INTERNATIONAL TOURIST ENTERTAINMENT CORP, 10-K, 1997-06-16

INTERNATIONAL TOURIST ENTERTAINMENT CORP
10-K, 1997-06-16
MOTION PICTURE THEATERS

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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENT OF INCOME 6-30-96 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 362,179
<SECURITIES> 0
<RECEIVABLES> 17,763
<ALLOWANCES> 0
<INVENTORY> 51,495
<CURRENT-ASSETS> 639,550
<PP&E> 6,204,996
<DEPRECIATION> 336,449
<TOTAL-ASSETS> 8,076,578
<CURRENT-LIABILITIES> 3,835,833
<BONDS> 5,503,834
0
213
<COMMON> 6,360
<OTHER-SE> (1,269,662)
<TOTAL-LIABILITY-AND-EQUITY> 8,076,578
<SALES> 1,783,416
<TOTAL-REVENUES> 4,067,089
<CGS> 631,647
<TOTAL-COSTS> 9,677,601
<OTHER-EXPENSES> 1,910
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 759,939
<INCOME-PRETAX> (6,364,973)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,364,973)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,364,973)
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)

</TABLE>

<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB

(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required] for the
fiscal year ended June 30, 1996.

[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [No Fee Required] for
the transition period from ____________ to ____________.

Commission file number 0-21070

INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION

U.S. Virgin Islands 66-0426648
---------------------- ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)

7030 Park Centre Drive
Salt Lake City, Utah 84121
(801) 566-9000

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value

Check whether the registrant (1) filed all reports required
to be filed by Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90
days.
(1) Yes No X
------- -------
(2) Yes X No
------- -------

Check if there is no disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. X
----

The registrant's revenues for its most recent fiscal year
were $4,067,089.

The aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $412,848 as
of May 27, 1997, computed by reference to the price of which
the stock was sold, or the average bid and asked prices of
such stock.

Check whether the issuer has filed all documents and reports
required by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed
by a court. Yes No X .
------- --------

The number of shares outstanding of each of the registrant's
classes of common stock as of May 27, 1997:

Class Shares Outstanding
----- ------------------
Common Stock, $.001 par value 6,015,397

Exhibit index at page 14.

Transitional Small Business Disclosure Format (check one):
Yes No X .
--------- --------
<PAGE>
PART I

Item 1. Description of Business
-----------------------

International Tourist Entertainment Corporation, a U.S.
Virgin Islands corporation, was incorporated June 3, 1986, to
develop, finance, own and operate destination, giant screen
theaters and associated amenities in popular tourist
locations.

The Company owns and operates a giant screen theater,
restaurant and mall facility in Branson, Missouri. The
Branson facility was constructed in 1993 and commenced
operations on October 8, 1993. The Branson facility consists
of an IMAX giant screen theater, retail space, a full-
service restaurant, other food concessions and related
amenities.

The Company has produced and owns a giant screen theme
film entitled "Ozarks: Legacy and Legend." The theme film
premiered on April 28, 1995 at the Branson facility and is
exhibited regularly there. The Company also rents giant
screen films from third parties for exhibition at its Branson
facility.

Revenue from the Branson facility is generated from
three primary sources: (1) ticket sales for admission to the
giant screen theater; (2) lease of retail space; (3) operation
of restaurant facilities, and retail shops and concessions
owned by the Company in the Branson facility.

On January 25, 1996, the Company filed a voluntary
petition for relief under Chapter 11 of the United States
Bankruptcy Code, Case No. 96-60122-S-11 (Chapter 11), with the
United States Bankruptcy Court, Western District of Missouri,
Southern Division. On December 18, 1996, the Company filed
its Second Amended Plan of Reorganization Dated December 18,
1996 (the "Plan of Reorganization") and its Second Amended
Disclosure Statement in Support of Proposed Debtor's Second
Amended Plan of Reorganization Dated December 18, 1996 (the
"Disclosure Statement") with the United States Bankruptcy
Court. On February 6, 1997, an Order Confirming the Plan of
Reorganization was entered by the United States Bankruptcy
Court in the matter of In Re: International Tourist
Entertainment Corporation, Debtor and Debtor-in-Possession.

The Plan of Reorganization provides for the
reorganization of the Company. The terms of the
reorganization provide for (i) the payment in full of
priority, administrative and tax claims, (ii) the modification
of the Boatmen's Bank secured claim, (iii) settlement of the
Bank of Nova Scotia secured claim by delivery of the St.
Thomas, U.S. Virgin Islands property of the Company to the
Bank of Nova Scotia, (iv) the performance of the Great
Southern mortgage obligation on a condominium owned by the
Company in accordance with its terms, (v) debentureholders may
elect to receive cash in the amount of 12 1/2% of their claims
and one-half share of the common stock of the Company for each
$10.00 of their claim; or cash in the amount of 10% of their
claims and one and one-half shares of the common stock of the
Company for each $10.00 of their claim, (vi) creditors with
Allowed Unsecured Claims may elect to receive cash in the
amount of 12 1/2% of their Allowed Unsecured Claims; or cash
in the amount of 10% of their Allowed Unsecured Claims and one
share of the common stock of the Company for each $10.00 in
debt, (vii) preferred shareholders will receive .8 shares of
the common stock of the Company for each share of preferred
stock held by them, rounded to the nearest whole share, and
(viii) common shareholders will receive 1 share of the common
stock of the Company for each 10 shares of common stock held
by them pre-petition, rounded to the nearest whole share.

The Plan of Reorganization is to be capitalized with a
$1.2 million investment of additional cash. The first
installment of $600,000 was delivered to the Company on or
about February 24, 1997 by Mr. Paul M. Bluto for which he
received approximately 4,433,490 shares of the common stock of
the Company. The second installment of $600,000 will be
provided to the Company from proceeds of a private placement
of the Company's common stock on or before September 10, 1997.
<PAGE>
Mr. Paul M. Bluto has agreed that at the conclusion of
the offering period he will purchase unsold Units in such
amount that the total proceeds of the offering to the Company
will be at least $600,000. Investors in this private
placement will receive 2,000,000 shares of the common stock of
the Company and warrants to purchase 2,000,000 shares of the
common stock of the Company.

Branson Facility
- ----------------

The total size of the Branson facility is approximately
60,000 square feet. The main feature of this facility is a
532 seat IMAX giant screen theater. The theater's screen is
approximately 62 feet high by 83 feet wide. In addition to
the theater, the Branson facility contains a lobby area and
retail shopping space with approximately 22,000 square feet of
leasable retail and restaurant space and approximately 2,000
square feet of leasable office space. The Company owns and
operates a 370 seat full service family restaurant under the
name "McFarlain's" at the Branson facility.

Giant Screen Film and Projection Format
- ---------------------------------------

The Company's giant screen theater is designed to take
advantage of the IMAX film and projection format. The giant
screen film format is up to ten times larger than the 35mm
film used in the typical movie theater. It is projected in a
specially designed giant screen theater, configured with
amphitheater style seating, using a special projection system.
The projected image fills a screen that is five to seven
stories high and is complemented with a digital sound system.
The result is that these giant screen films can be displayed
with great clarity at much larger than usual viewing size,
bringing the viewer "into" the film action on the screen.

The Company's theme film is produced in a giant screen
film format. The Company has leased a giant screen projection
system, sound system and projection screen for its Branson
facility from Imax Corporation. The System Lease Agreement is
dated August 1, 1993 and is between the Company and Imax
Corporation. The lease is for an initial term of ten years,
renewable for an additional ten year term at the election of
the Company. The lease generally provides for an initial
payment of rents in the amount of $1,200,000, and a royalty
percentage based upon net theater ticket revenues.

Competition
- -----------

The Company operates a single facility in Branson,
Missouri providing entertainment to tourists. The Company
must compete with other entertainment attractions in the
Branson area for tourists which visit the Branson area and the
Company will also be impacted by the competitive draw of
Branson in relation to other locations.

Branson has many live performance theaters with
presentations based on country music and other popular music
themes. These theaters generally operate from May through
mid-December, although more and more of these are also
offering a limited performance schedule in March and April.
On average, a theater operates two performances each day, for
six days a week, during the peak season, but may offer only
one performance per day or reduce the number of days per week
during slower months. Seasonality will cause a definite
business cycle within each year for the Company's Branson
facility.

