SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995.
OR
[ ] 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 0-19196
______________________CELEBRITY ENTERTAINMENT, INC._____________
(Exact name of registrant as specified in its charter)
(Formerly Celebrity Resorts, Inc.)
____________Delaware____________ ______11-2880337_________
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
214 Brazilian Avenue #400
_____________________Palm Beach, Florida 33480___________________
(Address of principle executive offices)
__________________________ (407) 659-3832________________________
(Registrant's telephone number including area code)
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 such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No______
Outstanding at
Class November 13, 1995:
Common Stock, $.0001 par value 2,116,753
Preferred Stock, $.01 par value 1,064,000
<PAGE>
CELEBRITY ENTERTAINMENT, INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements
Balance Sheet 4
Statement of Operations 5
Statement of Cash Flows 6
Statement of Stockholders' Equity 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis
or Plan of Operation 11
PART II. OTHER INFORMATION 15
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a
Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
The condensed financial statements for the periods
ended September 30, 1995 and September 30, 1994 included
herein have been prepared by Celebrity Entertainment, Inc.,
(the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the
"Commission"). In the opinion of management, the statements
include all adjustments necessary to present fairly the
financial position of the Company as of September 30, 1995
and the results of operations and cash flows for the nine-
month periods ended September 30, 1995 and 1994.
The Company's results of operations during the first
nine months of the Company's fiscal year are not necessarily
indicative of the results to be expected for the full fiscal
year.
The financial statements included in this report should
be read in conjunction with the financial statements and
notes thereto in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1994.
<PAGE>
Celebrity Entertainment, Inc.
Condensed Balance Sheet
September 30, 1995
Unaudited
Assets
Current Assets:
Cash $ 55,881
Total current assets 55,881
Property and equipment, net 3,214,549
Other assets:
Notes receivable 696,968
Total other assets 696,968
Total assets $ 3,967,398
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 282,273
Accrued expenses 35,711
Deferred revenue 57,669
Notes payable 260,457
Current maturities of long-term debt 27,805
Total current liabilities 663,915
Long-term debt 436,113
Stockholders' equity:
Preferred stock, $0.01 par value:
2,000,000 shares authorized and
designated as Class A 8% Convertible;
1,064,000 shares outstanding 10,640
Common stock, $0.0001 par value:
25,000,000 shares authorized;
1,816,753 shares outstanding 182
Additional paid-in capital 8,005,017
Deficit (5,147,929)
Total stockholders' equity 2,867,910
Total liabilities and
stockholders' equity $ 3,967,938
See accompanying notes to financial statements.
<PAGE>
Celebrity Entertainment, Inc.
Condensed Statement of Operations
For the Nine Months Ended September 30, 1995 and 1994
Unaudited
Nine Months Ended
September 30,
1995 1994
Revenues:
Resort membership sales $ 36,129 $ 44,967
Resort operations 71,922 130,122
Production revenues - 1,503,563
Total revenues 108,051 1,678,652
Costs and expenses
Cost of sales - 6,977
Production costs - 2,372,748
Gross profit 108,051 (701,073)
Selling, general and
administrative 528,798 634,191
Operating loss (420,747) (1,335,264)
Other income (expenses):
Interest income 4,075 8,111
Interest expense (38,659) (74,778)
(34,584) (66,667)
Loss from continuing operations (455,331) (1,401,931)
Discontinued operations of PSI - (71,292)
Net loss $(455,331) $(1,473,223)
Per common share:
Loss from continuing operations $ (0.28) $ (0.88)
Loss from discontinued operations $ - $ (0.04)
Net loss per common share $ (0.28) $ (0.92)
Weighted average number of
common shares outstanding 1,630,720 1,594,031
See accompanying notes to financial statements.
<PAGE>
Celebrity Entertainment, Inc.
