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 March 31, 1996.
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 principal 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______
Class Outstanding at May 15, 1996:
Common Stock, $.0001 par value 3,474,753
Preferred Stock, $.01 par value 1,064,000
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 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a
Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 18
Signatures
PART I. FINANCIAL INFORMATION
The condensed financial statements for the periods ended March 31, 1996
and March 31, 1995 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 March 31, 1996 and
the results of operations and cash flows for the three-month periods ended March
31, 1996 and 1995.
The Company's results of operations during the first three 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, 1995.
Celebrity Entertainment, Inc.
Condensed Balance Sheet
March 31, 1996
<TABLE>
<S> <C>
Unaudited
Assets
Current Assets:
Cash $ 120,159
Prepaid expenses 17,615
Total current assets 137,774
Property and equipment, net 3,165,120
Other assets 273
Total assets $ 3,303,167
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 293,279
Accrued expenses 99,132
Deferred revenue 56,942
Notes payable 54,661
Current maturities of long-term debt 30,087
Total current liabilities 534,101
Long-term debt 422,823
Stockholders' equity:
Preferred stock, $0.01 par value:
2,000,000 shares authorized
Designated as Class A 8% Convertible: 1,525,000 shares;
1,064,000 shares outstanding 10,640
Common stock, $0.0001 par value: 25,000,000
shares authorized; 2,944,753 shares outstanding 295
Additional paid-in capital 12,827,003
Deficit (10,491,695)
Total stockholders' equity 2,346,243
Total liabilities and stockholders' equity $ 3,303,167
See accompanying notes to financial statements.
Celebrity Entertainment, Inc.
Condensed Statement of Operations
Unaudited
Three Months Ended
March 31,
1996 1995
Revenues:
Resort membership sales $21,416 $ 12,522
Resort operations 49,500 38,922
Total revenues 70,916 51,514
Selling, general and (275,061) (193,390)
administrative
Operating loss (204,145) (141,876)
Other income (expenses):
Interest income 692 1,674
Interest expense (1,908) (12,502)
Sale of stock 844,442 -
843,226 (10,828)
Gain (loss) from
continuing operations 639,081 (152,704)
Net gain (loss) $ 639,081 $ (152,704)
Per common share:
Gain (loss) from
continuing operations $ 0.25 $ (0.07)
Net gain (loss) $ 0.25 $ (0.07)
Weighted average number of
common shares outstanding 2,543,945 2,038,767
See accompanying notes to financial statements.
Celebrity Entertainment, Inc.
Condensed Statement of Cash Flows
Unaudited
Three months ended March 31, 1996 1995
Cash flows from operating activities:
Net gain (loss) $ 639,081 $ (152,704)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 28,980 26,434
Change in current assets and liabilities:
Prepaid expenses (10,945) 4,098
Other assets (273) (273)
Accounts payable and accrued expenses (43,102) 89,091
Deferred membership revenue 3,868 8,809
Net cash provided by (used for) operating 617,609 (24,545)
activities
Cash flows from investing activities:
Purchase of equipment (3,957) -
Net cash used for investing activities (3,957) -
Cash flows from financing activities:
Repayments on loan payable (6,707) -
Repayments of long-term debt - (11,112)
Repayments of notes payable (222,929) -
Notes receivable from issuance of stock (275,167) -
Proceeds from sale of stock 58 -
Net cash provided by (used for)
financing activities (504,745) 26,100
Increase in cash and cash equivalents 108,907 1,555
Cash and cash equivalents, beginning of 11,252 2,278
period
Cash and cash equivalents, end of period $ 120,159 $ 3,833
Supplemental disclosure of cash paid for:
Interest $ 1,908 $ 12,502
Income taxes - -
See accompanying notes to financial statements.
Celebrity Entertainment, Inc.
