-----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, UheY9GNn1JoFthKIfiWRqeLtbDCiH0lQTuoEw01gAnUiaxFzaodz6g5StsAU7l8E OqqO/EQgVgwQ6U44xpoWVg== 0000950153-98-000662.txt : 19980608 0000950153-98-000662.hdr.sgml : 19980608 ACCESSION NUMBER: 0000950153-98-000662 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980605 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERACTIVE FLIGHT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000932021 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 113197148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25668 FILM NUMBER: 98642925 BUSINESS ADDRESS: STREET 1: 4041 NORTH CENTRAL AVENUE STREET 2: SUITE 2000 CITY: PHOENIX STATE: AZ ZIP: 85012 BUSINESS PHONE: 6022008900 MAIL ADDRESS: STREET 1: 4041 N CENTRAL AVE STREET 2: STE 2000 CITY: PHOENIX STATE: AZ ZIP: 85012 10QSB 1 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended April 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to _______ Commission File No. 0-25668 INTERACTIVE FLIGHT TECHNOLOGIES, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) DELAWARE 11-3197148 (State or Other Jurisdiction of (I.R.S. Employer Incorporation of Organization) Identification Number) 4041 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012 (Address of Principal Executive Offices) (602) 200-8900 (Issuer's Telephone Number, Including Area Code) Not Applicable (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding at May 29, 1998 ----- --------------------------- Class A Common Stock, $.01 par value 17,324,224 shares Class B Common Stock, $.01 par value 3,733,334 shares Transitional Small Business Disclosure Format Yes ___ No X 2 INTERACTIVE FLIGHT TECHNOLOGIES, INC. INDEX PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets as of April 30, 1998 (unaudited) and October 31, 1997 (audited).............................. 3 Condensed Statements of Operations for the Three Months and Six Months Ended April 30, 1998 and 1997 (unaudited)................ 4 Condensed Statements of Cash Flows for the Six Months Ended April 30, 1998 and 1997 (unaudited)............................... 5 Notes to Condensed Financial Statements ................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings....................................................13 Item 6. Exhibits and Reports on Form 8-K.....................................13 SIGNATURES....................................................................14 2 3 INTERACTIVE FLIGHT TECHNOLOGIES, INC. CONDENSED BALANCE SHEETS
APRIL 30, OCTOBER 31, ASSETS 1998 1997 ------------- ------------- (UNAUDITED) Current assets: Cash and cash equivalents $ 40,706,887 $ 36,890,454 Short-term investment securities 1,698,772 2,137,084 Accounts receivable 544,225 5,654,118 Inventories, net of reserves of $11,635,327 and $11,179,895, respectively 1,107,379 6,110,761 Prepaid expenses 329,505 253,771 Other current assets 692,270 606,883 ------------- ------------- Total current assets 45,079,038 51,653,071 ------------- ------------- Investment securities 1,509,290 -- Property and equipment, net of accumulated depreciation of $4,934,603 and $9,555,383, respectively 2,344,510 2,959,539 Deposits 621,845 166,845 ------------- ------------- Total assets $ 49,554,683 $ 54,779,455 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,879,473 $ 5,747,833 Accrued liabilities 3,990,616 4,248,222 Deferred revenue 190,844 2,383,904 Accrued severance costs 55,000 55,000 Accrued maintenance costs 1,138,313 1,286,873 Accrued product warranties 6,856,503 4,610,687 Current maturities of capital lease obligations 84,876 80,753 ------------- ------------- Total current liabilities 14,195,625 18,413,272 ------------- ------------- Accrued severance costs, noncurrent 27,500 55,000 Capital lease obligations, less current maturities 33,346 76,840 ------------- ------------- Total liabilities 14,256,471 18,545,112 ------------- ------------- Stockholders' equity: Preferred stock, par value $0.01 per share, 5,000,000 shares authorized, none issued -- -- Class A common stock, one vote per share, par value $0.01 per share, 40,000,000 shares authorized; 18,377,724 and 18,189,995 shares issued, respectively 183,777 181,900 Class B common stock, six votes per share, par value $0.01 per share, 4,000,000 shares authorized; 3,733,334 shares issued and outstanding including 3,200,000 shares held in escrow 37,334 37,334 Additional paid-in capital 112,223,734 112,037,882 Accumulated deficit (76,135,654) (76,022,773) Treasury stock, at cost; 1,053,500 and 0 shares, respectively (1,010,979) -- ------------- ------------- Total stockholders' equity 35,298,212 36,234,343 ------------- ------------- Total liabilities and stockholders' equity $ 49,554,683 $ 54,779,455 ============= =============
See accompanying notes to condensed financial statements. 3 4 INTERACTIVE FLIGHT TECHNOLOGIES, INC. CONDENSED STATEMENTS OF OPERATIONS UNAUDITED
Three Months Six Months Ended April 30, Ended April 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenue: Equipment sales $ 4,569,337 $ 2,329,422 $ 17,860,563 $ 2,478,131 Service income 162,825 31,940 281,264 109,236 ------------ ------------ ------------ ------------ 4,732,162 2,361,362 18,141,827 2,587,367 ------------ ------------ ------------ ------------ Costs and expenses: Cost of equipment sales 3,768,459 6,155,089 15,335,854 8,879,913 Cost of service income 7,257 13,828 12,957 95,527 Provision for doubtful accounts -- 13,725 -- 150,315 Research and development expenses 482,389 2,080,017 1,092,316 4,646,361 Marketing and administrative expenses 1,271,967 2,996,333 2,878,398 6,434,330 Bad debt recoveries -- (1,064,284) -- (1,064,284) ------------ ------------ ------------ ------------ 5,530,072 10,194,708 19,319,525 19,142,162 ------------ ------------ ------------ ------------ Operating loss 797,910 7,833,346 1,177,698 16,554,795 Other: Interest income 526,180 489,663 1,071,312 893,435 Interest expense (3,234) (1,041) (6,995) (1,041) Other, net 500 (66,655) 500 (66,655) ------------ ------------ ------------ ------------ Net loss 274,464 $ 7,411,379 $ 112,881 $ 15,729,056 ============ ============ ============ ============ Basic and diluted net loss per share $ (0.02) $ (0.40) $ (0.01) $ (1.00) ============ ============ ============ ============ Weighted average shares outstanding 17,992,968 18,723,062 18,363,703 15,690,289 ============ ============ ============ ============
See accompanying notes to condensed financial statements. 4 5 INTERACTIVE FLIGHT TECHNOLOGIES, INC. CONDENSED STATEMENTS OF CASH FLOWS UNAUDITED
Six Months Ended April 30, ----------------------------- 1998 1997 ------------ ------------ Cash flows from operating activities: Net loss $ (112,881) $(15,729,056) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Provision for inventory obsolescence -- 800,000 Loss on sale of equipment -- 66,655 Depreciation and amortization 641,419 802,154 Expense recognized upon issuance of stock options and shares of Class A common stock -- 479,436 Changes in assets and liabilities: Decrease (increase) in accounts receivable 5,109,893 (854,008) Decrease in allowance for doubtful accounts -- (1,446,111) Decrease (increase) in inventories 5,003,382 (13,674,814) Increase in prepaid expenses, other current assets and deposits (616,121) (376,543) Increase (decrease) in accounts payable (3,868,360) 3,234,154 Increase (decrease) in accrued liabilities and maintenance (218,437) 523,187 Decrease in deferred revenue (2,193,060) -- Decrease in accrued severance costs (27,500) (502,500) Increase in accrued product warranties 2,245,816 502,506 ------------ ------------ Net cash provided by (used in) operating activities 5,964,151 (26,174,940) ------------ ------------ Cash flows from investing activities: Purchases of investments (1,305,593) -- Maturities of investments 234,615 6,810,275 Purchases of property and equipment (26,390) (8,532,103) ------------ ------------ Net cash used in investing activities (1,097,368) (1,721,828) ------------ ------------ Cash flows from financing activities: Payments on capital lease obligations (39,371) (9,561) Purchases of treasury stock (1,010,979) -- Redemption of Class B warrants -- (40,576) Proceeds from issuance of common stock -- 73,589,775 Registration costs -- (4,481,164) ------------ ------------ Net cash provided by (used in) financing activities (1,050,350) 69,058,474 ------------ ------------ Increase in cash and cash equivalents 3,816,433 41,161,706 Cash and cash equivalents at beginning of period 36,890,454 7,736,345 ------------ ------------ Cash and cash equivalents at end of period $ 40,706,887 $ 48,898,051 ============ ============
See accompanying notes to condensed financial statements. 5 6 INTERACTIVE FLIGHT TECHNOLOGIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The condensed financial statements of Interactive Flight Technologies, Inc. (the "Company") included herein have been prepared in accordance with generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying condensed financial statements reflect all adjustments (consisting of normal recurring accruals) which are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto for the fiscal year ended October 31, 1997, included in the Company's Annual Report on Form 10-KSB and amendment No. 1 to the Annual Report on Form 10-KSB/A for the fiscal year ended October 31, 1997. The results of operations for the three months and six months ended April 30, 1998 are not necessarily indicative of the results to be expected for the entire fiscal year. 2) COMPUTATION OF NET LOSS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128") which specifies the computation, presentation, and disclosure requirements for earnings per share for entities with publicly held common stock. This Statement is effective for both interim and annual periods ending after December 15, 1997. The Company adopted the provisions of SFAS No. 128 effective November 1, 1997. Net loss per share for the three months and six months ended April 30, 1997 has been restated to conform to SFAS No. 128. 3) TREASURY STOCK On December 17, 1997, the Board of Directors authorized the Company to repurchase shares of its Class A Common Stock on the open market. As of April 30, 1998, the Company had repurchased 1,053,500 shares at prices ranging from $0.75 to $1.00 per share. 