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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
Preliminary Information Statement
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Confidential, for Use of the Commission Only (as permitted by rule
14c-5(d)(2))
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X Definitive Information Statement
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CEC PROPERTIES, INC.
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(Name of Registrant As Specified In Its Charter)
Check the appropriate box:
X No fee required
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Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
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1) Title of each class of securities to which transaction applies:
N/A
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2) Aggregate number of securities to which transaction applies:
N/A
---
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
---
4) Proposed maximum aggregate vale of transaction:
N/A
---
5) Total fee paid:
N/A
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
Registrant
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4) Date Filed: September 27, 1999
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CEC PROPERTIES, INC.
1500 W. BALBOA AVENUE, SUITE 201
NEWPORT BEACH, CALIFORNIA 92663
September 28, 1999
To the Stockholders of CEC Properties, Inc.:
As you may be aware, since November 1, 1997, CEC Properties, Inc.
("CEC") has changed the focus of its business to development and management of
golf courses and related activities. In connection with that change the Board of
Directors of CEC and its largest stockholders (who are also directors) have
elected to effect a quasi-reorganization which will readjust the CEC capital
accounts so as to eliminate the historical deficit in retained earnings.
Enclosed is an Information Statement that contains information
regarding the quasi- reorganization. The Information Statement is being provided
for your information only. CEC is not soliciting your vote with respect to the
matters discussed therein.
CEC PROPERTIES, INC.
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
CEC PROPERTIES, INC.
1500 W. BALBOA AVENUE, SUITE 201
NEWPORT BEACH, CALIFORNIA 92663
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INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AND RULE 14c-2 THEREUNDER
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CEC PROPERTIES, INC.("CEC") pursuant to the approval of its Board of Directors
and the written consent of its majority stockholders (who are also directors)
approved a readjustment to its capital accounts pursuant to an accounting
technique known as a quasi-reorganization eliminating the deficit in its
retained earnings and reducing its contributed capital in a like amount.
The accounting change is designed to more accurately reflect the significant
change to the CEC business which occurred November 1, 1997.
As required by the Securities Exchange Act of 1934, as amended, (the "Exchange
Act"), and the regulations promulgated thereunder, this Information Statement is
being furnished to stockholders of CEC in connection with the
quasi-reorganization.
The approximate date on which this Information Statement is first being sent to
stockholders is September 28, 1999.
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VOTING RIGHTS
The Common Stock is the only outstanding class of voting securities of CEC. Each
holder of Common Stock is entitled to one vote for each share registered in such
holder's name for the election of directors and other matters subject to the
vote of the stockholders of CEC. As of July 31, 1999, CEC had outstanding
15,161,011 shares of Common Stock held by approximately 4,500 holders of record
and outstanding shares of convertible preferred stock which are convertible into
an additional 302,730 shares of Common Stock.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth the beneficial ownership, reported to CEC as of
July 31, 1999, by each stockholder owning more than 5% of the outstanding shares
of Common Stock, each current director and each current executive officer, and
all current directors and executive officers as a group. Unless otherwise
indicated, each such person has the sole power to vote and dispose of the shares
shown as beneficially owned by such person, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF COMMON
NAME/ADDRESS BENEFICIALLY OWNED (1) STOCK (2)
<S> <C> <C> <C>
Paul Balalis 7,106,996 (3) 46.8%
1500 W. Balboa
Newport Beach, CA 92663
Balalis Corporation 2,378,544 (4) 15.7%
1500 W. Balboa
Newport Beach, CA 92663
Charles Packard 150,000 1.0%
24 Charlotte
Irvine, CA
Frank Barbaro 27,402 (5)
31285 Camel Point
Laguna Beach, CA
Frederick Meyer 49,600 (6) (5)
1300 East Green Street
Pasadena, CA
Sanford Feld 274,000 (5)
66 Lake Road
Far Hills, NJ 07931
Donald Norbury 310,000 2.0%
1500 W. Balboa
Newport Beach, CA 92663
Thomas Quinn 85,000 (7) (5)
1500 W. Balboa
Newport Beach, CA 92663
W. Samuel Gunderson 445,440 (8) 2.9%
4409 South Rural Road
Tempe, AZ 85282
Milton Abell 75,000 (5)
510 Powder Spring Street
Marietta, GA 30064
All officers and directors as 8,460,938 55.8%
group (nine persons)
</TABLE>
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(1) For purposes of the above table, a person or group of persons is deemed
to have "beneficial ownership" of any shares that such persons or group
has the "right to acquire within 60 days after such date; and, for
purposes of computing the percentage of outstanding shares held by each
person or group on a given date, such shares are deemed to be
outstanding, but are not deemed to be outstanding for the purposes of
computing the percentage ownership of any other person.
