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 June 30, 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.
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(Exact name of small business issuer as specified in its charter)
Delaware 95-4417467
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12001 Ventura Place, Suite 340, Studio City, California 91604
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(Address of principal executive offices)
(818) 761-1002
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(Issuer's telephone number)
Not applicable
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(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 July 31, 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.
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CINEMA RIDE, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) - December
31, 1999 and June 30, 2000
Consolidated Statements of Operations (Unaudited) -
Three Months and Six Months Ended June 30, 2000 and 1999
Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements
(Unaudited) - Six Months Ended June 30, 2000 and 1999
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)
June 30, December 31,
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 133,414 $ 320,189
Prepaid expenses and other
current assets 47,026 25,804
------------ ------------
Total current assets 180,440 345,993
------------ ------------
Property and equipment:
Office equipment and furniture 110,033 105,249
Equipment under capital lease 208,236 204,858
Lease improvements 1,062,582 1,051,723
Theater and film equipment 1,695,877 1,673,132
------------ ------------
3,076,728 3,034,962
Accumulated depreciation (1,842,248) (1,688,658)
------------ ------------
1,234,480 1,346,304
------------ ------------
Other assets:
Film library, net of accumulated
amortization of $905,063 and
$869,930 at June 30, 2000 and
December 31, 1999, respectively 187,707 222,840
Investment in joint venture 385,688 411,663
Receivables from officers 870 8,069
Consulting agreement 23,409 28,611
Deferred lease costs and other
assets 109,377 123,967
------------ ------------
707,051 795,150
------------ ------------
Total assets $ 2,121,971 $ 2,487,447
============ ============
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(continued)
Cinema Ride, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited) (continued)
June 30, December 31,
2000 1999
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 192,766 $ 219,125
Current portion of capital
lease obligations 45,637 40,381
Current portion of note payable
to lender 142,712 133,077
Current portion of note payable
to bank 416
------------ ------------
Total current liabilities 381,115 392,999
------------ ------------
Non-current liabilities:
Obligations under capital lease,
less current portion 63,488 84,660
Note payable to lender, less
current portion 623,578 697,072
Deferred rent 72,079 84,061
Loan payable to officer 120,000 120,000
------------ ------------
879,145 985,793
------------ ------------
Total liabilities 1,260,260 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 June 30, 2000 and
December 31, 1999, respectively 62,386 58,546
Additional paid-in-capital 9,220,369 9,212,209
Accumulated deficit (8,421,044) (8,162,100)
------------ ------------
Total stockholders' equity 861,711 1,108,655
------------ ------------
Total liabilities and
stockholders' equity $ 2,121,971 $ 2,487,447
============ ============
See accompanying notes to consolidated
financial statements.
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Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30,
-----------------------------
2000 1999
------------ ------------
Revenues $ 766,192 $ 660,869
Selling, general and
administrative expenses 688,321 645,659
Depreciation and amortization 97,684 135,596
------------ ------------
Loss from operations (19,813) (120,386)
Other income (expense):
Equity in net income (loss)
of joint venture (2,328) 27,524
Interest income 764 2,281
Interest expense (44,763) (61,212)
------------ ------------
Net loss ($ 66,140) ($ 151,793)
============ ============
Basic and diluted net loss
per common share (Note 1) ($ 0.08) ($ 0.21)
============ ============
Weighted average common
shares outstanding -
basic and diluted 779,823 731,823
============ ============
See accompanying notes to consolidated
financial statements.
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Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Six Months Ended June 30,
-----------------------------
2000 1999
------------ ------------
Revenues $ 1,424,677 $ 1,172,327
Selling, general and
administrative expenses 1,331,852 1,183,828
Start-up costs for New Jersey
Facility (Note 3) 74,421
Depreciation and amortization 194,104 271,959
------------ ------------
Loss from operations (175,700) (283,460)
Other income (expense):
Equity in net income
of joint venture 5,833 45,579
Interest income 2,100 5,283
Interest expense (91,177) (115,211)
Fair value of warrants issued
to officer as commitment fee
for line of credit (Note 2) (64,620)
------------ ------------
Net loss ($ 258,944) ($ 412,429)
============ ============
Basic and diluted net loss
per common share (Note 1) ($ 0.33) ($ 0.56)
============ ============
Weighted average common
shares outstanding -
basic and diluted 775,823 731,823
============ ============
See accompanying notes to consolidated
financial statements.
