DRAFT 01/30/98
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
-------------
Date of Report (Date of earliest event reported): November 21, 1997
Clearview Cinema Group, Inc.
(Exact name of registrant as specified in charter)
Delaware 001-13187 22-3338356
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
97 Main Street 07928
Chatham, New Jersey (Zip code)
(Address of principal executive
offices)
Registrant's telephone number,
including area code: (973) 377-4646
The following amends and restates in its entirety Item 7 of the Form
8-K of Clearview Cinema Group, Inc. which reported an event dated November 21,
1997:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Nelson Ferman Theatres at Parsippany and Roxbury
Independent Auditors' Report
Combined Balance Sheet as of September 30, 1997
Combined Statements of Income and Changes in Retained Earnings for
the Year Ended December 31, 1996 and the Nine Months Ended September 30,
1997
Combined Statements of Cash Flows for the Year Ended December 31, 1996 and
the Nine Months Ended September 30, 1997
Notes to Combined Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
Clearview Cinema Group, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1997 (Unaudited)
Pro Forma Condensed Consolidated Statement of Operations
for the Nine Months Ended September 30, 1997 (Unaudited)
Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended December 31, 1996 (Unaudited)
Notes to Pro Forma Condensed Financial Statements
(c) EXHIBITS.
2.01 Asset Purchase Agreement dated as of November 21, 1997 by and
among Clearview Cinema Group, Inc., CCC Succasunna Cinema Corp.,
CCC Parsippany Cinema Corp., F&N Cinema, Inc., Roxbury Cinema,
Inc., John Nelson, Pamela Ferman and Seth Ferman (previously
filed)
2.02 Merger Agreement dated as of November 21, 1997 by and among
Clearview Cinema Group, Inc., CCC Mansfield Cinema Corp., Warren
County Cinemas, Inc., John Nelson, Pamela Ferman and Seth Ferman
(previously filed)
9.01 Voting Trust Agreement dated as of November 21, 1997 by and
among F&N Cinema, Inc., Roxbury Cinema, Inc. and A. Dale Mayo,
as Trustee (previously filed)
10.01 Subordinated Promissory Note dated as of November 21, 1997 in
the amount of $4.0 million (previously filed)
10.02 Subordinated Promissory Note dated as of November 21, 1997 in
the amount of $2.0 million (previously filed)
10.03 Registration Rights Agreement dated as of November 21, 1997 by
and among Clearview Cinema Group, Inc., F&N Cinema, Inc. and
Roxbury Cinema, Inc. (previously filed)
- 2 -
10.04 Assignment by F&N Cinema, Inc. dated November 7, 1997 assigning
to CCC Parsipanny Cinema Corp. that certain Ground Lease between
The Trustees of Net Realty Holding Trust and F&N Cinema, Inc.
dated May 12, 1993, as amended by the First Amendment to Ground
Lease dated July 11, 1994, and as further amended by Second
Amendment to Ground Lease dated December 19, 1994 (filed
herewith)
10.05 Assignment, Acceptance of Assignment and Consent to Assignment
of Lease between Roxbury Cinema Inc. and CCC Succasunna Cinema
Corp., dated November 21, 1997, assigning that certain Lease
between First Roxbury Company and Roxbury Cinema Inc. dated May
24, 1989, as amended by Lease Modification Agreement dated May
2, 1990, and as further amended by Second Lease Modification
Agreement dated December 20, 1994 (filed herewith)
- 3 -
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Clearview Cinema Group, Inc.
We have audited the combined balance sheet of the Nelson Ferman
Theaters at Parsippany and Roxbury (the "NF Theaters"), as of September 30, 1997
and the related combined statements of income and changes in retained earnings
and cash flows for the nine months ended September 30, 1997 and the year ended
December 31, 1996. These combined financial statements are the responsibility of
the management of Nelson Ferman, Inc. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financials are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of the NF
Theaters at September 30, 1997, and the results of their operations and their
cash flows for of the nine months ended September 30, 1997 and the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
October 22, 1997
- 4 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
CURRENT ASSETS:
Cash $37,017
Other current assets 84,415
------
Total current assets $ 121,432
PROPERTY AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION 3,828,748
OTHER ASSETS:
Due from affiliate 125,488
Other assets 36,403 161,891
------ -------
$ 4,112,071
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 302,917
Current portion of deferred income 100,000
Accounts payable and accrued expenses 723,674
-------
Total current liabilities $ 1,126,591
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 1,633,333
Deferred income, net of current portion 625,000 2,258,333
-------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock 504,000
Additional paid-in capital 27,000
Retained earnings 196,147
-------
Total Stockholders' Equity
727,147
-------
$ 4,112,071
===========
See accompanying notes to combined financial statements.