(2) Includes 246,400 shares outstanding assuming conversion of outstanding
preferred stock.
(3) Includes 2,378,544 shares owned by the Balalis Corporation.
(4) Also included with shares owned by Mr. Balalis.
(5) Less than one percent.
(6) Includes 25,000 shares subject to a five year option expiring in 2002,
exercisable at $.40 per share.
(7) Includes 50,000 shares subject to a five year option expiring in 2002,
exercisable at $.40 per share and 25,000 shares held in spouse's IRA.
(8) Includes 336,000 shares subject to an earnings formula based upon the
earnings of a CEC subsidiary.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act, and the rules and regulations promulgated
thereunder, require CEC's officers and directors, and persons who own more than
10% of a registered class of CEC's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than 10% stockholders are required by SEC regulation to furnish CEC with copies
of all forms that are filed with SEC.
Based solely on CEC's review of the copies of such forms it has received, there
was compliance during fiscal 1998 with all Section 16(a) filing requirements
applicable to CEC's officers, directors and greater than 10% stockholders with
the following exception: Milton Abell failed to timely report his acquisition of
75,000 shares in connection with the sale of Classic Golf in October 1997, Frank
Barbaro failed to timely report an acquisition of 1502 shares in April 1997,
Frederick Meyer failed to timely report his acquisition of 14,600 shares
acquired in 1998 and Thomas Quinn failed to timely report his initial
acquisition of 35,000 shares. All reports covering such shares were filed.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
CEC does not maintain a compensation committee of the Board of Directors, but
rather the entire Board makes all decisions regarding executive officer
compensation. None of the executive officers of CEC has served on the Board of
Directors or the compensation committee of any other entity, any of whose
officers serve on the Board of Directors of CEC.
THE BOARD OF DIRECTORS
The business of CEC is managed by or under the direction of the Board of
Directors. During fiscal 1998, the Board of Directors met one time and took
action by unanimous written consent on one occasion. Each director who served
during fiscal 1998 attended all of the meetings of the Board held during such
fiscal year. Directors of CEC are elected to serve in such capacities until the
next annual meeting of the stockholders and until their successors are duly
elected and qualified. There are no standing committees of the Board of
Directors.
<TABLE>
<CAPTION>
Principal Occupation for Past 5 Years, Certain
Name of Director Other Directorships & Age Director Since
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<S> <C> <C>
Paul Balalis Chairman of the Board, President and Chief 1995
Executive Officer; 60
Frank P. Barbaro Attorney; 55 1995
Sanford Feld President of Leafland Associates, engaged in 1997
syndication, development, management, acquisition,
financing and sales of multi-family, commercial and
industrial real estate. Mr. Feld also serves on the
board of directors of Flavor and Food Ingredients,
Inc., Stratus Corporation and Specialty Mortgage
Corp. of Albuquerque, New Mexico; 70
Frederick Meyer Consultant and previously president of Southern 1997
California Healthcare Systems. Mr. Meyer serves
on the board of directors of Blue Cross of California,
PrimeHealth of Southern California and Cohr, Inc.;
59
Charles Packard Executive vice president and chief financial officer 1995
of Arnel & Affiliates, a property management
company. Mr. Packard serves on the board of
directors of Kaiser Resources, Inc.; 55
</TABLE>
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EXECUTIVE OFFICERS OF CEC
The following persons serve as officers of CEC. No person, other than the
directors of CEC, acting solely in that capacity, is responsible for the naming
of an officer.
<TABLE>
<CAPTION>
Year First
Name Office and Age Appointed to Office
- ---- -------------- -------------------
<S> <C> <C>
Paul Balalis President and Chief Executive Officer; 1995
60
Donald Norbury Vice President, Secretary and Chief 1995
Financial Officer, 63
Thomas Quinn Vice President, Operations, 57 1997
Milton Abell Vice President and President of Classic 1997
Golf, 47
W. Samuel Gunderson Vice President and President of First 1998
Golf Corporation, 41
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
The following information is furnished on an accrual basis as to compensation
paid by CEC during the two fiscal years ended October 31, 1998, to CEC's
president and chief executive officer. No other executive officer during such
periods received compensation which exceeded $100,000, on an annualized basis.
<TABLE>
<CAPTION>
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Paul Balalis 1998 - - -
President, Chief Executive Officer and 1997 $6,000 - -
Chairman of the Board
</TABLE>
EMPLOYMENT CONTRACTS
In connection with the acquisition of the CEC subsidiary Classic Golf
Management, Inc. ("Classic Golf"), Classic Golf entered into a five-year
employment agreement expiring in 2002 with Milton Abell whereby he serves as
president of Classic Golf and receives base annual compensation of $80,000 and
an annual stock option bonus based upon the performance of Classic Golf.
