<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 March 31, 1997.
[ ] 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 June 17, 1997 is 6,735,397 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
March 31, 1997 1
Condensed Statements of Operations
Three and Nine Months Ended March 31, 1997
and March 31, 1996 2
Condensed Statements of Cash Flows
Nine Months Ended March 31, 1997
and March 31, 1996 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)
[CAPTION]
<TABLE>
March 31
ASSETS 1997
------------------
<S> <C>
Current assets:
Cash and cash equivalents $ 798,667
Receivables 13,956
Inventories 57,653
Prepaid expenses 13,163
Prepaid leases-current 166,915
Current portion of notes receivable - tenants 4,889
------------------
Total current assets 1,055,243
Prepaid leases-non current 1,424,204
Notes receivable-tenants 1,373
Film development costs, net of amortization of $67,500 832,500
Property and equipment, at cost 5,466,105
Less accumulated depreciation 514,766
------------------
Net property and equipment 4,951,339
Deposits 59,276
------------------
TOTAL ASSETS $ 8,323,935
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,101,197
Accrued expenses 980,758
Current installments of capital lease obligations 21,672
Notes payable and current installments of long-term debt 672,011
Notes payable to related parties 508,824
------------------
Total current liabilities 3,284,462
Long-term debt, excluding current installments:
Capital lease obligations (7,802)
Credit facility, notes, and mortgages payable 3,922,684
10% Convertible debenture, due June 1, 2008 2,055,000
Security deposits 25,968
Stockholders' equity
Common stock, $.001 par value. Authorized 40,000,000
shares, issued and outstanding 6,179,291 shares at March 31, 1997 6,179
Additional paid-in capital 10,360,359
Accumulated deficit (11,322,915)
------------------
Net stockholders' equity (956,377)
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,323,935
==================
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Operations
(Unaudited)
[CAPTION]
<TABLE>
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Revenue:
Theater admissions $ 226,576 178,157 1,335,215 1,322,328
Restaurant 175,223 124,061 1,446,047 1,026,040
Concession and retail sales 40,202 29,769 227,233 203,261
Retail rental income 75,049 58,001 309,370 238,639
-------------- ------------ ------------- ---------------
517,050 389,988 3,317,865 2,790,268
Costs and expenses:
Direct exhibition expenses 40,582 52,259 148,099 196,892
Direct restaurant 66,383 62,369 436,988 342,615
Direct concession and retail costs 22,413 16,457 122,605 108,874
Other operating expenses 92,189 77,162 350,526 318,453
Selling, general and administrative expenses:
Salaries and wages 231,444 198,101 964,303 831,868
Advertising 76,432 43,346 241,802 215,861
Depreciation and amortization 81,462 183,865 245,817 547,693
Occupancy 68,864 63,298 219,991 222,934
Other 169,572 163,730 476,439 498,213
-------------- ------------ ------------- ---------------
849,341 860,587 3,206,571 3,283,403
-------------- ------------ ------------- ---------------
Operating income (loss) (332,291) (470,600) 111,294 (493,135)
Other income (expense):
Interest income 5,627 709 16,818 5,782
Gain on sale of fixed assets 0 0 500 450
Interest expense (199,338) (176,824) (576,788) (546,060)
Interest expense on loans from related parties 0 (11,902) 0 (25,206)
-------------- ------------ ------------- ---------------
Other income (expense), net (193,711) (188,017) (559,470) (565,034)
-------------- ------------ ------------- ---------------
Net loss (526,002) (658,617) (448,176) (1,058,169)
Less accrued series B preferred stock dividends 0 (53,742) 0 (162,407)
-------------- ------------ ------------- ---------------
$ (526,002) (712,359) (448,176) (1,220,576)
============== ============ ============= ===============
Loss applicable to common stock
Net loss per common share $ (0.12) (0.88) (0.23) (1.51)
============== ============ ============= ===============
Weighted average common
shares outstanding 4,209,335 806,088 1,940,504 806,088
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
[CAPTION]
<TABLE>
Nine Months Ended
March 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (478,837) (1,058,168)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 245,817 547,693
Changes in operating assets and liabilities:
Decrease (increase) in receivables and notes receivable-tenants 9,534 34,465
Decrease (increase) in inventories (6,194) 46,104
Decrease (increase) in deposits and prepaid expenses (24,104) 14,868
Decrease (increase) in prepaid leases 125,187 125,186
Increase (decrease) in accounts payable and other accrued expenses 68,028 461,694
Increase (decrease) in other operating liabilities (832) 9,850
---------------- -----------------
Net cash provided by (used in) operating activities (61,401) 181,692
Cash flows from investing activities:
Capital expenditures (161,108) (163,636)
Proceeds from sale of fixed assets 0 5,951
---------------- -----------------
Net cash provided by (used in) investing activities (161,108) (157,685)
Cash flows from financing activities:
Principal payments under capital lease obligations (21,355) (13,218)
Principal payments on long-term debt (105,196) (120,103)
Proceeds from mortgage loan and note payable 0 100,000
Proceeds from issuance of common stock 785,549 0
---------------- -----------------
Net cash provided by (used in) financing activities 658,998 (33,321)
---------------- -----------------
Increase (decrease) in cash and cash equivalents 436,489 (9,314)
Cash and cash equivalents at beginning of period 362,179 163,587
---------------- -----------------
Cash and cash equivalents at end of period $ 798,668 154,273
================ =================
Supplemental cash flow information:
Cash paid during the period for interest (net of amount capitalized) 349,996 304,819
Supplemental disclosure of non-cash investing and financing activities:
Capital lease obligations incurred for property and equipment 0 11,013
Short-term notes payable and long-term debt incurred for fixed assets 0 20,804
Accrual of dividends on Series B preferred stock 0 162,407
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
March 31, 1997
(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 one
share of the common stock of
4
<PAGE>
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 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.
