013, compared to a net loss of $4,284 in the same period of 2022. This improvement was driven by a substantial increase in royalty revenue, which rose to $129,500 from $73,500 year-over-year, a 76.1% increase. However, for the six months ended June 30, 2023, total revenue decreased to $203,000 from $487,500 in 2022, a 58.3% decline, leading to a net income of $28,113, significantly lower than the $307,158 reported in the prior year's six-month period. The company's cash and cash equivalents increased to $52,168 as of June 30, 2023, from $7,600 at December 31, 2022. Despite these improvements, the company continues to face a substantial accumulated deficit of $6,848,485 and a working capital deficit of $175,182 as of June 30, 2023, raising substantial doubt about its ability to continue as a going concern. Strategic outlook involves raising additional working capital through continued and new brand licensing, with management believing the worst effects of the COVID-19 pandemic on the adult entertainment industry are over.

Why It Matters

For investors, the dramatic swing to profitability in Q2 2023, with net income of $51,013, offers a glimmer of hope, but the significant year-over-year revenue decline for the six-month period and the persistent 'going concern' warning are critical red flags. Employees and customers might see stability in the reopening of all royalty-paying licensees and increased interest in the 'SCORES' brand, suggesting a potential rebound in the adult entertainment market. However, the company's precarious financial position, marked by a $6.8 million accumulated deficit, indicates a high risk of operational instability. Competitively, the company's reliance on licensing the 'SCORES' trademark means its fortunes are tied to the broader health and regulatory environment of the adult entertainment industry, which is still recovering from COVID-19 impacts.

Risk Assessment

Risk Level: high — The company explicitly states a 'substantial doubt about the Company's ability to continue as a going concern' due to an accumulated deficit of $6,848,485 and a working capital deficit of $175,182 as of June 30, 2023. This is further exacerbated by a significant 58.3% decrease in total revenue for the six months ended June 30, 2023, from $487,500 to $203,000, indicating ongoing operational challenges despite a positive Q2.

Analyst Insight

Investors should exercise extreme caution and consider this a highly speculative investment due to the explicit 'going concern' warning and substantial accumulated deficit. Monitor future filings closely for concrete evidence of successful capital raises or sustained, significant revenue growth beyond the Q2 2023 bounce, as the current financial health is precarious.

Financial Highlights

debt To Equity

N/A

revenue

$203,000

operating Margin

14.14%

total Assets

$80,168

total Debt

$682,850

net Income

$28,113

eps

$0.000

gross Margin

N/A

cash Position

$52,168

revenue Growth

-58.3%

Revenue Breakdown

Key Numbers

• $51,013 — Net Income (Q2 2023) (Swung from a $4,284 net loss in Q2 2022, indicating a significant quarterly improvement.)
• $129,500 — Royalty Revenue (Q2 2023) (Increased 76.1% from $73,500 in Q2 2022, driving the quarterly profit.)
• $203,000 — Total Revenue (H1 2023) (Decreased 58.3% from $487,500 in H1 2022, highlighting a longer-term revenue decline.)
• $28,113 — Net Income (H1 2023) (Significantly lower than $307,158 in H1 2022, despite the Q2 profit.)
• $6,848,485 — Accumulated Deficit (As of June 30, 2023, indicating severe historical losses and a going concern risk.)
• $175,182 — Working Capital Deficit (As of June 30, 2023, contributing to the going concern doubt.)
• $52,168 — Cash and Cash Equivalents (Increased from $7,600 at Dec 31, 2022, showing improved liquidity but still low.)
• 165,186,144 — Common Shares Outstanding (Consistent across periods, indicating no recent dilution from new share issuance.)
• 6 — Number of Licensees (Generated royalty revenues from 6 licensees during Q2 and H1 2023.)
• 91% — Revenue Concentration (Q2 2023) (From four licensees, indicating high reliance on a few key partners.)

