<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 SEPTEMBER 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(1) Common Shares, $0.05 par value, were issued and outstanding
as of November 1, 1995.
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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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
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.
On September 8, 1995, Registrant filed a Form 8-K describing, pursuant to
Item 5, execution of an agreement to sell certain restaurants.
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ITEM 1 - FINANCIAL STATEMENTS
STRATAMERICA CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
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<S> <C> <C>
ASSETS
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Current assets:
Cash $ 5 $ 237
Restricted cash - 35
Trade accounts receivable 44 23
Interest receivable - related party 77 15
Inventories 169 161
Prepaid expenses 239 75
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Total current assets 534 546
Notes receivable - related party 611 611
Property and equipment, net 1,063 1,204
Goodwill, net 378 550
Other assets 83 80
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$ 2,669 $ 2,991
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Accounts payable $ 944 $ 765
Accrued liabilities 3,568 3,338
Current portion of long-term debt and
capital lease obligations 1,800 1,872
Notes payable 2,564 2,193
Deferred franchise fees 95 120
Deposit 246 246
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Total current liabilities 9,217 8,534
Long-term debt and capital lease obliga-
tions, less current portion 332 417
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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10,398 9,800
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Shareholders' equity:
Common stock, $.05 par value -
authorized 10,000,000 shares;
10,000,000 shares issued and outstanding 500 500
Capital in excess of par value 7,936 7,936
Accumulated deficit (16,165) (15,245)
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(7,729) (6,809)
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$ 2,669 $ 2,991
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-------- --------
</TABLE>
See notes to consolidated financial statements.
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STRATAMERICA CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
September 30,
----------------------
1995 1994
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<S> <C> <C>
Revenues:
Restaurant $ 3,704 $ 4,190
Retail 43 43
Franchise fees and royalties 100 151
Other - 28
Interest 39 65
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3,886 4,477
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Expenses:
Restaurant cost of sales,
excluding depreciation 2,421 2,655
Restaurant rent 404 435
Other restaurant occupancy
and operating expense 659 842
Retail cost of sales 18 8
Retail operating expense 61 28
General and administrative
expense 427 344
Depreciation and amortization 185 226
Interest 132 185
Loss on restaurant closure - 641
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4,307 5,364
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Net loss $ (421) $ (887)
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Net loss per share $ (0.04) $ (0.09)
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</TABLE>
See notes to consolidated financial statements.
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STRATAMERICA CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
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SEPTEMBER 30,
--------------------
1995 1994
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<S> <C> <C>
Revenues:
Restaurant $ 6,508 $ 7,417
Retail 144 80
Franchise fees and royalties 203 250
Other 1 36
Interest 63 136
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6,919 7,919
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Expenses:
Restaurant cost of sales,
excluding depreciation 4,350 4,698
Restaurant rent 728 774
Other restaurant occupancy
and operating expense 1,198 1,489
Retail cost of sales 96 24
Retail operating expense 93 44
General and administrative
expense 792 758
Depreciation and amortization 329 413
Interest 253 362
Equity in loss of
unconsolidated subsidiary - 20
Loss on restaurant closure - 641
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7,839 9,223
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Net loss $ (920) $(1,304)
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Net loss per share $ (0.09) $ (0.13)
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</TABLE>
See notes to consolidated financial statements.
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STRATAMERICA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
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September 30,
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1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 6,810 $ 7,894
Cash paid to suppliers and employees (6,881) (7,985)
Interest received 1 11
Interest paid (357) (369)
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Net cash used by operating
activities (427) (449)
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Cash flows from investing activities:
Purchase of property and equipment (15) (43)
Collection on notes receivable - 339
Other (4) -
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Net cash (used in) provided by
investing activities (19) 296
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Cash flows from financing activities:
Principal payments on long-term debt
and capital lease obligation (157) (540)
Proceeds from borrowings 371 670
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Net cash provided by
financing activities 214 130
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Net decrease in cash (232) (23)
Cash at the beginning of period 237 117
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Cash at end of period $ 5 $ 94
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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>
SIX MONTHS ENDED
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SEPTEMBER 30,
---------------------
1995 1994
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<S> <C> <C>
Net loss $ (920) $(1,304)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 329 413
Equity in losses of subsidiary - 20
Change in assets and liabilities:
Increase in receivables (21) (175)
Increase in other receivables (62) -
Increase in inventories (8) (2)
Increase in prepaid expenses (164) 491
Increase in accounts payable
and accrued liabilities 409 66
Change in deferred revenue,
deposits and other 10 42
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Net cash used by operating activities $ (427) $ (449)
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</TABLE>
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
None.
