SCORES HOLDING CO INC - Annual Report: 2013 (Form 10-K)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For fiscal year ended: December 31, 2013

OR

Commission file number:  000 ─16665

Registrant’s telephone number, including area code: (212) 246-9090

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ¨   No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes  ¨   No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 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  x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an 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.   

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

On June 30, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, 76,285,894 shares of its common stock, $0.001 par value per share (its only class of voting or non-voting common equity) were held by non-affiliates of the registrant. The market value of those shares was $2,288,577, based on the last sale price of $0.03 per share of the common stock on that date. Shares of common stock held by each officer and director and by each shareowner affiliated with a director have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of officer or affiliate status is not necessarily a conclusive determination for other purposes.

As of March 24, 2014, there were 165,186,124 shares of the registrant's common stock, par value $0.001, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

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 sections “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business”. 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.

PART I

Introduction: When we use the terms “Scores,” the “Company,” “we,” “us” and “our,” we mean Scores Holding Company, Inc. and all entities owned by us, except where it is clear that the term means only the parent company.

ITEM 1. BUSINESS.

Overview

Scores Holding Company, Inc. was incorporated in Utah on September 21, 1981 under the name Adonis Energy, Inc. The Company adopted its current name in July 2002. Since 2003, we have been in the business of licensing the “Scores” trademarks and other intellectual property to gentlemen’s nightclubs with adult entertainment in the United States. These clubs feature topless female entertainers together with opportunities for watching sporting events and corporate and private parties. There are six such clubs currently operating under the Scores name, in New York City, Baltimore, Chicago, Tampa, Atlantic City and New Orleans. We also have a licensing agreement in place for a club in Detroit (not currently operating).

Our trademarks and copyrights surrounding the Scores trade name are critical to the success and potential growth of our business. On December 9, 2013, the Company entered into a license agreement with its subsidiary, Scores Licensing Corp. (“SLC”), granting SLC the exclusive right to use certain trademarks, including the “Scores” stylized trademark, in connection with certain goods and services. The grant of license also includes the right to issue sublicenses to third parties, subject to the approval of the Company. Pursuant to the agreement, SLC shall pay to the Company a royalty, as determined by the Company, such as a percentage of net revenue or a flat fee, received in connection with the provision of services and/or sale of goods using the trademarks. SLC may also pay a percentage, as determined by the Company, of all royalties received by SLC under any sublicense agreements. SLC and any sublicensees are to adhere to quality standards as set by the Company, and the Company has the right to inspect all facilities and approve all promotional and marketing materials as well as any related packaging. The agreement has a one-year term with automatic one-year renewals, subject to either party’s election to terminate the agreement at least thirty days prior to such renewal. The Company also has the right to terminate the agreement, with immediate effect, upon the occurrence of certain events. The license is subject to any pre-existing license agreements as of the date of the agreement.

History and Development of our Business

On March 31, 2003, pursuant to the Amended and Restated Master License Agreement (the “MLA”) by and between us and our former affiliate, Entertainment Management Services, Inc. ("EMS"), an entity owned by two of our former directors and employees, we granted EMS an exclusive, worldwide renewable 20 year license in our property to sublicense the Scores trade name to nightclubs (the “Licensing Rights”). Under the MLA, EMS was required to pay us 100% of the royalties EMS received from the formerly affiliated clubs (defined below) and 50% of the royalties received from non-affiliated clubs (the “Royalty Rights”). These clubs had license agreements with EMS pursuant to which they typically paid EMS approximately 4.99% of their gross revenues from operations, including the sale of merchandise. We depended on these royalties to operate our business and as our principal source of revenue.

On January 27, 2009 (as further discussed below), we terminated the MLA with EMS and EMS transferred to us all of the Licensing Rights and Royalty Rights. Since termination of the MLA, our property is licensed directly by us to the three remaining clubs that previously had been sublicensing our property from EMS, and, thus, as of January 27, 2009, we are receiving 100% of the royalty payments made by these clubs rather than the 50% we were entitled to under the MLA.

Until January 27, 2009, we were under common control with two previously existing nightclubs in New York, New York (“Scores East” and “Scores West”) which were owned, respectively, by 333 East 60th Street, Inc. (“333”), and Go West Entertainment, Inc. (“Go West”). EMS is also owned by 333. Through EMS, we had sublicense agreements with each of Scores East and Scores West pursuant to which they were entitled to use the Scores intellectual property. Throughout this report, we refer to Scores East and Scores West as our “formerly affiliated clubs.” All other clubs with the exception of our newly opened club in New York, Scores New York (see discussion below), are referred to as non-affiliated clubs or as licensees (or sublicensees, as applicable), a term that may include the formerly affiliated clubs when the context requires.

Mr. Gans is the majority owner of I.M. Operating LLC (“IMO”).  IMO has a licensing agreement with us and has commenced operations in New York, New York under the club name Scores New York. (Throughout this report, we refer to Scores New York as our “affiliated club”).

As further discussed below, January 27, 2009, Mitchell’s East LLC, a New York limited liability company wholly owned by Robert M. Gans, acquired a majority interest in our outstanding capital stock.  

Change in our Ownership

On January 27, 2009, pursuant to a stock purchase agreement (the “SPA”), Mitchell’s East LLC (“Buyer”), purchased an aggregate of 88,900,230 shares (the “Owned Shares”) of our common stock beneficially owned by Richard Goldring and Elliot Osher (collectively the “Share Sellers”), as well as any rights Harvey Osher (the Share Sellers and Harvey Osher, together, the “Sellers”) may have in 13,886,059 shares of our common stock (the “Decedent Owned Shares”) currently held of record by the estate of William Osher, deceased, and any rights the Sellers may have in an additional 2,400,001 shares of our common stock (the “Expectancy Shares”).  Under the terms of the SPA, Harvey Osher is to deliver to the Buyer the Decedent Owned Shares that he may receive and the Sellers are to deliver to the Buyer any shares of the Company underlying the Expectancy Shares that any such Seller may receive.  Additionally, pursuant to the SPA, each of the Sellers granted to Buyer an irrevocable proxy enabling Buyer to act as his proxy with respect to any shares underlying the Decedent Owned Shares and the Expectancy Shares, as applicable.

The Owned Shares represent approximately fifty four percent (54%) of our outstanding capital stock and the Owned Shares together with the Decedent Owned Shares represent approximately sixty two percent (62%) of our outstanding capital stock.

Changes in our Management

On August 6, 2010, we appointed Robert M. Gans as our President and Chief Executive Officer and as a member of our Board of Directors. 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. Mr. Rosenbluth is also a director.

Nightclubs Currently Licensing our Scores Brand

Pursuant to the Assignment Agreement between us and EMS dated January 27, 2009, payments to EMS under existing licenses with non-affiliated clubs were assigned to us. Since this Assignment Agreement, we have retained 100% of the royalty payments from each of these clubs.

In 2003, EMS licensed the use of the "Scores Chicago" name to Stone Park Entertainment, Inc. for its club in Chicago, Illinois. Royalties payable to the Company under this license are the greater of $2,500 per week or 4.99% of the Chicago club’s gross revenues (less $25,000 per week) earned at that location. The Chicago club accounted for 20% and 18% of our total revenues during 2013 and 2012, respectively.

