U.S. 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, 1998
[ ] 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, 1998 was 262,690.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE>
CELEBRITY ENTERTAINMENT, INC.
FORM 10-QSB
For the Quarter Ended March 31, 1998
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet
Statement of Operations
Statement of Cash Flows
Statement of Stockholders' Equity
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
Celebrity Entertainment, Inc.
Balance Sheet
March 31, 1998
(Unaudited)
Assets
Current assets:
Cash $ 17,911
Accounts receivable 2,458
Total current assets 20,369
Property and equipment, net 2,980,645
Other assets:
Deposit 49,850
Note receivable - related party 618,306
Accrued interest receivable - related party 11,560
Investment in warrants - related party 29,200
Investment in oil and gas lease,
net of allowance for impairment of $465,000 1,251,221
Total assets $ 4,961,151
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 316,346
Accrued expenses 461,779
Notes payable - related parties 633,180
Mortgage note payable 419,910
Convertible debentures payable 1,640,000
Notes payable - debenture settlements 931,534
Total current liabilities 4,402,749
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
($5,320,000 total liquidation preference) 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 (17,293,581)
Less treasury stock, 10,100 shares common
and 475,000 shares preferred, at cost (500,000)
Unrealized gain on investment 29,200
Total stockholders' equity 558,402
Total liabilities and stockholders' equity $ 4,961,151
See accompanying notes to financial statements.
<PAGE>
Celebrity Entertainment, Inc.
Statements of Operations
(Unaudited)
<TABLE>
<S> <C> <C>
Three months ended March 31, 1998 1997
Revenues:
Resort operations $96,995 $ 86,942
Selling, general and administrative expenses 273,799 618,493
Operating loss (176,804) (531,551)
Other income (expenses):
Interest income 12,253 6,507
Interest expense ( 40,040) (9,439)
Total other income (expenses) ( 27,787) (2,932)
Loss before extraordinary income (204,591) (534,483)
Extraordinary income - forgiveness of debt 9,897 -
Net loss $ (194,694) $(534,483)
Basic and diluted loss per share:
Loss before extraordinary item $ ( 1.38) $ ( 2.03)
Extraordinary income .04 -
Net loss $ ( 1.34) $ ( 2.03)
</TABLE>
<PAGE>
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, 1998 1,064,000 $ 10,640 262,690 $ 26 10,100 475,000 $ 500,000 $ 18,312,117
Net loss - - - - - - - -
Balance at March 31, 1998 1,064,000 $ 10,640 262,690 $ 26 10,100 475,000 $ 500,000 $ 18,312,117
</TABLE>
<TABLE>
<S> <C> <C>
Accumulated Unrealized Gain
Deficit On Investment
Balance, January 1, 1998 $ (17,098,887) $29,200
Net loss ( 194,694) -
Balance at March 31, 1998 $ (17,293,581) $29,200
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
Celebrity Entertainment, Inc.
Statements of Cash Flows
(Unaudited)
<S> <C> <C>
Three months ended March 31, 1998 1997
Cash flows from operating activities:
Loss before extraordinary item $ (204,591) $ (534,483)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 29,257 31,710
Stock issued in payment of finder's fee for debt - 78,680
Stock issued in payment of consulting fees - 103,780
Change in current assets and liabilities:
(Increase) decrease in:
Accounts receivable 29,607 244,204
Accrued interest receivable ( 11,560) -
Deposit ( 49,850) -
Increase (decrease) in:
Accounts payable and accrued expenses 48,355 32,563
Deferred membership revenues - 1,096
Net cash used for operating activities (158,782) ( 42,450)
Cash flows from investing activities:
Purchase of property and equipment ( 1,252) ( 3,416)
Loans to related party (145,806) -
Investment in oil and gas lease - (330,125)
Net cash used for investing activities (147,058) (333,541)
Cash flows from financing activities:
Proceeds from issuance of notes to related party 202,215 -
Repayment of loan payable - (7,511)
Net cash provided by financing activities 202,215 (7,511)
Decrease in cash and cash equivalents (103,625) (383,502)
Cash and cash equivalents, beginning of period 121,536 444,510
Cash and cash equivalents, end of period $ 17,911 $ 61,008
Supplemental disclosure of cash paid for:
Interest $ 7,650 $ 9,439
Income taxes $ - $ -
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
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 Securities and Exchange
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, 1998 and the results of operations and cash flows for
the three-months ended March 31, 1998 and 1997. 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 1997 Form
10-KSB.
2. Basic and Diluted Loss Per Common Share
Basic and diluted 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.