- 5 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED STATEMENTS OF INCOME
AND CHANGES IN RETAINED EARNINGS
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
----------- -------------
THEATER REVENUES:
Box office $ 4,812,495 $ 4,015,770
Concession 1,129,729 989,484
Other 39,167 35,979
------ ------
5,981,391 5,041,233
--------- ---------
OPERATING EXPENSES:
Film rental and booking fees 2,373,986 1,925,740
Theater operating expenses 1,848,016 1,354,756
General and administrative expenses 1,103,057 819,520
Depreciation and amortization 403,075 298,980
------- -------
5,728,134 4,398,996
--------- ---------
OPERATING INCOME 253,257 642,237
INTEREST EXPENSE 250,156 188,963
----------- -----------
NET INCOME 3,101 453,274
RETAINED EARNINGS (DEFICIT),
BEGINNING OF PERIOD (260,228) (257,127)
-------- --------
RETAINED EARNINGS (DEFICIT),
END OF PERIOD $ (257,127) $ 196,147
=========== ===========
See accompanying notes to combined financial statements.
- 6 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED STATEMENTS OF CASH FLOWS
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,101 $ 453,274
Adjustments to reconcile net income
(loss) to net cash flows from
operating activities:
Depreciation and amortization 403,075 298,980
Recognition of deferred revenue (100,000) (75,000)
Amortization of accrued rent 25,146 18,860
Changes in operating assets and
liabilities:
Other current assets (28,286) 32,466
Other assets 10,000 12,000
Accounts payable and accrued
expenses 19,681 (157,215)
--------- ---------
Net cash flows from operating
activities 332,717 583,365
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (114,423) --
Advances to parent and affiliate (89,878) (494,209)
--------- ---------
Net cash flows from investing
activities (204,301) (494,209)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Payments on long-term debt (156,604) (151,250)
--------- ---------
NET CHANGE IN CASH (28,188) (62,094)
CASH, BEGINNING OF PERIOD 127,299 99,111
------- ------
CASH, END OF PERIOD $ 99,111 $ 37,017
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 250,156 $ 188,963
========= =========
Income taxes paid $ -- $ --
========= =========
See accompanying notes to combined financial statements.
- 7 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF COMBINATION - The combined financial statements include the
accounts of two theater affiliates of Nelson Ferman, Inc. ("Nelson Ferman") at
Parsippany and Roxbury (the "NF Theaters"). All significant inter-location
balances and transactions have been eliminated in combination.
NATURE OF THE BUSINESS - The NF Theaters operated multi-screen theaters in
Morris County, New Jersey.
REVENUES AND FILM RENTAL COSTS - The NF Theaters recognize revenues from
box office admissions at the time of sale. Concession sales are recognized as a
commission from a third party, when earned. Film rental costs are based on a
film's box office receipts and length of a film's run.
SEASONALITY - The NF Theaters' business is seasonal with a large portion
of their revenues and profits being derived during the summer months (June
through August) and the holiday season (November and December).
ESTIMATES AND UNCERTAINTIES - 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 and 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, as determined at a later date,
could differ from those estimates.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Theater equipment and office furniture and equipment are depreciated using
straight line and accelerated methods over the estimated useful lives of the
assets of 7 years. Leasehold improvements are amortized using the straight-line
method over the term of the related lease or the estimated useful life of the
asset, whichever is less.
RENT EXPENSE - The NF Theaters included in the combined financial
statements are operated under leases that contain predetermined increases in the
rentals payable during the term of such leases. For these leases, the aggregate
rental expense over the lease terms is recognized on a straight-line basis over
the lease terms. The differences between the expense charged to operations and
the amount payable under that lease are recorded annually as deferred rent
expense, which will ultimately reverse over the lease terms.
Additional rent is paid for common area maintenance and may also be
charged based on a percentage of net revenue in excess of a predetermined
amount.
- 8 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
NOTES TO COMBINED FINANCIAL STATEMENTS
FINANCIAL INSTRUMENTS - Financial instruments include cash and accounts
payable and accrued expenses. The amounts reported for financial instruments are
considered to be reasonable approximations of their fair values, based on market
information of financial instruments with similar characteristics available to
management.
