SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-17018
STRATFORD AMERICAN CORPORATION
(Name of small business issuer in its charter)
Arizona 86-0608035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 E. Arizona Biltmore Circle, Building 2, Suite 1270, Phoenix, Arizona 85016
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602)956-7809
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value
Series "A" Preferred Stock, $.01 Par Value
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
Check if there is no disclosure of delinquent filers in response
to Item 405 of the Regulation S-B is not contained herein, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part of III of this Form
10-KSB or any amendment to this Form 10-KSB [X]
Issuer's revenues for its most recent fiscal year: $13,060,000.
The aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the February 28, 1998 average bid and
asked prices of $.04 per share, is $2,521,000.
At February 28, 1998, 88,076,806 shares of the issuer's common
stock and no shares of its preferred stock were issued and outstanding.
Transitional Small Business Disclosure Format (check one) Yes No X
--- ---
Certain portions of the registrant's definitive Proxy Statement,
which will be filed with the Commission on or about April 30, 1998, in
connection with the Annual Meeting of Shareholders of the registrant to be held
on July 8, 1998, are incorporated by reference into Part III of this report.
<PAGE>
PART I
ITEM 1. BUSINESS
- ----------------
General
- -------
General Development of Business. Stratford American Corporation,
an Arizona corporation (the "Company"), has several wholly-owned subsidiaries
and one subsidiary of which it owns 80%. Unless otherwise specified, the term
"Company" as used herein includes the Company's subsidiaries.
In June 1994, the Company established Stratford American Car
Rental Systems, Inc. ("SCRS") to acquire the assets and franchise rights of
substantially all of the Arizona operations doing business as Dollar Rent A Car.
Narrative Description of Business
- ---------------------------------
The Company, through its subsidiaries, is engaged principally in
the business of leisure and commercial car rental in the State of Arizona. It
has nominal involvement in real estate management and natural resource
exploration and development. The Company employs 98 full-time employees.
Dollar Rent A Car. In June 1994, through the Company's 80% owned
subsidiary SCRS, the Company acquired the assets and franchise rights to
substantially all of the Arizona operations doing business as Dollar Rent A Car.
As part of the acquisition, additional funds were raised by SCRS from
subordinated notes. The noteholders also own 20% of the outstanding common stock
of SCRS. See Notes 9 and 12 to the Consolidated Financial Statements. The status
of SCRS as a franchise is governed by a franchise agreement (the "Franchise
Agreement") granted by Dollar Systems, Inc. (the "Franchisor"). The Franchise
Agreement grants to SCRS certain exclusive territories in which to operate the
Dollar Rent A Car vehicle rental business. These territories include all Arizona
counties except the Counties of Coconino, Navajo and Pima. The Franchise
Agreement is in effect for a period of ten years with an option to renew such
agreement for an additional ten years provided that SCRS has operated its
business in compliance with the terms of the Franchise Agreement. The Franchise
Agreement provides the Franchisor with significant rights regarding the business
and operations of SCRS. Specifically, SCRS must operate its franchise in
accordance with certain standards contained in the Franchise Agreement and the
Dollar Rent A Car Operations Guide. This includes certain guidelines relating to
the number of vehicles maintained for rental, and the amount of advertising and
promotion expenditures required. The Franchisor has the right to monitor the
operations of SCRS, and certain defaults by SCRS under the Franchise Agreement
would give the Franchisor the right to terminate the franchise governed by such
Franchise Agreement. Any loss of the franchise could have a material adverse
effect on the Company's business, operating results and financial condition.
Certain license fees are required to be paid monthly based on an agreed upon
percentage structure of gross rental revenues. In May 1995, an Assistance
Agreement between SCRS and Franchisor modified the Franchise Agreement (see Note
3 to the Consolidated Financial Statements).
SCRS rents cars, trucks, and passenger vans to business and
leisure travelers and others at 6 locations, including all three terminals at
Phoenix Sky Harbor International Airport. SCRS also generates revenue from the
sales of ancillary products such as loss damage waivers, supplemental liability
insurance, personal accident insurance and personal effects insurance. Total
revenues from the car rental operations accounted for approximately 99% of
consolidated revenue during the year ended December 31, 1997.
