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 September 30, 1998.
[ ] 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
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(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.)
3562 Shepherd of the Hills Expressway Branson, MO 65616
-------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
(417) 335-3533
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(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 X No
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2. Yes X No
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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, $.001 par value
as of November 13, 1998 is 7,937,638 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Page Number
Condensed Balance Sheet
September 30, 1998 ..........................................................................1
Condensed Statements of Operations
Three Months Ended September 30,1997
and September 30,1998........................................................................2
Condensed Statements of Cash Flows
Three Months Ended September 30, 1997
and September 30, 1998.......................................................................3
Notes to Condensed Financial Statements ........................................................4
Item 2. Management's Discussion and Analysis
or Plan of Operation.........................................................................5
Part II. OTHER INFORMATION....................................................................6
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<CAPTION>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Balance Sheet
(Unaudited)
September 30
ASSETS 1998
-----------------
Current assets:
<S> <C>
Cash and cash equivalents $ 421,312
Receivables 56,487
Inventories 98,440
Prepaid leases-current 166,915
-----------------
Total current assets 743,154
Property and equipment, net 5,889,752
Prepaid leases-non current 1,173,832
Deposits 34,716
-----------------
TOTAL ASSETS $ 7,841,454
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 169,284
Accrued expenses 309,979
Current portion of long-term debt 121,380
-----------------
Total current liabilities 600,643
Accrued lease expense 295,826
Long-term debt 3,522,475
Deposits 20,500
-----------------
Total liabilities 4,439,444
Stockholders' equity
Common stock, $.001 par value. Authorized 40,000,000
shares, issued and outstanding 7,937,638 shares as of
September 30, 1998 7,859
Additional paid-in capital 10,781,155
Accumulated deficit (7,387,004)
-----------------
Net stockholders' equity 3,402,010
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,841,454
=================
See accompanying notes to condensed financial statements.
1
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<CAPTION>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Operations
(Unaudited)
Three Months Ended
September 30
1998 1997
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Revenue:
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Theater admissions $ 742,480 637,092
Restaurant and deli 807,290 824,350
Concession and retail sales 209,275 140,856
Retail rental income 112,608 111,478
-------------- ---------------
1,871,653 1,713,776
-------------- ---------------
Costs and expenses:
Direct exhibition film costs 127,156 83,590
Direct restaurant and deli costs 247,280 252,278
Direct concession and retail costs 78,852 76,339
Other operating expenses 141,046 142,527
Selling, general and administrative expenses:
Salaries and wages 531,673 446,682
Advertising 89,430 88,271
Depreciation and amortization 101,444 100,010
Occupancy 108,317 98,954
Other 227,606 211,833
-------------- ---------------
1,652,804 1,500,484
-------------- ---------------
Operating income 218,849 213,292
Other income (expense):
Interest income 5,792 6,914
Interest expense (82,891) (85,464)
-------------- ---------------
Other income (expense), net (77,099) (78,550)
-------------- ---------------
IncomeNbeforesprovision for income taxes $ 141,750 134,742
Provision for Income Taxes - -
-------------- ---------------
Net income 141,750 134,742
============== ===============
Net income per common share $ .02 .03
============== ===============
Weighted average common
shares outstanding 7,937,638 4,067,000
See accompanying notes to condensed financial statements.
2
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<CAPTION>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended
September 30
1998 1997
----------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 141,750 134,742
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 101,444 100,010
Changes in operating assets and liabilities:
Decrease (increase) in receivables and notes receivable-tenants (18,876) 2,149
(Increase) in inventories (20,735) (15,805)
Decrease (increase) in deposits and prepaid expenses 12,734 (59)
Decrease in prepaid leases 41,728 41,728
Increase (decrease) in accounts payable and other accrued expenses (46,902) 40,647
------------------ --------------
Net cash provided by operating activities 211,143 303,412
Cash flows used in investing activities:
Capital expenditures 123,004 43,369
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Net cash used in investing activities 123,004 43,369
Cash flows from financing activities:
Principal payments on long-term debt (17,620) (32,134)
Proceeds from issuance of common stock - 349,751
------------------ --------------
Net cash provided by (used in) financing activities (17,620) 317,617
Increase in cash and cash equivalents 70,519 577,660
Cash and cash equivalents at beginning of period 350,793 260,774
------------------ --------------
Cash and cash equivalents at end of period $ 421,312 838,434
================== ==============
Supplemental cash flow information:
Cash paid during the period for interest $ 82,891 85,464
See accompanying notes to condensed financial statements.
3
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
September 30, 1998
(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, 1998 as filed with the
Securities and Exchange Commission.
NOTE 2. NET INCOME OR LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS 128). SFAS 128
became effective for financial statements with interim and annual periods ending
after December 15, 1997. Accordingly, the Company has adopted SFAS 128 for the
quarter ended December 31, 1997.
SFAS 128 establishes a different method of computing earnings per share than was
required under the provisions of Accounting Principles Board Opinion No. 15.
Under SFAS 128, entities with publicly held common stock are required to present
basic earnings per share and diluted earnings per share. Basic earnings per
share is the amount of earnings for the period available to each share of common
stock outstanding during the reporting period. Diluted earnings per share is the
amount of earnings for the period available to each share of common stock
outstanding during the reporting period and to each share that would have been
outstanding assuming the issuance of common shares outstanding during the
period. Basic and fully diluted earnings per share are the same for all periods
presented.
