<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended December 31, 1996.
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act for the
transition period from _________ to _________
Commission File Number: 0-21070
International Tourist Entertainment Corporation
-----------------------------------------------
(Exact name of small business issuer as specified in its charter)
U.S. Virgin Islands 66-0426648
- --------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7030 Park Center Drive, Salt Lake City, Utah 84121
---------------------------------------------------
(Address of principal executive offices) (ZIP Code)
(801) 566-9000
---------------------------
(Issuer's telephone number)
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.
1. Yes No X
------ -------
2. Yes X No
------ -------
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934
after the distribution of securities under a plan confirmed by a court.
Yes X No
----- ------
The number of shares outstanding of the issuer's common stock, no par
value as of September 16, 1997 is 8,015,397 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page Number
-----------
Condensed Balance Sheet
December 31, 1996 1
Condensed Statements of Operations
Three and Six Months Ended December 31, 1996
and December 31, 1995 2
Condensed Statements of Cash Flows
Six Months Ended December 31, 1996
and December 31, 1995 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 6
Part II. OTHER INFORMATION 8
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Balance Sheet
(Unaudited)
December 31
ASSETS 1996
------ -----------
Current assets:
Cash and cash equivalents $ 651,395
Receivables 13,847
Deposits 17,126
Inventories 39,803
Prepaid expenses 12,861
Prepaid leases-current 166,915
Current portion of notes receivable - tenants 5,024
-----------
Total current assets 906,971
Prepaid leases-non current 1,465,933
Notes receivable-tenants 2,259
Film Development costs, net of amortization of $45,000 855,000
Property and equipment, at cost 5,324,608
Less accumulated depreciation 455,804
-----------
Net property and equipment 4,868,804
TOTAL ASSETS $ 8,098,967
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable $ 1,165,666
Accrued expenses 912,039
Current installments of capital lease obligations 23,220
Notes payable and current installments of long-term debt 674,636
Notes payable to related parties 508,824
-----------
Total current liabilities 3,284,384
Long-term debt, excluding current installments:
Capital lease obligations (1,934)
Credit facility, notes, and mortgages payable 3,926,093
10% Convertible debenture, due June 1, 2008 2,055,000
Security deposits 26,800
Stockholders' deficit
Preferred stock, $.001 par value. Authorized 5,000,000
shares, issued and outstanding 212,613 shares as of
December 31, 1996 213
Common stock, $.001 par value. Authorized 40,000,000
shares, issued and outstanding 6,359,985 shares as of
December 31, 1996 6,360
Additional paid-in capital 9,598,965
Accumulated deficit (10,796,913)
-----------
Net stockholders' deficit (1,191,375)
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,098,967
===========
See accompanying notes to condensed financial statements.
1
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Theater admissions $ 473,641 449,518 1,108,639 1,144,170
Restaurant 698,269 476,554 1,270,824 797,768
Concession and retail sales 95,857 126,915 187,031 277,704
Retail rental income 127,616 96,205 234,321 180,638
---------- ---------- ---------- ----------
1,395,384 1,149,192 2,800,815 2,400,280
Costs and expenses:
Direct exhibition expenses 35,204 42,631 107,518 144,633
Direct restaurant 205,104 127,739 370,606 221,140
Direct concession and retail costs 50,085 81,048 100,191 151,522
Other operating expenses 127,633 113,886 258,336 241,291
Selling, general and administrative expenses:
Salaries and wages 395,844 325,980 732,859 633,767
Advertising 74,730 72,345 165,371 172,515
Depreciation and amortization 82,793 182,550 164,355 363,828
Occupancy 69,301 72,162 151,127 159,636
Other 160,597 160,183 306,866 334,484
---------- ---------- ---------- ----------
1,201,292 1,178,522 2,357,230 2,422,815
---------- ---------- ---------- ----------
Operating income (loss) 194,092 (29,330) 443,586 (22,535)
Other income (expense):
Interest income 7,216 2,648 11,190 5,073
Gain on sale of fixed assets 0 450 500 450
Interest expense (187,036) (189,652) (377,449) (382,540)
---------- ---------- ---------- ----------
Other income (expense), net (179,820) (186,554) (365,759) (377,016)
---------- ---------- ---------- ----------
Net income (loss) 14,272 (215,884) 77,827 (399,552)
Less accrued series B preferred stock dividends 0 (53,742) 0 (108,655)
---------- ---------- ---------- ----------
Gain (loss) applicable to common stock $ 14,272 (269,626) 77,827 (508,207)
========== ========== ========== ==========
Net loss per common share $ 0.00 (0.04) 0.01 (0.08)
========== ========== ========== ===========
Weighted average common
shares outstanding 6,359,985 6,359,995 6,359,985 6,359,995
See accompanying notes to condensed financial statements.
