<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-QSB
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to__________
Commission File Number 0-24592
---------
CINEMA RIDE, INC.
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-4417467
- ------------------------------------ ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12001 VENTURA PLACE, STUDIO CITY, SUITE 340, CALIFORNIA 91604
(Address of principal executive offices)
(Zip Code)
(818) 761-1002
(Registrant's telephone number, including area code)
...............................................................
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or give 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 No X
----- -----
As of November 8, 1996, there were 5,037,500 outstanding shares of common stock,
par value $0.01 per share.
Transitional Small Business Disclosure Format: Yes No X
----- -----
1
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED
SEPTEMBER 30, 1996
==================================
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheets as of September 30, 1996, and as
of December 31, 1995. 3
Statements of Operations for the three months and nine
months ended September 30, 1996, and September 30, 1995. 5
Statements of Cash Flows for the nine months ended
September 30, 1996, and September 30, 1995. 6
Summary of Accounting Policies 8
Notes to Financial Statements. 10
Item 2. Management Discussion and Analysis of Financial Condition 10
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CINEMA RIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996, AND DECEMBER 31, 1995
=========================================
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 116,629 $ 144,539
Inventories 60,574 45,806
Prepaid expenses 116,948 141,367
Other Receivables 17,577 21,154
---------- ----------
Total current assets 311,728 352,866
---------- ----------
Property and equipment:
Office equipment and furniture 108,352 104,094
Equipment under capital lease 589,474 139,474
Leasehold improvements 2,113,376 1,076,097
Theater and film equipment 3,048,986 1,693,129
Theater and film equipment under construction 564,432 1,521,414
---------- ----------
6,424,620 4,534,208
Less accumulated depreciation and
amortization ( 675,871) ( 291,679)
---------- ----------
Total property and equipment 5,748,749 4,242,529
---------- ----------
Film library:
Film projects under development 269,872 259,411
Film library, net 482,082 542,787
---------- ----------
Total film library, net 751,954 802,198
---------- ----------
Receivable from officers 95,933 100,000
Deferred lease costs and other assets (net) 768,647 317,112
---------- ----------
$7,677,011 $5,814,705
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
SEPTEMBER 30, 1996, AND DECEMBER 31, 1995
=========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(unaudited) (audited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 1,567,840 $ 517,765
Current portion of capital lease obligation (Note 2) 53,034 13,485
Current portion of notes payable (Note 1) 446,422 -
------------- ------------
Total current liabilities 2,067,296 531,250
------------- ------------
Obligation under capital lease (Note 2) 348,546 97,989
Deferred Rent 158,422 -
Long term portion of notes payable (Note 1) 26,593 -
------------- ------------
Total long term liabilities 533,561 97,989
Total liabilities 2,600,857 629,239
Commitments and contingency (Note 1 and Note 2)
Stockholders' equity
Preferred stock, $.01 par value, 500,000
shares authorized, none issued - -
Common stock, $.01 par value, 20,000,000
shares authorized, 5,037,500 and 4,570,000
shares issued and outstanding (Note 1 and Note 3) 50,375 45,700
Additional paid-in-capital 8,638,678 8,363,638
Accumulated deficit (3,612,899) (3,223,872)
------------- ------------
Total stockholders' equity 5,076,154 5,185,466
------------- ------------
Total liabilities and stockholders' equity $ 7,677,011 $ 5,814,705
============= ============
</TABLE>
See Accompanying Note to Unaudited Consolidated Financial Statements
4
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996, AND SEPTEMBER 30, 1995
==============================================================================
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
Revenues $1,001,387 $ 665,208 $2,323,355 $ 1,638,064
---------- ---------- ---------- -----------
Selling, general and administrative expenses 761,501 1,085,933 2,082,259 2,476,062
Depreciation and amortization 141,433 102,358 528,222 267,380
---------- ---------- ---------- -----------
Total expenses 902,934 1,188,291 2,610,481 2,743,442
---------- ---------- ---------- -----------
Income (Loss) from operations 98,453 (523,083) (287,126) (1,105,378)
Interest expense 103,100 4,047 124,637 5,148
Interest income 6,928 13,194 12,934 70,770
---------- ---------- ---------- -----------
Net Income (Loss) $ 2,281 $ (513,936) $ (398,829) $(1,039,756)
========== ========== ========== ===========
Net Income (Loss) per common share $.0004 $(.1138) $(.0862) $(.2306)
========== ========== ========== ===========
Weighted average common share outstanding 4,735,833 4,515,598 4,625,278 4,508,571
========== ========== ========== ===========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
5
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 & SEPTEMBER 30, 1995
=========================================================