Key Players & Entities

• SCORES HOLDING COMPANY, INC. (company) — registrant
• Scores Licensing Corp. (company) — wholly-owned subsidiary
• SEC (regulator) — Securities and Exchange Commission
• $51,013 (dollar_amount) — Net income for three months ended June 30, 2023
• $4,284 (dollar_amount) — Net loss for three months ended June 30, 2022
• $129,500 (dollar_amount) — Royalty revenue for three months ended June 30, 2023
• $73,500 (dollar_amount) — Royalty revenue for three months ended June 30, 2022
• $203,000 (dollar_amount) — Total revenue for six months ended June 30, 2023
• $487,500 (dollar_amount) — Total revenue for six months ended June 30, 2022
• $6,848,485 (dollar_amount) — Accumulated deficit as of June 30, 2023

FAQ

Risk Factors

• Going Concern Uncertainty [high — financial]: The company has a substantial accumulated deficit of $6,848,485 and a working capital deficit of $175,182 as of June 30, 2023. This raises substantial doubt about its ability to continue as a going concern.
• Low Cash Position [medium — financial]: Despite an increase to $52,168 in cash and cash equivalents as of June 30, 2023, from $7,600 at December 31, 2022, the overall cash balance remains low, potentially limiting operational flexibility and ability to meet short-term obligations.
• Revenue Concentration [medium — financial]: In Q2 2023, 91% of royalty revenue was generated from only four licensees. This high concentration indicates a significant reliance on a few key partners, making the company vulnerable to the loss of any one of them.
• Industry Volatility [medium — market]: The company operates in the adult entertainment industry, which can be subject to significant shifts in consumer demand and regulatory scrutiny. While management believes the worst effects of the COVID-19 pandemic are over, the industry remains susceptible to external shocks.
• Dependence on Licensing [medium — operational]: The company's business model relies heavily on brand licensing. Success is contingent on attracting and retaining licensees, and generating sufficient royalty revenue from them. A slowdown in new licensing agreements or reduced performance from existing licensees directly impacts revenue.

Industry Context

SCORES HOLDING CO INC operates within the adult entertainment industry, a sector characterized by evolving consumer preferences and potential regulatory oversight. The company's business model is centered on brand licensing, making it reliant on the performance and appeal of its brands to attract and retain licensees. While management perceives a recovery post-pandemic, the industry remains susceptible to market shifts and external economic factors.

Regulatory Implications

The adult entertainment industry can face varying degrees of regulatory scrutiny depending on jurisdiction, impacting content, distribution, and marketing. While this filing does not detail specific regulatory actions, companies in this sector must remain vigilant about compliance with local and international laws to avoid operational disruptions or penalties.

What Investors Should Do

1. Monitor Royalty Revenue Trends
2. Assess Going Concern Risk
3. Analyze Licensee Performance

Key Dates

• 2023-06-30: End of Second Quarter and Six-Month Period — Reported a significant turnaround in quarterly net income to $51,013, driven by a 76.1% increase in royalty revenue. However, year-to-date revenue declined 58.3% to $203,000, resulting in a lower net income of $28,113 compared to the prior year.
• 2023-06-30: Balance Sheet Date — Showed an increase in cash and cash equivalents to $52,168, but also revealed a substantial accumulated deficit of $6,848,485 and a working capital deficit of $175,182, raising going concern doubts.
• 2022-06-30: End of Second Quarter and Six-Month Period (Prior Year) — Reported a net loss of $4,284 for the quarter and net income of $307,158 for the six-month period, with royalty revenue of $73,500 for the quarter and $487,500 for the six-month period.

Glossary

Accumulated Deficit

The total cumulative net losses of a company since its inception that have not been offset by net income or additional paid-in capital. (Indicates the company's long history of unprofitability and is a key factor in the going concern assessment.)

Working Capital Deficit

Occurs when a company's current liabilities exceed its current assets, indicating a potential short-term liquidity problem. (Highlights the company's immediate challenges in meeting its short-term obligations.)

Going Concern

An accounting assumption that a business will continue to operate for the foreseeable future, typically at least 12 months. (The company's financial condition raises substantial doubt about its ability to continue as a going concern, a critical disclosure for investors.)

Royalty Revenue

Income earned from licensing the use of intellectual property, such as brands or trademarks, to other parties. (This is the primary revenue source for SCORES HOLDING CO INC, and its fluctuations directly impact the company's financial performance.)

Contract Liabilities

Obligations to transfer goods or services to a customer for which the company has received consideration from the customer. (Represents deferred revenue, indicating payments received for services or rights not yet fully delivered or recognized.)

