UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _____________ to _______________.
Commission file number 0-21070
ITEC Attractions, Inc.
Nevada 66-0426648
------- ----------
(State of Incorporation) (IRS Employer Identification No.)
3562 Shepherd of the Hills Expressway
Branson, Missouri 65616
(417) 335-3533
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Check whether the registrant (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, and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
-- ---
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
---
The registrant's revenues for its fiscal year ended December 31, 1999 were
$6,515,863.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $475,000 as of March 25, 2000, computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock.
Check whether the issuer has filed all documents and reports required by Section
12, 13 or 15(d) of the Exchange Act after the distribution of securities under a
plan confirmed by a court. Yes X No .
-- ---
The number of shares outstanding of the registrant's class of common equity as
of March 25, 2000:
Class Shares Outstanding
----- ------------------
Common Stock, $.001 par value 7,937,638
Transitional Small Business Disclosure Format (check one): Yes No X .
---- ------
<PAGE>
PART I
Item 1. Description of Business
-----------------------
International Tourist Entertainment Corporation was formed June 3,
1986. At a shareholders meeting held October 16, 1999, the shareholders of
International Tourist Entertainment Corporation, a U.S. Virgin Islands
corporation, approved the merger of International Tourist Entertainment
Corporation with ITEC Attractions, Inc., a Nevada corporation which was
incorporated September 3, 1999. The sole purpose of the merger was to change the
domicile from the U.S. Virgin Islands to Nevada. Hereafter, International
Tourist Entertainment Corporation, the predecessor, and ITEC Attractions, Inc.,
the successor, together and separately, are referred to as the Company.
The Company owns and operates a major, giant screen entertainment
facility in Branson, Missouri, known as the IMAX(R) Entertainment Complex. The
Branson facility was constructed by the Company and commenced operations on
October 8, 1993. The IMAX(R) Entertainment Complex consists of the Ozarks
Discovery IMAX(R) Theater, a giant screen motion picture theater, the Remember
When Theater which features live performances, McFarlain's, a full service
restaurant, retail shops, various food concessions and related amenities.
The Company produced and owns an IMAX(R) theme film entitled "Ozarks:
Legacy and Legend." The theme film premiered on April 28, 1995 and is exhibited
only at the Ozarks Discovery IMAX(R) Theater. The Company also rents giant
screen films and 35mm feature films from third parties for exhibition at its
Branson facility.
Revenues from the Branson facility are generated from four general
sources: (1) ticket sales for admission to the IMAX(R) Theater; (2) lease of
retail space; (3) operation of restaurant facilities, retail shops, and
concessions owned by the Company in the Branson facility; and (4) ticket sales
for admission to the Remember When Theater.
On January 25, 1996, the Company filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code, Case No. 96-60122-S-11
(Chapter 11), with the United States Bankruptcy Court, Western District of
Missouri, Southern Division. On December 18, 1996, the Company filed its Second
Amended Plan of Reorganization (the "Plan of Reorganization") and its Second
Amended Disclosure Statement in Support of Proposed Debtor's Second Amended Plan
of Reorganization Dated December 18, 1996 (the "Disclosure Statement") with the
United States Bankruptcy Court. On February 6, 1997, an Order Confirming the
Plan of Reorganization was entered by the United States Bankruptcy Court in the
matter of In Re: International Tourist Entertainment Corporation, Debtor and
Debtor-in-Possession.
The Plan of Reorganization has proven effective. The Company has
operated with significant positive cash flow since emerging from Chapter 11.
2
<PAGE>
IMAX(R) Entertainment Complex, Branson, MO
- ------------------------------------------
The Branson facility is known as the IMAX(R) Entertainment Complex. The
Complex features a 532 seat IMAX(R) giant screen theater with a screen that is
approximately 6 stories (62 feet) tall and 83 feet wide. This theater is known
as the "Ozarks Discovery IMAX(R) Theater." Other features of the Complex which
are operated by the Company are:
- - "McFarlain's Family Restaurant," one of Branson's most popular eating
establishments. The Restaurant seats 600 people and features regional
food specialties as well as home baked pies and other desserts.
- - The Back Porch, an Ozark style deli. The Back Porch was operated during
1999 but is now in the process of being converted to a food court.
- - The Remember When Theater, a 200 seat live performance theater.
Currently, the theater stars Mike Radford and Jimmie Rodgers. Mike
Radford presents a comedy and patriotic show called the Remember When
Show. A show which honors our heritage and pays tribute to our country.
Jimmie Rodgers, a popular singer during the '60's, presents a show
called Jimmie Rodgers Remembers. In his show, Jimmie shares his life
and his music.
- - Legacy & Legends Gift Shop offers products which tie to the IMAX(R)
films being presented in the theater, reflect the lifestyle of the
Ozarks and a large line of gift shop items.
The Complex also houses some 13 other tourist related retail shops and
kiosks, consisting of approximately 10,000 square feet, which are leased to and
operated by third parties.
Ozarks Discovery IMAX(R) Theater and Projection Formats
- -------------------------------------------------------
The Company's giant screen theater was designed initially to take
advantage of only the IMAX(R) film and projection format. This IMAX(R) format is
ten times larger than the 35mm film used in the typical movie theater. This
specially designed giant screen theater is configured with amphitheater style
seating and uses a special projection and sound system. The projected image
fills the screen that is 62 feet high and is 83 feet wide. The result is that
giant screen films can be displayed with great clarity at much larger than usual
viewing size, bringing the viewer "into" the film action on the screen. The
visual image is complemented with a digital, 22,000-watt, 44 speaker, surround
sound system, which management believes is one of the best theater sound systems
in the world.
The Company is leasing the giant screen projection system, sound system
and projection screen from IMAX(R) Corporation.
The Company's exclusive film, "Ozarks: Legacy & Legend," which is
exhibited three to five times per day, was produced in the IMAX(R) format. The
Company typically exhibits two to four other IMAX(R) films in its regular daily
schedule, in addition to the "Ozarks: Legacy & Legend" film.
3
<PAGE>
In December of 1997, the Company installed a 35mm projection system
with special lenses that allow the image of regular feature films to be
projected in such a way as to fill approximately 60% of the six story tall
screen. The projection system is tied into the powerful IMAX(R) sound system.
This combination of the largest possible visual image and perhaps the nations
most sophisticated and effective sound system, make viewing a feature 35mm film
a memorable experience.
The reception of this unique 35mm projection system has been
outstanding from both the local citizens and tourists. 35mm feature films are
typically longer than IMAX(R) and as a result, concession sales have increased
dramatically during the past year.
As a result of the experience the Company has had with exhibiting 35-mm
movies, the Company board gave management approval to explore the feasibility of
building a small 35-mm complex adjacent to the IMAX Complex. A preliminary
design of the proposed complex has been completed. The proposed complex would
have three theaters, two of which would seat 175 people and one, which would
seat 135 people. One of the 175 seat theaters would have a stage so it could
also be used as a live theater.
All three theaters would have stadium seating and would have state of
the art sound and projection systems. If the Company is successful in obtaining
financing, construction on the theater complex will begin in early summer of
2000.
The new theater complex requires approximately 165 new parking spaces.
In late 1999, the Company had an opportunity to lease the land needed to build
the new parking lot. The land involved requires that a large amount of fill be
brought in to prepare for the parking lot. The Company is currently in the
process of having the fill delivered.
McFarlain's Family Restaurant
- -----------------------------
The Company acquired the restaurant operation in May 1995 and has
increased the total seating to slightly over 600.
The key factors in the success of McFarlain's are quality food and
extra special service. Unique specialties like fried green tomatoes and french
fried sweet potatoes are provided to entice customers.
McFarlain's can accommodate up to 15 motor coach groups per hour. While
tour groups are important, they represent only 33% of the restaurant's business.
In 1999, the restaurant served over 380,000 people.
The Back Porch Deli
- -------------------
The Company acquired The Back Porch Deli operation in January 1997. In
late 1999, because of continuing operating losses at The Back Porch Deli, the
Company's board approved the conversion of The Back Porch to a food court called
The IMAX Food Court. The Company will own and operate The IMAX Food Court and
has acquired franchises for Quiznos Subs, Baskin Robbins and Breadeaux Pizza.
The Company expects The IMAX Food Court to open by May 1, 2000.
4
<PAGE>
Remember When Theater
- ---------------------
To better utilize space and broaden the entertainment offerings of the
Complex, in 1998 the Company completed the construction of a 220 seat, intimate
live performance theater in an area of the facility which had been a holding
area for the IMAX(R) Theater.
This theater was completed in March of 1998 and currently features Mike
Radford's Remember When Show and the Jimmie Rodgers Remembers Show. The Remember
When Show has a comedy and patriotic theme that is both nostalgic and fun and
has a lot of audience participation. Tony Orlando, a popular singer, has stated,
"The Mike Radford Remember When Show is the best tribute to Veterans in
Branson." In the Jimmie Rodgers Remembers Show, which was added in early 1999,
Jimmie shares his life and his many popular hit songs from the '60's and '70's.
He also performs a number of new songs he has written.
Legacy & Legends Gift Shop
- --------------------------
The Legacy & Legends Gift Shop is a full-fledged specialty gift shop.
It generates the highest percentage profit of any of the Company's departments.
Sales for calendar 1999, especially after the relocation to a larger space, have
continued to increase substantially.
Retail Shops
- ------------
Since the inception of the Complex in 1993, retail sales have been a
very important factor in creating a total experience for visitors. There are now
13 retail shops and kiosks in the Complex that are leased to third parties. The
Complex boasts the most atmospheric, comfortable and unique indoor shopping
experience in Branson and is able to demand some of the highest rents for retail
space in Branson.
Competition
- -----------
The Company operates a single facility in Branson, Missouri providing
entertainment, food, and shopping for tourists. The Company competes with other
entertainment attractions, restaurants, and retail shops in the Branson area.
The Company is also impacted by the competitive draw of Branson in relation to
other locations across the country.
Branson has many live performance theaters with presentations ranging
from music to comedy to drama. These theaters generally operate from May through
mid-December, although more of these theaters are now offering a limited
performance schedule in March and April. On average, a theater offers two
performances each day, for six days a week, during the peak season, but may
offer only one performance per day or reduce the number of days per week during
slower months. Seasonality causes a definite business cycle within each year for
the Company's Branson facility.
5
<PAGE>
The major attraction in Branson is Silver Dollar City, an amusement
park with an 1890's theme, which attracts almost 2 million visitors each year.