INCOME TAXES - The NF Theaters have elected under Section 1361 of the
Internal Revenue Code and under New Jersey corporate statutes to be taxed as
small business corporations. Under these provisions, all earnings and losses of
the NF Theaters are reported on the tax returns of the shareholders.
Accordingly, no provision has been made for federal income taxes and the NF
Theaters are subject to state taxes at a nominal rate.
IMPAIRMENT OF LONG-LIVED ASSETS - In 1996, Nelson Ferman adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The effect of the adoption of that statement did not have a material effect on
the financial statements.
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment at September 30, 1997 are summarized as follows:
Leasehold improvements $ 4,063,081
Furniture and equipment 1,563,084
------------
5,626,165
Less: Accumulated depreciation and
amortization 1,797,417
---------
$ 3,828,748
===========
- 9 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 3--LONG-TERM DEBT:
LONG-TERM DEBT - A summary of long-term debt at September 30, 1997
follows:
Interest
Description Rate
----------- ----
Notes payable, due in monthly Prime $ 1,808,333
installments of $14,583 plus plus .25%
interest, through November 2000
with the remaining balance of
$1,239,583 due in January 2001
Other Various 127,917
-------------
1,936,250
Less: Current maturities 302,917
-------------
$ 1,633,333
=============
The above debt is secured by the leasehold interest and other operating assets
of the NF Theaters and is guaranteed by all affiliates of Nelson Ferman,
including its stockholders.
Long-term debt matures as follows:
Year Ended September 30,
------------------------
1998 $ 302,917
1999 175,000
2000 175,000
2001 1,283,333
-------------
$ 1,936,250
===========
NOTE 4--DEFERRED INCOME:
The NF Theaters entered into an agreement with the concession vendor of
the Parsippany location in November, 1994, wherein the concessionaire paid
$1,000,000 as advance commissions. The commissions are being recognized as
income ratably over the term of the concession agreement, which expires in
November 2004. At September 30, 1997, the unamortized deferred commission
amounted to approximately $725,000.
The agreement stipulates that if the NF Theater at Parsippany cancels the
agreement prior to its expiration, the remaining unamortized balance must be
refunded to the concessionaire.
- 10 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 5--COMMON STOCK:
Common stock consists of the following at September 30, 1997:
Parsippany:
No par value, authorized and
issued 100 shares $ 500,000
Roxbury:
No par value, authorized and
issued 100 shares 4,000
---------
$ 504,000
=========
NOTE 6--COMMITMENTS AND CONTINGENCIES:
THEATER LEASES - The following is a schedule of future minimum rental
payments required for all non-cancelable operating leases (for theater
facilities) that have initial or remaining lease terms in excess of one year at
September 30, 1997:
Year Ending September 30,
-------------------------
1997 $ 353,805
1998 353,805
1999 361,523
2000 361,523
2001 375,478
2002 and thereafter 5,954,209
------------
$ 7,760,343
============
Rent expense for theater operating leases for the year ended December 30,
1996 and the nine months ended September 30, 1997 was approximately $570,000 and
$384,000, respectively.
NOTE 7--RELATED PARTY TRANSACTIONS:
OPERATING EXPENSES, MANAGEMENT FEES AND INTEREST EXPENSE - The NF
Theaters' operations through the date of sale were significantly controlled by
Nelson Ferman. In that regard, the cash deposited to the NF Theaters' operating
accounts was transferred to Nelson Ferman, which used the funds to pay operating
expenses, along with the funds from other Nelson Ferman affiliated theaters, on
a company-wide basis using an integrated system.
- 11 -
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
NOTES TO COMBINED FINANCIAL STATEMENTS
Interest expense represents an allocation of interest costs incurred by
Nelson Ferman and is charged to the NF Theaters based on each theater's
respective net assets.
NOTE 8--SUBSEQUENT EVENT (UNAUDITED):
In November 1997, Nelson Ferman sold substantially all of the assets,
including leasehold interests, equipment and various operating contracts of the
NF Theaters at Parsippany and Roxbury to Clearview Cinema Group, Inc.
("Clearview") for $18.5 million; $11.6 million in cash, 10 1/2% subordinated
notes aggregating $6.0 million, and common stock of Clearview valued at
$500,000, with an additional $400,000 held in escrow until the satisfaction of
certain obligations of Nelson Ferman.