In 2004, EMS licensed the use of "Scores Baltimore" to Club 2000 Eastern Avenue, Inc. for its nightclub in Baltimore, Maryland. Royalties payable to the Company under this license are the greater of $1,000 per week or 4.99% of gross revenues. The Baltimore club accounted for 19% and 20% of our total revenues in 2013 and 2012, respectively.

In April 2007, EMS licensed the use of the Scores brand name to Silver Bourbon, Inc. for a night club in New Orleans, Louisiana “Score New Orleans”. Royalties payable under this license are capped at the greater of $4,000 per month or 4.99% of gross revenues. The New Orleans club accounted for 16% and 17% of our total revenues during each of 2013 and 2012, respectively.

On January 27, 2009, we entered into a licensing agreement with IMO for the use of the Scores brand name “Scores New York.” IMO is owned in the majority by Robert M. Gans who is also our majority shareholder. The address where IMO’s new club is located is the same address as that of the former Scores West nightclub, 533-535 West 27th Street, New York, NY (the “West 27 ^th Street Building”). Royalties payable to us under this license agreement have been set at 3% of gross revenues of Scores New York. Scores New York commenced operations in May 2009 and has accounted for 21% of our total revenue during 2013 and 29% of our total royalty revenue during 2012. The West 27th Street Building is owned by Westside Realty of New York (“WSR”). Robert M. Gans is the majority owner of WSR.

On September 30, 2010, we entered into a licensing agreement with Tampa Food & Entertainment, Inc.  Upon signing the contract, we received a non-refundable fee.  For the first twelve months we received a flat fee of $6,000 per month with an advance payment made at the signing of the contract.  Following that initial 12-month period, royalties payable to us under this license are capped at the greater of $6,000 per month or 4.99% of net revenues, and beginning July 1, 2012, the greater of $10,000 or 4.99% of the net revenues. The Company subsequently entered into an Addendum to this agreement providing that until such time as 4.99% of net revenues for any month are equal to or greater than $8,000, the fee shall be $10,000 per month. The Tampa club accounted for 16% of our total revenue during 2013 and 14% of our total revenue during 2012.

On December 26, 2012, we entered into a licensing agreement with Norm A Properties LLC for the use of certain Scores trademarks in Michigan. For the first five years of the agreement, we will receive a flat fee of $10,000 per month but will be required to designate a portion of that fee for advertising Scores Detroit. The Detroit club was not operating as of December 31, 2013.

Pursuant to an oral arrangement, in September 2013 we granted an exclusive, non-transferable license for the use of the “Scores Atlantic City” name to Star Light Events LLC (“Star Light”) for its gentlemen’s club in Atlantic City, New Jersey. Royalties under this license are payable at the rate of $10,000 per month, commencing in April 2014, and the license is for a term of five years, with five successive five year renewal terms. This oral arrangement was memorialized in a written license agreement between SLC and Star Light effective December 9, 2013. Pursuant to the written agreement, SLC also granted Star Light a non-exclusive, non-transferable license to sell certain licensed products bearing our trademarks. Starlight will purchase for the licensed products from us or our affiliates at our cost plus 25%. Robert M. Gans, our President, Chief Executive Officer and a director, is the majority owner of Star Light Events LLC.

Scoreslive.com

On January 24, 2006, we entered into a licensing agreement with AYA International, Inc. (“AYA”) granting AYA the right to use our trademarks in connection with its online video chat website, “Scoreslive.com.” EMS was not a party to this license agreement. Our agreement with AYA provides for royalty payments to be made directly to us at the rate of 4.99% of weekly gross revenues from all revenue sources within the AYA website. The license continues for as long as the website is operational. Scoreslive.com piloted in January 2007. The Company began accruing royalties under the Scoreslive.com license in the second quarter of 2012. The Scoreslive.com license accounted for 7% and 1% of our total revenues in 2013 and 2012, respectively. On December 21, 2009, AYA transferred all of its rights in Scoreslive.com and in its licensing agreement with us to Swan Media Group, Inc. (“SMG”), a newly formed New York corporation whose majority owner is Robert M. Gans.

Burhill LLC

On August 5, 2010, we entered into a license agreement (the “License Agreement”) with Burhill LLC (the “Licensee”) pursuant to which the Licensee 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.”  The Licensee had agreed to pay us a non-refundable royalty equal to five percent (5%) of the revenues of the Licensee earned in connection with the Licensee’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 the Licensee.  The Licensee is wholly owned by Robert M. Gans, our President and Chief Executive Officer and owner of Mitchell’s East LLC, our majority stockholder. This arrangement with Burhill LLC was terminated in July 2011. No royalties were ever paid pursuant to the License Agreement.

Competition

The adult nightclub entertainment business is highly competitive with respect to price, service, location and professionalism of its entertainment. Sublicensed clubs will compete with many locally-owned adult nightclubs. It is our belief, however, that only a few of these nightclubs have names that enjoy recognition and status equal to the Scores brand. For example, there are approximately twenty five (25) adult entertainment cabaret night clubs within the five boroughs of New York City; approximately six upscale located in the borough of Manhattan. We believe only three (Ricks Cabaret, Hustler and Penthouse) provide the most competitive adult entertainment experience to that of our brand and our New York affiliate. Other localities where our “Scores” brand is licensed have similar competitive environments. Penthouse is a related-party competitor due to the common control and ownership by our President and Chief Executive Officer.

We believe the combination of our name recognition and our distinctive entertainment environment allows our licensees to effectively compete within the industry, although we cannot assure anyone that this will prove to be the case. The success of our licensees depends upon their ability to retain quality entertainers, employees and to provide customer service to their customers. The inability to sustain quality entertainers, employees and customer service could have a material or adverse impact on the ability of our licensees to compete within the industry.

Competition among online adult entertainment providers is intense with respect to both content and subscribers’ capital. SMG’s competition for its Scoreslive.com internet site varies in both the type and quality of offerings, but consists primarily of other premium pay services. The availability of, and price pressure from, more explicit content on the Internet, frequently offered for free, also presents a significant competitive challenge to SMG. The Internet is highly competitive, and Scoreslive.com will compete for visitors, subscribers, shoppers and advertisers. We believe that the primary competitive factors affecting SMG’s Internet operations include brand recognition, the quality of content and products, pricing, ease of use and sales and marketing efforts. We believe that SMG and Scoreslive.com have the advantage of leveraging the power of our Scores brand across multiple media platforms.

Employees

At the present time, we have no employees.

Government Regulation

Our licensees are subject to a variety of governmental regulations depending upon the laws of the jurisdictions in which they operate. The most significant governmental regulations are described below.

Liquor Licenses

Our licensees are subject to state and local licensing regulation of the sale of alcoholic beverages. We expect licensees to obtain and maintain appropriate licenses allowing them to sell liquor, beer and wine. Obtaining a liquor license may be a time consuming procedure. In New York, for example, a licensee must make an application to the New York State Liquor Authority (the “NYSLA”) for a liquor license regarding its proposed nightclub. The NYSLA has the authority, in its discretion, to issue or deny such a license request. The NYSLA typically requires local community board approval in connection with such grants. Approval is usually granted or denied within 90-120 days from the initial application date, but can take longer in certain circumstances. Other jurisdictions have their own procedures.

We cannot offer any assurance that our licensees will obtain liquor licenses or that, once obtained, they will maintain their liquor licenses or be able to assign or transfer them if necessary. A license to sell alcoholic beverages in many cases requires annual renewal and may be revoked or suspended for cause, including any regulatory violation by the nightclub operating the license or its employees. Royalties for our business could decrease, if one or more of our licensees fails to maintain its liquor license.