2
<PAGE>
The vehicle rental industry is very competitive and subject to the
pressures of both the rental rates and fleet sizes of competitors as well as the
availability of a reasonably priced fleet. In any given location, SCRS may
encounter competition from national, regional and local companies, many of whom,
particularly those owned by the major vehicle rental companies, have access to
greater financial resources than SCRS. SCRS's main competitors are The Hertz
Corporation, Avis Inc., Alamo Rent a Car Inc., National Car Rental System Inc.,
and Budget Rent a Car Corporation. SCRS's operations are generally the sixth
largest at its Phoenix Sky Harbor Airport locations. There can be no assurance
the Company will be able to compete successfully. Any inability by the Company
to compete successfully would have a material adverse effect on the Company's
business, operating results and financial condition.
Approximately 84% of SCRS's revenue is generated at its airport
facilities. Any event which disrupts air travel patterns at SCRS's airport
facilities for a continued period of time could have a material adverse effect
on SCRS's financial condition and results of operations. These events could
include labor unrest, airline bankruptcies or consolidations, the outbreak of
war or terrorist incidents, natural occurrences, such as earthquakes, and
general economic conditions.
SCRS's rental business is seasonal, and historically the stronger
revenue months occur from February through May. As a result, any occurrence that
disrupts travel patterns during this period could have a material adverse effect
on SCRS's annual performance. SCRS's weakest revenue months are generally the
months of August, September and December.
Sports Careers. In October 1996, the assets of the Company's
subsidiary Stratford American Sports Corp. ("SASC") were sold. The stock of SASC
was subsequently sold in December 1996. SASC has been accounted for as a
discontinued operation as discussed in Note 14 to the Consolidated Financial
Statements. The Company has no future plans to participate in sports career
related activities.
Natural Resources. The Company owns, through its subsidiaries, an
interest in an Alaskan gold mining prospect. As of December 1997, the remaining
book value of this mining interest has been written off completely due to
impairment caused by continued depressed gold prices. A nominal interest in four
oil and gas wells located in Arkansas and Oklahoma have been effectively turned
over and assigned to a third party during 1997, based on a completed payout
agreement. The Company has no other interest in any oil and gas properties.
Total revenues from natural resource operations were insignificant during the
year ended December 31, 1997. (See Item 2 - Properties.)
ITEM 2. PROPERTIES
- ------------------
Principal Offices. The principal offices of the Company are
located at 2400 East Arizona Biltmore Circle, Building 2, Suite 1270, Phoenix,
Arizona 85016, telephone (602) 956-7809. The premises are leased at the rate of
approximately $99,000 per year. The term of the current lease expires in
September 1999. The Company believes its office space is sufficient to meet its
operational needs in the near future.
SCRS leases a 2,500 square foot building situated on 2.4 acres of
land for use in its Dollar Rent A Car operations as a service facility and
vehicle staging area. This facility, located at 50 S. 24th Street in Phoenix,
Arizona, is leased at a current rate of approximately $79,000 per year. The
lease expires in May 1999 and contains a five year extension option. SCRS also
leases various facilities for its satellite and airport operations for Dollar
Rent A Car under leases with terms ranging from month to month through ten
years. The airport lease requires minimum annual lease payments of $1,150,000
and a maximum of 10% of specified airport revenues. This lease expires in
October 2000.
3
<PAGE>
Natural Resource Properties
- ---------------------------
Alaska Gold Exploration. The Company, has determined that its
41.3% interest in the "Big Hurrah," a gold mine prospect located near Nome,
Alaska, has no value and has been completely written off in 1997. See Note 6 to
the Consolidated Financial Statements.
Oil and Gas. The Company's remaining oil and gas properties were
assigned to a third party during 1997 based on a completed payout agreement. The
Company has no other interest in any oil and gas properties.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
The Company is not currently a party to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
No matter was submitted to a vote of the Company's shareholders
during the fourth quarter ended December 31, 1997.