- 12 -
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed financial information and
related notes give effect to the acquisition of the Nelson Ferman Theaters at
Parsippany and Roxbury (the "Acquisition") by Clearview Cinema Group, Inc. (the
"Company"). The pro forma financial information includes: (i) an unaudited pro
forma condensed consolidated balance sheet of the Company giving effect to the
Acquisition as if it had occurred on September 30, 1997; (ii) an unaudited pro
forma consolidated statement of operations of the Company for the nine months
ended September 30, 1997 giving effect to the Acquisition as if it had occurred
on January 1, 1997; and (iii) an unaudited pro forma consolidated statement of
operations of the Company for the year ended December 31, 1996 giving effect to
the Acquisition and the Company's prior acquisitions as if they had occurred on
January 1, 1996.
This pro forma financial information is based on the estimates and
assumptions set forth herein and in the notes thereto and has been prepared
utilizing the consolidated and combined financial statements and notes thereto
appearing in the Company's Registration Statement on Form SB-2 (as amended),
which became effective on August 12, 1997 (the "Form SB-2") and its Form 10-QSB
for the quarter ended September 30, 1997 (See Notes 1 and 3).
The following unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of (i) the results
of operations of the Company that actually would have occurred had the
Acquisition and the Company's prior acquisitions been consummated on the dates
indicated or (ii) the results of operations of the Company that may occur or be
obtained in the future. The following information is qualified in its entirety
by reference to and should be read in conjunction with the Company's
consolidated financial statements, including the notes thereto, and the other
financial information appearing in the Company's Form SB-2 and its Form 10-QSB
for the quarter ended September 30, 1997 (See Note 1).
- 13 -
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
Pro Forma
-------------------------
NF
Historical Theaters Adjustments Amount
------------ ----------- ------------ -----------
(Note 1) (Note 2)
ASSETS
CURRENT ASSETS:
Cash $ 1,195,712 $ 37,017 $ (437,017) $ 795,712
Inventories 78,236 -- -- 78,236
Other current assets 321,365 84,415 315,585 721,365
------------ ------------ ------------ ------------
Total current assets 1,595,313 121,492 (121,432) 1,595,313
------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT,
LESS ACCUMULATED
DEPRECIATION 21,072,010 3,828,748 171,252 25,072,010
------------ ------------ ------------ ------------
OTHER ASSETS:
Intangible assets, less
accumulated
amortization 3,360,478 -- 14,200,000 17,560,478
Security deposits and
other assets 526,014 161,891 (161,891) 526,014
------------ ------------ ------------ ------------
3,886,492 161,891 14,038,109 18,086,492
------------ ------------ ------------ ------------
$ 26,553,815 $ 4,112,071 $ 14,087,929 $ 44,753,815
============ ============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities
of long-term debt $ 1,317,696 $ 302,917 $ 2,017,083 $ 3,637,696
Current portion of
deferred revenue -- 100,000 (100,000) --
Current maturities of
subordinated 491,046 -- -- 491,046
notes payable
Accounts payable and
accrued expenses 1,936,235 723,674 (723,674) 1,936,235
------------ ------------ ------------ ------------
Total current
liabilities 3,744,977 1,126,591 1,193,409 6,064,977
------------ ------------ ------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, less
current maturities 12,770,454 1,633,333 7,646,667 22,050,454
Deferred income, less
current maturities -- 625,000 (625,000) --
Subordinated notes
payable, less
current maturities 599,530 -- 6,000,000 6,599,530
------- --------- --------- ---------
13,369,984 2,258,333 13,021,667 28,649,984
------------ ------------ ------------ ------------
- 14 -
(Table continued)
Pro Forma
-------------------------
NF
Historical Theaters Adjustments Amount
------------ ----------- ------------ -----------
(Note 1) (Note 2)
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock 8 -- -- 8
Common stock 21,088 504,000 (503,583) 21,505
Additional paid-in 11,012,433 27,000 572,583 11,612,016
capital
Accumulated deficit (1,594,675) 196,147 (196,147) (1,594,675)
------------ ------------ ------------ ------------
Total stockholders'
equity 9,438,854 727,147 (127,147) 10,038,854
--------- ------- -------- ----------
$ 26,553,815 $ 4,112,071 $ 14,087,929 $ 44,753,815
============ ============ ============ ============
- 15 -
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
