<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
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Commission file number 0-15399
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StratAmerica Corporation
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(Exact name of registrant as specified in its charter)
Utah 87-0368170
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
42-620 Caroline Court, Palm Desert, California 92211
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(Address of principal executive offices) (Zip Code)
(619) 776-1010
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(Registrant's Telephone Number, including area code)
N/A
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Former Address from Previous Form 10-Q
Indicate by check mark 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
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10,000,000 Common Shares, $0.05 par value, were issued and outstanding
as of July 31, 1995(1).
Transitional Small Business Disclosure Format.
Yes No X
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(1) Calculated without reference to Regulation 240.13d-3.
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ITEM 1 - FINANCIAL STATEMENTS
STRATAMERICA CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 6 $ 237
Restricted cash -- 35
Trade accounts receivable 48 23
Interest receivable - related party 38 15
Inventories 165 161
Prepaid expenses 152 75
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Total current assets 409 546
Notes receivable - related party 611 611
Property and equipment, net 1,140 1,204
Goodwill, net 476 550
Other assets 82 80
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$ 2,718 $ 2,991
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 816 $ 765
Accrued liabilities 3,482 3,338
Current portion of long-term debt and
capital lease obligations 1,800 1,872
Notes payable 2,329 2,193
Deferred franchise fees 95 120
Deposit 246 246
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Total current liabilities 8,768 8,534
Long-term debt and capital lease obligations, less
current portion 409 417
Accumulated losses in excess of investment in
unconsolidated subsidiary 121 121
Deferred revenue 378 378
Minority interest in consolidated subsidiary 350 350
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10,026 9,800
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Shareholder's equity:
Common stock, $.05 par value - authorized
10,000,000 shares; 10,000,000 shares issued
and outstanding 500 500
Capital in excess of par value 7,936 7,936
Accumulated deficit (15,744) (15,245)
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(7,308) (6,809)
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$ 2,718 $ 2,991
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</TABLE>
See notes to consolidated financial statements.
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<PAGE>
STRATAMERICA CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
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1995 1994
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<S> <C> <C>
Revenues:
Restaurant $2,804 $3,227
Retail 101 37
Franchise fees and royalties 103 99
Other 1 8
Interest 24 71
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3,033 3,442
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Expenses:
Restaurant cost of sales, excluding
depreciation 1,929 2,043
Restaurant rent 324 339
Other restaurant occupancy and operating
expenses 539 647
Retail cost of sales 78 16
Retail operating expense 32 26
General and administrative expense 365 404
Depreciation and amortization 144 187
Interest 121 177
Equity in losses of subsidiary -- 20
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3,532 3,859
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Net loss $ (499) $ (417)
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Net loss per share $(0.05) $(0.04)
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</TABLE>
See notes to consolidated financial statements.
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<PAGE>
STRATAMERICA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
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1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 2,959 $ 3,448
Cash paid to suppliers and employees (2,857) (3,493)
Interest received 1 --
Interest paid (382) (118)
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Net cash used by operating activities (279) (163)
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Cash flows from investing activities:
Purchase of property and equipment (5) (34)
Other (3) 2
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Net cash (used in) provided by investing
activities (8) (32)
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Cash flows from financing activities:
Principal payments on long-term debt and
capital lease obligation (80) (43)
Proceeds from borrowings 136 252
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Net cash (used in) provided by financing
activities 56 209
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Net increase in cash (231) 14
Cash at the beginning of period 237 117
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Cash at end of period $ 6 $ 131
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</TABLE>
(continued)
See notes to consolidated financial statements.
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<PAGE>
STRATAMERICA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(unaudited)
(continued)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------
1995 1994
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<S> <C> <C>
Net loss $ (499) $ (417)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 144 187
Equity in losses of subsidiary -- 20
Change in assets and liabilities:
Increase in receivables (25) (83)
Increase in other receivables (23) --
Increase in inventories (4) (1)
Increase in prepaid expenses (77) (73)
Increase in accounts payable
and accrued liabilities 195 162
Change in deferred revenue, deposits and other 10 42
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Net cash used by operating activities $ (279) $ (163)
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</TABLE>
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
None.
See notes to consolidated financial statements.
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<PAGE>
STRATAMERICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- UNAUDITED FINANCIAL STATEMENTS:
Information as of June 30, 1995 and for the three months ended June 30, 1995
and 1994 is unaudited. The information in the unaudited financial statements
reflects all adjustments which are, in the opinion of management, necessary
to a fair presentation of the financial statements. These adjustments are of a
normal recurring nature. These financial statements are prepared in accordance
with the requirements of Form 10-Q and consequently may not include all the
disclosures normally required by generally accepted accounting principles or
those normally made in the annual Form 10-K filing. Any required information
omitted is either insignificant or is not applicable.
