<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
[ ] TRANSITION REPORT UNDER 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 small business issuer 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, Suite 340, Studio City, California 91604
--------------------------------------------------------------
(Address of principal executive offices)
(818) 761-1002
--------------------------
(Issuer's telephone number)
Not applicable
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of October 31, 1999, the Company had 731,823 shares of common stock issued
and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Documents incorporated by reference: None.
<PAGE>
CINEMA RIDE, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) - December 31, 1998
and September 30, 1999
Consolidated Statements of Operations (Unaudited) - Three
months and nine months ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows (Unaudited) - Nine
months ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements (Unaudited) - Nine
Months Ended September 30, 1999 and 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
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Cinema Ride, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 264,826 $ 240,341
Inventories 19,131 8,666
Prepaid expenses and other
current assets 27,418 62,577
---------- ----------
Total current assets 311,375 311,584
---------- ----------
Property and equipment:
Office equipment and furniture 105,249 105,477
Equipment under capital lease 139,474 139,474
Lease improvements 946,515 946,515
Theater and film equipment 1,655,805 1,653,798
---------- ----------
2,847,043 2,845,264
Accumulated depreciation (1,615,321) (1,390,528)
---------- ----------
1,231,722 1,454,736
---------- ----------
Other assets:
Film library, net of accumulated
amortization of $850,668 and
$676,293 242,103 416,477
Investment in joint venture 429,546 473,957
Receivables from officers 95,264 89,631
Consulting agreement 31,213 39,016
Deferred lease costs and other
assets 126,761 156,679
---------- ----------
924,887 1,175,760
---------- ----------
Total assets $2,467,984 $2,942,080
========== ==========
</TABLE>
(continued)
3
<PAGE>
Cinema Ride, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited) (continued)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 159,372 $ 243,480
Current portion of capital
lease obligations 21,583 18,985
Current portion of note payable
to lender (Note 2) 95,166 111,386
Current portion of note payable
to bank 2,293 10,052
----------- -----------
Total current liabilities 278,414 383,903
----------- -----------
Non-current liabilities:
Obligations under capital lease,
less current portion 46,476 63,004
Note payable to lender, less
current portion (Note 2) 755,259 782,849
Deferred rent 90,051 109,157
----------- -----------
891,786 955,010
----------- -----------
Total liabilities 1,170,200 1,338,913
----------- -----------
Stockholders' equity (Notes 3 and 4):
Preferred stock, $.01 par value -
Authorized - 500,000 shares
Issued - None
Common stock, $.08 par value -
Authorized - 20,000,000 shares
Issued - 731,823 shares 58,546 58,546
Additional paid-in-capital 9,212,209 9,175,780
Treasury stock, at cost - 6,473
shares at December 31, 1998 (29,000)
Accumulated deficit (7,972,971) (7,602,159)
----------- -----------
Total stockholders' equity 1,297,784 1,603,167
----------- -----------
Total liabilities and
stockholders' equity $ 2,467,984 $ 2,942,080
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues $711,437 $708,901
Selling, general and
administrative expenses 508,265 557,346
Depreciation and amortization 135,280 137,838
------- -------
Income from operations 67,892 13,717
Other income (expense)
Equity in net income
of joint venture 12,610 4,489
Interest income 3,610 6,727
Interest expense (42,495) (54,565)
------- -------
Net income (loss) $ 41,617 $(29,632)
======= =======
Basic and diluted net income
(loss) per common share
(Note 1) $0.06 $ (0.04)
======= =======
Weighted average common
shares outstanding -
basic and diluted 731,823 731,885
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues $1,883,764 $1,869,919
Selling, general and
administrative expenses 1,692,093 1,797,050
Depreciation and amortization 407,239 446,385
--------- ---------
Loss from operations (215,568) (373,516)
Other income (expense)
Equity in net income
of joint venture 58,189 4,489
Interest income 8,893 21,769
Interest expense (157,706) (179,743)
Fair value of warrants
issued to Chief
Executive Officer as
commitment fee for line
of credit (Note 4) (64,620)
--------- ---------
Operating loss before
extraordinary item (370,812) (527,001)
Extraordinary item -
settlement with vendors 56,413
--------- ---------
Net loss $(370,812) $(470,588)
========= =========
Basic and diluted loss per
common share (Note 1):
Operating loss before
extraordinary item $(0.51) $(0.72)
Extraordinary item 0.08
--------- ---------
Net loss ($0.51) $(0.64)
========= =========
Weighted average common
shares outstanding -
basic and diluted 731,823 731,273
