SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
Form 10-QSB/A
(Mark One)
[X] QUARTERLY REPORTS UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-21662
Strategia Corporation
(Exact name of registrant as specified in its charter)
Kentucky 61-1064606
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10301 Linn Station Road, P.O. Box 37144, Louisville, KY 40233-7144
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 502-426-3434
Former name, former address, and former fiscal year, if changed since last
report.
Indicate by check [X] whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange 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. Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date - 4,666,819.
Strategia Corporation hereby amends and restates Part I, Items 1 and 2 of its
Quarterly report for the quarter ended June 30, 1997. An amended and
restated Exhibit 27 is also filed herewith.
Part I
Item 1 - Financial Statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
Condensed Consolidated Balance Sheets
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,438,780 $ 338,436
Accounts receivable, net 1,397,763 1,099,636
Other current assets 284,175 57,738
Total current assets 9,120,718 1,495,810
Property and equipment 18,359,042 18,335,606
Less accumulated depreciation and amortization 10,680,223 9,851,977
7,678,819 8,483,629
Other assets 483,177 765,971
$17,282,714 $10,745,410
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 226,181 $ 63,008
Current installments of obligations under
capital leases 1,657,284 1,973,729
Note payable to stockholder - 800,000
Accounts payable 570,069 695,079
Accrued income taxes 28,663 55,196
Accrued expenses and other current liabilities 1,014,993 896,865
Total current liabilities 3,497,190 4,483,877
Long-term debt, excluding current installments 1,080,537 978,598
Obligations under capital leases,
excluding current installments 844,435 1,705,724
Customers' deposits 60,926 54,117
Deferred revenue 1,640,058 1,072,469
Deferred income taxes 333,524 378,312
Total liabilities 7,456,670 8,673,097
Stockholders' equity:
Preferred stock -- authorized 2,000,000 shares:
Series AA Convertible Preferred ($10 stated value);
authorized 100,000 shares; issued and
outstanding 0 shares at June 30, 1997
and 64,546 shares at December 31, 1996 - 645,460
Common stock without par value. Authorized
15,000,000 shares; issued and outstanding
4,666,819 shares at June 30, 1997 and
3,038,885 shares at December 31, 1996 13,615,550 4,386,834
Accumulated deficit (3,641,180) (2,938,423)
Foreign currency translation (148,326) (21,558)
Total stockholders' equity 9,826,044 2,072,313
$17,282,714 $10,745,410
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Service revenues 2,258,059 $2,375,601 $4,801,258 $4,719,718
Operating expenses:
Cost of services 1,643,544 1,866,200 3,360,709 3,372,685
Selling, general and
administrative expenses 1,115,323 539,952 1,841,896 1,128,062
2,758,867 2,406,152 5,202,605 4,500,747
Operating income (loss) (500,808) (30,551) (401,347) 218,971
Other income (expense):
Interest expense (104,269) (202,232) (276,283) (363,939)
Other 99,876 4,963 84,278 6,760
(4,393) (197,269) (192,005) (357,179)
Loss before
income taxes $ (505,201) $(227,820) $ (593,352) $ (138,208)
Provision for income taxes 31,993 23,636 84,001 122,761
Net loss $ (537,194) $(251,456) $ (677,353) $ (260,969)
Net loss per share
of common stock $ (0.12) $ (.10) $ (0.22) $ (.10)
Weighted average number
of common shares
outstanding 4,407,722 2,522,006 3,068,356 2,517,962
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)
<CAPTION>
Series AA Foreign
Preferred Common Accumulated Currency
Stock Stock Deficit Translation Total
<S> <C> <C> <C> <C> <C>
Balance at
December 31,
1996 $ 645,460 $ 4,386,834 $(2,938,423) $ (21,558) $ 2,072,313
Issuance of
1,366,000
shares of
Common Stock,
Net of
offering costs - 8,583,256 - - 8,583,256
Net loss for
three months
ended March
31, 1997 - - (140,159) - (140,159)
Payments of
dividends - - (12,731) - (12,731)
Translation
adjustment at
March 31, 1997 - - - (84,005) (84,005)
Balance at March
31, 1997 645,460 12,970,090 (3,091,313) (105,563) 10,418,674
Conversion of
Series AA
Preferred Stock (645,460) 645,460 - - -
Net loss for
Three months ended
June 30, 1997 - - (537,194) - (537,194)
Payments of
Dividends - - (12,673) - (12,673)
Translation
adjustment at
June 30, 1997 - - - (42,763) (42,763)
Balance at June
30, 1997 $ - $13,615,550 $(3,641,180) $(148,326) $9,826,044
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (677,353) $(260,969)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,280,290 1,343,969
Deferred income taxes - 8,870
Other 1,048 (3,105)
Change in operating assets and liabilities:
Accounts receivable (434,711) (38,139)