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Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
-----------------------------
2000 1999
------------ ------------
Cash flows from operating activities:
Net loss ($ 258,944) ($ 412,429)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 194,104 271,959
Common stock issued for services
rendered 12,000 809
Equity in net income of joint
venture (5,832) (45,579)
Amortization of consulting
agreement 5,202 5,202
Amortization of deferred
financing costs 6,209 6,209
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 (3,194)
Prepaid expenses and other
current assets (21,222) 44,417
Deposits 3,000 12,532
Increase (decrease) in:
Accounts payable and
accrued expenses (26,359) (66,544)
Deferred rent (11,982) (13,115)
------------ ------------
Net cash used in operating
activities (103,824) (135,113)
------------ ------------
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(continued)
Cinema Ride, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (continued)
Six Months Ended June 30,
-----------------------------
2000 1999
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment ($ 41,766) $
Investment in joint venture (1,724)
Dividends received from joint
venture 31,807 81,422
(Increase) decrease in receivables
from officers 7,199 (3,717)
------------ ------------
Net cash provided by (used in)
investing activities (2,760) 75,981
------------ ------------
Cash flows from financing activities:
Payments on notes payable (64,275) (10,297)
Principal payments on capital
lease obligations (15,916) (9,087)
------------ ------------
Net cash used in financing
activities (80,191) (19,384)
------------ ------------
Cash and cash equivalents:
Net decrease (186,775) (78,516)
At beginning of period 320,189 240,341
------------ ------------
At end of period $ 133,414 $ 161,825
============ ============
See accompanying notes to consolidated
financial statements.
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Cinema Ride, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Six Months Ended June 30, 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's
ride facilities are located 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 June 30, 2000, the results of operations for the three months and
six months ended June 30, 2000 and 1999, and the cash flows for the six months
ended June 30, 2000 and 1999. The consolidated balance sheet as of December 31,
1999 is derived from the Company's audited financial statements.
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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 and six months ended June 30,
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 June 30, 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.
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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 June 30, 2000,
potentially dilutive securities consisted of outstanding stock options and
warrants to acquire 222,188 shares and 1,899,535 shares of common stock,
respectively.
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 six months ended June 30, 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.
During February 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 six
months ended June 30, 1999.
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 six months ended June 30, 2000,
which were charged to operations as incurred.
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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 June 30,
2000 contains "forward-looking" statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, including statements that include the
words "believes", "expects", "anticipates", or similar expressions. 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 June 30, 2000 involve known and unknown risks,
uncertainties and other factors that could cause the actual results, performance
or achievements of the Company to differ materially from those expressed in or
implied by the forward-looking 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.
12
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Recent Development:
During May 2000, the Company entered into an agreement with Dave & Buster's,
Inc. to amend and update its existing joint venture agreement to include the
installation of five additional ride facilities in new or existing Dave &
Buster's, Inc. locations. The Company will be responsible for the installation
of its newly-designed eight seat open pod simulator system. The Company will
also be responsible for providing all hardware and software required to operate
the ride facility. In order to fund its obligations under this agreement with
Dave & Buster's, Inc., the Company anticipates that it will be required to raise
additional working capital through one or more debt or equity financings.
However, there can be no assurances that the Company will be successful in this
regard.
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 June 30, 2000 and 1999 -
Revenues increased by $105,323 or 15.9% to $766,192 in 2000 from $660,869 in
1999. Approximately $103,735 or 98% of the increase in revenues was attributable
to the New Jersey Facility, which opened in January 2000.
Selling, general and administrative expenses increased by $42,662 or 6.6% to
$688,321 in 2000 from $645,659 in 1999, primarily as a result of the opening of
the New Jersey Facility in January 2000.
