<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, 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 66-426648
-------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7030 Park Center Drive, Salt Lake City, Utah 84121
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(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 X No
----- -----
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, $.001 par
value as of May 6, 1998 is 7,854,680 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
---- -----
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page Number
-----------
Condensed Balance Sheet
March 31, 1998 1
Condensed Statements of Operations
Three and Nine Months Ended March 31, 1998
and March 31, 1997 2
Condensed Statements of Cash Flows
Nine Months Ended March 31, 1998
and March 31, 1997 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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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Balance Sheet
(Unaudited)
March 31
ASSETS 1998
------ ------------
Current assets:
Cash and cash equivalents $ 340,779
Receivables 20,199
Inventories 78,217
Prepaid expenses 15,157
Current portion of prepaid leases 166,915
-----------
Total current assets 621,267
Property and equipment, net 5,742,690
Prepaid leases 1,257,289
Deposits 12,276
-----------
$ 7,633,522
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 45,126
Accrued expenses 335,993
Current portion of long-term debt 125,658
-----------
Total current liabilities 506,777
Accrued lease expense 267,652
Long-term debt 3,579,712
Security deposits 20,500
-----------
Total liabilities 4,374,641
Stockholders' equity
Common stock, $.001 par value. Authorized 40,000,000 7,859
shares, issued and outstanding 7,858,959 shares as of
March 31, 1998
Additional paid-in capital 10,781,155
Accumulated deficit (7,530,133)
-----------
Total stockholders' equity 3,258,881
-----------
$ 7,633,522
===========
See accompanying notes to condensed financial statements.
1
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Operations
(Unaudited)
[CAPTION]
<TABLE>
Three Months Ended Nine Months Ended
March 31 March 31
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Theater admissions $ 264,258 226,576 1,453,930 1,335,215
Restaurant 201,881 175,223 2,031,496 1,446,047
Concession and retail sales 62,241 40,202 379,415 227,233
Retail rental income 76,791 75,049 328,260 309,370
----------- ---------- ---------- ----------
605,171 517,050 4,193,101 3,317,865
Costs and expenses:
Direct exhibition expenses 86,666 40,582 245,087 148,099
Direct restaurant 67,497 66,383 601,285 436,988
Direct concession and retail costs 33,156 22,413 188,765 122,605
Other operating expenses 109,346 92,189 388,710 350,526
Selling, general and administrative
expenses:
Salaries and wages 379,761 231,444 1,343,013 964,303
Advertising 96,813 76,432 282,354 241,802
Depreciation and amortization 106,313 81,462 307,442 245,817
Occupancy 73,481 68,864 249,671 219,991
Other 171,503 169,572 613,094 476,439
---------- ---------- ---------- ----------
1,124,536 849,341 4,219,421 3,206,571
---------- ---------- ---------- ----------
Operating income (loss) (519,365) (332,291) (26,320) 111,294
Other income (expense):
Interest income 7,230 5,627 23,236 16,818
Gain on sale of fixed assets 0 0 0 500
Interest expense (84,421) (199,338) (254,140) (576,788)
Other income 271 0 3,319 0
---------- ---------- ---------- ----------
Other income (expense), net (76,920) (193,711) (227,585) (559,470)
---------- ---------- ---------- ----------
Net loss $ (596,285) (526,002) (253,905) (448,176)
Loss Per Share - Basic $ (0.08) (0.12) (0.03) (0.23)
========== ========== ========== ==========
Loss Per Share - Diluted $ (0.08) (0.12) (0.03) (0.23)
========== ========== ========== ==========
Weighted average common
shares outstanding 7,858,959 4,209,335 7,637,145 1,940,504
</TABLE>
See accompanying notes to condensed financial statements.
2
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
[CAPTION]
<TABLE> Nine Months Ended
March 31,
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (253,905) (478,837)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 307,442 245,817
Changes in operating assets and liabilities:
Decrease (increase) in receivables and notes receivable-tenants 15,946 9,534
Decrease (increase) in inventories (18,278) (6,194)
Decrease (increase) in deposits and prepaid expenses (5,348) (24,104)
Decrease (increase) in prepaid leases 125,186 125,187
Increase (decrease) in accounts payable and other accrued expenses 53,092 68,028
Increase (decrease) in other operating liabilities (1,500) (832)
---------- ----------
Net cash provided by (used in) operating activities 222,635 (61,401)
---------- ----------
Cash flows from investing activities-
Capital expenditures (401,303) (161,108)
Cash flows from financing activities:
Principal payments under capital lease obligations (8,789) (21,355)
Principal payments on long-term debt (82,289) (105,196)
Proceeds from issuance of common stock 349,751 785,549
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Net cash provided by (used in) financing activities 258,673 658,998
---------- ----------
Increase (decrease) in cash and cash equivalents 80,005 436,489
Cash and cash equivalents at beginning of period 260,774 362,179
---------- ----------
Cash and cash equivalents at end of period $ 340,779 798,668
========== ==========
Supplemental cash flow information:
Cash paid during the period for interest (net of amount capitalized) 254,140 349,966
Cash paid during the period for taxes 0 0
</TABLE>
See accompanying notes to condensed financial statements.