4) CONTINGENCIES On March 6, 1998, the Company was named as a nominal defendant in a derivative action filed in the Supreme Court of the State of New York. The lawsuit names ten current and former officers and directors of the Company and alleges various breaches of fiduciary duty. The complaint seeks at least $50,000,000 in damages and an injunction against the defendants taking any action to manage the Company. The plaintiffs have recently filed an amended complaint, seeking the same relief, to which the defendants have yet to respond. The defendants intend to defend the actions vigorously. 6 7 INTERACTIVE FLIGHT TECHNOLOGIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Interactive Flight Technologies, Inc. ("the Company") has been engaged in the development, manufacture, installation and operation of a computer-based in-flight entertainment network ("Entertainment Network" or "system"), which provides aircraft passengers the opportunity to view movies, purchase goods and services, play computer games and, in certain cases where permitted by applicable law, gamble through an in-seat video touch screen. The Company had originally based its business plan on allowing airlines to finance the purchase of the system out of a share of gaming revenues without paying any money down. However, gaming revenues from the operation of the system have proven to be insufficient to support the financing of the system. As a result, the Company sought to have airlines finance the purchase and installation of the system themselves, with the Company receiving only a limited percentage of revenues from the Entertainment Networks. The decision of the Company not to finance system purchases out of future contingent revenues eliminated certain potential customers who do not have the resources to finance the systems independently. Moreover, the Company has had to attempt to justify the costs of the Entertainment Networks (both purchase and operational) based solely on a perceived competitive need, rather than on ancillary revenue. The perception of that need depends on the phase of the business cycle in the airline industry, as airlines are more likely to invest in competitive factors at times when competition for customers is intense. With load factors at a historically high level, this is a difficult phase of the industry cycle for airlines to justify purchases of the Entertainment Network. The Company's continuation in the in-flight entertainment business has been dependent upon its ability to obtain future major orders. As of April 30, 1998, the only order for the Company's Entertainment Network consists of a letter of intent from Swissair for $3,970,000, which is for first and business class installations on three Swissair MD-11 aircraft that are being added to the Swissair fleet in November 1998. The Company has also received a letter of intent from Swissair for $3,975,000 to extend the warranty on all installed systems for a second and third year. The Company has had no success in pursuing other major airlines to fill its pipeline following the completion of the installation phase of the initial Swissair program in March 1998. Because of the lack of prospects for success in obtaining additional orders, and in order to reduce its expenses further, the Company terminated almost all sales and marketing efforts as of May 29, 1998. Although the Company may respond to any requests for proposals it receives from airlines, the decision not to continue to invest resources in sales and marketing reflects the fact that the Company has no significant prospects for additional revenue from in-flight entertainment other than those related to the two letters of intent from Swissair. Moreover, the Company's prior decision not to expend money on developing the next generation of the Entertainment Network means that any technological leads it had in this area can be expected to dissipate quickly. As a consequence, the Company may well not be able to compete in the in-flight entertainment business even if market conditions were to improve. The Company believes that it has cash and liquidity resources in excess of that required to fulfill its current contractual commitments, although this will depend in large part on the ability of the Company to fulfill those obligations in an efficient manner. Because of the difficulties in 7 8 obtaining new in-flight entertainment customers, the Company has begun actively looking for possible acquisitions in other lines of business. The Company is working to identify specific areas for alternative business development or acquisition which can use the Company's principal assets -- its cash and net operating losses. There can be no assurance that the Company will find acceptable opportunities for alternative business development or acquisition, or that the Company will be successful in entering or operating in alternative business areas. In addition, the Company has used in the past, and may continue to use, a portion of its cash to repurchase its own shares. SWISSAIR INSTALLATIONS The Company's main agreement with Swissair requires the Company to install and maintain the Entertainment Network in the first, business and economy class sections of three aircraft at no cost and in only the first and business class of another sixteen aircraft at an average price of $1.7 million per aircraft. As of April 30, 1998, the Company had completed all installations under the initial Swissair program. The Company is responsible for maintenance costs through September 1998 for all nineteen aircraft. The Swissair agreement also provides a one-year warranty (which would be extended to three years under the recent letter of intent) on all of the Entertainment Networks and requires specific software and hardware upgrades to the Entertainment Networks. Development of these upgrades is not complete. If the upgrades are not completed by specified deadlines, the Company will face significant penalties. The Company must also meet operational reliability criteria for the Entertainment Networks. The Company is working to further improve the reliability of the system through software revisions and through design improvements. The Company believes that the reliability goals for the system can be met; however, there can be no assurance that technical obstacles may not prove more difficult than anticipated or that as yet undetermined issues will not appear. The Company is subject to certain penalties, which could be substantial, if the Entertainment Networks do not meet these operational reliability criteria through the year 2003. Avoiding these penalties may require the Company to continue to maintain a presence in the in-flight entertainment business even if it pursues other businesses. In conjunction with the Swissair agreement, the Company has an agreement with Interkantonale Landeslotterie ("ILL"), a Swiss non-profit organization that organizes lotteries in Switzerland. Pursuant to the agreements, any net gaming profits generated from the Swissair Entertainment Networks are to be divided between the three parties with 4% being paid to the ILL and the remaining 96% being divided between the Company and Swissair based on a priority of expenses. As of April 30, 1998, the Company's cumulative portion of the net gaming profits generated by the Swissair systems was $30,167. Pursuant to a separate Media Programming Services Agreement with Swissair, the Company may bill Swissair for costs incurred related to the supply of program material and other entertainment programming costs. Swissair receives all entertainment programming revenues generated by the Entertainment Networks. As previously noted, the Company has recently entered into two letters of intent with Swissair. The first is for a $3,970,000 order for first and business class installations on three Swissair MD-11 aircraft that are being added to the Swissair fleet in November 1998. The Company has also received a letter of intent from Swissair for $3,975,000 to extend the warranty on all installed systems for a second and third year. No assurance can be given that these letters of intent will actually become signed contracts. 8 9 OTHER INSTALLATIONS With regard to other airlines, the Company had an agreement with Debonair to manufacture, assemble, deliver, install, operate and maintain the Entertainment Network on six aircraft. In February 1998, the Company and Debonair signed a Termination Agreement under which Debonair removed the Entertainment Network from the one aircraft on which it had been installed and the Company paid $134,235 in settlement of its obligations to Debonair. Pursuant to a contract with Alitalia Airlines, the Company delivered five first generation systems for installation on Alitalia aircraft during fiscal 1996. However, Alitalia installed only four of these five Entertainment Networks and did not purchase sufficient spare parts to support continued operation of the systems. Alitalia has ceased operation of the systems, and the Company has ceased supporting the systems. To date, no contractual resolution has been sought by either party. RESULTS OF OPERATIONS Revenues for the quarter ended April 30, 1998 were $4,732,162, an increase of $2,370,800 (or 100%) over revenues of $2,361,362 for the corresponding quarter of the previous fiscal year. Revenues for the six months ended April 30, 1998 were $18,141,827, an increase of $15,554,460 (or 601%) over revenues of $2,587,367 in the corresponding period of the previous fiscal year. Equipment sales generated during the three months and six months ended April 30, 1998 were principally from the installation of the Entertainment Networks on Swissair aircraft. During the three and six months ended April 30, 1998, the Company completed installations under the initial Swissair program on seven aircraft and nine aircraft, respectively. During the six months ended April 30, 1997, the Company completed installations of the Entertainment Network on two Swissair aircraft. Service income of $162,825 and $281,264 for the three months and six months ended April 30, 1998, respectively, was principally generated from services provided to Swissair pursuant to a Media Programming Services Agreement, the Company's share of gaming profits generated by the Swissair systems and revenue earned under the Swissair Letter of Intent to extend the warranty. Service income of $31,940 and $109,236 for the three months and six months ended April 30, 1997, respectively, was