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 March 31, 2000
[ ] 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 April 30, 2000, the Company had 779,823 shares of common stock issued and
outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Documents incorporated by reference: None.
CINEMA RIDE, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) - December 31,
1999 and March 31, 2000
Consolidated Statements of Operations (Unaudited) -
Three Months Ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements
(Unaudited) - Three Months Ended March 31, 2000 and
1999
Item 2. Management's Discussion and Analysis or Plan of
Operation
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Cinema Ride, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 149,832 $ 320,189
Prepaid expenses and other
current assets 40,326 25,804
--------- ---------
Total current assets 190,158 345,993
--------- ---------
Property and equipment:
Office equipment and furniture 107,007 105,249
Equipment under capital lease 208,236 204,858
Lease improvements 1,061,682 1,051,723
Theater and film equipment 1,679,782 1,673,132
--------- ---------
3,056,707 3,034,962
Accumulated depreciation (1,764,821) (1,688,658)
--------- ---------
1,291,886 1,346,304
--------- ---------
Other assets:
Film library, net of accumulated
amortization of $887,497 and
$869,930 at March 31, 2000 and
December 31, 1999, respectively 205,273 222,840
Investment in joint venture 398,716 411,663
Receivables from officers 4,469 8,069
Consulting agreement 26,010 28,611
Deferred lease costs and other
assets 115,172 123,967
--------- ---------
749,640 795,150
--------- ---------
Total assets $2,231,684 $2,487,447
========= =========
</TABLE>
(continued)
Cinema Ride, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited) (continued)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 187,299 $ 219,125
Current portion of capital
lease obligations 44,091 40,381
Current portion of note payable
to lender 136,937 133,077
Current portion of note payable
to bank 416
--------- ---------
Total current liabilities 368,327 392,999
--------- ---------
Non-current liabilities:
Obligations under capital lease,
less current portion 75,494 84,660
Note payable to lender, less
current portion 661,942 697,072
Deferred rent 78,070 84,061
Loan payable to officer 120,000 120,000
--------- ---------
935,506 985,793
--------- ---------
Total liabilities 1,303,833 1,378,792
--------- ---------
Stockholders' equity (Note 2):
Preferred stock, $.01 par value -
Authorized - 500,000 shares
Issued - None
Common stock, $.08 par value -
Authorized - 20,000,000 shares
Issued and Outstanding -
779,823 shares and 731,823
shares at March 31, 2000 and
December 31, 1999, respectively 62,386 58,546
Additional paid-in-capital 9,220,369 9,212,209
Accumulated deficit (8,354,904) (8,162,100)
--------- ---------
Total stockholders' equity 927,851 1,108,655
--------- ---------
Total liabilities and
stockholders' equity $2,231,684 $2,487,447
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
Revenues $658,485 $511,458
Selling, general and
administrative expenses 643,531 538,169
Start-up costs for New Jersey
Facility (Note 3) 74,421
Depreciation and amortization 96,420 136,363
------- -------
Loss from operations (155,887) (163,074)
Other income (expense):
Equity in net income
of joint venture 8,161 18,055
Interest income 1,336 3,002
Interest expense (46,414) (53,999)
Fair value of warrants issued
to officer as commitment fee
for line of credit (64,620)
------- -------
Net loss ($192,804) ($260,636)
======= =======
Basic and diluted net loss
per common share (Note 1) ($0.25) ($0.36)
==== ====
Weighted average common
shares outstanding -
basic and diluted 775,823 729,665
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($192,804) ($260,636)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 96,420 136,363
Common stock issued for services
rendered 12,000 809
Equity in net income of joint
venture (8,161) (18,055)
Amortization of consulting
agreement 2,601 2,601
Amortization of deferred
financing costs 3,105 3,104
Fair value of warrants issued
to officer as commitment fee
for line of credit 64,620
Changes in operating assets and
liabilities:
(Increase) decrease in:
Inventories (3,386)
Prepaid expenses and other
current assets (14,522) 11,877
Other receivables 438
Deposits 3,000 9,000
Increase (decrease) in:
Accounts payable and
accrued expenses (31,826) (131,734)
Deferred rent (5,991) (5,990)
------- ---------
Net cash used in operating
activities (136,178) (190,989)
------- ---------
</TABLE>
(continued)
Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from investing activities:
Purchase of property and equipment $(21,745) $
Investment in joint venture (8,285)
Dividends received from joint
venture 21,108 41,537
(Increase) decrease in receivables
from officers 3,600 (1,840)
------- -------
Net cash provided by investing
Activities 2,963 31,412
------- -------
Cash flows from financing activities:
Proceeds from notes payable 22,337
Payments on notes payable (31,686) (2,490)
Principal payments on capital
lease obligations (5,456) (4,446)
------- -------
Net cash provided by (used in)
financing activities (37,142) 15,401
------- -------
Cash and cash equivalents:
Net decrease (170,357) (144,176)
At beginning of period 320,189 240,341
------- -------
At end of period $149,832 $ 96,165
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
Cinema Ride, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Three Months Ended March 31, 2000 and 1999
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 3-D motion simulator attractions and filmed entertainment that
combines 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. With regard to the
technology employed by the Company in its ride facilities, on January 12, 1999,
the Company was granted Patent No. 5,857,917 by the United States Patent and
Trademark Office for 3-D video projected motion simulator rides. The Company
currently operates ride facilities in Las Vegas, Nevada; Edmonton, Alberta,
Canada; Atlanta, Georgia; and Elizabeth, New Jersey.