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($370,812) ($470,588)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 407,239 446,385
Common stock issued for services
rendered 809 3,107
Equity in net income of joint
venture (58,189) (4,489)
Amortization of consulting
agreement 7,803 7,803
Amortization of deferred
financing costs 9,314 32,190
Settlement with vendors (56,413)
Fair value of warrants issued
to Chief Executive Officer
as commitment fee for line
of credit 64,620
Changes in operating assets and
liabilities:
(Increase) decrease in:
Inventories (10,465) 13,206
Prepaid expenses and other
current assets 35,159 (9,185)
Receivable from Times Square
landlord 500,000
Deposits 12,532
Increase (decrease) in:
Accounts payable and
accrued expenses (85,887) (195,237)
Deferred rent (19,106) (22,469)
--------- ---------
Net cash provided by (used in)
operating activities (6,983) 244,310
--------- ---------
</TABLE>
(continued)
7
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Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures $ ($ 16,018)
Film production costs (2,643)
Investment in joint venture (4,376) (95,924)
Dividends received from joint
venture 106,976
Increase in receivables from
officers (5,633) (35,000)
Deferred lease costs and other
assets (9,000)
-------- --------
Net cash provided by (used in)
investing activities 96,967 (158,585)
-------- --------
Cash flows from financing activities:
Payments on notes payable (51,569) (246,405)
Principal payments on capital
lease obligations (13,930) (112,647)
-------- --------
Net cash used in financing
activities (65,499) (359,052)
-------- --------
Cash and cash equivalents:
Net increase (decrease) 24,485 (273,327)
At beginning of period 240,341 705,630
-------- --------
At end of period $264,826 $432,303
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
Cinema Ride, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Nine Months Ended September 30, 1999 and 1998
1. Organization and Basis of Presentation
Basis of Presentation - The accompanying consolidated financial statements
include the operations of Cinema Ride, Inc. and its wholly-owned subsidiaries
(the "Company"). All significant intercompany transactions and balances have
been eliminated in consolidation.
The Company's investment in joint venture is accounted for under the equity
method of accounting, whereby the Company recognizes its share of the joint
venture's net income or loss and accordingly, the carrying value of the
Company's investment in joint venture in the accompanying consolidated balance
sheets is adjusted.
Business - The Company is in the business of developing and operating rides
consisting of motion simulator attractions that combine projected
three-dimensional action films of approximately four minutes in duration with
computer-controlled, hydraulically-mobilized capsules that are programmed to
move in concert with the on-screen action. The Company currently operates rides
in Las Vegas, Nevada; Edmonton, Alberta, Canada; and Atlanta, Georgia. The
Company plans to open a new ride in Elizabeth, New Jersey in December 1999.
Comments - The accompanying consolidated financial statements are unaudited, but
in the opinion of management of the Company, contain all adjustments, which
include normal recurring adjustments, necessary to present fairly the financial
position at September 30, 1999, the results of operations for the three months
and nine months ended September 30, 1998 and 1999, and the cash flows for the
nine months ended September 30, 1998 and 1999. The consolidated balance sheet as
of December 31, 1998 is derived from the Company's audited financial statements.
Certain information and footnote disclosures normally included in financial
statements that have been presented in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, although management of
the Company believes that the disclosures contained in these financial
statements are adequate to make the information presented therein not
misleading. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998, as filed with the Securities
and Exchange
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Commission.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
The results of operations for the three months and nine months ended September
30, 1999 are not necessarily indicative of the results of operations to be
expected for the full fiscal year ending December 31, 1999.
Going Concern - The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The carrying amounts of assets and liabilities
presented in the accompanying consolidated financial statements do not purport
to represent the realizable or settlement values. The Company has suffered
recurring operating losses and had a working capital deficit at December 31,
1998 that has impaired its ability to obtain additional financing. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. As a result, the Company's independent certified public accountants
have included a modification paragraph in their report on the Company's
consolidated financial statements for the year ended December 31, 1998.