primarily derived from entertainment programming services provided to Alitalia and another air carrier. Cost of equipment sales and service income for the quarter ended April 30, 1998 were $3,775,716, an increase of $2,393,201 (or 39%) over cost of sales of $6,168,917 for the corresponding quarter of the previous fiscal year. Cost of equipment sales and service income for the six months ended April 30, 1998 were $15,348,811, an increase of $6,373,371 (or 71%) over cost of sales of $8,975,440 in the corresponding period of the previous fiscal year. As a percentage of revenue, cost of equipment sales and service were 80% and 85% for the three and six months ended April 30, 1998, respectively, compared to 261% and 347% for the three and six months ended April 30, 1997, respectively. The increase in cost of sales is due to the installations on additional Swissair aircraft during the first six months of fiscal 1998. Pursuant to the Swissair agreement, the Company is responsible for all costs related to the installation of the Entertainment Networks on the Swissair aircraft and maintenance costs of the systems until September 1998. Both the installation and maintenance required under the Swissair agreement are out-sourced by the Company to third parties. Cost of equipment sales includes materials, installation and maintenance costs, as well as estimated warranty costs and costs of upgrades to the Swissair Entertainment Networks that the Company is contractually committed to providing to Swissair. Cost of equipment sales and service income for the six months ended April 30, 1997 also included provisions for inventory obsolescence of $800,000 and scrapped inventory and rework adjustments of $3,462,684. The scrapped inventory resulted from the re-design of certain components of the Entertainment Network during the first quarter of fiscal 1997. 9 10 There was no provision for doubtful accounts during the three months and six months ended April 30, 1998, compared to $13,725 and $150,315 for the three months and six months ended April 30, 1997, respectively. Fiscal 1997 provisions resulted from entertainment programming services provided under the Alitalia agreement. Bad debt recoveries of $1,064,284 during the three months and six months ended April 30, 1997 resulted from the recovery of accounts receivable under the Alitalia agreement which were reserved for during the Company's fourth quarter of its fiscal year ended October 31, 1996. Research and development expenses for the quarter ended April 30, 1998 were $482,389, a decrease of $1,597,628 (or 77%) over expenses of $2,080,017 for the corresponding quarter of the previous fiscal year. Research and development expenses for the six months ended April 30, 1998 were $1,092,316, a decrease of $3,554,045 (or 76%) over expenses of $4,646,361 in the corresponding period of the previous fiscal year. The decrease in expenses reflects the Company's decision not to develop the next generation of the Entertainment Network and the resulting reduction in staff and professional fees. The Company does not plan to continue its research and development beyond those efforts that are required contractually by the Swissair agreement. The Swissair agreement requires the Company to provide specific upgrades to the Entertainment Network currently installed on Swissair aircraft. The Company expects to complete the development and implementation of these upgrades by December 1998 and does not plan to develop any further upgrades to the Entertainment Network. The anticipated costs of developing these upgrades were included in the Company's statements of operations as a cost of equipment sales upon installations of the systems. The Company expects to continue any development efforts that are required to support the Swissair system reliability guarantees through the year 2003. Marketing and administrative expenses for the quarter ended April 30, 1998 were $1,271,967, a decrease of $1,724,366 (or 58%) over expenses of $2,996,333 for the corresponding quarter of the previous fiscal year. Marketing and administrative expenses for the six months ended April 30, 1998 were $2,878,398, a decrease of $3,555,932 (or 55%) over expenses of $6,434,330 for the corresponding period of the previous fiscal year. The decrease in expenses reflects the Company's reduction in staff in administrative areas, including production, marketing and program management departments. The Company has further reduced its sales and marketing efforts and other administrative expenses subsequent to April 30, 1998. Interest income of $526,180 and $1,071,312 for the three months and six months ended April 30, 1998 increased from $489,663 and $893,435 for the three months and six months ended April 30, 1997, respectively. The interest arose principally out of short-term investments of working capital. The increase in income is due to the higher average cash balance during the first six months of fiscal 1998 compared to fiscal 1997. Interest expense was $3,234 and $6,995 for the three months and six months ended April 30, 1998 compared to $1,041 for the three months and six months ended April 30, 1997. The increase in expense is due to capital lease agreements that the Company entered into during the second quarter of fiscal 1997. The leases expire in September 1999. Other income of $500 for the three months and six months ended April 30, 1998 and other expense of $66,655 for the three months and six months ended April 30, 1997 represents the net loss or gain on sales of equipment. 10 11 LIQUIDITY AND CAPITAL RESOURCES At April 30, 1998, the Company had working capital of approximately $30.9 million. The Company's primary source of funding has been through equity offerings. Excluding any payments to be received under the Swissair Letter of Intent to extend the warranty, the Company's backlog consists only of installations on three Swissair aircraft. Therefore, the Company does not expect any significant profit for the foreseeable future. As a result working capital may continue to decrease. During the six months ended April 30, 1998, the Company generated $6.0 million of cash from operating activities, an increase of $32.1 million from the corresponding period of the previous fiscal year. The cash provided by operations during the six months ended April 30, 1998 is primarily a result of decreases in accounts receivable and inventories and an increase in accrued product warranties, partly offset by decreases in accounts payable and deferred revenue. Purchases of property and equipment for the six months ended April 30, 1998 were $26,390 compared to $8.5 million for the six months ended April 30, 1997. Capital expenditures for the first six months of fiscal 1997 were primarily related to the manufacture of the system under the Debonair agreement, the installation of systems on three aircraft under the Swissair Agreement, and research and development equipment. On December 17, 1997, the Board of Directors authorized the Company to repurchase shares of its Class A Common Stock on the open market. As of April 30, 1998, the Company had repurchased 1,053,500 shares at prices ranging from $0.75 to $1.00 per share. On May 27, 1998, the Company executed a lease termination agreement for its office space in California. Pursuant to the termination agreement, the Company paid $6,604 to terminate its lease as of May 31, 1998. Additionally, the Company executed a lease surrender agreement as of May 12, 1998 for a portion of its office space in Arizona. Pursuant to the surrender agreement, the Company surrendered a portion of its leased premises in exchange for a reduction in the monthly rental rate. At April 30, 1998, the Company's material capital commitments were purchase orders of approximately $2.8 million relating primarily to inventory purchases for its obligations under the Swissair Agreements. The Company is currently using its working capital to finance its current expenses, including installations, product development, inventory purchases, repairs and other expenses associated with the delivery and installation of the Swissair systems. The Company believes that its current cash balances will be sufficient to meet the Company's currently anticipated cash requirements for at least the next twelve months. However, in the event the Company were to obtain additional orders for systems (which the Company does not consider likely), the Company may require significant additional financing for manufacture, assembly and installation of any such future orders. As an alternative, as previously noted, the Company is seeking opportunities to acquire or develop other business in which to deploy its cash resources. No assurance can be given that any such alternative opportunities can be located, or if located, could be successfully acquired and operated profitably. 11 12 FORWARD-LOOKING INFORMATION Except for historical information contained herein, the matters discussed in this Quarterly Report on Form 10-QSB are forward-looking statements (within the meaning of Section 27A of the Securities Act of 1993, as amended and Section 21E of the Securities Exchange Act of 1934, as amended) that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in such forward-looking statements. Such risks and uncertainties include, but are not limited to, cost overruns in connection with the Company's current and future contracts, failure of installed systems to perform in accordance with system specifications, the failure to execute definitive agreements relating to the letters of intent with Swissair, the inability of the Company to locate, evaluate, purchase and operate other businesses, the inability of the Company to convince airlines to purchase its systems, the failure of the Company to receive sufficient financing to perform under any new airline contracts, the impact of competition and downward pricing pressures, the effect of changing economic conditions and conditions in the airline and other industries, the impact of any changes in domestic and foreign regulatory environments, the Company's inability to obtain requisite government approvals, technology changes, currency fluctuations, and the other risks and uncertainties detailed in the Company's Annual Report on Form 10-KSB and amendment No. 1 to the Annual Report on Form 10-KSB/A for the fiscal year ended October 31, 1997. 