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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-QSB/A
Quarterly report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For Quarter Ended: September 30, 1997
Commission File No. 0-23396
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
(Exact name of small business issuer as specified in its charter)
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New York 11-3182335
(State of Incorporation) (IRS Employer Identification No.)
350 Fifth Avenue
New York, New York
10118
(Address of principal executive office)
(Zip code)
(212) 564-2224
Issuer's telephone number, including area code
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Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
As of November 10, 1997, there were issued and outstanding 1,385,000
shares of Common Stock, $.001 par value per share, 960,000 shares of Class A
Common Stock, $.001 par value per share, and 1,090,909 shares of Series A
Convertible Participating Preferred Stock, $.001 par value per share.
Transitional Small Business Disclosure Format
Yes ___ No _X_
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EXPLANATORY NOTE
This Amendment No. 1 to Form 10-QSB for the quarter ended
September 30, 1997, is being amended and restated in its entirety to
reflect the correction of certain immaterial financial information
included in footnote 3 to the financial statements, footnote 12 to the
financial statements, and the amount of net income generated from New
York Skyride of $325,000 (from $92,000 previously reported herein) for
the fiscal quarter ended September 30, 1996, and other immaterial
changes.
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed consolidated financial statements
(unaudited)
Balance sheet as of September 30, 1997 3
Statements of operations for the three months
ended September 30, 1997 and 1996 4
Statements of cash flows for the three months
ended September 30, 1997 and 1996 5
Notes to financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 16
SIGNATURES 17
INDEX TO EXHIBITS 18
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2
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
September 30, 1997
ASSETS
Current Assets
Cash $ 397,000
Inventory (Note 5) 140,000
Prepaid expenses and
other current assets 409,000
------------
Total Current Assets 946,000
Property, equipment and leasehold
improvements - net (Note 4) 12,216,000
Security deposits (Note 6) 972,000
Deferred project and leasing
costs (Note 4) 1,167,000
Due from officer (Note 11) 279,000
Deferred financing costs -- net 170,000
Payments to Contractor 400,000
Other assets -- net 34,000
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Total Assets $ 16,184,000
============
LIABILITIES
Current Liabilities
Capital Lease Obligations - current portion (Note 6) 747,000
Accounts payable 2,042,000
Accrued expenses and other current liabilities 1,391,000
Due to Contractors 1,100,000
Deferred sponsorship income (Note 9) 47,000
Note Payable (Note 7) 500,000
------------
Total Current Liabilities 5,827,000
Capital Lease Obligations - long term portion
(Notes 6 and 7) 1,833,000
Note Payable (Note 7) 3,849,000
Deferred rent payable (Note 8) 1,152,000
------------
Total Liabilities 12,661,000
Commitments and Contingencies (Note 4)
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share 1,000
Common stock, par value $.001 per share 2,000
Class A common stock, par value $.001 per share 1,000
Treasury Stock (601,000)
Additional paid in capital 9,989,000
Accumulated deficit (5,869,000)
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Total Stockholders' equity 3,523,000
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Total Liabilities and Stockholders' Equity $ 16,184,000
============
The accompanying notes are an integral part of these financial statements.
3
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED
September 30
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1997 1996
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Revenues:
Attraction sales $ 2,722,000 $ 1,574,000
Concession sales 326,000 377,000
Sponsorship income 88,000 86,000
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Total Revenues 3,136,000 2,037,000
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Operating Expenses:
Cost of merchandise sold 125,000 133,000
Selling, general and administrative 2,672,000 1,318,000
Depreciation and amortization 444,000 136,000
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Total Operating Expenses 3,241,000 1,587,000
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Income/(loss) from operations (105,000) 450,000
Net interest (expense) (Notes 6 and 7) (234,000) (2,000)
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Income/(loss) before provision for income taxes (339,000) 448,000
Income tax expense (benefit) (Note 3) 0 144,000
Net deferred tax expense (Note 3) 0 (595,000)
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Net income/(loss) $ (339,000) $ 899,000
=========== ===========
Net income/(loss) per share
of common stock $ (.20) $ .31
=========== ===========
Weighted average number of shares
(excludes 670,000 escrow shares) 1,734,000 2,876,000
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The accompanying notes are an integral part of these financial statements.
4
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
September 30
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1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (339,000) $ 899,000
Adjustments to reconcile net income/(loss)
to net cash provided by operating activities:
Depreciation and amortization expense 444,000 136,000
Deferred income taxes 0 (466,000)
Write off of trademark costs 37,000 0
Changes in operating assets and liabilities:
(Increase) decrease in inventory 28,000 (52,000)
(Increase) in prepaid and other assets (166,000) (339,000)
(Decrease) in deferred sponsorship income (28,000) (26,000)
Increase in accounts payable, accrued expenses and
deferred rent payable 272,000 1,128,000
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Net cash provided by operating activities 248,000 1,280,000
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Cash flows from investing activities:
(Increase) in security deposits (20,000) (54,000)
Acquisition of property, equipment and
leasehold improvements (451,000) (313,000)
Advances to officer/stockholder 0 (454,000)
(Increase)Decrease in certificate of deposit 209,000 (200,000)
Repayments from officer/stockholder 0 341,000
(Increase) in deferred project and leasing costs (545,000) (1,246,000)
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Net cash (used in) investing activities (807,000) (1,926,000)
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Cash flows from financing activities:
Repayment of notes payable (163,000) (59,000)
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Net cash (used in) financing activities (163,000) (59,000)
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Net (decrease) in cash (722,000) (705,000)
Cash at beginning of period 1,119,000 2,198,000
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Cash at end of period $ 397,000 $ 1,493,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest ................................ $ 78,000 $ 21,000
Taxes ................................... $ 12,000 $ 17,000
Acquisition of Equipment Under Capital Lease ............ $ 20,000 0
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5
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB and rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the full
fiscal year ended June 30, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended June 30, 1997.
