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 June 30, 1999.
[ ] 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.)
3562 Shepherd of the Hills Expressway Branson, Missouri 65616
-------------------------------------------------------------
(Address of principal executive offices)
(417) 335-3533
--------------
(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. 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 June 30, 1999 is 7,937,638 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
June 30, 1999 .......................................................1
Condensed Statements of Operations
Three and Six Months Ended June 30, 1999
and June 30, 1998....................................................2
Condensed Statements of Cash Flows
Six Months Ended June 30, 1999
and June 30, 1998 ...................................................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>
<TABLE>
<CAPTION>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Balance Sheet
(Unaudited)
June 30, June 30,
ASSETS 1999 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 202,009 $ 350,793
Receivables 86,872 37,611
Inventories 143,698 77,705
Prepaid expenses 74,573 22,947
Prepaid leases-current 166,915 166,915
-------------- -------------
Total current assets 674,067 655,971
Property and equipment, net 5,830,955 5,868,192
Prepaid leases-non current 1,048,646 1,215,560
Deposits 14,654 24,503
-------------- -------------
TOTAL ASSETS $ 7,568,322 $ 7,764,226
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 355,811 202,225
Accrued expenses 293,516 323,940
Current portion of long-term debt 136,826 121,380
-------------- -------------
Total current liabilities 786,153 647,545
Accrued lease expense 338,087 281,739
Long-term debt 3,425,184 3,554,182
Security deposits 20,441 20,500
-------------- -------------
Total liabilities 4,569,865 4,503,966
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 7,938
Additional paid-in capital 10,781,076 10,781,076
Accumulated deficit (7,790,557) (7,528,754)
-------------- -------------
Net stockholders' equity 2,998,457 3,260,260
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,568,322 $ 7,764,226
============== =============
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenue:
Theater and concession $ 723,948 690,043 $ 972,663 985,959
Restaurant and deli 813,170 810,686 1,001,652 1,016,058
Gift shop 144,168 97,291 188,005 125,338
Mall operation 109,475 97,836 206,766 175,439
------------ ------------ ------------ -------------
1,790,761 1,695,856 2,369,086 2,302,794
------------ ------------ ------------ -------------
Direct Expense:
Theater and concession 307,666 339,143 501,057 599,448
Restaurant and deli 620,411 659,370 848,385 934,140
Gift shop 109,423 69,097 144,956 98,436
Mall operations 97,933 108,040 176,795 149,916
------------ ------------ ------------ -------------
1,135,433 1,175,650 1,671,193 1,781,940
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Gross Profit 655,328 520,206 697,893 520,854
------------ ------------ ------------ -------------
General and administrative 170,776 179,383 376,587 461,040
Advertising and marketing 211,308 156,601 399,900 287,420
Depreciation and amortization 114,516 100,008 225,872 206,320
------------ ------------ ------------ -------------
496,600 435,992 1,002,359 954,780
------------ ------------ ------------ -------------
Operating Income 158,728 84,214 (304,466) (433,926)
Other income (expense):
Interest income 1,198 2,636 4,593 9,867
Interest expense (78,508) (86,424) (160,609) (170,846)
------------ ------------ ------------ -------------
Other income (expense), net (77,310) (83,788) (156,016) (160,979)
------------ ------------ ------------ -------------
Income before provision for income taxes $ 81,418 426 $ (460,482) (594,905)
Net loss 81,418 426 (460,482) (594,905)
============ ============ ============ =============
Net income (loss) per common share-basic and diluted $ .01 .00 $ (.06) (.07)
============ ============ ============ =============
Weighted average common
shares outstanding-basic and diluted 7,937,638 7,937,638 7,937,638 7,937,638
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (460,482) $ (594,905)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 225,872 206,053
Changes in operating assets and liabilities:
Decrease (increase) in receivables and notes receivable-tenants (71,882) 30,948
(Increase) in inventories (64,890) (13,567)
Decrease (increase) in deposits and prepaid expenses (37,336) (18,353)
Decrease in prepaid leases 83,458 83,458
Increase (decrease) in accounts payable and other accrued expenses 90,694 238,842
Increase (decrease) in other operating liabilities (59) 1,500
-------------- -------------
Net cash provided by (used in) operating activities (234,625) (66,024)
-------------- -------------
Cash flows used in investing activities:
Capital expenditures (161,719) (527,039)
-------------- -------------
Net cash used in investing activities (161,719) (527,039)
-------------- -------------
Cash flows from financing activities:
Capitalized lease obligations 26,956 (2,084)
Principal payments under capital lease obligations and long-term debt (83,363) (40,086)
-------------- -------------
Net cash used in financing activities (56,407) (42,170)
-------------- -------------
Decrease in cash and cash equivalents (452,751) (635,233)
Cash and cash equivalents at beginning of period 654,760 986,026
-------------- -------------
Cash and cash equivalents at end of period $ 202,009 $ 350,793
============== =============
Supplemental cash flow information:
Cash paid during the period for interest $ 160,609 $ 170,846
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
June 30, 1999
(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 and for the transition
period ending December 31, 1998 as filed with the Securities and Exchange
Commission.