12 13 PART II. OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS On March 6, 1998, the Company was named as a nominal defendant in a derivative action filed in the Supreme Court of the State of New York, County of New York, entitled Barington Capital Group, L.P. et al. v. Yuri Itkis et al. (no. 98103878). The lawsuit names ten current and former officers and directors of the Company and alleges various breaches of fiduciary duty. The complaint seeks at least $50,000,000 in damages and an injunction against the defendants taking any action to manage the Company. The plaintiffs have recently filed an amended complaint, seeking the same relief, to which the defendants have yet to respond. The defendants intend to defend the actions vigorously. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 3.1(1)* - Certificate of Ownership and Merger 3.2(1)* - Amended and Restated Certificate of Incorporation of the Registrant 3.3(1)* - Certificate of Amendment of Amended and Restated Certificate of Incorporation of Registrant 3.4(1)* - By-laws of the Registrant 4.5(1)* - Form of Underwriter's Unit Purchase Option 4.6(1)* - Specimen of Class A Common Stock Certificate 4.7(1)* - Specimen of Class B Common Stock Certificate 4.10(2)* - Specimen of Class D Warrant Certificate 4.11(4)* - Stock Purchase Warrant, dated as of November 7, 1996, issued to FortuNet, Inc. 4.12(4)* - Stock Purchase Warrant, dated as of November 12, 1996, issued to Houlihan Lokey Howard & Zukin 10.20 - Debonair Termination Agreement, dated as of February 13, 1998 10.21 - Lease Termination Agreement, dated as of May 27, 1998 10.22 - Lease Surrender Agreement, dated as of May 12, 1998 27 - Financial Data Schedule 27.1 - Financial Data Schedule, Restated Fiscal Years Ended October 31, 1997 and 1996 27.2 - Financial Data Schedule, Restated Quarters 1, 2, and 3 of Fiscal Year Ended October 31, 1997 - ---------- * Incorporated by reference from the Registrant's Annual Report on Form 10-KSB for the fiscal year ended October 31, 1997 and Amendment No. 1 to the Annual Report on Form 10-KSB/A filed with the Securities and Exchange Commission. (b) REPORTS ON FORM 8-K The Company did not file any reports on Form 8-K during the quarter ended April 30, 1998. 13 14 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: June 5, 1998 INTERACTIVE FLIGHT TECHNOLOGIES, INC. By: /s/ Michail Itkis -------------------------------- Michail Itkis Chief Executive Officer By: /s/ John W. Alderfer -------------------------------- John W. Alderfer Chief Financial Officer 14 15 INDEX OF EXHIBITS Exhibit No. Description Page No. - ----------- ----------- -------- 3.1(1) Certificate of Ownership and Merger * 3.2(1) Amended and Restated Certificate of * Incorporation of the Registrant 3.3(1) Certificate of Amendment of Amended and * Restated Certificate of Incorporation of Registrant 3.4(1) By-laws of the Registrant * 4.5(1) Form of Underwriter's Unit Purchase Option * 4.6(1) Specimen of Class A Common Stock Certificate * 4.7(1) Specimen of Class B Common Stock Certificate * 4.10(2) Specimen of Class D Warrant Certificate * 4.11(4) Stock Purchase Warrant, dated as of November * 7, 1996, issued to FortuNet, Inc. 4.12(4) Stock Purchase Warrant, dated as of November * 12, 1996, issued to Houlihan Lokey Howard & Zukin 10.20 Debonair Termination Agreement, dated as of February 13, 1998 19 10.21 Lease Termination Agreement, dated as of May 27, 1998 21 10.22 Lease Surrender Agreement, dated as of May 12, 1998 26 27 Financial Data Schedule 16 27.1 Financial Data Schedule, Restated Fiscal Years Ended October 31, 1997 and 1996 17 27.2 Financial Data Schedule, Restated Quarters 1, 2, and 3 of Fiscal Year Ended October 31, 1997 18 - ---------- * Incorporated by reference from the Registrant's Annual Report on Form 10-KSB for the fiscal year ended October 31, 1997 and Amendment No. 1 to the Annual Report on Form 10-KSB/A filed with the Securities and Exchange Commission. 15 EX-10.20 2 EX-10.20 1 Exhibit 10.20 TERMINATION AGREEMENT This Termination Agreement is made as of this 13 day of February 1998 by DEBONAIR AIRWAYS, LTD. ("DEBONAIR") and INTERACTIVE FLIGHT TECHNOLOGIES, INC. ("IFT") with reference to the following facts: DEBONAIR and IFT are parties to that certain agreement dated as of March 1996 (as subsequently amended and supplemented, the "AGREEMENT") relating to the purchase and installation of an IFEN-2 in-flight entertainment network. The Agreement originally provided for the installation of six ship sets, but the parties have decided to terminate their relationship on the terms and conditions set forth herein. Now, therefore, in consideration of these premises and the mutual covenants contained herein, the parties agree as follows: 1. PAYMENT AND TERMINATION. In full and final settlement of all of its obligations to DEBONAIR under the Agreement, IFT agrees to pay immediately to DEBONAIR the sum of $81,274.63 sterling. Upon receipt by DEBONAIR of such payment, all rights, liabilities and obligations of the parties under the Agreement are hereby terminated and the Agreement shall be of no force or effect. DEBONAIR understands and acknowledges that it will be responsible for removing the IFEN-2 from the aircraft on which it was installed and returning to IFT at IFT's cost. Shipping arrangements must be pre-approved by IFT and completed by DEBONAIR in a commercially reasonable time frame. However, DEBONAIR shall have no liability whatsoever (including, without limitation, liability for loss of use, loss of revenue or loss of profit) for any damage to any IFEN-2 sustained during such removal or otherwise, except for that arising from gross negligence or willful misconduct of DEBONAIR. 2. RELEASE. Each of DEBONAIR and IFT does hereby fully and forever release and discharge, respectively, the IFT Group and the DEBONAIR Group from any and all Claims that DEBONAIR and IFT have had, may have had, or now has, or hereafter can, shall or may have through and including the date hereof. "CLAIMS" means any and all claims, demands, agreements, contracts, covenants, representations, warranties, promises, undertakings, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, accounts, damages, judgments, losses, injuries and liabilities, of whatever kind or nature, in law, equity or otherwise, present and future, whether known or unknown, suspected or unsuspected, contingent or fixed. "IFT GROUP" and "DEBONAIR GROUP" mean, respectively, IFT and DEBONAIR and their present and former subsidiaries, successors, and assigns and, in their capacity as such, their directors, officers, partners, agents, affiliates, attorneys and employees. 3. REPRESENTATIONS AND WARRANTIES. Each of DEBONAIR and IFT represents and warrants that it (i) has full power and authority to enter into this Termination Agreement and (ii) is the owner of the Claims that it has released herein and (iii) has not (nor has it purported to have) assigned, conveyed, encumbered, or in any manner transferred any -1- 2 portion of the Claims covered hereby. IFT represents and warrants that it has full power and authority to enter into this Termination Agreement. Each party hereby agrees to indemnify and hold the other harmless from any and all claims (including, but not limited to, all attorneys' fees actually incurred) resulting from any breach of that party's warranties and representations in this Termination Agreement. Except as expressly set forth herein, none of the parties hereto has made any representations or warranties in connection with this Termination Agreement, and no party has relied upon any oral or written representation or warranty of any other party in entering into this Termination Agreement. 4. MODIFICATION. This Termination Agreement may not be amended, modified or altered except by an express writing executed by the parties. 5. ATTORNEYS' FEES. In any dispute between the parties hereto or their representatives concerning any provision of this Agreement or the rights and duties of any person or entity hereunder, the party or parties prevailing in such dispute shall be entitled, in addition to such other relief as may be granted, to the reasonable attorneys' fees and court costs incurred by reason of such litigation. 6. GOVERNING LAW. This Termination Agreement has been entered into in the State of Nevada and shall be governed by and interpreted in accordance with the laws of that State, without giving effect to the conflict of laws provisions thereof or of any other jurisdiction. 7. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties approved and executed this Termination Agreement as of the date first set forth above. DEBONAIR INTERACTIVE FLIGHT TECHNOLOGIES, INC. By: /s/ F. Mancassola By: /s/ John W. Alderfer -------------------- ----------------------- Printed Printed name: F. Mancassola name: John W. Alderfer ------------------ --------------------- Title: Chairman CEO Title: Treasurer ----------------- -------------------- -2- EX-10.21 3 EX-10.21 1 Exhibit 10.21 LEASE TERMINATION AGREEMENT This LEASE TERMINATION AGREEMENT (the "Agreement") is dated as of May , 1998 and is entered into by and between PACIFIC CORPORATE TOWERS LLC, a Delaware limited liability company ("Landlord"), and INTERACTIVE FLIGHT TECHNOLOGIES, INC., a Delaware corporation ("Tenant"). RECITALS A. Landlord and Tenant entered into that certain Standard Office Lease dated as of August 21, 1996 ("Lease") for certain premises (the "Premises") known as Suite 1507 in the building located at 222 North Sepulveda Boulevard, El Segundo, California. B. Tenant has requested that Landlord agree to an early termination of the Lease and that Landlord release Tenant from liability for the performance of its prospective obligations under the Lease in exchange for a lump sum payment from Tenant, and Landlord has agreed thereto, upon and subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing recitals, the terms and mutual covenants contained herein, and for other consideration, the sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as follows: AGREEMENT 1. Termination of Lease. Subject to satisfaction of the conditions set forth in Section 2 hereof, the Lease shall terminate as of the date that both Landlord and Tenant have executed and delivered this Agreement ("Termination Date"); provided, however, such termination shall not release, waive or terminate any obligations of Tenant under Article 9, Article 10, Article 13.1, Article 22, or Article 28.3 of the Lease which shall have accrued prior to the Termination Date ("Continuing Obligations"). Tenant hereby agrees that the Continuing Obligations shall survive the termination of the Lease and the execution of this Agreement. 