The major attraction in Branson is Silver Dollar City
which is an amusement park with an 1890's theme and attracts
almost 2 million visitors each year. Several other
attractions exist in Branson, including water parks, family
amusements and activities related to the lakes in the region.
The Company has entered into cross promotion arrangements with
Silver Dollar City and with several of the major entertainers
in Branson. The Company's Branson facility is now listed in
all major tour guides and publications for the Branson area.
<PAGE>
Employees
- ---------
At May 31, 1997, the Company had approximately 126
employees, almost all of which work at the Company's Branson
facility, in the theater and the restaurant. At June 30, 1996
and 1995, the Company had approximately 103 employees and 82
employees, respectively.

Item 2. Description of Property
-----------------------

The Company entered into a 50 year ground lease in July
1993 for the 5.5 acre site on which its Branson facility is
located. The Company has prepaid the first 20 years of the
lease with a payment of $1,025,000. Commencing in the 21st
year of the lease, the annual lease payment will be $145,000,
adjusted to reflect inflationary increases.

The Company completed the construction of its Branson
facility in 1993 on the 5.5 acre site leased by the Company.
The Company owns the Branson facility subject to a mortgage in
the principal amount of approximately $3,500,000 in favor of
Boatmen's Bank of Southern Missouri.

The Company owns a condominium in Branson, Missouri
which it acquired in 1994 for $148,000 and which is subject to
a mortgage at June 30, 1996 in the principal amount of
$111,297 in favor of Great Southern with monthly payments of
$975. The condominium is used as a residence by the Company's
president, Mr. Cullimore.

The Company owned a two and one-half acre site on St.
Thomas which was the planned location of a giant screen
complex. Pursuant to the Plan of Reorganization, the Company
has conveyed the property to the Bank of Nova Scotia, which
held a mortgage on the property in the principal amount of
$480,000 at June 30, 1996, in full satisfaction of the
Company's obligation to the bank.

The Company owns no other real properties.

The Company produced and owns the giant screen theme
film "Ozarks: Legacy and Legend."

The Company has registered the service mark "ITEC
Attractions" with the U.S. Patent and Trademark Office and has
submitted applications to register the service marks "Ozarks
Discovery" and "McFarlain's."

The properties and facilities of the Company are deemed
adequate and suitable for its operations.

Item 3. Legal Proceedings
-----------------

Other than the bankruptcy proceeding described above,
there are no material pending legal proceedings to which the
Company is a party or of which any of its property is the
subject.

Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------

No matter was submitted to a vote of security holders
through the solicitation of proxies or otherwise during the
fourth quarter of the fiscal year covered by this report.

In December 1996, subsequent to the filing of the Plan
of Reorganization and Disclosure Statement with the United
States Bankruptcy Court, the Company solicited and obtained
approvals of its creditors and security holders for the Plan
of Reorganization.

<PAGE>
PART II

Item 5. Market for the Company's Common Equity and Related
Stockholder Matters

(a) Market Information. Prior to February 1996, the
Company's common stock was reported on the NASDAQ
System. Since February 1996, trading in the Company's
common stock has been limited and sporadic. The
Company's common stock may be traded in the over-the-
counter market. Over-the-counter quotations reflect
inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual
transactions. The following table shows the range of
high and low bid information available to the Company
for the Company's common stock for the quarterly
periods indicated. The prices in the table have been
adjusted to give effect to the implementation of the
Company's Plan of Reorganization. The common stock
was first publicly traded in December 1992.

High Low
----- -----

1st Quarter (July 1994 - September 1994) $0.68 $0.35
2nd Quarter (October 1994 - December 1994) 0.38 0.20
3rd Quarter (January 1995 - March 1995) 0.28 0.15
4th Quarter (April 1995 - June 1995) 0.18 0.08

1st Quarter (July 1995 - September 1995) 0.14 0.06
2nd Quarter (October 1995 - December 1995) 0.13 0.01
3rd Quarter (January 1996 - March 1996) 0.02 0.00
4th Quarter (April 1996 - June 1996) 0.00 0.00

1st Quarter (July 1996 - September 1996) 0.00 0.00
2nd Quarter (October 1996 - December 1996) 0.00 0.00
3rd Quarter (January 1997 - March 1997) 0.00 0.00

(b) Holders. The approximate number of record holders
as of May 27, 1997 of the Company's common stock, $.001 par
value, was 344.

(c) Dividends. The Company has not paid cash
dividends on its common stock during the past two fiscal
years. At the present time, the Company's anticipated
capital requirements are such that it intends to follow a
policy of retaining any earnings in order to finance the
development of its business.

The Company's loan agreement with Boatmen's Bank of
Southern Missouri restricts the payment of dividends to an
amount not exceeding the Company's net profits plus
depreciation plus interest expense, less 1.25 times the
Company's annual principal and interest payments unless
otherwise agreed to by Boatmen's Bank of Southern Missouri.

Recent Sales of Unregistered Securities
- ---------------------------------------

Commencing January 26, 1995, the Company offered and
sold $500,000 of its 10% notes. No underwriter or selling
agent was used in connection with this offer and sale. The
sale of these securities was made pursuant to available
exemptions under Section 4(2) and the regulations
promulgated pursuant thereto of the Securities Act of 1933,
as amended.

Commencing February 24, 1995, the Company issued 68,593
Units, each Unit consisting of one restricted share of the
series B preferred stock of the Company, one series B
warrant to purchase five restricted shares of the common
stock of the Company at a price of $3.00 per share and one
series C warrant to purchase five shares of the common stock
<PAGE>
of the Company at a price to be determined. The Units were
issued to note holders of the Company in exchange for
outstanding notes in the principal amount of $500,000, plus
accrued interest, and to investors for $155,500 cash. The
Units were offered and sold to investors through Euro-
Atlantic Securities, Inc. for which it was paid a 10%
commission and a 3% non-accountable expense allowance. The
sale of these securities was made pursuant to available
exemptions under Section 4(2) and the regulations
promulgated pursuant thereto of the Securities Act of 1933,
as amended.

Commencing May 5, 1995, the Company issued 144,020
Units, each Unit consisting of one restricted share of the
series B preferred stock of the Company, one series B
warrant to purchase five restricted shares of the common
stock of the Company at a price of $3.00 per share and one
series C warrant to purchase five shares of the common stock
of the Company at a price to be determined. The Units were
issued to debentureholders of the Company in exchange for
outstanding debentures in the principal amount of
$1,405,000, plus accrued interest. No underwriter or
selling agent was used in connection with this sale. The
sale of these securities was made pursuant to available
exemptions under Section 4(2) and the regulations
promulgated pursuant thereto of the Securities Act of 1933,
as amended.

In February 1997, the Company issued approximately
4,433,490 restricted shares of its common stock to Mr. Paul
M. Bluto in consideration of $600,000 cash. No underwriter
or selling agent was used in connection with this sale. The
sale of these shares was made pursuant to available
exemptions under Section 4(2), Section 4(6), and the
regulations promulgated pursuant thereto, of the Securities
Act of 1933, as amended.

Commencing February 28, 1997, the Company is offering
up to approximately 2,166,667 Units at a price of $.30 per
Unit for an aggregate consideration of $650,000, each Unit
consisting of one restricted share of the common stock of
the Company and one warrant to purchase one restricted share
of the common stock of the Company at a price of $1.00 per
share. No underwriter or selling agent is being used in
connection with this offer and sale. The sale of these
shares is made pursuant to available exemptions under
Section 4(2), Section 4(6), and the regulations promulgated
pursuant thereto, of the Securities Act of 1933, as amended.
As of May 27, 1997, the Company had received orders for
approximately $300,000 of the private placement.

Item 6. Management's Discussion and Analysis or Plan of
Operation

The Company filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code on January 25,
1996. An Order confirming the Company's Plan of
Reorganization was entered on February 6, 1997.

Results of Operations
- ---------------------

The Company's revenues for its fiscal year ending June
30, 1996 increased 43% to $4,067,089 compared to $2,834,670
for the fiscal year ending June 30, 1995. This increase was
primarily due to the addition of and increased revenues at the
McFarlain's restaurant acquired from Frontier Pies Restaurant
who was a tenant in the Company's mall in Branson.

The Company's direct costs for film exhibition
decreased to $253,514 as compared to $355,597 in the prior
year. This decrease is due to a reduction in film rental
expenses resulting from the Company producing its own theme
film: Ozarks: Legacy and Legend. This film premiered on
April 28, 1995 and is exhibited daily at the Branson
facility. Restaurant expenses increased to $396,914 as
compared to $58,319 in the prior year period. Concession
expenses increased to $234,733 as compared to $170,569 in
fiscal 1995. These increases reflect the increased business
experienced during the year. In addition, the McFarlain's
<PAGE>
Restaurant was acquired in May, 1995 and therefore
represents only two months of operations in fiscal 1995.

