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 MARCH 31, 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.)
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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 May 12, 1997 was 402,690.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
CELEBRITY ENTERTAINMENT, INC.
FORM 10-QSB
For the Quarter Ended March 31, 1997
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Balance Sheet
Unaudited Statement of Operations
Unaudited Statement of Cash Flows
Unaudited Statement of Stockholders Equity
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
Celebrity Entertainment, Inc.
Balance Sheet
March 31, 1997
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 61,008
Prepaid expenses 273
Accounts receivable 3,324
Notes receivable 25,530
Total current assets 90,135
Property and equipment
Land 670,780
Buildings and improvements 2,881,393
Equipment 156,917
Furniture and fixtures 56,782
Total 3,765,872
Less accumulated depreciation and amortization 672,552
Net 3,093,320
Other assets:
Investment in affiliated company 1,298,234
Investment in joint venture, net of allowance 330,125
Total assets $ 4,811,814
See accompanying notes to the financial statements.
Celebrity Entertainment, Inc.
Balance Sheet
March 31, 1997
(Unaudited)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 195,802
Accrued expenses 172,937
Deferred membership revenues 36,982
Mortgage note payable 422,275
Total current liabilities 827,996
Convertible debentures 3,010,000
Total liabilities 3,837,996
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized
Designated class A 8% convertible;
1,525,000 shares designated,
1,064,000 shares issued 10,640
Common stock, $.0001 par value; 25,000,000 shares
authorized, 397,690 shares issued 40
Additional paid-in capital 19,619,604
Accumulated deficit (16,843,966)
Less treasury stock, 10,100 shares common
and 475,000 shares preferred, at cost (500,000)
Less stock subscriptions receivable (1,312,500)
Total stockholders' equity 973,818
Total liabilities and stockholders' equity $ 4,811,814
See accompanying notes to the financial statements.
Celebrity Entertainment, Inc.
Statements of Operations
(Unaudited)
<TABLE>
<S> <C> <C>
Three months ended March 31, 1997 1996
Revenues:
Resort membership sales $ 38,684 $ 21,416
Resort operations 48,258 49,500
Total revenues 86,942 70,916
Selling, general and administrative expenses 618,493 456,791
Operating loss (531,551) (385,875)
Other income (expenses):
Interest income 6,507 692
Interest expense (9,439) (1,908)
Total other income(expenses) (2,932) (1,216)
Net loss (534,483) (387,091)
Per common share:
Net loss $ (1.57) $ (7.61)
Weighted average number of
common shares outstanding 340,690 50,879
</TABLE>
See notes to the financial statements.
<TABLE>
Celebrity Entertainment, Inc.
Statements of Stockholders' Equity
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Treasury Stock Additional
Preferred Stock Common Stock Common Preferred Paid-In
Shares Amount Shares Amount Shares Shares Amount Capital
Balance, January 1, 1997 1,064,000 $ 10,640 304,408 $ 30 10,100 475,000 $ 500,000 $ 19,427,154
Sale of common stock - - 50,000 5 - - - 77,495
Common stock issued in payment
of consulting fees - - 40,000 5 - - - 104,955
Conversion of debentures into
common stock - - 3,282 - - - - 10,000
Net loss - - - - - - - -
Balance at March 31, 1997 1,064,000 $ 10,640 397,690 $ 40 10,100 475,000 $ 500,000 $ 19,619,604
<S> <C> <C>
Accumulated Stock Subscriptions
Deficit Receivable
Balance, January 1, 1997 $ (16,309,483) $ (1,312,500)
Sale of common stock - -
Common stock issued in payment
of consulting fees - -
Conversion of debentures into
common stock - -
Net loss (534,483) -
Balance at March 31, 1997 $ (16,843,966) $ (1,312,500)
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
Celebrity Entertainment, Inc.