2. Conditions to Termination. The termination of the Lease pursuant to this Agreement shall be subject to the satisfaction of all of the following conditions on or before the Termination Date ("Termination Conditions"): (a) Termination Payment. In consideration for Landlord's agreement to early termination of the Lease, Tenant shall pay to Landlord, concurrently with the execution and delivery of this Agreement, without deduction or offset, the sum of Six Thousand Six Hundred Three Dollars and Seventy-four Cents ($6,603.74) ("Termination Payment"). The Termination Payment is comprised of two (2) months Basic Rental. The Termination Payment is not intended to be, and is not being, paid or retained on account of an antecedent debt of Tenant to Landlord, but rather as a settlement and compromise of claims Landlord has against Tenant and as a contemporaneous exchange for new value given. -1- 2 (b) Vacation and Surrender. Prior to the Termination Date, Tenant shall, at Tenant's sole cost and expense, deliver to Landlord all keys delivered to Tenant under the Lease, remove all of Tenant's personal property from the Premises, and surrender the Premises to Landlord in the condition required by Article 29.2 and Article 29.4 of the Lease, free and clear of all occupants and tenancies. Any and all personal property of Tenant not so removed by the Termination Date shall be deemed to have been abandoned by Tenant and shall otherwise be governed by the terms of Article 29.3 of the Lease, and Landlord may, in its sole and absolute discretion, store and/or dispose of such property in any manner and at Tenant's expense in accordance therewith. Tenant shall from time to time reimburse Landlord for all costs incurred by Landlord to store or dispose of property abandoned by Tenant (the "Tenant Property Costs") within five (5) business days after notice by Landlord to Tenant of any Tenant Property Costs, and such obligation shall survive the termination of the Lease. If either Termination Condition is not satisfied on or before the Termination Date, then this Agreement shall, at Landlord's option, be null and void and the Lease shall remain in full force and effect as if this Agreement had never been executed. In such event, Landlord shall apply the Termination Payment to any amounts due from Tenant under the Lease until the Termination Payment is exhausted. If Tenant fails to pay the Termination Payment concurrently with execution of this Agreement or vacate and surrender the Premises in the condition specified herein prior to the Termination Date, Tenant shall protect, defend, indemnify and hold Landlord harmless from and against any claim, loss, cost, damage or judgment arising out of Tenant's failure to comply with this Agreement, including but not limited to, any claims made by a tenant under any new lease for the Premises arising out of Landlord's inability to deliver the Premises to such new tenant due to Tenant's failure to comply with this Agreement. 3. Holdover. If Tenant remains in occupancy of the Premises after the Termination Date, then subject to Landlord's election to proceed with this Agreement, Tenant shall be a tenant at sufferance only, at a rental rate equal to Two Thousand Dollars ($2,000) per day. No payment of money nor holdover of the Premises by Tenant after the Termination Date shall reinstate, continue or extend the term of the Lease. In the event of any holdover of the Premises by Tenant after the Termination Date, Landlord, without notice, may immediately commence unlawful detainer proceedings against Tenant for possession of the Property, and Tenant hereby waives all notices of termination of Tenant's occupancy or tenancy at sufferance of the Premises and all notices of any action for Landlord's eviction of Tenant from the Premises. 4. Release. In consideration of Landlord's termination of the Lease, and subject to satisfaction of the Termination Conditions on or before the Termination Date or if the Termination Conditions are not consummated by the Termination Date, subject to Landlord's election to proceed with this Agreement, and except as expressly set forth in this Agreement, Landlord and its parent companies, partners, members, affiliates, subsidiaries, directors, officers, successors and assigns, agents, employees, and representatives are hereby unconditionally and fully released and discharged from any and all obligations, claims, actions, and liability, past, present, and future, of whatever kind or character, known or unknown, by reason of, growing out of, arising out of or existing in connection with the execution of the Lease or any of the terms or provisions thereof, Tenant's use and occupancy of the Premises, or by reason of the breach or -2- 3 alleged breach of Landlord, or conduct or activity resulting in the breach or alleged breach of Landlord, of any of the terms or provisions of the Lease. Except as expressly set forth in this Agreement, this Agreement shall fully and finally settle all demands, claims, charges, accounts or causes of action of Tenant of any nature arising out of or connected with the provisions of the Lease. Tenant hereby acknowledges that it is familiar with Section 1542 of the California Civil Code which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Tenant hereby waives and relinquishes every right or benefit it may have under Civil Code Section 1542 and all other similar statutes or laws with respect to any claims and other matters released in this Agreement. In connection with such waiver and relinquishment, Tenant hereby acknowledges that it is aware that it may hereafter discover facts in addition to or different from those which it now knows or believes to be true, but that it is its intention to fully, finally and forever settle and release all claims and other matters released in this Agreement, known or unknown, suspected or unsuspected, which may now exist or which may have previously existed, and Tenant hereby agrees that the foregoing releases shall be and remain in effect notwithstanding the discovery or existence of any such additional or different facts. Landlord's Initials:_______ Tenant's Initials:_______ 5. Return of Security Deposit. If the Termination Conditions are satisfied on or before the Termination Date, then within thirty (30) days after the Termination Date, Landlord shall return to Tenant the security deposit in the amount of Three Thousand Three Hundred One Dollars and Eighty-seven Cents ($3,301.87), less any amounts Landlord is authorized to deduct therefrom pursuant to Article 4 of the Lease. 6. Tenant's Representations and Warranties. Tenant hereby represents and warrants to Landlord as follows: (a) Tenant has not made any assignment, sublease, transfer, conveyance or other disposition of (i) the Lease; (ii) its interest in the Lease; or (iii) any claim, demand, obligation, liability, action, or cause of action arising under the terms of the Lease, to any person, firm, partnership, association, or other entity; (b) Tenant has full power and authority to sign and deliver this Agreement, and the execution and delivery of this Agreement will not violate and will not constitute a default under any agreements Tenant has with any third parties; and -3- 4 (c) Tenant shall indemnify, defend and hold Landlord harmless against all actions, demands, liabilities, costs, expenses, rights of action, or causes of action based on, arising out of, or in connection with any breach of any of the foregoing representations and warranties. 7. Jurisdiction. Tenant hereby submits to personal jurisdiction in the State of California for the enforcement of Tenant's obligations hereunder and waives any and all personal rights under the law of any other state or jurisdiction to object to jurisdiction in the State of California for purposes of litigation to enforce such obligation of Tenant. In the event such litigation is commenced, Tenant agrees that, in addition to any other manner provided by applicable law or court rule, service of process may be made and personal jurisdiction over Tenant obtained, by service of a copy of the summons, complaint and other pleadings required by applicable law to commence such litigation upon Tenant's appointed Agent for Service of Process in the State of California. 8. Miscellaneous. Time is of the essence of each and every provision of this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts between California residents entered into and to be performed entirely within the State of California. This Agreement will be binding upon and inure to the benefit of Landlord and Tenant and their respective successors and assigns. This Agreement constitutes the entire agreement of the parties hereto with respect to the specific subject matter hereof, and supersedes and replaces any and all prior negotiations and agreements between the parties, whether written or oral, as well as any contemporaneous oral negotiations and agreements. This Agreement may only be amended by a written agreement executed by both parties. Any waiver of any portion of this Agreement must be in writing executed by the waiving party. This Agreement may be executed in counterpart originals, each of which, and all of which together, shall constitute one and the same agreement. IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement on the date first written above. LANDLORD: PACIFIC CORPORATE TOWERS LLC, a Delaware limited liability company By: GE Capital Investment Advisors, Inc., its authorized investment advisor By: _____________________________ Name: _____________________________ Title: _____________________________ -4- 5 TENANT: INTERACTIVE FLIGHT TECHNOLOGIES, INC., a Delaware corporation By: /s/ John W. Alderfer ------------------------ Name: John W. Alderfer ------------------------ Title: Treasurer ------------------------ By: ------------------------ Name: ------------------------ Title: ------------------------ -5- EX-10.22 4 EX-10.22 1 Exhibit 10.22 AGREEMENT This AGREEMENT (this "Agreement") is made as of this 12th day of May, 1998, by and between INTERACTIVE FLIGHT TECHNOLOGIES, INC., A DELAWARE CORPORATION ("Interactive"), having an