<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, 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 66-426648
- -------------------------------- -----------------
(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 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 February 11, 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
December 31, 1997 1
Condensed Statements of Operations
Three and Six Months Ended December 31, 1997
And December 31, 1996 2
Condensed Statements of Cash Flows
Six Months Ended December 31, 1997
And December 31, 1996 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)
<TABLE>
<CAPTION>
December 31
ASSETS 1997
------------
<S> <C>
Current assets:
Cash and cash equivalents $ 986,026
Receivables 68,559
Inventories 64,138
Prepaid expenses 16,821
Current portion of prepaid leases 166,915
-----------
Total current assets 1,302,459
Property and equipment, net 5,547,206
Prepaid leases 1,299,018
Deposits 12,276
-----------
$ 8,160,959
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,939
Accrued expenses 273,329
Current portion of long-term debt 125,658
-----------
Total current liabilities 424,926
Accrued lease expense 253,566
Long-term debt 3,608,302
Security deposits 19,000
-----------
Total liabilities 4,305,794
Stockholders' equity
Common stock, $.001 par value. Authorized 40,000,000 7,855
shares, issued and outstanding 7,854,680 shares as of
December 31, 1997
Additional paid-in capital 10,781,158
Accumulated deficit (6,933,848)
-----------
Total stockholders' equity 3,855,165
-----------
$ 8,160,959
===========
</TABLE>
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 Six Months Ended
December 31 December 31
1997 1996 1997 1996
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Theater admissions $ 552,579 473,641 1,189,672 1,108,639
Restaurant 870,277 698,269 1,595,582 1,270,824
Concession and retail sales 311,305 95,857 551,206 187,031
Retail rental income 139,992 127,616 251,470 234,321
----------- ---------- ----------- -----------
1,874,153 1,395,384 3,587,930 2,800,815
Costs and expenses:
Direct exhibition expenses 74,831 35,204 158,420 107,518
Direct restaurant 239,574 205,104 454,036 370,606
Direct concession and retail costs 121,206 50,085 235,361 100,191
Other operating expenses 137,779 127,633 279,364 258,336
Selling, general and administrative expenses:
Salaries and wages 515,628 395,844 963,252 732,859
Advertising 97,270 74,730 185,541 165,371
Depreciation and amortization 101,119 82,793 201,129 164,355
Occupancy 77,236 69,301 176,191 151,127
Other 229,758 160,597 441,591 306,866
------------ ---------- ----------- -----------
1,594,401 1,201,292 3,094,885 2,357,230
------------ ---------- ----------- -----------
Operating income 279,752 194,092 493,045 443,586
Other income (expense):
Interest income 12,139 7,216 19,054 11,190
Gain on sale of fixed assets 0 0 0 500
Interest expense (84,254) (187,036) (169,719) (377,449)
------------ ---------- ----------- -----------
Other income (expense), net (72,115) (179,820) (150,665) (365,759)
------------ ---------- ----------- -----------
Net income $ 207,637 14,272 342,380 77,827
============ ========== =========== ===========
Earnings Per Share - Basic $ 0.03 0.00 0.05 0.01
============ ========== =========== ===========
Earnings Per Share - Diluted $ 0.03 0.00 0.05 0.01
============ ========== =========== ===========
Weighted average number of common shares 7,854,680 6,359,985 7,581,106 6,359,985
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
[CAPTION]
<TABLE>
Six Months Ended
December 31
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ 342,380 77,827
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 201,129 164,355
Changes in operating assets and liabilities:
Decrease (increase) in receivables and notes receivable-tenants (32,414) 8,622
Decrease (increase) in inventories (4,199) 11,656
Decrease (increase) in deposits and prepaid expenses (7,012) 18,349
Decrease (increase) in prepaid leases 83,457 83,457
Increase (decrease) in accounts payable and other accrued expenses (42,846) 57,665
Increase (decrease) in other operating liabilities (3,000) 0
------------- -------------
Net cash provided by (used in) operating activities 537,495 421,931
------------- -------------
Cash flows from investing activities-
Capital expenditures (99,506) (19,613)
Cash flows from financing activities:
Principal payments under capital lease obligations (6,705) (13,939)
Principal payments on long-term debt (55,783) (99,163)
Proceeds from issuance of common stock 349,751 0
------------- -------------
Net cash provided by (used in) financing activities 287,263 (113,102)
------------- -------------
Increase (decrease) in cash and cash equivalents 725,252 289,216
Cash and cash equivalents at beginning of period 260,774 362,179
------------- -------------
Cash and cash equivalents at end of period $ 986,026 651,395
============= =============
Supplemental cash flow information:
Cash paid during the period for interest (net of amount capitalized) 168,162 239,310
Cash paid during the period for taxes 0 0
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
December 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, 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 December 31, 1997.