2. Per Share Data
Net income/(loss) per share for each period is calculated by dividing net
income/(loss) for the period by the weighted average number of common shares
outstanding for each period, excluding shares held in escrow. The weighted
average number of common shares was calculated for the quarter ended September
30, 1996 including the convertible participating preferred stock as common stock
equivalents. For the quarter ended September 30, 1997, the 1,090,909 shares of
Series A Convertible Participating Preferred Stock were not included in the
calculation of the net (loss) per share as such shares were considered to be
anti-dilutive.
3. Income Taxes
The principal components of Deferred Tax Assets, Liabilities, and the
Valuation Allowance are as follows:
September 30
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1997 1996
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Deferred Tax Assets:
Capitalization of start-up costs $ 390,000 $ 566,000
Net operating loss carryforwards 3,026,000 599,000
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3,416,000 1,165,000
Valuation allowance (2,797,000) 0
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619,000 1,165,000
Deferred Tax Liabilities:
Depreciation differences 619,000 359,000
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Net Deferred Tax Asset $ 0 $ 806,000
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6
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
The Company has provided a valuation allowance of $2,797,000 against its
deferred tax asset due to uncertainty of the Company being able to use this
benefit to offset future taxable income. The Company will periodically evaluate
the likelihood of realizing such asset and will adjust such amount accordingly.
4. Property, equipment and leasehold improvements
(A) Property and equipment, including assets under capital leases are
recorded at cost and are depreciated on the straight-line method over the
estimated useful lives of the assets from three to twelve years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the asset. Property, equipment
and leasehold improvements at cost are summarized as follows:
Equipment and fixtures $ 1,971,000
Simulation equipment 2,736,000
Simulation film 1,069,000
Leasehold improvements 8,580,000
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14,356,000
Less: Accumulated depreciation
and amortization (2,140,000)
-----------
Total $12,216,000
===========
(B) The Company has incurred leasing costs in connection with the
development of its Times Square and Chicago sites. It is expected that
additional costs aggregating approximately $5,500,000 will be required to
complete each of the Chicago and Australia sites. See "--Management's Discussion
and Analysis of Financial Condition and Results of Operations." Upon
commencement of operations, such costs will be amortized and depreciated over
their estimated useful lives.
5. Inventory
Inventory consists of clothing, souvenirs and food sold at the Company's
existing sites and is valued at the lower of cost (first-in, first-out) or
market.
6. Notes Payable
(A) During November 1996 the Company entered into a loan agreement with an
institutional lender to finance the acquisition of the equipment for its XS New
York site. The Company received approximately $1,024,000 with $495,000 held by
the lender as security. Such security is to be released after 24 months subject
to a satisfactory payment record by the Company. The amount financed bears
interest at 11 1/2% per annum compounded monthly and is to be repaid in 48
monthly installments. The institutional lender obtained a first security
interest in the equipment and up to $750,000 of the loan is personally
guaranteed by the Company's president. In connection with this transaction, the
Company issued five year warrants to purchase 50,000 shares of the Company's
common stock at an exercise price of $6.00 per share.
(B) On December 31, 1996, the Company refinanced its existing equipment at
its New York Skyride location with aggregate proceeds of $1,500,000. The new
note bears interest at 11 1/2% per annum compounded monthly and is to be repaid
in 48 monthly installments secured by a first security interest in all of the
equipment at the New York Skyride location. Additionally, up to $250,000 of the
loan is personally guaranteed by the Company's president.
(C) During March 1997, the Company entered into a loan agreement with an
institutional lender to finance the acquisition of additional equipment for XS
New York. Pursuant to this transaction, the Company received $559,000 with
7
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
an additional $51,000 held by the lender as security. Such security is to be
released after 24 months subject to a satisfactory payment record by the
Company. The amount financed bears interest at 11 1/2% per annum compounded
monthly and is to be repaid in 48 monthly installments. The institutional lender
obtained a first security interest in the equipment and up to $ 125,000 of the
loan is personally guaranteed by the Company's president.
7. Subordinated Note Payable
(A) Between December 1996 and March 1997, the Company borrowed in the
aggregate $4,450,000 from certain institutional lenders which loans accrue
interest at an annual rate of 14% and require the payment of both principal and
interest five years from the date of issuance. In connection with the
subordinated debt, lenders received in the aggregate warrants to purchase up to
434,146 shares of Common Stock at an exercise price of $4.25 per share, which
the Company valued at approximately $278,000 using the Black Scholes pricing
model, which amount is amortized over the term of the loans. A purchase price of
$1.00 per warrant was allocated from the subordinated debt proceeds received by
the Company. One of the institutional lenders loaned the Company an additional
$500,000 on June 30, 1997.
(B) Future annual principal payments on long-term debt exclusive of capital
lease obligations, as of September 30, 1997 are as follows:
Year Ending June 30
2000 $2,500,000
2001 1,950,000
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4,450,000
Less unamortized debt discount (601,000)
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$3,849,000
==========
8. Deferred Rent Payable
The Company for financial accounting purposes spreads scheduled rent
increases and rent holidays over the terms of the respective leases using the
straight - line method.
9. Sponsorship Income
During the fiscal year ended June 30, 1995, the Company entered into two
sponsorship agreements, one with a major international electronics manufacturer,
appointing it the presenting sponsor of its New York facility, and one with a
major soft drink manufacturer. The agreements are for three and five year terms,
respectively, and provide for annual fees, capital improvements and cross
promotions for the Company. During the quarter ended December 31, 1995, the
Company entered into a three year sponsorship agreement with a major distributor
of photographic and magnetic imaging equipment. Sponsorship revenue under these
agreements aggregate approximately $1,300,000 over the respective terms. During
the quarters ended September 1997 and 1996, the Company recognized as income
$88,000 and $86,000, respectively, which represent a portion of the capital
improvements and monetary fees received from these sponsors and approximately
$47,000 and $35,000, respectively, were deferred during such periods.