address at 4041 North Central Avenue, Phoenix, Arizona 85012; SAMARITAN HEALTH SYSTEM, AN ARIZONA NON-PROFIT CORPORATION ("Sublandlord"), having an address at 1441 North 12th Street, Phoenix, Arizona 85006; FEDERAL INSURANCE COMPANY, AN INDIANA CORPORATION ("Federal"), having an address at 15 Mountain View Road, Post Office Box 1615, Warren, New Jersey 07059; and METROPOLITAN LIFE INSURANCE COMPANY, A NEW YORK CORPORATION ("Landlord"), having an address at 4041 North Central Avenue, Phoenix, Arizona 85012. WITNESSETH: WHEREAS, Landlord's predecessor and Sublandlord's predecessor entered into that certain Office Lease, dated October 28, 1987, as same may have been amended (the "Original Lease"), pursuant to which Landlord has leases to Sublandlord, and Sublandlord has hired from Landlord, for a term expiring on October 31, 1998, certain premises located on the first and second floors of Building B located at 4041 Central Plaza, Phoenix, Arizona (the "Leased Premises"); and WHEREAS, Interactive, Sublandlord or its predecessor and Landlord's predecessor entered into that certain Sublease and Consent, dated as of July 19, 1996, as same may have been amended (the "Interactive Sublease"), pursuant to which Sublandlord leased to Interactive, and Interactive hired from Sublandlord, for a term expiring on October 31, 1998, the Leased Premises; and WHEREAS, Landlord's predecessor and Interactive entered into that certain Office Lease, dated July 16, 1996, as the same may have been amended (the "Interactive Prime Lease") pursuant to which Landlord's predecessor has leased to Interactive, and Interactive has hired from Landlord, space at 4041 Central Plaza, including but not limited to, effective as of November 1, 1998, the Leased Premises; and WHEREAS, Landlord's predecessor and Sublandlord's predecessor entered into that certain Parking Agreement, dated October 28, 1997 (the "Samaritan Parking Agreement"), pursuant to which Landlord's predecessor licensed Sublandlord's predecessor to use certain parking spaces at 4041 Central Plaza during the term of the Original Lease; and WHEREAS, Landlord's predecessor and Interactive entered into that certain Parking Agreement, dated July, 1996 (the "Interactive 20th Floor Parking Agreement"), pursuant to which Landlord has licensed Interactive to use seventy-one (71) parking spaces at 4041 Central Plaza; and WHEREAS, Landlord's predecessor and Interactive, in connection with the Interactive Sublease, entered into that certain Parking Agreement dated July __, 1996 (the "Interactive Building B Parking Agreement"), pursuant to which Landlord licensed Interactive to 2 use up to 44 spaces (consisting of up to three (3) covered reserve spaces and up to forty-one (41) covered unreserved or roof top spaces) at 4041 Central Plaza until the earlier of the Expiration Date of the Interactive Sublease and/or the Interactive Prime Lease or the abandonment by Interactive of the Leased Premises; and WHEREAS, the rights of Sublandlord to use any parking spaces under the Samaritan Parking Agreement were suspended and negated pursuant to the terms of the Interactive Sublease for so long as the Interactive Sublease is in effect; and WHEREAS, Interactive desires to surrender (a) a portion of the Leased Premises, consisting of the entire first floor of Building B except for the computer/switch room in the location depicted on Exhibit A annexed hereto (which space to be surrendered is hereinafter referred to as the "Surrender Space" and which computer/switch room on the first floor consists of approximately 301 square feet and is hereinafter referred to as the "Computer/Switch Room") and (b) thirty-seven (37) parking spaces (consisting of three (3) covered reserved spaces and thirty-four (34) covered unreserved or roof top spaces licensed to Interactive under the Interactive Building B Parking Agreement (the "Surrendered Parking Spaces"); and WHEREAS, in order to induce Landlord to accept the surrender of the Surrender Space, Interactive has proposed that Federal lease the portion of the Surrender Space depicted on EXHIBIT A annexed hereto (the "Federal Premises"), which excludes the Computer/Switch Room and the bathroom, elevator and common hallways on the first floor of Building B, directly from Landlord; and WHEREAS, Landlord has agreed to accept such surrender upon the condition that Federal enter into a lease with Landlord relating to the Federal Premises for the remainder of the terms of the Interactive Sublease and of the Interactive Prime Lease and that Federal, Sublandlord, Interactive and Landlord enter into certain other agreements; and WHEREAS, Landlord has agreed to lease to Federal, and Federal has agreed to lease from Landlord, the Federal Premises, pursuant to the terms and conditions of that certain Lease Agreement between Landlord and Federal of this date (the "Federal Lease"), on the condition that Landlord, Sublandlord, Federal and Interactive enter into the other agreements more particularly set forth herein; and WHEREAS, the Federal Lease, among other things, also grants to Federal the right to extend the term of the Federal Lease beyond the expiration date of the Interactive Prime Lease and, in addition, it is possible that Federal and Landlord may wish to extend the term of the Federal Lease beyond the expiration of the extension periods now permitted by the Federal Lease; and WHEREAS, Interactive has also leased from a third party certain furniture which is now located in the Federal Premises (the "Furniture") and in the second floor of the Leased Premises; 2 3 NOW, THEREFORE, in consideration of the foregoing premises, the promises herein contained, and other good and valuable consideration, receipt of which is hereby acknowledged. Interactive, Federal, Sublandlord and Landlord hereby agree as follows: 1. Surrender. Effective as of June 15, 1998 (the "Surrender Date"), Interactive and Sublandlord each hereby surrenders, and Landlord and Sublandlord hereby accepts the surrender of, the Surrender Space under the Original Lease, the Interactive Prime Lease and the Interactive Sublease, as applicable. Landlord also accepts the surrender of the Surrendered Parking Spaces in accordance with the provisions of Section 10 hereof. Except for any obligations expressly set forth herein, Interactive, Sublandlord and Landlord hereby release each other as of the Surrender Date from and against any liability arising under the Original Lease, the Interactive Sublease and the Interactive Prime Lease relating to the Surrender Space which accrues after the Surrender Date, but not for any liabilities that exist as of the Surrender Date and not for any liability with respect to space subject to the Original Lease, the Interactive Sublease or the Interactive Prime Lease other than the Surrender Space. In connection with such surrender: (a) Landlord and Sublandlord agree that, effective upon the Commencement Date of the Federal Lease, the Base Rent otherwise owing each month under the Original Lease shall be reduced by $13,618.13 and that Tenant's Pro Rata Share of Operating Expenses and Taxes shall be appropriately reduced to reflect such surrender. (b) Sublandlord and Interactive agree that, effective upon the Commencement Date of the Federal Lease, the Base Rent otherwise owing each month under the Interactive Sublease shall be reduced by $15,131.25 and all other obligations of Interactive under the Interactive Sublease shall be appropriately reduced to reflect such surrender. (c) Landlord and Interactive agree that, effective November 1, 1998, but in no event earlier than the Commencement Date under the Federal Lease, the Base Rent otherwise owing each month under the Interactive Prime Lease, after increase pursuant to Rider Three of the Interactive Prime Lease, shall be reduced by $17,653.13; the Tenant's Pro Rata Share of Taxes and Operating Expenses, after increase pursuant to Rider Three of the Interactive Prime Lease, shall be appropriately reduced to reflect such surrender; and any other obligations of Landlord pursuant to Rider Three of the Interactive Prime Lease shall be appropriately reduced to reflect such surrender. In addition, each of the Original Lease, the Interactive Sublease and the Interactive Prime Lease shall be deemed terminated with respect to, but only with respect to, the Surrender Space and, except as specifically provided herein, the Sublandlord and Interactive shall fully comply with all obligations of such entity that apply to such Surrender Space upon the termination or expiration of the existing 3 4 Lease or Sublease for such Surrender Space, including but not limited to the removal of personal property and trade fixtures from the Surrender Space. 2. Common Areas. The portions of the Surrender Space which are located outside of the Federal Premises (the "New Common Areas") will be common areas of the building as of the Surrender Date. 3. Installation. Prior to the Surrender Date, (a) Landlord shall install, at its own expense, a door and, to the extent necessary, a wall in the location designated on Exhibit A restricting access from the New Common Areas to the Federal Premises (the "Federal Common Area Door"); (b) Interactive shall, at its own cost and expense, (i) close and seal the existing door from the Computer/Switch Room into the Federal Premises so as to prohibit access through such existing door; (ii) install a door (the "Computer Room Door") and, to the extent necessary, walls at the location designated on Exhibit A in order to separate all of the Computer/Switch Room from the remaining portions of the first floor of the building and to provide access from the Computer/Switch Room into the hallway west of the Computer/Switch Room; and (iii) reinstall the Landlord's card key security access system at the northeast entry door for Building B; and (c) Federal shall have the right to install, at its option, a card key security access system at the Federal Common Area Door and/or the Computer/Switch Room and/or the hallway adjacent to the Computer Room Door so that access to the Federal Premises is restricted to persons designated by Federal and also by Interactive pursuant to the license rights granted to Interactive in Section 7 below. The mandatory improvements described in Subsections (a) and (b) above are a material inducement for Federal's and Landlord's entry into the Federal Lease. If such improvements are not completed prior to the Surrender Date, then the Surrender Date and the Commencement Date under the Federal Lease shall be extended until such improvements have been completed. 