Reclassification - Certain prior period amounts have been reclassified to
conform to the current year presentation.
Foreign Currency Translation - Foreign currency denominated assets and
liabilities of the subsidiary where the United States dollar is the functional
currency and which have certain transactions denominated in a local currency are
remeasured as if the functional currency was the United States dollar. The
remeasurement of local currency into United States dollars creates translation
adjustments which are included in the statement of operations.
Loss Per Share - Basic earnings per share are calculated by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects the potential dilution that would
occur if stock options and warrants were exercised. These potentially dilutive
securities were anti-dilutive for all periods presented, and accordingly, basic
and diluted earnings per share are the same for all periods presented. As of
September 30, 1999, potential common
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<PAGE>
stock consisted of 184,813 stock options and 1,899,535 warrants outstanding.
2. Note Payable to Lender
On December 31, 1996, the Company completed a financing agreement (the
"Financing Agreement") with Finova Technology Finance, Inc. (the "Lender")
structured as a sale-leaseback transaction of certain equipment owned by the
Company. Based on the substance of this transaction, the Financing Agreement was
accounted for as a note payable for financial reporting purposes. The gross loan
amount was for $1,575,027 and the original terms specified a four-year term with
payments of $40,903 per month and a balloon payment at the end of the term of
$157,503. On March 10, 1999, the Financing Agreement was amended to reduce the
monthly payments from $40,903 to $21,789 and to extend the maturity date from
January 1, 2001 to January 1, 2004, with no change in the balloon payment of
$157,503. The loan bears interest at 15.7% per annum. The Financing Agreement
requires the Company to repurchase the equipment at the end of the lease for
$1.00. The loan had a balance of $850,425 and $894,235 at September 30, 1999 and
December 31, 1998, respectively.
3. Stockholders' Equity
During January 1998, the Company issued 6,474 shares of common stock to its
former Chief Financial Officer. The Company recorded the issuance of such shares
as additional compensation to the former Chief Financial Officer at the
aggregate fair market value of $3,107 during the nine months ended September 30,
1998.
During April 1997, the Company paid $29,000 to repurchase 6,473 shares of its
common stock previously issued to one of its vendors. During February 1999, the
Company reissued these 6,473 shares held as treasury stock to its former Chief
Financial Officer. The Company recorded the issuance of such shares as
additional compensation to the former Chief Financial Officer at the aggregate
fair market value of $809 during the nine months ended September 30, 1999. The
$28,191 difference between the original cost of the treasury shares of $29,000
and the fair market value on the date of issuance of $809 was charged to
additional paid-in capital.
11
<PAGE>
4. Warrants Issued to Chief Executive Officer
On February 2, 1999, the Company entered into a loan agreement with its Chief
Executive Officer. The loan agreement amended outstanding notes receivable,
including accrued interest, of approximately $90,000 from such officer to grant
the Company the right to demand repayment within 90 days of a written request.
In addition, the loan agreement included a line of credit for $120,000 that the
Chief Executive Officer provided to the Company that expires on February 2,
2002, with interest at 12% per annum, which is secured by a lien on the
Company's assets. As consideration for providing the line of credit, the Company
granted the Chief Executive Officer warrants to purchase 1,527,461 shares of
common stock at an exercise price of $0.13 per share, the fair market value on
the date of the agreement, expiring on February 2, 2002.
During November 1999, the Company borrowed $120,000 from its Chief Executive
Officer under the line of credit, and received $85,000 as repayment of the
principal balance of the aforementioned notes receivable from the Chief
Executive Officer.