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (398,829) $ (1,039,756)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 528,222 267,380
Amortization of deferred interest 41,744 -
Issuance of stock for services rendered 15,900 -
Increase (decrease) from changes in:
Inventories (14,768) 19,634
Prepaid expenses 24,419 (116,901)
Other receivables (2,354) (19,524)
Accounts payable and accrued expenses 906,123 195,694
Deferred Rent 158,422 (20,449)
Accrued interest on note payable 43,952 -
Loss on foreign currency translation 9,801 -
Customer deposits - (273,000)
----------- -----------
Net cash provided by (used in) operating activities 1,312,632 (986,922)
----------- -----------
Cash flows from investing activities:
Capital expenditures for
Office furniture and equipment (4,258) (70,413)
Leasehold Improvements (1,023,933) (88,673)
Theater and film equipment (1,286,923) (565,257)
Theater and film equipment under construction 848,821 (704,474)
Film production costs (49,303) (86,161)
Film production costs under development (10,461) (148,682)
Equipment under capital lease (50,000) (28,000)
Proceeds from insurance for equipment 33,671 -
Organization costs and other assets (271,277) (238,418)
----------- -----------
Net cash used in investing activities (1,813,663) (1,930,078)
----------- -----------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
6
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 & SEPTEMBER 30, 1995
=========================================================
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
------------- ------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable 1,077,828 -
Payments made on note payable (604,813) -
Principal payments under capital lease obligation (9,894) (2,090)
Loans (payments) made to (from) officers 10,000 (100,000)
------------- ------------
Net cash provided by (used in) financing activities 473,121 (102,090)
Net increase (decrease) in cash (27,910) (3,019,090)
Cash at beginning of period 144,539 3,511,754
------------- ------------
Cash at end of period $ 116,629 $ 492,664
============= ============
Operating and investing activities not
affecting cash:
Issuance of warrants for lease hold improvements 13,346 -
Issuance of stock to lenders 250,469 -
Increase in capital lease obligation and
accounts payable for equipment 300,000 109,384
</TABLE>
See Accompanying Notes to Unaudited Conolidated Financial Statements
7
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
NINE MONTHS ENDED SEPTEMBER 30, 1996
====================================
Basis of presentation
- ---------------------
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position of Cinema Ride,
Inc. (the "Company") as of September 30, 1996, and December 31, 1995, and the
results of its operations and statements of cash flows for each of the three
months and nine months ended September 30, 1996, and September 30, 1995, in
conformity with generally accepted accounting principles applied on a consistent
basis. Unless the context otherwise requires, references to the "Company" in
this report refer to Cinema Ride, Inc. and its consolidated subsidiaries.
The results of operations for the nine months ended September 30, 1996, are not
necessarily indicative of the results of operations to be expected for the full
year ending December 31, 1996.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying financial statements should be
read in conjunction with the Company's audited financial statements and notes
thereto incorporated by reference in the 1995 Annual Report on Form 10-KSB.
The accompanying consolidated unaudited financial statements have been prepared
assuming the Company will continue as a going concern. As of September 30,
1996, the Company had a negative working capital of $1,755,568 and the Company
will require substantial additional funds though debt or equity financing to pay
expenses already incurred relating to the construction and opening of its new
facility in New York, as well as meeting its other current obligations.
Certain reclassifications were made to the financial statements previously
reported to conform with current year presentation.
Organization
- ------------
The Company was incorporated in Delaware in April 1993. The Company is in the
business of developing and operating rides consisting of motion simulator
attractions and filmed entertainment which combine video-projected three-
dimensional action films of approximately four minutes duration with computer-
controlled, hydraulically-mobilized seating platforms that are programmed to
move in concert with the on-screen action. Each attraction is designed to
provide the viewer with a realistic feeling of being a participant in the action
on the screen. To date, the Company has completed construction and installation
of three facilities. The first facility (the "Las Vegas Facility") commenced
operations in October 1994 and is located in the Forum Shops at Caesars (the
"Forum Shops"), a high traffic tourist mall which is located between Caesars
Palace Hotel & Casino and the Mirage Hotel in Las Vegas, Nevada. The second
facility (the " West Edmonton Mall Facility") commenced operations in August
1995 and is located in the West Edmonton Mall, Alberta, Canada. The third
facility (the " Times Square Facility") commenced operation in September 1996
and is located in Times Square in New York City, New York. The Company's
executive offices are located in Studio City, California.
