SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
(mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-19196
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CELEBRITY ENTERTAINMENT, INC.
(Name of Small Business Issuer in its Charter)
Delaware 11-2880337
(State of or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
214 Brazilian Avenue, Suite 400, Palm Beach, Florida 33480 561/659-3832
(Address of principal executive offices. Issuer's telephone number.)
-----------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
The number of shares outstanding of the issuer's Common Stock, $ 0.0001 par
value, as of November 19, 1997 was 262,690.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
CELEBRITY ENTERTAINMENT, INC.
FORM 10-QSB
For the Quarter Ended September 30, 1997
(Unaudited)
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet
Statement of Operations and
Changes in Accumulated Deficit
Statement of Cash Flows
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> Celebrity Entertainment, Inc.
Balance Sheet
September 30, 1997
(Unaudited)
Assets
Current Assets:
Cash $ 160,208
Prepaid expenses 2,500
Accounts receivable 11,278
Total current assets 173,986
Property and equipment:
Land 670,780
Buildings and improvements 2,885,592
Equipment 157,805
Furniture and fixtures 58,227
Total 3,772,404
Less: accumulated depreciation and amortization ( 735,189)
Total property and equipment, net 3,037,215
Other assets: Investment in joint venture 1,102,221
Total assets $ 4,313,422
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 245,635
Accrued expenses 526,767
Deferred membership revenues 42,365
Notes payable 89,693
Mortgage note payable 419,910
Due to affiliate 70,150
Total current liabilities 1,394,520
Convertible debentures 2,851,925
Stockholders' equity:
Preferred stock, $0.01 par value: 2,000,000 shares authorized
Designated as Class A 8% convertible:
1,525,000 shares designated; 1,064,000 shares issued 10,640
Common stock, $0.0001 par value: 25,000,000 shares authorized;
262,690 shares issued 26
Additional paid-in capital 18,312,117
Accumulated deficit (17,755,806)
Less treasury stock, 10,100 shares common
and 475,000 shares preferred, at cost (500,000)
Total stockholders' equity 66,977
Total liabilities and stockholders' equity $ 4,313,422
See accompanying notes to financial statements.
<TABLE>
Celebrity Entertainment, Inc.
Statements of Operations and Changes in Accumulated Deficit
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Resort sales $ 15,262 $ 1,372 $ 75,949 $ 28,818
Resort operations 16,831 46,534 80,270 117,592
Forgiveness of debt - - 3,221 24,186
Total revenues 32,093 47,906 159,440 170,596
Selling, general & administrative 490,744 522,049 1,669,855 2,393,356
Operating income (loss) (458,651) (474,143) (1,510,415) (2,222,760)
Other income (expense):
Interest income 1,491 58,748 9,485 66,120
Dividend income 86,802 - 86,802 -
Interest expense (10,025) (18,924) (32,195) 201,937
Total other income 78,268 39,824 64,092 268,057
Net loss (380,383) (434,319) (1,446,323) (1,954,703)
Accumulated deficit -
beginning of period (17,375,423) (11,583,819) (16,309,483) (10,063,435)
Accumulated deficit -
end of period $(17,755,806) $(12,018,138) $(17,755,806)$(12,018,138)
Per common share:
Net loss per common share $(1.05) $(0.12) $(3.93) $(0.55)
Weighted average number of
common shares outstanding 361,603 3,530,226 367,891 3,530,226
See accompanying notes to the financial statements.
</TABLE>
Celebrity Entertainment, Inc.