Condensed Statement of Cash Flows
Unaudited
Nine months ended September 30, 1995 1994
Cash flows from
operating activities:
Net loss $ (455,331) $ (1,473,223)
Adjustments to reconcile
net loss to net cash used
by operating activities: - 2,509,943
Depreciation and amortization 79,302 66,339
Change in current assets
and liabilities: - (968,928)
Prepaid expenses 6,473 -
Accounts payable and
accrued expenses 82,479 -
Deferred membership revenue 7,263 -
Net cash provided by (used for)
operating activities (279,814) 134,131
Cash flows from investing activities:
Increase in production cost - (916,086)
Capital expenditures - (35,086)
Other - (4,036)
Net cash used for investing activities - (955,208)
Cash flows from financing activities:
Increase in notes payable 188,729 -
Increase in notes receivable (196,968) -
Additions (payments) of
long-term debt (21,394) 485,728
Repayments of notes payable - (1,458,766)
Proceeds from sale of stock 363,050 2,294,453
Net cash provided by
financing activities 333,417 1,321,415
Increase in cash and cash equivalents 53,603 500,338
Cash and cash equivalents,
beginning of period 2,278 5,362
Cash and cash equivalents,
end of period $ 55,881 $ 505,700
Supplemental disclosure of
cash paid for:
Interest $ 38,659 $ 103,960
Income taxes - -
See accompanying notes to financial statements.
<PAGE>
Celebrity Entertainment, Inc.
Statement of Shareholders' Equity
Nine Months Ended September 30, 1995
Unaudited
Additional
Preferred Stock Common Stock Paid-In
Shares Amount Shares Amount Capital Deficit
Balance at
January 1,
1995 589,000 $5,890 407,753 $ 41 $6,977,806 ($4,692,598)
Sales 475,000 $4,750 1,409,000 $141 $1,027,211 -
Net loss - - - - - (455,331)
Balance at
September
30, 1995 1,064,000 $10,640 1,816,753 $182 $8,005,017 ($5,147,929)
See accompanying notes to financial statements.
<PAGE>
CELEBRITY ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements have been prepared by
the Company without audit, pursuant to the rules and
regulations of the Commission. In the opinion of
management, these financial statements include all
adjustments necessary to present fairly the financial
position of the Company as of September 30, 1995 and the
results of operations and cash flows for the nine-month
periods ended September 30, 1995 and 1994. The Company's
results of operations during the first nine months of the
Company's fiscal year are not necessarily indicative of the
results to be expected for the full fiscal year. The
financial statements included in this report should be read
in conjunction with the financial statements and notes
thereto in the Company's 1994 Form 10-KSB and any amendments
thereto.
2. Net Loss Per Common Share
Net loss per common share is computed using the weighted
average number of shares outstanding during each period.
Common stock equivalents have not been included since the
effect of such inclusion would be antidilutive.
3. Current Maturities of Long-Term Debt
Current maturities are comprised of the amounts outstanding
under the mortgage on the resort property at September 30,
1995. The mortgage note matures and is due and payable on
May 2, 1997.
4. Revenue Recognition
Memberships sold represent the right to use the resort
facilities upon continuous payment of monthly membership
installments, dues and usage fees. Memberships generally
require an initial payment of 10% upon signing of the
contract with the balance payable in monthly installments
over three to five years. The initial payment and all
monthly payments are deferred and recognized as revenues in
the period when the membership fee is paid in full. In the
event of a default in the payment of monthly payments, the
member forfeits all amounts collected by the Company at the
time of default, and any such amounts that were deferred are
recognized as revenue. Revenues from usage fees are
recognized on a daily basis as the resort facilities are
used. Dues revenues are deferred and recognized on a
prorata basis over the dues period which ranges from one
month to one year.
5. Reclassifications
Certain reclassifications have been made to conform prior
period financial statements with the current presentation.
6. Acquisition and Discontinued Operations
On June 15, 1993, the Company acquired the outstanding
common stock of Production Services International, Inc.
("PSI") in exchange for 402,672 shares of the Company's
common stock. At June 15, 1993, PSI's liabilities exceeded
its assets (at their fair market value) by $150,558, and the
excess of the purchase price over the deficiency in the net
assets acquired equaled $553,230. This goodwill amount was
being amortized over seven years and is included in the
amortization amounts in the 1994 financial statements. The
total acquisition cost has been valued at $402,672, which
amount has been written off as of December 31, 1994 in
connection with the abandonment of the Company's investment
in PSI's operations.
The management of the Company recognized that the financial
condition of PSI at December 31, 1994 was such that the
Company was not able to exercise control over the operations
of its subsidiary, PSI, and that unless immediate financing
were obtained under conditions acceptable to the distributor
of PSI's principal television series production (the
"Series"), bankruptcy of PSI was inevitable. On March 6,
1995, the Company's board of directors approved a formal
plan to discontinue the operations and settle the
liabilities of PSI by liquidating the assets of PSI. As of
December 31, 1994, the Company abandoned its investment in
PSI and deconsolidated the assets, liabilities and
operations of the PSI subsidiary on its financial
statements.