4. Right of First Refusal. Federal shall have an ongoing first right of refusal through July 31, 1999 (the "Federal ROFR") to lease all or any portion of the second floor of the Leased Premises (the "Expansion Space"), on the following terms and conditions. If Interactive receives a bona fide offer to sublease all or any portion of the Expansion Space (the "Offer Space") for a term commencing after October 31, 1998, which Interactive desires to accept, Interactive shall notify Federal and Landlord of the receipt of said offer. Within five (5) business days after receipt of notice of such offer, Federal shall notify Interactive and Landlord whether Federal wishes to lease such Offer Space on the terms and conditions set forth in that offer, with the following exceptions: (a) instead of subleasing the Offer Space directly from Interactive, Federal shall enter into a lease directly with Landlord; (b) rental for the Offer Space shall be at the same rent per square foot as set forth in the Federal Lease; (c) the terms of the offer must be acceptable to the Landlord; and (d) Landlord shall not be obligated to license to Federal more than three (3) parking spaces for each full 1,000 square feet of additional space leased by Federal, with the fee for such additional spaces to be at the same rate as for the spaces licensed to Federal under the Federal Lease. If Federal exercises the Federal ROFR and the offer is acceptable to Landlord, then Landlord agrees to amend the Federal Lease through the term of the Federal Lease to include the Offer Space and also to accept the surrender of the Offer Space from Interactive on the same terms and conditions as specified in 4 5 the first paragraph of Section 1 of this Agreement; provided, however, the number of parking spaces surrendered shall be in accordance with Section 10(d) below and the Base Rent and Tenant's Pro Rata Share of Operating Expenses and Taxes shall also be proportionately reduced. If Federal does not exercise the Federal ROFR within five (5) business days after receipt of Interactive's notice or the terms of the offer are not acceptable to Landlord, then Federal shall have waived the Federal ROFR with respect to such offer, but not with respect to any subsequent offers. In no event shall the Federal ROFR apply during any extension of the Federal Lease pursuant to Section 2.2 of the Federal Lease, but, if the Federal ROFR has been exercised prior to July 31, 1999, and the term of the Lease has been extended pursuant to Section 2.2 of the Lease, then such extension shall apply to all of the space then leased under the Federal Lease including, but not limited to, space leased pursuant to the Federal ROFR. 5. Expansion Option. Federal shall also have an on-going option through July 31, 1999 (the "Federal Expansion Option"), to lease all or any portion of the Expansion Space which has not been leased to a third party after a failure by Federal to exercise the Federal ROFR with respect to such space under Section 4 above; provided, however, the term of the lease with respect to such Expansion Space may commence no earlier than November 1, 1998, and no later than July 31, 1999. The Federal Expansion Option must be exercised, and the lease of such Expansion Space shall be, in accordance with the following terms and conditions. Federal may notify Interactive and Landlord of its wish to exercise the Federal Expansion Option at any time and from time to time on or before ninety (90) days prior to the date upon which the lease with respect to such Expansion Space is to commence and of the portion of the Expansion Space to be so leased. Upon each such exercise of the Federal Expansion Option, the Federal Lease shall be amended to add the portion of the Expansion Space so designated as a portion of the Federal Premises, effective as of the commencement date with respect to such Expansion Space specified in Federal's notice; provided, however, as of the effective date of such expansion, the rental under the Federal Lease shall be increased to at all times reflect that the rental of the Expansion Space is to be at the same rent per square foot from time to time as is applicable under the Federal Lease to the original Federal Premises. In addition, Landlord shall not be obligated to license to Federal more than three (3) additional parking spaces for each 1,000 square feet of additional space leased by Federal, with the fee for such additional spaces to be at the same rate as for the spaces licensed to Federal under the Federal Lease. If Federal exercises the Federal Expansion Option, then Landlord agrees to accept the surrender of, and Interactive agrees to surrender, the applicable portion of the Expansion Space on the same terms and conditions as specified in the first paragraph of Section 1 of this Agreement; provided, however, the number of parking spaces surrendered shall be in accordance with Section 10(d) below and the Base Rent and Tenant's Pro Rata Share of Operating Expenses and Taxes shall also be proportionately reduced. In no event shall the Federal Expansion Option apply during any extension of the Federal Lease pursuant to Section 2.2 of the Federal Lease but, if the Federal Expansion Option has been exercised so that the Federal Lease includes portions of the Expansion Space prior to July 31, 1999, and the term of the Lease has been extended pursuant to Section 2.2 of the Federal Lease, then such extension shall apply to all of the space then leased under the Federal Lease including, but not limited to, space leased pursuant to the Federal Expansion Option. 5 6 6. Furniture. Interactive agrees that Federal shall have the right, at no cost and expense, to use the Furniture now located within the Federal Premises during the term of the Federal Lease, including any extension of the Federal Lease pursuant to the provisions of Section 2.2 of the Federal Lease or otherwise. In addition, if Federal exercises the Federal ROFR or the Federal Expansion Option for any portion of the Expansion Space. Interactive agrees that Federal shall have the right to use any of the Furniture which is now located in such portion of the Expansion Space and, for the purposes of the remainder of this Section 6, the term "Furniture" shall include such additional furniture which Federal becomes entitled to use. Federal shall maintain the Furniture in as good condition as at the commencement of the Federal Lease or the date the applicable portion of the Expansion Space is added to the Federal Lease, as applicable, ordinary wear and tear excepted. Upon expiration of the Federal Lease, Federal shall surrender the Furniture to Interactive, and Interactive shall remove the Furniture from the Federal Premises, no later than the expiration of the Federal Lease. Landlord agrees that, notwithstanding anything set forth in the Federal Lease to the contrary, Landlord shall look solely to Interactive for the removal of such Furniture and for the enforcement of any remedies arising out of the failure of Interactive to remove such Furniture. Federal acknowledges that, except for Landlord's payment obligations pursuant to the next paragraph of this Section 6. Landlord has no responsibility to Federal of any type with respect to the Furniture and Federal's failure to obtain the use of the Furniture, or loss of use of such Furniture, for any reason shall not affect the Federal Lease. Anything in the foregoing to the contrary notwithstanding, if Federal wishes to continue to use the Furniture on the Federal Premises for any period after July 31, 1999, and so notifies Interactive on or before May 31, 1999, (a) Interactive shall, if Interactive has not previously done so, acquire fee ownership of the Furniture then on the Federal Premises, as the Federal Premises may have been expanded pursuant to Sections 4 and/or 5 above; (b) Interactive shall permit Federal to continue to use the Furniture on the Federal Premises until the earlier of (i) receipt by Interactive of notice from Federal that Federal no longer wishes to use the Furniture or (ii) the date Federal ceases to occupy the Federal Premises; and (c)Landlord shall pay to Interactive, in consideration for Federal's use of the Furniture after July 31, 1999, the sum of (i) $500 per month for each month after July 31, 1999, that Federal uses the Furniture that was on the first floor of the Leased Premises and (ii) the sum of $500 per month for each month after July 31, 1999, that Federal uses the Furniture that was located on the Expansion Space, which sums shall be paid by Landlord to Interactive on or before ten (10) days after the first day of each calendar month that the Furniture is used by Federal after July 31, 1999; provided, however, if Federal has, as of July 31, 1999, occupied some but not all of the Expansion Space, then such $500 sum applicable to the Expansion Space shall be equitably reduced to reflect the fact that Federal is entitled to use only the Furniture that was on the portion of the Expansion Space occupied by Federal. Upon termination of Federal's right to use the Furniture during such period after July 31, 1999. Interactive shall, as required in the first paragraph of this Section 6, promptly remove the Furniture from all of the Federal Premises. 7. Computer/Switch Room. Federal hereby grants to Interactive a license to enter the Federal Premises for the limited purpose of accessing the Computer/Switch Room of Interactive located on the first floor of Building B. Interactive shall exercise such license in a 6 7 manner that does not interrupt, and that minimizes the interference with, Federal's use and enjoyment of the Federal Premises. Interactive agrees to indemnify and hold harmless Federal from and against any loss, damage or liability arising out of the exercise of this license by Interactive, or its employees, agents, contractors or invitees. 