EXECUTIVE OFFICERS
- ------------------
Name Age Office Officer Since
---- --- ------ -------------
David H. Eaton 62 Chief Executive Officer 6/88
Mel L. Shultz 47 President 5/87
Timothy A. Laos 44 Vice President, Chief 3/95
Financial Officer,
Treasurer and Secretary
David H. Eaton has been the Chairman of the Board of Directors of
the Company since February 29, 1988 and its Chief Executive Officer since June
1, 1988.
Mel L. Shultz has been a Director and the President of the Company
since May 20, 1987. Mr. Shultz was previously involved on his own behalf in real
estate development and oil and gas investment.
Timothy A. Laos, C.P.A., became a Vice President, Chief Financial
Officer, Treasurer and Secretary of the Company effective March 1, 1995. He was
involved in public accounting from 1978 to 1981 including the first two years
employed by Price Waterhouse. From 1984 through 1992, Mr. Laos was the corporate
controller for Martin Oil and Gas Company, an independent oil and gas producer.
From 1992 through 1995, he was the corporate controller for the Haworth
Corporation, a local real estate developer.
4
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ----------------------------------------------------------------
Market Information
- ------------------
As of December 31, 1997, the Company's common stock, $0.01 par
value, was listed and traded on the OTC Bulletin Board (symbol: STFA).
The high and low bid prices for each quarter since January 1,
1996, are as follows:
Time Period High Low
----------- ---- ---
1997: First quarter .045 .02
Second quarter .04 .025
Third quarter .035 .026
Fourth quarter .055 .03
1996: First quarter .03 .02
Second quarter .08 .02
Third quarter .04 .03
Fourth quarter .04 .02
The above information is based on the bid price as furnished by
the National Quotation Bureau. The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions.
Holders
- -------
As of February 28, 1998, the common stock of the Company is
estimated to be held beneficially by approximately 2,000 shareholders. No
preferred stock is outstanding.
Dividends
- ---------
The Company has never paid cash dividends on its common equity.
Arizona law restricts the ability of a corporation to pay dividends. These state
law restrictions materially limit the Company's ability to pay dividends and are
likely to materially limit the future payment of dividends. The Company does not
expect to pay dividends in the foreseeable future, but rather expects to use any
cash otherwise available for distribution to satisfy debt obligations and build
business operations.
Recent Sales of Unregistered Securities
- ---------------------------------------
In March 1997, an option to purchase 3,000,000 shares, granted to an officer of
the Company in 1994, were exercised for an aggregate exercise price of $30,000.
In September 1997, options to purchase 1,000,000 shares, granted to certain
Advisory Committee members in 1992, were exercised for an aggregate exercise
price of $50,000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- -----------------------------------------------------------------
General
- -------
The Company recognized a consolidated loss for the fourth quarter
of 1997 as a result of an expected seasonal decline in the vehicle rental
business coupled with a provision for certain receivable accounts which were
determined to be uncollectable. Additionally, the Company wrote off its mining
interest during the fourth quarter due to impairment. This determination
effected a $375,000 non cash loss which is included in the Company's
consolidated loss for the year. In September 1997, the Company closed four of
its off airport rental locations determined to be unprofitable, keeping three
remaining locations in proximity to the Sky Harbor Airport with the strategy to
focus its resources more specifically toward the stronger airport market.
The vehicle rental business in Arizona is seasonal with the months
of February through May typically representing the higher revenue months. The
vehicle rental business is also highly competitive and subject to pressures of
both the rental rates and fleet sizes of competitors as well as the availability
of a reasonably priced fleet. Efforts are in place to reduce fleet and other
operational costs in order to achieve profitability.
5
<PAGE>
Liquidity and Capital Resources
- -------------------------------
In December 1996, the Company, through SCRS, secured a $3,000,000
credit line from a major bank, including a $2,000,000 line available for general
operational use, and a $1,000,000 line to purchase revenue earning vehicles. In
addition, the Company continues to maintain already existing vehicle lines of
credit from other sources.
SCRS incurs a minimum of $1,150,000 in airport access charges
yearly based on the level of car rental business recognized at all three airport
terminal locations. Effective June 1997, SCRS began passing through most of its
airport access charges to car rental customers with no significant impact on its
level of business activity. With continued success in implementing this policy,
the Company should achieve significant future cost savings.