Statement of Cash Flows
Unaudited
For the Nine Months Ended September 30,
1997 1996
Cash flows from operating activities:
Net loss $(1,446,323) $(1,954,704)
Adjustments to reconcile net loss to net
cash used for operating activities: - 85,360
Depreciation and amortization 94,345 -
Stock issued in payment of finder's fee
for debt 78,680 -
Stock issued in payment of consulting fees 108,780 -
Change in current assets and liabilities: - (4,364,890)
(Increase) decrease in:
Prepaid expenses and accounts receivable (6,447) -
Notes receivable 266,000 -
Increase (decrease) in:
Note payable 425,817 -
Accounts payable and accrued expenses 90,226 -
Deferred membership revenues 6,479
Due to affiliate 70,129 -
Net cash used in operating activities (312,314) (6,234,234)
Cash flows from investing activities:
Purchase of property and equipment (9,947) (41,240)
Investment in stock - (1,400,000)
Investment in joint venture (1,102,221) -
Proceeds on redemption of stock 1,253,180 -
Net cash (used in) provided by
investing activities 141,012 (1,441,240)
Cash flows from financing activities:
Payments on notes payable - (277,589)
Proceeds from notes receivable - 500,000
Payments on long-term debt - (27,697)
Proceeds from the issuance of debentures - 3,794,300
Proceeds from the sale of common stock - 4,093,186
Settlement of convertible debentures (113,000) -
Net cash (used in) provided by
financing activities (113,000) 8,082,200
Increase (decrease) in cash and cash equivalents (284,302) 406,726
Cash and cash equivalents, beginning of period 444,510 11,252
Cash and cash equivalents, end of period $ 160,208 $ 417,978
See accompanying notes to financial statements.
Celebrity Entertainment, Inc.
Statement of Cash Flows
(Continued)
Supplemental disclosures of cash flow information:
Interest $ 32,195 $ 18,924
Income taxes - -
Noncash investing and financing activities:
Stock issued in payment of finder's fee
for debt $ 94,345 $ -
Stock issued in payment of consulting fees $ 108,780 $ -
On November 5, 1996, the Company issued 140,000 shares of common stock for a
note receivable in the amount of $1,312,500 in conjunction with the
development of oil and gas interests in a joint venture agreement. On
September 3, 1997, in a settlement agreement with the holder of the note, the
note and the shares of common stock were canceled.
See accompanying notes to financial statements.
CELEBRITY ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
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, 1997
and the results of operations and cash flows for the three-month and nine-month
periods ended September 30, 1997 and 1996. 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 1996 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. Changes in Preferred and Common Shares
Changes in preferred shares and treasury stock for the nine months ended
September 30, 1997, were as follows:
Preferred Stock Treasury Stock
Shares Amount Common Preferred Amount
<TABLE>
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 1,064,000 $10,640 10,100 475,000 ($500,000)
Changes - - - - -
Balance at September 30, 1997 1,064,000 $10,640 10,100 475,000 ($500,000)
</TABLE>
Change in common stock and additional paid in capital for the nine month
period ended September 30, 1997 was as follows:
Common stock Additional
Shares Amount Paid In Capital
Balance at December 31, 1996 304,408 $30 $19,427,154
Sale of common stock 50,000 5 77,495
Issuance for consulting fees 45,000 5 109,954
Conversion of debentures
into common stock 3,282 - 10,000
Settlement in joint venture
cancellation of $1,312,500
note securing stock (140,000) (14) ( 1,312,486)
Balance at September 30, 1997 262,690 26 $18,312,117
Item 2. Management's Discussion and Analysis
The following discussion includes forward-looking statements, including, but
not limited to, the Company's future financial performance, operating
results, plans and objectives. Actual results may differ materially from
those currently anticipated depending on a variety of factors.
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
Nine-month Period Ended September 30, 1997 Compared to Nine-month Period Ended
September 30, 1996:
Revenues from resort operations, net of forgiveness of debt, amounted to
$156,219 for the nine-month period ended September 30, 1997 compared to
$146,410 for the nine-month period ended September 30, 1996, reflecting an
increase in operations of $9,809 or seven percent. Total revenues for the
nine-month period ended September 30, 1997 amounted to $159,440 compared to
$170,596 for the nine-month period ended September 30, 1996, reflecting a
decrease of $11,156. The decrease in revenues reflected for the nine-month
period ended September 30, 1997 is a combined result of an increase
in resort operation revenues, offset by a decrease in forgiveness of debt.
Selling, general and administrative expenses were $1,669,855 for the nine
months ended September 30, 1997 compared to $2,393,356 for the nine-month period
ended September 30, 1996, representing a decrease of $723,501. The decrease
is due principally to a reduction in fees related to the sale of the Company's
securities.