Selling, general and administrative expenses for the
fiscal year ended June 30, 1996 increased to $3,674,242 as
compared to $3,178,115 in the prior year, reflecting the
increased expenses and costs associated with the full year
of operations of the McFarlain's restaurant together with
the costs associated with the bankruptcy reorganization.

During fiscal 1996, the Company adopted Statement of
Financial Accounting Standard (SFAS) No. 121 "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to
Be Disposed Of. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles which are held
and used by the Company be reviewed for impairment whenever
changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. In performing the
review of recoverability, the Company estimated the future
cash flows expected to result from the use of various assets
including the Company's property, film and intangible assets
and recognized an impairment loss in the amount of
$5,118,198 for the year ended June 30, 1996.

The Company's operating loss was $5,610,512 in fiscal
1996 compared to $927,930 in fiscal 1995. This increase was
primarily due to the write-down of assets.

The increase in interest expense for the 1996 fiscal
year reflects carrying costs of the Company's mortgage on
the Branson theater complex, the Company's 1993 Debentures
issued in September 1993 and borrowings required to complete
the production of the Ozarks film.

The Company had a net loss applicable to common stock
for the fiscal year ended June 30, 1996 totaling $6,577,586
as compared to $1,562,172 for 1995. Excluding the one-time
write-down of assets discussed above, the net loss for
fiscal 1996 equaled $1,246,775. Of this amount, $731,264
represents non-cash expenses from depreciation and
amortization of assets.

Liquidity and Capital Resources

At June 30, 1996 the Company had a cash balance of
$362,179. The Company had a working capital deficit at June
30, 1996 of $3,196,283.

The Company's Plan of Reorganization, which was
confirmed on February 6, 1997, relieved the Company of
approximately $3,193,647 of current liabilities and
approximately $2,177,989 of long-term debt for which it paid
$600,000. This has significantly improved the Company's
financial condition.

The Company expects to be able to finance its operations
and immediate capital requirements from current operations,
capital invested pursuant to the Plan of Reorganization and
proceeds of its private placement offering.

The Company has not been unusually impacted by
inflation or changing prices during the past three years.

Item 7. Financial Statements
--------------------

The Financial Statements of the Company required by
this Item are attached as a separate section of this report
and are listed in Part IV, Item 13 of this Form 10-KSB.

<PAGE>
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure

On February 11, 1997, the Company notified KPMG Peat
Marwick LLP, Salt Lake City, Utah, that they would not be
retained as the principal accountants to audit the Company's
financial statements for the June 30, 1996 year. The
accountant's report on the Company's financial statements
for the fiscal year ended June 30, 1995 contained a going
concern explanatory paragraph. There have been no
disagreements between the Company and the former accountant
on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or
procedure in connection with the audits of the two years
ended June 30, 1995 or any subsequent period preceding the
change described herein.

On February 12, 1997, the Company engaged Tanner + Co.,
Salt Lake City, Utah, as the principal accountant to audit
the Company's financial statements. The Board of Directors
of the Company has approved the change of accountants.

PART III

Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a) of the
Exchange Act

Directors and Executive Officers

The directors and executive officers of the Company at
May 27, 1997 are:

Name Age Position in Company

Paul M. Bluto 68 Chairman of the Board and
Chief Financial Officer

Kelvyn H. Cullimore 61 President, Chief
Executive Officer, and
Director

Robert J. Cardon 34 Secretary/Treasurer

Kelvyn H. Cullimore, Jr. 40 Director

Francis E. McLaughlin 54 Director

Kumar V. Patel 50 Director

Kelvyn H. Cullimore is the father of Kelvyn H.
Cullimore, Jr. There are no other family relationships among
any of the above-named persons.

All directors of the Company are elected to hold office
until the annual meeting of the shareholders following their
election and until their successors have been duly elected and
qualified. Officers of the Company are elected by the Board of
Directors at the first meeting after the annual meeting of the
Company's shareholders and hold office until their successors
are chosen and qualify, or until their death, or until they
resign or have been removed from office.

Kelvyn H. Cullimore is employed by the Company as its
President and Chief Executive Officer and will also continue
to devote part of his time to his duties as Chairman of the
Board of Dynatronics Corporation. It is not anticipated that
this arrangement will interfere with Mr. Cullimore's ability
to perform his duties for the Company. All other staff
personnel employed by the Company devote full-time to the
business of the Company as salaried employees. Robert J.
Cardon and other support personnel are available under the
contract with Dynatronics Corporation to provide services to
<PAGE>
the Company on an as needed basis. See "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS." Dynatronics Corporation is a
public company which manufactures devices for the physical
medicine market.

Paul M. Bluto has been a Director of the Company since
April 1995. He became Chairman of the Board and Chief
Financial Officer in February 1997. Since 1990, Mr. Bluto has
been employed by G.S.&W. Services in marketing, special
projects and computerization. From 1966 to 1990, Mr. Bluto
was employed with the United Automobile, Aerospace,
Agriculture Implement Workers of America (U.A.W.), most
recently as a Senior Vice President of Operations and Human
Resources.

Kelvyn H. Cullimore has served as President of the
Company since its incorporation in 1986. He served as
Chairman of the Board from 1986 to February 1997 and became
Chief Executive Officer in February 1997. Mr. Cullimore
received a B.S. in Marketing from Brigham Young University in
1957 and, following graduation, worked for a number of years
as a partner in a family-owned home furnishings business in
Oklahoma City, Oklahoma. Mr. Cullimore has participated in
the organization and management of various enterprises,
becoming the president or general partner in several business
entities, including real estate, the motion picture industry
and equipment partnerships and has served on the board of
directors of Brighton Bank and a privately-owned wholesale
travel agency. Since 1975, Mr. Cullimore has consulted for
independent film production and distribution companies and has
been involved in the raising of capital for the production of
feature-length films. From 1979 to 1992, Mr. Cullimore served
as chairman of the board and president of American
Consolidated Industries ("ACI"), a corporate affiliate of
Dynatronics Corporation, which in 1992 was merged with and
into Dynatronics Corporation. ACI was a privately-owned
holding company for various investments. From 1983 to 1992,
Mr. Cullimore also served as president of Dynatronics
Corporation and from 1983 to present, he has served as
chairman of the board of Dynatronics Corporation, a publicly-
held company whose securities are registered under the
Securities Exchange Act of 1934, as amended.

Robert J. Cardon was appointed Corporate Secretary of
the Company in February 1992 and became Treasurer of the
Company in February 1997. Since 1988, Mr. Cardon has served
as administrative assistant to the President of the Company
and of Dynatronics Corporation, and since December 1992 has
served as Corporate Secretary of Dynatronics Corporation.
From 1987 to 1988, Mr. Cardon was employed as a registered
representative by an investment banking firm. He received his
B.A. in 1987 and his M.B.A. in 1990, both from Brigham Young
University.

Kelvyn H. Cullimore, Jr. has been a Director of the
Company since its incorporation in 1986. He graduated from
Brigham Young University with a degree in Financial and Estate
Planning in 1980. Since graduation, Mr. Cullimore, Jr. has
served on the board of directors of several businesses,
including Dynatronics Corporation, Dynatronics Marketing
Company, ACI and a privately-owned wholesale travel agency.
In addition, he has served as secretary/treasurer of each of
the foregoing companies. Mr. Cullimore, Jr. also served as
Executive Vice President and Chief Operating Officer of ACI
and he currently serves as President and a Director of
Dynatronics Corporation, a publicly-held company whose
securities are registered under the Securities Exchange Act of
1934, as amended.

Francis E. McLaughlin has been a Director of the
Company since 1988. He is the founder and principal owner of
the McLaughlin Companies, which includes the largest real
estate firm in the U.S. Virgin Islands, a real estate
appraisal company and a property management company. Mr.
McLaughlin is a licensed real estate broker holding the
Certified Residential Broker (CRB) and Graduate, Realtors
Institute (GRI) designations. He has developed several
residential and commercial real estate projects in the U.S.
Virgin Islands. He is also active in community and civic
affairs in the U.S. Virgin Islands.
<PAGE>
Kumar V. Patel was elected a director of the Company in
April 1995. Since 1976, Mr. Patel has been self-employed in
real estate investment and management in Southern California.
He received a B.A. in Honors Economics and Accounting from
the University of Newcastle-Upon-Tyne, Great Britain. He is a
licensed Real Estate Broker and a licensed General Contractor
in California. He is also President of Great Designs Realty
and Development Inc., a family business offering service in
foreclosure, property management and construction.