The Company anticipates that with its recently completed financing
and with the continuation of efforts to improve Dollar Rent A Car operating
results as discussed above, it should meet its operational cash flow needs for
the remainder of 1998. However, due to, among other things, the factors
described above, some of which are outside the Company's control, there are no
assurances that either profitability or adequate cash flows from operations will
be achieved.
Results of Operations - Year Ended December 31, 1997, Compared with Year Ended
- --------------------------------------------------------------------------------
December 31, 1996
- -----------------
The Company reported a net loss of $1,199,000 during 1997 in
comparison to a net loss of $268,000 in 1996. The 1997 results include a loss of
$375,000 from impairment of a mining interest as discussed in Note 6 to the
Consolidated Financial Statements. The 1996 results include a net gain of
$221,000 from discontinued operations as discussed in Note 14 to the
Consolidated Financial Statements. The increase in vehicle rental operations
expenses from $11,071,000 in 1996 to $ 11,646,000 in 1997 is primarily due to
losses incurred on the sale of risk vehicles due to a weak wholesale market in
1997 compared to risk vehicle gains recognized in 1996, and also due to a
provision for certain receivable accounts which were determined to be
uncollectable in 1997.
Vehicle Rental Activities. Revenues from rental car activities
accounted for 99% of total revenues from operations in 1997. The slight increase
in total vehicle rental revenues includes a 7% increase in airport revenue due
to increased airport activity, and a 19% decrease in off airport revenue due to
the closing of four off airport locations deemed to be unprofitable.
Capital Requirements
- --------------------
The Company does not have any material plans for future capital
expenditures at the present time.
Impact of Inflation
- -------------------
Inflation has not had a significant impact on the Company's
results of operations. Due to competitive pressures, the Company is not always
able to pass through modest increases in rental rates. Future inflationary
increases, if any, is a factor of which the Company must be cognizant.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
Certain statements contained in this report, including statements
containing the words "believes," "anticipates," "intends," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 and are subject to the safe
harbors created thereby. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual results
to be materially different from the forward-looking statements. Such factors
include, among others, the following: SCRS's ability to maintain the Dollar Rent
A Car franchise, the Company's ability to compete successfully, the risk of
disruption of air travel patterns, the fact that the Company's operating results
are seasonal, the risk that all of the foregoing factors or other factors could
cause fluctuations in the price of the Company's common stock, and other risks
detailed in this report and from time to time in the Company's other filings
with the Securities and Exchange Commission. Given these uncertainties, readers
should not place undue reliance on such forward-looking statements.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
<TABLE>
<CAPTION>
Index Page
----- ----
Stratford American Corporation and Subsidiaries Consolidated Financial Statements
December 31, 1997
<S> <C>
Independent Auditors' Report 8
Consolidated Balance Sheet as of December 31, 1997 9
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996 10
Consolidated Statements of Shareholders'
Equity (Deficiency) for the years ended
December 31, 1997 and 1996 11
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996 12
Notes to Consolidated Financial Statements 13
</TABLE>
All schedules are omitted as the required information is inapplicable or not
present in amounts sufficient to require submission of the schedule, or because
the required information is presented in the consolidated financial statements
or notes thereto.
