-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GDKAuW+hedyk6UPHhNLkPXEqBBCbLj4Lksk05IJjVQ1fc+2QV1xH898gqc5M89r1 SeYW4Nx4A8FU8qP4CO2S7g== 0000898430-97-004851.txt : 19971117 0000898430-97-004851.hdr.sgml : 19971117 ACCESSION NUMBER: 0000898430-97-004851 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINEMA RIDE INC CENTRAL INDEX KEY: 0000925956 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 954417467 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24592 FILM NUMBER: 97718020 BUSINESS ADDRESS: STREET 1: 12001 VENTURA PL STREET 2: STE340 CITY: STUDIO CITY STATE: CA ZIP: 91604 BUSINESS PHONE: 8187611002 MAIL ADDRESS: STREET 1: 12001 VENTURA PL #340 CITY: STUDIO CITY STATE: CA ZIP: 91604 10QSB 1 CINEMA RIDE, INC. FORM 10-QSB ================================================================================ 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, 1997 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 X No --- --- As of November 12, 1997, there were 5,734,999 outstanding shares of common stock, par value $0.01 per share. Transitional Small Business Disclosure Format: Yes No X --- --- CINEMA RIDE, INC. AND SUBSIDIARIES INDEX TO FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997 ================================== PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Balance Sheets as of September 30, 1997 and December 31, 1996. 3 Statements of Operations for the three months and nine months ended September 30, 1997 and 1996. 5 Statements of Cash Flows for the nine months ended September 30, 1997 and 1996. 6 Summary of Accounting Policies 8 Notes to Financial Statements. 10 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 4. Submission to Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 Exhibits Index 18
2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CINEMA RIDE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 ======================================== ASSETS
September 30, December 31, 1997 1996 ------------- ------------ (unaudited) (audited) Current assets: Cash and cash equivalents $ 252,804 $ 1,395,978 Inventories 29,229 45,515 Prepaid expenses 84,453 93,330 Other Receivables 731 5,311 ----------- ----------- Total current assets 367,217 1,540,134 ----------- ----------- Property and equipment: Office equipment and furniture 106,938 103,050 Equipment under capital lease 589,474 589,474 Leasehold improvements 2,265,914 2,222,967 Theater and film equipment 3,078,593 3,078,593 Theater and film equipment under construction 564,432 564,432 ----------- ----------- 6,605,351 6,558,516 Less accumulated depreciation and amortization (1,325,040) (846,873) ----------- ----------- Total property and equipment 5,280,311 5,711,643 ----------- ----------- Film library: Film projects under development 307,948 271,872 Film library, net 341,184 454,783 ----------- ----------- Total film library, net 649,132 726,655 ----------- ----------- Receivable from officers 99,170 97,865 Deferred lease costs and other assets (net) 379,635 783,217 ----------- ----------- $ 6,775,465 $ 8,859,514 =========== ===========
See Accompanying Notes to Unaudited Consolidated Financial Statements 3 CINEMA RIDE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 ======================================== LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31, 1997 1996 ------------- ------------ (unaudited) (audited) Current liabilities: Accounts payable and accrued expenses $ 811,700 $ 1,342,855 Accrued interest - 50,547 Current portion of capital lease obligation 57,604 53,102 Notes payable to investors (Note 1) - 337,500 Notes payable to related party (Note 1) 50,000 - Current portion of notes payable to lender (Note 1) 309,955 275,979 Notes payable to vendors (Note 1) 38,195 52,612 Note payable to bank (Note 1) 10,338 9,310 ----------- ----------- Total current liabilities 1,277,792 2,121,905 ----------- ----------- Obligation under capital lease 306,574 336,548 Note payable to bank (Note 1) 14,451 23,370 Note payable to lender (Note 1) 979,443 1,116,384 Deferred rent 141,778 154,261 ----------- ----------- Total long term liabilities 1,442,246 1,630,563 Total liabilities 2,720,038 3,752,468 Commitments and contingency (Notes 1 and 3) Stockholders' equity Preferred stock, $.01 par value, 500,000 shares authorized, none issued - - Common stock, $.01 par value, 20,000,000 shares authorized, 5,734,999 and 5,731,785 shares issued and outstanding 57,350 57,318 Additional paid-in-capital 9,237,208 9,134,389 Accumulated deficit (5,239,131) (4,084,661) ----------- ----------- Total stockholders' equity 4,055,427 5,107,046 ----------- ----------- Total liabilities and stockholders' equity $ 6,775,465 $ 8,859,514 =========== ===========
See Accompanying Notes to Unaudited Consolidated Financial Statements 4 CINEMA RIDE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 =============================================================== (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ------------------------ ------------------------- Revenues $1,203,879 $1,001,387 $ 2,991,646 $2,323,355 ---------- ---------- ----------- ---------- Selling, general and administrative expenses 996,618 761,501 2,859,871 2,082,259 Depreciation and amortization 280,555 141,433 934,166 528,222 ---------- ---------- ----------- ---------- Total expenses 1,277,173 902,934 3,794,037 2,610,481 ---------- ---------- ----------- ---------- Income (Loss) from operations (73,294) 98,453 (802,391) (287,126) Interest expense 57,940 103,100 360,708 124,637 Interest income 5,342 6,928 8,377 12,934 ---------- ---------- ----------- ---------- Net Income (Loss) $ (125,892) $ 2,281 $(1,154,722) $ (398,829) ========== ========== =========== ========== Net Income (Loss) per common share $ (.022) $ .0005 $ (.20) $ (.0862) ========== ========== =========== ========== Weighted Average common share outstanding 5,734,999 4,735,833 5,755,885 4,625,278 ========== ========== =========== ==========
See Accompanying Notes to Unaudited Consolidated Financial Statements. 5 CINEMA RIDE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 ============================================= (UNAUDITED)
Nine Months Nine Months Ended Ended September 30, September 30, 1997 1996 ------------- ------------- Cash flows from operating activities: Net loss $(1,154,722) $ (398,829) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 934,166 528,222 Amortization of deferred interest - 41,744 Stock issued for services rendered 20,900 15,900 Non cash compensation 14,652 - Write-off of organization costs 10,677 - Amortization of deferred financing costs 146,107 - Increase (decrease) from changes in: Inventories 16,286 (14,768) Prepaid expenses 8,877 24,419 Other receivables 4,580 (2,354) Accounts payable and accrued expenses (531,582) 906,123 Deferred rent (12,483) 158,422 Accrued interest on note payable (48,824) 43,952 Loss on foreign currency translation - 9,801 ----------- ----------- Net cash (used in) provided by operating activities (591,366) 1,312,632 ----------- ----------- Cash flows from investing activities: Acquisition of: Capital expenditures (46,836) (1,466,293) Film production costs (44,076) (59,764) Equipment under capital lease - (50,000) Proceeds from insurance for equipment - 33,671 Deferred lease costs and other assets 5,000 (271,277) ----------- ----------- Net cash used in investing activities (85,912) (1,813,663) ----------- ----------- Cash flows from financing activities: Proceeds from notes payable 150,000 1,077,828 Payments made on notes payable (576,424) (604,813) Loan payments from officers 5,000 10,000 Repurchase of stock (19,000) - Principal payments under capital lease obligation (25,472) (9,894) ----------- ----------- Net cash (used in) provided by financing activities (465,896) 473,121 ----------- -----------
See Accompanying Notes to Unaudited Consolidated Financial Statements. 6 CINEMA RIDE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 ============================================= (UNAUDITED)