Compliance With Section 16(a) of the Exchange Act
- -------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934
requires the Company's Officers and Directors and persons who
own more than 10% of a registered class of the Company's
equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Officers, directors and greater than 10% beneficial owners are
required by regulations of the Securities and Exchange
Commission to furnish the Company with copies of all Section
16(a) forms which they file.

Based solely on review of the copies of such forms
furnished to the Company, the Company believes that during its
1996 fiscal year all Section 16(a) filings applicable to its
officers, directors and greater than 10% beneficial owners
were made.

Item 10. Executive Compensation
----------------------

Compensation of Executive Officers
- ----------------------------------

The following table sets forth the compensation of the
Company's chief executive officer during the fiscal years
ended June 30, 1996, 1995, and 1994. No other executive
officer had a total annual salary and bonus exceeding
$100,000.

Summary Compensation Table
<TABLE>
<CAPTION>

Long Term Compensation
----------------------
Annual Compensation Awards Payouts
--------------------------------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Restricted
Name and Annual Stock LTIP All Other
Principal Compen- Award(s) Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) ($) SAR(#) ($) sation($)
- -------- ---- --------- ------- --------- ---------- -------- ------- ----------

Kelvyn H. Cullimore 1996 $124,784 $ -0- $38,791(1) $ -0- -0- $ -0- $ -0-
CEO(2) 1995 $125,538 $ -0- $42,074(1) $ -0- -0- $ -0- $ -0-
1994 $125,538 $ -0- $44,196(1) $ -0- -0- $ -0- $ -0-
_______________
</TABLE>
(1) Included in these amounts are premiums of $34,134
for 1996, $34,211 for 1995, and $34,221 for 1994 on
insurance policies funding a salary continuation plan for
Mr. Kelvyn H. Cullimore. Also included are life insurance
premiums, disability insurance premiums and personal usage
of a Company automobile.

(2) Mr. Cullimore's presence in Branson on behalf of
the Company is considered temporary and therefore, the above
Compensation Table does not include any amount for use of
the condominium by Mr. Cullimore.

The Company did not grant to executive officers nor
were there outstanding any stock options or stock
appreciation rights during its last completed fiscal year
ending June 30, 1996.

<PAGE>

During the last completed fiscal year, the Company made
no awards under any long-term incentive plan. The Company
does not maintain any defined benefit or actuarial plan.

Employment Agreements
- ---------------------

Pursuant to the Plan of Reorganization confirmed by the
U.S. Bankruptcy Court on February 6, 1997, Mr. Cullimore has
agreed to continue to work for the Company on the following
terms: an annual salary of $100,800; an automobile allowance
of $250 per month; a $35,000 annual contribution to Mr.
Cullimore's retirement fund; and the condominium owned by the
Company will be provided to Mr. Cullimore for his living
accommodations.

Mr. Cullimore will also share in an incentive bonus pool
equal to 50% of positive cash flow from operations per year
from $200,000 to $300,000, 25% from $300,000 to $400,000, and
10% in excess of $400,000.

Compensation of Directors
- -------------------------

Directors of the Company receive $250.00 per meeting for
service as directors of the Company. The Board of Directors
will meet quarterly or more often as needed. Directors are
reimbursed for expenses incurred on behalf of the Company in
attending directors' meetings.

Item 11. Security Ownership of Certain Beneficial Owners
and Management

The following table sets forth, as of May 27, 1997,
certain information with respect to any person who is known to
the Company to be the beneficial owner of more than five
percent (5%) of the Company's capital stock, each director,
certain executive officers and as to all directors and
officers as a group:

Common Stock Beneficially Owned
-------------------------------

Number
Name of shares % of Class(1)

Paul M. Bluto (2) 4,444,503 73.9

Kelvyn H. Cullimore (3) 216,976 3.6

Kelvyn H. Cullimore, Jr. (4) 0 -

Francis E. McLaughlin 8,030 0.1

Kumar V. Patel 0 -

All Directors and Officers
of the Company as a Group
(6 persons) 4,669,509 77.6%

___________________

(1) These calculations are based upon a total of 6,015,397
shares outstanding. Pursuant to the Plan of Reorganization,
284,243 shares of common stock are issued to debentureholders
upon conversion of their claims; 88,530 shares of common stock
are issued to unsecured creditors upon conversion of their
claims; 635,999 shares of common stock are issued to pre-
petition common shareholders; 170,090 shares of common stock
are issued to pre-petition preferred shareholders; 403,045
shares of common stock are issued to management of the Company
pursuant to an incentive program; and 4,433,490 shares of
common stock are issued to Mr. Bluto in consideration of
$600,000 cash.
<PAGE>
(2) Mr. Bluto owns 11,013 shares as a result of the pre-
petition holdings of himself and his wife and acquired
4,433,490 shares pursuant to the Plan of Reorganization. Mr.
Bluto may acquire additional shares in the Company's current
private offering.

(3) Mr. Cullimore owns 10,453 shares as a result of pre-
petition holdings, he is a participant in an incentive program
pursuant to which he received 201,523 shares and he owns 5,000
shares which he received in satisfaction of claims as a
creditor of the Company. Mr. Cullimore may be deemed to be a
control person of Dynatronics Corporation which owns 230,339
shares, which are not included in Mr. Cullimore's holdings.

(4) Mr. Cullimore, Jr. may be deemed to be a control person
of Dynatronics Corporation which owns 230,339 shares, which
are not included in Mr. Cullimore, Jr.'s holdings.

Item 12. Certain Relationships And Related Transactions
----------------------------------------------

Mr. Kelvyn H. Cullimore is the Chairman of the Board of
Dynatronics Corporation. Mr. Kelvyn H. Cullimore, Jr. is the
President and a Director of Dynatronics Corporation. Kelvyn H.
Cullimore and Kelvyn H. Cullimore, Jr. may be considered to be
affiliates of Dynatronics Corporation by virtue of their
positions with Dynatronics Corporation. The Company pays
Dynatronics Corporation, an affiliate of the Company, $6,000 per
month to provide administrative, payroll, staffing, accounting
functions and support. Dynatronics Corporation owns
approximately 4% of the common stock of the Company (post
reorganizaton).

Mr. Paul M. Bluto has agreed that at the conclusion of
the private placement offering period he will purchase unsold
Units in an amount that the total proceeds to the Company from
the offering will equal $600,000. As a result, he may acquire
additional ownership in the Company.

Mr. Bluto has agreed to loan to the Company an amount
equal to up to $90,000 to reimburse the Company for the payment
of accrued interest to Boatmen's Bank on its mortgage loan to the
Company. This loan will be made only if such funds are needed by
the Company.

<PAGE>
PART IV

Item 13. Exhibits and Reports on Form 8-K
--------------------------------

Documents filed as part of Form 10-K:

Financial Statements Filed as part of Form 10-KSB:
- -------------------------------------------------

Independent Auditors' Report
Tanner + Co. F-1
KPMG Peat Marwick LLP F-2

Balance Sheet at June 30, 1996 F-3

Statements of Operations --
years ended June 30, 1996 and 1995 F-4

Statements of Stockholders'
Equity -- years ended June 30,
1996 and 1995 F-5

Statements of Cash Flows --
years ended June 30, 1996 and 1995 F-6

Notes to Financial Statements F-7

(a) Exhibits
--------

Reg. S-B
Exhibit No. Description
---------- -----------

3.1 Articles of Incorporation of the Registrant,
as amended (incorporated by reference to
Registration Statement on Form S-1,
Registration No. 33-48630)

3.2 Bylaws of the Registrant, as amended and
restated on April 6, 1991 (incorporated by
reference to Registration Statement on Form
S-1, Registration No. 33-48630)

3.3 Amendments to Bylaws of the Registrant dated
August 28, 1991 and July 24, 1992
(incorporated by reference to Registration
Statement on Form S-1, Registration No. 33-
48630)

4.1 Specimen Certificate for the Common Stock of
the Registrant (incorporated by reference to
Registration Statement on Form S-1,
Registration No. 33-48630)
<PAGE>

10.3 Ground Lease Agreement dated July 27, 1993
between Treasure Lake R.V. Resort Camping
Club, Inc. and International Tourist
Entertainment Corporation (incorporated by
reference to Registration Statement on Form
S-1, Registration No. 33-64132)

10.4 Loan Agreement dated July 30, 1993 for loan
from Boatmen's Bank, Branson, Missouri to
International Tourist Entertainment
Corporation (incorporated by reference to
Registration Statement on Form S-1,
Registration No. 33-64132)

10.5 Deed of Trust dated July 30, 1993 for benefit
of Boatmen's Bank, Branson, Missouri
(incorporated by reference to Registration
Statement on Form S-1, Registration No. 33-
64132)

10.10 Distribution Agreement dated July 14, 1995
between Imax Corporation and the Company

10.11 Second Amended Plan of Reorganization dated
December 18, 1996 and Second Amended Disclosure
Statement in Support of Proposed Second Amended
Plan of Reorganization dated December 18, 1996
(incorporated by reference to Form 8-K filed
on February 26, 1997)

10.12 Third Modification Agreement dated March 1,
1997 between Boatmen's Bank of Southern Missouri
and the Company.

10.13 System Lease Agreement as amended dated
August 1, 1993 between IMAX Corporation and the
Company.

(b) Reports on Form 8-K: No report on Form 8-K has been
filed by the Company during the last quarter of the
period covered by this report.