Pro Forma
-------------------------
Pro Forma -
Company and
Prior NF
Acquisitions Theaters Adjustments Amount
------------ ----------- ------------ -----------
(Note 3) (Note 4)
THEATER REVENUES:
Box office $ 10,644,032 $ 4,015,770 $ -- $ 14,659,802
Concession 3,073,713 989,484 -- 4,063,197
Other 314,431 35,979 -- 350,410
------------ ------------ ------------ ------------
14,032,176 5,041,233 -- 19,073,409
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Film rental and booking
fees 5,026,096 1,925,740 -- 6,951,836
Cost of concession sales 493,655 -- -- 493,655
Theater operating
expenses 5,443,509 1,354,756 -- 6,798,265
General and
administrative 827,361 819,520 -- 1,646,881
Depreciation and
amortization 1,651,734 298,980 696,020 2,646,734
------------ ------------ ------------ ------------
13,442,355 4,398,996 696,020 18,537,371
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) 589,821 642,237 (696,020) 536,038
INTEREST EXPENSE 1,368,101 188,963 1,154,037 2,711,101
------------ ------------ ------------ ------------
NET INCOME (LOSS) (778,280) 453,274 $ (1,850,057) $ (2,175,063)
============ ============ ============ ============
NET INCOME (LOSS)
PER SHARE $ (.30) $ (.81)
====== ======
- 16 -
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
Pro Forma
-------------------------
Pro Forma -
Company and
Prior NF
Acquisitions Theaters Adjustments Amount
------------ ----------- ------------ -----------
(Note 3) (Note 4)
THEATER REVENUES:
Box office $ 13,834,642 $ 4,812,495 $ -- $ 18,647,137
Concession 3,656,988 1,129,729 -- 4,786,717
Other 491,823 39,167 -- 530,990
------------ ------------ ------------ ------------
17,983,453 5,981,391 -- 23,964,844
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Film rental and booking
fees 6,456,164 2,373,986 -- 8,830,150
Cost of concession sales 540,670 -- -- 540,670
Theater operating
expenses 7,145,257 1,848,016 -- 8,993,273
General and
administrative 1,125,240 1,103,057 -- 2,228,297
Depreciation and
amortization 1,902,452 403,075 922,925 3,228,452
Impairment of long-lived
assets 224,908 -- -- 224,908
------------ ------------ ------------ ------------
17,394,691 5,728,134 922,925 24,045,750
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) 588,762 253,257 (922,925) (80,906)
INTEREST EXPENSE 1,558,846 250,156 1,539,844 3,348,846
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (970,084) $ 3,101 $ (2,462,769) $ (3,429,752)
============ ============ ============ ============
NET INCOME (LOSS)
PER SHARE $ (.36) $ (1.27)
======= =======
- 17 -
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
In November 1997, the Company acquired substantially all of the assets,
including leasehold interests, equipment and various operating contracts of the
NF Theaters at Parsippany and Roxbury for $18.5 million; $11.6 million in cash
obtained from the Company's credit facility; 10 1/2% subordinated notes
aggregating $6.0 million, and shares of common stock of the Company valued at
$500,000, with an additional $400,000 held in escrow until the satisfaction of
certain obligations of Nelson Ferman, Inc.
NOTE 1 -- BASIS OF PRESENTATION
The pro forma condensed consolidated balance sheet as of September 30, 1997
includes the Company's historical balance sheet as reflected in its
September 30, 1997 Form 10-QSB. Such historical consolidated balance sheet
included all of the Company's acquisitions through September 30, 1997. The
pro forma condensed consolidated balance sheet also includes the balance
sheet of the Nelson Ferman Theaters at Parsippany and Roxbury (the "NF
Theaters"), included elsewhere herein, and the pro forma adjustments as
described in Note 2.
The Acquisition will be accounted for under the purchase method of
accounting. Under the purchase method of accounting, the results of
operations of an acquired entity are included in the Company's historical
consolidated financial statements from its acquisition date. Under that
method of accounting, the acquired assets are included based on the
allocation of their aggregate purchase price as of their date of
acquisition.
The Company acquired from Nelson Ferman, Inc. the operations of the NF
Theaters and certain leasehold interests and the theater equipment of the
two theater locations. Cash, other current assets, other assets, long-term
debt, deferred income and accounts payable and accrued expenses of the
acquired theaters will remain the property of, or the obligation of, the
seller, Nelson Ferman, Inc. The net equity of the theaters acquired has been
eliminated in combination. Interest expense incurred by the NF Theaters has
also been eliminated in combination.