4
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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 IMAX Entertainment Complex. The
Complex 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 retail space. MCFARLAIN'S, a family
restaurant in the mall, has been owned and operated by the Company since May 1,
1995. During the quarter ended March 31, 1997, the Company acquired assets to
begin the operation of McFarlain's Back Porch, an express deli and bakery which
is also in the mall. In 1994, the company began selling gift items related to
the films which were being exhibited in the theater or which are representative
of the lifestyle of the Ozark's. This operation has evolved into the Legacy &
Legends Gift Shop, which is one of the Company's most profitable and fastest
growing departments. Seventeen other shops and kiosks are currently leased to
third parties. In December 1997, the Company installed a new 35mm projection
system, in addition to its IMAX giant screen projection system, and began
showing feature 35mm films each evening in addition to the IMAX giant screen
film presentations.
In March 1998, the Company completed the construction of a 210 seat theater for
live performances in its Branson complex. The Mike Radford's - Remember When
Show performs daily in this theater.
During thew current reporting period the Company completed an addition to the
McFarlain's restaurant, which increased seating by 133 people. This is the
second expansion of the restaurant during the last two years and brings the
total seating to over 600 people.
RESULTS OF OPERATIONS
Revenues for the quarter ended September 30, 1998 increased 9.2 percent to
$1,871,653 as compared to $1,713,776 for the same quarter of the previous year.
The Company reported revenue increases in most segments of its operations, with
the largest increases coming from the Legacy & Legends Gift Shop, from ticket
sales due to the addition of the 35mm feature films and the addition of the
Remember When Show.
Costs and expenses increased 10.1 percent to $1,652,804 for the reporting
quarter ended September 30, 1998 as compared to expenses of $1,500,484 for the
comparable period of the previous year. Costs and expenses increased due
primarily to the increase level of business generated at the Branson facility.
5
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The operating income for the reporting quarter was $218,849 as compared to
$213,292 in the same quarter of the prior year.
Interest expense was $82,891 for the quarter ended September 30, 1998 as
compared to $85,464 for the comparable period of the prior year.
The net income for the reporting quarter was $141,750 compared to a net income
of $134,742 in the same quarter of the previous year. It should be noted that
non-cash expenses equaled approximately $52,000 per month. Thus, the cash flow
from operations for the three month period ended September 30, 1998 was
approximately $211,000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998 current assets totaled $743,154, while current
liabilities totaled $588,119. The Company's current ratio at September 30, 1998
was 1.2 to 1.
The Company maintains a $200,000 unsecured line of credit facility with a
commercial bank. No borrowings were made under the line of credit during the
reporting quarter.
Going forward, the Company expects to be able to finance its operations and
immediate capital requirements from currently available capital, cash flow from
operations, and available sources of borrowings including the line of credit.
The Company is in the process of ensuring that its internal computer systems are
Year 2000 compliant. The Company does not expect any material Year 2000
compliance issues to arise related to its primary internal business information
systems. With respect to third-party providers whose services are critical to
the Company, the Company intends to monitor the efforts of such providers, as
they become Year 2000 compliant. Management is presently not aware of any Year
2000 issues that have been encountered by any such third-party providers that
could materially affect the Company's operations. Notwithstanding the foregoing,
there can be no assurance that the Company will not experience operational
difficulties as a result of Year 2000 issues, whether arising out of internal
operations, or caused by third-party service providers, which individually or
collectively could have an adverse impact on business operations or require the
Company to incur unanticipated expenses to remedy such problems.
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
------------------
There are no material legal proceedings pending to which the
Company is a party or of which any of its property is the
subject.
6
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Item 2. Changes in Securities
---------------------
The Board of Directors of the Company, at a meeting
of the Board of Directors on October 30, 1998, approved an
extension of the Exercise Deadline for the Company's currently
outstanding warrants from December 31, 1998 until December 31,
2000. The warrants were issued subjects to the terms and
conditions of a Warrant Agreement dated February 28, 1997, and
all other terms of the warrants, except for the extension of
the Exercise deadline, remain unchanged.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
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 secured by Deed of
Trust for loan from NationsBank (formerly Boatman'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
NationsBank Bank, Branson, Missouri (incorporated by reference
to Registration Statement on Form S-1, Registration No.
33-64132).
7
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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
NationsBank 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).
27.1 Financial Data Schedule for the 3 months ended September
30, 1998.
B) Reports on Form 8-K :
----------------------
On February 2, 1998, the Company filed a Report on Form 8-K
reporting a change in its fiscal year end to December 31. A
transitional Report for the period ending December 31, 1998
will be filed on Form 10-KSB.
8
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date 11/13/98 /s/ Paul M. Bluto
-------- -----------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Date 11/13/98 /s/ Kelvyn H. Cullimore
--------- ------------------------
Kelvyn H. Cullimore
President
Chief Executive Officer
Duly Authorized Officer
9
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION SEPTEMBER 30, 1998 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 421,312
<SECURITIES> 0
<RECEIVABLES> 56,487
<ALLOWANCES> 0
<INVENTORY> 98,440
<CURRENT-ASSETS> 743,154
<PP&E> 7,083,872
<DEPRECIATION> 1,194,120
<TOTAL-ASSETS> 7,841,454
<CURRENT-LIABILITIES> 600,643
<BONDS> 3,838,801
0
0
<COMMON> 7,859
<OTHER-SE> 3,394,151
<TOTAL-LIABILITY-AND-EQUITY> 7,841,454
<SALES> 1,759,045
<TOTAL-REVENUES> 1,871,653
<CGS> 453,288
<TOTAL-COSTS> 1,652,804
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,891
<INCOME-PRETAX> 141,750
<INCOME-TAX> 0
<INCOME-CONTINUING> 141,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,750
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
