UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 2000.
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act for the transition period from ____________ to ------------.
Commission file number 0-21070
ITEC Attractions, Inc.
(Exact name of small business issuer as specified in its charter.)
Nevada 66-0426648
------ ----------
(State of Incorporation) (IRS Employer Identification No.)
3562 Shepherd of the Hills Expressway Branson, Missouri 65616
-------------------------------------------------------------
(Address of principal executive offices)
(417) 335-3533
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 after
the distribution of securities under a plan confirmed by a court.
Yes X No____
The number of shares outstanding of the issuer's common stock, $.001 par value,
as of September 30, 2000 is 7,937,638 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
ITEC Attractions, Inc.
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Condensed Balance Sheet
September 30, 2000 ..................................................................... 1
Condensed Statements of Operations
Three and Nine Months Ended September 30, 2000
And September 30, 1999..... ............................................................ 2
Condensed Statements of Cash Flows
Nine Months Ended September 30, 2000
And September 30, 1999................................................................... 3
Notes to Condensed Financial Statements .................................................. 4
Item 2. Management's Discussion and Analysis
Or Plan of Operation ................................................................... 5
PART II. Other Information........... .................................................... 9
</TABLE>
<PAGE>
ITEC Attractions, Inc.
Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
Sept 30, Sept. 30,
2000 1999
--------- --------
ASSETS
------
<S> <C> <C>
Current assets:
Cash $ 180,801 $ 419,166
Receivables 90,002 107,482
Inventories 225,511 165,444
Prepaid expenses 75,974 109,153
Prepaid leases-current 166,915 166,915
------------- -------------
Total current assets 739,203 968,160
Property and equipment, net 5,980,056 5,740,812
Prepaid leases-non current 840,002 1,006,917
Deposits 13,787 14,654
------------- -------------
TOTAL ASSETS $ 7,573,048 $ 7,730,543
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 309,329 $ 263,460
Accrued expenses 365,856 413,543
Current portion of long-term debt 179,333 136,826
------------- -------------
Total current liabilities 854,518 813,829
Accrued lease expense 408,522 352,174
Long-term debt 3,494,739 3,378,998
Security deposits 16,900 20,441
------------- -------------
Total liabilities 4,774,679 4,565,442
Stockholders' equity
Common stock, $.001 par value. Authorized 40,000,000
shares, issued and outstanding 7,937,638 shares as of
September 30, 2000 7,938 7,938
Additional paid-in capital 10,781,076 10,781,076
Accumulated deficit (7,990,645) (7,623,913)
------------- -------------
Net stockholders' equity 2,798,369 3,165,101
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,573,048 $ 7,730,543
============= =============
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
ITEC Attractions, Inc.
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenue:
Theater and concession $ 738,959 $ 776,731 $ 1,827,979 $ 1,749,394
Restaurant and Food Court 1,015,125 866,363 2,054,774 1,868,015
Gift shop 175,813 168,862 383,723 356,867
Mall operation 138,664 136,477 347,502 335,190
------------ ------------ ------------- -----------
2,068,561 1,948,433 4,613,978 4,309,466
------------ ------------ ------------- -----------
Direct Expense:
Theater and concession 370,197 299,501 1,011,642 800,019
Restaurant and Food Court 848,819 702,097 1,802,394 1,551,608
Gift shop 124,986 119,104 281,693 265,561
Mall operations 101,460 112,220 270,077 289,373
------------ ------------ ------------- -----------
1,445,462 1,232,922 3,365,807 2,906,561
------------ ------------ ------------- -----------
------------ ------------ ------------- -----------
Gross Profit 623,099 715,511 1,248,171 1,402,905
------------ ------------ ------------- -----------
General and administrative 184,243 188,537 587,108 554,684
Advertising and marketing 203,453 170,742 579,319 570,581
Depreciation and amortization 133,207 116,743 373,303 342,615
------------ ------------ ------------- -----------
520,903 476,022 1,539,730 1,467,880
------------ ------------ ------------- -----------
Operating Income (loss) 102,196 239,489 (291,559) (64,975)
Other (income) expense:
Interest income (1,439) (4,467) (5,761) (9,061)
Interest expense 72,867 77,313 229,144 237,922
------------ ------------ ------------- -----------
Other expense, net 71,428 72,846 223,383 228,861
------------ ------------ ------------- -----------
Income (loss) before provision for income taxes 30,768 166,643 (514,942) (293,836)
Income Taxes - - - -
------------ ------------ ------------- -----------
Net Income (Loss) $ 30,768 $ 166,643 $ (514,942) $ (293,836)
============ ============ ============= ===========