- 18 -
NOTE 2 -- ACQUISITION OF NF THEATERS
The purchase price for the Acquisition was $18.5 million, plus estimated
costs of approximately $100,000. An estimated allocation of the purchase
price, based on management estimates, is as follows:
Leasehold improvements $ 2,000,000
Equipment 2,000,000
Goodwill 14,200,000
Other assets 400,000 $18,600,000
------------
Less: Carrying value of assets in the
historical financial statements
of the NF Theaters -
Property and equipment $ 3,828,748
Other current assets 84,415
------------
3,913,163
---------
Adjustment to carrying value of assets
acquired $14,686,837
-----------
The adjustment to the carrying value of
the assets acquired is recorded as
follows:
Increase in property and equipment 171,252
Increase in goodwill 14,200,000
Increase in other current assets 315,585
------------
$14,686,837
===========
The pro forma adjustments to the September 30, 1997 pro forma balance sheet
also include the bank financing for $11.6 million, the issuance of the
subordinated note payable for $6.0 million and the issuance of shares of
common stock valued at $500,000 in connection with the Acquisition.
NOTE 3 -- PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma condensed consolidated statement of operations for the nine
months ended September 30, 1997 includes (in column 1) the pro forma
statement of operations as derived from the Company's September 30, 1997
Form 10-QSB. This pro forma column includes the Company's historical
statement of operations and the pro forma statement of operations for all
prior acquisitions for the nine months ended September 30, 1997.
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The pro forma condensed consolidated statement of operations for the year
ended December 31, 1996 includes (in column 1) the pro forma statement of
operations as derived from the Company's Form SB-2. This pro forma column
includes the Company's historical statement of operations and the pro forma
statement of operations for all prior acquisitions for the year ended
December 31, 1996.
NOTE 4 -- PRO FORMA ADJUSTMENTS
Pro forma adjustments to the pro forma statements of operations at September
30, 1997 and December 31, 1996 have been made for the following:
a) Increase to depreciation expense resulting from the increase in the
carrying value of the acquired theaters' property and equipment.
b) Increase in amortization expense to reflect, over a 15 year period,
the amortization of the excess of cost over the fair value of assets
aquired ("goodwill") and
c) Increase in interest expense to reflect the interest cost of debt
obligations incurred as if the related acquisition financing had
occurred on January 1, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CLEARVIEW CINEMA GROUP, INC.
By: /s/ A. Dale Mayo
--------------------------------
A. Dale Mayo
Chairman of the Board, President and
Chief Executive Officer
Date: February 2, 1998
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Exhibit Index
Sequential
Exhibit No. Document Page No.
----------- -------- --------
2.01 Asset Purchase Agreement dated as of November previously
21, 1997 by and among Clearview Cinema Group, filed
Inc., CCC Succasunna Cinema Corp., CCC
Parsippany Cinema Corp., F&N Cinema, Inc.,
Roxbury Cinema, Inc., John Nelson, Pamela
Ferman and Seth Ferman.
2.02 Merger Agreement dated as of November 21, 1997 previously
by and among Clearview Cinema Group, Inc., CCC filed
Mansfield Cinema Corp., Warren County Cinemas,
Inc., John Nelson, Pamela Ferman and Seth
Ferman.
9.01 Voting Trust Agreement dated as of November previously
21, 1997 by and among F&N Cinema, Inc., filed
Roxbury Cinema, Inc. and A. Dale Mayo, as
Trustee.
10.01 Subordinated Promissory Note dated as of previously
November 21, 1997 in the amount of $4.0 filed
million.
10.02 Subordinated Promissory Note dated as of previously
November 21, 1997 in the amount of $2.0 filed
million.
10.03 Registration Rights Agreement dated as of previously
November 21, 1997 by and among Clearview filed
Cinema Group, Inc., F&N Cinema, Inc. and
Roxbury Cinema, Inc.
10.04 Assignment by F&N Cinema, Inc. dated November
7, 1997 Assigning to CCC Parsipanny Cinema
Corp. that certain Ground Lease between The
Trustees of Net Realty Holding Trust and F&N
Cinema, Inc. dated May 12, 1993, as amended by
the First Amendment to Ground Lease dated July
11, 1994, and as further amended by Second
Amendment to Ground Lease dated December 19,
1994.
10.05 Assignment, Acceptance of Assignment and
Consent to Assignment of Lease between Roxbury
Cinema Inc. and CCC Succasunna Cinema Corp.,
dated November 21, 1997, assigning that
certain Lease between First Roxbury Company
and Roxbury Cinema Inc. dated May 24, 1989, as
amended by Lease Modification Agreement dated
May 2, 1990, and as further amended by Second
Lease Modification Agreement dated December
20, 1994.