Statements of Cash Flows
(Unaudited)
Unaudited
<S> <C>
Three months ended March 31, 1997 1996
Cash flows from operating activities:
Net loss $ (534,483) $ (387,091)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 31,710 28,980
Stock issued in payment of finder's fee for debt 78,680 202,387
Stock issued in payment of consulting fees 103,780 -
Change in current assets and liabilities:
Prepaid expenses and accounts receivable 244,204 (10,945)
Other assets - (273)
Accounts payable and accrued expenses 32,563 (43,102)
Deferred membership revenues 1,096 3,868
Net cash used for operating activities (42,450) (206,176)
Cash flows from investing activities:
Purchase of property and equipment (3,416) (3,957)
Investment in joint venture (330,125) -
Net cash used for investing activities (333,541) (3,957)
Cash flows from financing activities:
Repayment of loan payable (7,511) (6,707)
Repayments of notes payable - (222,929)
Notes receivable from the issuance of common stock - (275,167)
Proceeds from the sale of common stock - 823,843
Net cash (used in) provided by financing activities (7,511) 319,040
Increase in cash and cash equivalents (383,502) 108,907
Cash and cash equivalents, beginning of period 444,510 11,252
Cash and cash equivalents, end of period $ 61,008 $ 120,159
Supplemental disclosure of cash paid for:
Interest $ 9,439 $ 1,908
Income taxes - -
</TABLE>
See accompanying notes to the 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 March 31, 1997
and the results of operations and cash flows for the three-months ended March
31, 1997 and 1996. 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 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.
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
Three-month Period Ended March 31, 1997 Compared to Three-month Period Ended
March 31, 1996
Revenues for the three-month period ended March 31, 1997 amounted to
$86,942 compared to $70,916 for the three-month period ended March 31, 1996,
reflecting an increase of $16,026. 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, 1997 is a result of improved
marketing and use of the Company's resort facilities.
Selling, general and administrative expenses were $618,493 for the three
months ended March 31, 1997 compared to $456,791 for the three-month period
ended March 31, 1996, representing an increase of $161,702. The increase
is due principally to expenses related to business acquisitions .
During the three-month period ended March 31, 1997, $9,439 in
interest expense was charged to operations compared to $1,908 charged to
interest expense for the three-month period ended March 31, 1996, reflecting
an increase of $7,531.
Net loss for the three-month period ended March 31, 1997 was
$534,483, which represents an increase of $147,392 above the net loss of
$387,091 for the three-month period ended March 31, 1996. The increase is due
principally to expenses related to business acquisitions.
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 in response to
changing interests of the public away from memberships in favor of destination
and special interest resort amenities, has resulted in an increase in cash flows
from operations for the current year, which trend is expected to continue in
future years.
Cash decreased $383,502 to $61,008 at March 31, 1997 from $444,510 at
December 31, 1996. Net cash used for operating activities was $42,450 during
the three-month period ended March 31, 1997 compared to cash used for
operating activities of $206,176 during the three-month period ended March 31,
1996. The reduction was primarily due to collection of a receivable of
approximately $244,000.
Investing Activities
During the three-month period ended March 31, 1997, there was
$333,541 used for investing activities, compared with $3,957 used for investing
activities during the three-month period ended March 31, 1996. The increase was
primarily due to additional investment in a joint venture of $330,125.
Financing Activities
During the three-month period ended March 31, 1997, net cash used in
financing activities was $7,511 for payment on loans, representing a decrease of
$326,551 below net cash provided by financing activities of $319,040 during the
three-month period ended March 31, 1996 consisting of proceeds of $823,843 on
sale of common stock less debt repayment of $504,803.
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 $16,843,966 at March 31,
1997. During the three-month period ended March 31, 1997, the Company generated
revenues from resort operations of $86,942; however, it incurred a net loss of
$534,483 and has negative working capital of $737,861. 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 1996-97
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;
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;
Arranging for the conversion or repayment of the convertible debt through the
sale of the Company's equity securities; and
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.
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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
The Company filed one report on Form 8-K during the quarter ended March 31,
1997, reporting the issuance of certain shares of common stock pursuant to
Regulation S. No financial statements were filed with the report.
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: May 16, 1997
CELEBRITY ENTERTAINMENT, INC.
By: /s/ J. William Metzger
J. William Metzger
Executive Vice President
<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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 61,008
<SECURITIES> 0
<RECEIVABLES> 28,854
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90,135
<PP&E> 3,765,872
<DEPRECIATION> 672,552
<TOTAL-ASSETS> 4,811,814
<CURRENT-LIABILITIES> 827,996
<BONDS> 3,010,000
10,640
0
<COMMON> 40
<OTHER-SE> (16,843,966)
<TOTAL-LIABILITY-AND-EQUITY> 4,811,814
<SALES> 86,942
<TOTAL-REVENUES> 86,942
<CGS> 0
<TOTAL-COSTS> 618,493
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,439
<INCOME-PRETAX> (534,483)
<INCOME-TAX> (534,483)
<INCOME-CONTINUING> (534,483)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (534,483)
<EPS-PRIMARY> (1.57)
<EPS-DILUTED> (1.57)
</TABLE>