"Cabaret" Licenses

Although not a requirement, our licensees typically request a cabaret license in connection with the operation of their nightclubs. Cabaret licenses are not a requirement in all states; however, some states mandate that such licenses be obtained prior to the operation of an adult nightclub. For example, one of our formerly affiliated licensees was granted a cabaret license for a nightclub by the City of New York’s Department of Consumer Affairs (the "DCA"). We believe our licensees comply with all regulatory laws regarding cabaret or an adult entertainment license; however, there is no assurance that any of their licenses will remain effective or that they could be assigned or transferred if necessary. If one or more of our licensees failed to maintain a required license, this could have a material or adverse effect on our cash flow and profitability.

Zoning Restrictions

Adult entertainment establishments must comply with local zoning restrictions which can be stringent. For example, zoning regulations in the City of New York mandate that an adult entertainment business operate in an area zoned as residential, or in areas that are commercially zoned, and devotes more than either 40% or more of its space available to customers or 10,000 square feet for adult entertainment activities. Although we expect our licensees to operate within "zoned" areas, we cannot make any assurances that local zoning regulations will remain constant, or that if changed, our licensees will be able to continue operations under our Scores brand name trademark. If zoning regulations were to restrict the operations of one or more of our licensees, this could have a material or adverse effect on our cash flow and profitability.

We hold trademark and/or service mark registrations for the following trademarks in the United States: SCORES (Stylized) trademark, SCORES NEW YORK (Stylized), and SCORES SHOWROOM and Design. Such registrations were granted on various dates and are subject to renewal on various dates. Some of these trademarks are also registered in other jurisdictions outside of the United States. Applications have also been filed in the United States for other trademarks and/or service marks incorporating the SCORES word trademark, as well as others. It is too early to know whether registrations will issue for these pending applications.

Our trademarks and service marks provide significant value to us and are an important factor in our business. We believe that our trademarks and service marks do not infringe the intellectual property rights of any third parties.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

As of July 1, 2008, WSR, the owner of the West 27th Street Building, became the new lessor of our 700 square feet office occupancy at that location. Since April 1, 2009, the monthly rent, which includes overhead cost, has been $2,500. Mr. Gans, the Company’s President, Chief Executive Officer, and majority shareholder, is the majority owner of WSR.

ITEM 3. LEGAL PROCEEDINGS.

On June 14, 2013, Elizabeth Shiflett, a former cocktail waitress, filed a civil lawsuit against us in the S.D.N.Y. alleging violations of Title VII of the Civil Rights Act of 1964 (“Title VII”), as amended, the New York State Human Rights Law (“NYSHRL”) and the New York City Human Rights Law (“NYCHRL”) based upon allegations of sexual discrimination, creating a hostile work environment based upon plaintiff’s sex and race and unlawful retaliation against plaintiff. The lawsuit further alleges that at all material times we were the employer of the plaintiff. The lawsuit had been preceded by a Determination of the U.S. Equal Employment Opportunity Commission (the “EEOC”) on January 25, 2013 that there was reasonable cause to believe that we had violated Title VII as a result of the complained-of conduct. The lawsuit seeks a declaratory judgment that the practices complained of violated Title VII, the NYSHRL and the NYCHRL, an injunction enjoining us from engaging in future unlawful acts of discrimination, harassment and retaliation, unspecified compensatory damages for plaintiff’s alleged loss of past and future earnings, emotional distress, humiliation and loss of reputation, punitive damages as a result of our alleged disregard of plaintiff’s protected civil rights, and attorneys’ fees and costs. We dispute that we were an employer of the plaintiff and categorically deny all allegations of sexual discrimination, sexual and racial harassment and retaliation. In November 2013, we filed a motion for summary judgment seeking dismissal of the case. We will vigorously defend ourselves in this litigation and do not expect that the outcome will be material.

On March 14, 2013, Miki Yamada, a former bartender at the Scores New York nightclub located at 536 West 28th Street, New York, NY filed charges against us and IM Operating LLC (“IMO”) with the EEOC claiming violations of Title VII based upon alleged sexual harassment, discrimination based on gender and unlawful retaliation. Ms. Yamada also delivered a draft civil complaint to us containing similar allegations. Although we disputed the issues of liability and damages asserted by Ms. Yamada, we and the other respondents settled these matters for a payment of $90,000 (of which we paid $0) to Ms. Yamada pursuant to a settlement and release agreement dated April 30, 2013. These matters were settled out of court.

On June 14, 2011, Christina Maldonado, a former front door receptionist/coat checker at Scores New York, located in New York NY filed a civil lawsuit in New York State Supreme Court against us and IMO alleging violations of Title VII of the Civil Rights Act, New York State Human Rights Law, New York Executive Law, New York City Human Rights Law and the New York City Administrative Code, based on allegations of sexual discrimination and sexual harassment. The lawsuit further alleges that both we and IMO were her employers. The lawsuit seeks unspecified damages for alleged loss of past and future earnings and emotional distress and humiliation. We dispute that that we were an employer of the plaintiff and categorically deny all allegations of sexual discrimination and sexual harassment. We responded to the complaint and later filed an amended complaint and asserted a cross claim against IMO. We are vigorously defending ourselves in this litigation and do not expect that the outcome will be material.

In mid-March 2010, we were named by Nichole Hughes in a complaint filed with the SCNY. Ms. Hughes sued 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 pre-answer motion to dismiss the complaint, which was denied on December 17, 2010. We then filed an answer and affirmative defenses and a third party complaint against IMO, owner and operator of the club where Ms. Hughes was employed. Plaintiff’s counsel was granted leave by the court to withdraw from representation in January 2013. Plaintiff failed to appoint new counsel or further participate in the case and the case was dismissed on May 20, 2013.

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 lawsuit 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. 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 was lifted. We subsequently filed an amended response asserting cross-claims for judgment against both Go West and our former affiliate, Entertainment Management Services, Inc. ("EMS"), an entity owned by two of our former directors and employees. After engaging in discovery and other pre-trial activities the two sides agreed to a confidential settlement on February 22, 2013 and the case has been dismissed. The settlement does not have a material outcome on us.

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 4.MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information.

Our common stock has been quoted on OTC Pink, a marketplace under the OTC Markets Group (formerly known as Pink OTC Markets and Pink Sheets) under the symbol “SCRH” since 2004. The following table sets forth, for the fiscal quarters indicated, the high and low closing bid prices per share of our common stock, as reported by Nasdaq on its website, www.nasdaq.com. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

Holders

As of March 24, 2014, there were 579 record holders of our common stock.

Dividends

We have never declared any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.

Recent Sales of Unregistered Securities

None.

Securities Authorized For Issuance under Equity Compensation Plans

On August 6, 2010, our Board of Directors adopted the 2010 Equity Incentive Plan (the “2010 Plan”), subject to the approval of our shareholders within twelve months of adoption. Shareholders had not adopted the 2010 Plan by August 6, 2011 and, accordingly, the 2010 Plan terminated.  The 2010 Plan provides for the issuance of both non-statutory and incentive stock options and other awards to officers, directors, employees and consultants to acquire up to 20,000,000 shares of our common stock.  The following table sets forth information about our equity compensation plans as of December 31, 2013.