8. Brokerage. Interactive hereby agrees to pay to the Brokers (defined in the Federal Lease) all commissions due to the Brokers arising out of the Federal Lease or any extension or renewal thereof; arising out of this Agreement, including but not limited to any commissions owing as a result of the exercise of the Federal ROFR and/or the Federal Expansion Option: and arising out of any exercise by Federal of the extension right set forth in Section 2.2 of the Federal Lease. Interactive shall indemnify and save harmless Landlord and Federal from and against any and all liabilities, claims, suits, demands, judgments, costs, interests and expenses to which Landlord or Federal may be subject or suffer by reason of any claim made by any person, firm or corporation other than the Brokers for any commission, expense or other compensation as a result of the execution and delivery of the Federal Lease and based on alleged conversations or negotiations by said person, firm or corporation with Interactive. 9. Deficiency Obligation. Interactive shall pay to Landlord the following amounts, as determined on a monthly basis: (a) During the period from the Commencement Date under the Federal Lease through October 31, 1998, the excess of (i) the payments for such month which would have been owing to Landlord by the Sublandlord under the Original Lease for all Base Rent, rental tax and other charges of any type (except for the Tenant's Pro Rata Shares of Operating Expenses and Taxes payable under Articles 7(A) and 7(B) of the Original Lease) with respect to the Federal Premises but for the execution of this Agreement and (ii) the payments for such month to be received by Landlord from Federal under the Federal Lease, whether or not such payments are actually received from Federal; and (b) During the period from the later of (i) the Commencement Date under the Federal Lease or (ii) November 1, 1998, through July 31, 1999, the excess of (A) the payments for such month which would have been owing to Landlord by Interactive under the Interactive Prime Lease for all Base Rent, rental tax and other charges of any type with respect to the Federal Premises (as such Federal Premises may have been expanded pursuant to Sections 4 and 5 of this Agreement) but for the execution of this Agreement and (B) the payments for such month to be received by Landlord from Federal under the Federal Lease (including but not limited to payments received as a result of the expansion of the Federal Premises pursuant to Sections 4 and 5 of this Agreement), whether or not such payments are actually received from Federal under the Federal Lease. The determination of such amounts shall be made by Landlord in the exercise of Landlord's reasonable discretion and, unless otherwise appropriate, the calculations of amounts which would have been owing to Landlord under Subsections (a)(i) and (b)(i) above for the Federal Premises shall 7 8 be made on the basis of square footage of the Federal Premises and New Common Areas and the square footage of the Leased Premises remaining subject to the Original Lease or the Interactive Prime Lease, as applicable. All payments owing by Interactive under this Section 9 shall be due and payable within fourteen (14) days after receipt by Interactive of a statement therefor. Statements for such sums shall be sent to Interactive at the address of Interactive established by the Interactive Prime Lease. The failure of Landlord to receive any such payment within fourteen (14) days after the receipt by Interactive of such statement shall constitute a default by Interactive under Article 23(A)(i) of the Interactive Prime Lease which, if not cured within ten (10) days after notice from Landlord, shall entitle Landlord, in addition to any other rights and remedies Landlord may have at law or in equity for such failure, to exercise the remedies set forth in Article 23 of the Lease and to consider the amounts owing hereunder to be unpaid Rent owing and in default under the Interactive Prime Lease. 10. Parking Amendments. The parking provisions of the various Parking Agreements are hereby amended and clarified as follows: (a) This Agreement and the surrender by Interactive of the Surrender Space shall not affect the continued applicability of Paragraph 20 of Rider One to the Interactive Sublease and the Interactive Sublease shall be considered to still be in full force and effect for the purposes of said Paragraph 20 despite the effect of any of the provisions of this Agreement on the Interactive Sublease or the Sublease Premises thereunder. (b) The Interactive 20th Floor Parking Agreement shall not be affected by this Agreement. (c) Interactive, effective as of the Commencement Date of the Federal Lease, shall have the license under the Interactive Building B Parking Agreement to use only up to seven (7) of the forty-one (41) covered non-reserved or roof top parking spaces now licensed under the Inactive Building B Parking Agreement and shall not have the right to use any of the three (3) covered reserved spaces now licensed to Interactive under the Interactive Building B Parking Agreement. (d) If Federal from time to time exercises the Federal ROFR and/or the Federal Expansion Option, Interactive's license to use the seven (7) non-reserved covered spaces or roof top spaces which continue to be licensed to Interactive after the Commencement Date for the Federal Lease shall be reduced for such seven (7) spaces in accordance with the following schedule: 8 9
CUMULATIVE ADDITIONAL SQUARE CUMULATIVE REDUCTION IN SPACES FEET OF SPACE LEASED BY FEDERAL LICENSED TO INTERACTIVE ------------------------------- ----------------------- 0-999 0 1000-1999 3 2000-2999 6 Over 3000 7
11. CONTINGENCIES. This Agreement shall be effective only upon execution and delivery hereof by all of the parties hereto. This Agreement is expressly contingent upon the execution and delivery of the Federal Lease by Landlord and Federal. 12. NOTICES. All notices, demands, requests, consents, approvals, offers, statements and other instruments or communications required or permitted to be given hereunder shall be in writing; shall be either hand delivered, delivered by respectable priority overnight delivery service, or mailed by first class registered or certified mail, postage prepaid, addressed to the address for such party set forth above, or to such other address as any party shall designate to the others in writing; and shall be deemed to have been given when delivered or three (3) days after being mailed. Notwithstanding the foregoing, any notice changing the address of a party shall not be deemed given until received by the party to whom it was addressed. 13. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. The partially executed signature page of any counterpart of this Agreement may be attached to any other partially executed counterpart of this Agreement without impairing the legal effect of the signature(s) on such signature page. 14. INTERPRETATION. Except as set forth herein, the Original Lease, the Interactive Sublease and the Interactive Prime Lease shall remain unmodified and in full force and effect. 9 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. INTERACTIVE FLIGHT TECHNOLOGIES INC. By: /s/ JOHN W. ALDERFER ------------------------------ Name: John W. Alderfer ------------------------------ Title: Treasurer ------------------------------ SAMARITAN HEALTH SYSTEM By: ------------------------------ Name: ------------------------------ Title: ------------------------------ FEDERAL INSURANCE COMPANY By: /s/ JOAN L. O'SULLIVAN ------------------------------ Name: Joan L. O'Sullivan ------------------------------ Title: Vice President ------------------------------ METROPOLITAN LIFE INSURANCE COMPANY By: /s/ MICHAEL J. MATHEWS ------------------------------ Name: Michael J. Mathews ------------------------------ Title: Asset Manager ------------------------------ 10 EX-27 5 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND IN THE COMPANY'S 10-QSB FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS 3-MOS OCT-31-1998 OCT-31-1998 NOV-01-1997 FEB-01-1998 APR-30-1998 APR-30-1998 40,706,887 40,706,887 1,698,772 1,698,772 544,225 544,225 0 0 1,107,379 1,107,379 45,079,038 45,079,038 7,279,113 7,279,113 4,934,603 4,934,603 49,554,683 49,554,683 14,195,625 14,195,625 0 0 0 0 0 0 221,111 221,111 35,077,101 35,077,101 49,554,683 49,554,683 17,860,563 4,569,337 18,141,827 4,732,162 15,335,854 3,768,459 15,348,811 3,775,716 3,970,714 1,754,356 0 0 6,995 3,234 (112,881) (274,464) 0 0 (112,881) (274,464) 0 0 0 0 0 0 (112,881) (274,464) (0.01) (0.02) (0.01) (0.02)
EX-27.1 6 EX-27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND IN THE COMPANY'S 10-KSB FOR THE YEAR, AND IS QUALIFIED IN ITS ENTIRETY BY REFERECE TO SUCH FINANCIAL STATEMENTS. YEAR YEAR OCT-31-1997 OCT-31-1996 NOV-01-1996 NOV-01-1995 OCT-31-1997 OCT-31-1996 36,890,454 7,736,345 2,137,084 6,810,275 5,654,118 1,838,979 0 1,732,377 6,110,761 4,726,935 51,653,071 20,554,960 12,514,922 5,111,301 9,555,383 451,801 54,779,455 25,307,490 18,413,272 7,489,619 0 0 0 0 0 0 219,234 120,620 36,015,109 17,587,251 54,779,455 25,307,490 10,524,828 2,671,924 11,100,709 2,985,402 24,646,334 3,711,702 24,878,460 4,577,277 38,981,344 18,251,217 216,820 1,732,377 13,423 2,076 (51,022,312) (19,266,901) 0 0 (51,022,312) (19,266,901) 0 0 0 0 0 0 (51,022,312) (19,266,901) (2.96) (3.11) (2.96) (3.11) EPS-PRIMARY AND EPS-DILUTED ARE RESTATED TO INCLUDE THE IMPACT OF FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 128.
EX-27.2 7 EX-27.2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND IN THE COMPANY'S 10-QSB FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS 6-MOS 3-MOS OCT-31-1997 OCT-31-1997 OCT-31-1997 NOV-01-1996 NOV-01-1996 NOV-01-1996 JUL-31-1997 APR-30-1997 JAN-31-1997 36,042,027 48,898,051 66,631,029 0 0 0 5,518,041 2,692,987 1,881,356 314,316 286,266 1,868,968 16,224,670 17,601,749 3,573,176 58,832,159 70,477,806 72,293,024 12,412,299 13,693,888 16,499,701 6,356,031 1,160,417 653,556 64,961,831 83,084,368 88,882,399 11,207,551 10,226,696 9,350,213 0 0 0 0 0 0 0 0 0 219,234 219,231 219,225 53,145,943 71,307,055 78,753,761 64,961,831 83,084,368 88,882,399 3,642,842 2,478,131 148,709 4,129,865 2,587,367 226,005 11,841,364 8,879,913 148,404 12,001,862 8,975,440 230,103 27,563,188 10,166,722 8,717,351 179,319 150,315 136,590 0 0 0 (33,891,478) (15,729,056) (8,317,677) 0 0 0 (33,891,478) (15,729,056) (8,317,677) 0 0 0 0 0 0 0 0 0 (33,891,478) (15,729,056) (8,317,677) (2.03) (1.00) (0.66) (2.03) (1.00) (0.66) EPS-PRIMARY AND EPS-DILUTED ARE RESTATED TO INCLUDE THE IMPACT OF FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 128.
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