NOTE 2 -- LOSS PER SHARE:
Loss per share amounts are based on the weighted average shares outstanding
of 10,000,000 for the three months ended June 30, 1995 and 1994, respectively.
NOTE 3 -- INVENTORY:
Inventory consists of food and beverage inventories sold through its restaurant
business.
NOTE 4 -- SALE OF SUBSIDIARY:
During June 1995, the Company entered into a letter of intent to sell Shari's
Franchise Corporation, a wholly-owned subsidiary, to Shari's Management
Corporation. This transaction is subject to reaching a definitive agreement
between the parties and obtaining shareholder approval.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES:
The Company has guaranteed five store lease obligations of third party and
former employee franchisees of Dreams Franchise Corporation, which are in
default at June 30, 1995. The total future minimum lease payments related to
the leases in default is approximately $785 at June 30, 1995. The Company has
accrued for the estimated cost of settling these guarantees.
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<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the three months ended June 30, 1995 were $3,033,000
compared to $3,442,000 for the three months ended June 30, 1994, representing
a decrease of $409,000. This decrease is due primarily to a decrease in
restaurant revenues of $423,000, resulting from a decrease in restaurant
revenues at B.B. O'Briens, Inc. of $245,000 and a decrease in restaurant
revenues at Shari's Franchise Corporation of $178,000 during the three months
ended June 30, 1995 compared to the three months ended June 30, 1994. The
decrease at Shari's Franchise Corporation is due to the October 1994 closure
of a Shari's restaurant located in Palm Springs, California. The decrease in
restaurant revenues at B.B. O'Briens, Inc. is due to declining sales and the
decision to close this operation. The restaurant was closed July 1995.
Total expenses for the three months ended June 30, 1995 were $3,532,000
compared to $3,859,000 for the three months ended June 30, 1994, representing
a decrease of $327,000. This decrease is due primarily to the decrease in
restaurant operations described above. Restaurant cost of sales, occupancy,
and operating costs decreased by a total of $237,000, representing the
majority of the overall decrease in costs.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Registrant has a working capital deficit of $8,359,000
compared to a working capital deficit of $7,988,000 at March 31, 1995. This
increase in the working capital deficit of $371,000 is due primarily to the
losses from operations for the three months ended June 30, 1995. These
continued losses have created a significant working capital deficit, which
makes it difficult to find additional equity or financing sources. Management
has relied primarily on borrowings from related parties to finance ongoing
losses from operations but the Registrant cannot predict what additional
financing, related party or other financing, may be available in the future,
nor can it predict whether it can substantially improve its future results of
operations. The failure of the Registrant to obtain additional sources of
working capital and/or to substantially improve its results of operations
will have a significant negative impact on the liquidity and capital
resources of the Registrant and be detrimental to the Registrant's ongoing
future operations.
The Registrant has entered into a letter of intent to sell Shari's Franchise
Corporation and the Registrant has closed the operations of B.B. O'Briens,
Inc. While these transactions will improve working capital, they alone are
insufficient to significantly impact the current working capital deficit.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
In October, 1994 a Complaint was filed in San Bernardino Superior Court,
State of California against Registrant and Dreams Franchise Corporation ("DFC")
by Acquiport Five Corporation relating to a lease in a mall in Montclair,
California. The Complaint was an action for unlawful detainer and for
past due rents. During the fiscal quarter ended June 30, 1995, Registrant and
DFC negotiated a settlement with the Landlord, pursuant to which the monthly
rent during the remaining term of the lease commencing June 1, 1995 has been
increased to an amount of $4,753.32 per month which rental increases will
compensate the Landlord for the past due rents. Pursuant to that settlement,
Registrant and DFC also executed a stipulation for entry of judgment which
provides that if rental payments required under the lease are not made, after
ten days written notice, the Plaintiff shall be entitled to a judgment
giving it possession of the premises and writ of execution.
Item 2. CHANGES IN SECURITIES.
None
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
Item 5. OTHER INFORMATION.
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
None
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<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGNATURES
StratAmerica Corporation
02/01/95 /s/ Sam Battistone
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Date President
Sam Battistone
01/31/95 /s/ Dale E. Larsson
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Date Principal Financial Officer
Dale E. Larsson
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 48
<ALLOWANCES> 0
<INVENTORY> 165
<CURRENT-ASSETS> 409
<PP&E> 3,069
<DEPRECIATION> (1,929)
<TOTAL-ASSETS> 2,718
<CURRENT-LIABILITIES> 8,768
<BONDS> 0
<COMMON> 500
0
0
<OTHER-SE> 7,936
<TOTAL-LIABILITY-AND-EQUITY> 2,718
<SALES> 2,905
<TOTAL-REVENUES> 3,033
<CGS> 2,007
<TOTAL-COSTS> 3,411
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 121
<INCOME-PRETAX> (499)
<INCOME-TAX> 0
<INCOME-CONTINUING> (499)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (499)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