¹On October 22, 2002, we granted options to purchase shares of the Company’s common stock to the Company’s former executive officers in consideration for their employment with the Company. The options vested upon issuance on October 22, 2002 and expired on March 21, 2013. The table above reflects those shares that were authorized for issuance as of December 31, 2013.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations:

For the year ended December 31, 2013 (the “2013 period”) compared to the year ended December 31, 2012 (the “2012 period”).

Revenues:

Revenues increased to $731,563 for the 2013 period from $693,889 for the 2012 period. This increase was primarily due to the launching of the Scoreslive.com website, which commenced accruing royalties in the second quarter of 2012. Royalties for the Scoreslive.com website increased 436% to $50,417 in the 2013 period from $9,400 in the 2012 period. Our operations are dependent upon royalties from our New York affiliated club which, in 2013, represented 21% of our total revenue. We license our brand to innovative and experienced operators who help sustain our brand by providing quality service to customers. Revenues increased 21% to $147,186 in the 2013 period from $121,816 in the 2012 period for the Chicago club, revenues increased 2% to $141,120 in the 2013 period from $138,781 in the 2012 period for the Baltimore club, revenues increased 25% to $120,000 in the 2013 period from $96,000 in the 2012 period for the Tampa Club and remained the same at $120,000 for the 2013 period and the 2012 period for the New Orleans club. Revenues decreased 23% to $152,840 in the 2013 period from $197,892 in the 2012 period for the New York club. Since our licenses are mostly structured such that we receive a percentage of revenues from our licensees, the foregoing increase or decreases are a direct result of revenues at the licensee level.

We recognize revenues as they are earned, not as they are collected.

Operating Expenses:

Operating expenses for the 2013 period and the 2012 period were $528,133 and $670,719 respectively. These expenses were directly related to the maintenance of the corporate entity and regulatory filing of periodic reports under the Securities Exchange Act of 1934 (the “Exchange Act”). To comply with the requirements of Sarbanes Oxley, we expect these regulatory costs to increase in future years. Virtually all of the 21% decrease in operating expenses can be attributed to our business development, legal costs and other executive administrative costs that changed modestly during the 2013 period from the 2012 period, but are expected to increase in future periods due to the expansion of our brand into emerging markets.

Provision for Income Taxes:

The provision for state income taxes relates primarily to average assets and capital which were not impacted by net operating losses.

Net Income per share:

Our net income for the 2013 year end was $200,607 or $.001 per share versus a net income of $39,090 or $.000 per share for the 2012 year end. During the 2013 period, we increased our royalty revenue by $37,674. Our net income increased in 2013 by $161,517 due to the decrease in our operating costs, primarily due to the shift in business development and legal costs incurred. This material change from the 2013 period to the 2012 period is based on net income available to common shareholders divided by the weighted average of the common shares outstanding.

Liquidity and Capital Resources

At December 31, 2013, we had $4,522 in cash and cash equivalents compared to $59,139 in cash and cash equivalents at December 31, 2012.

On February 28, 2007, our then President, Chief Executive Officer, Director and majority stockholder, Richard Goldring resigned from each of his positions, and terminated his employment with us. Under the terms of his employment agreement dated March 31, 2003, we were obligated to pay Mr. Goldring a $1 million termination fee (the “Termination Fee”). Because of our lack of cash and other business related reasons, we did not pay Mr. Goldring the Termination Fee. On May 10, 2009 Mr. Goldring assigned his right, title and interest in and to the Termination Fee to Robert M. Gans. We do not expect Mr. Gans to require from us payment of the Termination Fee.

We have incurred losses since the inception of our business. Since our inception, we have been dependent on funding from private lenders and investors to conduct operations. As of December 31, 2013 we had an accumulated deficit of $(6,358,147). As of December 31, 2013, we had total current assets of $343,335 and total current liabilities of $473,306 or negative working capital of $(129,971). As of December 31, 2012, we had total current assets of $270,341 and total current liabilities of $572,520 or negative working capital of $(302,179). The decrease in the amount of negative working capital has been primarily attributable to the decrease in our related party payable.

We presently do not have any available credit, bank financing or other external sources of liquidity to fund our operations. We will need to obtain additional capital in order to meet our working needs and to continue to execute our business plan, build our operations and remain profitable. In order to obtain capital, we may need to sell additional shares of our common stock or debt securities, or borrow funds from private or institutional lenders. Because of recent problems in the credit markets, steep stock market declines, financial institution failures and government bail-outs, there can be no assurance that we will be successful in obtaining additional funding in amounts or on terms acceptable to us, if at all. If we are unable to raise additional funding as necessary, we may have to suspend our operations temporarily or cease operations entirely.

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 also 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. Our future liquidity and capital requirements will depend upon numerous factors, including the success of our adult entertainment trademark licensing business.

Off Balance Sheet Arrangements.

The Company has no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure on contingent assets and liabilities at the date of our financial at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies see note 2 to our consolidated financial statements.

Revenue Recognition

Revenues for the 2013 period and the 2012 period were derived predominately from royalties. We apply judgment to ensure that the criteria for recognizing revenues are consistently applied and achieved for all recognized sales transactions.

Accounting for Income Taxes

As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes. Professional judgment is required by management in estimating a provision for our deferred tax asset. Because the Company consistently incurred net losses in prior years, a valuation for the full deferred tax asset was recorded based on carry forwards of such net operating losses. This was due to the Company not demonstrating any consistent profitable operations. In the event that the actual results differ from these estimates or we adjust these estimates in future periods we may need to adjust such valuation recorded.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our audited consolidated financial statements as of, and for the years ended, December 31, 2013 and 2012 are included beginning immediately following the signature page to this report. See Item 15 for a list of the financial statements included herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A.  CONTROLS AND PROCEDURES.

(a) Management’s Report on Disclosure Controls and Procedures

Under the supervision and with the participation of our senior management, consisting of Robert M. Gans, our chief executive officer, and Howard Rosenbluth, our chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded, as of the Evaluation Date, that our disclosure controls and procedures were effective to ensure that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer and secretary, as appropriate, to allow timely decisions regarding required disclosure.

(b)  Management’s Annual Report on Internal Control over Financial Reporting.

Management of Scores Holding Company, Inc. is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). 

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. In evaluating the effectiveness of our internal control over financial reporting, management used the criteria set forth in the framework in Internal Control—Integrated Framework and the Internal Control over Financial Reporting – Guidance for Smaller Public Companies both issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this evaluation, management concluded that, as of December 31, 2013 our internal controls over financial reporting were effective, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

Our management, including our chief executive officer and our chief financial officer, do 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 system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on 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. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.

(c)  Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the last fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Executive Officers and Directors

The following table sets forth certain information, as of March 24, 2014, with respect to our directors and executive officers.

Directors serve until the next annual meeting of the stockholders, until their successors are elected or appointed and qualified, or until their prior resignation or removal. Officers serve until the next annual meeting of the Board of Directors, until their successors are elected or appointed and qualified, or until their prior resignation or removal.

The following is a brief account of the business experience during the past five years or more of our directors and executive officer.

Robert M. Gans. Mr. Gans became President, Chief Executive Officer and director on August 6, 2010. For the past forty three years Robert M. Gans has owned and operated companies in the building materials business, as well as gentlemen’s clubs, restaurants, and several commercial and residential real estate properties.  Mr. Gans has either been the President, Managing Member, or sole owner of all of the companies in which he has been involved, including The Executive Club LLC, a company operating in the Gentlemen’s Club industry. None of the companies was or is a public company.  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 gentlemen’s clubs.