Several other attractions exist in Branson, including water parks, family
amusements, and activities related to the lake in the region. The Company has
entered into cross promotion arrangements with Silver Dollar City and with
several of the major entertainers and timeshare developers in Branson. The
IMAX(R) Entertainment Complex has become established as one of the major
attractions in Branson and approximately 1,000,000 people visited the facility
in 1999.
Employees
- ---------
At December 31, 1999, the Company had approximately 140 full-time
employees and all of them work at the IMAX(R)Entertainment Complex in Branson,
Missouri.
Forward-Looking Statements
- --------------------------
Statements in this Form 10-K, including those concerning the company's
expectations regarding its business, and certain of the information presented in
this report, constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. As such, actual results may
vary materially from such expectations. There can be no assurance that the
company's results of operations will not be adversely affected by factors that
could cause actual results to differ from expectations. The company undertakes
no obligation to revise or publicly release the results of any revision to these
forward looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's opinion only as of
the date hereof.
Item 2. Description of Property
-----------------------
The Company entered into a 50-year ground lease in July 1993 for the
5.5-acre site on which its Branson facility is located. The Company has prepaid
the first 20 years of the lease with a payment of $1,025,000. Commencing in the
21st year of the lease, the annual lease payment will be $145,000 per year,
adjusted to reflect inflationary increases. In conjunction with the anticipated
construction of a new 35-mm theater complex, the Company leased an additional
one-acre of land at an annual lease payment of $20,000 per year. The term of
this lease is the same as the 5.5-acre lease. The Company is presently preparing
this ground for the commencement of construction of the parking lot.
The Company completed the construction of its Branson facility in 1993
on the 5.5-acre site leased by the Company. The Company owns the Branson
facility, subject to a mortgage in the principal amount of approximately
$3,222,000 in favor of the Bank of America.
The Company owns a condominium in Branson, Missouri which it acquired
in 1994 for $148,000 and which is subject to a mortgage at December 31, 1999 in
the approximate principal amount of $102,000 in favor of Great Southern Bank
with monthly payments of $741. The condominium is used as a part-time residence
by the Company's Chairman, Paul Bluto.
The Company owns no other real properties.
The Company produced and owns the giant screen theme film "Ozarks:
Legacy and Legend."
6
<PAGE>
The Company has registered the service mark "ITEC Attractions" and the
"McFarlain's" Logo with the U.S. Patent and Trademark Office.
The properties and facilities of the Company are deemed adequate and
suitable for its operations.
Item 3. Legal Proceedings
-----------------
There are no material pending legal proceedings to which the Company is
a party or of which any of its property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At a shareholders meeting held October 16, 1999, the shareholders of
International Tourist Entertainment Corporation, a U.S. Virgin Islands
corporation, approved the merger of International Tourist Entertainment
Corporation with ITEC Attractions, Inc., a Nevada corporation which was
incorporated September 3, 1999. The sole purpose of this merger was to change
the domicile from the U.S. Virgin Islands to Nevada.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
----------------------------------------------------------------------
(a) Market Information. Since February 1998 the Company's common stock has been
traded in the over-the-counter market and reported on the NASD's OTC Bulletin
Board. The current symbol is "ITAT." The common stock of the Company was first
publicly traded in December 1992. Over-the-counter quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
necessarily represent actual transactions. The following table shows the range
of high and low bid information available to the Company for its common stock
for the quarterly periods indicated.
High Low
---- ---
1998
----
1st Quarter 1.55 0.60
2nd Quarter 1.20 0.40
3rd Quarter 0.00 0.26
4th Quarter 0.00 0.26
1999
----
1st Quarter 0.37 0.25
2nd Quarter 0.35 0.18
3rd Quarter 0.50 0.25
4th Quarter 0.41 0.18
(b) Holders. The approximate number of record holders as of March 25,
2000 of the Company's common stock, $.001 par value, was 380. This number does
not include beneficial owners of shares held in "nominee" or "street" name.
Including those beneficial owners, the Company estimates the total number of
shareholders exceeds 1,200.
7
<PAGE>
(c) Dividends. The Company has not paid cash dividends on its common
stock during the past two years. At the present time, the Company's anticipated
capital requirements are such that it intends to follow a policy of retaining
any earnings in order to finance the operation and development of its business.
The Company's loan agreement with the Bank of America restricts the
payment of dividends to an amount not exceeding the Company's net profits plus
depreciation plus interest expense, less 1.25 times the Company's annual
principal and interest payments unless otherwise agreed to by the Bank of
America. Recent Sales of Unregistered Securities
As part of the Company's plan of reorganization, in February 1997, the
Company issued 4,433,490 restricted shares of its common stock to Mr. Paul M.
Bluto in consideration of $600,000 cash. No underwriter or selling agent was
used in connection with this sale. The sale of these shares was made pursuant to
available exemptions under Section 4(2) and Section 4(6) of the Securities Act
of 1933, as amended, and the regulations promulgated pursuant thereto.
Commencing February 28, 1997 and concluding on September 10, 1997, the
Company offered and sold 2,000,000 Units at a price of $.30 per Unit for an
aggregate consideration of $600,000. Each Unit consisting of one restricted
share of the common stock of the Company and one warrant to purchase one
restricted share of the common stock of the Company at a price of $1.00 per
share. No underwriter or selling agent was used in connection with this offer
and sale. The sale of these shares was made pursuant to available exemptions
under Section 4(2) and Section 4(6) of the Securities Act of 1933, as amended,
and the regulations promulgated pursuant thereto.
Item 6. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
Financial Condition and Results of Operations
- ---------------------------------------------
At December 31, 1999, the Company had a cash balance of $644,706. The
Company had working capital at December 31, 1999 of $372,182, and a current
ratio of 1.53 to 1. The Company maintains a $400,000 secured line of credit
facility with the Bank of America. No borrowings were made under the line of
credit during the year ended December 31, 1999 and no amounts are owed.
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 has not been unusually impacted by inflation or changing
prices during the past two years.
The Company does not expect any other significant changes in the number
of employees during the current fiscal year.
8
<PAGE>
The Company's revenues for the year ended December 31,1999 increased
approximately 11% to $6,515,863 compared to $5,893,074 for the fiscal year ended
June 30, 1998. These increases were primarily due to increased revenues at the
Remember When Theater, from the addition of the Jimmie Rodgers Remembers Show,
the McFarlain's Family Restaurant, and the Legacy & Legend Gift Shop. The
increase in revenues at the Gift Shop was related to the shop's relocation to a
substantially larger space. Revenues from 35mm feature films actually decreased
in the year ended December 31, 1999 as compared to feature film revenue for the
fiscal year June 30, 1998.
The Company's operating expenses for the year ended December 31, 1999
increased approximately 5% to $4,313,599 compared to $4,091,689 for the fiscal
year ended June 30, 1998. These increases were primarily related to an increase
in cost of sales due to increased revenues in the Legacy & Legends Gift Shop and
increased royalties paid for the additional revenues in the Remember When
Theater from the addition of the Jimmie Rodgers Remembers Show. Operating
expense for the IMAX theater and McFarlain's Restaurant actually decreased as a
result of cost control programs implemented in 1999.
Selling and general and administrative expenses for the year ended
December 31, 1999 increased 17 percent to $1,586,799 as compared to $1,355,806
for the fiscal year ended June 30, 1998. This increase was primarily due to an
increase in advertising and marketing expense incurred in marketing the Jimmie
Rodgers Remembers Show and from the creation of a new marketing program for the
complex.
Income from operations for the year ended December 31, 1999 was
$150,710 compared to $38,130 for the fiscal year ended June 30, 1998.
Interest expense for the year ended December 31, 1999 and the fiscal
year ended June 30, 1998, primarily reflects carrying costs of the Company's
mortgage on the Branson facility.
Net loss applicable to common stock for the fiscal year ended December
31, 1999 totaled $145,628 as compared to a net loss of $252,526 for the fiscal
year ended June 30, 1998.
Item 7. Financial Statements
--------------------
The Financial Statements of the Company required by this Item are
attached as a separate section of this report and are listed in Part IV, Item 13
of this Form 10-KSB.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
--------------------
There has been no change in the Company's independent certified public
accountants, Tanner + Co. during the Company's two most recent fiscal years.
Tanner + Co. have served as the Company's accountant since June 30, 1996.
9
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
--------------------------------------
Directors and Executive Officers
The directors and executive officers of the Company at March 25, 2000
are:
Name Age Position in Company
- ---- --- -------------------
Paul M. Bluto 71 Chairman of the Board of Directors,
Chief Executive Officer
and Chief Financial Officer
Lourette Ann Bluto 67 Director
Thomas J. Carlson 47 Director
Kelvyn H. Cullimore 64 Director
Kelvyn H. Cullimore, Jr. 43 Director
Francis E. McLaughlin 58 Director
Kumar V. Patel 54 Director
Paul Rasmussen 58 President and Chief Operating Officer
Michael L. Pitman 44 Senior Vice President of Marketing
Dennis Berard 52 Vice President - Restaurant Operations
Randy S. Brashers 32 Vice President of Operations
Robert J. Cardon 36 Secretary/Treasurer
Kelvyn H. Cullimore is the father of Kelvyn H. Cullimore, Jr and
Lourette Ann Bluto is the wife of Paul M. Bluto. There are no other family
relationships among any of the above-named persons.
All directors of the Company are elected to hold office until the
annual meeting of the shareholders following their election and until their
successors have been duly elected and qualified. Officers of the Company are
elected by the Board of Directors at the first meeting after the annual meeting
of the Company's shareholders and hold office until their successors are chosen
and qualify, or until their death, or until they resign or have been removed
from office.
All staff personnel employed by the Company devote full time to the
business of the Company as salaried employees, with the exception of Robert J.
Cardon and Paul M. Bluto. Paul M. Bluto is employed by GS&W Services, a Company
owned by Lourette Ann Bluto, and provides services to GS&W, such as marketing,
special projects and computerization. Mr. Paul M. Bluto devotes approximately
50% of his time to his duties for the Company. Robert Cardon is an employee of
Dynatronics Corporation and provides services to the Company on an as-needed
basis. Mr. Cardon devotes approximately 5% of his time to his duties for the
Company. Dynatronics Corporation is a public company, which manufactures devices
for the physical medicine market. .See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
10
<PAGE>
Paul M. Bluto has been a Director of the Company since April 1995. He
became Chairman of the Board and Chief Financial Officer in February 1997 and on
March 1, 1999 became Chief Executive Officer. Since 1990, Mr. Bluto has been
employed by GS&W Services in marketing, special projects and computerization.