Other current assets (229,647) 131,246
Accounts payable (110,571) 181,575
Accrued expenses 206,057 131,462
Accrued income taxes (18,755) (143,837)
Increase in other assets 200,468 (50,620)
Increase in deferred revenue 736,816 1,330,803
Increase (decrease) in customers' deposits 7,442 14,207
Net cash provided by operating activities 961,084 2,645,462
Cash flows from investing activities:
Acquisition of property and equipment (527,192) (282,684)
Net cash used in investing activities (527,192) (282,684)
Cash flows from financing activities:
Proceeds from sale of common stock, net 8,528,256 -
Proceeds from bank line of credit 100,000 250,000
Payment of note payable to stockholder (800,000) -
Principal payments on long-term debt and
obligations under capital leases (1,077,653) (1,653,826)
Payment of dividends on preferred stock 25,404) -
Net cash used in financing
activities 6,725,199 (1,403,826)
Effect of exchange rate changes on cash (58,747) (27,549)
Net increase (decrease) in cash and cash equivalents 7,100,344 931,402
Cash and cash equivalents at beginning of period 338,436 170,636
Cash and cash equivalents at end of period $7,438,780 $1,102,039
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1997
(1) In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position
as of June 30, 1997 and the results of operations for the three and six months
then ended and cash flows for the six months then ended.
Certain reclassifications of amounts in the condensed consolidated
financial statements have been made to reflect comparability.
(2) This financial information should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-KSB for the period ended December 31, 1996.
(3) For financial reporting purposes, income (loss) before income taxes for
the three and six months ended June 30, 1997 and 1996, includes the following
components:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
Pretax income (loss): 1997 1996 1997 1996
<S> <C> <C> <C> <C>
United States $ (592,445) $ (292,277) $(822,427) $ (472,981)
Foreign 87,244 64,457 229,075 334,773
$ (505,201) (227,820) $(593,352) $ (138,208)
</TABLE>
The provision for income tax expense is attributable to earnings from foreign
operations.
(4) Income (loss) per share is based on net income (loss) less preferred
dividends divided by the weighted average number of common and equivalent
shares outstanding during the period. Common stock equivalents outstanding
are calculated for stock options and warrants using the treasury stock method.
Fully diluted per share amounts are not materially different from primary per
share amounts.
(5) The Company called its Series AA Preferred Stock on June 30, 1997.
All preferred shares were converted to Common Stock.
(6) Revenue from Year 2000 compliance consulting and program renovation
contracts is recognized as services are provided and costs are incurred.
For fixed-price contracts, revenue is recognized on the
percentage-of-completion method. Costs incurred to date as a percentage
of estimated total contract costs is used to determine the percentage of
completion because management considers expended costs to be the best
available measure of progress on these contracts. Contract costs
include all direct material and labor costs and those indirect costs
related to contract performance. Selling, general and administrative
costs are charged to expense as incurred. Provisions for estimated
losses on uncompleted contracts are made in the period in which such
losses are determined.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Company reported revenue of $2,258,059 and $4,801,258 for the three and
six months ended June 30, 1997, respectively. This compares to revenue of
$2,375,601 and $4,719,718 for the comparable periods in 1996. The Company
reported net losses of $537,194 and $677,353 for the three and six months
ended June 30, 1997 after reporting net losses of $251,456 and $260,969 for
the same periods in 1996. The increase in revenue in 1997 is attributable
mainly to additional computer services revenues generated in North America
associated with millennium consulting. Revenue recorded for the three
and six months ended June 30, 1997 by the Company's subsidiary, Twinsys
Dataguard S.A. (hereinafter referred to as "Twinsys") was comparable
to the revenue recorded for the same periods in 1996.
The losses incurred by the Company year to date reflect the early stage
of development of the Year 2000 business, generally. To establish its
presence in the growing Year 2000 market and to be in a position to bid
for contracts, the Company has added technical, marketing and support
staff and otherwise devoted substantial financial resources to build
infrastructure to support growth in the volume of business expected
to develop in the coming two years.