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 March 31, 2000, the results of operations for the three months ended
March 31, 2000 and 1999, and the cash flows for the three months ended March 31,
2000 and 1999. The consolidated balance sheet as of December 31, 1999 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, 1999, as filed with the Securities
and Exchange 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 ended March 31, 2000 are not
necessarily indicative of the results of operations to be expected for the full
fiscal year ending December 31, 2000.
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,
1999 and March 31, 2000 that may impair 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,
1999.
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 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
March 31, 2000, potential common stock consisted of 222,188 stock options and
1,899,535 warrants outstanding.
2. Stockholders' Equity
During January 2000, the Company issued 48,000 shares of common stock to certain
of its non-officer employees and consultants as a bonus, which were recorded at
fair market value on the date of issuance of $0.25 per share. Accordingly, for
the three months ended March 31, 2000, the Company recognized compensation
expense of $12,000, which is included in selling, general and administrative
expenses in the accompanying statement of operations.
During January 2000, as a result of the opening of the Company's new ride
facility in Elizabeth, New Jersey, the Company was obligated to grant its Chief
Executive Officer a bonus in the form of a stock option to purchase 25,000
shares of common stock exercisable for a period of five years at $0.25 per
share, which was fair market value at the date of grant. The Chief Executive
Officer was granted this stock option pursuant to the terms of his employment
agreement with the Company, which provides for the granting of stock options
based on various occurrences, including the opening of new ride facilities.
3. Start-up Costs for New Jersey Facility
The Company began development of the New Jersey Facility during late 1999. The
New Jersey Facility was completed and began operations in January 2000. In
connection with the establishment of the New Jersey Facility, the Company
incurred start-up costs of $74,421 during the three months ended March 31, 2000,
which were charged to operations as incurred.
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 March 31,
2000 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 March 31, 2000
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, Nevada Facility was opened. The Company opened
its other locations, the West Edmonton Mall Facility, the Times Square Facility,
the Atlanta, Georgia Facility, and the Elizabeth, New Jersey Facility in August
1995, September 1996, September 1998 and January 2000, respectively. The
Company closed the Times Square Facility in January 1998.
Seasonality:
Because of the seasonal nature of tourist traffic, attendance patterns at
attractions may vary. The degree of this seasonality 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 the
highest during June through August (the height of the tourist season) and lowest
during January and February. As a result, the Company's results of operations
at its facilities will depend upon revenues generated from the peak tourist
periods and any significant decrease in revenues in such periods could have a
material adverse effect upon the Company's results of operations.
Results of Operations:
Three Months Ended March 31, 2000 and 1999 -
Revenues increased by $147,027 or 28.7% to $658,485 in 2000 from $511,458 in
1999. Approximately $91,814 or 62.4% of the increase in revenues was
attributable to the New Jersey Facility, which opened in January 2000.
Selling, general and administrative expenses increased by $105,362 or 19.6% to
$643,531 in 2000 from $538,169 in 1999, primarily as a result of the opening of
the New Jersey Facility in January 2000.
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.
During the three months ended March 31, 2000, the Company recorded start-up
costs of $74,421 related to the opening of the New Jersey Facility in January
2000.
Depreciation and amortization decreased by $39,943 or 29.3% to $96,420 in 2000
from $136,363 in 1999, primarily as a result of certain fixed assets being fully
depreciated at December 31, 1999.
Interest expense decreased by $7,585 or 14.0% to $46,414 in 2000 from $53,999 in
1999.
Equity in net income of joint venture decreased by $9,894 to $8,161 in 2000 from
$18,055 in 1999.
As consideration for providing a line of credit to the Company, the Company
granted the Chief Executive Officer warrants to purchase 1,538,461 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 using the
Black-Scholes option pricing model, and charged the fair value of $64,620 to
operations as a loan commitment fee during the three months ended March 31,
1999.
Net loss was $192,804 for the three months ended March 31, 2000, as compared to
a net loss of $260,636 for the three months ended March 31, 1999.