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stratford American Corporation:
We have audited the accompanying consolidated balance sheet of Stratford
American Corporation and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, shareholders' equity (deficiency), and
cash flows for each of the years in the two-year period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Stratford American
Corporation and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for each of the years in the two-year period
then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
March 20, 1998
8
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 168,000
Receivables:
Trade, less allowance for doubtful accounts of $180,000 648,000
Mortgages 63,000
------------
711,000
Prepaid expenses 232,000
Revenue earning vehicles, net 390,000
Property and equipment, net 376,000
Deposits 217,000
Other assets 199,000
Franchise rights, less accumulated amortization of $121,000 261,000
------------
$ 2,554,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable, secured by revenue earning vehicles $ 370,000
Accounts payable 1,059,000
Notes payable and other debt 1,973,000
Accrued interest 570,000
Accrued liabilities 384,000
------------
Total liabilities 4,356,000
Shareholders' equity (deficiency):
Nonredeemable preferred stock, par value $.01 per share;
authorized 50,000,000 shares, none issued
Common stock, par value $.01 per share; authorized 100,000,000 shares;
issued and outstanding 88,076,806 shares 881,000
Additional paid-in capital 25,981,000
Retained earnings (deficit) (28,653,000)
Treasury stock, 29,500 shares at cost (11,000)
------------
(1,802,000)
Commitments and subsequent events ------------
$ 2,554,000
============
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1997 and 1996
1997 1996
------------ ------------
REVENUES:
Vehicle rental activities $ 12,957,000 $ 12,691,000
Interest and other income 103,000 171,000
------------ ------------
13,060,000 12,862,000
------------ ------------
EXPENSES:
Vehicle rental operations 11,646,000 11,071,000
General and administrative 602,000 649,000
Depreciation and amortization 1,055,000 1,013,000
Interest 581,000 565,000
Loss on impairment - mining interest 375,000
------------ ------------
14,259,000 13,298,000
------------ ------------
LOSS FROM CONTINUING OPERATIONS (1,199,000) (436,000)
DISCONTINUED OPERATIONS:
Loss from operations of Sports Careers (53,000)
Gain on disposal of Sports Careers 221,000
------------ ------------
Net income from discontinued operations 168,000
------------ ------------
NET LOSS $ (1,199,000) $ (268,000)
============ ============
Basic and diluted net loss per share:
Loss from continuing operations $ (0.01) $ (0.01)
Income from discontinued operations 0.01
------------ ------------
Basic and diluted net loss per share $ (0.01) $ (0.00)
============ ============
See accompanying notes to consolidated financial statements.
10
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Total
Common Stock Additional Retained Treasury Stock shareholders'
---------------------------- paid-in earnings --------------------------- equity
Shares Amount capital (deficit) Shares Amount (deficiency)
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 84,076,806 $ 841,000 $ 25,780,000 $(27,186,000) 29,500 $ (11,000) $ (576,000)
Repurchase of
minority interest 161,000 161,000
Net loss (268,000) (268,000)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance,
December 31, 1996 84,076,806 $ 841,000 $ 25,941,000 $(27,454,000) 29,500 $ (11,000) $ (683,000)
Common stock issued 4,000,000 40,000 40,000 80,000
Net loss (1,199,000) (1,199,000)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance,
December 31, 1997 88,076,806 $ 881,000 $ 25,981,000 $(28,653,000) 29,500 $ (11,000) $ (1,802,000)
============ ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,199,000) $ (268,000)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization from continuing operations 1,055,000 1,013,000
Depreciation and amortization from discontinued operations 11,000
Loss on sale of revenue earning vehicles 290,000 8,000
Gain on sale of discontinued operations (221,000)
Loss on impairment of mining interest 375,000
Changes in assets and liabilities:
Decrease (increase) in accounts and mortgages receivable 48,000 (333,000)
Decrease (increase) in other assets (54,000) 93,000
Increase in accounts payable 84,000 66,000
Increase in accrued liabilities 65,000 253,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 664,000 622,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Addition) reduction to restricted cash 760,000 (21,000)
Proceeds from sales of revenue earning vehicles 6,322,000 4,671,000
Proceeds, net, from sale of subsidiary 247,000
Purchases of property and equipment (54,000) (170,000)
Purchases of revenue earning vehicles (888,000) (8,478,000)
----------- -----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 6,140,000 (3,751,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revenue earning vehicle financing 843,000 8,460,000
Payments on revenue earning vehicle financing (7,543,000) (5,617,000)
Proceeds from other debt 375,000 225,000
Payments on other debt (564,000) (147,000)
Proceeds from issuance of common stock 80,000
----------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (6,809,000) 2,921,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,000) (208,000)
CASH AND CASH EQUIVALENTS, beginning of year 173,000 381,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 168,000 $ 173,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year $ 526,000 $ 376,000
----------- -----------
Equipment acquired in exchange for long-term debt $ 65,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1 - NATURE OF BUSINESS
- ---------------------------
Stratford American Corporation (the "Company"), with its principal car rental
locations at or near Phoenix Sky Harbor International Airport, is engaged
principally in the business of leisure and commercial car rental in the State of
Arizona. It has nominal involvement in real estate management.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with original maturities of
3 months or less to be cash equivalents. The carrying amount approximates fair
value because of the short maturity of the financial instruments.