On March 1, 1995, certain creditors of PSI (the "Petitioning
Creditors") filed an involuntary petition with the United
States Bankruptcy Court, Middle District of Florida, Orlando
Division, requesting an order for relief under Chapter 11 of
the Bankruptcy Code (the "Petition"). The Petition asserted
claims of amounts owed as a result of the television Series
which ceased production in November, 1994. During the nine-
month period ended September 30, 1995, PSI and the
Petitioning Creditors have reached a settlement regarding
the issues connected with the production and distribution of
the Series. Among the terms of the settlement, PSI's
ownership interest in the television series has been
relinquished to the distributor of the Series, mutual
releases and waivers of all other claims were exchanged, and
the Petition was withdrawn. The Company has agreed to
assist PSI in providing $250,000 as payment to the
Petitioning Creditors and further to assist PSI in
establishing a fund to satisfy the remaining claims from
other creditors of the Series. Commencing in the nine-month
period ended September 30, 1995, PSI has been pursuing an
effort to identify and quantify all outstanding claims of
indebtedness related to PSI's operations and has formulated
a proposed cash settlement of all such claims. A substantial
majority of creditors have been identified and have agreed
to the proposed settlement,which the Company intends to fund
during the fourth quarter, 1995. Based on the completion of
this funding, the Company believes that any potential
material exposure to the Company as a result of the
discontinuation of the Series will have been substantially
mitigated and possibly eliminated.
As a result of the discontinuation of PSI, no results of
operations or net assets and liabilities of PSI are included
in the accompanying financial statements. The financial
statements for 1994 have been restated to conform to this
presentation.
7. Management Plans
During the nine-month period ended September 30, 1995, the
Company entered into a Financing Agreement and Letter of
Intent (the "Financing Agreement") with representatives of a
private financing group (the "Financing Group"). Pursuant
to the terms of the Financing Agreement, the Company issued
to the Financing Group a promissory note in the principal
amount of $200,000 payable on December 1, 1995 in return for
the Financing Group's payment of $200,000 in cash to the
Company. In addition, the Financing Group purchased
200,000 shares of the Company's common stock in return for
a cash payment of $100,000 to the Company; and 800,000 of
the Company's common shares together with 475,000 of the
Company's Class A 8% Convertible preferred shares, payment
for which was made by a secured promissory note payable to
the Company. The Company's shares issued in connection with
these transactions are not currently registered for sale,
but it is anticipated that they will be registered in the
Company's next registration statement. Also, options were
granted to officers and directors of the Company in exchange
for indebtedness. In connection with additional funding
which the Financing Group has agreed to provide, the Company
has granted to the Financing Group options to purchase
additional common stock of the Company.
The Company and the Financing Group have entered a period of
negotiation and due diligence in order to complete a
proposed business combination of the Company with one or
more of the entities controlled or represented by the
Financing Group. If such proposed business combination is
effected, it is anticipated that a public offering or other
sale of securities would be completed, the proceeds from
which, in part, would be used to reduce the liabilities of
CEI and expand CEI's resort operations and the combining
company's operations. This would result in the reduction of
CEI's liabilities and provide expected income in the
upcoming year of the Company's operations. However, there
can be no assurance that any proposed business combination
will be effected. Any such business combination and related
public offering is subject to the combining entity's
acceptance of the Company's financial statements, the state
of the general securities markets and of the specific market
for the Company's securities, and any necessary regulatory
review of the securities to be issued in connection with the
combination.
Although management believes material progress has been
achieved toward acquiring the necessary funding to meet the
Company's existing obligations as well as contemplated
capital requirements, as of the date of this filing
substantial additional financial capital is required and,
consequently, there is doubt concerning the Company's
ability to continue as a going concern.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
General
The Company is principally engaged in the development,
ownership, marketing and operation of a destination resort
community and fishing camp located on Orange Lake near
Ocala, Florida.
