<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended: January 31, 1999
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OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
[ ] For the transition period from to
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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 of (IRS Employer Identification Number)
Incorporation or Organization)
1500 W. Balboa Blvd. Suite 201, Newport Beach, CA 92663
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(Address of principal executive offices) (Zip Code)
(949) 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)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
14,503,730 shares of common stock as of 1/31/99
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CEC PROPERTIES
(A DELAWARE CORPORATION)
Part I - Financial Information
The condensed consolidated financial statements included herein have been
prepared by the Registrant without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations. However, the Registrant believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in the Registrant's
latest Annual Report on Form 10-KSB.
In the opinion of the Registrant, all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the financial position,
results of operations and cash flows of the Registrant for the three months
ended January 31, 1999 and 1998 have been made. The results of operations for
such interim periods are not necessarily indicative of the results to be
expected for the entire year.
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<PAGE>
<TABLE>
CEC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Jan 31, 1999 Oct 31,1998
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Unaudited Audited
ASSETS
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<S> <C> <C>
Investment - (net) $ 25,000 $ 25,000
Cash in the Bank 149,102 200,400
Other 1,429,498 1,272,032
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TOTAL ASSETS $ 1,603,600 $ 1,497,432
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
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Notes Payable $ 43,367 $ 11,884
Due to Stockholders 129,716 89,367
Other 143,574 394,672
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TOTAL LIABILITIES $ 316,657 $ 495,923
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STOCKHOLDER'S EQUITY
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Preferred stock, $0.90 par value; 2,000,000 shares
Authorized, and 711,250 and 1,005,000 outstanding
Jan 31,1999 and Oct 31,1998 respectively
(liquidation preference $ 711,250 and $ 1,005,000
respectively). 516,375 706,232
Common Stock $ .01 Par Value, Shares Authorized;
14,503,730 and 13,674,198 outstanding
at Jan 31, 1999 and Oct 31, 1998,
respectively $ 145,037 $ 136,742
Additional Paid In Capital $ 23,993,423 $ 23,823,752
Accumulated Deficit $(23,398,379) $(23,665,217)
Current (Loss)/Profit 30,487 $ (99,431)
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TOTAL STOCKHOLDER'S EQUITY 1,286,943 1,002,509
TOTAL LIABILITIES &
STOCKHOLDER'S EQUITY $ 1,603,600 $ 1,497,432
============= =============
</TABLE>
See Notes to the Consolidated Financial Statements:
<PAGE>
<TABLE>
CEC PROPERTIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Jan. 31
--------------------------
1999 1998
REVENUE
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<S> <C> <C>
CONTINUING OPERATIONS:
REVENUE $ 729,146 $ 348,814
OPERATING EXPENSES 687,719 413,722
INTEREST 1,104 0
DEPRECIATION 9,836 0
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TOTAL EXPENSES $ 698,659 $ 413,722
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PROFIT /(LOSS) FROM CONTINUING
OPERATIONS $ 30,487 $ (64,908)
============ ============
DISCONTINUED OPERATIONS:
INCOME 0 60,850
EXPENSE 0 0
INTEREST 0 12,805
DEPRECIATION 0 3,655
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0 16,460
INCOME FROM
DISCONTINUED OPERATIONS 0 44,390
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NET PROFIT (LOSS) $ 0 $ (20,518)
============ ============
Net Profit (Loss) From Continuing
Operations Per Common Share 0.002 (0.005)
============ ============
Net Income From Discontinued
Operations Per Common Share 0 0.0035
============ ============
Weighted Average Shares Outstanding 14,503,730 12,676,724
</TABLE>
See Notes to the Consolidated Financial Statements
<PAGE>
<TABLE>
CEC PROPERTIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended Jan. 31
--------------------------
1999 1998
<S> <C> <C>
Cash Flow From Operating Activities:
Net Profit/(Loss) $ 30,487 $ (20,518)
Adjustment to reconcile net income
to net cash provided by operating activities
Depreciation 15,742 3,655
Increase from other Assets 117,685 (251)
Decrease in Other Liabilities (162,750) (1,081)
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Net Cash Used by Operations 1,164 (18,195)
Cash Flows from Investing Activities (76.604) 0
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Cash Flows from Financing Activities
Stockholder Loan Advance (Repayment) (24,353) (10,000)
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Net Cash Provided (Used) in Financing Activities (11,891) (10,000)
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Net Increase (Decrease) in Cash (111,684) (28,195)
Cash at Beginning of Period 206,786 59,963
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Cash at end of Period $ 149,102 $ 31,768
============ ============
</TABLE>
See Notes to Consolidated Financial Statements:
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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(1) Summary of Significant Accounting Policies
The financial statements are reported on a consolidated basis with the Company's
wholly owned subsidiaries CEC Properties Corp, Classic Golf Management and First
Golf. All material inter-company transactions have been eliminated.
The Company reports on the accrual basis of accounting whereby revenues are
recognized when earned and expenses are recorded when incurred.
All adjustments made to the financial statements are of a normal recurring
nature necessary to present fairly the financial condition of the Company.