Revenue Earning Vehicles
- ------------------------
Revenue earning vehicles are stated at cost less accumulated depreciation. The
straight-line method is used to depreciate revenue earning vehicles to their
estimated residual values over the anticipated periods of use based on the
Company's fleet plan, typically ranging from 6 to 14 months.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Depreciation is recorded based on
the straight-line method over the estimated useful lives of the related assets
ranging from 3 to 7 years. Leasehold improvements are amortized over the lesser
of the lease term or the estimated useful lives.
Franchise Rights
- ----------------
Franchise rights are recorded at cost. Amortization is recorded using the
straight-line method over the term and renewal option period of the franchise
agreement (20 years).
13
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Income Taxes
- ------------
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Net Loss Per Common Share
- -------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128)
which specifies the computation, presentation and disclosure requirements for
earnings (loss) per share for companies with publicly held common stock. The
Company has adopted the provisions of SFAS No. 128 in 1997 and has retroactively
applied the provisions in 1996. Basic net loss per share is computed using the
weighted average number of common shares outstanding during each period
(86,869,224 shares for 1997 and 84,076,806 for 1996). Diluted net loss per share
is the same as basic net loss per share in both 1997 and 1996 due to the
antidilutive nature of common stock equivalents.
Accounting Standards Not Yet Adopted by the Company
- ---------------------------------------------------
The Financial Accounting Standards Board has issued several Statements of
Financial Accounting Standards for which the required implementation date has
not yet become effective. None of these accounting standards will have a
material impact on the Company's consolidated financial statements.
Use of Estimates
- ----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Reclassifications
- -----------------
Certain amounts in the accompanying 1996 financial statements have been
reclassified to conform with the 1997 presentation.
NOTE 3 - DOLLAR RENT A CAR FRANCHISE LICENSE AGREEMENT
- ------------------------------------------------------
A License Agreement dated May 31, 1994 was entered into between Stratford
American Car Rental Systems, Inc. ("SCRS") and Dollar Systems, Inc., the Dollar
Rent A Car franchisor. A $1,900,000 note payable to Dollar Systems, Inc. was
executed by SCRS which required monthly payments of $18,000, including principal
and interest at 8%, and matured in June 2000. On May 16, 1995, an agreement
between SCRS and Dollar Systems, Inc. was executed which served to adjust the
previously set cost of the license agreement. Along with other license
concessions, the remaining note payable balance to Dollar Systems, Inc.,
totaling $1,858,000, was eliminated, provided that the Company did not default
on any obligations due to Dollar Systems, Inc. through the end of 1996, in which
case half of the balance would become due in June 2000. Effective January 1,
1997, the Company successfully met its requirement for completing the terms and
conditions of debt elimination.
14
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 4 - REVENUE EARNING VEHICLES
- ---------------------------------
Revenue earning vehicles consist of the following as of December 31, 1997:
Revenue earning vehicles $ 452,000
Less accumulated depreciation (62,000)
---------
$ 390,000
=========
The Company also leases vehicles under operating lease agreements which require
the Company to provide normal maintenance and liability coverage. The agreements
have initial terms of 6 to 9 months. The vehicles are returned to the lessor at
the end of the lease term. Total vehicle lease expense was $4,313,000 and
$4,009,000 for 1997 and 1996, respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment consist of the following as of December 31, 1997:
Service equipment $ 191,000
Computer software and equipment 305,000
Furniture and fixtures 162,000
Leasehold improvements 105,000
---------
763,000
Accumulated depreciation and amortization (387,000)
---------
$ 376,000
NOTE 6 - MINING INTEREST
- ------------------------
In 1985, the Company acquired the right to conduct mineral exploration and
development pursuant to a mining lease in Alaska through the issuance of 105,000
common shares. In February 1990, an additional 200,000 shares of the Company's
common stock were issued in connection with this acquisition. Pursuant to an
agreement dated September 16, 1988, the Company assigned its 41.3% interest in
the joint venture to a wholly-owned subsidiary, Stratford American Gold Venture
Corporation ("SAGVC"). Under the terms of an agreement of September 16, 1988,
the Company and its joint venture partner granted to a third party an option to
acquire a 70% interest in the property. Upon the third party exercising such
option, SAGVC would hold a 12.39% interest in the property.