Net income (loss) per common share-basic and diluted $ 0.00 $ 0.02 $ (0.06) $ (0.04)
============ ============ ============= ===========
Weighted average common
shares outstanding-basic and diluted 7,938,000 7,938,000 7,938,000 7,938,000
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
ITEC Attractions, Inc.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (514,942) $ (293,836)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 373,303 342,615
Changes in operating assets and liabilities:
Increase in receivables and notes receivable-tenants (9,314) (92,492)
Increase in inventories (129,758) (86,636)
Decrease (increase) in deposits and prepaid expenses 11,633 (99,876)
Decrease in prepaid leases 125,186 125,186
Increase in accounts payable and accrued expenses 150,316 146,271
Decrease in deposits and deferred revenue (41,357) -
---------------- ----------------
Net cash provided by (used in) operating activities (34,933) 41,232
---------------- ----------------
Cash flows used in investing activities:
Capital expenditures (661,938) (188,321)
---------------- ----------------
Cash flows from financing activities:
Capitalized lease obligations 49,331 27,058
Increase to debt 195,953 -
Principal payments under capital lease obligations and long-term debt (12,318) (115,563)
---------------- ----------------
Net cash provided by (used in) financing activities 232,966 (88,505)
---------------- ----------------
Decrease in cash and cash equivalents (463,905) (235,594)
Cash and cash equivalents at beginning of period 644,706 654,760
---------------- ----------------
Cash and cash equivalents at end of period $ 180,801 $ 419,166
================ ================
Supplemental cash flow information:
Cash paid during the period for interest $ 229,144 $ 237,922
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
ITEC Attractions, Inc.
Notes to Condensed Financial Statements
September 30, 2000
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
ITEC Attractions, Inc. (formerly known as International Tourist Entertainment
Corporation) (the "Company") commenced operations in October 1993. The
accompanying interim condensed financial statements are unaudited, but in the
opinion of management reflect all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the results for such periods. The
results of operations for any interim period are not necessarily indicative of
results for the respective full year. These condensed financial statements
should be read in conjunction with the financial statements and notes thereto
contained in the Company's annual report of form 10-KSB for the year ended
December 31, 1999 as filed with the Securities and Exchange Commission.
-4-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the results of
operations and financial condition of ITEC Attractions, Inc. This discussion and
analysis should be read in conjunction with the financial statements, related
notes and Management's Discussion and Analysis or Plan of Operation included in
the Company's Annual Report on Form 10KSB for the year ended December 31, 1999.
ITEC Attractions, Inc. began operations with the opening of its giant screen
theater and mall facility in Branson, Missouri in October 1993. This facility is
known as the IMAX Entertainment Complex. The Complex contains a 532 seat IMAX
theater with a screen that is 62 feet tall and 83 feet wide. In addition, the
facility includes an enclosed shopping mall with approximately 22,000 square
feet of retail space. McFarlain's, a family restaurant in the mall, has been
owned and operated by the Company since May 1, 1995. During the quarter ended
March 31, 1997, the Company acquired assets to begin the operation of
McFarlain's Back Porch, an express deli and bakery which is also located in the
mall. The Back Porch was recently converted to the IMAX Food Court. The IMAX
Food Court includes franchises for Quiznos Sub Sandwiches, Baskin & Robbins Ice
Cream and Breadeaux Pizza. In 1994, the Company began selling gift items related
to the films which were being exhibited in the theater or which are
representative of the lifestyle of the Ozarks. This operation has evolved into
the Legacy & Legends Gift Shop, which has been one of the Company's most
profitable and fastest growing departments. Seventeen other shops and kiosks are
currently leased to third parties. In December 1997, the Company installed a new
35mm projection system, in addition to its IMAX giant screen projection system,
and began showing feature 35mm films each evening in addition to the IMAX giant
screen film presentations.
In March 1998, the Company completed the construction of a 210-seat theater for
live performances in the Branson complex. Mike Radford's Remember When Show and
Jimmie Rodgers Remembers perform daily in this theater.
During the quarter ending September 30, 1998, the Company completed an addition
to the McFarlain's restaurant that increased seating by 133 people. This is the
second major expansion of the restaurant during the last two and a half years
and brings the total seating to over 655 people.