(2) Investment Properties
The Company adopted a plan to sell its two remaining rental properties in order
to focus on its golf management operations. As such, the revenues and expense
from rental operations are disclosed as discontinued operations in the income
statement ended January 31, 1998. Both properties were sold during the Company's
second fiscal quarter in 1998.
<PAGE>
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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The Company manages, constructs and maintains golf courses through its wholly
owned subsidiaries, Classic Golf Management and First Golf Corporation. It
currently has three management contracts in the Atlanta GA. area and one in
Arizona. (The Company is responsible for the snack bar, carts, driving range,
tennis and employees, with the Company retaining the revenues from those
operations. The Company's employees are obtained from a third party who,
effectively leases the Company its employees. The Company is focusing its
efforts on bidding and obtaining new management contracts and acquisition of
related companies.
In October, 1997 the Company completed its acquisition of Classic Golf
Management and purchased the assets of Classic Golf Shops. Prior to November
1997 the Company's primary income was from rental properties. The Company
divested itself of all of those properties by April 1, 1998 in order to focus on
its golf management business. In October of 1998 the company completed an
acquisition of First Golf Corporation of Tempe, Arizona. First Golf is in the
business of golf course construction management and currently is in the process
of constructing 3 golf courses and have 8 pending in various phases of
development.
On May 30, 1998, the Company completed a $1,005,000 Convertible Preferred
Offering and used part of the proceeds to retire debt and for acquisitions.
RESULTS OF OPERATIONS THREE MONTHS ENDED JANUARY 31, 1999 COMPARED TO THREE
MONTHS ENDED JANUARY 31, 1998
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The majority of the increase in revenues for the first quarter, from $409,664 in
1998 to $729,146 in 1999, was generated from revenues related to the acquisition
of Classic Golf Management.
The expenses were $698,659 in the first quarter of 1999, up from $430,182 in
1998. Most of the increase was attributable to the recently acquired operations
of Classic Golf Management and First Golf. Operating expenses were $687,719 in
1999 and $299,000 in 1998. General and administrative expenses of $307,780 in
1999 were 42% of revenue and 45% of total expenses. In 1998 expenses of $129,000
were 31% of revenue and 30% of total expense.
The resulting Net Income was reduced from a loss of ($20,518) in 1998 to $30,487
profits in 1999.
<PAGE>
CAPITAL AND LIQUIDITY RESOURCES
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Historically the Company has been undercapitalized. The Company has financed
itself from the cash flow of operations, the sales of its real estate properties
and loans from the principal stockholder. The Company anticipates, based on
current plans and assumptions relating to its operations, that the Company's
existing business and cash generated from operations should be sufficient to
satisfy the Company's contemplated cash requirements for at least 18 months.
There can be no assurance, however, that the Company will not require additional
cash during or after such 18-month period.
An anticipated positive cash flow from Classic Golf Management and First Golf
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.
The Company estimates that it will incur additional capital expenditures of
approximately $3,600,000 during the next fifteen months in connection with the
acquisition and construction of golf courses. These will be provided through
LLC's and third party lenders, of which none have yet been obtained.
SEASONALITY
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The golf industry is seasonal in nature because of weather. This is the reason
the Company 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.
FORWARD-LOOKING STATEMENTS
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The forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties. Such forward-looking statements are
based on assumptions that the Company will have adequate financial resources to
fund the development and operation of its business, and there will be no
material adverse change in the Company's operations or business. The foregoing
assumptions are based on judgments with respect to, among other things,
information available to the Company, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Accordingly, although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any such assumption
could prove to be inaccurate and therefore there can be no assurance that the
results contemplated in the forward-looking statements will be realized. There
are a number of other risks presented by the Company's business and operations
which could cause the Company's financial performance to vary markedly from
prior results or results contemplated by the forward-looking statements.
Management decisions, including budgeting, are subjective in many respects and
periodic revisions must be made to reflect actual conditions and business
developments, the impact of which may cause the Company to alter its capital
investment and other expenditures, which may also adversely affect the Company's
results of operations. In light of significant uncertainties inherent in
forward-looking information included in this quarterly Report on Form 10QSB, the
inclusion of such information should not be regarded as a representation by the
Company or any person that the Company's objectives or plans will be achieved.
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereto
duly authorized.
CEC Properties, Inc.
By:/S/ Paul Balalis
------------------------
Paul Balalis
President
By:/S/ Don Norbury
------------------------
Don Norbury
Chief Financial Officer
<TABLE> <S> <C>
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 149102
<SECURITIES> 25000
<RECEIVABLES> 0
<ALLOWANCES> 0
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<CURRENT-ASSETS> 1603600
<PP&E> 0
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<CURRENT-LIABILITIES> 316657
<BONDS> 0
0
516375
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<OTHER-SE> 625531
<TOTAL-LIABILITY-AND-EQUITY> 1603600
<SALES> 729146
<TOTAL-REVENUES> 729146
<CGS> 687719
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<NET-INCOME> 30487
<EPS-PRIMARY> .002
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</TABLE>