10. Preferred Stock
On July 7, 1995, the Company consummated a stock purchase agreement with
Prospect Street NYC Discovery
8
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
Fund, L.P. ("Prospect Street"), a small business investment company, pursuant to
which the Company sold 1,090,909 shares of Series A Convertible Participating
Preferred Stock, par value $.001 per share (the "Preferred Stock"), for
$3,000,000. Net proceeds from such investment, aggregated approximately
$2,833,000. The Preferred Stock issued is convertible into common stock of the
Company at any time on a share-for-share basis. Pursuant to the stock purchase
agreement, the Preferred Stock and underlying common stock into which it is
convertible are subject to both demand and piggyback registration rights since
March 1996. The Preferred Stock has a liquidation preference equal to $2.75 per
share, or $3,000,000, but does not pay any dividends unless declared by the
Board of Directors. The preferred stockholder is entitled to an aggregate of up
to 24.9% of the outstanding voting power of the Company, which can increase to
50.1% of the voting power if, in good faith, in the sole discretion of such
preferred stockholder, it becomes reasonably necessary for the protection of its
investment.
11. Due from Officer
During the quarter ended September 30, 1996, the Company advanced an
aggregate of $524,000 to its President, pursuant to several demand notes at an
annual interest rate of 8%. The Company has received payment of $341,000 against
these advances. In addition, pursuant to his employment contract, the President
earned a bonus of $70,000 for the quarter then ended, which bonus was credited
against amounts due to the Company. During the quarter ended September 30, 1997,
no advances were made to the Company's executive officers. Amounts due from
officer represent primarily certain federal, state and local payroll related
withholding tax obligations due to the Company from its President. Amounts due
accrue interest at 8% annually. Additionally, the Company's President has
agreed, subject to negotiation of definitive documents relating to his
employment, to refund $750,000 of compensation received during the year ended
June 30, 1997. Upon receipt, such amounts will be reflected as additional
contributions to capital.
12. Recently Issued Accounting Standards
During fiscal year ended June 30, 1997 the Company implemented Statement of
Financial Accounting Standards No. 123, "Account for Stock-Based Compensation"
(SFAS No. 123). The provisions of SFAS No. 123 allow companies to either expense
the estimated fair value of employee stock options or to continue to follow the
intrinsic value method set forth in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma
effects on net loss and net loss per share had the fair value of the options
been expensed. The Company has elected to continue to apply APB 25 in accounting
for its stock option incentive plans. Under FAS 123, the warrants granted in
connection with both the notes payable and subordinated notes payable require
valuation based on fair value. The fair value of the 484,146 warrants granted in
connection with the above equipment financings was calculated using the
Black-Scholes pricing model, which resulted in an aggregate valuation of
approximately $313,000. The value of these warrants are charged to interest
expense over the terms of the respective notes. During the quarter ended
September 30, 1997, an aggregate of approximately $25,000 was charged to
interest expense as a result of the fair value calculation relating to the
warrants described above.
13. Revenue Sharing Agreements
The Company has been provided with certain equipment for use in its XS New
York facility in exchange for a percentage of the revenues generated therefrom.
During November 1997, a new agreement was entered into with a specific vendor
whereby the Company's revenue-sharing obligation was reduced from 40% to 14% in
exchange for the Company selling the XS trademark and related intellectual
property rights to such vendor. The Company can continue to use the XS trademark
at its Times Square location pursuant to a license agreement entered into in
connection with the sale of the trademark. In addition, the vendor agreed to
waive all amounts due under the prior revenue-sharing agreement (aggregating
approximately $514,000 as of September 30, 1997). Such amounts were offset
against selling, general and
9
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
administrative expenses for the quarter.
10
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Operational Overview
From its inception until December 22, 1994, the Company's primary
activities consisted of developmental activities, including the preparation of
plans relating to the design of New York Skyride, the Company's first motion
simulator film-based attraction; negotiation of a lease and a license agreement
with the operators of the Empire State Building, the location of New York
Skyride ; working with engineers, architects, contractors, designers, and other
parties in connection with the construction of New York Skyride; developing
software and video films in connection with New York Skyride; developing
marketing strategies; initiating marketing and corporate sponsorship activities;
selecting a management team; and obtaining financing.
On December 22, 1994 , the Company commenced operations of New York Skyride
and began generating revenue from ticket sales to the attraction and the sale of
merchandise at its souvenir/concession area. New York Skyride was opened on a
preview basis until February 21, 1995, the date of its official Grand Opening.
During April 1996, the Company signed a 20 year renewable lease (the
"Additional Lease") for an additional 35,000 square feet of space within the
Empire State Building, adjacent to and above the current location of New York
Skyride. The Additional Lease was entered into in conjunction with the
modification of the lease and the license agreement relating to the New York
Skyride facility (the "Modification Agreements"). The Additional Lease and the
Modification Agreements were the direct result of negotiations between the
Company and the Empire State Building Company (the "ESBCo"), the landlord of the
Empire State Building (the "ESB"), relating to the opening of a competitive
simulator attraction on the lower level of the ESB. As a result of the
Additional Lease and the Modification Agreements, which requires the ESBCo to
increase the level of cooperation with the Company and improve relations between
the ESB staff and the Company's employees, the Company concluded that the
existence of a smaller non-New York related simulator which would not get the
level of preferential treatment as promised to the Company by the ESBCo, would
not have a material impact on the Company's operations taken as a whole.
Additionally, the Company had intended to utilize the additional space to create
a mixed use location-based entertainment center, which development plans for
such additional space were deferred until such time as the XS New York project
was operating profitably and further assessment was made with respect to the
cost and funding of the Woodfield Mall and Sydney Skyride projects (described
below). However, the Company believes that the ESBCo and the ESB staff have not
provided the level of cooperation promised and that such lack of cooperation,
not merely the existence of a competitor, has impacted the Company's operations.