On February 19, 1997 the Company filed a report on Form
8-K reporting a change in its certifying accountant.

On February 26, 1997 the Company filed a report on Form
8-K reporting a change in control of the Company resulting
from the confirmation of the Plan of Reorganization on
February 6, 1997 and the Company's Bankruptcy proceeding.

<PAGE>

INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Index to Financial Statements

Page

Report of Tanner + Co. F-2

Report of KPMG Peat Marwick LLP F-3

Balance Sheet F-4

Statement of Operations F-5

Statement of Stockholders' Equity F-6

Statement of Cash Flows F-7

Notes to Financial Statements F-8

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
International Tourist Entertainment Corporation

We have audited the balance sheet of International Tourist
Entertainment Corporation as of June 30, 1996, and the
related statements of operations, stockholders' deficit and
cash flows for the year then ended. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
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 audit provides
a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of International Tourist Entertainment Corporation
as of June 30, 1996, and the results of their operations and
their cash flows for the year then ended, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in note 2 to the financial statements, the
Company has suffered recurring losses from operations, is in
arrears on certain payments, and current liabilities exceed
current assets. These conditions raise substantial doubt
about its ability to continue as a going concern.
Management's plans in regard to these matters are also
described in note 2. The financial statements do not
include any adjustments that might result from the outcome
of this uncertainty.

As described in notes 1 and 11 to the financial statements,
the Company changed its method of accounting for its long-
lived assets.

TANNER + CO.

Salt Lake City, Utah
April 4, 1997 except for note 2,
which is dated May 9, 1997

<PAGE>
Independent Auditors' Report

The Board of Directors
International Tourist Entertainment Corporation:

We have audited the accompanying statements of operations,
stockholders' equity and cash flows of International Tourist
Entertainment Corporation for the year ended June 30, 1995.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion the financial statements referred to above
present fairly, in all material respects, the results of
operations and cash flows of International Tourist
Entertainment Corporation for the year ended June 30, 1995,
in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in note 1 to the financial statements, the
Company has suffered recurring losses from operations, is in
the arrears on certain lease payments, and current
liabilities exceed current assets that raise substantial
doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also
described in note 2. The financial statements do not
include any adjustments that might result from the outcome
of this uncertainty.

KPMG Peat Marwick LLP

Salt Lake City, Utah
August 11, 1995
<PAGE>
Balance Sheet

June 30, 1996

Assets

Current assets:

Cash and cash equivalents $362,179
Receivables 17,763
Inventories 51,459
Prepaid expenses 36,210
Current portion of prepaid leases 166,915
Other current assets 5,024
----------

Total current assets 639,550

Property and equipment, net 5,868,547
Prepaid leases 1,549,390
Deposits 12,126
Other assets 6,965
----------

$8,076,578
==========

Liabilities and Stockholders' Deficit

Current liabilities:

Current portion of long-term debt $1,213,082
Accounts payable 1,183,721
Accrued expenses 830,206
Related party payables 608,824
---------

Total current liabilities 3,835,833
---------

Long-term debt 3,422,034
Convertible debentures 2,055,000
Deposits 26,800

Commitments and contingencies -

Stockholders' deficit:
Preferred stock, $.001 par value,
authorized 5,000,000 shares, issued
and outstanding 212,613 shares
(aggregate liquidation preference
$2,363,291) 213
Common stock, $.001 par value;
authorized 40,000,000 shares; issued
and outstanding 6,359,985 shares 6,360
Additional paid-in capital 9,574,416
Accumulated deficit (10,844,078)
-----------

Total stockholders' deficit (1,263,089)
-----------

$8,076,578
===========
<PAGE>

Statement of Operations

Years Ended June 30,

1996 1995
------------ -------------
Revenues:
Theater admissions $1,825,826 $1,872,777
Restaurant 1,388,656 183,435
Concession and retail sales 394,760 395,818
Retail rental income 457,847 382,640
------------ -------------

4,067,089 2,834,670
------------ -------------

Costs and expenses:
Direct exhibition film costs 253,514 355,597
Direct restaurant 396,914 58,319
Direct concession and retail costs 234,733 170,569
Selling, general, and administrative
expenses 3,674,242 3,178,115
Property, film, and intangible asset
write-down 5,118,198 -
------------ ------------

9,677,601 3,762,600
------------ ------------
Loss from operations (5,610,512) (927,930)

Other income (expense):

Interest expense (759,939) (619,068)
Interest income 7,388 9,374
Other (1,910) -
------------ -------------

(754,461) (609,694)
------------ -------------

Loss before provision for income taxes (6,364,973) (1,537,624)

Provision for income taxes - -
------------ -------------

Net loss $(6,364,973) $(1,537,624)
============ =============

Dividends on convertible preferred
stock; unpaid (212,613) (24,548)
------------ ------------

Loss applicable to common stock $(6,577,586) $(1,562,172)
------------ ------------

Net loss per common share $ (1.03) $ (.25)
------------ ------------

Weighted average common shares
outstanding 6,359,000 6,359,000
------------ ------------
<PAGE>

Statement of Stockholders' Equity

Years Ended June 30, 1996 and 1995

<TABLE>
<CAPTION>
Net
Additional Stockholders'
Preferred Stock Common Stock Paid-in Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficit)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1994 - $ - 6,359,995 $6,360 $7,599,257 $(2,941,481) $4,664,136

Issuance of preferred
stock in satisfaction
of notes payable and
related interest 53,043 53 - - 530,377 - 530,430

Conversion of
debentures and related
interest for preferred
stock 144,020 144 - - 1,439,981 - 1,440,125

Issuance of preferred
stock for cash, less
placement costs of
$126,068 15,550 16 - - 29,416 - 29,432

Surrender of 10 shares
of common stock from
employee stock bonus
program - - (10) - (67) - (67)

Dividend accrued on
preferred stock - - - - (24,548) - (24,548)

Net loss - - - - - (1,537,624) (1,537,624)
----------------------------------------------------------------------------------------

Balance, June 30, 1995 212,613 213 6,359,985 6,360 9,574,416 (4,479,105) 5,101,884

Net loss - - - - - (6,364,973) (6,364,973)
----------------------------------------------------------------------------------------

Balance, June 30, 1996 212,613 $ 213 6,359,985 $6,360 $9,574,416 $(10,844,078) $(1,263,089)
========================================================================================
</TABLE>
<PAGE>

Statement of Cash Flows

Years Ended June 30,

Cash flows from operating activities: 1996 1995
------------ ------------
<S> <C> <C>
Net loss $(6,364,973) $(1,537,624)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 731,264 635,142
Loss on disposition of property and
equipment 79,502 -
Property, film, and intangible
asset write-down 5,118,198 -
Changes in assets and liabilities:
Decrease in receivables and
notes receivable - tenants 26,082 61,963
Decrease (increase) in inventories 43,843 (67,333)
Decrease (increase) in deposits
and prepaid expenses 14,812 (17,766)
Decrease in prepaid leases 166,915 167,213
Decrease in other assets - 13,650
Increase in accounts payable and
accrued expenses 678,468 819,542
Increase in deposits 8,850 50
----------- -----------
Net cash provided by
operating activities 502,961 74,837
----------- -----------