NOTE 3. NET LOSS PER SHARE
For all periods presented, the Company's 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. The number of
common shares has been adjusted to reflect certain provisions of the Plan
of Reorganization as described in NOTE 2 of the Notes to the Financial
Statements; including issuance of 170,090 shares upon conversion of the
preferred shareholders, issuance of 635,999 shares upon exchange of the
common shareholders, issuance of 4,433,490 shares to Mr. Bluto, issuance of
403,045 shares to management pursuant to an incentive program, and issuance
of 536,667 shares subscribed in the private placement as of March 31, 1997.
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. During the reporting
quarter, the Company acquired assets to begin the operation of McFarlain's
Back Porch, a deli express and bakery in the mall. Seventeen other shops
and kiosks are currently leased to third parties. One kiosk in the mall is
owned and operated by the Company.
During the reporting quarter the Company received confirmation of its Plan
of Reorganization from the U.S. Bankruptcy Court. The Plan requires a
reorganization of the Company including a capital infusion of $1.2 million,
of which $600,000 was paid in February, 1997 with the remaining $600,000 to
be paid prior to September 10, 1997. Investors of the new capital will
retain approximately 80 percent of the Company's common stock. Pre-
petition shareholders, debentureholders/creditors, and management will
retain approximately 10 percent, 5 percent and 5 percent of the Company's
common stock respectively.
RESULTS OF OPERATIONS
Revenues for the quarter ended March 31, 1997 increased 33 percent to
$517,050 as compared with $389,988 for the same quarter of the previous
year. The Company reported revenue increases in every segment of its
operation, with the largest increases coming from theater admissions and
restaurant operations. Revenues for the reporting quarter were comprised of
ticket sales (43.8%), restaurant sales (33.9%), concession and retail
sales (7.8%) and retail rental income (14.5%). Revenues for the nine month
period ended March 31, 1997 increased 19 percent to $3,317,865 as compared
to $2,790,268 in the prior year period. This $527,597 increase is primarily
related to increased revenues at the Company's McFarlain's restaurant and
the addition of McFarlain's Back Porch express deli and bakery.
Costs and expenses were $849,341 for the reporting quarter and $3,206,571
for the nine months ended March 31, 1997 as compared to expenses of
$860,587 and $3,283,403 respectively for comparable periods of the
previous year. Costs were up primarily due to the addition of the
McFarlain's Back Porch deli and bakery operation discussed above.
Depreciation expense decreased $102,403 during the reporting quarter as a
result of the Company's $5.1 million write down of assets in the fourth
quarter of fiscal 1996.
<PAGE>
The operating loss for the reporting quarter was $332,291 as compared to
$470,600 in the same quarter of the prior year. For the nine month period
ended March 31, 1997, the Company generated an operating profit of
$111,294 as compared to an operating loss of $493,135 in the prior year
period. These improvements are primarily due to increased revenues during
the quarter and nine month period together with decreased depreciation and
amortization expenses.
Interest expense increased by $22,514 for the quarter ended March 31, 1997
and by $30,728 for the nine month period as compared to the comparable
periods of the prior year.
The net loss in the reporting quarter was $526,002 compared to a net loss
of $658,617 in the same quarter of the previous year. The net loss for the
nine-month period ended March 31, 1997 was $448,176 as compared to
$1,058,169 in the prior year period. This improvement for both the three
and nine-month periods is related to the significant increase in revenues
together with the decrease in depreciation/amortization expense.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, current assets totaled $1,055,243 while current
liabilities totaled $3,284,462. The Company's current ratio at March 31,
1997 was .32 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 will relieve the Company of approximately
$2,177,989 of long-term debt and approximately $3,193,647 of current
liabilities in the fourth quarter of the current fiscal year. The Company
will pay approximately $600,000 to satisfy these liabilities.
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.
BUSINESS PLAN
The Company is in the process of seeking trading status for its common
stock on the NASDAQ Bulletin Board. Management anticipates receiving
approval for trading later this summer.
The Company is currently offering to accredited investors up to
approximately 2.1 million Units at a price of $.30 per Unit for an
aggregate consideration of $650,000. 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. No underwriter or selling agent is being used in connection with
this offer and sale. As of June 17, 1997, the Company had received orders
for approximately one-half of the private placement.
<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 receive .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 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 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
---------------------------------------------------
During the reporting quarter, 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>
B) 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 7/9/97 /S/ Paul M. Bluto
------------------- ---------------------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Date 7/9/97 /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 3-31-97 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 798,667
<SECURITIES> 0
<RECEIVABLES> 13,956
<ALLOWANCES> 0
<INVENTORY> 57,653
<CURRENT-ASSETS> 1,055,243
<PP&E> 5,466,105
<DEPRECIATION> 514,766
<TOTAL-ASSETS> 8,323,935
<CURRENT-LIABILITIES> 3,284,462
<BONDS> 5,995,850
0
0
<COMMON> 6,179
<OTHER-SE> (965,556)
<TOTAL-LIABILITY-AND-EQUITY> 8,323,935
<SALES> 1,673,280
<TOTAL-REVENUES> 3,317,865
<CGS> 559,593
<TOTAL-COSTS> 3,206,571
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 576,788
<INCOME-PRETAX> (448,176)
<INCOME-TAX> 0
<INCOME-CONTINUING> (448,176)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (448,176)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