2
</TABLE>
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ 77,827 (399,552)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 164,355 363,828
Changes in operating assets and liabilities:
Decrease (increase) in receivables and notes
receivable-tenants 8,622 15,082
Decrease (increase) in inventories 11,656 7,007
Decrease (increase) in deposits and prepaid expenses 18,349 7,844
Decrease (increase) in prepaid leases 83,457 83,458
Increase (decrease) in accounts payable and other
accrued expenses 57,665 235,481
Increase (decrease) in other operating liabilities 0 1,500
---------- ----------
Net cash provided by (used in) operating activities 421,931 314,648
Cash flows from investing activities:
Capital expenditures (19,613) (160,970)
---------- ----------
Net cash provided by (used in) investing activities (19,613) (160,970)
Cash flows from financing activities:
Principal payments under capital lease obligations (13,939) (10,302)
Principal payments on long-term debt (99,163) (106,584)
Payment of deferred stock offering costs 0 (5,726)
---------- ----------
Net cash provided by (used in) financing activities (113,102) (122,612)
---------- ----------
Increase (decrease) in cash and cash equivalents 289,216 31,066
Cash and cash equivalents at beginning of period 362,179 163,587
---------- ----------
Cash and cash equivalents at end of period $ 651,395 194,653
========== ==========
Supplemental cash flow information:
Cash paid during the period for interest
(net of amount capitalized) 239,310 294,869
Supplemental disclosure of non-cash investing and
financing activities:
Capital lease obligations incurred for property
and equipment 0 5,433
Short-term notes payable and long-term debt incurred
for fixed assets 0 20,804
Accrual of dividends on Series B preferred stock 0 108,665
See accompanying notes to condensed financial statements.
3
</TABLE>
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
December 31, 1996
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
International Tourist Entertainment Corporation (the "Company") commenced
operations in October 1993. The accompanying interim condensed financial
statements are unaudited, but in the opinion of management reflect all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results of operations for
any interim period are not necessarily indicative of results for the
respective full year. These condensed financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's annual report of form 10-KSB for the year ended June 30, 1996 as
filed with the Securities and Exchange Commission.
NOTE 2. BANKRUPTCY FILING AND PLAN OF REORGANIZATION
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
4
<PAGE>
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. 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 up to 2,166,667 shares of the
common stock of the Company and warrants to purchase up to 2,166,667 shares of
the common stock of the Company. The financial statements at December 31,
1996 do not reflect the proposed bankruptcy plan as the plan was filed in
February, 1997.
NOTE 3. NET INCOME OR LOSS PER SHARE
For all periods presented, the Company's income or loss per share is based
on the weighted average number of common shares outstanding. Common share
equivalents resulting from options or warrants outstanding during the
periods have not been included as they are antidilutive.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
ITEC Attractions (the trade name of the Company) began operations with the
opening of its giant screen theater and mall facility in Branson, Missouri
in October, 1993. This facility is known as the OZARKS DISCOVERY IMAX
THEATER AND MALL. It contains a 532 seat IMAX theater with a screen that
is 62 feet tall and 83 feet wide. In addition, the facility includes an
enclosed shopping mall with approximately 22,000 square feet of leased
retail space. MCFARLAIN'S, a family restaurant in the mall, has been owned
and operated by the Company since May 1, 1995. Seventeen other shops and
kiosks are currently leased to third parties. One kiosk in the mall is
owned and operated by the Company.
On February 6, 1997 the Company received confirmation of its Plan of
Reorganization from the U.S. Bankruptcy Court. The Plan required a
reorganization of the Company including a capital infusion of $1.2 million,
of which $600,000 was paid in February, 1997 and $600,000 was paid by
September 10, 1997. Investors of the new capital own approximately 80
percent of the Company's common stock. Pre-petition shareholders,
debentureholders/creditors, and management retain approximately 10 percent,
5 percent and 5 percent of the Company's common stock respectively.
RESULTS OF OPERATIONS
Revenues for the quarter ended December 31, 1996 increased 21 percent to
$1,395,384 as compared with $1,149,192 for the same quarter of the previous
year. Revenues for the six-month period ended December 31, 1996 increased
17 percent to $2,800,815 as compared to $2,400,280 in the prior year
period. During the reporting quarter, the Company generated a 47 percent
increase in revenues at the Company's McFarlain's restaurant in the mall
together with a 33 percent increase in rental income and a five percent
increase in theater revenues. Concession and retail sales for the
reporting quarter decreased 24 percent due to the Company having sold its
Gingerbread Kids Clothing Shop operation in the mall. Revenues for the
reporting quarter were comprised of ticket sales (33.9%), restaurant sales
(50.0%), concession and retail sales (6.9%) and retail rental income
(9.1%).
Costs and expenses were $1,201,292 for the reporting quarter as compared to
expenses of $1,178,522 in the similar quarter of the previous year. Costs
and expenses were $2,357,203 for the six-month period ended December 31,
1996 compared to $2,422,815 in the prior year period. Depreciation expense
decreased $99,757 during the reporting quarter and $199,473 for the six-
month period as a result of the Company's $5.1 million write down of assets
in the fourth quarter of fiscal 1996 ended June 30, 1996.