Property and equipment
- -----------------------
Property and equipment are stated at cost. Depreciation is provided at the time
property and equipment is placed in service using the straight-line method over
the estimated useful lives of the assets which range from five to ten years.
Amortization of tenant improvements is provided using the straight-line method
over the lower of the estimated useful lives of the assets or the lease term
which range from five to ten years.
8
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
NINE MONTHS ENDED SEPTEMBER 30, 1996
====================================
(CONTINUED)
Film Production Costs
- ---------------------
Film production costs are stated at the lower of amortized cost or market. Upon
completion, film production costs are amortized on an individual production
basis in the proportion that current gross revenues bear to management's
estimate of total gross revenues with such estimates being reviewed at least
quarterly.
Deferred Lease Costs
- --------------------
Deferred lease costs represent amounts paid in connection with the successful
negotiation of the Company's leases. Costs are amortized on a straight-line
basis over the term of the leases.
Pre-opening Costs
- -----------------
The Company capitalizes pre-opening costs incurred in connection with potential
new locations. These costs are amortized over the twelve months following
commencement of operations, or charged to expense if the project is abandoned.
At September 30, 1996, pre opening costs of $368,694 are included in other
assets primarily relating to the Times Square Facility.
Foreign Currency Translation
- ----------------------------
Foreign currency denominated assets and liabilities of subsidiaries with local
functional currencies are translated to United States dollars at the prevailing
exchange rates. The effects of translation are recorded in the cumulative
translation component of shareholder's equity.
Income Taxes
- ------------
The Company provides for income taxes in accordance with Statement of Financial
Accounting Standards 109 ("SFAS109"), Accounting for Income Taxes. Deferred
income taxes are provided on the difference in earnings determined for tax and
financial reporting purposes and result primarily from differences in methods
used to amortize production costs.
Income (Loss) Per Share
- -----------------------
Income (Loss) per share is based on the weighted average number of shares of
common stock outstanding during the period.
Statement of Cash Flows
- -----------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Accounting Estimates
- --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities,
9
<PAGE>
disclosures 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.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NOTE PAYABLE
On March 6, 1996, Cinema Ride Edmonton, Inc. obtained a $40,328 loan
($55,000 Canadian dollars) from a Canadian bank at prime plus two percent. The
loan has a term of four years requiring monthly payments of approximately $1,027
($1,400 Canadian dollars) and is guaranteed by the Company. The lender has
first security interest in the equipment and improvements located at the West
Edmonton Facility. The loan also restricts transfer of funds to the Company
other than amounts in excess of cash flow. The loan may be prepaid at any time
without any penalties.
On June 17, 1996, the Company obtained a loan for $600,000 from an
unaffiliated party. The loan was due in sixty days bearing interest at 2% per
month compounded monthly. In connection with obtaining the loan, the Company
agreed to pay the lender a 2 point fee ($12,000), and issue 50,000 warrants to
purchase the Company's common stock at the then fair market value. The Company
repaid this loan during the quarter ended September 30, 1996. As of November 8,
1996 approximately $34,140 of accrued interest remains unpaid relating to this
loan.
During the quarter ended September 30, 1996, the Company obtained several
loans aggregating $437,500 bearing interest at 15% compounded and paid monthly
with the principal balance due at the earlier of one year or at the time the
Company successfully obtains permanent financing. These loans are secured by
certain equipment owned by the Company and by the net cash flow of the Las Vegas
Facility. In connection with obtaining these loans, the Company issued 437,500
shares of the Company's common stock to the lenders. In connection with the
issuance of the shares to the lenders the Company recognized $250,469 in
financing costs which is deferred and is amortized as interest expense over the
life of these loans.
NOTE 2 - COMMITMENT AND CONTINGENCIES
During the quarter ended June 30, 1996, the Company entered into a lease
agreement for a sign to be installed at the Times Square Facility. The lease
term is for sixty months commencing the first month following installation of
the sign. The Company is required to pay $150,000 as a down payment on the
sign, of which, $50,000 was paid during August 1996, $50,000 is due upon
installation, and $50,000 to be paid over the following ten months at a rate of
$5,000 per month. The lease requires monthly payments of $7,950 which includes
taxes and maintenance. The Company has the option to purchase the sign at the
end of the lease term for approximately $45,000. As of September 30, 1996, the
Company accrued $100,000 relating to this lease.
