<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the First Quarter Ended Commission File No. 0-14035
September 30, 1995
QUALITY RESORTS OF AMERICA, INC.
(Exact name of Registrant as specified in its charter)
California 68-0046021
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11357A Pyrites Way, Suite 3
Rancho Cordova, CA 95628
(Address of principal executive (Zip Code)
office)
Registrant's telephone number, including area code: (916)853-9812
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the SecuritiesExchange 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.
(1) Yes X No
(2) Yes X No
The number of shares outstanding of the Registrant's only class of
common stock, as of September 30, 1995 was 3,284,818.
<PAGE>
<TABLE>
QUALITY RESORTS OF AMERICA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FOR THREE MONTH PERIOD ENDING
SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Sept 30, June 30,
1995 1995
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 26,288 $ 16,913
Current maturities of membership
contracts receivable, net 287,526 290,576
Current Maturities of Notes
Receivable 75,000 62,297
Interest and dues receivable 120,797 126,007
Due from Officers and Employees 16,355 13,228
Other current assets 246,944 215,714
__________ __________
Total Current Assets 772,910 724,735
Membership contracts, net 2,030,029 1,807,284
Operating Resorts, net 1,969,681 1,969,681
Property held for development, net 523,965 536,765
Operating equipment, net 175,922 183,406
Notes Receivable 734,684 747,990
Other assets 58,242 57,135
__________ ___________
TOTAL ASSETS $ 6,265,433 $ 6,026,996
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 249,543 199,371
Accrued Expenses and other current
liabilities 343,080 268,053
Due to Officers 66,797 59,863
Current Portion of Deferred Income 191,244 191,244
Current maturities long-term debt 1,101,281 651,818
__________ __________
Total Current Liabilities 1,951,945 1,370,349
Long-term debt 3,733,989 4,177,876
Deferred income 637,759 660,735
__________ __________
Total Liabilities 6,323,693 6,208,960
</TABLE>
<PAGE>
<TABLE>
QUALITY RESORTS OF AMERICA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FOR THREE MONTH PERIOD ENDING
SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Continued
<S> <C> <C>
Stockholders' Equity
Preferred stock, 5,000,000 shares
authorized; none issued
Common stock, no par value,
20,000,000 shares authorized;
3,284,818 shares outstanding 2,514,969 2,514,969
Retained earnings (deficit) (2,573,229) (2,696,933)
__________ __________
Total Stockholders' Equity ( 58,260) ( 181,964)
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY $ 6,265,433 $ 5,026,996
========= ========
</TABLE>
<PAGE>
<TABLE>
QUALITY RESORTS OF AMERICA, INC.AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTH PERIOD ENDING
SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Three Months Ended
-------------------
September 30,
1995 1994
---------- ----------
Revenues
<S> <C> <C>
Membership Sales $ 690,468 $ 377,747
Resort Operations 433,782 457,321
Interest Income 89,220 72,767
Other Income 1,755 1,192
__________ ________
Total Revenue $1,215,225 909,027
Expenses
Sales & Marketing 337,160 200,142
Resort Operations 306,291 309,181
General & Administrative 235,660 197,020
Allowance for Doubtful Accounts 55,374 14,885
Interest Expense 154,637 153,888
_________ ________
Total Expenses 1,089,121 875,116
Income (Loss) from Operations 126,104 33,911
Other income (expense):
Nonrecurring Items -0- ( 2,284)
___________ __________
Income (loss) before provision
for income taxes 126,104 31,627
Provision for income taxes(credits) 2,400 --
______ _______
Net income (loss) $ 123,704 $ 31,627
====== =======
Net income (loss) per share 04 01
=== ===
Average number of shares outstanding
during the periods: 3,284,818
</TABLE>
<PAGE>
<TABLE>
QUALITY RESORTS OF AMERICA
AND SUBSIDIARIES
STATEMENT OF CASH FLOW
FOR THREE MONTH PERIOD ENDING
SEPTEMBER 30, 1995 AND 1994
(Unaudited)
September September
1995 1994
____________ _______________
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 123,704 $ 31,627
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 21,120 20,910
Provision for losses on
contracts and interest receivable 55,374 14,885
(Gain) Loss on Sales of Assets -0- 2,300
Deferred Income ( 22,976) 2,298
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Increase Contracts Receivable ( 275,069) ( 110,061)
(Increase)Decrease Interest and Dues receivable 5,210