<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 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 which is 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 Ozark's. 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 June 30, 1999 increased 6 percent to $1,790,761
as compared to $1,695,856 for the same quarter of the previous year. Revenues
for the six-month period ended June 30, 1999 increased 3 percent to $2,369,086
compared to $2,302,794 in the prior year period. The Company reported revenue
increases in every segment of its operation during the reporting period, with
the largest increases coming in the Gift Shop.
Direct operating expenses were $1,135,433 for the reporting quarter ended June
30, 1999 representing 63 percent of sales, as compared to expenses of $1,175,650
or 69 percent of sales, for the comparable period of the previous year. Direct
operating expenses were $1,671,193 for the six months ended June 30, 1999,
representing 71 percent of sales, as compared to expenses of $1,781,940 or 77
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
six month periods, is a result of an expense reduction program that was
implemented in early 1999.
<PAGE>
General and administrative expenses were $170,776 and advertising and marketing
were $211,308 for the three months ended June 30, 1999 as compared to $179,383
and $156,601 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 increase in advertising programs, and
the additional expenses related to the marketing of the Jimmie Rodgers show.
Interest expense was $78,508 and $86,424 for the quarters ended June 30, 1999
and 1998 respectively and was $160,609 for the six months ended June 30, 1999
and $170,846 for same period ended 1998.
The net income was $81,418 for the reporting period compared to $426 for the
same period of the previous year. The net loss was ($460,482) for the six months
ended June 30, 1999 compared to ($594,905) for the six months ended June 30,
1998. The fluctuation between quarters reflects the seasonal nature of the
Company's business.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, current assets totaled $674,067, while current liabilities
totaled $786,153. The Company's current ratio at June 30, 1999 was .86 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 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.
<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
---------------------
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 subject 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 Dead 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).
<PAGE>
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).
10.11 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 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 June 30,
1999.
B) Reports on Form 8-K :
No reports on Form 8-K were filed during the reporting
quarter.
<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 8/13/99 /s/ Paul M. Bluto
------- -----------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Chief Executive Officer
Date 8/13/99 /s/ Paul E. Rasmussen
------- ---------------------
Paul E. Rasmussen
President
Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION JUNE 30, 1999 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 202,009
<SECURITIES> 0
<RECEIVABLES> 86,872
<ALLOWANCES> 0
<INVENTORY> 143,698
<CURRENT-ASSETS> 674,067
<PP&E> 7,359,140
<DEPRECIATION> 1,528,185
<TOTAL-ASSETS> 7,568,322
<CURRENT-LIABILITIES> 786,153
<BONDS> 3,763,271
0
0
<COMMON> 7,938
<OTHER-SE> 2,990,519
<TOTAL-LIABILITY-AND-EQUITY> 7,568,322
<SALES> 2,369,086
<TOTAL-REVENUES> 2,373,679
<CGS> 1,671,193
<TOTAL-COSTS> 2,673,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,609
<INCOME-PRETAX> (460,482)
<INCOME-TAX> 0
<INCOME-CONTINUING> (460,482)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (460,482)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