Martin Gans. Martin Gans, who became a director on June 23, 2009, has been retired since 2002.  Prior to his retirement, Mr. Gans held managerial positions with The Nassau County Board of Elections, from 1994 to 2002, and with the Metropolitan New York hospitals, from 1990 to 1994.  Mr. Gans has a MBA in Health Care Administration from George Washington University and a Bachelor’s degree in Economics from Hunter College. Mr. Gans served in the United States Army where he reached the rank of SP4. 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.

Robert Gans and Martin Gans are brothers.

Howard Rosenbluth. Mr. Rosenbluth became our Treasurer, Chief Financial Officer and Secretary on August 6, 2010, and became a director on April 21, 2009. Over the past five years, Mr. Rosenbluth has been an executive officer overseeing the financial operations for Metropolitan Lumber Hardware and Building Supplies, Inc., and The Executive Club LLC, a company operating in the Gentlemen’s club industry.   Mr. Rosenbluth received an MBA in Finance in 1975 from the University of Connecticut and has owned a consulting firm, a manufacturing company and a restaurant and has worked in public accounting and consulting for more than 35 years. 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 gentlemen’s clubs.

Board of Directors

None of our directors receives any remuneration for acting as such. Directors may, however, be reimbursed for their out-of-pocket expenses, if any, for attendance at meetings of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees. No such committees have been established to date. Accordingly, we do not have an audit committee or an audit committee financial expert. Given the small size of the Company’s board of directors and the limited number of independent directors over the Company’s history, the board has determined that it is appropriate for the entire board of directors to act as its audit committee, which has resulted in the directors who are also executive officers serving on its audit committee. Similarly, we do not have a nominating committee or a committee performing similar functions. We have not implemented procedures by which our security holders may recommend board nominees to us, but expect to do so in the future.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial statements of beneficial ownership on Form 3, reports of changes in ownership on Form 4 and annual reports concerning their ownership on Form 5. Executive officers, directors and greater than 10% stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file.

Based solely on the Company’s review of copies of Forms 3 and 4 and amendments thereto received by it during 2013 and Forms 5 and amendments thereto received by the Company with respect to 2013 and any written representations from certain reporting persons that no Form 5 is required, none of our directors, executive officers, or greater than 10% stockholders failed to file a required report on Form 3, Form 4 or Form 5 during the fiscal year ended December 31, 2013.

Director Independence

We are not subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board of Directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “Independent Directors.”

Code of Ethics

Due to the scope of our current operations, as of December 31, 2013, we have not adopted a code of ethics for financial executives, which include our Chief Executive Officer, Chief Financial Officer or persons performing similar functions. Our decision not to adopt such a code of ethics results from our having only a limited number of officers and directors operating as management. We believe that as a result of the limited interaction which occurs having such a small management structure eliminates the current need for such a code. 

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended December 31, 2013 and 2012 to (i) all individuals that served as our chief executive officer and our chief financial officer or acted in similar capacities for us at any time during the fiscal years ended December 31, 2013 and 2012 and (ii) all individuals that served as executive officers of ours at any time during the fiscal year ended December 31, 2013 and 2012 that received annual compensation during such fiscal years in excess of $100,000 (collectively, the “named executive officers”).

Summary Compensation Table

We have not issued any stock options or maintained any stock option or other incentive plans other than our 2010 Plan, which was adopted by our board but never approved by our shareholders. (See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Securities Authorized for Issuance Under Equity Compensation Plans” above.) We have no other plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with, the resignation, retirement or other termination of a named executive officer, or a change in control of the Company or a change in a named executive officer’s responsibilities following a change in control.

Effective January 1, 2013, we entered into a management services agreement with Metropolitan Lumber, Hardware and Building Supplies, Inc., pursuant to which Metropolitan Lumber Hardware and Building Supplies, Inc. provides management and other services to us, including the services of Robert M. Gans and Howard Rosenbluth to act as executive officers of the Company. In consideration of the services, we pay Metropolitan Lumber Hardware and Building Supplies, Inc. a fee in the amount of $30,000 per year. The agreement may be terminated by either party upon ten days’ written notice.  Mr. Gans is the sole owner of Metropolitan Lumber Hardware and Building Supplies, Inc. The Company owed Metropolitan Lumber Hardware and Building Supplies, Inc. $30,000 and $0 in unpaid management services as of December 31, 2013 and December 31, 2012, respectively.

Outstanding Equity Awards at 2013 Fiscal Year-End

As of the year ended December 31, 2013, there were no unexercised options, stock that has not vested or equity incentive plan awards held by any of the Company’s named executive officers.

Compensation of Directors

None of our directors receives any compensation for serving as such, for serving on committees of the Board of Directors or for special assignments. During the fiscal years ended December 31, 2013 and 2012 there were no other arrangements between us and our directors that resulted in our making payments to any of our directors for any services provided to us by them as directors. The following table shows compensation earned by each of our non-officer directors for the year ended December 31, 2013.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information with respect to the beneficial ownership of our common stock known by us as of March 24, 2014 by

The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on such date and all shares of our common stock issuable to such holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by such person at said date which are exercisable within 60 days of such date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse. The addresses for our executive officers and directors are c/o Scores Holding Company, Inc., 533-535 West 27^th Street, New York, NY 10001.

Securities Authorized for Issuance under Equity Compensation Plans

On August 6, 2010, our Board of Directors adopted the 2010 Plan.  The 2010 Plan provided for the issuance of both non-statutory and incentive stock options and other awards to acquire up to 20,000,000 shares of our common stock. Having never been approved by our shareholders, the 2010 Plan terminated on August 6, 2011. We had not issued any shares and there are no outstanding grants under the 2010 Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

On January 24, 2006, the Company entered into a licensing agreement with AYA International, Inc. (“AYA”) granting AYA the right to use our trademarks in connection with its online video chat website, “Scoreslive.com.” The agreement with AYA provides for royalty payments to be made directly to the Company at the rate of 4.99% of weekly gross revenues from all revenue sources within the AYA website. On December 21, 2009, AYA transferred all of its rights in Scoreslive.com and in its licensing agreement with us to Swan Media Group, Inc., a newly formed New York corporation whose majority owner is Robert M. Gans, who is also the majority shareholder and chief executive officer of the Company. The Company is owed $95,899 and $12,800 in unpaid royalties and expenses as of December 31, 2013 and December 31, 2012, respectively.

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”.  Robert M. Gans is the majority owner of IMO and is also the Company’s majority shareholder.  IMO paid for various years of administrative costs related to accounting, business development, insurance and legal services for the Company, which a portion thereof in the amount of $6,275 and $144,115 remains a payable to this related party as of December 31, 2013 and December 31, 2012, respectively.  The Company also leases office space directly from Westside Realty of New York, Inc. (WSR), the owner of the West 27th Street Building.  The majority owner of WSR is Robert M. Gans.  Since April 1, 2009, the monthly rent has been $2,500 per month including overhead costs.  The Company owed WSR $107,500 and $77,500 in unpaid rents as of December 31, 2013 and December 31, 2012, respectively.