Nine Months Nine Months Ended Ended September 30, September 30, 1997 1996 ------------- ------------- Net decrease in cash and cash equivalents (1,143,174) (27,910) Cash and cash equivalents at beginning of period 1,395,978 144,539 ----------- ----------- Cash and cash equivalents at end of period $ 252,804 $ 116,629 =========== =========== Supplemental Disclosure of Cash Flow Information Cash paid during the period for income taxes $ 800 $ 800 =========== =========== Cash paid during the period for interest $ 196,180 $ 9,256 =========== =========== Non cash financing activities: Conversion of accounts payable to notes payable 12,354 - Issue of warrants to public 92,603 - Issue of warrants for leasehold improvements - 13,346 Issue of stock to lenders - 250,469 Increase in capital lease obligation - 300,000
See Accompanying Notes to Unaudited Consolidated Financial Statements. 7 CINEMA RIDE, INC. AND SUBSIDIARIES SUMMARY OF ACCOUNTING POLICIES NINE MONTHS ENDED SEPTEMBER 30, 1997 ==================================== 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, 1997, and December 31, 1996, the results of its operations for the three months and nine months ended September 30, 1997 and 1996, and statements of cash flows for the nine months ended September 30, 1997 and 1996, 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 three months and nine months ended September 30, 1997, are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 1997. 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 in reference in the 1996 Annual Report on Form 10-KSB. 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 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 operations 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 terms which range from five to ten years. 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. 8 CINEMA RIDE, INC. AND SUBSIDIARIES SUMMARY OF ACCOUNTING POLICIES NINE MONTHS ENDED SEPTEMBER 30, 1997 ==================================== (CONTINUED) 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 when the project is abandoned. At September 30, 1996 unamortized pre-opening costs of $83,586 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, 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 affect the reported amounts of assets and liabilities, 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. New Accounting Standards - ------------------------ On March 3, 1997, the FASB issued Statement of Financial Accounting Standard No. 128. Earnings per share (SFAS 128). This pronouncement provides a different method of calculating earnings per share than is currently used in accordance with APB 15, Earnings per Share. SFAS 128 provides for the calculation 9 CINEMA RIDE, INC. AND SUBSIDIARIES SUMMARY OF ACCOUNTING POLICIES NINE MONTHS ENDED SEPTEMBER 30, 1997 ==================================== (CONTINUED) of Basic and Diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of the entity, similar to fully diluted earnings per share. This pronouncement is effective for fiscal years and interim periods after December 15, 1997; early adoption is not permitted. The Company has not determined the effect, if any, of adoption on its EPS computation(s). Statements of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130) issued by the FASB is effective for financial statements with fiscal years beginning after December 15, 1997. Early application is permitted. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Company has not determined the effect on its financial position or results of operations, if any, from the adoption of this statements. Statements of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" (SFAS No. 131) issued by the FASB is effective for financial statements beginning after December 15, 1997. The new standard requires that public business enterprises report certain information about operating segments in complete sets of financial statements of the enterprise and in condensed financial statements of interim periods issued to shareholders. It also requires that public business enterprises report certain information about their products and services, the geographic areas in which they operate and their major customers. The Company does not expect the adoption of SFAS No. 131 to have a material effect, if any, on its Results of Operations. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NOTE PAYABLE NOTE PAYABLE TO BANK 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. NOTE PAYABLE TO INVESTORS During the quarter ended September 30, 1996, the Company obtained loans aggregating $437,500 bearing interest at 15% per annum 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 were 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. During the fourth quarter, some lenders elected to convert $100,000 of the above notes to common stock at the then fair market value of $.40 per share. Accordingly, the Company issued 250,000 additional shares relating to the conversion of these notes. During January 1997, the Company repaid the remaining $337,500 balance of the notes. As such, the 10 Company wrote off, in January 1997, the remaining unamortized portion of the deferred financing costs relating to these notes as interest expense. NOTE PAYABLE TO LENDER On December 31, 1996, the Company closed a 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, this financing agreement was accounted for as a note payable for financial reporting purposes. The gross loan amount was for $1,575,027 to be paid over a four year term at $40,903 per month with a balloon payment of $157,503. The loan bears a variable interest rate based on the average weekly interest rate of three-year U.S. Treasury Securities. The financing agreement requires the Company to repurchase the equipment at the end of the lease for $1. In connection with obtaining the financing, the Lender required the Company to raise a minimum of $500,000 through a combination of equity, subordinated debt, or conversion to equity of existing notes/liabilities. As of October 17, 1997, the Company has issued 444,285 shares of the Company's common stock to various vendors and 250,000 shares to existing note holders in lieu of amounts owed by the Company, enabling the Company to meet the Lender's requirement. The Company also issued 100,000 warrants to the Lender at an exercise price of $2.00 per share, and an aggregate of 265,643 warrants to the brokers who arranged the financing at an exercise price of $.41 per share representing approximately 110% of the market value at the closing date of the financing. During the quarter ended March 31, 1997, the Company received the remaining $100,000 of this loan, which was held by the Lender pending the Company's meeting all of the Lender's requirements. NOTE PAYABLE TO VENDORS As part of the requirements to obtain the Financing Agreement referred to above, the Company converted $64,965 of accounts payable to vendors into unsecured subordinated notes payable bearing interest at 8%. Principal payments on the notes are to be made at 20% increments on April 30, 1997 and July 31, 1997 with the remaining 60% and interest due on September 30, 1997. As of November 12, 1997, payments of $16,951 have been made relating to the remaining 60% and interest due to vendors. NOTE PAYABLE TO RELATED PARTIES During April 1997, the Company obtained a $50,000 loan from a related party bearing interest at 18% per annum with both principal and interest due in six months. In connection with obtaining this loan, the Company issued 25,000 warrants at an exercise price of $.28 per share. NOTE 2. STOCK TRANSACTIONS During April 1997, the Company repurchased 51,786 shares of the Company's common stock previously issued to one of its vendors for $29,000 of which $20,000 has been paid as of November 12, 1997. NOTE 3. EMPLOYMENT AGREEMENT During the quarter ended September 30, 1997, the Company entered into a three year employment agreement with its chief executive officer, Mitch Francis. The agreement provides for a base annual salary of $195,000, annual increases of 8%, annual bonuses based on 6% of the Company's annual earnings before interest, taxes, depreciation and amortization in excess of $500,000, and issuance of 300,000 options exercisable at $0.25 per share vesting equally over the next three years. The agreement also approves the granting of additional performance options based on various occurrences such as the opening of new locations, obtaining additional funds, and attaining and maintaining certain market price for the Company's common stock. 