( 87,025)
Increase Prepaid Expenses & Other Assets ( 35,464) ( 131,027)
Increase in Accounts Payable 50,172 1,729
Increase (Decrease) Accrued expenses 81,961 23,651
__________ __________
NET CASH USED IN OPERATING ACTIVITIES 4,032 ( 230,713)
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal Repayment of Notes Receivable 603 546
Sale of Fixed Assets -0- 2,700
Additions to property and equipment ( 836) ( 12,904)
__________ __________
NET CASH FLOW FROM INVESTING ACTIVITIES ( 233) ( 9,658)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowing 26,793 365,304
Principal repayments on debts ( 21,217) ( 33,105)
__________ __________
NET CASH FROM FINANCING ACTIVITIES 5,576 332,199
NET INCREASE (DECREASE) IN CASH 9,375 91,828
CASH, beginning of period 16,913 189,282
__________ __________
CASH, end of period $ 26,288 $ 281,110
========== ==========
</TABLE>
<PAGE>
QUALITY RESORTS OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - General
The condensed consolidated balance sheet and the condensed consolidated
statement of operations as of June 30, 1995, have been audited, while the
balance sheet and statement of operations for the periods ended September
30, 1995, and September 30, 1994, are unaudited. In the opinion of
management, all adjustments (which include any normal recurring
adjustments) necessary to present fairly the financial position and results
of operations for all periods presented, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The results of
operations for the three-month periods ended September 30, 1995, and 1994
are not necessarily indicative of the operating results for the full year.
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
Overview
The Company's revenues are derived primarily from membership sales and
resort operations. Membership sales generally consist of membership in
Quality Resorts of America, Inc. (QRA), with prices ranging from $1,995 to
$3,995, and membership in its wholly owned subsidiary, Club Rainbow
Vacations, Inc. (CRV), with prices ranging from $4,995 to $6,995. For the
fiscal year ended June 30, 1995, the Company sold 560 new memberships, of
which 104 canceled (18.6%), compared to fiscal year ended 1994, in which
the Company sold 513 new memberships with cancellations of 97 (18.9%).
Resort operations consist of income from maintenance dues, rental units,
store sales, and storage income.
Results of Operations
The following table sets forth for the three months ended September 30,
1995, and September 30, 1994, the percentage of total sales represented by
items included in the Company's Statements of Operations.
<TABLE>
Sep 1995 Jun 1995 Sep 1994
Revenues:
<S> <C> <C> <C>
Membership Sales 57% 53% 42%
Resort Operations 36% 39% 50%
Interest Income 7% 8% 8%
Other Income 0% 0% 0%
_____ _____ _____
Total Revenues 100% 100% 100%
Expenses:
Sales and Marketing 28% 29% 22%
Resort Operations 25% 27% 34%
General and Administrative 19% 22% 22%
Provision for Bad Debt 5% 3% 2%
Interest 13% 17% 17%
_____ _____ _____
Total Expenses ( 90%) ( 97%) ( 96%)
Earnings(Loss) before Income
Tax and Extraordinary Items 10% 3% 4%
Income Tax Provision 0% 0% 0%
Extraordinary Items 0% 0% 0%
Net Income(Loss) 10% 3% 4%
===== ===== =====
</TABLE>
The Company's strategy for growth is: i) to open offsite sales offices
in Southern California to expand its marketing area to areas outside of the
Resorts marketing areas; and ii) to extend the number of resorts available
to its members by affiliating with other resorts not owned by the Company,
and establishing sales offices at these resorts. There is no assurance,
<PAGE>
however, that the Company will be successful in achieving its growth
strategies or that sales or profits will increase from the implementation
of these strategies.
Membership Sales
For the three-month period ended September 30, 1995, membership sales
increased from the prior period by $332,000 (98%), from $378,000 to
$690,000. This increase is partially attributed to an upgrade product
being offered to current members that have not upgraded in the past. This
upgrade offers family usage for a period of four years, a resale program
that becomes effective after a four year period, extended stays at the
Resorts, and a condominium package. During the first quarter ended
September 30, 1995, 54 members purchased upgrades for a total of $137,000.
Upgrades were not offered to members during the first quarter ending
September 30, 1994. New membership sales increased by $195,000 (54%).