Year-Over-Year Comparison

Compared to the prior year's six-month period, SCORES HOLDING CO INC experienced a significant revenue decline of 58.3%, from $487,500 to $203,000. This led to a substantial decrease in net income from $307,158 to $28,113. While the current quarter (Q2 2023) showed a positive turnaround with a net income of $51,013 driven by a 76.1% increase in royalty revenue, the year-to-date figures highlight ongoing challenges. The company's financial position remains precarious, with a persistent working capital deficit and accumulated deficit, though cash reserves have improved.

Key Financial Figures

• $0.001 — ere 165,186,144 shares of common stock, $0.001 par value per share, outstanding. Tabl
• $250,000 — s. There are times when cash may exceed $250,000, the FDIC insured limit. At June 30, 20

Filing Documents

• tmb-20230630x10q.htm (10-Q) — 837KB
• tmb-20230630xex31d1.htm (EX-31.1) — 12KB
• tmb-20230630xex31d2.htm (EX-31.2) — 12KB
• tmb-20230630xex32d1.htm (EX-32.1) — 6KB
• tmb-20230630xex32d2.htm (EX-32.2) — 6KB
• 0001410578-25-001736.txt ( ) — 3278KB
• tmb-20230630.xsd (EX-101.SCH) — 25KB
• tmb-20230630_cal.xml (EX-101.CAL) — 19KB
• tmb-20230630_def.xml (EX-101.DEF) — 83KB
• tmb-20230630_lab.xml (EX-101.LAB) — 185KB
• tmb-20230630_pre.xml (EX-101.PRE) — 149KB
• tmb-20230630x10q_htm.xml (XML) — 427KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited) F-1

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 3

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 7

Controls and Procedures

Item 4. Controls and Procedures 7

– OTHER INFORMATION

PART II – OTHER INFORMATION 9

Legal Proceedings

Item 1. Legal Proceedings 9

Risk Factors

Item 1A. Risk Factors 12

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12

Defaults upon Senior Securities

Item 3. Defaults upon Senior Securities 12

Mine Safety Disclosure

Item 4. Mine Safety Disclosure 12

Other Information

Item 5. Other Information 12

Exhibits

Item 6. Exhibits 13 2 Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Except for historical information, this report contains "forward-looking information" within the meaning of the Private Securities Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended. 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 can be identified by the use of forward-looking terminology such as "may," "will," "anticipates," "intends," "expects," "projects," "estimates," "believes," "seeks," "could," "should," the negative thereof or comparable terminology. 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 the section "Management's Discussion and Analysis of Financial Condition and Results of Operations". 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 taking place after the date of this document, except as required by law.

–FINANCIAL INFORMATION

PART I –FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS Unaudited Condensed Consolidated Balance Sheets F-2 Unaudited Condensed Consolidated Statements of Operations F-3 Unaudited Condensed Consolidated Statements of Cash Flows F-4 Unaudited Condensed Consolidated Statement of Changes in Stockholders' Deficit F-5 Notes to Unaudited Condensed Consolidated Financial Statements F-6 F-1 Table of Contents SCORES HOLDING COMPANY, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2023 2022 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 52,168 $ 7,600 Trade receivables, net of allowance of $ 0 and $ 0 , respectively 28,000 12,499 Prepaid expenses — 38,087 Total Current Assets 80,168 58,186 TOTAL ASSETS $ 80,168 $ 58,186 LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 165,350 $ 196,481 Related party payable 90,000 67,500 Total Current Liabilities 255,350 263,981 Contract Liabilities 427,500 447,500 TOTAL LIABILITIES 682,850 711,481 Commitments and Contingencies (Note 7) — — STOCKHOLDERS' DEFICIT Preferred stock, $ .0001 par value, 10,000,000 shares authorized, -0- share issued and outstanding — — Common stock, $ .001 par value; 500,000,000 shares authorized, 165,186,144 shares issued and 165,186,144 shares outstanding, respectively 165,186 165,186 Additional paid-in capital 6,080,617 6,058,117 Accumulated deficit ( 6,848,485 ) ( 6,876,598 ) Total Stockholders' Deficit ( 602,682 ) ( 653,295 ) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 80,168 $ 58,186 See notes to the unaudited condensed consolidated financial statements. F-2 Table of Contents SCORES HOLDING COMPANY, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 REVENUES Royalty Revenue $ 1

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