The financial statements of the Company for the nine-
months ended September 30, 1995 do not include the accounts
of its previously owned subsidiary, Production Services
International, Inc. ("PSI"), which the Company discontinued
at December 31, 1994 and also do not include its previously
owned subsidiary, Celebrity Football, Inc. ("CFI") which was
dissolved as of August 13, 1993.
The Company recognizes revenues related to sales of
memberships on the date that the membership contract is paid
in full. Until such time, all partial payments received on
memberships are recorded as deferred membership revenues on
the Company's balance sheet. Any receivable related to the
original membership agreement is netted against the deferred
membership revenues. Buyers have a five day right of
rescission with respect to Membership Agreements.
Results of Operations
Nine-month Period Ended September 30, 1995 Compared to Nine-
month Period Ended September 30, 1994
Revenues for the nine-month period ended September 30,
1995 amounted to $108,051 compared to $1,678,652 for the
nine-month period ended September 30, 1994, reflecting a
decrease of $1,570,601. Revenues are comprised of
memberships paid in full, dues and resort operations. The
decrease in revenues reflected for the nine-month period
ended September 30, 1995 is a result of the discontinuation
of the Company's television production subsidiary as of
December, 1994, the re-classification of certain deferred
revenues, and the stabilized use of the resort facilities at
the current membership level. There were no costs and
expenses of revenues for the nine-month period ended
September 30, 1995 compared to $6,977 for the nine-month
period ended September 30, 1994, resulting in a decrease of
$6,977. The decrease is attributable principally to a
redefinition of previous costs of sales categories to
general and administrative expenses together with the
reduction of merchandise sold in the resort's general store.
See "Liquidity and Capital Resources."
Selling, general and administrative expenses were
$528,798 for the nine months ended September 30, 1995
compared to $634,191 for the nine-month period ended
September 30, 1994, representing a decrease of $105,393.
The decrease is due principally to the decreased legal,
accounting and corporate administrative costs associated
with the discontinuation of PSI.
During the nine-month period ended September 30, 1995,
$38,659 in interest expense was charged to operations
compared to $74,778 for the nine-month period ended
September 30, 1994, reflecting a decrease of $36,119. The
decrease was due principally to the payments of interest on
the mortgage note and reduced payments of the Company's
other indebtedness. Interest expense will continue to be
charged to operations as the related debt instruments are
amortized over future years.
Net losses for the nine-month period ended September
30, 1995 were $455,331 which represents a decrease of
$1,017,892 below the net loss of $1,473,223 for the nine-
month period ended September 30, 1994. This decrease is
primarily attributable to the discontinuation of the PSI
television subsidiary. See "Liquidity and Capital
Resources."
Liquidity and Capital Resources
The Company intends to complete the development of the
Resort Property during the 1995-97 resort seasons at a total
cost of approximately $300,000. Commencing in 1993, the
Company pursued a marketing plan which focuses on the on-
site sale of new memberships. It is anticipated that
revenues will increase as a result of membership sales and
facilities use, and that such increase will generate cash
flow from operations sufficient to finance approximately one-
half of the completion of the Resort. While there can be no
assurance, the Company is confident that additional capital
that may be obtained from operations and from the planned
financing activities to be initiated during 1995 and 1996
will facilitate the completion of RV sites and additional
Resort facilities and amenities, which the Company believes
will provide increasing revenue growth through increased
membership sales and Resort facilities use fees.
Liquidity and capital resources are hereinafter
discussed in three broad categories: operating activities,
investing activities and financing activities.
Cash decreased $449,819 to $55,881 at September 30,
1995 from $505,700 at September 30, 1994. Net cash used for
operating activities was $279,814 during the nine-month
period ended September 30, 1995 compared to cash provided by
operating activities of $134,131 during the nine-month
period ended September 30, 1994. The change in cash
provided by and used for operating activities resulted
primarily from the discontinuation of the PSI television
subsidiary.
During the nine-month period ended September 30, 1995,
there was no net cash provided by or used for investing
activities, compared with $955,208 used for investing
activities during the nine-month period ended September 30,
1994. The decrease of $955,208 is a result of the
abandonment of PSI television production and development
activities combined with purchases of property and equipment
at the Resort.
During the nine-month period ended September 30, 1995,
net cash provided by financing activities was $333,417,
representing a decrease of $987,998 from net cash provided
by financing activities of $1,321,415 during the nine-month
period ended September 30, 1994. The decrease is a result
primarily of the net proceeds from the completion of a
public offering of the Company's securities which occurred
in January 1994, which resulted in greater net proceeds to
the Company than the additional indebtedness and stock sales
completed by the Company during the nine-month period ended
September 30, 1995.
