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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: October 31, 1997
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Commission file number: 0-188
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CEC Properties, Inc.
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(exact name of registrant as specified in its charter)
Delaware 13-1919940
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(State or other jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
1500 W. Balboa Blvd. Suite 201, Newport Beach, CA 92663
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(Address of principal executive offices) (Zip Code)
(714) 673-2282
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(Registrant's Telephone Number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(s) of the Act:
Common Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of regulation S-K is not contained herein, and will not 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.
State issuer's revenues for its most recent fiscal year $133,191.
No existing market
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(Aggregate Market Value of voting stock held by
non-affiliates of the registrant)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of January 31, 1997 there
were 12, 566,698 shares of Common Stock, $.01 par value per share, outstanding.
Documents incorporated by Reference: None
Transitional Small Business Disclosure Format: Yes No X
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ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Fiscal year ended
October 31,1997 1996
Operating Revenues $ 148,585 $ 133,191
Net Income $ ( 94,724) $ (72,698)
Net Income per share outstanding $ (0.007) $ (0.006)
Total Assets $ 1,214,609 $ 1,112,013
Long Term Liabilities $ 839,171 $ 1,047,126
Shareholder's Equity $ (87,717) $ (47,993)
GENERAL
CEC was substantially reorganized in 1995. CEC manages, constructs and maintains
golf courses and golf driving ranges through its wholly owned subsidiary,
Classic Golf Management. It currently has two management contracts: (A) an
operating contract for the City Club golf course in Marietta, Georgia, at
$50,000 per year plus a performance bonus of two percent (2%) of revenues.
Additionally, CEC owns the pro shop, and the teaching center, and (B) At Sugar
Creek in DeKalb County, Georgia, CEC pays a fee to the county which is
substantially all of the green fees which is similar to a triple net lease. CEC
receives substantially all of the revenue from the carts, pro shop, driving
range and lessons and pays substantially all expenses associated with those
operations. CEC also has a contract for the maintenance of the Heritage Hills
driving range, which pays CEC approximately $2,000 per month. CEC is focusing
its efforts on bidding and obtaining new management contracts and acquisition of
management companies.
CEC entered into negotiations in 1996 to purchase Blue T, a golf course
construction and management company. In early 1997 the negotiations were
terminated. Paul Balalis, the chief executive officer and principal stockholder
of the Company (see "Item 9") personally guaranteed a loan to Blue T for a third
party that was defaulted by Blue T. CEC had loaned Blue T funds for an option to
develop the Camarillo golf course. When Blue T could not repay the loan, CEC
acquired the option for Camarillo, together with a former Blue T employee, who
owns 20% of the option and who is entitled to 20% of the net profits of the golf
course.
CEC presently retains 80% of the rights to Camarillo Creek in Ventura County,
California and 100% to the Hickory Stick golf course to be built in Atlanta,
Georgia. The Camarillo Creek course was designed by Charles Howard, a golf
course designer from Austin, Texas. As stipulated in his agreement Mr. Howard
did the complete design of the grading, irrigation and finishing and will
oversee the awarding of the construction contract. Milton Abell, president of
CEC's subsidiary, Classic Golf Management, designed the Hickory Stick Project
and will be supervising the construction and the awarding of any contract. The
Environmental Impact Report and Specific Plan for Camarillo Creek was approved
by the Ventura County Board of Supervisors in October, 1997. An environmental
group's litigation against CEC, Ventura County and CAMP (a partnership which
intends to build a 16,000-seat amphitheater adjacent to the golf course) has
delayed this project. The result of this suit will determine when the Army Corps
of Engineers issues the final wetlands permit, which will allow construction to
proceed.
In October, 1997, CEC acquired Classic Golf Management and purchased the assets
of Classic Golf Shops. Prior to October 1997 CEC's primary income was from
rental properties. Management decided to sell its two remaining investment
properties in order to focus on its golf operations. As such, the revenues and
expense from investment operations are disclosed as income from discontinued
operations in the income statement ended January 31, 1998. Both properties were
sold during CEC's second fiscal quarter.
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CAPITAL AND LIQUIDITY
Historically CEC has been undercapitalized. CEC has financed itself from the
cash flow of operations, the sales of one of its properties and loans from the
principal stockholder. CEC anticipates, based on current plans and assumptions
relating to its operations, that the proceeds of a private placement that
concluded in May 1998, together with cash generated from CEC's existing
operations, should be sufficient to meet CEC's contemplated cash requirements
for its current business operations for at least 18 months after raising of
additional capital via a private placement. There can be no assurance, however,
that CEC will not require additional cash during or afer such 18-month period
for its current operations.
An anticipated positive cash flow from Classic Golf Management of approximately
$200,000 in 1998 should eliminate the need to further borrow from the principal
stockholder. The long-term debt of $767,000 incurred from the two rental
properties was eliminated by their sale in the second fiscal quarter of 1998.
CEC estimates that it will incur additional capital expenditures of
approximately $4,600,000 during the twelve months following the consummation of
the contemplated private placement in connection with the acquisition and
construction of golf courses. $600,000 will be funded from the private placement
and $4,000,000 is to be provided by construction loans from third party lenders
to the extent it can be obtained on a reasonable basis.
RESULTS OF OPERATIONS - YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED
OCTOBER 31, 1996
CEC has losses in 1996 of $69,610 and $93,924 in 1997. The equivalent net loss
per common share was $.006 in 1996 and $.007 in 1997.
CEC's revenue increased by 7.8% from $133,191 in 1996 to $148,585 in 1997,
primarily due to the sale of one piece of commercial residential property. The
expenses increased by 19.6% from $202,801 in 1996 to $242,509 in 1997. Those
results accounted for an increase in the net loss from $72,684 to $94,724.
The largest increase in expense was in General and Administrative of 217% to
$146,189 from $67,210. The majority of this increase resulted from a one-time
payment of $71,078 to an independent financial consultant in the form of
approximately 142,000 shares of Common Stock.
SEASONALITY
The golf industry is seasonal in nature because of weather. This is the reason
CEC has thus far concentrated on those parts of the country that do not
experience a severe winter. The continuation of play through the winter months
allows for continuity in financial performance. Unfortunately, the ?el nino?
storms produced unusual weather conditions in 1997 and 1998 in the Atlanta,
Georgia area which resulted in estimated lost revenue of approximately $70,000.
FORWARD-LOOKING STATEMENTS
Certain information in this Form 10-KSB may contain "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including any
projections of earnings, revenues or other financial items, any statements of
the plans and objectives of management for future operations, any statements
concerning proposed new products or services, any statements regarding future
economic conditions or performance and any statement of assumptions underlying
any of the foregoing. In some cases, forward-looking statements can be
identified by the use of terminology such as "may", "will", "expects", "plans",
"anticipates", "estimates", "potential" or "continue", or the negative thereof
or their comparable terminology. Although CEC believes that the expectations
reflected in its forward-looking statements are reasonable, it can give no
assurance that such expectations or any of its forward-looking statements will
prove to be correct, and actual results could differ materially from those
projected or assumed in CEC's forward-looking statements. Forward-looking
statements are subject to inherent risks and uncertainties, some of which are
summarized in this section.