From 1966 to 1990, Mr. Bluto was employed with the United Automobile, Aerospace,
Agriculture Implement Workers of America (U.A.W.), most recently as a Senior
Vice President of Operations and Human Resources.
Lourette Ann Bluto was elected a director of the Company on October 3,
1997. She is President and sole owner of GS&W Services, Inc., a full service
printing and mailing corporation. Mrs. Bluto founded GS&W Services in 1969, and
currently has 31 employees. GS&W Services is located in Walnut, California. Mrs.
Bluto is active in community and civic affairs, having served as Vice-President
of Edison Elementary School P.T.A., President of the Walnut/Diamond Bar
Soroptimist Club, Board member of the Santa Ana YWCA Hotel for Women. She has
presided as President of the California Chapter of M.A.S.A., and has served on
the Board of Directors of several businesses, including Local 509 Federal Credit
Union.
Thomas J. Carlson became a Director in June 1997. Mr. Carlson has been
in a private law practice for over 14 years in Springfield, Missouri. From 1987
to 1993, he served as Mayor of Springfield and currently serves as a member of
Springfield's City Council. He serves on various community service boards of
directors. Mr. Carlson received a JD degree from the University of Missouri at
Kansas City in 1979 and a BA degree in Journalism from George Washington
University in 1975.
Kelvyn H. Cullimore has served as President of the Company since its
incorporation in 1986, resigned as President and Chief Executive Officer
effective February 28, 1999. He has been a director since 1986 and served as
Chairman of the Board from 1986 to February 1997. Mr. Cullimore continues to
serve as a Director of the Company. Mr. Cullimore received a B.S. in Marketing
from Brigham Young University in 1957 and, following graduation, worked for a
number of years as a partner in a family-owned home furnishings business in
Oklahoma City, Oklahoma. Mr. Cullimore has participated in the organization and
management of various enterprises, becoming the president or general partner in
several business entities, including real estate, the motion picture industry
and equipment partnerships and has served on the board of directors of Brighton
Bank and a privately-owned wholesale travel agency. Since 1975, Mr. Cullimore
has consulted for independent film production and distribution companies and has
been involved in the raising of capital for the production of feature-length
films. From 1979 to 1992, Mr. Cullimore served as chairman of the board and
president of American Consolidated Industries ("ACI"), a corporate affiliate of
Dynatronics Corporation, which in 1992 was merged with and into Dynatronics
Corporation. ACI was a privately-owned holding company for various investments.
From 1983 to 1992, Mr. Cullimore also served as president of Dynatronics
Corporation and from 1983 to present, he has served as chairman of the board of
Dynatronics Corporation, a publicly-held company whose securities are registered
under the Securities Exchange Act of 1934, as amended.
Kelvyn H. Cullimore, Jr. has been a Director of the Company since its
incorporation in 1986. He graduated from Brigham Young University with a degree
in Financial and Estate Planning in 1980. Since graduation, Mr. Cullimore, Jr.
has served on the board of directors of several businesses, including
Dynatronics Corporation, Dynatronics Marketing Company, ACI and a
privately-owned wholesale travel agency. In addition, he has served as
secretary/treasurer of each of the foregoing companies. Mr. Cullimore, Jr. also
served as Executive Vice President and Chief Operating Officer of ACI and he
currently serves as President and a Director of Dynatronics Corporation, a
publicly-held company whose securities are registered under the Securities
Exchange Act of 1934, as amended.
11
<PAGE>
Francis E. McLaughlin has been a Director of the Company since 1988. He
is the founder and principal owner of the McLaughlin Companies, which includes
the largest real estate firm in the U.S. Virgin Islands, as well as a real
estate appraisal company, and property management companies. He has been
involved in the development of several residential and commercial real estate
projects there. An original investor in the First Virgin Islands Federal Savings
Bank, he currently serves as chairman of the board of the institution. Over the
years, Mr. McLaughlin has held leadership positions in civic, community and
professional organizations.
Kumar V. Patel was elected a director of the Company in April 1995.
Since 1976, Mr. Patel has been self-employed in real estate investment and
management in Southern California. He received a B.A. in Honors Economics and
Accounting from the University of Newcastle-Upon-Tyne, Great Britain. He is a
licensed Real Estate Broker and a licensed General Contractor in California. He
is also President of Great Designs Realty and Development Inc., a family
business offering service in foreclosure, property management and construction.
Paul Rasmussen was elected President and Chief Operating Officer
effective March 1, 1999. Prior to being named President, he had served as the
Company's Controller. Mr. Rasmussen has held a number of financial and operation
positions in the airline industry prior to joining ITEC. Mr. Rasmussen received
a Bachelor of Science degree in accounting from the University of Montana in
1972.
Michael L. Pitman has been with the Company since April of 1993. He
served as Marketing Director until June of 1997 at which time he was elected
Senior Vice President of Marketing. Prior to his employment with ITEC, Mr.
Pitman was a salesman for a natural sugar company and a regional food brokerage.
Prior to that time, he managed Ike's Candy Company in Salt Lake City, Utah for
five years.
Dennis Berard was elected Vice-President - Restaurant Operations on
October 31, 1998. He joined the Company in June of 1995 as a co-manager of
McFarlain's Restaurant. Prior to joining the Company, he was the co-owner of a
restaurant in Kimberling City, Missouri. Before moving to the Branson area,
Dennis held various management positions with a number of national restaurant
chains.
Randy S. Brashers was elected Vice President of Operations for the
Company in June of 1997. Mr. Brashers is a life-long resident of the Ozarks. He
grew up in the retail and wholesale broker business and graduated with a B.S.
degree from Southern Missouri State University. He was employed by the
Kimberling City Chamber of Commerce prior to joining ITEC in December of 1993.
He has served as floor manager, assistant operations manager and as operations
manager prior to his current position.
Robert J. Cardon was appointed Corporate Secretary of the Company in
February 1992 and became Treasurer of the Company in February 1997. Mr. Cardon
is Corporate Secretary and is a full time employee of Dynatronics Corporation.
From 1987 to 1988, Mr. Cardon was employed as a registered representative of an
investment-banking firm. He received his B.A. in 1987 and his M.B.A. in 1990,
both from Brigham Young University.
12
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Directors,
officers and beneficial owners of more than 10% of the Company's stock are
required by regulations of the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) forms which they file.
Based solely upon a review of reports furnished to the Company pursuant
to Section 16(a) for its most recent fiscal year, the Company is not aware of
any reports required by Section 16(a) to be filed by directors, officers or
beneficial owners of more than 10% of the Company's stock that were not filed on
a timely basis.
Item 10. Executive Compensation
----------------------
Compensation of Executive Officers
- ----------------------------------
The following table sets forth the compensation of the Company's chief
executive officer during the fiscal years ended June 30, 1998 and 1997 and for
the six month transition period ended December 31, 1998 and year ended December
31, 1999. No other executive officer or individual had a total annual salary and
bonus exceeding $100,000 for any of these periods. No officer had total annual
salary and bonuses in excess of $100,000 for the year ended December 31, 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------------- --------------------- --------------------
Other Restricted
Name and Annual Stock LTIP All Other
Principal Compen- Award(s) Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) ($) SAR(#) ($) sation($)
- --------- ---- --------- -------- ----------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul M. Bluto 1999 -0- -0- $52,500 $ -0- -0- $ -0- $ -0-
(CEO)(1)
Kelvyn H. Cullimore 1998 $ 50,400 $ 43,421 $29,406(3) $ -0- -0- $ -0- $ -0-
(CEO) (2) 1998 $100,800 $ 32,500 $44,019(3) $ -0- -0- $ -0- $ -0-
1997 $100,800 $ -0-(4) $37,076(3) $ -0- -0- $ -0- $ -0 (4)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Bluto was elected the Company's Chief Executive Officer
effective March 1, 1999. Mr. Bluto is not paid a salary for
holding the position of Chief Executive Officer. He was, however,
paid $52,500 for director's fee and consultation services rendered
to the Company for the year ended December 31, 1999. Mr. Bluto
maintains a home in California but visits Branson several times a
year. The Company does provide Mr. Bluto with the use of a Company
owned condominium during his visits to Branson. The Company
payments for the condominium were $9,583 for the months March
through December 1999. This amount is not included in the
compensation table above.
13
<PAGE>
(2) Mr. Cullimore resigned as the Company's Chief Executive Officer
and President effective February 28, 1999. The table above
represents Mr. Cullimore's compensation for the two-month period
ended February 28, 1999, the six-month transition period ended
December 31, 1998; and the two fiscal years ended June 30, 1998
and 1997. Mr. Cullimore's presence in Branson on behalf of the
Company was considered temporary and, therefore, the above
Compensation Table does not include any amount for use by Mr.
Cullimore of the condominium owned by the Company. The Company
payments for the condominium were $1,917 for the months of January
and February 1999; $5,750 for the six-month transition period
ended December 31, 1998; and $11,500 for each of the fiscal years
ended June 30, 1998 and 1997.
(3) Included in these amounts are premiums of $5,704 for the year
ended December 31, 1999, $17,112 for the six-month transition
period ended December 31, 1998, $39,967 for the fiscal year ended
June 30, 1998, and $34,224 for the fiscal year ended June 30, 1997
and on insurance policies funding a salary continuation plan for
Mr. Kelvyn H. Cullimore. Also included are life insurance
premiums, disability insurance premiums and personal usage of a
Company automobile or car allowance.
(4) Mr. Cullimore received 201,523 shares of restricted common stock
as part of the Company's Plan of Reorganization in fiscal 1997.
The stock had no value at that time, and since the value was not
determinable, no value was placed on the stock.
The Company did not grant to executive officers nor were there
outstanding any stock options or stock appreciation rights during fiscal years
ending June 30, 1997 and 1998 or during the transition period ended December 31,
1998 or for the calendar year ended December 31, 1999.
During the last completed fiscal year, the Company made no awards under
any long-term incentive plan. The Company does not maintain any defined benefit
or actuarial plan.
Compensation of Directors
- -------------------------
Directors of the Company receive $1,050 per meeting for service as
directors of the Company. The Board of Directors will meet quarterly or more
often as needed. Directors are reimbursed for expenses incurred on behalf of the
Company in attending directors' meetings.