-5-
<PAGE>
On July 24, 2000 the Company completed financial arrangements for a program of
capital improvements to the Branson Complex. These improvements include the
construction of a new theater center adjacent to the Branson Complex which will
house three theaters with state-of-the-art sound systems and stadium style
seating, designed to exhibit 35mm feature length films. Two of the theaters have
a seating capacity of 175 each and the third theater has a seating capacity of
140. Construction on the theaters is expected to commence during the fourth
quarter of 2000 and to be completed during the second quarter of 2001. The
Company is also increasing the parking capacity of the Branson Complex by 165
spaces to accommodate the new theaters. Construction of the parking expansion
commenced in January 2000. The Company also remodeled the food court in the
Branson Complex to incorporate with the new theater center. The cost of these
capital improvements is approximately $1.8 million.
RESULTS OF OPERATIONS
Revenues for the quarter ended September 30, 2000 increased 6 percent to
$2,068,561 as compared to $1,948,433 for the same quarter of the previous year.
Revenues for the nine-month period ended September 30, 2000 increased 7 percent
to $4,613,978 compared to $4,309,466 in the prior year period. The Company
reported revenue increases in every segment of its operation during the nine
months ended September 30, 2000.
Direct operating expenses were $1,445,462 for the reporting quarter ended
September 30, 2000 representing 70 percent of sales, as compared to expenses of
$1,232,922 or 63 percent of sales, for the comparable period of the previous
year. Direct operating expenses were $3,365,807 for the nine months ended
September 30, 2000, representing 73 percent of sales, as compared to expenses of
$2,906,561 or 67 percent of sales, for the comparable period of the previous
year.
General and administrative expenses were $184,243 and $188,537 for the quarters
ended September 30, 2000 and 1999 respectively and were $587,108 and $554,684
for the nine months ended September 30, 2000 and 1999, respectively.
Advertising and marketing expense was $203,453 for the quarter ended September
30, 2000 compared to $170,742 for the same period in 1999 and were $579,319 for
nine months ended September 30, 2000 compared to $570,581 for the same period in
1999.
Interest expense was $72,867 and $77,313 for the quarters ended September 30,
2000 and 1999 respectively and was $229,144 for the nine months ended September
30, 2000 and $237,922 for same period ended 1999.
The net income was $30,768 for the quarter ended September 30, 2000 compared to
a net income of $166,643 for the same period of the previous year. The net loss
was $514,942 for the nine months ended September 30, 2000 compared to a net loss
of $293,836 for the nine months ended June 30, 1999.
-6-
<PAGE>
The Company's results of operations for the current year have been adversely
impacted by several factors. During the current year, the Company converted its
Back Porch operation to a food court configuration. As a result, this space was
under construction and not operational for several months with a resulting
decrease in theater and concession revenues for the period of approximately
$40,000. Costs of employee benefits have also increased significantly with the
implementation of a 401(k) plan for employees and an increase in health
insurance premiums of approximately 25%, for a combined increase of
approximately $60,000. The Company has also entered into new entertainment
contracts with Mike Radford and Jimmie Rodgers, which increase their royalty
share of revenues generated by ticket sales to their performances.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000 current assets totaled $739,203, while current
liabilities totaled $854,519. The Company's current ratio at September 30, 2000
was .87 to 1.00.
During the nine months ended September 30, 2000, the company borrowed $100,000
from Ms. Ann Bluto, a director of the Company. The loan bears interest at prime
plus 1% and is due February 28, 2001. Proceeds of the loan were used to provide
working capital for the Company.
On July 24, 2000, the Company refinanced its existing line of credit and
existing long term debt with a new line of credit in the amount of $200,000 and
a new term loan in the amount of $4,676,203. The proceeds of the term loan are
to refinance existing indebtedness and to finance the construction of three new
theaters and additional parking related thereto and the construction of the food
court. No borrowings were made under the line of credit during the reporting
quarter. The line of credit and the term loan are secured by deeds of trust on
the company's theater complex and ground leases.
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 and
the restructured term loan.
-7-
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB, in other filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public stockholder communications, or in oral statements made with the approval
of an authorized executive officer of the Company, the words or phrases "would
be," "will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project," or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made, are based on certain
assumptions and expectations which may or may not be valid or actually occur,
and which involve various risks and uncertainties, including but not limited to
risk of product demand, market acceptance, economic conditions, competitive
products and pricing, difficulties in product development, commercialization,
and technology and other risks. In addition, sales and other revenues may not
commence and/or continue as anticipated due to delays or otherwise. As a result,
the Company's actual results for future periods could differ materially from
those anticipated or projected. Please refer to the "Management's Discussion and
Analysis or Plan of Operation" that is found in the Company's Annual Report on
Form 10-KSB for the period ended December 31, 1999 for more details.