The Company is engaged in a current dialogue with the ESBCo in order to resolve
all open issues. In late October, 1997, the ESBCo sent notices of default to the
Company with respect to the Company's various leases at the ESB for failure to
pay rent. In addition to attempting to resolve the foregoing issues relating to
the circumstances involving the Modification Agreements, the Company also
believes it has valid claims, credits and offsets against a portion of the rents
claimed by the ESBCo. The Company is in the process of attempting to resolve the
rent and other disputes amicably, and the ESBCo has extended the deadline on its
default notices through November 28, 1997. In the event the Company is unable to
resolve the rent default issues by such date, the Company may be forced to seek
an injunction to prevent the ESBCo from terminating the leases and the license
agreement relating to New York Skyride, which, if terminated, would have a
material adverse effect on the Company. The Company is also considering its
alternatives and possible remedies with respect to the issues surrounding the
Modification Agreements and related matters.
Further, as previously disclosed, it is likely, that the Company will be
unable to develop the additional space within the ESB in the near term, in which
event , the Company will be forced to surrender this space to the ESB, assign or
sublet such space or seek rescission of the Additional Lease. The Company is
currently exploring its options with respect to these alternatives.
11
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On December 27, 1996, the Company commenced operations, through its
wholly-owned subsidiary, Skyline Virtual Reality, Inc., of an interactive
virtual reality entertainment center, XS New York, which is located in the heart
of Times Square in New York City. XS New York features state-of-the-art
entertainment technology, including the latest in virtual reality hardware and
software, simulation technology and interactive participation game experiences.
Additionally, the facility includes a "cybercafe" which offers light food and
refreshments and computer terminals which are linked to the World Wide Web and
the Internet. XS New York was opened on a preview basis until March 20, 1997,
the date of its official Grand Opening. The Company, on November 4, 1997,
renegotiated its revenue-sharing agreement with the primary equipment supplier
of XS New York in consideration of the sale to such supplier of the "XS"
trademarks and related intellectual property rights. Additionally, in connection
with the sale of the trademarks and other intellectual property rights, such
equipment supplier has forgiven all amounts owed to it by the Company (in the
aggregate amount of approximately $514,000 as of September 30, 1997). Pursuant
to a license agreement from such supplier, the Company may continue to use the
"XS" trademarks in connection with the Times Square location. See "--Liquidity
and Capital Resources."
Historically, in the New York metropolitan area, the summer months, which
include significant tourist traffic, represents the busiest period of the year.
During each of the quarters ending September 30, 1997 and 1996, New York Skyride
was visited by approximately 191,000 and 240,000 customers, respectively. The
Company believes that such decrease also reflects a decrease in the capture rate
of the traffic to the Observatory of the ESB from 22% to 16%. The Company
further believes that such decrease in the capture rate is attributable, at
least in part, to the lack of cooperation of the ESBCo and the staff of the ESB
as described above.
Promoting New York Skyride and XS New York to tourist boards (such as the
New York Convention and Visitors Bureau), travel agents, managers of group
activities and visitors to New York City represents a primary focus of the
Company's marketing efforts for these attractions. Since tourists and visitors
are a primary target, special volume discounts are offered to groups such as
conventions and trade associations, as well as through travel agent packages.
School groups are also a significant market for New York Skyride and XS New
York, and special programs are being implemented to target these audiences,
especially during the slower tourist periods in the fall and winter months.
Additionally, the marketing efforts have focused significant attention on
promoting New York Skyride and XS New York for birthday parties and special
events.
During September 1996, the Company entered into a 15 year lease for
approximately 21,000 square feet of space in the Woodfield Mall outside of
Chicago, in Schaumberg, Illinois. The Company, through its subsidiary, Skyline
Chicago, Inc., plans to develop a state-of-the-art interactive virtual reality
entertainment center similar to the XS New York project, but under a different
name. The location for this entertainment center will be situated near the
Rainforest Cafe, a successful themed restaurant, and other retail establishments
that attract tourists and regional area residents. The Woodfield Mall, one of
the largest and most heavily visited malls in the United States, boasts annual
attendance of approximately 20 million people. In connection with the execution
of the lease, the Company was required to provide a $200,000 irrevocable letter
of credit as security for the performance of the Company's obligations under the
lease. As a result of construction delays due to the lack of sufficient funding,
the Company will not be able to commence operations on the date required in the
lease. The Company does not believe that the landlord will declare a default
under the lease provided construction is continuing. However, the Company has
temporarily suspended construction while the Company attempts to identify
alternative sources of financing. Additionally, the Company did not make certain
rent payments claimed by the landlord as owed and the landlord is applying the
Company's security deposit against such rents due. The Company is in the process
of negotiating with the landlord with respect to the rent commencement date. The
landlord may only use the security deposit to offset rent, other charges and
damages as a result of the Company's breach. The Company believes this situation
will ultimately be resolved in its favor; however, there can be no assurance
that such resolution will be favorable, in which event, the Company will
continue to be in default under the lease, and, if such lease is terminated,
would have a material adverse effect on the Company. See "--Liquidity and
Capital Resources."
During December 1996, the Company signed a letter of intent to develop a
simulator attraction, similar to New York Skyride, to be located in the
Centrepoint Shopping Center which adjoins the world famous Sydney Tower (the
"Tower") in Sydney, Australia. The Centrepoint Shopping Center is the leading
shopping and tourist attraction in Sydney,
12
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Australia, and will be the merchandising and promotional center for the 2000
Olympics, which will take place in Sydney. The Tower alone attracts
approximately 1,300,000 visitors per year and an additional 20,000,000 people
visit the adjoining shopping center annually. The letter of intent provides for
an eight year renewable lease (currently being negotiated) for approximately
16,500 square feet of space located on the promenade level of the Tower, which
is the entry point to the Tower. The base rent is expected to range from
$225,000 in Year 1 to $600,000 in Year 8. The letter of intent also contemplates
a provision for percentage rent of 6.5% of gross sales in excess of $7,000,000.
The Company has a right of first refusal on certain additional space located
within the shopping center which may be used for development of an "XS-type"
attraction in the future. The Company is still in the process of negotiating for
the sale of a combined ticket to both the Tower and the Company's attraction or
a possible joint venture with the owner of the Tower; however, no assurance can
be given with respect to the successful conclusion of such negotiations or, if
successfully concluded, whether funding will be available to commence
construction or whether such site will operate profitably or provide net income
to the Company.