14
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table sets forth, as of March 25, 2000, certain
information with respect to any person who is known to the Company to be the
beneficial owner of more than five percent (5%) of the Company's capital stock,
each director, certain executive officers and as to all directors and officers
as a group:
Common Stock Beneficially Owned
-------------------------------
Number
Name of shares % of Class(1)
---- --------- -------------
Paul M. Bluto (2) 6,296,572 71.1%
Lourette Ann Bluto (2) 6,296,572 71.1%
Kelvyn H. Cullimore (3) 480,649 6.0%
Kelvyn H. Cullimore, Jr. (4) 230,339 2.9%
Francis E. McLaughlin (5) 177,764 2.2%
Kumar V. Patel (6) 200,000 2.5%
Thomas J. Carlson(7) 133,334 1.7%
Michael L. Pitman 70,563 0.9%
Randy S. Brashers 70,543 0.9%
All Directors and Officers
of the Company as a Group 7,429,445 81.6%
(9 persons)(8)
(1) These calculations are based upon a total of 7,937,638 shares
outstanding as of March 25, 2000. In addition, for each person or
group the number of shares owned and the calculation of the
percentage ownership includes the number of shares that person or
group has the right to acquire.
(2) Mr. Paul Bluto and Mrs. Lourette Ann Bluto jointly own 11,013 shares
as a result of their pre-bankruptcy holdings. Mr. Bluto acquired
4,433,490 restricted shares pursuant to the Company's Plan of
Reorganization. Mr. Bluto acquired 539,573 restricted shares in a
private placement by the Company, and Mrs. Bluto owns 6,257 shares.
In addition, Mr. Bluto is a trustee of the GS&W Services Defined
Benefit Plan, which acquired 383,333 restricted shares in a private
placement by the Company and Mr. Bluto is deemed to be the
beneficial owner of these shares. Mr. Bluto also owns warrants to
purchase 539,573 restricted shares at a price of $1.00 per share.
The GS&W Services Defined Benefit Plan also owns warrants to
purchase 383,333 restricted shares at a price of $1.00 per share.
All shares owned directly or beneficially by either Mr. Bluto or
Mrs. Bluto are deemed to be beneficially owned by the other.
15
<PAGE>
(3) Mr. Cullimore owns 10,453 shares as a result of pre-petition
holdings, he received 201,523 shares as part of the Company's Plan
of Reorganization and he owns 5,000 shares, which he received in
satisfaction of claims as a creditor of the Company. In addition,
Mr. Cullimore acquired 16,667 restricted shares of common stock in
the Company's private placement. Mr. Cullimore may be deemed to be a
control person of Dynatronics Corporation, which owns 230,339
shares, which are included in Mr. Cullimore's holdings.
(4) Mr. Cullimore, Jr. may be deemed to be a control person of
Dynatronics Corporation, which owns 230,339 shares, which are
included in Mr. Cullimore, Jr.'s holdings.
(5) Mr. McLaughlin owns 9,430 shares as a result of pre-petition
holdings and he acquired 66,667 restricted shares in the Company's
private placement. He also owns warrants to purchase 66,667
restricted shares of the Company's common stock at a price of $1.00
per share. He has also purchased 35,000 shares in the open market.
(6) Mr. Patel acquired 100,000 restricted shares in the Company's
private placement. He also owns warrants to purchase 100,000
restricted shares of the Company's common stock at a price of $1.00
per share.
(7) Mr. Carlson acquired 66,667 restricted shares in the Company's
private placement. He also owns warrants to purchase 66,667
restricted shares of the Company's common stock at a price of $1.00
per share.
(8) The calculation of beneficially owned shares of all executive
officers and directors as a group eliminates the duplicate entries
of shares owned by Dynatronics which are reflected in the beneficial
ownership of both Kelvyn H. Cullimore and Kelvyn H. Cullimore, Jr.,
as well as shares owned by GS&W Services, Inc. and the Bluto family,
which are reflected in the beneficial ownership of both Paul and
Lourette Ann Bluto.
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
Mr. Kelvyn H. Cullimore is the Chairman of the Board of Dynatronics
Corporation. Mr. Kelvyn H. Cullimore, Jr. is the President and a Director of
Dynatronics Corporation. Kelvyn H. Cullimore and Kelvyn H. Cullimore, Jr. may be
considered to be affiliates of Dynatronics Corporation by virtue of their
positions with Dynatronics Corporation. Robert J. Cardon, an employee of
Dynatronics Corporation, is the Company Secretary/Treasurer and is paid $1,050
for each board meeting. Dynatronics Corporation owns approximately 3% of the
common stock of the Company (post reorganization).
16
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
--------------------------------
Financial Statements Filed as part of Form 10-KSB: See Index to
Financials on Page F1
<PAGE>
ITEC ATTRACTIONS, INC.
Financial Statements
December 31, 1999
<PAGE>
ITEC ATTRACTIONS, INC.
Index to Financial Statements
- --------------------------------------------------------------------------------
Page
----
Independent Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
ITEC Attractions, Inc.
We have audited the balance sheet of ITEC Attractions, Inc. as of December 31,
1999, and the related statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999, and June 30, 1998, and the six
months ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITEC Attractions, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
years ended December 31, 1999, and June 30, 1998, and the six months ended
December 31, 1998, in conformity with generally accepted accounting principles.
TANNER + Co.
Salt Lake City, Utah
February 24, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
ITEC ATTRACTIONS, INC.
Balance Sheet
December 31, 1999
- ----------------------------------------------------------------------------------------------------------
Assets
------
<S> <C>
Current assets:
Cash $ 644,706
Receivables 80,688
Inventories 95,753
Prepaid expenses 88,322
Current portion of prepaid leases 166,915
------------------
Total current assets 1,076,384
Property and equipment, net 5,691,421
Prepaid leases 965,188
Deposits 13,072
------------------
$ 7,746,065
------------------
- ----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 237,725
Accrued expenses 287,144
Current portion of long-term debt 179,333
------------------
Total current liabilities 704,202
Long-term debt 3,304,034
Accrued lease expense 366,261
Deferred revenue 40,557
Deposits 17,700
------------------
Total liabilities 4,432,754
------------------
Commitments and contingencies -
Stockholders' equity:
Common stock, $.001 par value; authorized 40,000,000
shares; issued and outstanding 7,937,638 shares 7,938
Additional paid-in capital 10,781,076
Accumulated deficit (7,475,703)
------------------
Total stockholders' equity 3,313,311
------------------
$ 7,746,065
------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEC ATTRACTIONS, INC.
Statement of Operations
- ----------------------------------------------------------------------------------------------------------
Year Ended Year Ended Six Months Ended
December 31, June 30, December 31,
-------------------------------------------------------------
1997
1999 1998 1998 (Unaudited)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Theater admissions and concessions $ 2,473,767 $ 2,286,232 $ 1,441,875 $ 1,267,498
Restaurant and deli 2,985,221 2,843,511 1,918,358 1,863,511
Retail sales 596,931 333,120 336,822 205,451
Retail rental income 459,944 430,211 241,503 251,470
-------------------------------------------------------------
6,515,863 5,893,074 3,938,558 3,587,930
-------------------------------------------------------------
Costs and expenses:
Direct exhibition film costs and
concessions 1,188,131 1,054,714 696,495 676,498
Direct restaurant and deli costs 2,327,693 2,396,087 1,509,632 1,514,234
Direct retail costs 436,628 241,257 207,349 142,821
Direct mall operating costs 361,147 399,631 196,147 225,500
-------------------------------------------------------------
4,313,599 4,091,689 2,609,623 2,559,053
-------------------------------------------------------------
Gross profit 2,202,264 1,801,385 1,328,935 1,028,877
-------------------------------------------------------------
General and administrative expenses 779,610 830,325 457,829 173,269
Advertising and marketing expenses 807,189 525,481 305,533 173,434
Depreciation and amortization expenses 464,755 407,449 209,637 201,129
-------------------------------------------------------------
Operating income 150,710 38,130 355,936 481,045
Other income (expense):
Interest expense (313,641) (340,674) (170,100) (169,719)
Interest income 17,303 26,018 12,843 19,054
Other - 24,000 - 12,000
-------------------------------------------------------------
(296,338) (290,656) (157,257) (138,665)
-------------------------------------------------------------
(Loss) income before
provision for
income taxes (145,628) (252,526) 198,679 342,380
Provision for income taxes - - - -
-------------------------------------------------------------
Net (loss) income $ (145,628) $ (252,526) $ 198,679 $ 342,380
-------------------------------------------------------------
Net (loss) income per share -
basic and dilu$ed $ (.02) $ (.03) $ .03 $ .05
-------------------------------------------------------------
Weighted average common shares -
basic and diluted 7,938,000 7,716,000 7,938,000 7,573,000
-------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEC ATTRACTIONS, INC.
Statement of Stockholders' Equity
Year Ended December 31, 1999,
Six Months Ended December 31, 1998, Year Ended June 30, 1998
- ----------------------------------------------------------------------------------------------------------
Total
Common Stock Additional Stockholders'
------------------------------- Paid-In Accumulated Equity
Shares Amount Capital Deficit (Deficit)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1997 6,844,397 $ 6,844 $ 10,432,419 $ (7,276,228) $ 3,163,035
Issuance of common stock for
cash and bankruptcy
conversions and settlements 1,093,241 1,094 348,657 - 349,751
Net loss - - - (252,526) (252,526)
---------------------------------------------------------------------------
Balance, June 30, 1998 7,937,638 7,938 10,781,076 (7,528,754) 3,260,260
Net income - - - 198,679 198,679
---------------------------------------------------------------------------
Balance, December 31, 1998 7,937,638 7,938 10,781,076 (7,330,075) 3,458,939
Net loss - - - (145,628) (145,628)
---------------------------------------------------------------------------
Balance, December 31, 1999 7,937,638 $ 7,938 $ 10,781,076 $ (7,475,703) $ 3,313,311
---------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEC ATTRACTIONS, INC.