During the nine-month period ended September 30, 1997, $32,195 in
interest expense was charged to operations compared to an adjustment reducing
interest expense to a positive balance (effectively interest income)of
$201,937 for the nine-month period ended September 30, 1996, reflecting an
increase in net expense of $234,132. The increase is a result of the
accounting adjustment made in 1996 which was related to an overpayment during
a previous period.
Net loss for the nine-month period ended September 30, 1997 was
$1,446,323, which represents a decrease in loss of $508,380 from the net loss of
$1,954,703 for the nine-month period ended September 30, 1996. The decrease
in loss is due principally to the reduction in costs associated with issuance
of the Company's securities.
Liquidity and Capital Resources
Liquidity and capital resources are hereinafter discussed in three broad
categories: operating activities, investing activities and financing
activities.
Operating Activities
The revised marketing and sales approach, initiated in 1995 and
continued through 1996 and 1997 in response to changing interests of the
public away from memberships and in favor of destination and special interest
resort amenities, has resulted in an increase in cash flows from operations
for the current year, a trend which is expected to continue in future years.
Cash decreased by $284,302 to $160,208 at September 30, 1997 from $444,510
at December 31, 1996. Net cash used for operating activities was $312,314
during the nine-month period ended September 30, 1997 compared to cash used for
operating activities of $6,234,234 during the nine-month period ended
September 30,1996. The increase in cash provided was primarily due to improved
operations and a reduction in expenses related to sale of the Company's
securities.
Investing Activities
During the nine-month period ended September 30, 1997, there was
$141,012 provided by investing activities, compared with $1,441,240 used for
investing activities during the nine-month period ended September 30, 1996.
The decrease of $1,582,252 was primarily due to the redemption of an
investment in stock and related dividends as well as the investment in the oil
& gas joint venture in 1997, compared to the investment in investing
activities through the purchase of certain securities of an entity related
through common directorship and for office and Resort maintenance equipment
during 1996.
Financing Activities
During the nine-month period ended September 30, 1997, net cash used in
financing activities was $113,000, which is the result of settlement for a
portion of the convertible debentures outstanding, representing a decrease of
$8,195,200 from net cash provided by financing activities of $8,082,200 during
the nine-month period ended September 30, 1996. The decrease is a result of
sales of the Company's securities in 1996 which did not occur during 1997.
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.
Management Plans
As shown in the accompanying financial statements, the Company has
experienced operating losses and negative cash flow from operations in recent
years and has an accumulated deficit of $17,755,806 at September 30, 1997.
During the nine-month period ended September 30, 1997, the Company generated
net revenues from resort operations of $156,219, representing a seven percent
increase over the same period in 1996. It incurred a net loss of $1,510,415.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern.
Management's plans to improve the financial position and operations with
the goal of sustaining the Company's operations for the current year and
beyond include:
Continuing to complete the development of the Resort Property during the 1997-98
resort seasons. The additional facilities that will be provided by such
improvements are expected to enhance the operating revenue and cash flow of
the Resort facilities. The Company will require a minimum of an additional
$75,000 to complete the development;
Refinancing the Company's mortgage note with the possibility of obtaining
additional funds for working capital from the new mortgage loan. The Company
has received a lender's commitment for a secured loan and anticipates a
closing of the refinancing by year end;
Arranging with a company (related through common directorship) to provide
funds on a monthly basis as a loan, collateralized by the preferred stock
which the Company owns in such company, or the sale of such stock to provide
working capital and investment capital for the funding of a business
combination. Such provision has been effected and all preferred stock has
been redeemed as of the date of this filing;
Acquiring assets and operations of one or more entities for which the Company
has been in negotiation with the expectation that such business combination,
if completed, would provide additional cash flow and net income. The Company
has identified, through the engagement of industry specialists, a group of
such companies in the broadcast media industry and expects to proceed with
negotiations for acquisition of such group;
Completing a settlement agreement with all debenture holders on terms that are
arranged in such amounts and on such schedules that the Company will be able
to substantially reduce its debenture-related debt and secure its
plans for business restructuring;
Realizing a return of the Company's investment through the sale of its
interest in a joint venture. Solicitations and offers have been in
negotiation toward sale and recovery of such investment.