The Company hopes to finalize lease negotiations and documentation during
the Winter of 1998 and expects to pattern the Tower project after New York
Skyride, but with a uniquely Australian theme. The Company anticipates that it
will open its "Sydney Skyride" during the following Fall in 1998. The previous
sentence is considered a forward-looking statement and is based on estimates by
the Company that include assumptions with respect to availability of funding and
seasonal construction issues, either or both of which may affect the proposed
opening of a particular site. For example, unavailability of adequate funding
will result in delays in commencement or suspension of construction.
Additionally, construction may also be hampered by adverse weather conditions in
the winter months, as well as increases in prices for raw materials and
equipment, strikes, work-stoppages, unanticipated events and regional, national
and international economic trends. Accordingly, there can be no assurances that
the Company will be able to open such facility as anticipated. Additionally,
there can be no assurance that the Company will be able to successfully finalize
lease negotiations with the landlord of the Tower and the Centrepoint Shopping
Center, or, if finalized, that it will be able to arrange for adequate financing
of this project and complete construction of the "Sydney Skyride" by the date
anticipated, if at all.
The Company intends to use the expertise and experience which it gained
from the operation of New York Skyride and XS New York to develop these and
similar attractions at other locations in the United States and abroad. However,
there can be no assurance that the Company will be successful in developing
these attractions at additional locations.
The Company will continue to market and promote its various activities
through traditional print advertising in publications that go to New York City
tourists and others, as well as broaden its advertising and promotional programs
to the general public through local radio and newspaper advertising. The Company
is in the process of developing its marketing plans for its attractions to be
located in the Woodfield Mall and the Sydney Skyride and expects to employ
similar advertising and promotional programs throughout such local areas and
surrounding regions.
Results of Operations
Revenues. Revenues generated during the three months ended September 30,
1997, compared to September 30, 1996 aggregated $3,136,000 and $2,037,000
respectively. The increase in revenue for the three months ended September 30,
1997, from the prior year period is primarily due to the commencement of
operations from the Company's XS New York facility, which accounted for total
revenues of $1,263,000 during the quarter ended September 30, 1997.
Management expects to continue to supplement its primary revenue stream
from ticket sales for New York Skyride by soliciting corporate sponsorships from
a number of key consumer product companies. During the three month periods ended
September 30, 1997 and 1996 the Company earned approximately $88,000 and
$86,000 respectively, in sponsorship income as a result of monthly fees and
capital improvements received from sponsors. Current agreements with the
Company's three sponsors are expected to provide annual sponsorship fees
aggregating approximately $1,300,000 during the five year duration of such
agreements which commenced November 1994.
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Operating Expenses. Operating expenses incurred during the three months
ended September 30, 1997, aggregated $3,241,000 compared to $1,587,000 for the
three months ended September 30, 1996. The increase is due primarily to an
increase of overhead as a result of the operations of XS New York.
Net Income and Earnings Per Share. Net income/(loss) and earnings/(loss)
per share before deferred taxes were ($339,000) and ($.20) for the three months
ended September 30, 1997 as compared to $899,000 and $.31 for the three months
ended September 30, 1996. The net loss for the quarter ended September 30, 1997
included a loss of approximately ($352,000) related to XS New York (see
"Operating Expenses" above), offset by income of approximately $129,000 from New
York Skyride, and a loss of approximately ($116,000) related to certain start-up
costs in connection with the Company's Woodfield Mall and proposed Australia
sites. During the quarter ended September 30, 1996, New York Skyride operations
generated income of approximately $325,000 with $595,000 in deferred tax benefit
realized, offset, in part, by start-up costs of approximately $21,000 related to
XS New York.
As a result of operating loss carryforwards from prior years, the Company
recognized a net deferred tax benefit of $595,000 or $.20 per share, during the
quarter ended September 30, 1996 which was offset by a provision for certain
state and local income taxes of ($144,000) or ($.05) per share. During the
quarter ended September 30, 1997 there was a provision for certain state and
local taxes on capital aggregating $14,000 with no benefit recognized for net
operating loss carryforwards.
Working Capital. Working capital (deficiency) at September 30, 1997, was
approximately ($4,881,000) compared to working capital of approximately $348,000
at September 30, 1996. The reduction in working capital is primarily the result
of the XS New York buildout of approximately $7,832,000, the operating loss
incurred during the past three month period of ($339,000), deferred project
leasing and financing costs aggregating $1,337,000 related to the Company's
capital investments in XS New York and the Woodfield Mall site and costs
associated with the Company's stock buy-back program of $601,000.
Liquidity and Capital Resources
On July 7, 1995, the Company consummated a private placement with Prospect
Street whereby 1,090,909 shares of Preferred Stock were sold for gross proceeds
of $2.75 per share, or $3,000,000. The Preferred Stock is convertible into
Common Stock of the Company at any time on a share-for-share basis. The holders
of the Preferred Stock are entitled to an aggregate of up to 24.9% of the
outstanding voting power of the Company on all matters which come before the
shareholders. Additionally, so long as 272,727 shares of Preferred Stock remain
outstanding, the holders thereof will have the ability to elect a majority of
the Board of Directors and obtain up to 50.1% of the outstanding voting power of
the Company in the event that the holders of the Preferred Stock determine in
good faith, in their sole discretion, that such action is reasonably necessary
for the protection of their investment. The Preferred Stock and underlying
Common Stock into which it is convertible are subject to both demand and
piggyback registration rights. Net proceeds to the Company from such investment
was $2,833,333.
The Company used a portion of the net proceeds of the Preferred Stock sale
to repay certain indebtedness in connection with the New York Skyride project
and used the balance of the proceeds for working capital, which included
expansion of the Company's business through developing attractions at new
locations, including the XS New York project.