The Company accounts for stock options and warrants granted to non-employees in
accordance with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation", which establishes a fair value method of
accounting for stock-based compensation plans and for transactions in which an
entity acquires goods or services in exchange for equity instruments. The
Company calculated the fair value of the warrants issued to the Chief Executive
Officer on the date of grant using the Black-Scholes option pricing model, and
charged the fair value of $64,620 to operations as a loan commitment fee during
the nine months ended September 30, 1999.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Quarterly Report on Form 10-QSB for the quarterly period ended September
30, 1999 contains "forward-looking" statements within the meaning of the Federal
securities laws. These forward-looking statements include, among others,
statements concerning the Company's expectations regarding its working capital
requirements, its business, growth prospects, competition and results of
operations, and other statements of expectations, beliefs, future plans and
strategies, anticipated events or trends, and similar expressions concerning
matters that are not historical facts. The forward-looking statements in this
Quarterly Report on Form 10-QSB for the quarterly period ended September 30,
1999 are subject to risks and uncertainties that could cause actual results to
differ materially from those results expressed in or implied by the statements
contained herein.
Overview:
The Company was formed in April 1993, and operations of the Company commenced in
October 1994 when the Las Vegas Facility was opened. The Company opened its
other locations, the West Edmonton Mall Facility, the Times Square Facility, and
the Atlanta Facility, in August 1995, September 1996 and September 1998,
respectively. The Company closed the Times Square Facility in January 1998. The
Company plans to open a new facility at a factory outlet/entertainment mall in
Elizabeth, New Jersey near Newark Airport in December 1999.
Going Concern:
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The carrying amounts of assets and liabilities presented in the
accompanying consolidated financial statements do not purport to represent the
realizable or settlement values. The Company has suffered recurring operating
losses and had a working capital deficit at December 31, 1998 that has impaired
its ability to obtain additional financing. These factors raise substantial
doubt about the Company's ability to continue as a going concern. As a result,
the Company's independent certified public accountants have included a
modification paragraph in their report on the Company's consolidated financial
statements for the year ended December 31, 1998.
The Company intends to manage its short-term liquidity
13
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requirements through a modified financing arrangement with its Lender and
borrowings under its line of credit provided by its Chief Executive Officer
(see "Liquidity and Capital Resources - September 30, 1999" below). The
Company believes that its previous efforts to operate more efficiently will
result in reduced expenses and improved operating cash flows in the future.
Management believes that these previous efforts, combined with the modified
financing arrangement with the Lender and the line of credit provided by the
Chief Executive Officer, will be adequate to fund operations as well as the
costs associated with the new ride facility in Elizabeth, New Jersey.
However, there can be no assurances that the Company will be able to realize
any benefit from improved operating efficiencies that will result in
increased operating cash flows.
In addition, the Company is continuing its efforts to secure working capital for
operations, expansion and possible acquisitions, mergers or joint ventures. The
Company is also considering a wide range of other business opportunities, some
of which are unrelated to the Company's current business activities and could
result in a change in control of the Company. There can be no assurances that
the Company will be able to secure the working capital necessary to fund any
future business endeavor on a timely basis and/or under acceptable terms and
conditions.
Results of Operations:
Three Months Ended September 30, 1999 and 1998 -
Revenues remained relatively constant, increasing by $2,536 to $711,437 in 1999
from $708,901 in 1998.
Selling, general and administrative expenses decreased by 9% or $49,081, to
$508,265 in 1999 from $557,346 in 1998, primarily as a result of the Company's
former Chief Financial Officer leaving the Company effective March 1, 1999.
Depreciation and amortization remained relatively constant, decreasing by 2% or
$2,558, to $135,280 in 1999 from $137,838 in 1998.
Interest expense decreased by 22% or $12,070, to $42,495 in 1999 from $54,565 in
1998.
Equity in net income of joint venture increased by $8,121, to $12,610 in 1999
from $4,489 in 1998.
Net income was $41,617 for the three months ended September 30, 1999, as
compared to a net loss of $29,632 for the three months ended September 30, 1998.
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Nine Months Ended September 30, 1999 and 1998 -
Revenues remained relatively constant, increasing by 1% or $13,845, to
$1,883,764 in 1999 from $1,869,919 in 1998. Included in 1998 revenues is
approximately $70,000 of revenues from the Times Square Facility prior to its
closure in January 1998. However, as a result of new marketing programs
implemented during 1999 that increased both traffic and sales per customer at
the Las Vegas Facility, the Las Vegas Facility generated a sufficient increase
in revenues in 1999 to more than offset the loss of revenues from the Times
Square Facility.