Though management believes the Company will secure additional capital
and/or attain one or more of the above goals, there can be no assurance that any
acquisition, financing or other plan will be effected. Any acquisition or
securities offering is subject to the Company's due diligence, the state of
the general securities markets and of the specific market for the Company's
securities, and any necessary regulatory review.
While the Company believes that its plans for the Resort, additional
funding, or possible business combination have the reasonable capability of
improving the Company's financial situation and ensuring the continuation of its
business, there can be no assurance that the Company will be successful in
carrying out its plans and the failure to achieve them could have a material
adverse effect on the Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to a legal proceeding brought by AmSouth Bank on
or about September 1, 1997, against the Company and Celebrity Fish Camp, Inc.,
et al., seeking to foreclose on property of the Company based on an alleged
default in promissory note payments secured by a mortgage on the Company's
real property. The proceeding is pending in the Circuit Court of the Fifth
Judicial Circuit, in and for Marion County, Florida, Civil Division.
Currently a motion to dismiss brought by the Company, based on technical
errors in the plaintiff's filing, is pending.
The Company's promissory note owed to AmSouth became due and payable in
full on May 7, 1997, and the Company has not yet made that payment, due to
unanticipated delays in obtaining refinancing of the loan. The Company
has received a lender's commitment for a secured loan and anticipates a
closing of the refinancing by year end. At the time of closing of the
refinancing, AmSouth will be satisfied in full out of the new loan proceeds,
and the legal proceeding will be withdrawn.
Item 5. Other Information.
On May 5, 1997, subsequent to a hearing before a Nasdaq Listing
Qualifications Panel, the Company's common stock was delisted from the Nasdaq
Stock Market. The Company is eligible to reapply for listing and plans to do
so at such time as it meets the initial listing criteria for the Nasdaq Smallcap
Market. The Company's common stock is not currently traded or quoted on any
exchange or quotation system.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 10.1. Settlement Agreement among the Company, Energex Oil, Inc.;
Douglas Ross Pedrie; First American of Breckenridge, Inc.; David A. Jakobot;
and Rhonda Salters Jakobot, dated September 3, 1997.
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: November 19, 1997
CELEBRITY ENTERTAINMENT, INC.
By: /s/ J. William Metzger
J. William Metzger
Executive Vice President
Chief Financial Officer
SETTLEMENT AGREEMENT
The undersigned ENERGEX OIL, INC. DBA ENERGEX, INC. ("Energex");
DOUGLAS ROSS PEDRIE ("Pedrie"); FIRST AMERICAN OF BRECKENRIDGE, INC. D/B/A
FIRST AMERICAN OPERATING, DAVID A. JAKOBOT, and RHONDA SALTERS JAKOBOT
("Jakobot" collectively), for and in consideration of the premises and in
consideration of the mutual covenants, agreements and other consideration herein
recited, do hereby stipulate, contract and agree to settle all issues,
differences, controversies and claims of every nature with CELEBRITY
ENTERTAINMENT, INC. ("Celebrity") under the following terms and conditions, to-
wit:
1. The following terms, as used in this Agreement, shall mean:
A. The Green Lease - Oil and Gas Lease dated August 1, 1992, from
W. H. Green, Jr. et al, Lessors, to Throckmorton Oil Company,
Lessee, recorded in Volume 1064, Page 100, of the Official Public
Records of Stephens County, Texas, covering 9947.38 acres, more or
less, in Stephens and Shackelford Counties, Texas, a copy of said
Lease being attached as Exhibit "A".
B. Delafosse - Energex Farmout Agreement - That certain Farmout
Agreement dated April 1, 1997, between Delafosse Properties, Ltd.
and Energex, Inc. covering the East Green "H" acreage in Stephens
County, Texas, a copy of said Agreement being attached hereto as
Exhibit "B".
C. 640 acre HBP Tract - Six Hundred Forty (640) acres which is
held by production by under a prior oil and Gas Lease as outlined in
red on the plat attached hereto as Exhibit "C".
D. Monterey Well - The Energex #2 Monterey Well and the 20-acre
tract attributable to said well as identified in Exhibit "D"
attached hereto.
E. Willard's Wish #1 Well - The Willard's Wish #1 Well and the 20-
acre tract surrounding same, said tract being outlined in red on the
plat attached hereto as Exhibit "E".