During the six months ended June 30, 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 $37,912 or 28.0% to $97,684 in 2000
from $135,596 in 1999, primarily as a result of certain fixed assets having been
fully depreciated at December 31, 1999.
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Interest expense decreased by $16,449 or 26.9% to $44,763 in 2000 from $61,212
in 1999, primarily as a result of a reduction in the outstanding principal
balance of interest-bearing debt.
Equity in net income (loss) of joint venture decreased by $29,852, to a net loss
of $2,328 in 2000 from net income of $27,524 in 1999, primarily as a result of
reduced marketing of the Company's ride facility by Dave & Buster, Inc.'s
on-site management. In response, the Company has hired its own on-site manager
to promote the Company's ride facility.
As a result of the aforementioned factors, the net loss was $66,140 for the
three months ended June 30, 2000, as compared to a net loss of $151,793 for the
three months ended June 30, 1999.
Six Months Ended June 30, 2000 and 1999 -
Revenues increased by $252,350 or 21.5% to $1,424,677 in 2000 from $1,172,327 in
1999. Approximately $195,549 or 77% of the increase in revenues was attributable
to the New Jersey Facility, which opened in January 2000.
Selling, general and administrative expenses increased by $148,024 or 12.5% to
$1,331,852 in 2000 from $1,183,828 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 six months ended June 30, 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 $77,855 or 28.6% to $194,104 in 2000
from $271,959 in 1999, primarily as a result of certain fixed assets having been
fully depreciated at December 31, 1999.
Interest expense decreased by $24,034 or 20.9% to $91,177 in 2000 from $115,211
in 1999, primarily as a result of a reduction in the outstanding balance of
interest-bearing debt.
Equity in net income of joint venture decreased by $39,746 to $5,833 in 2000
from $45,579 in 1999, primarily as a result of reduced marketing of the
Company's ride facility by Dave & Buster, Inc.'s on-site management. In
response, the Company has hired its own on-site manager to promote the Company's
ride facility.
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During February 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 six
months ended June 30, 1999.
As a result of the aforementioned factors, the net loss was $258,944 for the six
months ended June 30, 2000, as compared to a net loss of $412,429 for the six
months ended June 30, 1999.
Liquidity and Capital Resources - June 30, 2000:
Operating Activities. The Company utilized cash of $103,824 in operating
activities during the six months ended June 30, 2000, as compared to utilizing
cash of $135,113 during the six months ended June 30, 1999. The reduction in
cash utilized in operating activities in 2000 as compared to 1999 of $31,289 was
primarily a result of a reduced loss from operations. At June 30, 2000, cash and
cash equivalents had decreased by $186,775, to $133,414, as compared to $320,189
at December 31, 1999. As a result, the Company had a working capital deficit of
$200,675 at June 30, 2000, as compared to a working capital deficit of $47,006
at December 31, 1999, resulting in current ratios of .47:1 and .88:1 at June 30,
2000 and December 31, 1999, respectively.
Investing Activities. Net cash used in investing activities was $2,760 for the
six months ended June 30, 2000, primarily as a result of the purchase of fixed
assets of $41,766, offset in part by $31,807 of dividends received from the
Company's joint venture with Dave & Buster's, Inc. Net cash provided by
investing activities was $75,981 for the six months ended June 30, 1999,
primarily as a result of $81,422 of dividends received from the Company's joint
venture with Dave & Buster's, Inc.
Financing Activities. Net cash used in financing activities was $80,191 and
$19,384 for the six months ended June 30, 2000 and 1999, respectively, as a
result of payments on notes payable and capital lease obligations.
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.
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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 also 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 June 30, 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 actually 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 anticipates that it will be required to raise additional capital to
fund operations, expansion plans and possible acquisitions, mergers and joint
ventures, including the amended joint venture agreement with Dave & Buster's,
Inc. 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 capital necessary to
fund its future business operations on a timely basis and/or under acceptable
terms and conditions.
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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 June 30, 2000 - None
17
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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: August 8, 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)