11 NOTE 4. SUBSEQUENT EVENT The Company entered into an agreement dated October 28, 1997 with the landlord of the Times Square Facility to terminate the lease due to the intended demolition of the existing building where the facility is located. The agreement, among other things, requires the Company to vacate the premises by February 28, 1998 and waive the security deposit previously made to the landlord. In consideration, the landlord will 1) pay the Company $500,000 upon the execution of the agreement, 2) agree to a rent concession for the period from April 97 through October 97 , 3) waives its right for all future rents following execution of the agreement to include the months of November 97 through February 98, and 4) pay the Company an additional $500,000 upon the timely delivery of possession of the premises to the landlord on or before February 28, 1998. The Company is currently seeking a new location to replace this existing facility. As of November 12, 1997, the Company can not reasonably estimate the amount to be written off relating to expenditures incurred at this facility due to this termination. However, the Company expects the loss would not exceed $600,000 the exact amount of which will depend upon the Company's ability to utilize all or portion of the tenant improvements from the facility. 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. RESULTS OF OPERATIONS - --------------------- QUARTER ENDED SEPTEMBER 30, 1997 VS. QUARTER ENDED SEPTEMBER 30, 1996: Revenues increased by 20% or $202,492 from $1,001,387 in 1996 to $1,203,879 in 1997. The increase is due to an increase in revenues at the Times Square Facility by 325% or $355,867 from $109,259 in 1996 to $465,126 in 1997 due to the facility being open for the full quarter in 1997 which was partially offset by 1) a decrease in revenues at the Las Vegas Facility by 17% or $131,519 from $787,665 in 1996 to $656,146 in 1997 which management believes is due to lower attendance at the Forum Shops resulting from the construction of the new wing and the opening of other casinos, and 2) a decrease in revenues at the West Edmonton Mall Facility by 21% or approximately $22,000 from approximately $105,000 in 1996 to approximately $83,000 in 1997. In addition, the Company raised the price of a single ticket to eight dollars from seven dollars which partially offset the decrease in revenues due to the lower attendance. The average ticket price remained under four dollars due to discounts offered through multiple purchases of tickets. Management believes that the trend at the Las Vegas and West Edmonton Facilities is expected to continue. Selling, general and administrative expenses increased by 31% or $235,117 from $761,501 in 1996 to $996,618 in 1997. This increase is mainly due to 1) an increase in overall expenses of approximately $170,279 relating to the new Times Square Facility which opened in September 1996 and was fully operational in 1997, and 2) an increase of approximately $38,000 at the Las Vegas Facility mainly due to labor costs incurred in staffing the newly installed remote ticket booth. Depreciation and amortization increased by 98% or $139,122 from $141,433 in 1996 to $280,555 in 1997 mainly due to the new Times Square Facility, which contributed to an increase of $118,499 in 1997. Interest expense decreased by 44% or $45,160 from $103,100 in 1996 to $57,940 in 1997 mostly due to the Company amortization of financing costs relating to the Company's issuance of stock to lenders in 1996 as discussed in Note 1 to the unaudited consolidated financial statements. Interest expense in 1997 is mainly due to approximately $53,000 in interest incurred relating to the note payable to lender as discussed in Note 1 to the unaudited consolidated financial statements. 12 NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30 1996: Revenues increased by 29% or $668,291 from $2,323,355 in 1996 to $2,991,646 in 1997. The increase is due to an increase in revenues at the Times Square Facility (which opened during September 1996) by 1000% or $1,092,768 from $109,259 in 1996 to $1,202,027 in 1997 due to the facility being open for the full year in 1997 which was partially offset by 1) a decrease in revenues at the Las Vegas Facility by 19% or $377,965 from $1,992,915 in 1996 to $1,614,950 in 1997, which management believes is due to lower attendance at the Forum Shops resulting from the construction of the new wing and the opening of other casinos, and 2) a decrease in revenues at the West Edmonton Mall Facility by 21% or approximately $46,500 from approximately $222,000 in 1996 to approximately $175,500 in 1997. In addition, the Company raised the price of a single ticket to eight dollars from seven dollars, which partially offset the decrease in revenues due to the lower attendance. The average ticket price remained under four dollars due to discounts offered through multiple purchases of tickets. Management believes that the trend at the Las Vegas and West Edmonton Facilities is expected to continue. Selling, general and administrative expenses increased by 37% or $777,612 from $2,082,259 in 1996 to $2,859,871 in 1997. This increase is mainly due to 1) an increase in overall expenses of approximately $750,000 relating to the new Times Square Facility, which was opened in September 1996 and was fully operational in 1997, and 2) an increase in corporate expenses by approximately $102,000 due to an increase of approximately $115,000 in professional fees mainly due to costs incurred in connection with the Company's registration of newly issued shares of common stock in 1997 and due to a decrease in insurance reimbursements of approximately $75,000 in 1997 which was offset by a decrease of approximately $86,000 in expenses relating to decreases in salaries and other administrative expenses. Expenses at the Las Vegas Facility decreased by approximately $28,000 mainly due to decreases in advertising expense of approximately $106,000 which was offset by increases in labor costs incurred in staffing the newly installed remote ticket booth and due to increases in repairs and maintenance. Expenses at the West Edmonton Facility decreased by approximately $46,000 mainly due to decreased in wages, advertising, and other administrative expenses. Depreciation and amortization increased by 77% or $405,944 from $528,222 in 1996 to $934,166 in 1997 due to 1) the new Times Square Facility which contributed to an increase of $481,379 in 1997, 2) an increase of approximately $79,000 in amortization of lease commissions incurred in connection with obtaining the loan and amortization of warrants costs issued to the public, which was partially offset by a decrease of approximately $154,000 relating to the write off of certain assets in 1996. Interest expense increased by $236,071 from $124,637 in 1996 to $360,708 in 1997 mostly due to 1) increase in the Company's write off by $104,363 of deferred interest relating to the issuance of common stock to note holders and the subsequent repayment of these notes in January 1997, and 2) the Company incurring approximately $165,000 in interest on the loan from lender in 1997. This increase was offset by the Company's incurring of interest in 1996 relating to loans which has since been paid as discussed in the notes to the unaudited consolidated financial statements. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Net cash used in operating activities was $591,366 during the nine months ended September 30, 1997, as compared to the cash provided by operating activities of $1,312,632 for the same period during the prior year. The decrease of $1,903,998 was primarily due to 1) an increase in losses for the nine months ended September 30, 1997 by $755,893, 2) a decrease in accounts payable and accrued expenses of $1,435,982, 3) a decrease in accrued interest on notes payable of $92,776, and 4) a decrease in deferred rent of $170,905 which was partially offset by an increase in depreciation and amortization of $405,944 and an increase in amortization of deferred financing costs of $146,107. Net cash used in investing activities decreased by $1,727,751 from $1,813,663 in 1996 to $85,912 in 1997. The decrease is primarily due to payments made by the Company to complete the construction of its 13 capsules during the prior year, and to costs associated with the lease for the Times Square Facility in 1996. Net cash used in financing activities was $465,896 during the nine months ended September 30, 1997, as compared to cash provided by financing activities of $473,121 for the same period during the prior year. The decrease of $939,017 was primarily due to 1) the Company obtaining $600,000 in short term borrowing in 1996, 2) the Company obtaining $437,500 in short term borrowing from investors in 1996 3) the Company's obtaining a loan from a Canadian bank during the quarter ended March 31, 1996, and 4) decrease in payments made on notes payable in 1997 by $28,389 as compared to payments made in 1996 which was partially offset by the receipt of $150,000 in 1997. The Company has relied on the proceeds of sales of Common Stock, Redeemable Warrants, loans and equipment leasing to provide it with the cash necessary to develop its facilities and ride films and to operate its business. 