Statement of Cash Flows
- ----------------------------------------------------------------------------------------------------------
Year Ended Year Ended Six Months Ended
December 31. June 30, December 31,
------------------------------------------------------
1997
1999 1998 1998 (Unaudited)
------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (145,628) $ (252,526) $ 198,679 $ 342,380
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Depreciation and amortization 464,755 407,449 209,637 201,129
Loss on disposition of property
and equipment - 925 12,416 -
Deferred revenue 40,557 - - -
(Increase) decrease in:
Receivables (65,698) (1,466) 22,621 (32,414)
Inventories (16,945) (17,766) (1,103) (4,199)
Prepaid expenses and deposits (77,404) (25,365) 23,460 (7,012)
Prepaid leases 166,915 166,915 83,457 83,457
Increase (decrease) in:
Accounts payable and accrued
expenses 50,485 212,225 32,741 (42,846)
Deposits (2,800) (1,500) - (3,000)
------------------------------------------------------
Net cash provided by
operating activities 414,237 488,891 581,908 537,495
------------------------------------------------------
Cash flows from investing activities-
purchase of property and equipment (240,259) (627,737) (188,939) (99,506)
------------------------------------------------------
Cash flows from financing activities:
Payments on debt (184,032) (120,886) (89,302) (62,488)
Net proceeds from issuance of
common stock - 349,751 - 349,751
------------------------------------------------------
Net cash (used in) provided
by financing activities (184,032) 228,865 (89,002) 287,263
------------------------------------------------------
(Decrease) increase in cash (10,054) 90,019 303,967 725,252
Cash beginning of period 654,760 260,774 350,793 260,774
------------------------------------------------------
Cash end of period $ 644,706 $ 350,793 $ 654,760 $ 986,026
------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
F-6
</TABLE>
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
December 31, 1999 and 1998, and June 30, 1998
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Organization
The Company's principal business is in the tourist entertainment sector. The
Company has a giant screen tourist entertainment complex in Branson, Missouri,
and began showing its own theme film produced especially for the Branson
location. The Company also operates a restaurant, a deli, a live performance
theater, and a small gift shop in the Branson complex.
Change in Fiscal Year
The Company changed its fiscal year from June 30 to December 31 beginning with
the period ended December 31, 1998.
Unaudited Information
In the opinion of management, the accompanying unaudited financial statements
for the six month period ended December 31, 1997 contain all adjustments
(consisting only of normal recurring items) necessary to present fairly the
results of operations and cash flows for the Company for the six month period
ended December 31, 1997.
Cash Equivalents
The Company considers all highly liquid temporary investments with an original
maturity of three months or less to be cash equivalents.
Inventories
Inventories consist of retail merchandise, food, and concession items and are
recorded at the lower of cost or market, cost being determined on the first-in
first-out (FIFO) method.
- --------------------------------------------------------------------------------
F-7
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Film Development Costs
Film development costs reflect the direct costs incurred to produce a giant
screen film exhibited by the Company. Such costs are amortized using the
straight-line method over an estimated useful life of ten years. The estimated
useful life and method of amortization are based principally on management's
estimates of projected future revenues, and the years over which similar theme
films have been exhibited within the giant screen theater industry. As films are
exhibited and historical information becomes available to aid management in film
revenue projections, amortization will be modified, if necessary, so as to
reasonably relate film costs to estimated gross revenues expected over the
estimated useful life of the films, not to exceed ten years. Management
evaluates the unamortized film development costs for possible impairment giving
consideration to various factors including revenue trends and projected cash
flows. Impairments determined through the evaluation are expensed currently.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation and amortization on capital leases and property and equipment is
determined using the straight-line method over the estimated useful lives of the
assets or terms of the lease. Expenditures of maintenance and repairs are
expensed when incurred and betterments are capitalized. Gains and losses on sale
of property and equipment are reflected in operations.
Income (Loss) Per Share
The computation of basic income (loss) per common share is based on the weighted
average number of shares outstanding during each period.
The computation of diluted income (loss) per common share is based on the
weighted average number of shares outstanding during the period plus the common
stock equivalents which would arise from the exercise of stock options
outstanding using the treasury stock method and the average market price per
share during the period. Common stock equivalents are not included in the
diluted earnings per share calculation when their effect is antidilutive.
- --------------------------------------------------------------------------------
F-8
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Income Taxes
Income taxes are recorded using the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of receivables. In the normal course of business,
the Company provides credit terms to its customers. Accordingly, the Company
performs ongoing credit evaluations of its customers and maintains allowances
for possible losses which, when realized, have been within the range of
management's expectations.
The Company maintains its cash in bank deposit amounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain amounts in the December 1998 and June 1998 financial statements have
been reclassified to conform with the current period presentation.
- --------------------------------------------------------------------------------
F-9
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Property and Equipment
Property and equipment at December 31, 1999 consist of the following:
Buildings $ 5,129,092
Equipment 972,050
Furniture and fixtures 306,410
Land improvements 150,937
Film development costs 900,000
----------------
7,458,489
Less accumulated depreciation and
amortization (1,767,068)
----------------
$ 5,691,421
----------------
3. Lease Obligations
The Company has a ten-year operating lease agreement for a giant screen theater
projection and sound system for its Branson Theater Complex. Under the terms of
this agreement, the Company was required to make advance rental payments. Such
amounts, net of amortization, are reflected in prepaid leases in the
accompanying financial statements. The advance rent payments are being amortized
on a straight-line basis over the initial ten year lease term. Additionally, the
lease agreement requires the monthly payments, adjusted annually based on the
Consumer Price Index, throughout the remaining lease term, together with annual
percentage royalties ranging from one to ten percent based upon the attainment
of certain net theater admission revenue volumes. The lease expires in June
2004, and has an option to be renewed for an additional ten year term. Advance
and fixed minimum lease commitments related to this lease are included in the
following tables.
- --------------------------------------------------------------------------------
F-10
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
3. Lease Obligations Continued
The Company also has a fifty year operating lease on land located in Branson,
Missouri, the site of the Company's giant screen tourist entertainment complex.
An advance rent payment of $1,025,000 was made at the time of the lease which
satisfied the Company's rent obligation for years one through twenty of the
lease agreement. For years twenty-one through fifty of the lease, the Company is
obligated to make quarterly rent payments aggregating $145,000 annually, these
amounts are subject to an annual consumer price index adjustment. Base rents
including the $1,025,000 in advance rents and the $145,000 annual amount
commencing in the twenty-first lease year is expensed on a straight-line basis
over the fifty-year lease term, which under the term of the agreement began
October 1, 1993. Amounts recorded as accrued lease expense in the accompanying
balance sheet reflects an accrual for those portions of the rents that will be
paid during years twenty-one through fifty which are expensed currently using
the straight-line expense recognition method.
In addition, the Company leases a vehicle under a noncancellable operating lease
agreement.
Advance rental payments associated with the theater system and land is reflected
in the current portion of prepaid leases and prepaid leases in the accompanying
balance sheet as summarized below:
Advance rents:
Theater system $ 436,116
Land 695,987
-----------------
1,132,103
-----------------
Less current portion of prepaid leases:
Theater system (116,298)
Land (50,617)
-----------------
Total current portion of prepaid leases (166,915)
-----------------
Prepaid leases $ 965,188
-----------------
- --------------------------------------------------------------------------------
F-11
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
3. Lease Obligations Continued
Annual amortization expense is as follows:
Theater system $ 116,298
Land 50,617
-----------------
$ 166,915
-----------------
A schedule of future minimum rental payments required under operating leases
that have initial or remaining noncancelable lease terms in excess of one year
as of December 31, 1999, is as follows:
Year Ending December 31: Amount
- ------------------------ -----------------
2000 $ 178,399
2001 177,500
2002 177,500
2003 177,500
2004 88,750
Thereafter 4,350,000
-----------------
$ 5,149,649
-----------------
Rental expense on operating leases for the years ended December 31, 1999 and
June 30, 1998 and six months ended December 31, 1998 was approximately $238,000,
and $242,000, $120,000, respectively.
The Company leases certain equipment under noncancellable capital lease
agreements. Assets under capital leases included in property and equipment at
December 31, 1999 are as follows:
Equipment $ 52,798
Less accumulated amortization (14,025)
-----------------
$ 38,773
-----------------
- --------------------------------------------------------------------------------
F-12
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
3. Lease Obligations Continued
Amortization expense for assets under capital leases during the years ended
December 31, 1999 and June 30, 1998 and six months ended December 31, 1998 was
approximately $10,000, $6,000, and $14,000, respectively.
The capital lease obligations have imputed interest rates approximately equal to
the Company's borrowing rate for similar type transactions and are payable in
monthly installments through October 2002. Future minimum lease payments on
capital lease obligations are as follows:
Year Ending December 31: Amount
- ------------------------ -----------------
2000 $ 17,655
2001 12,246
2002 3,102
-----------------
33,003
Less amount representing interest (4,064)
-----------------
Present value of capital lease obligations $ 28,939
-----------------
4. Bank Line-of-Credit
The Company has a bank line-of-credit agreement which allows the Company to
borrow a maximum amount of $400,000 at an interest rate equal to the bank's
prime rate plus 1%. The line-of-credit matures on June 15, 2000, is secured by
real property and has no outstanding balance at December 31, 1999.
5. Long-Term Debt
Long-term debt is comprised of the following:
Note payable to a bank in monthly installments
of $34,000, including interest at prime plus
.75% (9.25% at December 31, 1999) through February
2009, secured by the theater complex $ 3,222,290
Mortgage payable in monthly installments of $741
including adjustable interest from 4% to 12%,
secured by real property 102,414
- --------------------------------------------------------------------------------
F-13
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
5. Long-Term Debt Continued
Note payable in monthly installments of $1,514,
including interest at 10.8%, secured by equipment 55,861
Note payable to a bank in monthly installments of
$2,625, including interest at 9.25%, secured by
equipment 49,012
Note payable in monthly installments of $607,
including interest at 8%, secured by a vehicle 24,851
Capital lease obligations (see note 3) 28,939
-----------------
3,483,367
Less current portion (179,333)
-----------------
Long-term debt $ 3,304,034
-----------------
Future maturities of long-term debt are as follows:
Year Ending December 31: Amount
- ------------------------ -----------------
2000 $ 179,333
2001 194,149
2002 184,102
2003 194,944
2004 191,961
Thereafter 2,538,878
-----------------
$ 3,483,367
-----------------
6. Lessor Lease Agreements
The Company has agreements to rent space as lessor to various retail tenants in
its Branson, Missouri theater complex with terms ranging from one to five years.
The agreements also include certain renewal terms for leases beyond five years,
which are not included in the amounts below. As of December 31, 1999, the
Company held $17,700 in deposits related to the leases.