Unless otherwise required by applicable law, the Company does not undertake, and
specifically disclaims any obligations, to update any forward-looking statements
to reflect occurrences, developments, unanticipated events or circumstances
after the date of such statement.
-8-
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There are no material legal proceedings pending to which the
Company is a party of or which any of its property is the
subject.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
On July 24, 2000 the Company refinanced its existing debt with
Bank of America, N.A., providing the Company with a $200,000
Revolving Note due June 15, 2001, advances on which bear
interest at the prime rate plus 1%, and a Term Note and Credit
Agreement in the principal amount of up to $4,676,203. The
Term Note is amortized with monthly payments and matures on
June 30, 2013. The interest rate on the Term Note is prime
rate plus or minus .25% determined by certain financial ratios
of the Company. However, the Company has entered into an
interest rate transaction with Bank of America, N.A. to fix
the interest rate at 10.4% during the first six years of the
Term Note. Proceeds of the Term Note will be used to refinance
existing indebtedness and to finance the construction of three
new theaters and additional parking related thereto and the
remodeling of the restaurant area adjacent to the theaters.
The Revolving Note and the Term Note are secured by a Future
Advance and Future Obligation Leasehold Deed of Trust, a
Leasehold Deed of Trust, Assignment of Rents and leases and a
Security Agreement.
-9-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibits:
4.1 Specimen Certificate for the common stock of the
Registrant (incorporated by reference to the
Registrant's Registration Statement on Form S-1,
Registration No. 33-48630).
10.3 Ground Lease Agreement dated July 27, 1993 between
Treasure Lake R.V. Resort Camping Club, Inc. and the
Company (incorporated by reference to Registration
Statement on Form S-1, Registration No. 33-64132).
10.4 Loan Agreement dated July 30, 1993 secured by Deed of
Trust for loan from the Bank of America (successor to
Boatman's Bank), the Company (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 Bank
of America, Branson, Missouri (successor to Boatman's
Bank), (incorporated by reference to Registration
Statement on Form S-1, Registration No. 33-64132).
10.10 Distribution Agreement dated July 14, 1995 between IMAX
Corporation and the Company (incorporated by reference
to Form 10-KSB for the year ended June 30, 1996).
10.12 Third Modification Agreement dated March 1, 1997
between the Bank of America (successor to Boatman's
Bank) and the Company (incorporated by reference to
Form 10-KSB for the year ended June 30, 1996).
10.13 System Lease Agreement as amended dated August 1, 1993
between IMAX Corporation and the Company (incorporated
by reference to Form 10-KSB for the year ended June 30,
1996).
10.14 Ground Lease Agreement dated December 18, 1999 between
Treasure Lake RV Resort Camping Club, Inc. and the
Company. (incorporated by reference to Form 10-KSB for
the year ended December 30, 1999).
10.15 Second Amended and Restated Revolving Note dated July
24, 2000 between Bank of America, N.A. and the Company.
(incorporated by reference to Form 10-QSB for the
quarter ended June 30, 2000).
10.16 Amended and Restated Term Note and Credit Agreement
dated July 24, 2000 between Bank of America, N.A. and
the Company. (incorporated by reference to Form 10-QSB
for the quarter ended June 30, 2000).
10.17 Amendment No. 4 to Future Advance and Future Obligation
Leasehold Deed of Trust by and between the Company and
Bank of America, N.A. dated July 24, 2000.
(incorporated by reference to Form 10-QSB for the
quarter ended June 30, 2000).
-10-
<PAGE>
10.18 Amendment No. 2 to Leasehold Deed of Trust, Assignment
of Rents and Leases and Security Agreement by and
between the Company and Bank of America, N.A. dated
July 24, 2000. (incorporated by reference to Form
10-QSB for the quarter ended June 30, 2000).
10.19 Amendment to Security Agreement dated July 24, 2000
between Bank of America, N.A. and the Company.
(incorporated by reference to Form 10-QSB for the
quarter ended June 30, 2000).
27.1 Financial Data Schedule for the 9 months ended
September 30, 2000
B. Reports on Form 8-K:
No reports on Form 8-K were filed during the reporting quarter.
-11-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date 11/13/00 /s/ Paul M. Bluto
-------- ---------------------------
Paul M. Bluto
Chairman and
Principal Financial Officer
Chief Executive Officer
Date 11/13/00 /s/ Paul E. Rasmussen
-------- --------------------------
Paul E. Rasmussen
President
Chief Operating Officer
-12-