F. Willard's Wish #2 Well - The Willard's Wish #2 well (water
disposal well) and the 20-acre tract surrounding same, said tract
being outlined in green on the plat attached hereto as Exhibit "E".
G. Aspen Well - The #1 Aspen Well and the 20-acre tract
surrounding same as identified and outlined in red on Exhibit "F"
attached hereto.
H. Catalina Well - The Catalina Well and the 20-acre tract
surrounding same as identified and outlined in red on Exhibit "G"
attached hereto.
I. Cozumel Well - The Cozumel Well and the 20-acre tract
surrounding same as identified and outlined in red on Exhibit "H"
attached hereto.
J. Martin Trucking Well - The Martin Trucking Well and the 20-acre
tract surrounding same as identified and outlined in red on Exhibit
"I" attached hereto.
K. Carmel Well - The Carmel Well and the 20-acre tract surrounding
same as identified and outlined in green on Exhibit "I" attached
hereto.
L. First American #1 Rio Well - Proposed location for the drilling
of the First American #1 Rio Well and the 20-acre tract surrounding
such location as identified and outlined in red on Exhibit "J"
attached hereto.
M. Celebrity-Energex Dead of Trust - Deed of Trust dated January
22, 1997, from Energex, Inc.( Grantor, to Gordon Asbury, Jr.,
Trustee, for the benefit of Celebrity Entertainment, Inc. securing a
Promissory Note in the original principal sum of $1,312,500.00, all
of the lands described and included in the Green Ranch Oil & Gas
Lease attached hereto as Exhibit "K", and being recorded in Volume
1302, Page 205, official Public Records of Stephens County, Texas.
2. Cash Payments. Upon the final execution of this Agreement by all
parties, and conditioned upon the performance by all parties of all obligations
imposed upon them herein, Celebrity shall make the following payments, to-wit:
A. Celebrity shall pay to Energex the sum of $56,000.00 in cash.
B. Celebrity shall pay to Jakobot the sum of $30,000.00 in cash.
3. Deferred Payments. In addition to the cash consideration called for
in Paragraph 2 above, Celebrity shall make the following payments, to-wit:
A. Celebrity shall pay to Energex the sum of $80,000.00, said
payment to be made in eight (8) monthly installments of $10,000.00
each, the first such installment to be due one (1) month after the
payment to Energex of the consideration called for in Paragraph 2.A.
above.
B. Celebrity shall pay to Jakobot the sum of $210,000.00, said
payment to be made in twenty-one(21)monthly installments of
$10,000.00 each, the first such installment to be due one (1) month
after the payment to said parties of the consideration called for in
Paragraph 2.B. above.
C. Celebrity shall continue to pay promptly and when due, the
remaining $150,000.00 which is unpaid at the present time on that
certain Settlement and Forbearance Agreement dated June 16, 1997,
between David A. Jakobot et al, Celebrity Entertainment, Inc. and
the Willard Paul Estate.
4. Foreclosure. Energex shall cooperate with the foreclosure by
Celebrity of the Celebrity-Energex Dead of Trust, and all Stock in Celebrity
which has been issued to Energex and/or Pedrie shall be cancelled and voided on
the Corporation's books. All sums received from such foreclosure shall be
credited to the $1,312,500.00 Note from Energex to Celebrity; however, Celebrity
expressly agrees not to seek a deficiency judgment should a deficiency arise as
a result of the aforementioned foreclosures. It is specifically agreed that the
foreclosure of the Celebrity Energex Deed of Trust shall not affect the 640-acre
HBP Tract, the Aspen Well, the Catalina well, the Cozumel well, the Martin
Trucking Well, the Carmel Well, the Willard's Wish #1 Well, or the Willard's
Wish #2 Well. Celebrity by the execution hereof expressly renounces any
interest in and to the last-above mentioned wells and the acreage attributable
thereto and acknowledges that its Deed of Trust does not cover or affect the
640-acre HBP Tract.
