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, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act for the transition period from ____________ to ------------.
Commission file number 0-21070
ITEC ATTRACTIONS, INC.
(Exact name of small business issuer as specified in its charter.)
Nevada 66-0426648
- ------------------------ ----------------------------------
(State of Incorporation) (IRS Employer Identification No.)
3562 Shepherd of the Hills Expressway Branson, Missouri 65616
-------------------------------------------------------------
(Address of principal executive offices)
(417) 335-3533
--------------
(Issuer's telephone number)
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
-----------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding
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.
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 shared outstanding of the issuer's common stock, $.001 par value
as of September 30, 1999 is 7,937,638 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
<PAGE>
ITEC ATTRACTIONS, INC.
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Page Number
-----------
Condensed Balance Sheet
September 30, 1999 ........................................... 1
Condensed Statements of Operations
Three and Nine Months Ended September 30, 1999
And September 30, 1998 ....................................... 2
Condensed Statements of Cash Flows
Nine Months Ended September 30, 1999
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 .................................... 7
<PAGE>
ITEC ATTRACTIONS, INC
Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30
1999
--------------------
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 419,166
Receivables 107,482
Inventories 165,444
Prepaid expenses 109,153
Prepaid leases-current 166,915
--------------------
Total current assets 968,160
Property and equipment, net 5,740,812
Prepaid leases-non current 1,006,917
Deposits 14,654
------------------
TOTAL ASSETS $ 7,730,543
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 263,460
Accrued expenses 413,543
Current portion of long-term debt 136,826
------------------
Total current liabilities 813,829
Accrued lease expense 352,174
Long-term debt 3,378,998
Security deposits 20,441
------------------
Total liabilities 4,565,442
------------------
Stockholders' equity
Common stock, $.001 par value. Authorized 40,000,000
shares, issued and outstanding 7,937,638 shares as of
June 30, 1999 7,938
Additional paid-in capital 10,781,076
Accumulated deficit (7,623,913)
--------------------
Net stockholders' equity 3,165,101
--------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,730,543
====================
</TABLE>
See accompanying notes to condensed financial statements.
-1-
<PAGE>
ITEC ATTRACTIONS, INC.
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Theater and concession $ 776,731 $ 824,336 $ 1,749,394 $ 1,747,202
Restaurant and deli 866,363 821,373 1,868,015 1,837,431
Gift shop 168,862 113,336 356,867 300,813
Mall operation 136,477 112,608 335,190 288,047
------------- ------------- ------------- -------------
1,948,433 1,871,653 4,309,466 4,173,493
------------- ------------- ------------- -------------
Direct Expense:
Theater and concession 299,501 357,964 800,019 957,412
Restaurant and deli 702,097 690,485 1,551,608 1,633,376
Gift shop 119,104 79,370 265,561 177,806
Mall operations 112,220 106,627 289,373 256,544
------------- ------------- ------------- -------------
1,232,922 1,234,446 2,906,561 3,025,138
------------- ------------- ------------- -------------
Gross Profit 715,511 637,207 1,402,905 1,148,355
------------- ------------- ------------- -------------
General and administrative 188,537 179,885 554,684 631,221
Advertising and marketing 170,742 137,029 570,581 424,450
Depreciation and amortization 116,743 101,444 342,615 307,764
------------- ------------- ------------- -------------
476,022 418,358 1,467,880 1,363,435
------------- ------------- ------------- -------------
Operating Income (Loss) 239,489 218,849 (64,975) (215,080)
Other (income) expense:
Interest income (4,467) (5,791) (9,061) (15,659)
Interest expense 77,313 82,890 237,922 253,735
------------- ------------- ------------- -------------
Other income (expense), net 72,846 77,099 228,861 238,076
------------- ------------- ------------- -------------
Income before provision for income taxes 166,643 141,750 (293,836) (453,156)
Income tax expense - - - -
------------- ------------- ------------- -------------
Net income (Loss) $ 166,643 $ 141,750 $ (293,836) $ (453,156)
============= ============= ============= =============
Net income (Loss) per common share $ .02 $ .02 $ (.04) $ (.06)
============= ============= ============= =============
Weighted average common
shares outstanding 7,937,638 7,937,638 7,937,638 7,937,638
</TABLE>
See accompanying notes to condensed financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1999 1998
---------- --------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (293,836) $ (453,156)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 342,615 307,891
Changes in operating assets and liabilities:
Decrease (increase) in receivables (92,492) 12,072
Decrease (increase) in inventories (86,636) (34,302)
Decrease (increase) in deposits & prepaid expenses (99,876) (4,119)
Decrease (increase) in prepaid leases 125,186 125,186
Increase (decrease) in accounts payable and other accrued expenses 146,271 179,995
------------- --------------
Net cash provided by operating activities 41,232 133,567
------------- --------------
Cash flows used in investing activities:
Capital expenditures (188,321) (650,437)
------------- --------------
Net cash used in investing activities (188,321) (650,437)
------------- --------------
Cash flows from financing activities:
Increase in capital lease obligations 27,058 42,261
Principal payments on long-term debt (115,563) (90,105)
------------- --------------
Net cash used in financing activities (88,505) (47,844)
------------- --------------
Decrease in cash and cash equivalents (235,594) (564,714)
Cash and cash equivalents at beginning of period 654,760 986,026
------------- --------------
Cash and cash equivalents at end of period $ 419,166 $ 421,312
============= ==============
Supplemental cash flow information:
Cash paid during the period for interest $ 237,922 $ 253,735
============= ==============
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Condensed Financial Statements
September 30, 1999
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
ITEC Attractions, Inc. (formerly known as 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 September 30, 1999 and for the transition period ending December 31, 1998
as filed with the Securities and Exchange Commission.