Cash flows from investing activities:
Capital expenditures - film
development costs - (1,032,468)
Purchase of property and equipment (198,956) (375,554)
---------- -----------
Net cash used in investing activities (198,956) (1,408,022)
----------- -----------

Cash flows from financing activities:
Proceeds from debt 136,236 787,099
Payments on debt (241,649) (35,215)
Advances from stockholders and affiliates - 528,824
Net proceeds from issuance of preferred stock - 29,432
----------- -----------
Net cash (used in) provided by
financing activities (105,413) 1,310,140
----------- -----------

Increase (decrease) in cash and cash equivalents 198,592 (23,045)

Cash and cash equivalents, beginning of year 163,587 186,632
----------- -----------

Cash and cash equivalents, end of year $362,179 $163,587
=========== ===========
</TABLE>
<PAGE>

Notes to Financial Statements

June 30, 1996 and 1995

1. Summary of Significant Accounting Policies

Description of Business
- -----------------------

International Tourist Entertainment
Corporation (The Company) is a 36 percent
owned subsidiary of Dynatronics Corporation
(Dynatronics). The Company's principal
business is in the tourist entertainment
sector. During October 1993, the Company
completed and placed in operation its first
giant screen tourist entertainment complex in
Branson, Missouri. The Company began showing
its own theme film produced especially for
the Branson location in April 1995. The
Company also operates a restaurant (as of May
1995) and a small retail store in the Branson
complex.

Concentration of Credit Risk
- ----------------------------

Financial instruments which potentially
subject the Company to concentration of
credit risk consist primarily of trade
receivables. In the normal course of
business, the Company provides credit terms
to its customers. Accordingly, the Company
performs ongoing credit evaluations of its
customers and maintains allowances for
possible losses which, when realized, have
been within the range of management's
expectations.

The Company maintains its cash in bank
deposit amounts which, at times, may exceed
federally insured limits. The Company has
not experienced any losses in such accounts
and believes it is not exposed to any
significant credit risk on cash and cash
equivalents.

Cash Equivalents
- ----------------

The Company considers all highly liquid
temporary investments with an original
maturity of three months or less to be cash
equivalents.

Inventories
- -----------

Inventories consist of retail merchandise and
concession items that are recorded at the
lower of cost or market, cost being
determined on the first-in first-out (FIFO)
method.
<PAGE>
1. Summary of Significant Accounting Policies Continued

Film Development Costs
- ----------------------

Film development costs reflect the direct
costs incurred to produce giant screen films
exhibited by the Company. Such costs are
amortized, commencing when films are first
exhibited, using a straight-line method over
an estimated useful life of seven years. The
estimated useful life and method of
amortization is based principally on
management's estimates of projected future
revenues, and the years over which similar
theme films have been exhibited within the
giant screen theater industry. As films are
exhibited and historical information becomes
available to aid management in film revenue
projections, amortization will be modified,
if necessary, so as to reasonably relate film
costs to estimated gross revenues expected
over the estimated useful life of the films,
not to exceed seven years. Management
evaluates the unamortized film development
costs for possible impairment giving
consideration to various factors including
revenue trends and projected cash flows.
Impairments determined through the evaluation
are expensed currently. The Company
capitalized interest costs of $164,243
associated with development of the Branson
Theme film during fiscal 1995.

Property and Equipment
- ----------------------

Property and equipment are recorded at cost,
less accumulated depreciation. Depreciation
and amortization on capital leases and
property and equipment is determined using
the straight-line method over the estimated
useful lives of the assets or terms of the
lease. Expenditures of maintenance and
repairs are expensed when incurred and
betterments are capitalized. Gains and
losses on sale of property and equipment are
reflected in operations.

Loss Per Common Share
- ---------------------

Net loss per common share is based on net
loss after preferred stock dividend
requirements and the weighted average number
of common shares outstanding during each year
after giving effect to stock options
considered to be dilutive common stock
equivalents, determined using the treasury
stock method. Fully diluted net loss per
common share is not materially different from
primary net loss per common share.
<PAGE>
1. Summary of Significant Accounting Policies Continued

Income Taxes
- ------------

Income taxes are recorded using the asset and
liability method, deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to differences
between the financial statement carrying
amounts of existing assets and liabilities
and their respective tax bases and operating
loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using
enacted tax rates expected to apply to
taxable income in the years in which those
temporary differences are expected to be
recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax
rates is recognized in income in the period
that includes the enactment date.

Impairment of Assets
- --------------------

In 1996, the Company adopted Statement of
Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be
Disposed of. The Statement establishes
accounting standards for the impairment of
long-lived assets, certain identifiable
intangibles, and goodwill related to those
assets. Under provision of the Statement,
impairment losses are recognized when
expected future cash flows are less than the
assets' carrying value. Accordingly, when
indicators of impairment are present, the
Company evaluates the carrying value of
property, plant, and equipment and
intangibles in relation to the operating
performance and future undiscounted cash
flows of the underlying business. The
Company adjusts the net book value of the
underlying assets if the sum of expected
future cash flows is less than book value.

Use of Estimates in the Preparation of Financial Statements
- -----------------------------------------------------------

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 could differ from
those estimates.

Reclassifications
- -----------------

Certain amounts in the 1995 financial
statements have been reclassified to conform
with the current year presentation.
<PAGE>
2. Going Concern

The accompanying financial statements have
been prepared assuming the Company will
continue as a going concern. From
commencement through June 1996, the Company
has experienced negative cash flows from
operations and operating losses. In
addition, it has a working capital deficit of
$3,171,283. The Company has expended
significant dollars to produce the theme film
for the Branson Theater and finalize
architecture work necessary to commence
construction on the St. Thomas Complex. The
Company made certain of these expenditures in
anticipation of additional equity financing
during fiscal 1995, which was not realized.
The Company experienced cash flow
difficulties, and is in arrears on certain
payments. The Company filed for
reorganization under bankruptcy protection on
January 25, 1996. A plan of reorganization
was submitted and was approved to be
effective May 9, 1997. As part of the plan,
the Company will receive an equity infusion
of approximately $1,200,000, its long-term
obligations will be amended and the Company
will receive relief from its unsecured
creditors. The Company's ability to meet its
obligations is dependent on its ability to
achieve sustained cash flow from operating
activities, and comply with the terms of the
bankruptcy.

3. Property and Equipment

Property and equipment consists of the following:

Buildings $4,149.436
Land 480,000
Equipment 483,261
Furniture and fixtures 192,299
Film development costs 900,000
----------
6,204,996

Less accumulated depreciation and
amortization <336,449>
----------
$5,868,547
==========
<PAGE>
4. Related Party Transactions

Payables to related parties consists of the following:

Unsecured note payable to a
stockholder bearing interest
at prime plus .5 percent,
payable on demand $ 280,000

Unsecured note payable to an
entity under common ownership,
bearing interest at 10%,
payable on demand 228,824

Unsecured advance payable to
an entity under common ownership,
bearing interest at 10%,
payable on demand 100,000
------------

608,824

Less current portion (608,824)
------------

Long-term payable $ -
============

The Company pays Dynatronics a monthly fee
for administrative staff, accounting
services, and accounting personnel. The
related costs are included in general and
administrative expenses and amounted to
$82,500 and $72,000, for the years ended June
30, 1996 and 1995, respectively.

During 1995, Dynatronics guaranteed a
commercial bank loan of $500,000 to the
Company to pay for production of the Branson
theme film. Dynatronics also made advances
to the Company of $228,824 for reimbursement
of expenses. Additionally, the Company
borrowed $300,000 under a promissory note,
which is in default, that bears interest at
prime plus 1/2 percent for the production of
the Branson theme film from a director of the
Company. Interest charged on this note
totaled $25,683 and $21,563 for 1996 and
1995, respectively. In consideration for the
guarantee, advances and loans, the Company
granted to Dynatronics and the director a
security interest in its Branson theme film.
<PAGE>
5. Common Stock and Preferred Stock

During 1995, the Company borrowed from
selected directors and stockholders $500,000
in short-term notes for payment of the
Branson theme film. These notes plus accrued
interest of $30,430 were subsequently
converted into 53,043 shares of preferred
stock, 53,043 Series B warrants, and 53,043
Series C warrants to purchase shares of
common stock. Additionally in 1995, the
Company issued 15,550 shares of Series B
preferred stock for cash of $10 per share
together with 15,550 Series B warrants and
15,550 Series C warrants to purchase shares
of common stock.