In June 1993, the Company acquired PSI, a Delaware
corporation headquartered in Palm Beach, Florida. The
Company acquired all the issued and outstanding capital
stock of PSI in exchange for 402,672 newly-issued shares of
Common Stock of the Company with a value of $1.00 per share.
Accordingly, the total acquisition cost has been valued at
$402,672, which amount has been written off as of December
31, 1994 in connection with the abandonment of the Company's
investment in PSI's operations.
PSI has developed a number of television projects since
its inception. All of PSI's investment in television
projects has been abandoned by the Company as of December
31, 1994. The principal project of PSI was a concept
developed by PSI for a television program of a half-hour,
five episodes per week, late-night comedy Series based on
national and international events entitled "THE NEWZ."
During 1994, a national distributor of television
programming (the "Distributor") and PSI entered into an
agreement for the purchase by the Distributor of the
exclusive distribution and exploitation rights of the
Series. PSI had completed and delivered sixty-one episodes
of "THE NEWZ." However, due to technical difficulties and
other production overages that caused substantial cost
overruns, the total production funding provided by the
Distributor was not sufficient to cover the costs of
production for the completion of the initial ninety episode
order. Although PSI had located two alternative sources of
financing to provide the funding necessary to complete the
remaining episodes, PSI and the Distributor were unable to
agree on the revised terms of an arrangement for production
and distribution of the episodes. Consequently, all
production activity ceased in November, 1994.
The management of the Company recognized that the
financial condition of PSI at December 31, 1994 was such
that the Company was not able to exercise control over the
operations of its subsidiary, PSI, and that unless immediate
financing for production of the Series were obtained under
conditions acceptable to the Distributor, bankruptcy of PSI
was inevitable. On March 6, 1995, the Company's board of
directors approved a formal plan to discontinue the
operations and settle the liabilities of PSI by liquidating
the assets of PSI. As of December 31, 1994, the Company
abandoned its investment in PSI and deconsolidated the
assets, liabilities and operations of the PSI subsidiary on
its financial statements.
During the nine-month period ended September 30, 1995,
PSI and the Distributor have reached a settlement regarding
the issues connected with the production and distribution of
the Series. Among the terms of the settlement, PSI's
ownership interest in the television series has been
relinquished to the Distributor, mutual releases of
liability were exchanged between PSI and the Distributor,
and the petitioning creditors (which included the
Distributor) withdrew an involuntary petition that had been
filed on March 1, 1995 with the United States Bankruptcy
Court, Middle District of Florida, Orlando Division,
requesting an order for relief under Chapter 11 of the
Bankruptcy Code. The Company has agreed to assist PSI in
providing $250,000 as payment to the Distributor and the
other petitioning creditors and further to assist PSI in
establishing a fund to satisfy the remaining claims from
other creditors of the Series. Commencing in the nine-month
period ended September 30, 1995, PSI has been pursuing an
effort to identify and quantify all outstanding claims of
indebtedness related to PSI's operations and has formulated
a proposed cash settlement of all such claims. A
substantial majority of creditors have been identified and
have agreed to the proposed settlement, which the Company
intends to fund during the fourth quarter, 1995. Based on
the completion of this funding, the Company believes that
any potential material exposure to the Company as a result
of the discontinuation of the Series will have been
substantially mitigated and possibly eliminated.
Income from the resort is seasonal and on an annual
basis the Company is required to seek additional financing
in order to pay long-term debt obligations and the resort's
ongoing operations, including payroll, creditors and taxes.
Income from the resort operations is not sufficient to
sustain the Company's operations. Consequently, the Company
has been experiencing a liquidity problem and must obtain
financing in addition to expected revenues from operations
in order to pay its past due obligations and meet its
current obligations as they come due.