5. Suspense Monies. It is stipulated and agreed that there is
presently the sum of approximately $25,000.00 held in suspense by the crude oil
and/or gas purchasers which is attributable to the working interest in the
Monterey Well. The acreage covered by the Monterey Well is subject to the
Energex - Celebrity Deed of Trust, and any monies derived from the sale of oil
or gas from said well are subject to the security agreement lien as to proceeds.
Celebrity shall be entitled to all suspense monies held by any and all oil
and/or gas purchasers derived from the sale of oil and/or gas attributable to
Energex from the Monterey Well or lease. Energex, Pedrie and Jakobot, when
requested by Celebrity, shall notify all oil and/or gas purchasers holding
suspense monies on the Monterey Well that said monies should be paid to
Celebrity.
6. Monterey-Well Debts. Celebrity, in keeping with a prior agreement
with the other working interest owners in the Monterey Well, agrees to utilize
the funds received from the suspense monies referred to in Paragraph 5 above to
pay certain debts and expenses that have been incurred in the drilling and
completion of the Monterey Well, said expenses being limited to the sum of
$8,102.90, being the items that are listed in Exhibit "L" attached hereto.
7. Blanket Assignment of Interests. At such time as Celebrity
completes its foreclosure of the Energex - Celebrity Deed of Trust, ENERGEX
OIL, INC. DBA ENERGEX, INC., DOUGLAS ROSS PEDRIE, FIRST AMERICAN OF
BRECKENRIDGE, INC. D/B/A FIRST AMERICAN OPERATING, DAVID A. JAKOBOT, and RHONDA
SALTERS JAKOBOT expressly agree to execute in favor of the purchaser at the
foreclosure sale a quitclaim conveyance of all of their right, title and
interest in and to the Green Lease and all acreage covered thereby, save and
except the 640-acre HBP Tract and the 20-acre tracts attributable to the Aspen
Well, the Catalina Well, the Cozumel Well, the Martin Trucking Well, the Carmel
Well, the Willard's Wish 01 Well and the Willard's Wish #2 Well. Such
instrument shall be in form and content satisfactory to Celebrity.
8. Saltwater Disposal Well. It is agreed that the Willard's Wish #2
Well is presently configured and equipped as a saltwater disposal well.
Celebrity and its successors and assigns shall have the right to utilize said
Well for the purpose of injecting salt water produced from any and all wells
which Celebrity and/or its successors and assigns may drill on the Green Lease.
Celebrity shall pay ten cents ($.10) per barrel for each barrel of water
injected into the aforementioned well. Jakobot, its successors and assigns,
agrees, at its sole cost, risk and expense, to maintain said well in a useable
and workable condition and pay all electrical charges and other expenses
incident thereto; and further, should Jakobot elect to discontinue the use of
said well as a water injection well, Jakobot shall assign said well and all
equipment located thereon to Celebrity or its nominee.
9. Energex Farmin Acreage. The Farmout Agreement attached hereto as
Exhibit "B" grants to Energex the right to drill wells on the 640-acre HBP Tract
and thereby earn an assignment to 80 acres surrounding each well which is
drilled and completed as a producer. At the present time Energex has drilled
one (1) well on acreage covered by the 640-acre HBP Tract, i.e. the Energex Lake
Pasture Well. Energex shall immediately upon the final execution of this
Agreement notify the Farmoutor that any assignment allocated to any well drilled
on the Farmout acreage should contain a reservation and conveyance in favor of
Celebrity of a production payment equal to $75,000.00 payable out of 1/8th of
8/8ths of all oil and gas produced from the acreage assigned for the drilling of
any such well. Energex agrees that no assignment of the above referred to
acreage shall be recorded unless such a production payment is provided for in
said assignment. In the event additional wells are drilled on the 640-acre HBP
Tract, and Energex or its successors or assigns shall earn additional acreage by
virtue of the drilling same, any other assignment made by the Farmoutor to any
such party shall likewise contain a 1/8th of 8/8ths production payment until a
total of $75,000.00 (from all wells combined) has been received by Celebrity.
10. Settlement Notice. Pedrie and Energex acknowledge that all disputes
among the parties are settled hereby, and Pedrie has simultaneously herewith
executed and delivered to Celebrity five (5) originals of a notice in the
following form:
Dated:
To Whom it May Concern:
This is to notify you that all disputes which have ever existed
among myself and/or Energex, Inc. and/or Energex Oil, Inc., and
Celebrity Entertainment, Inc. have been resolved to the satisfaction
of all parties.