Effective January 1, 2013, the Company entered into a management services agreement with Metropolitan Lumber Hardware and Building Supplies, Inc., pursuant to which Metropolitan Lumber Hardware and Building Supplies, Inc. provides management and other services to the Company, including the services of Robert M. Gans and Howard Rosenbluth to act as executive officers of the Company. In consideration of the services, the Company pays Metropolitan Lumber Hardware and Building Supplies, Inc. a fee in the amount of $30,000 per year. The agreement may be terminated by either party upon ten days’ written notice. Mr. Gans is the sole owner of Metropolitan Lumber Hardware and Building Supplies, Inc. The Company owed Metropolitan Lumber Hardware and Building Supplies, Inc. $30,000 and $0 in unpaid management services as of December 31, 2013 and December 31, 2012, respectively

.

The total amounts due to the various related parties as of December 31, 2013 and 2012 was $143,775 and $221,615, respectively.

Pursuant to an oral arrangement, in September 2013 we granted an exclusive, non-transferable license for the use of the “Scores Atlantic City” name to Star Light Events LLC (“Star Light”) for its gentlemen’s club in Atlantic City, New Jersey. Royalties under this license are payable at the rate of $10,000 per month, commencing in April 2014, and the license is for a term of five years, with five successive five year renewal terms. This oral arrangement was memorialized in a written license agreement between SLC and Star Light effective December 9, 2013. Pursuant to the written agreement, we also granted Star Light a non-exclusive, non-transferable license to sell certain licensed products bearing our trademarks. Starlight will purchase the licensed products from us or our affiliates at our cost plus 25%. Robert M. Gans, our President, Chief Executive Officer and a director, is the majority owner of Star Light Events LLC.

Director Independence

Our Board of Directors has considered the independence of its directors in reference to the definition of “independent director” established by the Nasdaq Marketplace Rule 5605(a)(2). In doing so, the Board has reviewed all commercial and other relationships of each director in making its determination as to the independence of its directors. After such review, the Board has determined that none of our directors qualifies as independent under the requirements of the Nasdaq listing standards.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Audit Fees.

The aggregate fees billed to us by our principal accountant for services rendered during the fiscal years ended December 31, 2013 and 2012 are set forth in the table below:

Audit Committee’s Pre-Approval Practice.

Inasmuch as we do not have an audit committee, our Board of Directors performs the functions of an audit committee. Section 10A(i) of the Exchange Act prohibits our auditors from performing audit services for us as well as any services not considered to be “audit services” unless such services are pre-approved by the Board of Directors (in lieu of the audit committee) or unless the services meet certain de-minimis standards.

All audit services were approved by our Board of Directors.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

Financial Statement Schedules

The consolidated financial statements of Scores Holding Company, Inc. are listed on the Index to Financial Statements on this annual report on Form 10-K beginning on page F-1.

All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

Exhibits

The following Exhibits are being filed with this Annual Report on Form 10-K:

* Filed herewith.

**Indicates management contract or compensatory plan or arrangement.

*** This certification or information 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

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

PART IV – FINANCIAL INFORMATION

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Scores Holding Company, Inc. and subsidiary

We have audited the accompanying consolidated balance sheets of Scores Holding Company, Inc. and subsidiary as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years ended December 31, 2013 and 2012. 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 audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2013 and 2012, and the results of its operations and cash flows for each of the years ended December 31, 2013 and 2012 in conformity with generally accepted accounting principles in the United States.

The accompanying financial statements have been prepared assuming that Scores Holding Company, Inc. will continue as a going concern. As more fully described in Note 2, the Company has a working capital deficit as of December 31, 2013. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Liggett, Vogt & Webb, P.A.

Certified Public Accountants

New York, New York

March 24, 2014

SCORES HOLDING COMPANY and Subsidiaries

Years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

Note 1. Organization

Scores Holding Company, Inc. and subsidiary (the “Company”) is a Utah corporation, formed in September 1981 and located in New York, NY. Originally incorporated as Adonis Energy, Inc., the Company adopted its current name in July 2002. The Company is a licensing company that exploits the “SCORES” name and trademark for 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.

Note 2. Summary of Significant Accounting Principles

BASIS OF PRESENTATION - Going Concern

The Company has incurred cumulative losses totaling $(6,358,147) a working capital deficit of $(129,971) and a net income of $200,607 at December 31, 2013. 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.  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.

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.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Inter-company items and transactions have been eliminated in consolidation.

Cash and cash equivalents

The Company considers all highly liquid temporary cash investments, with a maturity of three months or less when purchased, to be cash equivalents. There are times when cash may exceed $250,000, the FDIC insured limit.

Fair Value of Financial Instruments

The carrying value of cash, trade receivables, prepaid expenses, other receivables, related party payable and accrued expenses, if applicable, approximate their fair values based on the short-term maturity of these instruments. The carrying amounts of debt were also estimated to approximate fair value.

The Company utilizes the methods of fair value measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

SCORES HOLDING COMPANY and Subsidiaries

Years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Trade receivables and reserves

Accounts deemed uncollectible are applied against the allowance for doubtful accounts. Allowance for doubtful accounts had a balance of $-0- and $-0- for the December 31, 2013 and 2012 periods. In reviewing any delinquent royalty or note receivable, the Company considers many factors in estimating its reserve, including historical data, experience, customer types, credit worthiness, financial distress and economic trends. From time to time, the Company may adjust its assumptions for anticipated changes in any of above or other factors expected to affect collectability.

Stock Based Compensation

The Company accounts for the plans under the recognition and measurement provisions of Accounting Standards Codification (ASC) Topic 718 Compensation – Stock Compensation. The standard requires entities to measure the cost of employee services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the employee is required to provide services for the award.

There were no stock options or warrants issued during the years ended December 31, 2013 and 2012, hence the Company has recorded no compensation expense. If the Company were to issue equity rights for compensation, then the Company would recognize compensation expense under Topic 718 over the requisite service period using the Black-Scholes model for equity rights granted.

Revenue recognition

The Company records revenues earned as royalties under its license agreements as they are earned over the term of the license agreements. The terms of the royalties earned under these license agreements vary from a flat monthly fee to a percentage of the revenues of the licensee on a monthly basis. If a license agreement is terminated then the remaining unearned balance of the deferred revenues are recorded as earned if applicable.

Revenues earned under its royalty agreements are recorded as they are earned.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10-25, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Company has a net operating loss carryforward of approximately $6,100,000, which expire in the years 2018 through 2034. The related deferred tax asset of approximately $2,690,000 has been offset by a valuation allowance. The Company’s net operating loss carryforwards may have been limited, pursuant to the Internal Revenue Code Section 382, as to the utilization of such net operating loss carryforwards due to changes in ownership of the Company over the years.

The reconciliation of the Company’s effective tax rate differs from the Federal income tax rate of 34% for the years ended December 31, 2013 and 2012, as a result of the following:

SCORES HOLDING COMPANY and Subsidiaries

Years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

Income per Share

Under ASC 260-10-45, “Earnings Per Share”, basic income (loss) per common share is computed by dividing the income (loss) applicable to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted income (loss) per common share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Accordingly, the weighted average number of common shares outstanding for the years ended December 31, 2013 and 2012, respectively, is the same for purposes of computing both basic and diluted net income per share for such years.

Accounting Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management 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 Company is charged a monthly fee for operating expenses and overhead as a result of the use of a shared facility and employees of an affiliate.

Concentration of Credit Risk

The Company earns predominately royalty revenues and to a lesser extent merchandise sales from 9 licensees.