NOTE 3 - STOCKHOLDERS' EQUITY
During the quarter ended September 30, 1996, the Company issued to one of
its officers 30,000 shares of the Company's common stock. The Company recorded
the then fair market value of the shares as additional compensation to the
officer.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
---------------------------------------------------------------------
OF OPERATIONS
- --------------
Although the Company was formed in April 1993, operations of the Company did
not commence until October 1994 when the Las Vegas Facility was opened. The
Company opened its other locations, the West Edmonton Mall Facility and the
Times Square Facility, in August 1995 and September 1996 respectively.
10
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
QUARTER ENDED SEPTEMBER 30, 1996 VS. QUARTER ENDED SEPTEMBER 30, 1995:
Revenues increased by 51% or $336,179 from $665,208 in 1995 to $1,001,387 in
1996. The increase is due to 1) the opening of the Times Square Facility in
September 1996 which contributed $109,259 in revenues for the partial month it
was open, and 2) an increase in revenues at the Las Vegas Facility by 40% or
$225,244 from $562,421 in 1995 to $787,665 in 1996. Revenues from the West
Edmonton Mall Facility which opened in August 1995 remained substantially
unchanged although the facility was open for the full quarter in 1996. In
addition, the Company raised the price of a single ticket to seven dollars from
five dollars. The average ticket price remained under four dollars due to
discounts offered through multiple purchases of tickets. The Company has been
successful in marketing the sale of multiple features tickets which had a
positive contribution to revenues.
Selling, general and administrative expenses decreased by approximately 30% or
$324,432, from $1,085,933 in 1995 to $761,501 in 1996. This decrease is due to
1) a decrease in expenses at the Las Vegas Facility of $203,485 (from
approximately $529,000 in 1995 to approximately $325,000 in 1996) relating
primarily to decreases in wages, advertising, and administrative expenses, 2) a
decrease in corporate expenses of $170,452 (from approximately $418,000 in 1995
to approximately $248,000 in 1996) relating primarily to decreases in
professional fees, insurance reimbursements, advertising and other
administrative expenses, 3) a decrease in expenses at the West Edmonton Mall
Facility of $82,236 (from approximately $135,000 in 1995 to approximately
$53,000 in 1996) relating primarily to decreases in wages, advertising, and
administrative expenses, which was partially offset by an increase in overall
expenses of approximately $131,000 relating to the opening of the Times Square
Facility in September 1996.
Depreciation and amortization increased by 38% or $39,075, from $102,358 in 1995
to $141,433 in 1996 due to the opening of the West Edmonton Mall Facility in
August 1995 which contributed to an increase of approximately $13,000, and due
to the opening of the Times Square Facility in September 1996 which contributed
to an increase of approximately $26,000 in depreciation and amortization during
the quarter.
Interest expense increased by $99,053 from $4,047 in 1995 to $103,100 in 1996
mostly due to the Company's incurring of interest on loans in 1996 and the
amortization of financing costs relating to the Company's issuance of stock to
lenders in connection of obtaining some of these notes as discussed in Note 1 to
the unaudited consolidated financial statements.
Interest income decreased by 47% or $6,266, from $13,194 in 1995 to $6,928 in
1996 mainly due to utilization of cash previously available to the Company from
the proceeds of the Company's public offering.
NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. NINE MONTHS ENDED SEPTEMBER 30 1995:
Revenues increased by 42% or $685,291, from $1,638,064 in 1995 to $2,323,355 in
1996. The increase is due to 1) the opening of the Times Square Facility in
September 1996 which contributed $109,259 in revenues for the partial month it
was open, 2) an increase in revenues at the Las Vegas Facility by 30% or
$457,637 from $1,535,278 in 1995 to $1,992,915 in 1996, and 3) an increase in
revenues at the West Edmonton Mall Facility by 115% or $118,395 from $102,787 in
1995 to $221,182 in 1996 due to the facility being in operation for the full
period in 1996. In addition, the Company raised the price of a single ticket to
seven dollars from five dollars. The average ticket price remained under four
dollars due to discounts offered through multiple purchases of tickets. The
Company has been successful in marketing the sale of multiple features tickets
which had a positive contribution to revenues.