In connection with the acquisition of the assets for the CEC
subsidiary, First Golf Corporation, the subsidiary entered into a five year
employment agreement expiring in 2003 with W. Samuel Gunderson whereby he serves
as president of the subsidiary and receives base annual compensation of $168,000
and an annual bonus of cash or stock options, at CEC's option, based upon the
performance of the subsidiary.
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INFORMATION CONCERNING STOCK OPTIONS
As of July 31, 1999, CEC had not adopted any stock option or any other
form of incentive plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
LOAN. In the fiscal year ended October 31, 1997, Paul L. Balalis and
the Balalis Corporation advanced funds to CEC, aggregating $118,600. The
principal amount bears interest at rates ranging between 8% and 10%. The 1997
advances when aggregated with previous advances by Mr. Balalis utilized by CEC
for general working capital as well as in connection with its acquisition of
Classic Golf totaled $204,375 as of October 31, 1997. $115,000 of the obligation
was paid off in fiscal 1998 with the balance of $89,367 due by October 31, 1999.
Additionally, Mr. Balalis has personally guaranteed CEC's obligations in
connection with the purchase of Classic Golf and has guaranteed a $30,000 CEC
line of credit.
TRANSFER OF CLASSIC GOLF AND RELATED MATTERS. In connection with the
acquisition of Classic Golf and related assets CEC's subsidiary entered into a
five year employment agreement with the president of the subsidiary providing
for compensation of $80,000 per year. Mr. Balalis personally guaranteed payment.
ADOPTION OF A QUASI-REORGANIZATION
Subsequent to October 31, 1997, the nature of the business of CEC
changed significantly. Prior to that date CEC had been engaged in various lines
of business under various names, none of which was in any way connected with the
business of CEC subsequent to October 31, 1997. In fact, for many years prior to
November 1, 1997, CEC was dormant, with neither assets nor liabilities. At
October 31, 1998, CEC had an accumulated deficit of $23,665,217, largely due to
activities prior to the advent of the CEC line of business which commenced in
November, 1997. Since November 1, 1997, CEC has embarked on a totally new line
of business which has no relationship to the activities of CEC prior to that
date. As a result, the Board of Directors and a majority of the stockholders,
who are also directors, believe it is in keeping with the changed corporation
that the historical accumulated deficit be removed.
A company with a deficit retained earnings is permitted, with the prior
approval of a majority of its shares, to readjust its capital accounts pursuant
to an accounting technique known as a quasi- reorganization, eliminating the
deficit in its retained earnings and reducing its contributed capital in a like
amount.
The quasi-reorganization, effected as of October 31, 1998, eliminates
the accumulated deficit as of October 31, 1998, of $23,665,217, thereby reducing
the contributed capital by the amount of the deficit to $158,535. The amount of
total stockholders equity remains unchanged at $136,742, however, the surplus is
reduced to $158,535. The stockholders' equity section of the CEC fiscal
statements is thus restated.
The following shows the stockholders' equity section (omitting
footnotes) as of October 31, 1998, and as adjusted for the quasi-reorganization.
<TABLE>
<CAPTION>
Adjusted for
Quasi-
October 31, 1998 Reorganization
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Stockholders' Equity:
<S> <C> <C>
Preferred stock $0.90 par value; 2,000,000 shares $ 706,232 $ 706,232
authorized, 1,005,000 shares issued and
outstanding in 1998 (liquidation preference
$1,005,000)
Common stock, $0.01 par value; 30,000,000 shares 136,742 136,742
authorized, 13,674,198 shares issued and
outstanding in 1998
Additional paid-in capital 23,823,752 158,535
Accumulated deficit (23,665,217) -0-
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Total Stockholders' Equity 1,001,509 1,001,509
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</TABLE>
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The accounting rules of the SEC require that for a period of a least 10
years subsequent to the effective date of a quasi-reorganization, any
description of retained earnings shall indicate the point in time from which the
new retained earnings dates and for a period of at least three years shall
indicate, on the face of the balance sheet, the total amount of the deficit
eliminated.
No Vote Required
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The purpose of this Statement is to provide information. The Board of
Directors and a majority of the stockholders have already approved the
quasi-reorganization and it is expected to become effective before the
end of the current fiscal year, October 31, 1999.
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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.
September 27, 1999
CEC Properties, Inc.
By:/S/ Paul Balalis
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Paul Balalis
President
By:/S/ Don Norbury
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Don Norbury
Chief Financial Officer
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