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% per annum paid monthly with the principal balance due at the earlier of one year or at the time the Company successfully obtains permanent financing. During December 1996, some of the lenders elected to convert $100,000 of the above notes to common stock at the then fair market value of $.40 per share. Accordingly, the Company issued 250,000 additional shares relating to the conversion of these notes. During January 1997, the Company repaid the remaining $337,500 balance of the notes. As such, the Company wrote off in January 1997 the remaining unamortized portion of the deferred financing costs relating to these notes as interest expense. As discussed in Note 1 to the unaudited consolidated financial statements, on December 31, 1996, the Company closed a financing agreement with Finova Technology Finance, Inc. ( the "Lender") structured as a sale leaseback transaction of certain equipment owned by the Company. In connection with obtaining the financing, the Lender required the Company to raise a minimum of $500,000 through a combination of equity, subordinated debt, or conversion to equity of existing notes/liabilities. As of November 12, 1997, the Company has issued 444,285 shares of the Company's common stock to various vendors and 250,000 shares to existing note holders in lieu of amounts owed by the Company, enabling the Company to meet the Lender's requirement. The Company also issued 100,000 warrants to the Lender at an exercise price of $2.00 per share, and an aggregate of 265,643 warrants to the brokers who arranged the financing at an exercise price of $.41 per share representing approximately 110% of the market value at the closing date of the financing. During the quarter ended March 31, 1997, the Company received the remaining $100,000 of this loan which was held by the Lender pending the Company's meeting all of the Lender's requirements. The Company is currently in production of two films, a ski and snowboard film which is being produced by Warren Miller Entertainment, and a roller coaster film, both scheduled to be released in Winter 1997. The Company has been performing additional work on its previously released films adding more special effects and reworking some scenes. As of November 12, 1997, the Company anticipates additional expenditures of approximately $20,000 relating to the completion of these films. The Company also expects to incur approximately an additional $50,000 in expenses relating to reprogramming the motion of its existing capsules for the above films. As of September 30, 1997, the Company had a negative working capital of $910,575. The Company's cash and cash equivalents as of September 30, 1997 were $252,804 as compared to $1,395,978 at December 31, 1996. Accordingly, in order for the Company to continue its operations as presently constituted and to fulfill its business plan described below, the Company must obtain additional working capital either in the form of debt, equity, or a combination thereof. In this connection, the Company has engaged the investment banking firm of L.H. Friend, Weinress, Frankson & Presson, Inc., to serve as the Company's exclusive financial advisor and investment banker. No assurance can be given, however, that the Company will be successful in raising capital. Additionally, the Company has and is continuing to take steps to reduce its expenses without materially impacting its operations. 14 As discussed in Note 4 to the unaudited consolidated financial statements, the Company entered into an agreement with the landlord of the Times Square Facility to terminate the lease due to the intended demolition of the existing building where the facility is located. The Company will attempt to replace the facility with another location. There can be no assurance that the Company will be successful in securing a location as favorable as the Times Square Facility, or that enough funds would be available to complete the construction of a new facility if secured. As of November 12, 1997, the Company can not reasonably estimate the amount to be written off relating to expenditures incurred at this facility due to this termination. However, the Company expects the loss would not exceed $600,000 the exact amount of which will depend upon the Company's ability to utilize all or portion of the tenant improvements from the facility. As of September 30, 1997, the Company was not in compliance with the minimum listing standards of the Nasdaq Small Cap Market. On November 3, 1997 the Company received a notice from The Nasdaq Stock Market, Inc. ("Nasdaq") providing the Company with 90 days to comply with these standards before the Company's securities will be subject to delisting. The Company is in the process of formulating a plan to meet its continued Nasdaq listing requirements. However, there can be no assurance that the Company will be successful in meeting all of the requirements. In addition, the Company was informed by Nasdaq on October 1, 1997 that the Company's warrants were delisted from the exchange due to the Company's no longer having any active market makers registered to trade the securities. 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. Accordingly, the Company expects to spend approximately at least 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 twenty 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 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 15 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 representatives to locate potential purchasers of simulators and licensees of ride films. SEASONALITY OF BUSINESS Because of the seasonal nature of tourist traffic, attendance patterns at attractions may vary. The 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 affected by seasonality as compared to the Las Vegas Facility due to the extreme weather conditions during the Winter months in Alberta, Canada. Similarly, the Times Square Facility is affected by seasonality during the slower Winter months. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None ITEM 6. EXHIBITS AND REPORTS IN FORM-8-K (A) EXHIBITS The following exhibits are submitted herewith:
NUMBER DESCRIPTION - ------ ----------- 10.35 Form of employment agreement with Mitch Francis dated September 1, 1997. 10.36 Stipulation and consent judgement between the Company and Three Times Square Center Partners, L.P., dated October 28, 1997.
(B) REPORTS ON FORM 8-K The Company filed no reports on Form 8-K during the quarter ended September 30, 1997. 16 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 12, 1997 - --------------------------------------------- ----------------- Mitch Francis Chairman of the Board, President, Chief Executive Officer and Director (principal executive officer) /S/ TOUFIC R. BASSIL NOVEMBER 12, 1997 - --------------------------------------------- ----------------- Toufic R. Bassil Chief Financial Officer, (principal financial officer, principal accounting officer), Secretary and Treasurer.
17 EXHIBITS INDEX
NUMBER DESCRIPTION - ------ ----------- 10.35 Form of employment agreement with Mitch Francis dated September 1, 1997. 10.36 Stipulation and consent judgement between the Company and Three Times Square Center Partners, L.P., dated October 28, 1997. 27 Financial Data Schedule for Quarterly Period Ended September 30, 1997.