- --------------------------------------------------------------------------------
F-14
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Lessor Lease Agreements Continued
A summary of future minimum rentals to be received are as follows:
Year Ending December 31: Amount
- ------------------------ -----------------
2000 $ 325,493
2001 252,000
2002 148,200
2003 116,775
2004 63,600
-----------------
$ 906,068
-----------------
7. Income Taxes
The provision for income taxes differs from the amounts which would be provided
by applying the statutory federal income tax rate to (loss) income before
provision for income taxes for the following reasons:
Year Year Six Months
Ended Ended Ended
December 31, June 30, December 31,
------------------------------------------------
1999 1998 1998
------------------------------------------------
Federal income tax
(provision) benefit at
statutory rate $ 53,000 $ 84,000 $ (68,000)
Change in valuation
allowance (53,000) (84,000) 68,000
------------------------------------------------
$ - $ - $ -
------------------------------------------------
- --------------------------------------------------------------------------------
F-15
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Income Taxes Continued
Deferred tax assets (liabilities) at December 31, 1999 are comprised of the
following:
Write-down of assets $ 1,666,000
Net operating loss carry forward 884,000
Depreciation (68,000)
Accrued rents 124,000
-----------------
2,606,000
Less valuation allowance (2,606,000)
-----------------
$ -
-----------------
A valuation allowance has ben recorded for the full amount of the deferred tax
asset because it is more likely than not that the deferred tax asset will not be
realized.
At December 31, 1999, the Company has approximately $2,600,000 of net operating
loss carryforwards to offset future taxable income. These carryforwards begin to
expire in 2011.
Since certain of the net operating losses were incurred from activities in the
U.S. Virgin Islands and the Company is treated as a foreign corporation doing
business in the United States, net operating losses generated from U.S. Virgin
Island activities are not available to offset income from activities within the
United States. In addition, if substantial changes in the Company's ownership
should occur, there would also be an annual limitation of the amount of NOL
carryforwards which could be utilized.
8. Related Party Transaction
During the year ended June 30, 1998, the Company paid Dynatronics Corporation
(Dynatronics), a company which had common management a monthly fee for
administrative staff, accounting services, and accounting personnel. The related
costs are included in general and administrative expenses and amounted to
approximately $64,000. Management has terminated this agreement, therefore, no
costs were incurred for the six months ended December 31, 1998 or for the year
ended December 31, 1999.
- --------------------------------------------------------------------------------
F-16
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
9. Supplemental Cash Flow Information
During the year ended December 31, 1999, the Company acquired property and
equipment in exchange for the long-term debt of $20,809.
During the six months ended December 31, 1998, the Company acquired property and
equipment in exchange for long-term debt of $60,030.
Actual amounts paid for interest and income taxes are as follows:
Year
Year Ended Ended Six Months Ended
December 31, June 30, December 31,
----------------------------------------------------------
1997
1999 1998 1998 (Unaudited)
----------------------------------------------------------
Interest $ 340,589 $ 337,592 $ 170,100 $ 168,162
----------------------------------------------------------
Income taxes $ - $ - $ - $ -
----------------------------------------------------------
10. Fair Value of Financial Instruments
The Company's financial instruments consist of cash, receivables, payables, and
notes payable. The carrying amount of cash, receivables and payables
approximates fair value because of the short-term nature of these items. The
carrying amount of the notes payable approximates fair value as te individual
borrowings bear interest at floating market interest rates.
- --------------------------------------------------------------------------------
F-17
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
11. Stock Options
The Company has granted stock options to purchase the Company's common stock.
Options generally vest over an eighteen month period. Information regarding
these stock options are summarized below:
Number of Option Price
Options Per Share
---------------------------------
Outstanding at July 1, 1997 829,001 $ 1.00
Granted 1,170,999 1.00
---------------------------------
Outstanding at December 31, 1998
and June 30, 1998 2,000,000 1.00
Expired (2,000,000) 1.00
---------------------------------
Outstanding at December 31, 1999 - $ -
---------------------------------
Options exercisable at December 31, 1999 and 1998 and June 30, 1998 were -0-,
2,000,000, and 944,000, respectively.
12. Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized in the financial
statements. During the year ended December 31, 1999, no options were granted,
therefore, there would be no pro forma effect on the 1999 operations. Had
compensation cost for the Company's stock options been determined based on the
fair value at the grant date consistent with the provisions of SFAS No. 123, the
Company's net earnings and earnings per share would have been reduced to the pro
forma amounts indicated below:
Six Months
Years Ended Ended
June 30, December 31,
1998 1998
-----------------------------------
Net income (loss) - as reported $ (252,526) $ 198,679
Net income (loss) - pro forma $ (476,592) $ 7,423
Income (loss) per share - as reported $ (.03) $ .03
Income (loss) per share - pro forma $ (.06) $ .00
- --------------------------------------------------------------------------------
F-18
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
12. Stock-Based Compensation Continued
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
Six Months
Years Ended Ended
June 30, December 31,
-----------------------------------
1998 1998
-----------------------------------
Expected dividend yield $ - $ -
Expected stock price volatility 202% 202%
Risk-free interest rate 6% 5%
Expected life of options 18 months 18 months
-----------------------------------
The weighted average fair value options granted during the year ended June 30,
1998 and the six months ended December 31, 1998 are $.19 and $.18, respectively.
- --------------------------------------------------------------------------------
F-19
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
13. Business Segments
The Company operates in three business segments: 1) Theater and concessions, 2)
Restaurant and deli services, 3) Retail services.
The following tables present financial information by business segment for the
years ended December 31, 1999 and June 30, 1998 and for the six months ended
December 31, 1998.
Restaurant Corporate
Year Ended Theater and and Deli Retail and
December 31, 1999 Concessions Services Services Eliminations Total
- --------------------------------------------------------------------------------
Sales to
unaffiliated
customers $2,473,767 $2,985,221 $1,056,875 $ - $6,515,863
Operating income
(loss) $1,285,636 $ 657,528 $ 259,100 $(2,051,554) $ 150,710
Identifiable
assets $ 843,193 $ 620,727 $ - $ 4,227,501 $5,691,421
Restaurant Corporate
Year Ended Theater and and Deli Retail and
June 30, 1998 Concessions Services Services Eliminations Total
- --------------------------------------------------------------------------------
Sales to
unaffiliated
customers $2,286,232 $2,843,511 $ 763,331 $ - $5,893,074
Operating income
(loss) $1,231,518 $ 447,424 $ 122,443 $(1,763,255) $ 38,130
Identifiable
assets $1,011,129 $ 526,170 $ - $ 4,330,893 $5,868,192
Restaurant Corporate
Six Months Ended Theater and and Deli Retail and
December 31, 1998 Concessions Services Services Eliminations Total
- --------------------------------------------------------------------------------
Sales to
unaffiliated
customers $1,441,875 $1,918,358 $ 578,325 $ - $3,938,558
Operating income
(loss) $ 745,380 $ 408,726 $ 174,829 $ (972,999) $ 355,936
Identifiable
assets $ 951,750 $ 659,413 $ - $ 4,283,945 $5,895,108
- --------------------------------------------------------------------------------
F-20
<PAGE>
ITEC ATTRACTIONS, INC.
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
14. Recent Accounting Pronouncements
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective date of FASB
Statement No. 133." SFAS 133 establishes accounting and reporting standards for
derivative instruments and requires recognition of all derivative as assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. SFAS 133 is now effective for fiscal years beginning
after June 15, 2000. The Company believes that the adoption of SFAS 133 will not
have any material effect on the financial statements of the Company.
- --------------------------------------------------------------------------------
F-21
<PAGE>
(a) Exhibits
--------
Reg. S-B
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation of the Registrant, as
amended (incorporated by reference to Registration
Statement on Form S-1, Registration No. 33-48630)
3.2 Bylaws of the Registrant, as amended and restated on
April 6, 1991 (incorporated by reference to
Registration Statement on Form S-1, Registration No.
33-48630)
3.3 Amendments to Bylaws of the Registrant dated August
28, 1991 and July 24, 1992 (incorporated by reference
to Registration Statement on Form S-1, Registration
No. 33-48630)
4.1 Specimen Certificate for the Common Stock of the
Registrant (incorporated by reference to Registration
Statement on Form S-1, Registration No. 33-48630)
10.3 Ground Lease Agreement dated July 27, 1993 between
Treasure Lake RV 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 for loan from the
Bank of America 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 the
Bank of America (incorporated by reference to
Registration Statement on Form S-1, Registration No.
33-64132)
10.10 Distribution Agreement dated July 14, 1995 between
IMAX(R) Corporation and the Company (incorporated by
reference to Form 10-KSB for year ended June 30,
1997).
10.12 Third Modification Agreement dated March 1, 1997
between NationsBank and the Company. (incorporated by
reference to Form 10-KSB for year ended June 30,
1997).
10.13 System Lease Agreement as amended dated August 1,
1993 between IMAX(R)Corporation and the Company.
(incorporated by reference to Form 10-KSB for year
ended June 30, 1997).
17
<PAGE>
10.14 Ground Lease Agreement dated December 18, 1999
between Treasure Lake RV Resort Camping Club, Inc.
and ITEC Attractions, Inc.
(b) Reports on Form 8-K:
-------------------
The Company filed a current report on Form 8-K with the Securities and Exchange
Commission on December 17, 1999 reporting the merger of International Tourist
Entertainment Corporation, a U.S. Virgin Islands corporation, into ITEC
Attractions, Inc., a Nevada corporation.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION
By /s/ Paul E. Rasmussen Date: March 25, 2000
----------------------------
Paul E. Rasmussen,
President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Paul M. Bluto Chairman of the Board of Directors 3/25/00
- ----------------------------
Paul M. Bluto Chief Executive Officer and
Chief Financial Officer
/s/ Paul E. Rasmussen President and 3/25/00
- ----------------------------
Paul E. Rasmussen Chief Operating Officer
/s/ Kelvyn H. Cullimore Director 3/25/00
- ----------------------------
Kelvyn H. Cullimore
/s/ Kelvyn H. Cullimore, Jr. Director 3/25/00
- ----------------------------
Kelvyn H. Cullimore, Jr.
- ---------------------------- Director 3/25/00
Francis E. McLaughlin
/s/Lourette Ann Bluto Director 3/25/00
- ----------------------------
Lourette Ann Bluto
- ---------------------------- Director 3/25/00
Thomas J. Carlson
- ---------------------------- Director 3/25/00
Kumar V. Patel
</TABLE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (the "Lease") is made and entered into the ______
day of ______________, 1999, by and between TREASURE LAKE R.V. RESORT CAMPING
CLUB, INC., a Missouri non-profit corporation of Branson, Missouri ("Lessor")
and ITEC ATTRACTIONS, INC., a Nevada corporation, successor to INTERNATIONAL
TOURIST ENTERTAINMENT CORPORATION, a U.S. Virgin Islands corporation,
("Lessee").