With regards to 2013, concentrations of sales from 5 licensees range from 16% to 21%, which there are receivables from the 3 licensees ranging from 13% to 51% on these licensees for 2013. Included in these amounts for 2013 is 1 licensee considered a related party. Sales from this licensee are 21%.

With regards to 2012, concentrations of sales from 5 licensees range from 14% to 29%, which there are receivables from the 5 licensees ranging from 14% to 32% on these licensees for 2012. Included in these amounts for 2012 is 1 licensee considered a related party. Sales from this licensee are 29%. There are receivables from 1 related party licensee of 18%.

New Accounting Pronouncements

In July 2013, the FASB issued Accounting Standards Update “ASU” 2013-11 on “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”.  The amendments in this ASU are to improve the current U.S. GAAP because they are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist.  Current U.S. GAAP does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This Update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted.

All other new accounting pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have any impact once adopted. 

Note 3. Related-Party Transactions

Transactions with Common ownership affiliates

SCORES HOLDING COMPANY and Subsidiaries

Years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

On January 24, 2006, the Company entered into a licensing agreement with AYA International, Inc. (“AYA”) granting AYA the right to use our trademarks in connection with its online video chat website, “Scoreslive.com.” The agreement with AYA provides for royalty payments to be made directly to the Company at the rate of 4.99% of weekly gross revenues from all revenue sources within the AYA website. On December 21, 2009, AYA transferred all of its rights in Scoreslive.com and in its licensing agreement with us to Swan Media Group, Inc., a newly formed New York corporation whose majority owner is Robert M. Gans, who is also the majority shareholder and chief executive officer of the Company. The Company is owed $95,899 and $12,800 in unpaid royalties and expenses as of December 31, 2013 and December 31, 2012, respectively.

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”.  Robert M. Gans is the majority owner of IMO and is also the Company’s majority shareholder.  IMO paid for various years of administrative costs related to accounting, business development, insurance and legal services for the Company, which a portion thereof in the amount of $6,275 and $144,115 remains a payable to this related party as of December 31, 2013 and December 31, 2012, respectively.  The Company also leases office space directly from Westside Realty of New York, Inc. (WSR), the owner of the West 27th Street Building.  The majority owner of WSR is Robert M. Gans.  Since April 1, 2009, the monthly rent has been $2,500 per month including overhead costs.  The Company owed WSR $107,500 and $77,500 in unpaid rents as of December 31, 2013 and December 31, 2012, respectively.

Effective January 1, 2013, the Company entered into a management services agreement with Metropolitan Lumber Hardware and Building Supplies, Inc., pursuant to which Metropolitan Lumber Hardware and Building Supplies, Inc. provides management and other services to the Company, including the services of Robert M. Gans and Howard Rosenbluth to act as executive officers of the Company. In consideration of the services, the Company pays Metropolitan Lumber Hardware and Building Supplies, Inc. a fee in the amount of $30,000 per year. The agreement may be terminated by either party upon ten days’ written notice. Mr. Gans is the sole owner of Metropolitan Lumber Hardware and Building Supplies, Inc. The Company owed Metropolitan Lumber Hardware and Building Supplies, Inc. $30,000 and $0 in unpaid management services as of December 31, 2013 and December 31, 2012, respectively.

The total amounts due to the various related parties as of December 31, 2013 and 2012 was $143,775 and $221,615, respectively.

Pursuant to an oral arrangement, in September 2013 we granted an exclusive, non-transferable license for the use of the “Scores Atlantic City” name to Star Light Events LLC (“Star Light”) for its gentlemen’s club in Atlantic City, New Jersey. Royalties under this license are payable at the rate of $10,000 per month, commencing in April 2014, and the license is for a term of five years, with five successive five year renewal terms. This oral arrangement was memorialized in a written license agreement between SLC and Star Light effective December 9, 2013. Pursuant to the written agreement, we also granted Star Light a non-exclusive, non-transferable license to sell certain licensed products bearing our trademarks. Starlight will purchase the licensed products from us or our affiliates at our cost plus 25%. Robert M. Gans, our President, Chief Executive Officer and a director, is the majority owner of Star Light Events LLC.

On December 9, 2013, the Company entered into a license agreement with its subsidiary, SLC, granting SLC the exclusive right to use certain trademarks, including the “Scores” stylized trademark, in connection with certain goods and services.  The grant of license also includes the right to issue sublicenses to third parties, subject to the approval of the Company.  Pursuant to the agreement, SLC shall pay to the Company a royalty, as determined by the Company, such as a percentage of net revenue or a flat fee, received in connection with the provision of services and/or sale of goods using the trademarks.  SLC may also pay a percentage, as determined by the Company, of all royalties received by SLC under any sublicense agreements.  SLC and any sublicensees are to adhere to quality standards as set by the Company, and the Company has the right to inspect all facilities and approve all promotional and marketing  materials as well as any related packaging.  The agreement has a one-year term with automatic one-year renewals, subject to either party’s election to terminate the agreement at least thirty days prior to such renewal.  The Company also has the right to terminate the agreement, with immediate effect, upon the occurrence of certain events.  The license is subject to any pre-existing license agreements as of the date of the agreement.

Note 4. Intangible Assets

Trademark

In connection with the acquisition of Scores Licensing Company (“SLC”) as discussed above, the Company acquired the trademark to the name "SCORES". This trademark had a gross recorded value at December 31, 2008 of $878,318 which had been increased for the purchase from SLC for $250,000. This trademark has been registered in the United States, Canada, Japan, Mexico and the European Community. The trademark has been completely 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 was amortized over ten years due to the difficult New York legal environment for which the related showcase adult club is operating. As of December 31, 2011 the cost of the trademark has been fully amortized.

SCORES HOLDING COMPANY and Subsidiaries

Years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

The Company believes that the carrying amount of the “Scores” trademark exceeds its fair or net present value as of December 31, 2013 and 2012.

Note 5. Licensees

The Company has nine license agreements which were obtained between 2003 and 2013; Stone Park Entertainment Group, Inc. known as “Scores Chicago”, Club 2000 Eastern Avenue Inc. known as “Scores Baltimore”, Silver Bourbon, Inc., I.M Operating LLC known as “IMO”, Tampa Food and Entertainment Inc., Norm A Properties, LLC, Swan Media Group, Inc. (formerly AYA International, Inc.) and Starlight Events LLC known as “Scores Atlantic City” and SLC.

“IMO’s” members are our majority shareholder, Robert M. Gans, and Secretary and Director, Howard Rosenbluth hence making “IMO” a related party. The building occupied by IMO is owned by Westside Realty of New York Inc., of which the majority owner is Robert M. Gans. The club accounted for 21% and 29% of our royalty revenues during the year of 2013 and 2012, respectively. Mr. Gans is also the majority owner of Swan Media Group, Inc., which accounted for 7% and 1% of our royalty revenues during the year of 2013 and 2012. Mr. Gans is also the majority owner of Scores Atlantic City, royalties do not accrue until April 2014.

Note 6. Settlement/Note Receivables

On September 26, 2011, the Company, Richard Goldring and Elliot Osher (Goldring and Osher were formerly two of the Company’s principal shareholders) (collectively the “Defendants”) and Sari Diaz et al. (the “Plaintiffs”) entered into a Court approved Joint Stipulation of Settlement and Release (the “Settlement Agreement”) relating to a purported class action and collective action on behalf of all tipped employees filed by Plaintiffs, pursuant to which Defendants agreed to make a settlement payment of $450,000 to resolve and settle awards to Plaintiffs and related Plaintiffs’ attorneys’ fees. Additionally, the Defendants agreed to pay the employer portion of payroll taxes on approximately $300,000 in distributions, approximately $15,600.