18 EX-10.35 2 MITCH FRANCIS EMPLOYMENT AGREEMENT EXHIBIT 10.35 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st day of September, 1997, by and between Cinema Ride, Inc., a Delaware corporation (hereinafter the "Company"), and MITCH FRANCIS, an individual (hereinafter "Employee"). WITNESSETH WHEREAS, the Company desire to retain the services of Employee, and Employee is willing to be an employee of the Company, on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, for and in consideration of the mutual promises herein contained, the parties hereto hereby agree as follows; 1. ENGAGEMENT; NATURE OF DUTIES. The Company hereby engages Employee, for the period hereinafter set forth, to serve as and hold the offices of Chairman of the Board, President and Chief Executive Officer, and to perform the duties of such offices as provided in the Bylaws of the Company and as directed by the Board of Directors of the Company. Employee agrees to serve in such capacity and to do and perform the service, acts, or things necessary to carry out the duties of such offices, and such other duties, not inconsistent with such offices and Employee's position as an executive officer of the Company. Employee shall report only to the Board of Directors of the Company. It is expressly agreed and acknowledged that employment in the capacity of the aforementioned offices was a material inducement to Employee to enter into this Agreement. The Company further agrees and acknowledges that election, and being retained in office, as a director was a material inducement to Employee to enter into this Agreement. The Company agrees to cause Employee to be nominated as a director at any and all meetings, or any actions of the stockholders of the Company for the purpose of electing directors, and to use the Company's best efforts to cause Employee to be elected and retained in office as a director throughout the term of this Agreement. 2. TERM. The term of employment pursuant to this Agreement shall be for a period of three (3) years, commencing on September 1, 1 1997 (the "Commencement Date"), unless sooner terminated in accordance with the provisions hereof (the "Term"). 3. PERFORMANCE OF DUTIES. Employee shall devote such time and attention to Employee's duties as may be reasonably necessary to perform and carry out such duties. Nothing herein contained shall be deemed to preclude Employee from performing services to other businesses or entities not affiliated with the Company or having personal investments and from devoting a reasonable amount of time to the care and attention thereof, provided that the same shall in no manner interfere with or derogate from Employee's work for the Company or conflict with the Company's business. Without limiting the generality of the foregoing, the Company, under separate agreement of the Board of Directors, has assigned its ownership and all rights of "California Wave" to Employee, (with certain compensation to the Company), and Employee shall be free to develop the "California Wave" concept independently of the Company. Employee shall perform his duties hereunder primarily in the Los Angeles, California area, and shall not be required to perform such duties on a regular basis at any other location except for site visits. Employee shall not be required to relocate without his consent. 4. COMPENSATION. (A) BASE SALARY. The Company shall pay to Employee a base salary in the amount of One Hundred Ninety-five Thousand Dollars ($195,000) per year (the "Base Salary"), retroactive to August 1, 1997, payable in periodic installments in accordance with the Company's prevailing policy for compensating personnel, but not less often than semi monthly. On each yearly anniversary of the Commencement Date (September 1, 1997), the Base Salary shall be increased by eight percent (8%). (B) EARNINGS BONUS. In addition to the Base Salary, and any and all other compensation, profit-sharing participating, benefits, bonuses or other amounts due to or receivable by Employee pursuant to this Agreement, Employee shall receive an annual bonus (the "Earnings Bonus") equal to six (6%) percent of the Company's annual earnings before interest, taxes, depreciation and amortization (ebitda) in excess of $500,000. A pro rata portion of the Earnings Bonus (calculated by annualizing the year to date ebitda and taking into account any Earnings Bonus paid for any prior periods) shall be due and payable within forty-five (45) days of each calendar quarter and shall be adjusted within ninety (90) days after the calendar (or the Company's fiscal) year end. In the event that this Agreement terminates prior to a final accounting of the Earnings Bonus, if any, for the applicable year, Employee shall repay any overpayment within 45 days of the final accounting. 2 (C) GRANT OF COMMON STOCK. Upon the funding of new capital or new debt for borrowed money to the Company, the Company shall grant Employee a number of shares of the Company's Common Stock equal to one (1%) percent of the Company's outstanding common and preferred shares, (after such new capital or debt and on a non-dilutive basis), for each One Million ($1,000,000) dollars of such funding, or fraction thereof on a pro rata basis. (D) OPTIONS. Effective on the Commencement Date, the Company shall grant to Employee 300,000 options to purchase shares of the Company's Common Stock at an exercise price of $.25 per share. Such options shall be vested equally over three (3) years (100,000 options on 9/1/98, 100,000 options on 9/1/99 and 100,000 options on (9/1/00) and shall be for a term of five years from the Commencement Date. If Employee voluntarily leaves or is terminated by the Company with cause, all unvested options shall automatically terminate. If Employee is terminated without cause, the options shall not terminate. The Company shall use its best efforts to register the resale of the underlying shares of Common Stock on Form S-8. (E) PERFORMANCE WARRANTS. During the Term hereof, the Company shall grant to Employee options to purchase shares of the Company's Common Stock upon the following occurrences and terms: (1) Stock price for 20 consecutive trading days at $.75 per share: 100,000 options exercisable @ $.75 (2) Stock price for 20 consecutive trading days at $1.00 per share: 150,000 options exercisable @ $1.00 (3) Stock price for 20 consecutive trading days at $1.50 per share: 200,000 options exercisable @ $1.50 (4) Stock price for 20 consecutive trading days at $2.00 per share: 200,000 options exercisable @ $2.00 (5) Stock price for twenty consecutive trading days at $3.00 per share: 300,000 options exercisable @ $3.00 (6) Stock price for twenty consecutive trading days at $4.00 per share: 300,000 options exercisable @ $4.00 (7) Upon opening each new Company owned, or joint ventured new facility, or Mobile system put into operation: 200,000 options exercisable at the price of the common stock on the day of opening. As used herein, the stock price shall be the closing bid price and shall be appropriately adjusted for any stock splits, stock dividends, recapitalizations etc. occurring after the Commencement Date. 3 5. EXPENSES REIMBURSEMENT; AUTOMOBILE. The services required of Employee by this Agreement shall include the responsibility and duty of entertaining business associates and others with whom the Company is, desires to be, or may become engaged in business or with whom it seeks, now or in the future, to develop or expand business relationships, or with whom it is otherwise to the benefit of the Company to establish or maintain communications. It may also be necessary for Employee to travel from time to time on behalf of and for the benefit of the Company, or in furtherance of the Company's business. It is the Company's belief that the performance of Employee's duties in such travel and entertainment activities will produce the maximum benefits which the Company expects to derive from Employee's services. Accordingly, the Company shall pay, or if Employee shall have paid, shall reimburse to Employee, any and all expenses incurred by him or for his account in the performance of his duties hereunder, including all expenses for business, entertainment, promotion and travel by Employee, subject only to Employee providing appropriate documentation for such expenses. It is expressly agreed, in connection therewith, that Employee shall be provided or reimbursed for reasonable travel and accommodations, but no first-class air travel will be deemed reasonable, (unless under special price offering). The Company shall provide Employee with an automobile, reasonably commensurate with Employee's office and position, for use by Employee in performing Employee's, duties hereunder and the Company shall be responsible for all expenses associated with ownership of such automobile, including, but not limited to, costs of licensing or registration, maintenance