As of September 30, 1997, the Company had a working capital deficiency of
approximately ($4,881,000) compared to working capital of $348,000 at September
30, 1996 which was due primarily to costs incurred in connection with the
opening of XS New York and losses incurred from operations. Since inception, the
Company spent approximately $6,050,000 related to capital expenditures with
respect to New York Skyride and approximately $7,927,000 related to capital
expenditures and leasing costs with respect to the XS New York Times Square
project. Additionally, the Company had expenditures of approximately $362,000
for security deposits and financing costs associated with the XS New York
project.
The Company is currently involved in a dispute with a subcontractor
regarding amounts billed for work allegedly performed in connection with the XS
New York project. The Company believes that it has adequately reserved for such
14
<PAGE>
contingency and does not believe that the resolution of the dispute will have a
material impact on the Company's financial position. Such contingency represents
leasehold improvements which, when amortized over the remaining term of the
Company's lease, will not have a material effect on the Company's results from
operations.
As a result of the Company's development of XS New York, the Company
incurred capital expenditures and leasing costs of approximately $7,927,000
consisting of $890,000 in leasing, design and consulting fees, $5,139,000 in
construction and theming, $253,000 for signage and approximately $1,645,000 for
equipment purchases. In order to complete the construction of XS New York and
provide additional working capital for growth and expansion the Company raised
additional secured and unsecured debt through its relationships with its
institutional investors and lenders as described below.
The Company entered into a revenue-sharing arrangement with its primary
equipment supplier of the games and attractions at XS New York. Under the prior
arrangement, which was renegotiated as of November 4, 1997, the Company was
obligated to pay 40% of revenues from such equipment to the supplier. The
Company did not anticipate that the machines installed by such supplier would
account for such a significant portion of the Company's revenues from XS New
York. The new revenue-sharing arrangement requires the Company to pay 14% of
revenues (as defined in the Agreement) to such equipment supplier. In connection
with such revised revenue-sharing agreement and the forgiveness of all amounts
owed by the Company to such equipment supplier (in the aggregate amount of
approximately $514,000 as of September 30, 1997), the Company agreed to sell the
"XS" trademarks and related intellectual property rights to the equipment
supplier. The Company, pursuant to a three-year renewable license agreement, can
continue to use the "XS" trademarks and related concepts at its Times Square
location.
On December 20, 1996, the Company entered into a Senior Credit Agreement
(the "Senior Credit Agreement") with Prospect Street and Bank of New York, as
Trustee for the Employees Retirement Plan of the Brooklyn Union Gas Company
("BUG"), to obtain up to $4,100,000 in senior unsecured subordinated debt which
accrues interest at an annual rate of 14% and requires the payment of both
principal and interest five (5) years from the date of issuance. The Senior
Credit Agreement was subsequently amended to increase the amount of the
subordinated debt to $4,450,000 and to provide for the inclusion of additional
lenders. Of such increased amount $2,500,000 was received by the Company from
BUG and a related pension fund and $1,950,000 was received by the Company from
Prospect Street and its affiliates. In connection with the Senior Credit
Agreement, BUG and its related pension fund received warrants to purchase up to
an aggregate of 243,904 shares of Common Stock and Prospect Street and its
affiliates received warrants to purchase up to an aggregate of 190,242 shares of
Common Stock, each exercisable and expiring at various dates from February 1999
through December 31, 2007 at various exercise prices ranging from $4.25 to $7.91
per share. A purchase price of $1.00 per warrant was allocated from the
subordinated debt proceeds received by the Company. As part of this financing,
on November 6, 1996, Prospect Street provided the Company with a demand loan of
$1,500,000, at an annual interest rate of 14%, which loan was exchanged for a
portion of the subordinated debt under the Senior Credit Agreement. On June 30,
1997, the Company received an additional loan in the principal amount of
$500,000 from Prospect Street.
During November 1996, an institutional lender agreed to finance the
acquisition of the equipment for the Company's XS New York site up to an
aggregate of $1,327,000. Pursuant to this transaction, the Company received
approximately $832,000 and an additional $495,000 is being held by the lender as
security. Such security is to be released after 24 months subject to a
satisfactory payment history by the Company. The lender has a first security
interest in all equipment financed and the Company's president has personally
guaranteed up to $750,000 of the loan amount. The amount financed will bear
annual interest at 11 1/2% and is to be repaid in 48 monthly installments. In
connection with this transaction, the Company issued warrants to purchase up to
50,000 shares of the Company's common stock at an exercise price of $6.00 per
share.
During March 1997 the Company signed an agreement to finance the
acquisition of additional equipment for XS New York aggregating approximately
$256,000. The terms of the loan are the same as described in the previous
paragraph except that the security amount withheld by the lender is $51,000 and
the personal guarantee from the Company's president is $125,000.
15
<PAGE>
During December 1996, the Company refinanced its existing equipment loan on
the equipment located at its New York Skyride location for aggregate proceeds of
$1,500,000 of which approximately $491,000 was applied to satisfy amounts due
under the original loan. The loan bears annual interest at 11 1/2% and is to be
repaid in 48 monthly installments and is secured by a first lien on all
equipment at New York Skyride. The Company's president has guaranteed up to
$250,000 of this loan.
As a result of construction delays due to the lack of sufficient funding,
the Company will not be able to commence operation of the Woodfield Mall site on
the date required in the lease. The Company does not believe that the landlord
will declare a default under the lease provided construction is continuing.
However, the Company has temporarily suspended construction while the Company
attempts to identify alternative sources of financing. Additionally, the Company
did not make certain rent payment claimed by the landlord as owed and the
landlord is applying the Company's security deposit against such rents due. The
Company is in the process of negotiating with the landlord with respect to the
rent commencement date. The landlord may only use the security deposit to offset
rent, other charges and damages as a result of the Company's breach. The Company
believes this situation will ultimately be resolved in its favor; however, there
can be no assurance that such resolution will be favorable, in which event the
Company will continue to be in default under the lease, which default may result
in loss of such lease and liability for damages incurred by the landlord, which
events would have a material adverse effect on the Company's operations. The
loss of expected revenues from such site would have an adverse effect on the
Company's business plans and could seriously damage the Company's reputation
making it more difficult to obtain leases at premier locations.