Statement of Shareholders' Equity
Three Months Ended March 31, 1995
</TABLE>
<TABLE>
Unaudited
Additional
Preferred Stock Common Stock Paid-In
Shares Amount Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 1,064,000 $10,640 2,366,753 $237 $12,827,004 ($10,063,435)
Sales - - 578,000 $ 58 - (1,067,341)
Net gain - - - - - 639,081
Balance at March 31, 1996 1,064,000 $10,640 2,944,753 $295 $12,827,004 ($10,491,695)
</TABLE>
See accompanying notes to financial statements.
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 March 31, 1996 and
the results of operations and cash flows for the three-month periods ended March
31, 1996 and 1995. The Company's results of operations during the first three
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 1995 Form 10-KSB and any
amendments thereto.
2. Net Gain or Loss Per Common Share
Net gain or 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 March 31, 1996. 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 facilitates 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. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7. Recent Accounting Pronouncements
The FASB has issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets Being Disposed of," which provides guidance on how
and when impairment losses are recognized on long-lived assets. This statement,
when adopted, is not expected to have a material impact on the Company.
The FASB has issued SFAS No. 123, Accounting for Stock-Based Compensation,
which establishes a fair value based method of accounting for stock-based
compensation plans. This statement provides a choice to either adopt the fair
value based method of accounting or continue to apply APB Opinion No. 25, which
would require only disclosure of the pro forma net income and earnings per
share, determined as if the fair value based method had been applied. The
Company plans to continue to apply APB Opinion No. 25 when adopting this
statement, and accordingly, this statement is not expected to have a material
impact on the Company.
8. 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. The acquisition of PSI was accounted for using
the purchase method of accounting. Accordingly, (a) the results of PSI's
operations were included in the statement of operations from the date of
acquisition and (b) the total acquisition cost has been allocated to the assets
and liabilities of PSI based on their relative estimated fair values at the
date of purchase. At June 15, 1993, PSI's liabilities exceeded its
assets (at their fair market value) by $150,558, and accordingly, 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.
Operations of PSI Discontinued
On March 1, 1995, certain creditors of PSI filed a petition with the United
States Bankruptcy Court in the middle district of Florida in Orlando, requesting
an order for relief under Chapter 11 of the Bankruptcy Code. The petition
asserted claims of amounts owed as a result of a television series which ceased
production in November 1994. Such claims are for amounts in excess of the
accounts payable and PSI is negotiating with the three creditors who initiated
the filing toward a settlement of their claims. This petition was withdrawn in
favor of a workout plan developed by the Company.
During the year ended December 31, 1995, the Company, at the advice of counsel,
entered into a settlement agreement with PSI's three major creditors to satisfy
$225,000 of existing PSI liabilities. The Company has also agreed to satisfy
liabilities to other creditors of PSI of approximately $207,000. No other
liabilities are expected to be paid on behalf of PSI.
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 a result of the petition for bankruptcy against PSI and the Company's related
inability to maintain control over PSI, the Company abandoned its investment
in PSI and deconsolidated the assets, liabilities and operations of the PSI
subsidiary on its financial statements in 1994.
9. Management Plans
CEI is in discussions with a representative of a privately-held company who
has provided a verbal commitment to complete a merger of such company with CEI.
Based on the historical performance of the subject company's operations, such a
business combination could result in an increase in annual revenues and net
income to CEI. Upon the completion of the proposed business combination, it is
anticipated that a public offering 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. However, there can be no assurance that any
proposed acquisition will be effected. Any such acquisition and public offering
is subject to the acquiring entity's acceptance of the 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 merger. The Company has sold certain of its
securities in a private sale through an exemption to registration in order to
reduce its obligations and facilitate the proposed acquisition. The Company is
considering selling additional securities in order to complete the acquisition.
Certain creditors and note holders have informed the Company that the
obligations of the Company to pay them may be exchanged for a number of the
Company's securities.