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 shares
outstanding during the period.
Prior periods have been restated for presentation in
accordance with SFAS 128.
4
<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 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
first-run feature films as the shows each evening. The
response has exceeded management's expectations with the
theater attracting sell-out crowds during the Christmas
season.
The Company is currently constructing a 220 seat theater for
live performances in its Branson complex. The Mike Radford -
Remember When Theater show will perform in the theater, which
is expected to open March 15, 1998.
RESULTS OF OPERATIONS
Revenues for the quarter ended December 31, 1997 increased 34
percent to a record $1,874,153 as compared to $1,395,384 for
the same quarter of the previous year. Revenues for the six-
month period ended December 31, 1997 increased 28 percent to a
record $3,587,930 compared to $2,800,815 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 operation in the mall.
Costs and expenses were $1,594,401 for the reporting quarter
ended December 31, 1997, representing 85 percent of sales, as
compared to expenses of $1,201,292, or 86 percent of sales,
for the comparable period of the previous year. Costs and
expenses for the six-month period ended December 31, 1997 were
$3,094,885 compared to $2,357,230 in the prior year period.
Costs and expenses were up primarily due to the increased
level of business generated at the McFarlain's Restaurant, the
addition of the McFarlain's Back Porch deli and bakery
operation discussed above and increased selling, general and
administrative expenses.
<PAGE>
Operating income for the reporting quarter increased 44
percent to $279,752 as compared to $194,092 in the same
quarter of the prior year. Operating income for the six-month
period ended December 31, 1997 increased 11 percent to
$493,045 compared to $443,586 in the previous year.
Interest expense decreased to $84,254 for the quarter and
$169,719 for the six-month period ended December 31, 1997 as
compared to $187,036 and $377,449 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.
Net income in the reporting quarter increased to a record
$207,637 compared to net income of $14,272 in the same quarter
of the previous year. Net income for the six-month period
jumped to $342,380, up from $77,827 in the prior year period.
These improvements are related primarily to the increase in
revenues and the decrease in interest expense during the
reporting periods.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997 current assets totaled $1,279,019
while current liabilities totaled $401,486. The Company's
current ratio at December 31, 1997 was 3.2 to 1.
During the quarter ended September 30, 1997 the Company
completed a private placement offering to accredited investors
of approximately 2 million Units at a price of $.30 per Unit
for an aggregate consideration of $600,000. Each Unit
consisted 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 was used in connection with this
offering.
Going forward, the Company expects to be able to finance its
operations and immediate capital requirements from its
operations and currently available capital.
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.
Item 2. Changes in Securities
---------------------
On September 10, 1997, the Company completed a
private placement to accredited investors wherein it
issued 2,000,000 units, each unit consisting of one
share of restricted common stock and one warrant to
purchase one share of restricted common stock in
<PAGE>
consideration of $600,000 cash. No underwriter or
selling agent was used in connection with this sale
of securities which 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
---------------------------------------------------
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
<PAGE>
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).
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 2/16/98 /s/ Paul M. Bluto
-------------- -----------------------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Date 2/16/98 /s/ Kelvyn H. Cullimore
-------------- -----------------------------
Kelvyn H. Cullimore
President
Chief Executive Officer
Duly Authorized Officer
9
<PAGE>
<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-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 986,026
<SECURITIES> 0
<RECEIVABLES> 68,559
<ALLOWANCES> 0
<INVENTORY> 64,138
<CURRENT-ASSETS> 1,302,459
<PP&E> 6,433,829
<DEPRECIATION> 886,623
<TOTAL-ASSETS> 8,160,959
<CURRENT-LIABILITIES> 424,926
<BONDS> 3,608,302
0
0
<COMMON> 7,855
<OTHER-SE> 3,847,310
<TOTAL-LIABILITY-AND-EQUITY> 8,160,959
<SALES> 2,146,788
<TOTAL-REVENUES> 3,587,930
<CGS> 689,397
<TOTAL-COSTS> 3,094,885
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 169,719
<INCOME-PRETAX> 342,380
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 342,380
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
