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 JUNE 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.)
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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 August 15, 1997 was 402,690.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
CELEBRITY ENTERTAINMENT, INC.
FORM 10-QSB
For the Quarter Ended June 30, 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
June 30, 1997
(Unaudited)
Assets
Current Assets:
Cash $ 438,306
Accounts receivable 11,278
Notes Receivable 37,627
Total current assets 487,211
Property and equipment
Land 670,780
Buildings and improvements 2,885,593
Equipment 157,393
Furniture and fixtures 57,400
Total 3,771,166
Less accumulated depreciation and amortization 705,499
Net 3,065,667
Other assets:
Investment in affiliated company 898,861
Investment in joint venture, net of allowance 430,125
Total assets $ 4,881,864
See accompanying notes to the financial statements.
Celebrity Entertainment, Inc.
Balance Sheet
June 30, 1997
(Unaudited)
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 187,178
Accrued expenses 201,979
Advances 620,000
Deferred membership revenues 40,512
Mortgage note payable 419,910
Total current liabilities 1,469,579
Convertible debentures 2,964,925
Total liabilities 4,434,504
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;
402,690 shares issued 40
Additional paid-in capital 19,624,603
Accumulated deficit (17,375,423)
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 447,360
Total liabilities and stockholders' equity $ 4,881,864
See accompanying notes to financial statements.
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Celebrity Entertainment, Inc.
Statement of Operations
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Resort membership sales $ 22,003 $ 943 $ 60,687 $ 27,446
Resort operations 15,182 26,646 63,440 71,058
Forgiveness of debt 3,221 24,186 3,221 24,186
Total revenues 40,406 51,775 127,348 122,690
Selling, general & administrative 560,618 1,396,102 1,179,111 1,871,307
Operating profit (loss) (520,212) (1,344,327) (1,051,763) (1,748,617)
Other income (expenses):
Interest income 1,486 6,678 7,993 7,371
Interest expense (12,731) 222,769 (22,170) 220,861
Total other income (expenses) (11,245) 229,447 (14,177) 228,232
Net loss (531,457) (1,114,880) (1,065,940) (1,520,385)
Per common share:
Net loss per common share $(1.43) $(0.36) $(2.87) $(0.50)
Weighted average number of
common shares outstanding 371,088 3,063,495 371,088 3,063,495
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
Celebrity Entertainment, Inc.
Statement of Cash Flows
Unaudited
Six months ended June 30, 1997 1996
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Cash flows from operating activities:
Net loss $(1,065,940) $(1,520,385)
Adjustments to reconcile net loss to net
cash used for operating activities: - 3,319,572
Depreciation and amortization 64,656 -
Stock issued in payment of finder's fee for debt 78,680 -
Stock issued in payment of consulting fees 63,702 -
Change in current assets and liabilities: - 2,408,082
Prepaid expenses and accounts receivable 224,426 -
Accounts payable and accrued expenses 672,981 -
Deferred membership revenues 4,625 -
Net cash used for operating activities 43,130 (4,207,269)
Cash flows from investing activities:
Purchase of property and equipment (8,706) 13,996
Investment in joint venture (30,752) -
Net cash used for investing activities (39,458) 13,996
Cash flows from financing activities:
Increase (decrease) in notes payable - (278,924)
Additions (payments) of long-term debt (9,876) 3,714,563
Proceeds from the sale of common stock - 4,203,750
Net cash provided by financing activities (9,876) 7,639,389
Increase in cash and cash equivalents (6,204) 3,446,116
Cash and cash equivalents, beginning of period 444,510 11,252
Cash and cash equivalents, end of period $ 438,306 $ 3,457,368
Supplemental disclosure of cash paid for:
Interest $ 22,170 $ 3,816
Income taxes - -
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Celebrity Entertainment, Inc.
Statement of Shareholders' Equity
Six Months Ended June 30, 1997
Unaudited
Additional
Treasury Stock Paid-In
Preferred Stock Common Stock Common Preferred Amount Capital
Shares Amount Shares Amount Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 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 - - 45,000 5 - - - 109,954
of consulting fees
Conversion of debentures into - - 3,282 - - - - 10,000
common stock
Net loss - - - - - - - -
Balance at June 30, 1997 1,064,000 $10,640 402,690 $40 $10,100 475,000 $500,000 $19,624,603
See accompanying notes to financial statements.
</TABLE>
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 June 30, 1997
and the results of operations and cash flows for the three-month and six-month
periods ended June 30, 1997 and 1996. The Company's results of operations
during the first six 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
Six-month Period Ended June 30, 1997 Compared to Six-month Period Ended
June 30, 1996
Revenues for the six-month period ended June 30, 1997 amounted to
$127,348 compared to $122,960 for the six-month period ended June 30, 1996,
reflecting an increase of $4,388. The increase in revenues reflected for the
six-month period ended June 30, 1997 is a result of improved marketing and use
of the Company's resort facilities.
Selling, general and administrative expenses were $1,179,111 for the six
months ended June 30, 1997 compared to $1,871,307 for the six-month period
ended June 30, 1996, representing a decrease of $692,196. The decrease
is due principally to a reduction in fees related to the sale of the Company's
securities.
During the six-month period ended June 30, 1997, $22,170 in
interest expense was charged to operations compared to $220,861 charged to
interest expense (as a reduction of expense) for the six-month period ended
June 30, 1996, reflecting an increase of $243,031. The increase is a result of
an accounting adjustment related to an overpayment of a prior-period account.
Net loss for the six-month period ended June 30, 1997 was $1,065,940,
which represents a decrease of $454,445 above the net loss of $1,520,385 for
the six-month period ended June 30, 1996. The increase 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 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 increased $427,054 to $438,306 at June 30, 1997 from $11,252 at
December 31, 1996. Net cash provided by operating activities was $43,130
during the six-month period ended June 30, 1997 compared to cash used for
operating activities of $4,207,269 during the six-month period ended June 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 six-month period ended June 30, 1997, there was $39,458 used
for investing activities, compared with $13,996 provided by investing
activities during the six-month period ended June 30, 1996. The increase was
primarily due to additional investment in a joint venture of $430,125.
Financing Activities
During the six-month period ended June 30, 1997, net cash used in
financing activities was $9,876 for payment on loans, representing a decrease of
$7,649,265 below net cash provided by financing activities of $7,639,389
during the six-month period ended June 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 $17,375,423 at June 30,
1997. During the six-month period ended June 30, 1997, the Company generated
revenues from resort operations of $127,348 however, it incurred a net loss of
$1,065,940. 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;
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; and
Realizing a return of the Company's investment through the sale of its interest
in a joint venture.
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 June 30,
1997, which report was dated April 29, 1997, reporting the resignation of the
Company's independent auditors. 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: August 19, 1997
CELEBRITY ENTERTAINMENT, INC.
By: /s/ J. William Metzger
J. William Metzger
Executive Vice President
Chief Financial Officer
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<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 438,306
<SECURITIES> 0
<RECEIVABLES> 48,905
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 487,211
<PP&E> 3,771,166
<DEPRECIATION> 705,499
<TOTAL-ASSETS> 4,881,869
<CURRENT-LIABILITIES> 1,469,579
<BONDS> 2,964,925
10,640
0
<COMMON> 40
<OTHER-SE> (17,375,423)
<TOTAL-LIABILITY-AND-EQUITY> 4,881,864
<SALES> 124,127
<TOTAL-REVENUES> 127,348
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,170
<INCOME-PRETAX> (1,065,940)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,065,940)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,065,940)
<EPS-PRIMARY> (2.87)
<EPS-DILUTED> (2.87)
</TABLE>