Selling, general and administrative expenses decreased by 6% or $104,957, to
$1,692,093 in 1999 from $1,797,050 in 1998, primarily as a result of the closure
of the Times Square Facility in January 1998. Included in selling, general and
administrative expenses in 1999 is a charge of $70,000 related to the Company's
former Chief Financial Officer leaving the Company effective March 1, 1999.
Depreciation and amortization decreased by 9% or $39,146, to $407,239 in 1999
from $446,385 in 1998, primarily as a result of depreciation and amortization
related to the Times Square Facility, which was closed in January 1998.
Interest expense decreased by 12% or $22,037, to $157,706 in 1999 from $179,743
in 1998.
As consideration for providing a line of credit to the Company, the Company
granted the Chief Executive Officer warrants to purchase 1,527,461 shares of
common stock at an exercise price of $0.13 per share, the fair market value on
the date of the agreement, expiring on February 2, 2002. The Company calculated
the fair value of the warrants issued to the Chief Executive Officer on the date
of grant using the Black-Scholes option pricing model, and charged the fair
value of $64,620 to operations as a loan commitment fee during the nine months
ended September 30, 1999.
Equity in net income of joint venture increased by $53,700, to $58,189 in 1999
from $4,489 in 1998.
The Company recorded an extraordinary item relating to a settlement with vendors
of $56,413 during the nine months ended September 30, 1998.
Net loss was $370,812 for the nine months ended September 30, 1999, as compared
to a net loss of $470,588 for the nine months ended September 30, 1998.
Liquidity and Capital Resources - September 30, 1999:
15
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The Company utilized cash of $6,983 in operating activities during the nine
months ended September 30, 1999, as compared to utilizing cash of $255,690
during the nine months ended September 30, 1998, excluding the collection of the
$500,000 receivable from the Times Square landlord during the nine months ended
September 30, 1998. The reduction in cash utilized in operating activities in
1999 as compared to 1998 of $248,707 was primarily a result of improved
operating results, a reduction in cash utilized for accounts payable and accrued
expenses, and the non-cash commitment fee for a line of credit charged to
operations in 1999. At September 30, 1999, cash and cash equivalents had
increased by $24,485, to $264,826, as compared to $240,341 at December 31, 1998.
As a result, the Company had working capital of $32,961 at September 30, 1999,
as compared to a working capital deficit of ($72,319) at December 31, 1998,
resulting in current ratios of 1.12:1 and .81:1 at September 30, 1999 and
December 31, 1998, respectively.
Net cash provided by investing activities was $96,967 for the nine months ended
September 30, 1999, primarily as a result of $106,976 of dividends received from
the Company's joint venture with Dave & Buster's, Inc. Net cash used in
investing activities was $158,585 for the nine months ended September 30, 1998,
primarily as a result of an investment in joint venture of $95,924 and a $35,000
loan to the Company's Chief Executive Officer.
Net cash used in financing activities was $65,499 and $359,052 for the nine
months ended September 30, 1999 and 1998, respectively, as a result of principal
payments on notes payable and capital lease obligations.
The Company has relied on the proceeds from the sale of its securities and from
loans and equipment leases to provide the cash necessary to develop its
facilities and ride films and to operate its business.
On December 31, 1996, the Company completed a financing agreement (the
"Financing Agreement") with Finova Technology Finance, Inc. (the "Lender")
structured as a sale-leaseback transaction of certain equipment owned by the
Company. Based on the substance of this transaction, the Financing Agreement was
accounted for as a note payable for financial reporting purposes. The gross loan
amount was for $1,575,027 and the original terms specified a four-year term with
payments of $40,903 per month and a balloon payment at the end of the term of
$157,503. On March 10, 1999, the Financing Agreement was amended to reduce the
monthly payments from $40,903 to $21,789 and to extend the maturity date from
January 1, 2001 to January 1, 2004, with no change in the balloon payment of
$157,503. The loan bears interest at 15.7% per annum. The Financing Agreement
requires the Company to repurchase the equipment at the end of the lease for
$1.00. The loan had a balance of $850,425 and $894,235 at September 30, 1999 and
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December 31, 1998, respectively.