3
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INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
March 31, 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, 1997 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 March 31, 1998.
SFAS 128 establishes a different method of computing earnings (loss) 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 (loss) per share and diluted earnings (loss) per
share. Basic earnings per share is the amount of earnings (loss) for the
period available to each share of common stock outstanding during the reporting
period. Diluted earnings per share is the amount of earnings (loss) 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 share equivalents outstanding during the period.
Prior periods have been restated for presentation in accordance with SFAS 128.
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 OZARKS DISCOVERY IMAX THEATER AND
MALL (also as IMAX Entertainment Complex.) 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 retail space, all of which is leased. 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 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. In December 1997,
the Company installed a new 35mm projection system, in addition to its IMAX
giant screen projection system, and began showing feature films each evening.
In March 1998, the Company completed the construction of a 210 seat theater for
live performances in its Branson complex. The Mike Radford - Remember When
Show performs daily in the theater.
RESULTS OF OPERATIONS
Revenues for the quarter ended March 31, 1998 increased 17 percent to $605,171
as compared to $517,050 for the same quarter of the previous year. Revenues
for the nine-month period ended March 31, 1998 increased 26 percent to
$4,193,101 compared to $3,317,865 in the prior year period. The Company
reported revenue increases in every segment of its operation, with the largest
increases coming from the McFarlain's restaurant operation and from ticket
sales due to the addition of the 35mm feature films. Revenues also increased
due to the addition of the McFarlain's Back Porch deli and bakery.
Costs and expenses increased 32 percent to $1,124,536 for the reporting quarter
ended March 31, 1998 as compared to expenses of $849,341, for the comparable
period of the previous year. Costs and expenses for the nine-month period
ended March 31, 1998 increased 32 percent to $4,219,421 compared to $3,206,571
in the prior year period. Costs and expenses increased due to several
factors including license fees for 35mm feature films which exceeded $40,000,
increased labor including bonuses paid to management in the amount of $58,500
pursuant to the Company's Plan of Reorganization, start-up expenses associated
with the Remember When Show, increased depreciation expenses due to additions
made to the facility, expenses of moving the Company's offices and headquarters
to Branson, Missouri which exceeded $20,000, expenses related to public
compliance and investor relations which did not exist the previous year, the
increased costs related to the increased level of business generated at the
theater and McFarlain's Restaurant, and the addition of the McFarlain's Back
Porch deli.
<PAGE>
The operating loss for the reporting quarter was $519,365 as compared to
$332,291 in the same quarter of the prior year. The operating loss for the
nine-month period ended March 31, 1998 was $26,320 compared to operating income
of $111,294 in the previous year period. The increase in expenses mentioned
above is the primary cause of the increase in operating losses.
Interest expense decreased to $84,421 for the quarter and $254,140 for the
nine-month period ended March 31, 1998 as compared to $199,338 and $576,788
respectively in the comparable periods of the prior year due to the
implementation of the Company's Plan of Reorganization which relieved the
Company of approximately $2.2 million of long-term debt.
The net loss for the reporting quarter was $596,285 compared to a net loss of
$526,002 in the same quarter of the previous year. The net loss for the
nine-month period was $253,905, as compared to $448,176 in the prior year
period. The increase in net loss for the reporting period was due to the
increased direct operating costs and SG&A expenses described above, some of
which are non-recurring in nature. It should be noted that non-cash expenses
equaled approximately $48,000 per month. Thus, the cash flow from
operations for the nine-month period was approximately $222,635.
The nature of the entertainment business in Branson is seasonal in nature. The
period of January through March is very slow with little tourist traffic. The
Company has determined that it is practical to remain open during this period
because the additional costs of being open for business are covered by
revenue.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998 current assets totaled $621,267, while current
liabilities totaled $506,777. The Company's current ratio at March 31, 1998
was 1.2 to 1.
During the reporting quarter, the Company secured a $200,000 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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There are no material legal proceedings pending to which the Company is
a party or of which any of its property is the subject.
<PAGE>
Item 2. Changes in Securities
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Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
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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 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).
<PAGE>
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).
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.
<PAGE>
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 5/14/98 /s/ Paul M. Bluto
---------------------- -----------------------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Date 5/14/98 /s/ Kelvyn H. Cullimore
----------------------- -----------------------------
Kelvyn H. Cullimore
President
Chief Executive Officer
Duly Authorized Officer
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENT OF INCOME 3-31-98 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-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 340,779
<SECURITIES> 0
<RECEIVABLES> 20,199
<ALLOWANCES> 0
<INVENTORY> 78,217
<CURRENT-ASSETS> 621,267
<PP&E> 6,735,626
<DEPRECIATION> 992,936
<TOTAL-ASSETS> 7,633,522
<CURRENT-LIABILITIES> 506,777
<BONDS> 3,579,712
0
0
<COMMON> 7,859
<OTHER-SE> 3,251,022
<TOTAL-LIABILITY-AND-EQUITY> 7,633,522
<SALES> 2,410,911
<TOTAL-REVENUES> 4,193,101
<CGS> 790,050
<TOTAL-COSTS> 4,219,422
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254,140
<INCOME-PRETAX> (253,905)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253,905)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
