SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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, 1996
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)
11707 Fair Oaks Blvd, Suite 210
Fair Oaks, CA 95628
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (916)967-9812
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, 1996 was 3,284,818.
<PAGE>
QUALITY RESORTS OF AMERICA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
For Three Months Ended SEPTEMBER 30, 1996
and Year Ended JUNE 30, 1996
<TABLE>
<CAPTION>
Sept 30, June 30,
1996 1996
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 163,434 $ 96,333
Current maturities of membership
contracts receivable, net 244,834 235,618
Current Maturities of Notes
Receivable 806,932 807,781
Interest and dues receivable 143,473 143,473
Due from Officers and Employees 9,272 75,908
Other current assets 433,743 384,024
__________ __________
Total Current Assets 1,801,688 1,743,155
Membership contracts, net 1,968,859 1,893,849
Operating Resorts, net 1,982,158 1,974,688
Property held for development, net 521,808 514,848
Operating equipment, net 199,944 205,519
Other assets 70,210 67,264
______-____ ___________
TOTAL ASSETS $ 6,544,667 $ 6,399,305
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 458,352 380,829
Accrued Expenses and other current
liabilities 338,007 257,502
Due to Officers 22,381 78,050
Current Portion of Deferred Income 202,560 191,814
Current maturities long-term debt 623,944 159,098
__________ __________
Total Current Liabilities 1,645,244 1,067,293
Long-term debt 4,210,703 4,678,116
Deferred income 523,433 537,868
__________ __________
Total Liabilities 6,379,380 6,283,277
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) (2,349,682) (2,398,941)
__________ __________
Total Stockholders' Equity 165,287 116,028
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY $ 6,544,667 $ 6,399,305
</TABLE>
<PAGE> =========== ===========
QUALITY RESORTS OF AMERICA, INC.AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTH PERIODS ENDING
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
September 30,
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Membership Sales $ 501,375 $ 690,468
Resort Operations 472,145 433,782
Interest Income 84,715 89,220
Other Income 215 1,755
__________ ___________
Total Revenue $1,058,450 $ 1,215,225
Expenses
Sales & Marketing 248,476 337,160
Resort Operations 296,137 306,291
General & Administrative 234,460 235,660
Allowance for Doubtful Accounts 52,048 55,374
Interest Expense 175,670 154,637
_________ _________
Total Expenses 1,006,791 1,089,121
Income (Loss) from Operations 51,659 126,104
Provision for income taxes(credits) 2,400 2,400
__________ __________
Net income (loss) $ 49,259 $ 123,704
========== ==========
Net income (loss) per share 01 04
=== ===
Average number of shares outstanding
during the periods: 3,284,818
</TABLE>
<PAGE>
QUALITY RESORTS OF AMERICA
AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
For Three Months Ended September 30, 1996
and Year Ended June 30, 1996
<TABLE>
<CAPTION>
September June
1996 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 49,259 $ 297,992
Adjustments to reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 19,467 64,457
Provision for Losses on Contracts and
Interest Receivable 52,048 450,657
(Gain) Loss on Sales of Assets 0 ( 1,380)
Deferred Income ( 3,689) ( 122,297)
Settlement of Obligations 0 ( 5,978)
Changes in Operating Assets and
Liabilities:
Increase in Contracts Receivable ( 136,274) ( 482,265)
Increase in Interest and Dues
Receivable 0 ( 17,466)
Increase in Prepaid Expenses and
Other Assets 13,971 ( 241,120)
Increase in Accounts Payable 77,523 181,458
Increase in Accrued Expenses 24,836 7,636
NET CASH FROM OPERATING ACTIVITIES 97,141 131,684
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to Notes Receivables 0 0
Principal Repayment of Notes
Receivables 849 2,506
Sale of Fixed Assets 9,060 13,408
Additions to Property and Equipment ( 37,382) ( 81,686)
NET CASH FROM INVESTING ACTIVITIES ( 27,473) ( 65,772)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing 35,000 67,437
Principal repayments on debts ( 37,567) ( 53,939)
NET CASH FROM FINANCING ACTIVITIES ( 2,567) 13,498
NET INCREASE (DECREASE) IN CASH 67,101 79,420
CASH, beginning of period 96,333 16,913
CASH, end of period $ 163,434 $ 96,333
=========== ===========
</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, 1996, have been audited, while the
balance sheet and statement of operations for the periods ended September
30, 1996, and September 30, 1995, 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, 1996, and 1995
are not necessarily indicative of the operating results for the full year.
<PAGE>
QUALITY RESORTS OF AMERICA, INC.
AND SUBSIDIARIES
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, 1996 the Company sold 675 new memberships
compared to fiscal year ended 1995 in which the Company sold 560 new
memberships. The Company has also offered to its existing membership an
upgrade package, with 196 members upgrading during 1996 compared to 154 in
1995. 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,
1996 and 1995, and for the year ended June 30, 1996, the percentage of
total sales represented by items included in the Company's Statements of
Operations.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sep 1996 Jun 1996 Sep 1995
Revenues: -------- -------- --------
Membership Sales 47% 54% 57%
Resort Operations 45% 37% 36%
Interest Income 8% 7% 7%
Other Income 0% 2% 0%
_____ _____ _____
Total Revenues 100% 100% 100%
Expenses:
Sales and Marketing 23% 26% 28%
Resort Operations 28% 22% 25%
General and Administrative 22% 21% 19%
Provision for Bad Debt 5% 10% 5%
Interest 17% 14% 13%
_____ _____ _____
Total Expenses ( 95%) ( 93%) ( 90%)
Earnings(Loss) before Income
Tax and Extraordinary Items 5% 7% 10%
Income Tax Provision 0% 0% 0%
----- ----- -----
Net Income(Loss) 5% 7% 10%
===== ===== =====
</TABLE>
The Company's strategy for growth is: i) to open offsite sales offices
to sell memberships to orphaned or dissatisfied members of other resorts;
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, 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
decreased from the prior period by $189,000 (27%), from $690,000 to
$501,000. This decrease is attributed to the decrease in membership
upgrade sales. During the first quarter ended September 30, 1995, 54
members purchased upgrades for a total of $137,000. During the first
quarter ended September 30, 1996, upgrade sales decreased to $2,000, as
the upgrade program exhausted the membership base. New membership sales
decreased by $62,000 (11%).
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 remained at 49 percent of membership sales
($248,000 in 1996 compared to $306,000 in 1995, a decrease of $58,000).
Commission expense decreased from $166,000 (24% of sales) in 1995, to
$115,000 (23% of sales) in 1996, (a decrease of $51,000) which is
attributed to the reduction in sales. Other sales expenses decreased from
$171,000 (25% of sales) to $134,000 (54 percent of sales).
Resort Operations
Revenues generated from Resort Operations increased by $ 38,000 (9
percent) over the same period in 1995. This increase is primarily
attributed to an increase in dues income. Expenses remained virtually the
same ($296,000 in 1996 compared to $306,000 in 1995).
General and Administrative Expense
General and administrative expense decreased slightly from $236,000
in 1995 to $234,000 in 1996.
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.
Current maturities of long term debt have increased by $465,000 since
June 30, 1996 primarily due to the maturity of loans secured by contracts
recievable and 7 loans secured by deeds of trust on Lighthouse Marina
Resort. Management anticipates that these 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.
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: March 13, 1996 /Susan Bienias
Susan Bienias
Chief Financial Officer
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