The Company estimates the capital expenditures required to develop each of
the Woodfield Mall and Sydney Skyride facilities to be approximately $5,500,000.
The Company expects to incur losses during the initial years of operation of
each new site primarily as a result of start-up expenses and costs associated
with commencement of operations. The previous sentences are considered
forward-looking statements and are based on estimates by the Company that
include the construction of the facility, equipment hardware and software, and
design and theming costs, which estimates are each subject to, and may be
increased by, construction delays, increased prices for raw materials and
equipment, architectural redesigns, strikes, and work-stoppages, unanticipated
events and regional, national and international economic trends. In order to
develop these attractions the Company will require additional debt or equity
financing which the Company is attempting to secure. However, there can be no
assurance that such financing will be available on terms acceptable to the
Company, or at all. Further there can be no assurance that demands placed on the
Company's financial resources by multiple projects, or any one project in
particular, will not affect the Company's ability to successfully complete or
finance one or more of such projects, which would adversely affect the Company's
expansion and growth strategy.
The Company is currently seeking alternative sources of financing to
satisfy its capital requirements for the foreseeable future. In the event the
Company does not receive adequate financing in the near term, of which there can
be no assurance, the Company will be forced to abandon certain of its proposed
projects, possibly curtail current operations, or be forced to sell some or a
significant portion of its assets in order to satisfy its obligations.
The Company's independent auditors have included an explanatory paragraph
in their report on the Company's financial statements to the effect that certain
matters raise substantial doubt about the Company's ability to continue as a
going concern, which is contingent upon, among other things, the Company's
ability to secure financing and attain profitable operations.
The Company's long term goal is to develop simulator and other
location-based entertainment attractions in other major cities in the United
States and other countries. There are, however, only a limited number of
locations in a small number of cities that are suitable for such attractions,
and there can be no assurance that the Company could obtain a lease at any such
locations or develop a successful attraction at such locations. Also,
development of additional attractions will require the Company to obtain
financing for such ventures, and there can be no assurance that such financing
will be available, or available on terms and conditions that are acceptable to
the Company. Additionally, it is possible that the Company would find it
necessary to have one or more local partners involved in any additional
attractions it might attempt to develop, further limiting the revenues that the
Company could generate from these locations.
16
<PAGE>
The Company continually explores expansion opportunities both in the United
States and abroad. From time to time, the Company may be involved in
negotiations for additional sites or other entertainment-based projects.
However, current negotiations, if any, are too preliminary to warrant additional
disclosure at this time. The Company will keep investors informed as other
prospects mature.
Inflation
The Company believes that the impact of inflation on its operations since
its inception has not been material.
Seasonality
The Company's business is seasonal in nature, based in part, on higher
volumes of tourists in the New York City Metropolitan area during the spring and
summer months and during the December holiday season. Similar seasonal trends
are anticipated for the Woodfield Mall location. The Sydney Skyride, located in
the southern hemisphere is much less seasonal and provides for a relatively
constant flow of traffic with its peak months being November - January, March
and July. The Company will direct a portion of its marketing and promotional
efforts in the New York City Metropolitan area to (i) attracting a larger
percentage of the Observatory traffic at the Empire State Building, thereby
increasing volume to New York Skyride and (ii) attracting visitors to XS New
York, particularly during non-peak seasons. In addition, the Company will employ
similar advertising and promotional programs, during these periods, throughout
the Chicago Metropolitan area and other surrounding regions for its Woodfield
Mall site upon commencement of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
period covered by this report.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index located at the end of this report.
(b) No reports of Form 8-K have been filed during the quarter.
17
<PAGE>
Signatures
Pursuant to the requirements 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.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By: /s/ Zalman Silber
---------------------------------------
Zalman Silber
President and Chief Executive Officer
By: /s/ Steven Schwartz
---------------------------------------
Steven Schwartz
Executive Vice President - Finance and Chief
Financial Officer (Principal Financial
and Accounting Officer)
Dated: November 17, 1997
18
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
3.1 Certificate of Incorporation of Registrant. (1)
3.2 By-laws of Registrant. (1)
3.3 Certificate of Amendment of Certificate of Incorporation relating to
the issuance of the Preferred Stock. (2)
4.1 See Exhibits 3.1 and 3.2
10.1 The Company's 1994 Stock Incentive Plan for the Registrant. (as
amended and restated.) (9)
10.2 The Company's Stock Option Plan for Non-Employee Directors. (as
amended and restated.) (9)
10.3 Employment Agreement dated October 1, 1993 between the Registrant and
Zalman Silber. (1)
10.4 Lease Agreement dated February 26, 1993 between the Company and the
Empire State Building Company. (1)
10.5 License Agreement dated February 26, 1993 between the Company and the
Empire State Building Company. (1)
10.6 Purchase Agreement dated February 14, 1994 between the Company and
Interactive Simulations, Inc. (3)
10.7 Film Production Agreement dated April 7, 1994 between the Company and
the Empire Productions, Inc., and Chromavision Corp. (3)
10.8 Lease Agreement dated April 14, 1994 between the Company and the
Empire State Building Company relating to the Company's executive
offices. (3)
10.9 Lease Agreement dated February 8, 1994 between the Company and the
Empire State Building Company relating to additional space. (3)