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 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
Three-Month Period Ended March 31, 1996 Compared to Three-Month Period Ended
March 31, 1995
Revenues for the three-month period ended March 31, 1996 amounted to
$70,916 compared to $51,514 for the three-month period ended March 31, 1995,
reflecting an increase of $19,402. Revenues are comprised of memberships paid in
full, dues and resort operations. The increase in revenues reflected for the
three-month period ended March 31, 1996 is a result of improved marketing and
use of the Company's resort facilities. See "Liquidity and Capital Resources."
Selling, general and administrative expenses were $275,061 for the three
months ended March 31, 1996 compared to $193,390 for the three-month period
ended March 31, 1995, representing an increase of $81,671. The increase is due
principally to the increased commissions associated with the sale of the
Company's securities. Such sales represented other income of $844,442 during
the three-month period ended March 31, 1996, while no such income was realized
during the same period ended March 31, 1995.
During the three-month period ended March 31, 1996, $1,908 in interest
expense was charged to operations compared to $12,502 for the three-month period
ended March 31, 1995, reflecting a decrease of $10,594. 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 gain for the three-month period ended March 31, 1996 was $639,081
which represents an increase of $791,785 above the net loss of $152,704 for the
three-month period ended March 31, 1995. This increase is primarily
attributable to sale of the Company's securities.
Liquidity and Capital Resources
The Company intends to complete the development of the Resort Property
during the 1996-97 resort seasons at a total cost of approximately $100,000.
Commencing in 1995, the Company pursued a marketing plan which focuses on the
destination use of the Resort and rallies and other group functions. It is
anticipated that revenues will continue to increase as a result of
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 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
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 increased $116,326 to $120,159 at March 31, 1996 from $3,833 at March
31, 1995. Net cash provided by operating activities was $617,609 during the
three-month period ended March 31, 1996 compared to cash used for operating
activities of $24,545 during the three-month period ended March 31, 1995. The
change in cash provided by and used for operating activities resulted primarily
from the sale of the Company s securities.
During the three-month period ended March 31, 1996, there was $3,957 used
for investing activities for office equipment, compared with no net cash used
for investing activities during the three-month period ended March 31, 1995.
During the three-month period ended March 31, 1996, net cash used for
financing activities was $504,745, representing an increase of $530,845 over net
cash provided by financing activities of $26,100 during the three-month period
ended March 31, 1995. The increase is a result primarily of the repayments of
notes payable together with notes receivable related to the issuance of the
Company's securities.
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.
The Company is in discussions with a representative of a privately-held
company who has provided a verbal commitment to complete a merger of such
company with the Company. Based on the historical performance of the subject
company's operations, such a business combination could result in an increase in
annual revenues and net income to the Company. Upon the completion of the
proposed business combination, it is anticipated that a public offering of
securities would be completed, the proceeds from which, in part, would be used
to reduce the liabilities of the Company and expand the Company's resort
operations. However, there can be no assurance that any proposed acquisition
will be effected. Any such acquisition and public offering is subject to the
acquiring entity's acceptance of the 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 merger. The Company has sold certain of its securities
in a private sale through an exemption to registration in order to reduce its
obligations and facilitate the proposed acquisition. The Company is considering
selling additional securities in order to complete the acquisition. In
addition, certain creditors and note holders have informed the Company that the
obligations of the Company to pay them may be exchanged for a number of the
Company's securities.
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
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
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: May 15, 1996
CELEBRITY ENTERTAINMENT, INC.
By: /s/ J. William Metzger
J. William Metzger,
Executive Vice-President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCLUDED IN FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 120,159
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 137,774
<PP&E> 3,713,530
<DEPRECIATION> 552,367
<TOTAL-ASSETS> 3,303,167
<CURRENT-LIABILITIES> 534,101
<BONDS> 422,823
<COMMON> 295
0
10,640
<OTHER-SE> 12,827,003
<TOTAL-LIABILITY-AND-EQUITY> 3,303,167
<SALES> 21,416
<TOTAL-REVENUES> 70,916
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1908
<INCOME-PRETAX> 639,081
<INCOME-TAX> 0
<INCOME-CONTINUING> 639,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 639,081
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.09
</TABLE>