11. Receivership. Celebrity, in Cause No. 97033 in the 259th District
Court of Shackelford County, Texas, filed an Application For The Appointment of
a Receiver to drill and operate a well on the Green Lease. Texas United
Geoproduction, Inc. was appointed Receiver and as Receiver has drilled the Texas
United Geoproduction #1 Green Well in the P. Sampson Survey, Abstract 161,
Stephens County, Texas. Subsequent to the appointment of said Receiver and the
drilling of said well, Energex appealed the appointment of said Receiver to the
Court of Appeals, 11th Judicial District of Texas. Energex shall immediately
upon the execution of this Agreement by all parties file all papers and take all
steps necessary or desirable in order to withdraw said appeal.
12. Jakobot Deed of Trust. DAVID A. JAKOBOT shall, upon the execution
of this agreement by all parties, execute and deliver to Celebrity a Release in
recordable form releasing the Deed of Trust dated October 15, 1996, from Energex
Oil, Inc., Grantor, to Thomas D. Zito, Trustee, for the benefit of David A.
Jakobot, said Deed of Trust being recorded in Volume 1327, page 178, of the
Official Public Records of Stephens County, Texas.
13. Accounting Records. Energex and Pedrie agree to furnish to
Celebrity all accounting records, computer accounting programs, copies of
cancelled checks and other evidence of payment and monies received concerning
the Monterey Well and all geological, geophysical and seismic information in
their possession concerning the Green Lease. This information shall be
furnished within ten (10) days from the date this Agreement is executed by all
parties.
14. RELEASE. FOR THE CONSIDERATION OF THE SETTLEMENT OF ALL MATTERS IN
CONTROVERSY AS CONTEMPLATED HEREBY, ENERGEX OIL, INC. DBA ENERGEX, INC.,
DOUGLAS ROSS PEDRIE, FIRST AMERICAN OF BRECKENRIDGE, INC. D/B/A FIRST AMERICAN
OPERATING, DAVID A. JAKOBOT, AND RHONDA SALTERS JAKOBOT DO HEREBY RELEASE,
ACQUIT AND FOREVER DISCHARGE CELEBRITY ENTERTAINMENT, INC., JAMES J. MCNAMARA,
J. WILLIAM METZGER, TELEMATRIX, INC., MICHAEL D. HERMAN AND DEBRA L. HERMAN,
THEIR SUCCESSORS, ASSIGNS, EMPLOYEES, DIRECTORS AND OFFICERS FROM ANY AND ALL
CAUSES OF ACTION, CLAIMS OR DEMANDS WHICH THEY MAY HAVE ON ACCOUNT OF, OR IN ANY
WAY GROWING OUT OF, OR ASSOCIATED WITH, ANY AND ALL CLAIMS OR DAMAGES, WHETHER
KNOWN OR UNKNOWN, WHICH RESULTED OR WHICH MAY RESULT FROM ANY AND ALL
TRANSACTIONS OR DEALINGS BETWEEN ENERGEX OIL, INC. DBA ENERGEX, INC., DOUGLAS
ROSS PEDRIE, FIRST AMERICAN OF BRECKENRIDGE, INC. D/B/A FIRST AMERICAN
OPERATING, DAVID A. JAKOBOT, AND RHONDA SALTERS JAKOBOT AND CELEBRITY
ENTERTAINMENT, INC. WITH REGARD TO ANY MATTER IN ANY WAY CONNECTED WITH THE
GREEN LEASE.