Selling, general and administrative expenses decreased by approximately 16% or
$393,803, from $2,476,062 in 1995 to $2,082,259 in 1996. This decrease is due
to 1) a decrease in expenses at the Las Vegas Facility of $382,581 (from
approximately $1,316,000 in 1995 to approximately $933,000 in 1996) relating
primarily
11
<PAGE>
to decreases in wages, advertising, and administrative expenses, 2) a decrease
in corporate expenses of approximately $167,886 (from approximately $1,025,000
in 1995 to approximately $857,000 in 1996) relating primarily to decreases in
professional fees, insurance, advertising and other administrative expenses,
which was partially offset by increases in salaries 3) an increase in expenses
at the West Edmonton Mall Facility of $25,631 (from approximately $136,000 in
1995 to $162,000 in 1996) relating primarily to decreases in wages, advertising,
and administrative expenses, which was partially offset by an increase in
overall expenses of approximately $131,000 relating to the opening of the Times
Square Facility in September 1996.
Depreciation and amortization increased by 98% or $260,842, from $267,380 in
1995 to $528,222 in 1996 due to 1) the West Edmonton Mall Facility, which was
opened in August 1995, being in operation for the full period in 1996 which
contributed to an increase of approximately $70,000, 2) to the opening of the
Times Square Facility in September 1996 which contributed to an increase of
$26,000, and 3) due to the Company non-recurring change of the useful life of
certain projection equipment from ten to two years which contributed
approximately an additional $171,200 in depreciation during the period.
Interest expense increased by $119,489, from $5,148 in 1995 to $124,637 in 1996
mostly due to the incurring of interest on loans in 1996 and the amortization of
financing costs relating to the Company's issuance of stock to lenders in
connection of obtaining some of these notes as discussed in Note 1 to the
unaudited consolidated financial statements.
Interest income decreased by 82% or $57,836, from $70,770 in 1995 to $12,934 in
1996 mainly due to utilization of cash previously available to the Company from
the proceeds of the Company's public offering.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided in operating activities was $1,312,632 during the nine
months ended September 30, 1996, as compared to the cash used in operating
activities of $986,922 for the same period during the prior year. The increase
of $2,299,554 was primarily due to an increase in accounts payable and accrued
expenses of $710,429, a decrease in losses of $640,927, an increase in
depreciation and amortization of $260,842, an increase in deferred rent of
$178,871, a decrease in customer deposits of $273,000, and a decrease in prepaid
expenses of $141,320.
Net cash used in investing activities decreased by $116,415 from $1,930,078
in 1995 to $1,813,663 in 1996. The decrease is primarily due to costs incurred
by the Company relating to film production.
Net cash provided by financing activities was $473,121 during the nine
months ended September 30, 1996, as compared to the cash used in financing
activities of $102,090 for the same period during the prior year. The increase
of $575,211 was due to a net increase in notes payable of $473,015, which was
partially offset by a decrease in loans aggregating $100,000 made to officers in
1995.
The Company has relied on the proceeds of sales of Common Stock, Redeemable
Warrants, and loans to provide it with the cash necessary to develop its
facilities and ride films and to operate its business.
On March 6, 1996, Cinema Ride Edmonton, Inc. obtained a $40,328 loan
($55,000 Canadian dollars) from a Canadian bank at prime plus two percent. The
loan has a term of four years requiring monthly payments of approximately $1,027
($1,400 Canadian dollars) and is guaranteed by the Company. The lender has
first security interest in the equipment and improvements located at the West
Edmonton Facility. The loan also restricts transfer of funds to the Company
other than amounts in excess of cash flow. The loan may be prepaid at any time
without any penalties.
As discussed in Note 1 to the unaudited consolidated financial statements,
on June 17, 1996, the Company obtained a loan for $600,000 from an unaffiliated
party. The loan was due in sixty days bearing interest at 2% per month
compounded monthly. In connection with obtaining the loan, the Company agreed
12
<PAGE>
to pay the lender a 2 point fee ($12,000), and issue 50,000 warrants to purchase
the Company's common stock at the then fair market value. The Company repaid
this loan during the quarter ended September 30, 1996. As of November 11, 1996
approximately $34,140 of accrued interest remains unpaid relating to this note.