and gasoline; provided, however, that in no event shall the Company's total cost in providing such automobile (excluding the cost of automobile insurance, registration, maintenance, and gasoline) exceed $800 per month. The Company and Employee may provide, by mutual agreement, that Employee may use an automobile owned by Employee in connection with performing his duties hereunder, in which case Employee shall be reimbursed by the Company for all costs associated with ownership of such automobile (excluding the cost of automobile insurance, registration, maintenance, and gasoline), subject to the $800 per month limitation described above. In addition to the foregoing expenses, the Company shall provide, or reimburse Employee for the cost of, automobile insurance, registration, maintenance and gasoline and shall provide cellular telephone service for such automobile. Employee shall maintain such records with respect to the use of such automobile as the Company may reasonably request. In the event that Employee shall be deemed to have received income, for state or federal income tax purposes, by reason of Employee's receipt of or reimbursement for any of the benefits or expenses set forth in this Paragraph 5, the Company shall pay or reimburse Employee for all taxes required to be paid by Employee with respect to such income. 4 6. MEDICAL AND LIFE INSURANCE; PENSION BENEFITS. The Company shall provide or reimburse Employee for health, life (premiums up to $3,000 per year), and disability income (up to $12,000 per month coverage) insurance. Coverage under any group health insurance shall also cover Employee's spouse. Employee shall also have the right to participate in any and all employee retirement benefits plan or profit-sharing plan which the Company maintains for its personnel, and in effect at any time during the period of Employee's employment hereunder, subject only to any eligibility restrictions of such plans. 7. VACATION. During each year of the Term, Employee shall be entitled to a vacation of four (4) weeks, without deduction of salary. Such vacation shall be taken at such time or times during the applicable year as may be mutually determined by Employee and the Company. Any additional vacation period shall be determined by the Company consistent with the general customs and practices of the Company applicable to its personnel. 8. TERMINATION. This Agreement may be terminated by the Company only for cause. As used herein, "cause" shall mean: (A) Employee's willful breach of Employee's duties hereunder which breach remains uncured for (30) days after written notice of such breach to Employee; or (B) Employee's conviction of a felony involving moral turpitude. In addition, this Agreement shall automatically be terminated upon Employee's death or permanent disability. As used herein, "permanent disability" shall mean Employee's complete inability to perform Employee's duties hereunder, as determined by Employee's physician, which inability continues for more than one-hundred eighty (180) consecutive days. In the event that this Agreement is terminated by the Company for any reason other than for cause or for death or permanent disability as defined above, the Company expressly agrees and acknowledges that Employee shall be entitled to receive the base salary, bonuses and benefits described in Section 5 of this Agreement for the remainder of the term and shall have no duty or obligation to and/or accept other employment, or otherwise mitigate Employee's damage resulting from such termination. The Company further agrees and acknowledges that, in the event Employee does obtain other employment following the Company's termination of this Agreement other than for cause, the Company shall not be entitled to any set off or reduction in the amounts payable to Employee hereunder 5 as a result of any compensation paid to Employee with respect to such new employment. 9. INDEMNIFICATION. The Company shall indemnify, defend and hold Employee harmless from and against and all claims, demands, suits, obligations, liabilities, actions, losses, cost, expenses, fines or penalties which may now or hereafter be pending, threatened or commenced against or incurred by Employee relating to or in any way resulting from Employee's performance of his duties hereunder, or any action or failure to act to Employee in connection with such duties. Employee's rights under this Section 9 shall be in addition to, and not in lieu of or, any and all other rights of Employee under applicable law or any agreement with the Company regarding indemnification. 10. CONFIDENTIAL INFORMATION. (A) As used in this Agreement "Confidential Information" means any and all information disclosed to Employee or which Employee gains knowledge of as a consequence or through Employee's employment by the Company (including information conceived, originated, discovered or developed by Employee) about the Company's products, processes, and services, including information relating to research, development, inventions, manufacture, purchasing, accounting, engineering, marketing, merchandising, selling trade secrets, or customer lists, which information the Company maintains as confidential. (B) Except as required in Employee's duties to the Company and then only with the Company's prior written consent, Employee will not, directly or indirectly, use for Employee's own benefit or the benefit of others, or disseminate, disclose, comment upon or publish articles concerning, any Confidential Information either during or at any time after the term of this Agreement without the Company's consent. (C) All documents, papers, notes, notebooks, memoranda, computer files, and other written electronic records of the Company of any kind in the possession or under the control of Employee, shall remain in the property of the Company at all times. Upon the termination of Employee's employment with the Company, all documents, papers, notes, notebooks, memoranda, computer files and other written or electronic records in Employee's possession, whether prepared by Employee or others will be left with Company. 11. NOTICES. Any and all notices which are required or permitted to be given by any party to any other party hereunder shall be given in writing, sent by registered or certified mail, electronic communications (including telegram or facsimile) followed by a confirmation letter sent by registered or certified 6 mail, postage prepaid, return receipt requested, or delivered by hand or messenger service with the charges therefor prepaid, addressed to such party as follows: (A) Notice to the Employee: Mitch Francis 12001 Ventura Place Suite 340 Studio City, CA 91604 Telecopy No. (818) 761-1072 (B) Notice to the Company: Cinema Ride, Inc. 12001 Ventura Place Suite 340 Studio City, CA 91604 Telecopy No. (818) 761-1072 or to such other address as the parties shall from time to time give notice of in accordance with this Section. Notices sent in accordance with this Section shall be deemed effective on the date of dispatch, and an affidavit of mailing or dispatch, executed under penalty of perjury, shall be deemed presumptive evidence of the date of dispatch. 12. ENTIRE AGREEMENT AND MODIFICATION. This Agreement, including the exhibits hereto and the agreements expressly referred to herein, constitutes the entire understanding between the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written. There are no warranties, representations or other agreements between the parties, in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless made in writing and executed by the party thereto to be bound. 13. WAIVERS. No term, condition or provision of this Agreement may be waived except by an express written instrument to such effect signed by the party to whom the benefit of such term condition or provision runs. No such waiver of any term condition or provision of this Agreement shall be deemed a waiver of any other term, condition or provision, irrespective of similarity, or shall constitute a continuing waiver of the same term, condition or provision, unless otherwise expressly provided. No failure or delay on the part of any party in exercising any right, power or privilege under any term, condition or provision of this agreement shall operate as a waiver thereof, nor shall a single or partial 7 exercise thereof preclude any other or further exercise of any other right, power or privilege. 14. SEVERABILITY. In the event any one or more of the terms, conditions or provisions contained in this Agreement should be found in a final award or judgment rendered by any court or arbitrator or panel of arbitrators of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining terms, conditions and provisions contained herein shall not in any way be affected or impaired thereby, and this Agreement shall be interpreted and construed as if such term condition or provision, to the extent the same shall have been held invalid, illegal or unenforceable, had never been contained herein, provided that such interpretation and construction is consistent with the intent of the parties as expressed in this Agreement. 