SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB/A#2
AMENDMENT NO. 2 to
[ 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, Suite 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 Outstanding at
November 13, 1995: June 27, 1996:
Common Stock, $.0001 par value 2,116,753 4,414,753
Preferred Stock, $.01 par value 1,064,000 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 10
PART II. OTHER INFORMATION 14
Item 1. Legal Proceedings 14
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 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures
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.
<TABLE>
Celebrity Entertainment, Inc.
Condensed Balance Sheet
September 30, 1995
Unaudited
<S>
Assets <C>
Current Assets:
Cash $ 55,881
Total current assets 55,881
Property and equipment, net 3,214,549
Total assets $ 3,270,430
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 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 11,501,888
Accumulated Deficit (8,645,340)
2,867,370
Less note receivable arising from
issuance of Preferred & Common stock (696,968)
Total stockholders' equity 2,170,402
Total liabilities and
stockholders' equity $ 3,270,430
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Celebrity Entertainment, Inc.
Condensed Statement of Operations
For Nine Months Endings September 30, 1995 and 1994
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Resort membership sales $14,785 $ 609 $ 36,129 44,967
Resort operations 16,906 19,015 71,922 130,122
Total revenues 31,691 19,624 108,051 175,089
Costs and expenses
Cost of sales - 505 - 6,977
Gross profit (loss) 31,691 19,119 108,051 168,112
Selling, general and administrative 189,194 247,141 811,541 634,191
Operating loss (157,503) (228,022) (703,490) (466,079)
Other income (expenses):
Interest income 1,001 2,180 4,075 8,111
Interest expense (740,464) (12,602) (3,253,326) (74,778)
(739,463) (10,422) (3,249,251) (66,667)
Loss from continuing operations (896,966) (238,444) (3,952,741) (532,766)
Discontinued operations of PSI - (957,384) - (940,477)
Net loss (896,966) (1,195,828) (3,952,741) (1,473,223)
Per common share:
Loss from continuing operations $(0.55) $(0.14) $(2.42) $(0.33)
Loss from discontinued operations $ - $(0.54) $ - $ (0.59)
Net loss per common share $(0.55) $(0.68) $(2.42) $ (0.92)
Weighted average number of
common shares outstanding 1,630,720 1,758,139 1,630,720 1,594,031
See accompanying notes are to financial statements.
</TABLE>
<TABLE>
Celebrity Entertainment, Inc.
Condensed Statement of Cash Flows
Unaudited
<S> <C> <C>
Nine months ended September 30, 1995 1994
Cash flows from operating activities:
Net loss $ (3,952,742) $(1,473,223)
Adjustments to reconcile net loss to net cash
used by operating activities 3,576,713 1,607,354
Change in current assets and liabilities 96,215 -
Net cash provided by (used for) operating activities (279,814) 134,131 <PAGE>
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 -
Decrease 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.
</TABLE>
<TABLE>
Celebrity Entertainment, Inc.
Statement of Shareholders' Equity
Nine Months Ended September 30, 1995
Unaudited
Note Receivable
Arising From
Additional Issuance of
Preferred Stock Common Stock Paid-In Preferred
Shares Amount Shares Amount Capital Deficit or Common Stock
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 589,000 $ 5,890 407,753 $ 41 $6,977,806 ($4,692,598) -
Issuance of Common Stock 475,000 $ 4,750 1,409,000 $141 $4,524,082 - $696,698
Net loss (3,952,742)
Balance at Sept. 30, 1995 1,064,000 $10,640 1,816,753 $182 $11,501,888 ($8,645,340) $696,698
See accompanying notes to financial statements.
</TABLE>
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. Discontinued 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 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.
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.
4. 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, in settlement of indebtedness to certain officers and
directors, the Company issued 200,000 options exercisable until June 1998 on the
basis of 100,000 common shares at $2.50 per share and 100,000 common shares at
$0.50 per share. 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.
The Company believes that such financing plans, which have been formulated to
overcome its financial difficulties, have the reasonable capability of removing
the threat to the continuation of its business during the twelve month period
subsequent to September 30, 1995. 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 substantial 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 $175,089 for the nine-month period ended September 30,
1994, reflecting a decrease of $67,038. 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
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 $811,541 for the nine
months ended September 30, 1995 compared to $634,191 for the nine-month period
ended September 30, 1994, representing an increase of $177,350. The increase
is due principally to the Company's stock issued as payment of consulting fees.
During the nine-month period ended September 30, 1995, $3,253,326 in
interest expense was charged to operations compared to $74,778 for the
nine-month period ended September 30, 1994, reflecting an increase of
$3,178,548. The increase was due principally to the issuance of the Company's
common stock and common stock options at substantially below market price.
Net losses for the nine-month period ended September 30, 1995 were
$3,952,741, which represents an increase of $2,479,518 above the net loss of
$1,473,223 for the nine-month period ended September 30, 1994. This increase
is primarily attributable to the issuance of the Company s stock and common
stock options. 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 increased $53,603 to $55,881 at September 30, 1995 from $2,278 at
December 31, 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 stock issued as payment of consulting fees at
substantially below market price.
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.
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 and which provided for a total of 500,000 shares to be granted
together with options to be granted for an additional 500 shares. As of the
date hereof 205,000 common shares were granted and options were granted for
50,000 common shares exercisable at $3.00 per share and an additional 30,000
common shares exercisable at $1.25 per share. 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
substantial doubt concerning the Company's ability to continue as a going
concern.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 1, 1995, the Distributor and tow other creditors of PSI (the
"Petitioning Creditors") filed an involuntary petition against PSI 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. As part of 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 claims 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:
EX 27.
(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: June 27, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 55,881
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 55,881
<PP&E> 3,607,089
<DEPRECIATION> 392,540
<TOTAL-ASSETS> 3,270,430
<CURRENT-LIABILITIES> 663,915
<BONDS> 436,113
<COMMON> 182
0
10,640
<OTHER-SE> 11,501,888
<TOTAL-LIABILITY-AND-EQUITY> 3,270,430
<SALES> 36,129
<TOTAL-REVENUES> 108,051
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,253,326
<INCOME-PRETAX> (3,952,741)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,952,741)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,952,741)
<EPS-PRIMARY> (2.42)
<EPS-DILUTED> (2.42)
</TABLE>