-4-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEC Attractions, Inc. 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 located 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 Ozarks. This operation has evolved into the Legacy & Legends Gift Shop,
which has been 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. Mike Radford's Remember When Show and
Jimmie Rodgers Remembers perform daily in this theater.
During the quarter ending September 30, 1998, the Company completed an addition
to the McFarlain's restaurant that increased seating by 133 people. This is the
second major expansion of the restaurant during the last two and a half years
and brings the total seating to over 655 people.
RESULTS OF OPERATIONS
Revenues for the quarter ended September 30, 1999 increased 4 percent to
$1,948,433 as compared to $1,871,653 for the same quarter of the previous year.
Revenues for the nine-month period ended September 30, 1999 increased 3 percent
to $4,309,466 compared to $4,173,493 in the prior year period. For the nine
months, the Company reported revenue increases in McFarlain's Restaurant and in
the Gift Shop.
Direct operating expenses were $1,232,922 for the reporting quarter ended
September 30, 1999 representing 63 percent of sales, as compared to expenses of
$1,234,446 or 66 percent of sales, for the comparable period of the previous
year. Direct operating expenses were $2,906,561 for the nine months ended
September 30, 1999, representing 67 percent of sales, as compared to expenses of
$3,025,138 or 72 percent of sales, for the comparable period of the previous
year. The reduction in direct operating expense as a percentage of revenue for
the three month and nine month periods, is a result of an expense reduction
program that was implemented in early 1999.
-5-
<PAGE>
General and administrative expenses were $188,537 and advertising and marketing
were $170,742 for the quarter ended September 30, 1999 as compared to $179,885
and $137,029 respectively for the same period in 1998.
The increase in advertising and marketing expense is a result of a total
remaking of all advertising material, an increased in advertising programs, and
the additional expenses related to the marketing of the Jimmie Rodgers show.
Interest expense was $77,313 and $82,890 for the quarters ended September 30,
1999 and 1998 respectively and was $237,922 for the nine months ended September
30, 1999 and $253,735 for same period ended 1998.
The net income was $166,643 for the reporting period compared to $141,750 for
the same period of the previous year. The net loss was ($293,836) for the nine
months ended September 30, 1999 compared to ($453,156) for the nine months ended
September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999 current assets totaled $968,160, while current
liabilities totaled $813,829. The Company's current ratio at September 30, 1999
was 1.19 to 1.
The Company maintains a $200,000 line of credit facility with a commercial bank.
No borrowings were made under the line of credit during the reporting quarter.
This credit facility is secured by a second deed of trust on the theater
complex.
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 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.
-6-
<PAGE>
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
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Events
------------
A Special Meeting of Shareholders of International Tourist
Entertainment Corporation, a U.S. Virgin Islands Corporation,
was held on Saturday, October 16, 1999 at 12:30 p.m., local
time, at the Company's offices in Branson, Missouri. At that
meeting, the Shareholders adopted and approved an Agreement
and Plan of Merger whereby International Tourist Entertainment
Corporation was merged with and into ITEC Attractions, Inc., a
Nevada corporation, with ITEC Attractions, Inc. as the
successor corporation.
The purpose and result of the merger were to effect a change
in domicile of the Company from the U.S. Virgin Islands to the
State of Nevada. As a result of the merger, the name of the
Company is changed from International Tourist Entertainment
Corporation to ITEC Attractions, Inc. The merger did not
result in any other change to the Company, including any
change in control of the Company or any change in the assets,
liabilities or financial condition of the Company.
-7-
<PAGE>
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 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
NationsBank, 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).
10.12 Third Modification Agreement dated March 1, 1997 between
NationsBank 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 6 months ended September
30, 1999.
B. Reports on Form 8-K :
No reports on Form 8-K were filed during the reporting
quarter.
-8-
<PAGE>
SIGNATURES
In accordance with 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 11/13/99 /s/ Paul M. Bluto
-------- -----------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Chief Executive Officer
Date 11/13/99 /s/ Paul E. Rasmussen
-------- ---------------------
Paul E. Rasmussen
President
Chief Operating Officer
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEC
ATTRACTIONS, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 419,166
<SECURITIES> 0
<RECEIVABLES> 107,482
<ALLOWANCES> 0
<INVENTORY> 165,444
<CURRENT-ASSETS> 968,160
<PP&E> 7,385,740
<DEPRECIATION> 1,644,928
<TOTAL-ASSETS> 7,730,543
<CURRENT-LIABILITIES> 813,829
<BONDS> 3,378,998
0
0
<COMMON> 7,938
<OTHER-SE> 3,157,163
<TOTAL-LIABILITY-AND-EQUITY> 7,730,543
<SALES> 4,309,466
<TOTAL-REVENUES> 4,318,527
<CGS> 2,906,561
<TOTAL-COSTS> 4,374,441
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 237,922
<INCOME-PRETAX> (293,836)
<INCOME-TAX> 0
<INCOME-CONTINUING> (293,836)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (296,836)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