This third party has not conducted exploration activities since July 1989, as
permitted by the agreement. Activity is not required until the price of gold
exceeds $400 for a period of ninety consecutive days. The Company recorded a
write-down of $551,000 in 1993 as a result of the length of time without
exploration activities and the inability of the price of gold to exceed $400 per
ounce since those activities ceased. In December 1997, the remaining book value
of $375,000 was written off due to impairment caused by continued depressed gold
prices.
15
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 7 - MORTGAGES RECEIVABLE
- -----------------------------
Mortgages receivable, secured by second deeds of trust on residential property,
bear interest at 10.5% per annum. Total principal and interest payments are
amortized over the 30-year life of the mortgages and are payable in equal
monthly installments. The principal payments to be received on the mortgages
receivable are as follows:
Year ending December 31:
1998 $ 3,000
1999 4,000
2000 4,000
2001 4,000
2002 5,000
Thereafter 43,000
-------
$63,000
=======
NOTE 8 - NOTES PAYABLE AND LINES OF CREDIT SECURED BY REVENUE EARNING VEHICLES
- ------------------------------------------------------------------------------
Notes payables and lines of credit secured by revenue earning vehicles consist
of the following as of December 31, 1997:
Notes payable under a $ 3.0 million line of credit to Ford Motor
Credit with various termination dates during 1999; secured by
certain revenue earning vehicles; 2.25% of principal due
monthly; interest at 30-day Federal Reserve rate plus 3.25% and
3.75% (8.80% & 9.30% at December 31, 1997)
due monthly. $ 295,000
$1.0 million asset based line of credit with Imperial Bank of
California, effective through December 11, 1998; secured by
certain revenue earning vehicles; 2% of principal due monthly;
interest at prime plus
1.5% (10.00% at December 31, 1997) due monthly. 75,000
$3.65 million revolving line of credit, Nissan Motors Acceptance
Corporation, secured by revenue earning vehicles; 2% of
principal due monthly; interest at prime plus 2% (10.50% at
December 31, 1997) due monthly, no stated termination date. 0
-----------
$ 370,000
===========
Unused revenue earning vehicle lines of credit at December 31, 1997 were
approximately $7,280,000.
16
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 9 - NOTES PAYABLE AND OTHER DEBT
- -------------------------------------
Notes payable and other debt consist of the following as of December 31, 1997:
Subordinated notes payable; due May 31,
1999, interest due quarterly at 12% to
the extent cash flow is available $1,075,000
$2.0 million revolving line of credit effective through December
11, 1998; secured by certain pledged common shares of SCRS;
interest at prime plus 1.5% (10.00% at December 31, 1997)
due monthly. 600,000
Capital lease obligations. (Note 11) 75,000
Other; interest rates ranging from 10.5% to 12%,
maturing through 2010. 223,000
----------
$1,973,000
==========
The Subordinated notes payable above include all remaining subordinated notes
payable that were originally due May 31, 1997 but were extended to May 31, 1999
in accordance with covenant restrictions related to the $2.0 Million revolving
line of credit referenced above. In March 1998, accrued interest of $271,000 on
all outstanding subordinated notes was paid through December 31, 1996.
The Company has obtained a lender waiver in connection with a loan covenant
violation related to the above referenced $2.0 Million revolving line of credit.
There are no other covenant violations as of December 31, 1997.
Included in other is a $174,000 convertible debenture note payable to an officer
of the Company which is due on demand. Interest accrues at the rate of 12%.