Each share of the Series B stock may be
converted at any time, at the option of the
holder, into eight shares of restricted
common stock. The preferred stock will
automatically convert into eight shares of
common stock upon the effective date of a
registration statement or a public offering
of any securities of the Company or the sale
of common stock underlying the preferred
stock, or when common stock trades at a price
greater than or equal to $3.00 per share for
any 20 of 30 consecutive trading days. In
the event of voluntary or involuntary
liquidation, the holders of the preferred
stock are entitled to a liquidation value
equal to $10 per share, plus all unpaid
dividends. The preferred stockholders are
entitled to vote on corporate matters equal
to the number of shares of common stock into
which the preferred stock is convertible.
Preferred stockholders are also entitled to
receive out of legally available funds, when
and as declared by the Board of Directors,
cumulative dividends equal to ten percent per
annum of the stated price of $10 per share.
No dividends have been declared for 1996,
which results in dividends in arrears for
1996 and 1995 of $237,161 and $24,548,
respectively, or $1.12 and $.12 per share,
respectively.

Each Series B warrant is exercisable
for five restricted shares of common
stock at a price of $3.00 per share. If
the common stock underlying the preferred
stock and Series B warrant is not registered
and declared effective within 13 months after May
25, 1995, the exercise price of the Series
B warrant will decrease by $.50 for each 30
days or portion thereof, but not below
$1.00, for which the registration is
delayed after the thirteen-month period. If
the Company files a registration statement
in connection with the sale of its securities
within 13 months after May 25, 1995, the above
mentioned price adjustment will not commence
until eight months after the completion or
termination of the public offering. The Series
B warrants expire on May 31, 1999, unless called
sooner. The warrants may be called upon 45 calendar
days notice when common stock trades at a price
greater than or equal to $5.00 per share for any 20 of
30 consecutive trading days.
<PAGE>
5. Common Stock and Preferred Stock Continued

Each Series C warrant is exercisable for five
shares of restricted common stock at the
highest price at which the Company sells its
common stock in a public offering within 13
months after May 25, 1995. If there is no
public offering within 13 months, then the
Series C warrants are not exercisable. The
Series C warrants expire on May 31, 1999,
unless called sooner. The warrants may be
called upon 45 calendar days notice when
common stock trades at a price greater than
or equal to the public offering price plus
$1.00.

6. Convertible Debenture Offering

The Company completed a convertible debenture
offering on September 1, 1993. The offering
consisted of $3,500,000 in ten percent
convertible debentures due June 1, 2008. The
debentures are convertible into shares of the
Company's common stock at a price of $6.50
per share. Offering costs associated with
the offering were approximately $560,000. In
connection with the offering, the underwriter
also received warrants to purchase $350,000
in debentures. Such warrants are exercisable
for a four-year period commencing August
1994, and are convertible into 53,846 shares
of common stock. During 1994, debentures
totaling $40,000 were converted into 6,153
shares of common stock. On May 31, 1995,
$1,405,000 of debentures were converted to
140,500 shares of Series B preferred stock,
and 140,500 Series B warrants, and 140,500
Series C warrants (see note 5) under a
special offering to qualified investors.
Also, $35,125 of accrued interest payable on
debentures was converted to 3,520 shares of
Series B stock together with 15,500 Series B
warrants and 15,500 Series C warrants. At
June 30, 1995, 316,154 shares of common stock
are issuable upon conversion of the remaining
outstanding debentures.

7. Lease Obligations

The Company has a ten year operating lease
agreement for a giant screen theater
projection and sound system for its Branson
Theater Complex. Under the terms of this
agreement, the Company was required to make
advance rental payments. Such amounts, net
of amortization, are reflected in prepaid
leases in the accompanying financial
statements. The advance rent payments are
being amortized on a straight-line basis over
the initial ten year lease term.
Additionally, the lease agreement requires
the payment of monthly rents in the amount of
$7,333 throughout the remaining lease term,
together with annual percentage royalties
ranging from one to ten percent based upon
the attainment of certain net theater
admission revenue volumes. Advance and fixed
minimum lease commitments related to this
lease are included in the following tables.
<PAGE>
7. Lease Obligations Continued

The Company also has a fifty year operating
lease on land located in Branson, Missouri,
the site of the Company's giant screen
tourist entertainment complex. The lease
required an advance rent payment of
$1,025,000 satisfying the Company's rent
obligation for years one through twenty of
the lease agreement. For years twenty-one
through fifty of the lease, the Company is
obligated to make quarterly rent payments
aggregating $145,000 annually, these amounts
are subject to an annual consumer price index
adjustment. Base rents including the
$1,025,000 in advance rents and the $145,000
annual amount commencing in the twenty-first
lease year is expensed on a straight-line
basis over the fifty-year lease term, which
under the term of the agreement began October
1, 1993. Amounts recorded as accrued rent
land lease noncurrent in the accompanying
balance sheet reflects an accrual for those
portions of the rents that will be paid
during years twenty-one through fifty which
are expensed currently using the straight-
line expense recognition method.

Advance rental payments associated with the
theater system and land are reflected in the
current portion of prepaid leases and prepaid
leases in the accompanying balance sheet as
summarized below:

Advance rents:
Theater system $ 843,156
Land 873,149
-----------
1,716,305
-----------

Less current portion of prepaid leases
Theater system (116,298)
Land (50,617)
-----------
(166,915)
-----------

Prepaid leases $ 1,549,390
===========
<PAGE>
7. Lease Obligations Continued

Annual amortization expense is as follows:

Theater system $ 116,298
Land 50,617
----------

$ 166,915
==========

The Company leases vehicles under
noncancelable operating lease agreements and
reimburses Dynatronics for vehicle lease
expenses. Rent expense for the years ended
June 30, 1996, and 1995 was approximately
$14,800, and $14,000, respectively.

A schedule of future minimum rental payments
required under operating leases that have
initial or remaining noncancelable lease
terms in excess of one year as of June 30,
1996, is as follows:

Year Amount
------ ----------
1997 $ 152,500
1998 152,500
1999 152,500
2000 152,500
2001 152,500
Thereafter 4,807,500
----------
Total $5,570,000
==========

The Company leases certain equipment under
noncancellable capital lease agreements.
Assets under capital leases included in
property and equipment are as follows:

Equipment $ 95,416

Less accumulated amortization (64,063)
----------
$ 31,353
==========

Amortization expense for assets under capital
lease during fiscal 1996 and 1995 was $28,311
and $23,810, respectively.
<PAGE>
7. Lease Obligations Continued

The capital lease obligations have an imputed
interest rate approximately equal to the
Company's borrowing rate for similar type
transactions and are payable in monthly
installments through October 1997. Future
maturities and minimum payments on capital
lease obligations are as follows:

Year Amount
------ ------------
1997 $ 28,457
1998 6,022
1999 1,811
------------
36,290

Less amount representing
interest (1,064)
------------

Present value of minimum
capital lease obligations $ 35,226
============
8. Lessor Lease Agreements

The Company has agreements to rent space as
lessor to various retail tenants in its
Branson, Missouri theater complex with terms
ranging from one to five years. The
agreements also include certain renewal terms
for lease beyond five years, which are not
included in the amounts below. As of
June 30, 1996, the Company held $26,800 in
deposits related to the leases.

A summary of future minimum rentals to be received follows:

Year Amount
------ ----------
1997 $ 156,200
1998 53,600
1999 30,000
2000 24,000
2001 3,000
----------
Total $ 266,800
==========
<PAGE>
9. Long-Term Debt

Long-term debt is comprised of the following:

Note payable to a bank in monthly
installments of $39,850, including
interest at prime plus 1.5%, secured
by the theater complex $3,442,972

Prime plus 2% note payable secured
by real property with payments of
$5,000 plus interest payable
monthly until November 1995 when
remaining principal balance is due 480,000

Prime index plus .5% note payable
to bank guaranteed by Dynatronics,
with monthly payments of $10,536
through August 2000 473,091

4% to 12% adjustable rate mortgage
secured by real property payable in
monthly installments of $741 through
2019 111,297

10.65% promissory note secured by
equipment payable in monthly
installments of $1,514 through
October 2003 92,530

Capital lease obligations
(see note 7) 35,226
-----------

4,635,116

Less current portion (1,213,082)
-----------

Long-term debt $ 3,422,034
===========
<PAGE>
9. Long-Term Debt Continued

Future maturities of long-term debt are as follows:

Year Amount
------ ----------
1997 $1,213,082
1998 168,362
1999 192,061
2000 217,356
2001 244,354
Thereafter 2,599,901
----------
$4,635,116
==========