Liquidity and Capital Resources - March 31, 2000:
The Company utilized cash of $136,178 in operating activities during the three
months ended March 31, 2000, as compared to utilizing cash of $190,989 during
the three months ended March 31, 1999. The reduction in cash utilized in
operating activities in 2000 as compared to 1999 of $54,811 was primarily a
result of a reduction in cash utilized for accounts payable and accrued
expenses. At March 31, 2000, cash and cash equivalents had decreased by
$170,357, to $149,832, as compared to $320,189 at December 31, 1999. As a
result, the Company had a working capital deficit of $178,169 at March 31, 2000,
as compared to a working capital deficit of $47,006 at December 31, 1999,
resulting in current ratios of .52:1 and .88:1 at March 31, 2000 and December
31, 1999, respectively.
Net cash provided by investing activities was $2,963 for the three months ended
March 31, 2000, primarily as a result of $21,108 of dividends received from the
Company's joint venture with Dave & Buster's, Inc., offset in substantial part
by the purchase of fixed assets of $21,745. Net cash provided by investing
activities was $31,412 for the three months ended March 31, 1999, primarily as a
result of dividends received from the Company's joint venture with Dave &
Buster's, Inc. of $41,537.
Net cash used in financing activities was $37,142 for the three months ended
March 31, 2000, as a result of payments on notes payable and capital lease
obligations. Net cash provided by financing activities was $15,401 for the
three months ended March 31, 1999, primarily as a result of the proceeds from
notes payable of $22,337.
The Company has relied on the proceeds from the sale of its securities, loans
from both unrelated and related parties, and equipment leases to provide the
cash necessary to develop its facilities and ride films and to operate its
business.
Pursuant to the Company's amended loan agreement with its Chief Executive
Officer, during November 1999, the Chief Executive Officer repaid $85,000 of his
notes receivable, consisting of principal of $75,000 and accrued interest of
$10,000, and the Company borrowed $120,000 from him under the line of credit.
The aggregate proceeds of $205,000 were utilized to fund the costs associated
with the installation of the Company's new ride facility in Elizabeth, New
Jersey, which opened in January 2000.
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, 1999 and March 31, 2000
that may impair 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, 1999.
The Company believes that its previous efforts to reduce costs and operate more
efficiently, combined with the modified financing arrangement with the Company's
Lender, borrowings under the line of credit provided by the Chief Executive
Officer, and the opening of the New Jersey Facility, will generate increased
cash flows sufficient to fund operations. However, there can be no assurances
that such efforts will result in increased operating cash flows. Furthermore,
to the extent that the Company experiences a revenue shortfall during the June
through August peak tourist season, the Company's liquidity and ability to
conduct operations may be impaired.
The Company is also 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.
Year 2000 Issue:
As of December 31, 1999, the Company had completed any required modifications to
its software to ensure that its software systems were Year 2000 compliant. The
cost of such modifications was not material.
Since the date rollover on January 1, 2000, the Company has not experienced any
material adverse effect from the Year 2000 Issue. While the primary risk to the
Company with respect to the Year 2000 Issue continued to be the ability of third
parties to provide goods and services in a timely and accurate manner, the
Company has not experienced any such disruption to date. The Company does not
expect any remaining risks with respect to the Year 2000 Issue to have a
material adverse effect on the Company.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Recent sales of unregistered securities
During January 2000, the Company issued 48,000 shares of common stock to certain
of its non-officer employees and consultants as a bonus, which were recorded at
fair market value on the date of issuance of $0.25 per share. Accordingly, for
the three months ended March 31, 2000, the Company recognized compensation
expense of $12,000, which is included in selling, general and administrative
expenses in the accompanying statement of operations.
During January 2000, as a result of the opening of the Company's new ride
facility in Elizabeth, New Jersey, the Company was obligated to grant its Chief
Executive Officer a bonus in the form of a stock option to purchase 25,000
shares of common stock exercisable for a period of five years at $0.25 per
share, which was fair market value at the date of grant. The Chief Executive
Officer was granted this stock option pursuant to the terms of his employment
agreement with the Company, which provides for the granting of stock options
based on various occurrences, including the opening of new ride facilities.
The shares of common stock and stock options were issued based on an exemption
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended, based on the representations of the recipients.
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 March 31, 2000 - None
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: May 10, 2000 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)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 149,832
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 190158
<PP&E> 3056707
<DEPRECIATION> 1764821
<TOTAL-ASSETS> 2231684
<CURRENT-LIABILITIES> 368327
<BONDS> 737436
0
0
<COMMON> 62386
<OTHER-SE> 865465
<TOTAL-LIABILITY-AND-EQUITY> 2231684
<SALES> 0
<TOTAL-REVENUES> 658485
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46414
<INCOME-PRETAX> (192804)
<INCOME-TAX> 0
<INCOME-CONTINUING> (192804)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192804)
<EPS-BASIC> (.25)
<EPS-DILUTED> (.25)
</TABLE>