As discussed in Note 1 to the unaudited consolidated financial statements,
during the quarter ended September 30, 1996, the Company obtained loans
aggregating $437,500 bearing interest at 15% paid monthly with the principal
balance due at the earlier of one year or at the time the Company successfully
obtains permanent financing. These loans are secured by certain equipment
owned by the Company and by the net cash flow of the Las Vegas Facility. In
connection with obtaining these loans, the Company issued 437,500 shares of the
Company's common stock to the lenders. In connection with the issuance of the
shares to the lenders the Company recognized $250,469 in financing costs which
is deferred and is amortized as interest expense over the life of these loans.
The Company is currently attempting to obtain the necessary funds to pay
expenses incurred relating to the completion of the Times Square Facility and
other current expenses through debt or equipment financing. As of September 30,
1996, the Company had incurred costs of approximately $3,100,000 relating to the
Times Square Facility (excluding costs relating to signage). These costs
include the construction of the motion simulators, costs of securing the lease,
and costs of leasehold improvements. The Times Square Facility was completed
and commenced operations in September 1996. The Company does not expect to
incur any additional material expenses relating to this facility. As of this
date, approximately $800,000 remains unpaid relating to the construction and
completion of this facility. To date the Company has not secured the financing
required to pay for costs already incurred related to this facility. There also
can be no assurance that the Company will be successful in obtaining the
required financing to meet its current obligations.
As of this date, three subcontractors who performed work at the Times Square
Facility filed mechanic's liens with the Clerk of the County of New York
aggregating approximately $300,000. The Company is disputing the total amounts
claimed by the vendors. The landlord at the Times Square Facility notified the
Company that it will be in default of the lease if these liens are not
discharged by November 14, 1996. The Company is currently attempting to resolve
these matters with the vendors. There can be no assurance that the company will
be successful in its attempts to discharge these liens by the required date.
As of September 30, 1996, the Company had commitments to purchase two
capsules designated for the Company's own use to operate or for sales to third
party. As of September 30, 1996, approximately $110,000 remains unpaid relating
to the construction of the remaining two capsules, which will become due upon
installation and acceptance. As of September 30, 1996, the Company has accrued
$66,000 relating to the completion and installation of the three capsules at the
Times Square Facility.
The Company is currently in production of a ski and snowboard film which is
being produced by Warren Miller Entertainment. As of September 30, 1996, the
Company anticipates an additional $70,000 in expenses relating to the production
of this film, of which $60,000 has been accrued by the Company. The film is
scheduled to be released in 1997. The Company has been performing additional
work on its previously released films adding more special effects and reworking
some scenes. As of September 30, 1996, the Company anticipates additional
expenditures of approximately $70,000 relating to the completion of this rework,
of which the Company has accrued approximately $25,000.
As of September 30, 1996, the Company had a negative working capital of
$1,755,568. The Company has and is continuing to take steps to reduce its
expenses without impacting its operations. Management believes that the
existing funds, combined with the Company's ability to generate cash from its
operations and through lease or debt financing of the Company's existing
equipment, or through equity financing, will be adequate to finance current
levels of activity. However, the Company has not been able to secure any
financing as of this date, which is necessary to pay for expenses already
incurred relating to the Times Square Facility, as well as other current
obligations. Additional funds will be required to finance the opening of
additional locations. There can be no assurance that the Company will be
successful in obtaining the necessary funds to
13
<PAGE>
finance the opening of any additional locations.
COMPANY OUTLOOK:
IDENTIFY AND DEVELOP NEW SITES FOR ATTRACTIONS
The Company is currently seeking additional locations for attractions. The
Company's goal is to open approximately three more facilities over the next two
years. In general, the Company will attempt to locate sites for its attractions
(i) which are in large metropolitan areas or which are at tourist destinations
which attract more than three million persons per year, (ii) at which the
Company can lease high-profile, high-traffic space at a reasonable cost, (iii)
which are in areas with a large number of permanent residents and which do not
have extreme seasonal attendance patterns, and (iv) which are at or near other
complementary tourist attractions.
The Company believes that each new attraction will take approximately four
to six months from lease execution to commencement of operations. Total cost of
developing new attractions, including construction, fixtures, equipment and
start-up costs after completion are estimated to be at least $1,250,000 per two-
capsule site. These costs will vary depending on the leased space, the scope of
any tenant improvements required to be performed by the Company in connection
with leasing a given location and the number of capsules installed, as well as
the size and location of the planned attraction.