10. Income Taxes

The provision for income taxes is different
than amounts which would be provided by
applying the statutory federal income tax
rate to loss before provision for income
taxes for the following reasons:

Years Ended
December 31,
1996 1995
----------------------------

Federal income tax
benefit at statuatory
rate $2,164,000 $ 523,000
Change in valuation
allowance (2,164,000) (523,000)
----------------------------
$ - $ -
============================

Deferred tax assets (liabilities) are comprised of the following:

Write-down of assets $ 1,887,000
Net operating loss carry forward 1,830,000
Depreciation (37,000)
Accured rents 63,000
------------
3,742,000

Less valuation allowance (3,742,000)
------------
$ -
============
<PAGE>
10. Income Taxes Continued

At June 30, 1996, the Company has net
operating loss carryforwards for income tax
purposes to offset future income
approximately as follows:

Virgin Islands U.S.
--------------------------------

Expiration Date
---------------
2004 $ 111,400 $ -
2005 41,800 -
2006 29,800 -
2007 278,900 -
2008 - -
2009 1,441,300 1,441,300
2010 1,552,300 1,552,300
2011 1,494,500 1,506,400
--------------------------------
$ 4,950,000 $ 4,500,000
================================

Since certain of the net operating losses
were incurred from activities in the U.S.
Virgin Islands and the Company is treated as
a foreign corporation doing business in the
United States, net operating losses generated
from U.S. Virgin Island activities are not
available to offset income from activities
within the United States. In addition, if
substantial changes in the Company's
ownership should occur, there would also be
an annual limitation of the amount of NOL
carryforwards which could be utilized.

11. Write-Down of Assets

During the year ended June 30, 1996, the
Company evaluated the carrying value of its
property and equipment, other assets and
intangible assets based upon current market
value appraisals and projected future cash
flows in accordance with Statement of
Financial Accounting Standards No. 121 (see
note 1). Based upon the valuation of these
assets the Company had an aggregate non-cash
expense for the write-down of assets of
$5,118,198.

<PAGE>
11. Write-Down of Assets Continued

The write-down of assets consisted of the following:

Film development costs $2,602,886
Building 1,206,044
Project development and start-up costs 1,049,791
Deferred debentue issuance costs 259,477
----------
$5,118,198
==========

12. Supplemental Cash Flow Information

During the year ended June 30, 1995, the
Company had the following noncash investing
and financing activities:

Capital lease obligations accrued for
property and equipment $ 29,516
Debt incurred for development of theme film $2,389,042
Conversion of debentures and related interest
to Series B preferred stock $1,440,125
Conversion of notes payable and related
interest to Series B preferred stock $ 530,430
Accrual of dividends on Series B and Series
A preferred stock $ 24,548
Surrender of common stock $ 67

Actual amounts paid for interest and income taxes are as follows:

Years Ended
June 30,
1996 1995
-------- --------
Interest $386,978 $539,042
======== ========

Income taxes $ - $ -

<PAGE>
13. Employment Agreements

The Company has entered into an employment
agreement with an officer of the Company that
expires December 31, 1997. The agreement
provides for base cash compensation
aggregating $122,000 per year adjusted for
inflation, incentive bonuses totaling two
percent of pretax profits, and stock bonuses
equal to one share of common stock for each
$10 of incentive bonus. Under the terms of
the agreement, the Company has also granted
options to purchase 20,000 shares of the
Company's common stock at $5.50 per share,
exercisable in increments upon the meeting of
certain deadlines for operation of the first
two planned giant screen tourist
entertainment complexes. The exercise period
of these options is five years following the
operating commencement date of the respective
sites. Additionally, $50,000 will be paid to
this key employee for his work on each film
produced by or for the Company. Should the
Company terminate the employment agreement
other than for criminal action, the Company
is required to pay this key employee 150
percent of the remaining compensation and
benefits that would have been payable had the
agreement continued to full term. Also, the
agreement provides for the Company to
reimburse Dynatronics for a portion of the
amount paid toward a salary continuation
program for this employee. In 1996 and 1995,
the Company's salary continuation expense was
$34,134 and $34,211, respectively.

Additionally, the Company has entered into a
consulting agreement with a former employee
in replacement of a preexisting employment
agreement. Under the consulting agreement,
the former employee has been granted options
to acquire up to 10,000 shares of common
stock at a price of $5.50 per share. The
options are currently exercisable and remain
exercisable through September 30, 1998. As
of June 30, 1996, none of these options had
been exercised.

14. Fair Value of Financial Instruments

None of the Company's financial instruments
are held for trading purposes. The Company
estimates that the fair value of all
financial instruments at June 30, 1996, does
not differ materially from the aggregate
carrying values of its financial instruments
recorded in the accompanying balance sheet.
The estimated fair value amounts have been
determined by the Company using available
market information and appropriate valuation
methodologies. Considerable judgement is
necessarily required in interpreting market
data to develop the estimates of fair value,
and, accordingly, the estimates are not
necessarily indicative of the amounts that
the Company could realize in a current market
exchange.

<PAGE>
15. Recent Accounting Pronounce- ment

In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation."
SFAS No. 123 defines a fair value based
method of accounting for an employee stock
option. Fair value of the stock option is
determined considering factors such as the
exercise price, the expected life of the
option, the current price of the underlying
stock and its volatility, expected dividends
on the stock, and the risk-free interest rate
for the expected term of the option. Under
the fair value based method, compensation
cost is measured at the grant date based on
the fair value of the award and is recognized
over the service period. A company may elect
to adopt SFAS No. 123 or elect to continue
accounting for its stock option or similar
equity awards using the intrinsic method,
where compensation cost is measured at the
date of grant based on the excess of the
market value of the underlying stock over the
exercise price. If a company elects not to
adopt SFAS No. 123, then it must provide pro
forma disclosure of net income and earnings
per share, as if the fair value based method
had been applied.

SFAS No. 123 is effective for fiscal years
that begin after December 15, 1995. Pro
forma disclosures for entities that elect to
continue to measure compensation cost under
the old method must include the effects of
all awards granted in fiscal years that begin
after December 15, 1994. It is currently
anticipated that the Company will continue to
account for stock-based compensation plans
under the intrinsic method and therefore,
SFAS No. 123 will have no effect on the
Company's consolidated financial statements.
<PAGE>
16. Subsequent Events

On February 6, 1997, the Bankruptcy Court
approved the Company's plan of reorganization
(the Plan). The Plan requires a capital
infusion of $1,200,000 of which $600,000 was
paid subsequent to June 30, 1996 with the
remaining $600,000 to be paid prior to
September 1997. Upon completion of the Plan
the Company's ownership will be as follows:

Stockholders' % Owned
------------ -----------

New capital infusion 80%
Existing stockholders' 10
Debenture holders 5
Management 5
-----------

Total 100%
===========

The Plan also calls for a modification of the
note payable to a bank, secured by the
Branson Theater Complex (see note 9). The
modified note will require monthly
installments over the next thirteen years at
a variable interest rate, commencing on April
1, 1997 and maturing on March 1, 2009. A
schedule of the monthly installments and
related interest rates are as follows:

Monthly Interest
Period Installment Rate
-------- ------------------------------

April 1, 1997 to March 1, 1998 $ 32,000 9%
April 1, 1998 to March 1, 1999 33,000 9%
April 1, 1999 to March 1, 2000 34,000 prime + .75%
April 1, 2000 to March 1, 2001 35,000 prime + .75%
April 1, 2001 to March 1, 2009 36,000 prime + .75%

The other creditors will receive from 10% to
100% of their claim plus common stock
depending on the level of their claim.

The employment agreement was also modified to
require an annual salary of $100,800, $250
per month car allowance, $35,000 retirement
fund contribution and the use of condominium
for living purposes.
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION

By /s/ Kelvyn H. Cullimore Date: June 11, 1997
-----------------------
Kelvyn H. Cullimore

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.

/s/ Paul M. Bluto Chairman of the Board, 6/11/97
- ---------------------------- Chief Financial Officer -----------
Paul M. Bluto

/s/ Kelvyn H. Cullimore Chief Executive Officer 6/11/97
- ---------------------------- and President -----------
Kelvyn H. Cullimore

/s/ Kelvyn H. Cullimore, Jr. Director 6/11/97
- ---------------------------- -----------

/s/ Francis E. McLaughlin Director 6/11/97
- ---------------------------- -----------
Francis E. McLaughlin

____________________________ Director ___________
Kumar V. Patel