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. LEASE GRANT. The Lessor hereby leases to the Lessee and the Lessee
does hereby take as Lessee from the Lessor, the real property, located in
Branson, Missouri and more particularly described in Exhibit A, attached hereto
and made a part hereof by reference (the "Premises") together with improvements
now or hereafter to be constructed on said real property.
2. TERM. The term of this Lease shall begin on the _____ day of
____________, 1999 (the "Effective Date"), and shall continue for a period
coextensive with the term, or any extension or reduction thereof, set forth in
that certain Ground Lease Agreement entered into between Lessor and Lessee on
the 16th day of February, 1993 (the "Original Ground Lease"), unless terminated
under any other provision of this Lease.
3. RENT. Lessee shall pay to Lessor during the term of this Lease the
amount of Twenty Thousand Dollars ($20,000.00) per calendar year (the "Base
Rent"), in equally amortized monthly installments payable, without demand, in
advance on the first day of each calendar month at One Treasure Lake Drive,
Branson, Missouri 65616. The first monthly installment shall be payable on the
first day of the seventh (7th) month after the execution of this Lease
Agreement. Time is of the essence in the payment of rent. Rent for any partial
year shall be prorated at the rate of one twelfth (1/12) of the annual rent for
each month of such partial year and rent for any partial month shall be prorated
on a per diem basis.
Lessee shall pay to Lessor, as additional rent, for any area of the
Premises exceeding 1.5 acres, a sum equal to the same rate per square foot as
the Base Rent of Twenty Thousand Dollars ($20,000.00) per year relates to 1.5
acres. Said additional rent shall be payable at the same time and in the same
manner as the Base Rent.
Lessee has contracted with Surrey Vacation Resorts, a Missouri
corporation ("Surrey"), whereby Surrey has committed to furnish sufficient fill
dirt (currently estimated at approximately 42,900 cubic yards) to the Premises
in order to permit Lessee to construct a parking lot on the Premises (the
"Parking Lot"). In the event that Surrey shall breach its obligations to Lessee
and fail to provide sufficient fill dirt to permit Lessee to construct and
complete the Parking Lot within the first six (6) months of this Lease, then the
Base Rent shall be reduced beginning with the seventh month from the scheduled
Twenty Thousand Dollars ($20,000.00) per year to Five Thousand Dollars
($5,000.00) per year (prorated in equally amortized monthly installments) until
the earlier of (i) the first month following completion or use of the Parking
Lot, or (ii) the third anniversary of the execution of this Lease.
4. CONDITION. Lessee has fully inspected the Premises and accepts the
same in an "AS IS" condition, acknowledging that Lessor has no duty to make any
changes, alterations or repairs to the Premises prior to or during this Lease,
other than those resulting from the negligence or omissions of Lessor, its
agents, employees or contractors.
<PAGE>
5. LESSEES PROPERTY. Lessee agrees that any furnishings, fixtures,
equipment, merchandise and other personal property of Lessee or persons claiming
under Lessee which may be on the Premises shall be at the sole risk and hazard
of Lessee. Lessee shall pay all taxes levied, imposed or assessed against the
furniture, fixtures, leasehold improvements, equipment, signs and any other of
Lessee's personal or other property located in or upon the Premises and any and
all sales and use taxes levied, imposed or assessed against the business
transactions of Lessee.
6. EXPENSES. Lessee shall pay for any and all utility services and
expenses required for the operation of or furnished to or consumed on the
Premises including, without limitation, all gas, water and electric utilities,
telephone, janitor, maintenance and trash removal expenses. Lessor shall pay all
property taxes associated with the Premises during the Term, and Lessee shall on
demand, reimburse Lessor for such payment. It is intended that during the term
of this Lease, the Base Rent, together with any additional rent as set forth
elsewhere herein, shall be absolutely net to Lessor of all expenses incident to
the Premises and this Lease.
7. MAINTENANCE. Lessee shall keep the Premises free from refuse and
shall maintain the Premises in a clean, safe and presentable condition, free
from nuisance and hazardous materials, as required by all applicable laws,
ordinances, codes and regulations. Lessee shall also repair all damage of any
kind to the Premises occurring during this Lease, provided, however, Lessee will
be permitted to determine in its sole discretion whether to repair or replace
any damaged or destroyed Improvements (as defined below). Lessee shall not
suffer or permit any lien or encumbrance (except for inchoate liens) to attach
to the Premises by reason of any work done or performed or any material or
materials furnished by or to the Lessee. Lessee covenants to indemnify, hold
harmless and defend Lessor, its successors and assigns, from any and all such
claims.
8. IMPROVEMENTS. Lessee may, but shall not be required to construct
upon the Premises, at such time or times as Lessee shall deem it to be
appropriate, such improvements as Lessee shall determine to be most appropriate
for its economic use of the Premises. All such improvements shall be constructed
in accordance with applicable insurance requirements, legal requirements, and in
a good and workmanlike manner. Such improvements shall comply with all
applicable code requirements from the public authorities with jurisdiction over
the Premises. Lessee shall comply with any requirements of the City of Branson,
Missouri regarding the replacement of trees which are removed to construct
improvements. To the fullest extent permissible by the City of Branson,
Missouri, Lessee shall place any replacement trees on property controlled by
Lessor, at such locations as Lessor may designate. "Improvements" means the
building or buildings, signs, other structures, site work, pavement and
landscaping currently in place or to be erected, constructed or placed upon or
to become a part of the Premises and all replacements thereof, and additions and
improvements thereto. All improvements made for or installed in the Premises by
Lessee shall become the property of Lessor upon the expiration or earlier
termination of this Lease.
Lessor shall, at Lessee's sole cost and expense, cooperate with Lessee
to enable Lessee to obtain all permits, zoning changes, approvals of
governmental entities or other parties, easements, utilities and other matters
reasonably necessary to enable Lessee to construct and operate the Improvements.
9. MECHANIC'S LIEN. Lessee will not permit any mechanic's lien or liens
to be placed upon the Premises (except for inchoate liens). Nothing in this
Lease shall be deemed or construed in any way as constituting the request of
Lessor, expressed or implied, to any person, for the performance of any labor or
the furnishing of any materials for all or part of the Premises. If any lien is
claimed against the Premises for services or materials provided at the request
or for the benefit of Lessee, then, in addition to any other right or remedy of
Lessor, if (1) Lessee has not caused such lien to be discharged of record or
<PAGE>
bonded within ninety (90) days after it receives written notice from Lessor of
the filing of such lien or (2) Lessee has not contested by appropriate
proceedings, the amount, validity, or application of any such lien which suspend
the collection thereof pending final determination of such proceedings, then
Lessor may notify Lessee that such continuing lien constitutes an event of
default.
10. LIABILITY. Lessor shall not be liable to Lessee or Lessee's
customers, licensees, agents, guests or employees for any injury or damages to
its, his or their persons or property by any cause except the direct and active
negligence of or intentional acts of Lessor.
11. INSURANCE. At all times during this Lease, Lessee shall, at its
sole cost and expense, (i) maintain, in full force and effect, a policy of
commercial general liability insurance, including contractual liability
coverage, on an occurrence form, providing coverage against claims for bodily
injury, death and property damage, with coverage of a minimum of One Million
Dollars ($1,000,000.00) per occurrence, naming Lessor as an additional insured,
and (ii) maintain, in full force and effect, a policy of workers' compensation
insurance providing full statutory coverage for the employees of Lessee under
the Missouri Workers' Compensation Law, including employers' liability coverage
with a minimum limit per occurrence of Five Hundred Thousand Dollars
($500,000.00).
Compliance with the above insurance requirements shall not limit
Lessee's liability in any way.
Upon execution of this Lease, annually at policy renewals, and any
other time upon written or oral request by Lessor, Lessee shall deliver
certificates of insurance evidencing insurance coverages to be maintained
hereunder. Each certificate shall provide that the insurer will not cancel or
materially amend such policies except after thirty (30) days written notice to
Lessor.
12. INDEMNIFICATION. Lessee shall indemnify and hold Lessor, its
members, officers, directors, employees, agents, successors and assigns,
harmless from any and all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees and expenses) causes of action, suits,
claims, demands or judgments of any nature arising from (a) injury to or death
of any person, or damage to or loss of property on the Premises or connected
with the use, condition or occupancy of the Premises, (b) Lessee's violation of
this Lease, (c) any act or omission of Lessee or their agents or invitees, or
(d) Lessee's use, generation, storage, release or disposal of any hazardous
materials or environmentally threatening condition or material on the Premises.
Lessee shall also indemnify and hold Lessor harmless from any and all liability,
cost or expense arising out of or connected with the business of Lessee.
13. ASSIGNMENT AND SUB-LETTING. Lessee shall have no right to assign or
sub-let the Premises, or any part thereof, without the written consent of
Lessor, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, Lessee may assign or sub-let the Premises in conjunction with any
assignment or sublease permitted under Section 14 of the Original Ground Lease.
14. USE OF THE PREMISES. The Premises shall not be used for any illegal
purposes or in violation of any legal requirement of any public authority, or in
any manner to create any nuance or trespass, or to make void or voidable any
insurance on the Premises. The Lessee shall not permit the Premises, or any part
thereof, to be used in any business having as its primary source of income, the
sale of alcoholic beverages.
<PAGE>
15. CARE OF THE PREMISES BY LESSEE. Lessee shall not commit or allow
any waste to be committed on any portion of the Premises and at the termination
of this Lease, Lessee shall deliver the Premises to Lessor in as good condition
as at the commencement date, ordinary wear and use excepted. Lessee will, at
Lessee's sole expense, take good care of the Premises and the appurtenances
therein. Subsequent to the execution of this Lease, the Lessor shall have no
right or obligation to make any repairs, improvements or alterations whatsoever
to the Premises except for repairs of latent defects not discoverable by Lessee
in the exercise of reasonable diligence. The Lessee shall service, keep and
maintain the Premises and all installed fixtures and systems, including, without
limitation, all driveways, parking lots, walkways, landscaped areas, plumbing,
wiring, piping, fixtures, doors, equipment, heating, air conditioning and
electrical systems and appurtenances serving the Premises in good order and
repair during the lease term.