The Company anticipates that three more locations will be added in the next
two years, with each location consisting of at least two capsules, at a cost of
at least $1,250,000 per location. Accordingly, the Company expects to spend
approximately an additional $3,750,000 on the acquisition and installation of
three more locations in the next two years. In addition to the costs of the
equipment necessary to establish a new attraction location, the Company expects
to add approximately thirty employees per each additional two-capsule location
that it owns and operates.
In order to reduce the out-of-pocket costs in the development of
attractions, the Company may also explore joint venture arrangements with third
parties. The Company and its co-venturer would then split the profits, if any,
from the attraction based on their respective contributions to the venture.
SIMULATOR SALES, JOINT VENTURES, AND RIDE FILM LEASING
The Company intends to actively pursue the sale or joint venturing of
simulator equipment to property owners and businesses that wish to operate
attractions of their own. The sale of simulators to third parties would provide
the Company with an additional source of revenues and profits with a lower
degree of risk than is associated with owning and operating systems. Additional
revenues would be generated from the leasing of the Company's library of ride
films to purchasers of the Company's simulators or to operators of already
existing simulators. The Company does not intend to sell simulators or ride
films into markets in which it expects to operate its own attractions.
It is expected that the Company's management will continue to be responsible
for the marketing of the Company's simulators and ride films for sale and/or
leasing. However, the Company may retain the services of outside or in-house
sales representative to locate potential purchasers of simulators and licensees
of ride films.
The Company is currently considering opening and operating entertainment
centers in several shopping malls and other locations across the country. The
entertainment centers will consist of, in addition to the Company's own
simulator equipment, other entertainment attractions and games, as well as
offering a food and beverage area. The Company may decide to sublease part of
these entertainment centers to third parties to operate. The concept of opening
and operating entertainment centers by the Company is in its preliminary
planning stage.
14
<PAGE>
SEASONALITY OF BUSINESS
Because of the seasonal nature of tourist traffic, attendance patterns at
attractions may vary. The nature and degree of this seasonality will vary among
attractions depending on the nature of tourist and local traffic patterns at a
given location as well as the nature of entertainment alternatives available to
audiences. The Company expects that attendance at its facilities will be the
highest in June through September (the height of the tourist season) and lowest
during January and February. The West Edmonton Mall Facility is more effected by
seasonality as compared to the Las Vegas Facility due to the extreme weather
conditions during the Winter months in Alberta, Canada. As a result, the
Company's results of operations at its three facilities will depend upon sales
generated from the peak tourist periods and any significant decrease in sales
for such periods could have a material adverse effect upon the Company's
operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
The Company is not currently involved in any legal proceedings that it
believes could have, either individually or in the aggregate, a material adverse
effect on its business or financial condition.
ITEM 6. EXHIBITS AND REPORTS IN FORM-8-K
(A) EXHIBITS
The following exhibits are submitted herewith:
Exhibit 27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended September 30,
1996.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CINEMA RIDE, INC.
BY: /S/ MITCH FRANCIS
----------------------------------
MITCH FRANCIS, PRESIDENT
SIGNATURE DATE
--------- ----
/S/ MITCH FRANCIS NOVEMBER 8, 1996
- -------------------------------------------- ----------------
Mitch Francis
Chairman of the Board, President, Chief
Executive Officer and Director (principal
executive officer)
/S/ GARY H. PACKMAN NOVEMBER 8, 1996
- -------------------------------------------- ----------------
Gary H. Packman
Chief Operating Officer, Executive Vice
President, Secretary, Treasurer and Director
/S/ TOUFIC R. BASSIL NOVEMBER 8, 1996
- -------------------------------------------- ----------------
Toufic R. Bassil
Chief Financial Officer
(principal financial officer,
principal accounting officer).
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 116,629
<SECURITIES> 0
<RECEIVABLES> 134,525
<ALLOWANCES> 0
<INVENTORY> 60,574
<CURRENT-ASSETS> 311,728
<PP&E> 6,424,620
<DEPRECIATION> 675,871
<TOTAL-ASSETS> 7,677,011
<CURRENT-LIABILITIES> 2,067,296
<BONDS> 0
0
0
<COMMON> 50,375
<OTHER-SE> 5,025,779
<TOTAL-LIABILITY-AND-EQUITY> 7,677,011
<SALES> 2,323,355
<TOTAL-REVENUES> 2,323,355
<CGS> 0
<TOTAL-COSTS> 2,610,481
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,637
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (398,829)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