During the nine-month period ended September 30, 1995,
the Company entered into a Financing Agreement and Letter of
Intent (the "Financing Agreement") with representatives of a
private financing group (the "Financing Group"). Pursuant
to the terms of the Financing Agreement, the Company issued
to the Financing Group a promissory note in the principal
amount of $200,000 payable on December 1, 1995 in return for
the Financing Group's payment of $200,000 in cash to the
Company. In addition, the Financing Group purchased
200,000 shares of the Company's common stock in return for
a cash payment of $100,000 to the Company, and 800,000 of
the Company's common shares together with 475,000 of the
Company's Class A 8% Convertible preferred shares, payment
for which was made by a secured promissory note payable to
the Company. The Company's shares issued in connection with
these transactions are not currently registered for sale,
but it is anticipated that they will be registered in the
Company's next registration statement. Also, options were
granted to officers and directors of the Company in exchange
for indebtedness. In connection with additional funding
which the Financing Group has agreed to provide, the Company
has granted to the Financing Group options to purchase
additional common stock of the Company.
The Company and the Financing Group have entered a
period of negotiation and due diligence in order to complete
a proposed business combination of the Company and one or
more of the entities controlled or represented by the
Financing Group. If such proposed business combination is
effected, it is anticipated that a public offering or other
sale of securities would be completed, the proceeds from
which, in part, would be used to reduce the liabilities of
CEI and expand CEI's resort operations and the combining
company's operations. This would result in the reduction of
CEI's liabilities and provide expected income in the
upcoming year of the Company's operations. However, there
can be no assurance that any proposed business combination
will be effected. Any such business combination and related
public offering is subject to the combining entity's
acceptance of the Company's financial statements, the state
of the general securities markets and of the specific market
for the Company's securities, and any necessary regulatory
review of the securities to be issued in connection with the
combination.
On August 3, 1995, the Company effected a reverse split
of its common stock on the basis of one share of common
stock in exchange for every five shares of the Company's
common stock. The number of common shares outstanding prior
to the reverse split was 7,653,767 and the number of common
shares outstanding after the reverse split was 1,531,753.
One of the effects of the reverse split was the increase of
the trading price of the Company's common stock on the
Nasdaq Small-Cap Market. The reverse split was effected as
part of the Company's plans to comply with the requirements
of maintaining the Company's listing of its securities on
NASDAQ.
Commencing in the nine-month period ended September 30,
1995, the Company engaged in relationships with certain
consultants who are providing services to the Company
relating principally to investment banking consultation
regarding possible business combinations between the Company
and other companies, and expanding the Company's
relationships with possible market-makers. In return for
such services, the Company granted to such consultants
shares and options to purchase shares of the Company's
common stock, which shares were registered pursuant to a
filing on Form S-8, which the Company completed during the
third quarter, 1995. The Company anticipates that the
efforts of the consultants will result in improved market
support for the Company's publicly-traded securities as well
as expanded opportunities for possible business
combinations.
Although management believes material progress has been
achieved toward acquiring the necessary funding to meet the
Company's existing obligations as well as contemplated
capital requirements, as of the date of this filing
substantial additional financial capital is required and,
consequently, there is doubt concerning the Company's
ability to continue as a going concern.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 1, 1995, certain creditors of PSI (the
"Petitioning Creditors") filed an involuntary petition with
the United States Bankruptcy Court, Middle District of
Florida, Orlando Division, requesting an order for relief
under Chapter 11 of the Bankruptcy Code (the "Petition").
The Petition asserted claims of amounts owed as a result of
the television Series which ceased production in November,
1994. During the nine-month period ended September 30,
1995, PSI and the Distributor have reached a settlement
regarding the issues connected with the production and
distribution of the Series. Among the terms of the
settlement, PSI's ownership interest in the television
series has been relinquished to the Distributor, mutual
releases of liability were exchanged between PSI and the
Distributor, and the petitioning creditors (which included
the Distributor) withdrew the Petition. The Company has
agreed to assist PSI in providing $250,000 as payment to the
Distributor and the other petitioning creditors and further
to assist PSI in establishing a fund to satisfy the
remaining claims from other creditors of the Series.
Commencing in the nine-month period ended September 30,
1995, PSI has been pursuing an effort to identify and
quantify all outstanding claims of indebtedness related to
PSI's operations and has formulated a proposed cash
settlement of all such claims. A substantial majority of
creditors has been identified and has agreed to the proposed
settlement, which the Company intends to fund during the
fourth quarter, 1995. Based on the completion of this
funding, the Company believes that any potential material
exposure to the Company as a result of the discontinuation
of the Series will have been substantially mitigated and
possibly eliminated.