In a settlement payment agreement among the Company, Goldring and Osher, the Company agreed to advance all of the Defendants’ obligations under the Settlement Agreement and to pay $64,500 of Goldring’s and Osher’s legal fees to their designated attorney. In consideration for the Company’s payment of these obligations, Goldring and Osher agreed, jointly and severally, to pay the Company $440,000 plus interest at the rate of 5% per annum on the unpaid balance of such amount, in 40 equal monthly payments of $11,965 per month. To secure his obligations under this agreement, Goldring agreed to assign to the Company a portion of his interests in a promissory note dated September 14, 2009 in the principal amount of $2,400,000 made by a third party to Goldring (the “Note”) and to grant the Company a security interest in the Note, which will remain in effect until his obligations under this settlement payment agreement are paid in full. As of December 31, 2013, the settlement receivable is $162,389

On December 29, 2011 the Company entered into a Promissory Note with Goldring for $30,000 plus interest at the rate of 5% per annum on the unpaid balance. To secure his obligations under this agreement, Goldring agreed to assign to the Company a portion of his interests in a promissory note dated September 14, 2009 in the principal amount of $2,400,000 made by a third party to Goldring (the “Note”) and to grant the Company a security interest in the Note, which will remain in effect until his obligations under this settlement payment agreement are paid in full. Three payments of $11,965 are due beginning March 2015. As of December 31, 2013, this promissory note balance is $33,148.

Note 7. Settlement/Note Payable

As discussed in Note 6 regarding the settlement receivable it should be noted that Mr. Gans (the Company’s Chief Executive Officer and majority stockholder) advanced $560,151 to settle the Sari Diaz et. al. litigation and fund the $30,000 loan to Mr. Goldring. As of December 31, 2013 $217,725 is outstanding.

Note 8. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of December 31, 2013 is comprised of professional fees of $36,000, legal fees of $58,244, filing fees of $14,651, marketing fees of $8,000 and miscellaneous accruals and payables of $13,565. Accounts payables and accrued expenses as of December 31, 2012 is comprised of $111,055 in settlement and legal fees, professional fees of $33,000 and miscellaneous accruals and payables of $13,649.

SCORES HOLDING COMPANY and Subsidiaries

Years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

Note 9. Stock Option

Stock option plan: The below options are unsubscribed and were granted to the Company’s former President, CEO, Director and Secretary in consideration with their employment with the Company. These options were granted by the Board for the optionee to purchase shares of the Company’s common stock. These stock options are not “incentive stock options” under Section 422 of the Internal Revenue Code of 1986. The granted options fully vested upon issuance on October 22, 2002 and expired on March 31, 2013.

Stock option activity for the two years ended December 31, 2013 is summarized as follows:

The intrinsic value of a stock option/SSAR is the amount by which the market value of the underlying stock exceeds the exercise price of the options/SSAR. The intrinsic value of the options/SSAR as of December 31, 2012 was $0.

Note 10. Commitments and Contingencies

The Company records $2,500 a month as rent, overhead, and services due to Metropolitan Lumber Hardware Building Supplies, Inc. for services rendered by the management of the Company. Mr. Gans is the sole owner of Metropolitian Lumber Hardware Building Supplies, Inc.

The Company currently leases office space from the Westside Realty of New York which is owned and operated by Robert Gans our majority shareholder, for $2,500 a month.

On June 14, 2011, Christina Maldonado, a former front door receptionist/coat checker at Scores New York, located in New York NY filed a civil lawsuit against the Company and IMO alleging violations of Title VII of the Civil Rights Act, New York State Human Rights Law, New York Executive Law, New York City Human Rights Law and the New York City Administrative Code, based on allegations of sexual discrimination and sexual harassment. The lawsuit further alleges that both the Company and IMO were her employers. The lawsuit seeks unspecified damages for alleged loss of past and future earnings and emotional distress and humiliation. The Company disputes that that it was an employer of the plaintiff and categorically denies all allegations of sexual discrimination and sexual harassment. The Company responded to the complaint and later filed an amended complaint and asserted a cross claim against IMO. The Company is vigorously defending itself in this litigation and does not expect that the outcome will be material.

In mid-March 2010, the Company was named by Nichole Hughes in a complaint filed with the SCNY. Ms. Hughes sued the Company for an unspecified amount of damages in connection with an alleged unauthorized use of her image in the Company’s advertising materials. On June 20, 2010, the Company filed a pre-answer motion to dismiss the complaint, which was denied on December 17, 2010. The Company then filed an answer and affirmative defenses and a third party complaint against IMO, owner and operator of the club where Ms. Hughes was employed. Plaintiff’s counsel was granted leave by the court to withdraw from representation in January 2013. Plaintiff failed to appoint new counsel or further participate in the case and the case was dismissed on May 20, 2013.

SCORES HOLDING COMPANY and Subsidiaries

Years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

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On March 14, 2013, Miki Yamada, a former bartender at the Scores New York nightclub located at 536 West 28th Street, New York, NY filed charges against the Company and IMO with the EEOC claiming violations of Title VII based upon alleged sexual harassment, discrimination based on gender and unlawful retaliation. Ms. Yamada also delivered a draft civil complaint to the Company containing similar allegations. Although the Company disputed the issues of liability and damages asserted by Ms. Yamada, the Company and the other respondents settled these matters for a payment of $90,000 (of which the Company paid $0) to Ms. Yamada pursuant to a settlement and release agreement dated April 30, 2013. These matters were settled out of court.

On June 14, 2013, Elizabeth Shiflett, a former cocktail waitress, filed a civil lawsuit against the Company in the S.D.N.Y. alleging violations of Title VII of the Civil Rights Act of 1964 (“Title VII”), as amended, the New York State Human Rights Law (“NYSHRL”) and the New York City Human Rights Law (“NYCHRL”) based upon allegations of sexual discrimination, creating a hostile work environment based upon plaintiff’s sex and race and unlawful retaliation against plaintiff. The lawsuit further alleges that at all material times the Company was the employer of the plaintiff. The lawsuit had been preceded by a Determination of the U.S. Equal Employment Opportunity Commission (the “EEOC”) on January 25, 2013 that there was reasonable cause to believe that the Company had violated Title VII as a result of the complained-of conduct. The lawsuit seeks a declaratory judgment that the practices complained of violated Title VII, the NYSHRL and the NYCHRL, an injunction enjoining the Company from engaging in future unlawful acts of discrimination, harassment and retaliation, unspecified compensatory damages for plaintiff’s alleged loss of past and future earnings, emotional distress, humiliation and loss of reputation, punitive damages as a result of the Company’s alleged disregard of plaintiff’s protected civil rights, and attorneys’ fees and costs. The Company disputes that it was an employer of the plaintiff and categorically denies all allegations of sexual discrimination, sexual and racial harassment and retaliation. The Company will vigorously defend itself in this litigation and does not expect that the outcome will be material.

There are no other material legal proceedings pending to which the Company or any of its property is subject, nor to our knowledge are any such proceedings threatened.

Note 11. SUBSEQUENT EVENTS

Management evaluated subsequent events through the date of this filing and determined that no additional events have occurred that would require adjustment to or disclosure in the financial statements.