15. HEADINGS. The headings of the Articles and Sections contained in this Agreement are included herein for reference purposes only, solely for the convenience of the parties hereto, and shall not in any way be deemed to affect the meaning, interpretation or applicability of this Agreement or any term, condition or provision hereof. 16. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California, notwithstanding the fact that one or more counterparts hereof may be executed outside of the State, or one or more of the obligations of the parties hereunder are to be performed outside of the state. 17. ATTORNEY'S FEES. In the event that any party to this Agreement shall commence any suit, action, arbitration or other proceeding to interpret this Agreement, or determine or enforce any right or obligation created hereby, including but not limited to any action for rescission of this Agreement or for a determination that this Agreement is void or ineffective abinitio, the prevailing party in such action shall recover such party's costs - -------- and expenses incurred in connection therewith, including attorney's fees and costs of appeal, if any. Any court, arbitrator or panel of arbitrators shall, in entering any judgment or making any award in any such suit, action, arbitration or other proceeding, in addition to any and all other relief awarded to such prevailing party, include in such judgment or award such party's costs and expenses as provided in this Section 17. 18. EXECUTION AND COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute only one instrument. Any or all of such counterparts may be executed within or outside the State of California. Any one of such counterparts shall be sufficient for the purpose of proving the existence and terms of this Agreement, and 8 no party shall be required to produce an original or all of such counterparts in making such proof. 19. COVENANT OF FURTHER ASSURANCES. All parties to this Agreement shall, upon request, perform any and all acts and execute and deliver any and all certificates, instruments and other documents that may be necessary or appropriate to carry out any of the terms, conditions and provisions hereof or to carry out the intent of this Agreement. 20. REMEDIES CUMULATIVE. Each and all of the several right and remedies provided for in this Agreement shall be construed as being cumulative and no one of them shall be deemed to be exclusive of the others or of any right or remedy allowed b law or equity, and pursuit of any one remedy, or a waiver of any other remedy. 21. BINDING EFFECT. Subject to the restrictions in Section 25 hereof respecting assignments, this Agreement shall inure to the benefit of and be binding upon all of the parties hereto and their respective executors, administrators, successors and permitted assigns. 22. COMPLIANCE WITH LAWS. Nothing contained in this Agreement shall be construed to require the commission of any act contrary to law and whenever there is a conflict between any term, condition or provision of this Agreement and any present or future statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, the latter shall prevail, but in such event the term, condition or provision of this Agreement affected shall be curtailed and limited only to the extent necessary to bring it within the requirement of the law, provided that such construction is consistent with the intent of the parties as expressed in this Agreement. 23. GENDER. As used in this Agreement, the masculine, feminine or neuter gender, and the singular or plural number, shall be deemed to include the others whenever the context so indicates. 24. NO THIRD PARTY BENEFIT. Nothing contained in this Agreement shall be deemed to confer any right or benefit on any person who is not a party to this Agreement. 25. ASSIGNMENT. Neither party may assign this Agreement, or any rights hereunder, without the prior express consent of the other party. 26. ARBITRATION. Any claim arising out of or relating to this Agreement, or the breach thereof, or Employee's employment by the Company, or the termination of Employee's employment by the Company, shall be settled by 9 binding arbitration in Los Angeles, California, in accordance with the commercial Arbitration Rules of the American Arbitration Association then in effect, and judgment upon the award entered by the arbitrator(s) may be entered in any court having jurisdiction thereof. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written. "COMPANY" CINEMA RIDE, INC. A Delaware Corporation By:____________________________________ Toufic Roger Basil, Vice President "EMPLOYEE" --------------------------------------- MITCH FRANCIS 10 COMPENSATION COMMITTEE APPROVAL The Cinema Ride, Inc. Compensation Committee hereby confirms and approves the EMPLOYMENT AGREEMENT for Mitch Francis dated September 1, 1997. __________________________________ _______________________ Ben Frankel Date __________________________________ ________________________ Ben Frankel Date 11 EX-10.36 3 STIPULATION & CONSENT JUDGEMENT EXHIBIT 10.36 CIVIL COURT OF THE CITY OF NEW YORK COUNTY OF NEW YORK - -------------------------------------------x THREE TIMES SQUARE CENTER PARTNERS, L.P., : Index No. Petitioner, : Non-Housing Part 52 -against- : CINEMA RIDE TIMES SQUARE, INC. : Respondent. : : STIPULATION Premises: Site 3A-7 AND CONSENT 1481-1483 Broadway : JUDGMENT ----------- New York, New York 10036 - -------------------------------------------x WHEREAS, Respondent, Cinema Ride Times Square, Inc. ("Respondent") is the tenant of the premises known as Site 3A-7 in the building known as and located at 1481-1483 Broadway, New York, New York ("Premises"), as more particularly described on Exhibit B to a written Agreement of Lease ("Lease") dated as of August 14, 1995 between Three Times Square Center Partners, L.P. ("Petitioner"), as landlord, and Cinema Ride, Inc. as tenant, and assigned to Respondent; and WHEREAS, Petitioner and Respondent acknowledge and admit that a dispute has arisen regarding their respective obligations under Section 38 and other Sections of the Lease; and WHEREAS, Petitioner and Respondent have agreed to amicably resolve their dispute, on the terms and conditions set forth below, IT IS THEREFORE STIPULATED AND AGREED, by and among the undersigned, Petitioner, Respondent and their legal counsel, as follows: 1. Upon the date of execution of the within Stipulation, the Lease shall terminate as if such date were the Expiration Date under the Lease, with all of the rights and obligations provided therein remaining in full force and effect, except that Respondent will not be entitled to any payments of monies resulting from said termination due it under the Lease, including payment of the Termination Amount as set forth in Section 38B of the Lease, except as set forth in this Stipulation. 2. Simultaneously with the execution of the within Stipulation, or as soon thereafter as possible, Petitioner will commence a summary holdover proceeding ("Holdover Proceeding") to recover possession of the Premises by the filing and service of a Notice of Petition and Petition in the forms annexed hereto, collectively, as Exhibit A. 3. Respondent designates its counsel, Loeb & Loeb LLP, 345 Park Avenue, New York, New York, as its agent for service of process in the Holdover Proceeding. 4. Respondent stipulates that it will not seek to interpose any defense or counterclaim (to the extent it may otherwise have had a right to interpose a counterclaim) in connection with the Holdover Proceeding. 5. Respondent (a) consents to the entry of judgment of possession forthwith, which judgment may be amended by Petitioner to provide for any actual reasonable costs and/or reasonable attorneys' fees incurred by Petitioner as a result of Respondents' non-compliance with this Stipulation, as provided in paragraph 8 below, and the immediate issuance of a warrant of eviction, and (b) waives any right it may have to appeal therefrom and/or to seek a stay thereof to the extent provided by applicable law. 6. Petitioner agrees to a stay of execution of the warrant of eviction until February 28, 1998, on condition that Respondent: A. On or before February 28, 1998, time being of the essence, vacates the Premises and delivers, or causes to be delivered, to Petitioner physical possession of the Premises; B. Waives any right to receive the security deposited with Petitioner pursuant to Section 42 of the Lease; and C. Is not in default beyond the applicable notice and grace periods provided for under the Lease with respect to any of the material terms, covenants and conditions of the Lease (other than for the payment of Rental, including Percentage Rent and other than Articles 21 and 37 of the Lease) as if the Lease were still in effect. Notwithstanding anything to the contrary contained in Article 21 and 37 of the Lease or elsewhere in the Lease or in this Stipulation and in substitution thereof, Respondent shall have the right in its sole and absolute discretion to remove from or leave at the Premises, all Equipment and any Alterations made under the Lease without payment or liability to Petitioner and without any responsibility to restore the Premises to any condition after any removal of such items therefrom. 