See notes to consolidated financial statements.
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STRATAMERICA CORPORATION
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(unaudited)
NOTE 1 - UNAUDITED FINANCIAL STATEMENTS:
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Information as of September 30, 1995 and for the three months and six months
ended September 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:
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Loss per share amounts are based on the weighted average shares outstanding of
10,000,000 for the three months and six months ended September 30, 1995 and
1994, respectively.
NOTE 3 - INVENTORY:
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Inventory consists of food and beverage inventories sold through its restaurant
business.
NOTE 4 - SALE OF SUBSIDIARY:
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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 obtaining shareholder approval.
NOTE 5 - COMMITMENTS AND CONTINGENCIES:
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The Company has guaranteed five store lease obligations of third party and
former employee franchisees of Dreams Franchise Corporation, which are in
default at September 30, 1995. The total future minimum lease payments related
to the leases in default is approximately $785 at September 30, 1995. The
Company has accrued for the estimated cost of settling these guarantees.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
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Total revenues for the six months ended September 30, 1995 were $6,919,000
compared to $7,919,000 for the six months ended September 30, 1994, representing
a decrease of $1,000,000. This decrease is due primarily to a decrease in
restaurant revenues of $909,000, resulting from a decrease in restaurant
revenues at B.B. O'Briens, Inc. of $530,000 and a decrease in restaurant
revenues at Shari's Franchise Corporation of $379,000 during the six months
ended September 30, 1995 compared to the six months ended September 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 six months ended September 30, 1995 were $7,839,000
compared to $9,223,000 for the six months ended September 30, 1994, representing
a decrease of $1,384,000. 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 $685,000, representing the majority of
the overall decrease in costs. Additionally, there was a loss on restaurant
closure of $641,000 during the six months ended September 30, 1994 and no
similar loss during the six months ended September 30, 1995.
The changes in revenues and expenses for the three months ended September
30, 1995 as compared to the three months ended September 30, 1994, reflect
differences similar to the differences described above for the six months ended
September 30, 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
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At September 30, 1995, the Company had a working capital deficit of
$8,683,000 compared to a working capital deficit of $7,988,000 at March 31,
1995. This increase in the working capital deficit of $695,000 is due primarily
to the losses from operations for the six months ended September 30, 1995.
Management has relied primarily on borrowings from related parties to finance
ongoing losses from operations but the Company 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 Company 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
Company and be detrimental to the Company'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
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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>
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
/ /95 /s/ Sam Battistone
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Date President
Sam Battistone
/ /95 /s/ Dale E. Larsson
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Date Principal Financial Officer
Dale E. Larsson
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 121
<ALLOWANCES> 0
<INVENTORY> 169
<CURRENT-ASSETS> 534
<PP&E> 3,082
<DEPRECIATION> 2,019
<TOTAL-ASSETS> 2,669
<CURRENT-LIABILITIES> 9,217
<BONDS> 0
<COMMON> 500
0
0
<OTHER-SE> 7,936
<TOTAL-LIABILITY-AND-EQUITY> 2,669
<SALES> 3,704
<TOTAL-REVENUES> 3,886
<CGS> 2,439
<TOTAL-COSTS> 2,439
<OTHER-EXPENSES> 1,736
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 132
<INCOME-PRETAX> (421)
<INCOME-TAX> 0
<INCOME-CONTINUING> (421)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (421)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