16. CONDEMNATION. If all of the Premises shall be taken in a
condemnation proceeding, or if a portion thereof shall be taken which materially
interferes with the use and operation of the Premises by Lessee, this Lease
shall terminate as of the date of such taking. If less than all of the Premises
shall be taken in a condemnation proceeding, but such taking does not materially
interfere with the use of the Premises by Lessee, then this Lease will continue
and the rights under this Lease shall not change, provided, however, the amount
of rent that Lessee is thereafter required to pay to Lessor shall be reduced for
any area of the Premises taken in such condemnation by an amount equal to the
same rate per square foot as the Base Rent of Twenty Thousand Dollars
($20,000.00) per year relates to 1.5 acres. Lessee shall have no right to any
proceeds of any condemnation award.
17. INSPECTION OF PREMISES BY LESSOR. Lessor shall have the right to
enter the Premises at all reasonable times for the purpose of inspecting the
same, or for exhibiting the Premises for purposes of appraisal, inspection,
sale, mortgage or re-letting or for repair in the event of loss.
18. REPRESENTATIONS AND WARRANTIES OF LESSOR. The following
representations and warranties set forth in the Original Ground Lease are hereby
made by Lessor with respect to the Premises as if set forth in haec verba:
6.1(a), 6.1(b), 6.1(c), 6.1(f), 6.1(g) and 6.1(h).
19. REPRESENTATIONS AND WARRANTIES OF LESSEE. The following
representations and warranties set forth in the Original Ground Lease are hereby
made by Lessee with respect to the Premises as if set forth in haec verba:
6.2(a) and 6.2(b).
20. RIGHT OF FIRST REFUSAL AND PURCHASE. If Lessor determines to sell
the Premises to a third party, Lessee shall have the right of first refusal to
acquire the Premises from Lessor. Lessee's right of first refusal to acquire the
Premises under this Section shall be upon the same terms and conditions as are
set forth in Section 27 of the Original Ground Lease.
21. EVENTS OF DEFAULT. The happening of any one or more of the
following events (if Lessee shall fail to cure, remedy or correct such event
within thirty (30) days after written notice from Lessor) shall constitute a
breach of this Lease by Lessee: (a) the failure of Lessee to pay any rent or any
other sums of money due hereunder; (b) the failure of Lessee to comply with any
provision of this Lease; (c) the failure to comply with any provision of the
Ground Lease Agreement dated the 16th day of February, 1993 entered into by the
parties; (d) the taking of the leasehold in execution or other process of law in
any action against Lessee; (e) the filing of any bankruptcy or similar
proceeding by or against Lessee under any applicable law; (f) the appointment of
a receiver or trustee for Lessee's leasehold interest in the Premises or for all
or a substantial part of the assets of Lessee; and, (g) any other act or
omission designated as an event of default in this Lease.
<PAGE>
22. REMEDIES ON DEFAULT. Upon the occurrence of any event of default by
Lessee, Lessor shall have the option, upon written notice to Lessee, to declare
this Lease to be terminated and upon such termination, all unpaid rental for the
remainder of the Lease term shall be immediately due and payable. Further, upon
such termination, Lessee shall remove all of Lessee's personal property
(including movable equipment and trade fixtures) and Lessee shall repair all
injury done by or in connection with the installation or removal of said
property and surrender the Premises (together with all keys and other access
devices to the Premises) in as good a condition as they were at the beginning of
the Lease term, reasonable wear and tear excepted. All property of Lessee
remaining on the Premises thereafter shall be deemed conclusively abandoned and
may, at the election of Lessor, either be retained as Lessor's property or be
removed and disposed of by Lessor. In the event of termination of the Lease,
Lessee's interest in this Lease shall be forfeited and Lessee shall be
considered a tenant from month to month for purposes of an action by Lessor to
recover rent and possession. If Lessor is required to utilize the courts to
enforce this agreement, Lessor shall be entitled to recover reasonable attorney
fees and court cost, in addition to any other relief sought.
23. RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by
this Lease are cumulative and the use of any one right or remedy by either party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
24. RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be
deemed or construed by the parties hereto, nor by any third party, as creating
the relationship of principal and agent or of partnership or of joint venture
between Lessor and Lessee, it being understood and agreed that no provision
contained herein, nor any acts of the parties herein shall be deemed to create
any relationship between the parties other than the relationship of Lessor and
Lessee.
25. WAIVER OF DEFAULT. No waiver by the parties hereto of any default
or breach of any term, condition or covenant of this Lease shall be deemed to be
a waiver of the same or any other term, condition or covenant contained herein.
26. ENTIRE AGREEMENT. This agreement represents the entire agreement
between the parties and no other agreements, warranties or representations of
any kind are made by either party except as expressly contained or referenced
herein. This agreement can only be amended in writing by a document signed by
both Lessor and Lessee.
27. GOVERNING LAW AND VENUE. This Lease and the rights and obligations
of the parties hereto are governed by the laws of the State of Missouri. Each
party agrees that any cause of action which may arise from this Lease or the
rights and obligations of the parties hereto, shall be brought in the Court of
the State of Missouri in Taney County, Missouri.
28. ATTORNEYS' FEES. The prevailing party in any action arising under
the terms of this Lease shall be entitled to recover the costs and a reasonable
attorneys' fees, at trial, in all administrative proceedings and appeals, and in
all post judgment enforcement and collection actions, and any judgment so
entered shall reserve jurisdiction for purposes of assessing such post judgment
costs and attorneys' fees.
29. FURTHER ASSURANCES. Lessor and Lessee agree that they will, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered such supplements hereto and such further instruments
as may be reasonably required for correcting any inadequate or incorrect
description of the Premises hereby leased or intended so to be or for carrying
out the intention hereof.
<PAGE>
30. NOTICES. Any and all notices or other communication required or
desired to be given hereunder by any party shall be in writing. A notice shall
be validly given or made to another party if delivered either personally or upon
receipt if deposited in the United States mail, certified or registered, postage
prepaid and if addressed to the applicable party as set forth below.
If to Lessor: TREASURE LAKE R.V. CAMPING CLUB
1 Treasure Lake Drive
Branson, Missouri 65616
With a copy (which shall not constitute notice) to:
GREENE & CURTIS, L.L.P.
ATTORNEYS AT LAW
Attention: Ben K. Upp
1350 East Woodhurst
Springfield, Missouri 65804
If to Lessee: ITEC ATTRACTIONS
3562 Shepherd of the Hills Expressway
Branson, Missouri 65616
Attention: Paul Rasmussen
With a copy (which shall not constitute notice) to:
SCHMIDT, KIRBY & SULLIVAN, P.C.
Attention: Dennis C. O'Dell
2838 South Ingram Mill Road
Springfield, Missouri 65804
31. DUPLICATE ORIGINALS. This Lease may be executed in duplicate and
each such executed duplicate shall constitute an original.
IN WITNESS WHEREOF, the parties have hereunto set their hands the day
and date first above written.
TREASURE LAKE R.V. RESORT
CAMPING CLUB, INC., a Missouri
Non-Profit Corporation
By: __________________________
Title: _______________________
"LESSOR"
ITEC ATTRACTIONS, INC., a
Nevada Corporation, successor
to INTERNATIONAL TOURIST
ENTERTAINMENT CORPORATION
By: __________________________
Title: _______________________
"LESSEE"
<PAGE>
Lease Area No. 3 Description:
A Parcel of land situated in the N 1/2 of the SE 1/4 of the NW 1/4 of Section
35, Township 23 North, Range 22 West, in the City of Branson, Taney County,
Missouri, Being more particularly described as follows: Beginning at a 5/8" iron
pin set by RLS 2190 marking the Northwest corner of the SE 1/4 of the NW 1/4,
said point being the Northwest corner of the Replat Commerce Park West Plat Book
22, at Page 42, a commercial subdivision plat recorded in Plat Book 26, at Pages
76 through 79 of the records of Taney County, Missouri, Thence S OO 05'34" E,
along the West line of said Replat Commerce Park West Plat Book 22, at page 42,
a distance of 538.60 feet to a point on the North right-of-way line of the
Shepherd of the Hills Expressway; Along the North right-of-way line of the
Shepherd of the Hills Expressway as follows: Thence S 87 34'48" W, a distance of
317.00 feet; Thence Westerly along a 2.2228 degree curve to the right, 43.79
feet (said curve having a radius of 2455.00 feet); Thence S 88 36'07" W, a
distance of 287.25 feet; Thence Westerly along a 1.6632 degree curve to the
left, 11.97 feet (said curve having a radius of 3445.00 feet) to a point of the
East line of the ITEC Property Lease; Then N 08 45'26" W, leaving the North
right-of-way line of the Shepherd of the Hills Expressway and along the East
line of the ITEC Property Lease, a distance of 109.85 feet to the New Point of
Beginning; Along the East line of the ITEC Property Lease as follows: Thence
continuing N 08 45'26" W, a distance of 14.07 feet, Thence N 05 55'39" E, a
distance of 131,93 feet; Thence N 20 46'01" W, a distance of 106.73 feet; Thence
N 08 45'26" W, a distance of 96.80 feet; Thence S 88 34'53" E, leaving the East
line of the ITEC Property Lease, a distance of 101.49 feet; Thence S 20 29'32"
E, a distance of 252.72 feet; Thence Southerly along a 66.6230 degree curve to
the right, 125.18 feet (said curve having a radius of 86.00 feet); Thence S 62
54'26" W, a distance of 98.06 feet; Thence Southwesterly along a 89.5247 degree
curve to the left, 1.13 feet (said curve having a radius of 64.00 feet) to the
New Point of Beginning; Containing 0.98 acres of land, more or less, Subject to
all easements and restrictions of record.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INTERNATIONAL TOURIST ENTERTAINMENT CORPORATION FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 644,706
<SECURITIES> 0
<RECEIVABLES> 80,688
<ALLOWANCES> 0
<INVENTORY> 95,753
<CURRENT-ASSETS> 1,076,384
<PP&E> 7,458,489
<DEPRECIATION> 1,767,068
<TOTAL-ASSETS> 7,746,065
<CURRENT-LIABILITIES> 704,202
<BONDS> 3,304,034
0
0
<COMMON> 7,938
<OTHER-SE> 3,305,373
<TOTAL-LIABILITY-AND-EQUITY> 7,746,065
<SALES> 6,515,863
<TOTAL-REVENUES> 6,533,166
<CGS> 4,313,599
<TOTAL-COSTS> 6,365,153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 313,641
<INCOME-PRETAX> (145,628)
<INCOME-TAX> 0
<INCOME-CONTINUING> (145,628)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (145,628)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