On February 2, 1999, the Company entered into a loan agreement with its Chief
Executive Officer. The loan agreement amended outstanding notes receivable,
including accrued interest, of approximately $90,000 from such officer to grant
the Company the right to demand repayment within 90 days of a written request.
In addition, the loan agreement included a line of credit of $120,000 that the
Chief Executive Officer provided to the Company that expires on February 2,
2002, with interest at 12% per annum, which is secured by a lien on the
Company's assets. As consideration for providing the line of credit, the Company
granted the Chief Executive Officer warrants to purchase 1,527,461 shares of
common stock at an exercise price of $0.13 per share, the fair market value on
the date of the agreement, expiring on February 2, 2002.
During November 1999, the Company borrowed $120,000 from its Chief Executive
Officer under the line of credit, and received $85,000 as repayment of the
principal balance of the aforementioned notes receivable from the Chief
Executive Officer. The aggregate proceeds of $205,000 are being utilized to fund
the costs associated with the installation of the Company's new ride facility in
Elizabeth, New Jersey, which is currently scheduled to open in December 1999.
Las Vegas Facility Lease:
The Company currently generates the majority of its revenues from the Las Vegas
Facility. In connection with the December 1995 amendment to the Las Vegas
Facility lease, the Company waived, on a one-time only basis, its exclusivity
right within the Forum Shops at Caesar's Palace Hotel and Casino to allow an
IMAX Simulator Theater to be installed within the Forum Shops. However, the
Company obtained the right to terminate its lease if the Company's sales for any
full lease year after opening of the IMAX Simulator Theater do not equal or
exceed $2,000,000, and in return the landlord obtained the right to terminate
the lease if sales for any full lease year do not equal or exceed $1,500,000.
The IMAX Simulator Theater opened during December 1997. Management does not
believe that the Company has experienced any significant decrease in revenues at
its Las Vegas Facility subsequent to that date as a result of the opening of the
IMAX Simulator Theater. However, there can be no assurances that revenues in
subsequent years at the Las Vegas Facility will not decrease below $1,500,000
annually and that the landlord will not terminate the lease.
Seasonality:
Because of the seasonal nature of tourist traffic, attendance patterns at
attractions may vary. The degree of this seasonality
17
<PAGE>
varies 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 highest during June through August (the height of the
tourist season) and lowest during January and February. The West Edmonton
Mall Facility is more effected by seasonality than the Las Vegas Facility due
to the extreme weather conditions during the winter months in Alberta,
Canada. The revenues generated during peak tourist periods have a significant
impact on the Company's results of operations.
Year 2000 Issue:
The Year 2000 issue results from the fact that certain computer programs have
been written using two digits rather than four digits to define the applicable
year. Computer programs that have date sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, sell tickets
or engage in similar normal business activities.
Based on a recent internal assessment, the Company has determined that its
software programs are already Year 2000 compliant, or that the cost of any
needed modifications will not have a material effect on the Company's
consolidated financial position, results of operations and cash flows.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K:
Three Months Ended September 30, 1999 - None
19
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CINEMA RIDE, INC.
-----------------
(Registrant)
/s/ MITCHELL J. FRANCIS
Date: November 10, 1999 By: __________________________
Mitchell J. Francis
Chief Executive Officer,
President, Chief Financial
Officer and Chairman of
the Board of Directors
(Duly Authorized Officer
and Chief Financial
Officer)
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S QUARTERLY
REPORT ON FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 264,826
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 19,131
<CURRENT-ASSETS> 311,375
<PP&E> 2,847,043
<DEPRECIATION> 1,615,321
<TOTAL-ASSETS> 2,467,984
<CURRENT-LIABILITIES> 278,414
<BONDS> 801,735
0
0
<COMMON> 58,546
<OTHER-SE> 1,239,238
<TOTAL-LIABILITY-AND-EQUITY> 2,467,984
<SALES> 0
<TOTAL-REVENUES> 1,883,764
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,706
<INCOME-PRETAX> (370,812)
<INCOME-TAX> 0
<INCOME-CONTINUING> (370,812)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (370,812)
<EPS-BASIC> (.51)
<EPS-DILUTED> (.51)
</TABLE>