The following table sets forth the computation of basic and diluted loss per
share for the three months ended March 31, 1998 and 1997:
1997 1996
Loss before extraordinary item $( 204,591) $( 534,483)
Preferred dividends ( 157,414) ( 157,414)
Loss to common shareholders
before extraordinary income ( 362,005) ( 691,897)
Extraordinary income - forgiveness of debt 9,897 -
Net loss $( 352,108) $( 691,897)
Weighted average common shares outstanding 262,690 340,690
Basic and diluted loss per share:
Loss per share before extraordinary income $( 1.38) $( 2.03)
Extraordinary income .04 -
Net loss $( 1.34) $( 2.03)
<PAGE>
3. Property and equipment
Property and equipment as of March 31, 1997 consisted of the following:
Land $ 670,780
Buildings and improvements 2,885,593
Equipment 157,805
Furniture and fixtures 61,495
Total property and equipment, cost 3,775,673
Less: accumulated depreciation and amortization ( 795,028)
Total property and equipment, net $ 2,980,645
4. Subsequent event - refinancing
The mortgage holder on the Resort property declined to extend the term of the
note and had initiated foreclosure proceedings. Management of the Company
arranged for alternative financing to prevent the foreclosure sale scheduled
for April 28, 1998. The Company retains ownership of the resort with first and
second mortgages secured by the property.
Item 2. Management's Discussion and Analysis
FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-QSB regarding the Company's future
prospects or profitability constitute forward-looking statements and as such,
must be considered with caution and with the understanding that various factors
could cause actual results to differ materially from those in such
forward-looking statements. Such factors include but are not limited to (i) the
ability of the Company to complete a business combination or acquisition as
anticipated, (ii) the securing of financing sufficient to fund such business
combination, acquisition, settlement of outstanding debt and litigation, or the
expansion of the Resort, and/or (iii) change in operating results provided by
the Resort or any newly-acquired operations due to economic or competitive
conditions or otherwise.
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. Management is currently considering
alternative business activities for the Company which could result in a decision
to sell the resort property.
<PAGE>
Results of Operations
Three-month Period Ended March 31, 1998 Compared to Three-month Period Ended
March 31, 1997:
Revenues for the three-month period ended March 31, 1998 amounted to
$96,995 compared to $86,942 for the three-month period ended March 31, 1997,
reflecting an increase of $10,053. 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, 1998 is a result of improved
marketing and use of the Company's resort facilities.
Selling, general and administrative expenses were $273,799 for the three
months ended March 31, 1998 compared to $618,493 for the three-month period
ended March 31, 1997, representing a decrease of $344,694. The decrease
is due principally to expenses related to consulting activities in connection
with business acquisitions in the prior-year period.
During the three-month period ended March 31, 1998, $40,040 in
interest expense was charged to operations compared to $9,439 charged to
interest expense for the three-month period ended March 31, 1997, reflecting
an increase of $30,601. The increase is due principally to the amounts paid
pursuant to notes issued in connection with settlements of liabilities related
to convertible securities of the Company issued in 1996.
Net loss for the three-month period ended March 31, 1998 was $194,695,
which represents a decrease in loss of $339,788 compared to the net loss of
$534,483 for the prior-year period. The decrease is due principally to
reduction of expenses related to consulting activities in connection with
business acquisitions in the prior-year period.
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 $103,625 to $17,911 at March 31, 1998 from $121,536 at
December 31, 1997. Net cash used for operating activities was $158,782 during
the three-month period ended March 31, 1998 compared to cash used for
operating activities of $42,450 during the three-month period ended March 31,
1997. The change in cash used for operating activities resulted primarily from a
reduction in accounts receivable and payments related to settlements of
convertible securities.
<PAGE>
Investing Activities
During the three-month period ended March 31, 1998, there was
$147,058 used for investing activities, compared with $333,541 used for
investing activities during the three-month period ended March 31, 1997. The
Company's investment in oil and gas exploration is expected to begin providing
net revenue in the second half of 1998.
Financing Activities
During the three-month period ended March 31, 1998, net cash provided by
financing activities was $202,215, representing an increase of $209,726 over net
cash used in financing activities of $7,511 during the three-month period ended
March 31, 1997. The increase is a result primarily of the proceeds derived from
a note issued to a related party.
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.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(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: May 15, 1998
CELEBRITY ENTERTAINMENT, INC.
By: /s/ J. William Metzger
J. William Metzger
Executive Vice President
<PAGE>
<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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,911
<SECURITIES> 0
<RECEIVABLES> 2,458
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,369
<PP&E> 3,775,673
<DEPRECIATION> 795,028
<TOTAL-ASSETS> 4,961,151
<CURRENT-LIABILITIES> 4,402,749
<BONDS> 0
10,640
0
<COMMON> 26
<OTHER-SE> (17,293,581)
<TOTAL-LIABILITY-AND-EQUITY> 4,961,151
<SALES> 96,995
<TOTAL-REVENUES> 96,995
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 273,799
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,040
<INCOME-PRETAX> (204,591)
<INCOME-TAX> 0
<INCOME-CONTINUING> (204,591)
<DISCONTINUED> 0
<EXTRAORDINARY> 9,897
<CHANGES> 0
<NET-INCOME> (194,694)
<EPS-PRIMARY> (1.34)
<EPS-DILUTED> (1.34)
</TABLE>