The Company has contracted with Affiliated Resorts, Inc. (a company
owned by Robert R. Brindle, the Company's Board Chairman) to sell CRV
memberships at offsite locations. An offsite office has been established
at Golden Pond Resort (GPR, owned by Affiliated Resorts, Inc.), located in
the Greater Palm Springs area. All current and new CRV members are allowed
specific usage, without charge, of this resort. Affiliated Resorts, Inc.,
(ARI) is responsible for all sales costs. In exchange, the Company pays
ARI 50% sales commission on sales and 40% of sales for CRV usage of the
resort.
Marketing expenses decreased to 49 percent of membership sales from
53 percent of sales in 1994 ($337,000 in 1995 compared to $201,000 in 1994,
an increase of $136,000). Commission expense increased from $129,000 (36%
of sales) in 1994, to $247,000 (36% of sales) in 1995, an increase of
$118,000. Other sales expenses increase from $72,000 (19% of sales) to
$90,000 (13 percent of sales).
Resort Operations
Revenues generated from Resort Operations decreased by $ 23,000 (5
percent) over the same period in 1994. This decrease is primarily from
dues income. Expenses remained vertually the same ($306,000 in 1995
compared to $309,000 in 1994) as management continued its efforts to
contain costs.
General and Administrative Expense
General and administrative expense increased from $197,000 in 1994 to
$236,000 in 1995 (an increase of 20 percent). This is attributed to an
increase in professional services in the amount of $30,000, and an increase
in office expense of $13,000.
The increase in professional services is due to increase in consulting
service fees paid to Robert R. Brindle, Board Chairman (from $52,000 per
year to $100,000 per year), and a personal loan guarantee fee paid to
Robert R. Brindle and Robert M. Brindle, President and Chief Executive
Officer, in the amount of $8,000 each. These guarantees were required for
the Small Business Administration Disaster Loan the Company received to
repair storm damage at Klamath Cove Resort. The increase in office expense
<PAGE>
is due to the Company's taking over all billing and collections of its
contracts and dues receivable.
Liquidity and Capital Resources
The Company experiences its most significant demand for working
capital between May and October. During these months, operating and sales
expenses increase significantly. Because this time represents the peak
usage of the campgrounds, it requires hiring seasonal workers and
increasing maintenance and operating expenses. These months are also the
months of the most active sales efforts, and, accordingly, sales expenses
increase significantly as well.
The Company's operations require a significant investment in resort
properties and improvements before a substantial level of revenues can be
expected from the sale of memberships. The operating cost of the Resorts
is not fully borne by the members until a certain portion of the
memberships are sold, necessitating the Company to bear the shortfall.
Membership sales are seasonal in nature, with the majority of such sales
occurring during the spring and summer months.
The Company was approved for a Small Business Administration Disaster
Loan in July 1995, for repairs to Klamath Cove Resort, which sustained
damage from winter storms. The loan is a three year loan at 8 percent
interest. The loan was approved for the amount of $281,000, secured by
personal guarantees from Robert R. Brindle and Robert M. Brindle, and by
a trust deed on River Grove Resort. The Company's estimation of damages
amounted to a much lower amount and asked that the loan amount to be
reduced to $90,000. The SBA has not yet made the determination to lower
the loan amount. The Company has received $25,000 of the loan amount for
work completed to date.
Current maturities of long term debt have increased by $585,000, due
to the maturity of secured loans on Klamath Cove Resort. These notes are
secured by 41 individual deeds of trust at interest rates between 12% and
15%, interest only payments, maturing in August 1996. Management
anticipates that the notes will roll over for an additional three years,
or will be paid off. However, there can be no assurance that a significant
number will roll over their notes for an additional term.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUALITY RESORTS OF AMERICA, INC.
Dated: FEBRUARY 09, 1996 Susan Bienias
Susan Bienias
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 4098
<ALLOWANCES> 850
<INVENTORY> 0
<CURRENT-ASSETS> 773
<PP&E> 6732
<DEPRECIATION> 4062
<TOTAL-ASSETS> 6265
<CURRENT-LIABILITIES> 1952
<BONDS> 3734
<COMMON> 2515
0
0
<OTHER-SE> (2573)
<TOTAL-LIABILITY-AND-EQUITY> 6265
<SALES> 690
<TOTAL-REVENUES> 1215
<CGS> 337
<TOTAL-COSTS> 643
<OTHER-EXPENSES> 236
<LOSS-PROVISION> 55
<INTEREST-EXPENSE> 155
<INCOME-PRETAX> 126
<INCOME-TAX> 2
<INCOME-CONTINUING> 124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