15. INDEMNITY. ENERGEX OIL, INC. DBA ENERGEX, INC., DOUGLAS ROSS
PEDRIE, FIRST AMERICAN OF BRECKENRIDGE, INC. D/B/A FIRST AMERICAN OPERATING,
DAVID A. JAKOBOT, AND RHONDA SALTERS JAKOBOT, JOINTLY AND SEVERALLY
("INDEMNITORS"), DO HEREBY UNDERTAKE AND AGREE TO INDEMNIFY AND SAVE HARMLESS
CELEBRITY ENTERTAINMENT, INC, ("INDEMNITEE"), ITS SUCCESSORS AND ASSIGNS AND THE
OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES OF CELEBRITY ENTERTAINMENT, INC. FROM
ANY AND ALL LIABILITY, DAMAGES OR CLAIMS WHICH CELEBRITY ENTERTAINMENT, INC., OR
ITS SUCCESSORS AND ASSIGNS, OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES, MAY
SUFFER AS A RESULT OF ANY CLAIMS, DEMANDS, COSTS, JUDGMENTS, ATTORNEY FEES OR
OTHER LIABILITIES, WHETHER KNOWN OR UNKNOWN AT THE TIME, AS A RESULT OF OR IN
ANY WAY CONNECTED WITH THE GREEN LEASE, INCLUDING, BUT NOT LIMITED TO, THE
PAYMENT OF ANY AND ALL BILLS, CHARGES, INVOICES, OR OTHER DEMANDS OR CLAIMS IN
ANY WAY ASSOCIATED WITH ANY WELL OR WELLS DRILLED ON SAID LEASE, EXCEPT WELLS
WHICH MAY BE IN THE FUTURE DRILLED BY CELEBRITY OR ITS SUCCESSORS AND ASSIGNS
AND THE TEXAS UNITED GEOPRODUCTION 01 GREEN WELL ABOVE REFERRED TO. ANY
LIABILITY UNDER THIS INDEMNITY ARRANGEMENT MAY BE SATISFIED BY CELEBRITY FROM
MONIES DUE TO THE INDEMNITORS ABOVE NAMED PURSUANT TO THE TERMS HEREOF, AND ANY
SUCH SUMS SO PAID SHALL BE OFFSET AGAINST THE MONIES OWED BY CELEBRITY TO SAID
PARTIES; HOWEVER, SUCH INDEMNITY SHALL NOT BE LIMITED IN AMOUNT TO THE SUMS
OWING BY CELEBRITY TO THE INDEMNITORS.
16. Additional Documents. The parties to this Agreement agree that
they, and each of them, shall willingly, at the request of any other party, or
his heirs, successors or assigns, execute, deliver and properly acknowledge
whatever additional instruments, documents, deeds, assignments or other papers
which may be required, desirable or necessary in order to carry out the
intention of this Agreement.
17. Binding Effect. This Agreement shall be binding upon and enure to
the benefit of the parties hereto and their respective heirs, devisees, legal
representatives, successors and assigns.
18. Texas Law. This Agreement shall be governed by the laws of the
State of Texas and all sums due and payable under the terms hereof shall be due
in Taylor County, Texas.
19. Counterparts. It is expressly provided that this Agreement may be
executed in counterparts, but shall not be effective or binding upon any of the
parties hereto until all of the parties have executed the same.
IN WITNESS HEREOF, the parties hereto have executed this agreement
in triplicate originals on or as this the 3rd day of September, 1997.
CELEBRITY ENTERTAINMENT, INC.
By: /s/ J. William Metzger
J. William Metzger, Exec. Vice Pres.
ENERGEX OIL, INC. DBA ENERGEX, INC.
By: /s/ Douglas Ross Pedrie
Douglas Ross Pedrie, President
/s/ Douglas Ross Pedrie
Douglas Ross Pedrie
FIRST AMERICAN OF BRECKENRIDGE, INC.
D/B/A FIRST AMERICAN OPERATING
By: /s/ David A. Jakobot
David A. Jakobot, President
/s/ David A. Jakobot
David A. Jakobot
/s/ Rhonda Salters Jakobot
Rhonda Salters Jakobot
[Notarizations]
[Exhibits]
<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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 160,208
<SECURITIES> 0
<RECEIVABLES> 11,278
<ALLOWANCES> 0
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<CURRENT-ASSETS> 173,986
<PP&E> 3,772,404
<DEPRECIATION> 735,189
<TOTAL-ASSETS> 4,313,422
<CURRENT-LIABILITIES> 1,394,520
<BONDS> 2,851,925
10,640
0
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<TOTAL-LIABILITY-AND-EQUITY> 4,313,422
<SALES> 156,219
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