7. Upon Respondent's failure to timely comply with any one or more of the terms or conditions set forth herein, Petitioner shall be entitled to apply, ex parte, to the Civil Court of the City of New York, County of New York, -- ----- for an order vacating the stay, and, upon such vacatur, to execute forthwith upon the warrant of eviction, without the need to provide the statutory 72 hours notice, which notice is expressly waived by Respondent. However, Petitioner, through counsel, will notify Respondent, through counsel, by telecopier at least 72 hours before executing upon the warrant of eviction. 8. Moreover, upon Respondent's default beyond the applicable notice and grace periods provided for under the Lease with respect to any of the material terms, covenants and conditions of the Lease (other than for the payment of Rental, including Percentage Rent and other than Articles 21 and 37 of the Lease) as if the Lease were still in effect, Respondent shall (1) return any monies paid to it upon the execution of the herein Stipulation, (2) forfeit any future payments due it under the within Stipulation, and (3) be liable for all unpaid past, present and future Rent obligations which were waived in the herein Stipulation. 9. It is understood that, in the event Respondent defaults in any of its obligations under this Stipulation, then Petitioner shall be entitled to recover of Respondent all reasonable and actual costs, including reasonable attorneys' fees incurred in connection with the preparation of the within Stipulation and all related documents, and the obtaining and executing a judgment and/or warrant of eviction as against Respondent. Except as provided in paragraphs 8, 9 and 10 of the within Stipulation, upon Respondent's vacating the Premises, neither Petitioner nor Respondent nor any guarantor of the Lease shall have any further obligations or liabilities under or with respect to the Lease, including any liability for the payment of Rental. 10. Upon the execution of the within Stipulation and the entry of judgment of possession by the Court, which Petitioner agrees to make best efforts to enter as quickly as possible, Petitioner will pay Respondent the sum of $500,000.00 by wire transfer to Respondent's account designated to Petitioner in writing. Furthermore, Petitioner agrees within one (1) month of such execution to deposit in escrow with its attorneys ("Escrowee") the cash amount of $500,000.00, and upon Respondent's timely compliance with all the terms and conditions set forth herein and upon Respondent's timely delivery of possession of the Premises on or before February 28, 1998, Petitioner will pay Respondent, within 72 hours of such delivery, an additional $500,000.00 by wire transfer to Respondent's account designated to Petitioner in writing. In performing its obligations as Escrowee under paragraph 10 above, Escrowee shall have no liability to any party hereunder except by reason of its gross negligence or willful misconduct. 11. In consideration of Respondent's deliverance of possession of the Premises to Petitioner on or before February 28, 1998, Petitioner will additionally waive any and all payments of Rental, including Percentage Rent, accruing from the date of execution of the within Stipulation through February 28, 1998. Petitioner will further relieve Respondent of any and all liability for Rental arrears as of the date of such execution. 12. The execution of the within Stipulation shall not constitute a reinstatement of the landlord-tenant relationship between Petitioner and Respondent, provide Respondent with any occupancy rights other than those set forth in this Stipulation and the Lease to the extent referenced herein, create a month-to-month tenancy, or constitute a waiver by Petitioner of its right to execute upon the warrant of eviction. 13. This Stipulation may be executed in counterparts. Any signature reproduced by telefacsimile or any other mechanical process shall be deemed to be an original signature, with the same force and effect thereof. 14. This Stipulation may be SO ORDERED by a Judge of the Civil Court or a presiding Judicial Hearing Officer without either further notice or the necessity of an appearance by either party. The failure to do so shall not effect any of the parties' rights, remedies and obligations hereunder. 15. Disclosures; Confidentiality. Respondent and its past, present ---------------------------- and future attorneys, accountants, representatives, agents and employees agree that the terms and provisions of the within Stipulation are and shall be deemed confidential and shall not be disclosed to any other person or entity and agree that they will maintain in confidence the terms and conditions hereof, except (i) by written agreement of Petitioner; (ii) to its legal, business and financial advisors, but only to the extent such disclosure is necessary for such persons to render services in connection therewith and only after such persons have agreed in writing to maintain confidentiality pursuant to this paragraph; (iii) to governmental or regulatory authorities, including the Securities and Exchange Commission (SEC), NASDAQ, or similar authorities, to the extent that such disclosure is required by law and after reasonable written notice has been given to Petitioner; (iv) to a court, arbitrator, mediator, or other tribunal to the extent necessary to enforce any of the terms of this Stipulation; and (v) except as provided in (iii) above, if required in order to comply with any lawful process, provided that, upon the receipt thereof and before complying with such process, Respondent and/or its attorneys, accountants, representatives, agents and employees, past, present and future (a) promptly notifies Petitioner of the existence, terms and circumstances surrounding such process, (b) provides Petitioner with a reasonable period of time, from the date notice is given, in which to petition to quash such process; and (c) at Petitioner's reasonable request and expense, seeks to maintain the confidentiality of this Stipulation through protective order or similar arrangement. Petitioner acknowledges and agrees that Respondent is required to disclose the transaction contemplated by this Stipulation to the SEC including the amount of payments to be made to Respondent hereunder, and to issue a press release regarding this transaction and Respondent's vacating of the Premises. Petitioner hereby consents to the issuance of a press release substantially in the form and substance annexed hereto as Exhibit B. 16. As a material inducement to Respondent's entering into this Stipulation and Consent Judgment, Petitioner hereby represents, warrants and convents to Respondent that: a. the Building in which the Premises is located is intended to be demolished; and b. Landlord does not intend to relet or otherwise allow the occupancy of the Premises by any other tenant, concessionaire or other occupant after Respondent vacates the Premises. 17. The terms and provisions of this Stipulation and Consent Judgment shall enure to the benefit of all successors and/or assigns of the undersigned. Dated: October 28, 1997 Signature page to Stipulation and Consent Judgment between Three Times Square Center Partners, L.P. and Cinema Ride Times Square, Inc. THREE TIMES SQUARE CENTER PARTNERS, L.P. By: Prudential Times Square Center Associates, General Partner By:___________________________ Name: Sharon Barnes Its: Managing Vice President WARSHAW BURSTEIN COHEN SCHLESINGER & KUH, LLP Attorneys for Petitioner Three Times Square Center Partners, L.P. By:___________________________ JAY A. KRANIS, ESQ. CINEMA RIDE TIMES SQUARE, INC. By:___________________________ Name: Its: LOEB & LOEB LLP Attorneys for Respondent Cinema Ride, Inc. and Escrowee By:___________________________ ANDREW E. LIPPMANN, ESQ. SO ORDERED: - ----------------------- J.C.C. Audrey Rubin, Esq. Skadden, Arps, Slate, et al. 919 Third Avenue 44th Floor New York, New York 10022 EX-27 4 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 252,804 0 99,901 0 29,229 367,217 5,605,351 1,325,040 6,775,465 1,277,792 0 0 0 57,350 3,998,077 6,775,465 2,991,646 2,991,646 0 3,785,660 0 0 360,708 0 0 0 0 0 0 (1,154,722) (.20) (.20)
-----END PRIVACY-ENHANCED MESSAGE-----