Operating income for the reporting quarter was $194,092 as compared to a
loss of $29,330 in the same quarter of the prior year, while operating
income for the six-month period totaled $443,586 compared to an operating
loss of $22,535 in the prior year period. This improvement is primarily due
to increased revenues as discussed above together with decreased
depreciation and amortization expenses.
<PAGE>
Interest expense totaled $187,036 for the quarter ended December 31, 1996,
as compared to $189,652 for the similar period of the prior year. Interest
expense for the six month period ended December 31, 1996 totaled $377,449
as compared to $382,540 in the prior year period.
Net income for the reporting quarter was $14,272 compared to a net loss of
$269,626 in the same quarter of the previous year. Net income for the six-
month period was $77,827 as compared to a net loss of $508,207 in the prior
year period. This improvement is primarily related to the increase in
revenues discussed above together with the decrease in
depreciation/amortization expense.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, current assets totaled $906,971 while current
liabilities totaled $3,284,384. The Company's current ratio at December
31, 1996 was .28 to 1. However, these amounts do not reflect the
implementation of the Company's Plan of Reorganization. The Company's Plan
of Reorganization, which was confirmed on February 6, 1997 by the U.S.
Bankruptcy Court, relieved the Company of approximately $2.2 million of
long-term debt and approximately $3.2 of current liabilities related to
unsecured creditors in the fourth quarter of fiscal 1997. The Company paid
approximately $600,000 to satisfy these liabilities.
On September 10, 1997, the Company completed a private offering solely to
accredited investors of 2 million Units at a price of $.30 per Unit for an
aggregate consideration of $600,000. Each Unit consists of one restricted
share of common stock of the Company and one warrant to purchase one
restricted share of common stock of the Company at a price of $1.00 per
share. These securities are not registered under the Securities Act of
1933 and may not be offered or resold absent registration or pursuant to an
applicable exemption from registration under the Securities Act of 1933.
No underwriter or selling agent was used in connection with this offer and
sale.
Going forward, the Company expects to be able to finance its operations and
immediate capital requirements from its operations and capital invested
pursuant to the Plan of Reorganization.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Except for the bankruptcy filing described above, there are no
material legal proceedings pending to which the Company is a
party or of which any of its property is the subject.
Item 2. Changes in Securities
---------------------
Pursuant to the Company's Plan of Reorganization confirmed on
February 6, 1997 by the U.S. Bankruptcy Court, shareholders of
preferred stock received .8 shares of common stock of the Company
for each share of preferred stock held by them pre-petition,
rounded to the nearest whole share and shareholders of common
stock received 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 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.
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.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during
the quarter ended December 31, 1996. During the quarter ended
March 31, 1997, shareholders, debentureholders, and creditors
voted in favor of the Company's Second Amended Plan of
Reorganization Dated December 18, 1996.
<PAGE>
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A) Exhibits:
4.1 Specimen Certificate for the common stock of the Registrant
(incorporated by reference to the Registrant's Registration
Statement on Form S-1, Registration No. 33-48630).
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 (incorporated by reference to Form
10-KSB for the year ended June 30, 1996).
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
(incorporated by reference to Form 10-KSB for the year ended
June 30, 1996).
10.13 System Lease Agreement as amended dated August 1, 1993
between IMAX Corporation and the Company (incorporated by
reference to Form 10-KSB for the year ended June 30, 1996).
<PAGE>
Reports on Form 8-K :
-------------------
On February 19, 1997, the Company filed a report on Form 8-K
reporting a change in its certifying accountant. The Company
engaged Tanner + Co., Salt Lake City, Utah, to replace KPMG
Peat Marwick LLP as the principal accountant to audit the
Company's financial statements. 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 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>
SIGNATURES
Pursuant to the requirements 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.
Date 9/30/97 /s/ Paul M. Bluto
---------------- -------------------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Date 9/30/97 /s/ Kelvyn H. Cullimore
---------------- -------------------------
Kelvyn H. Cullimore
President
Chief Executive Officer
Duly Authorized Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENT OF INCOME 12-31-97 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 651,395
<SECURITIES> 0
<RECEIVABLES> 13,847
<ALLOWANCES> 0
<INVENTORY> 39,803
<CURRENT-ASSETS> 906,971
<PP&E> 5,324,608
<DEPRECIATION> 455,804
<TOTAL-ASSETS> 8,098,967
<CURRENT-LIABILITIES> 3,284,384
<BONDS> 6,005,959
0
213
<COMMON> 6,360
<OTHER-SE> (1,197,948)
<TOTAL-LIABILITY-AND-EQUITY> 8,098,967
<SALES> 1,457,855
<TOTAL-REVENUES> 2,800,815
<CGS> 470,797
<TOTAL-COSTS> 2,357,230
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 377,449
<INCOME-PRETAX> 77,827
<INCOME-TAX> 0
<INCOME-CONTINUING> 77,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,827
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