Item 2. Changes in Securities
Common shares were issued in the aggregate number of
205,000, registered pursuant to a filing on Form S-8. In
addition, options for the purchase of common stock were
issued in the aggregate number of 80,000.
As a result of private financing transactions, an
additional 475,000 shares of the Company's Class A 8%
convertible preferred stock was issued together with an
additional 1,123,000 shares of the Company's common stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Item 5. Other Information
During the nine-month period ended September 30, 1995,
the Company entered into a Financing Agreement and Letter of
Intent (the "Financing Agreement") with representatives of a
private financing group (the "Financing Group"). Pursuant
to the terms of the Financing Agreement, the Company issued
to the Financing Group a promissory note in the principal
amount of $200,000 payable on December 1, 1995 in return for
the Financing Group's payment of $200,000 in cash to the
Company. In addition, the Financing Group purchased
200,000 shares of the Company's common stock in return for
a cash payment of $100,000 to the Company; and 800,000 of
the Company's common shares together with 475,000 of the
Company's Class A 8% Convertible preferred shares, payment
for which was made by a secured promissory note payable to
the Company. The Company's shares issued in connection with
these transactions are not currently registered for sale,
but it is anticipated that they will be registered in the
Company's next registration statement. Also, options were
granted to officers and directors of the Company in exchange
for indebtedness. In connection with additional funding
which the Financing Group has agreed to provide, the Company
has granted to the Financing Group options to purchase
additional common stock of the Company.
The Company and the Financing Group have entered a
period of negotiation and due diligence in order to complete
a proposed business combination of the Company and one or
more of the entities controlled or represented by the
Financing Group. Such business combination is expected to
result in substantial additional annual revenues and net
income to the Company. If such proposed business
combination is effected, it is anticipated that a public
offering or other sale of securities would be completed, the
proceeds from which, in part, would be used to reduce the
liabilities of CEI and expand CEI's resort operations and
the combining company's operations. This would result in
the reduction of CEI's liabilities and provide expected
income in the upcoming year of the Company's operations.
However, there can be no assurance that any proposed
business combination will be effected. Any such business
combination and related public offering is subject to the
combining entity's acceptance of the Company's financial
statements, the state of the general securities markets and
of the specific market for the Company's securities, and any
necessary regulatory review of the securities to be issued
in connection with the combination.
A majority of the Company's shareholders authorized the
reverse split of the Company's common stock on the basis of
one new common share in exchange for each five shares of the
Company's existing common stock. Such reverse split took
effect on August 3, 1995 with the result that, as of the
date of this filing, the Company has outstanding 2,116,753
shares of common stock.
On June 12, 1995, representatives of the Company
appeared in an oral hearing before a Panel authorized by the
National Association of Securities Dealers and presented a
plan to demonstrate compliance with the minimum bid price
required for the Company's securities to continue to be
listed on The Nasdaq SmallCap Market ("Nasdaq"). As a
result of the hearing procedure, the Panel recommended that
the Nasdaq Listing Qualifications Committee approve the
Company's request to receive a temporary exception to the
bid price requirements, which exception was granted.
Consequently, the Company's securities have continued to be
listed on Nasdaq. As of the date of this filing, the
Company has demonstrated compliance with the minimum bid
price requirements.
Commencing in the nine-month period ended September 30,
1995, the Company engaged in relationships with certain
consultants who are providing services to the Company
relating principally to investment banking consultation
regarding possible business combinations between the Company
and other companies, and expanding the Company's
relationships with possible market-makers. In return for
such services, the Company granted to such consultants
shares and options to purchase shares of the Company's
common stock, which shares were registered pursuant to a
filing on Form S-8, which the Company completed during the
third quarter, 1995. The Company anticipates that the
efforts of the consultants will result in improved market
support for the Company's publicly-traded securities as well
as expanded opportunities for possible business
combinations.
Although management believes material progress has been
achieved toward acquiring the necessary funding to meet the
Company's existing obligations as well as contemplated
capital requirements, as of the date of this filing
substantial additional financial capital is required and,
consequently, there is doubt concerning the Company's
ability to continue as a going concern.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to 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: November 13, 1995
CELEBRITY ENTERTAINMENT, INC.
By: /s/ J. William Metzger
J. William Metzger
Executive Vice-President and
Chief Financial Officer