Consolidated service revenue decreased $117,542 and increased $81,540
for the three and six month periods ended June 30, 1997 when compared
to the same periods in 1996. Twinsys accounted for approximately
68% and 67% of consolidated service revenue, respectively, for these
periods in 1997. It is expected that the percentage of the Company's
consolidated service revenue generated by Twinsys will decrease
during the remainder of 1997 due to the anticipated growth of revenues
from millennium and outsourcing services in North America. The
overall development of the millennium services market in Europe is
slower than in North America. The Company currently has both
outsourcing and millennium service contracts in process in North
America.
The Company's cost of services decreased to $1,643,544 from $1,866,200
and $3,360,709 from $3,372,685 for the three and six months ended
June 30, 1997 when compared to the same periods in 1996, respectively.
Selling general and administrative expenses increased approximately 107%
for the three months ended June 30, 1997 and 63% for the six months
ended June 30, 1997 when compared to the same periods in 1996. These
increases reflect (i) significant growth in the Company's direct
marketing staff in anticipation of increased demand for millennium
and outsourcing services, and (ii) increases in expenditures for
advertising, promotions, and trade shows both in North America and
Europe regarding Year 2000 and other computer services offerings.
In addition, following the completion of its public offering of
Common Stock on March 31, 1997, the Company incurred increases in
professional fees and other expenses related to investor relations
services, stock market listing, and similar post-offering matters.
Operating expenses as a percentage of total revenues are expected
to increase over the last half of 1997 as the Company continues
to add key personnel, facilities and equipment to meet the expected
demand for millennium services.
Interest expense totaled $104,269 and $276,283 for the three and six months
ended June 30, 1997, respectively, as compared to $202,232 and $363,939 for
the same periods last year. Interest expense is related mainly to capital
leases for computer equipment. The reduction is attributable to a pay
down in capital lease obligations and the repayment of a stockholder
loan from the offering proceeds received during the first quarter of 1997.
The provision for income taxes totaled $84,001 and $122,761 for the six
month periods ended June 30, 1997 and 1996, respectively. These amounts
reflect French income taxes resulting from income of Twinsys.
No income tax benefits can be recognized currently for U.S.
operating losses, but these losses are available to offset any
future U.S. taxable income.
Liquidity and Capital Resources
At June 30, 1997, the Company had working capital totaling $5,623,528.
In March 1997, the Company completed a public offering of its Common
Stock that raised $8,592,982, net of offering expenses. The Company
has used a portion of these offering proceeds to repay an $800,000
stockholder loan and to pay certain accounts payable, accrued expenses,
and other current liabilities. The Company has also used offering
proceeds to add marketing staff, project managers, and technical
personnel in anticipation of the increased demand for millennium
services during the next several months. In addition, the Company
plans to use offering proceeds to establish and equip regional
testing facilities as Year 2000 conversion projects enter the
implementation phase. The Company established one such facility in
North America during April 1997. The Company has plans to assist
in the initial capitalization and financing of efforts to establish
a presence in Europe for millennium services as well as
Euro currency conversion services.
Pending use for working capital needs, the Company has converted
a portion of the net offering proceeds in short-term,
investment-grade, interest-bearing securities.
The Company called its Series AA Preferred Stock at June 30, 1997.
The holders of all preferred shares elected to convert their Preferred
to Common Stock. Therefore, no cash outlay was required in the
call of these shares.
Part II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the registrant
has caused this amendment to its quarterly report to be signed on its behalf by
the undersigned, hereunto duly authorized.
STRATEGIA CORPORATION
Date: March 31, 1998 By: \s\ Richard W. Smith
Richard W. Smith, President
(Chief Executive Officer)
(Chief Financial Officer)
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> $ 7,438,780
<SECURITIES> 0
<RECEIVABLES> 1,397,763
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,120,718
<PP&E> 18,359,042
<DEPRECIATION> 10,680,223
<TOTAL-ASSETS> 17,282,714
<CURRENT-LIABILITIES> 3,497,190
<BONDS> 1,080,537
<COMMON> 13,615,550
0
0
<OTHER-SE> (3,641,180)
<TOTAL-LIABILITY-AND-EQUITY> 17,282,714
<SALES> 0
<TOTAL-REVENUES> 4,801,258
<CGS> 0
<TOTAL-COSTS> 5,202,605
<OTHER-EXPENSES> 84,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276,283
<INCOME-PRETAX> (593,352)
<INCOME-TAX> 84,001
<INCOME-CONTINUING> (677,353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (677,353)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