10.10 Construction contract dated July 5, 1994 between the Company and
Signature Construction Group Inc. (4)
10.11 Loan and security agreement dated November 16, 1994 between the
Company and PhoenixCor, Inc. (5)
10.12 Employment Agreement dated August 13, 1994 between the Company and
Steven Schwartz. (5)
10.13 Sponsorship Agreement dated February 21, 1995 between the Company and
Dentsu USA, Inc. on behalf of JVC Company of America. (6)
19
<PAGE>
INDEX TO EXHIBITS (Continued)
Exhibit
Number Description
10.14 Stock Purchase Agreement, dated as of July 7, 1995, between the
Company and Prospect Street Fund. (2)
10.15 Registration Rights Agreement dated as of July 7, 1995, between the
Company and Prospect Street relating to the Common Stock issuable upon
conversion of the Preferred Stock. (2)
10.16 Guarantee of Zalman Silber, as of July 7, 1995, relating to the
guarantee of the Company's obligations under the Stock Purchase
Agreement. (2)
10.17 Stockholders' Agreement dated as of July 7, 1995, between Zalman
Silber and Prospect Street. (2)
10.18 Amendment to Employment Agreement dated June 29, 1995, between the
Company and Zalman Silber. (7)
10.19 Agreement dated March 16, 1995 by and between Skyline, PhoenixCor,
Inc., and Zalman Silber relating to the release of certain security
deposits, and the Rider dated March 16, 1995 to the Individual
Guaranty of Zalman Silber. (7)
10.20 Lease Agreement dated March 1996 between the Company and the Empire
State Building Company relating to additional space. (8)
10.21 Amendment, dated March 1996, to the Company's original lease and
licensing agreement with the Empire State Building Company. (8)
10.22 Lease Agreement dated March 1996, between the Company and One Times
Square Center Partners, L. P., for space located at 1457-1463
Broadway, New York, NY. (8)
10.23 Lease Agreement dated September 5, 1996, between the Company and
Woodfield Associates, for space located at the Woodfield Mall in
Schaumberg, Illinois. (9)
10.24 Letter of Intent relating to senior unsecured subordinated debt
financing dated October 23, 1996, between the Company and Prospect
Street. (10)
10.25 Note Purchase Agreement dated November 6, 1996, between the Company
and Prospect Street. (10)
10.26 Guarantee of Zalman Silber dated November 6, 1996 relating to the Note
Purchase Agreement. (10)
10.27 Senior Credit Agreement dated December 20, 1996, between the Company
and Prospect Street and Bank of New York as Trustee for the Employees
Retirement Plan of The Brooklyn Union Gas Company. (11)
20
<PAGE>
INDEX TO EXHIBITS (Continued)
Exhibit
Number Description
10.28 Subsidiary Guaranty Agreement dated December 20, 1996, between the
Company and Prospect Street. (11)
10.29 Indemnity, Subrogation and Contribution Agreement dated December 20,
1996, between the Company and Prospect Street. (11)
10.30 Amended and restated Registration Rights Agreement dated December 20,
1996, between the Company, Prospect Street, and Bank of New York as
Trustee for the Employees Retirement Plan of The Brooklyn Union Gas
Company. (11)
10.31 Senior Promissory Note dated December 20, 1996, between the Company
and Prospect Street. (11)
10.32 Senior Promissory Note dated December 20, 1996 between the Company and
Bank of New York as Trustee for the Employees Retirement Plan of The
Brooklyn Union Gas Company. (11)
10.33 Stock Purchase Warrant Agreements dated December 20, 1996, between the
Company, Prospect Street, and Bank of New York as Trustee for the
Employees Retirement Plan of The Brooklyn Union Gas Company. (11)
10.34 Loan and Security Agreement dated December 4, 1996, between the
Company and People's Bank. (11)
10.35 Loan and Security Agreement dated December 4, 1996, between the
Company and the Independent Resources Inc. (11)
10.36 Loan and Security Agreement dated December 4, 1996, between the
Company and the PhoenixCor, Inc. (11)
10.37 Guarantees of Zalman Silber dated December 4, 1996 relating to the
Loan and Security Agreements with People's Bank and PhoenixCor, Inc.
(11)
10.38 Senior Promissory Note dated February 18, 1997 between the Company and
Bank of New York, as Trustee for the Employees Retirement Plan of The
Brooklyn Union Gas Company.(12)
10.39 Senior Promissory Note dated March 14, 1997 between the Company and
Prospect Street NYC Co- Investment Fund, L.P.(12)
10.40 Senior Promissory Note dated March 21, 1997 between the Company and
Bank of New York, as Trustee for Brooklyn Union Gas Company
Non-Bargaining Health VEBA.(12)
10.41 Stock Purchase Warrant Agreement dated February 18, 1997 between the
Company and Bank of New York, as Trustee for the Employee Retirement
Plan of The Brooklyn Union Gas Company.(12)
21
<PAGE>
INDEX TO EXHIBITS (Continued)
Exhibit
Number Description
10.42 Stock Purchase Warrant Agreements dated March 14, 1997 between the
Company and Prospect Street NYC Co-Investment Fund, L.P.(12)
10.43 Stock Purchase Warrant Agreement dated March 21, 1997 between the
Company and Bank of New York, as Trustee for Brooklyn Union Gas
Company Non-Bargaining Health VEBA.(12)
10.44 Purchase Agreement, dated as of November 4, 1997, by and among the
Company, Skyline Virtual Reality, Inc. ("SVR") and Namco
Cybertainment, Inc. ("Namco").(13)
10.45 Trademark License Agreement, dated as of November 4, 1997, between SVR
and Namco.(13)
10.46 Revenue-Sharing Agreement, dated as of November 4, 1997, by and among
the Company, SVR and Namco.(13)
21 Subsidiaries of the Company. (9)
27.1 Financial Data Schedule. (13)
- ----------------------------------------
(1) Previously filed as exhibit to Registration Statement on Form SB-2
(Commission File No. 33-73276) declared effective on February 14, 1994.
(2) Previously filed as an exhibit to the Company's current report on Form 8-K
filed on July 21, 1995.
(3) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30, 1994.
(4) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended September 30, 1994.
(5) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended December 31, 1994.
(6) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended March 31, 1995.
(7) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30, 1995.
(8) Previously filed as an exhibit to the Company's quarterly report on Form
10-QSB for the quarter ended March 31, 1996.
(9) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30, 1996.
22
<PAGE>
INDEX TO EXHIBITS (Continued)
Exhibit
Number Description
(10) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended September 30, 1996.
(11) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended December 31, 1996.
(12) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended March 31, 1997.
(13) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended September 30, 1997 (as filed with
the Commission on November 13, 1997).
23