Accrued interest at December 31, 1997 amounts to $166,000. The note can be
converted, at the holder's election, into 1,367,629 shares of $0.01 par value
common stock, based on the market value of the common stock on the date the note
was executed.
Under notes payable and other debt loan provisions in effect as outlined above,
principal payments due are as follows:
Year ending December 31:
1998 $ 971,000
1999 1,309,000
2000 13,000
2001 11,000
2002 3,000
Thereafter 36,000
-----------
$2,343,000
==========
17
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
- ---------------------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires that the Company disclose estimated
fair values for its financial instruments.
The carrying amount of receivables, deposits, accounts payable and accrued
liabilities approximates fair value as they are expected to be collected or paid
within 90 days of year end. The fair value of the Company's debt is estimated to
be equal to its carrying value and is based on quoted market prices for the same
or similar issues or on the current rates offered to the Company for debt of the
same remaining maturities.
Limitations
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument; they
are subjective in nature and involve uncertainties, matters of judgment and,
therefore, cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular instrument. Changes in assumptions
could significantly affect these estimates.
Since the fair value is estimated as of December 31, 1997, the amounts that will
actually be realized or paid at settlement or maturity of the instruments could
be significantly different.
18
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 11 - OBLIGATIONS UNDER CAPITAL LEASES
- ------------------------------------------
The Company has computer equipment, telephone equipment and vehicle service and
maintenance equipment under capital lease agreements, which expire in 1998
through 2001. The combined cost of the equipment is $225,000 and is included in
service equipment and computer software and equipment (Note 5). Accumulated
amortization totaled $100,000 as of December 31, 1997.
A summary of the present value of future minimum capital lease payments are as
follows:
Year ending December 31:
1998 $47,000
1999 21,000
2000 12,000
2001 8,000
-------
Total minimum capital lease payments 88,000
Less amount representing interest 13,000
-------
Present value of future minimum capital lease payments $75,000
=======
NOTE 12 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
- ------------------------------------------------------
In June 1994, Stratford American Car Rental Systems, Inc. ("SCRS") issued common
stock equal to 20% of the outstanding shares as consideration due under certain
loans obtained for use in the acquisition of the Dollar Rent A Car operations.
The Company owns 80% of the outstanding shares of SCRS.
NOTE 13 - COMMON STOCK OPTIONS
- ------------------------------
An option to purchase 3,000,000 shares of the Company's common stock was granted
to an officer of the Company in 1994. In March 1997, before the date of
expiration, the option to purchase all 3,000,000 shares was exercised for an
aggregate exercise price of $30,000.
Options to purchase 3,500,000 shares at .05 per share were granted to certain
Advisory Committee members in 1992. In September 1997, before the date of
expiration, options to purchase 1,000,000 of the 3,500,000 shares were exercised
for an aggregate exercise price of $50,000. As of December 31, 1997, options to
purchase 500,000 shares of the Company's common stock remain outstanding and
expire in September, 1999. Options totaling 2,000,000 shares have expired as of
December 31, 1997. There were no additional grants of stock options in 1995,
1996 or 1997.
19
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 14 - SALE OF DISCONTINUED OPERATIONS
- -----------------------------------------
In the fourth quarter of 1996, the Company sold its interest in Stratford
American Sports Corp. ("SASC"). Prior to the sale, the Company repurchased the
minority interest for a nominal amount, resulting in a capital contribution to
additional paid-in capital. The liquidation was finalized on December 30, 1996.
SASC has been accounted for as a discontinued operation and, accordingly, its
results of operations in 1996 are segregated in the consolidated financial
statements. Revenue and related income associated with the discontinued
operations are as follows:
Year ended December 31,
-----------------------
1996
----
Revenue $841,000
========
Income from discontinued operations $168,000
========
NOTE 15 - INCOME TAXES
- ----------------------
There was no income tax benefit associated with the net loss for the years ended
December 31, 1997 and 1996.
The following net operating loss and investment tax credit carryforwards are
available at December 31, 1997, to offset future taxable income and income taxes
as follows:
Year
expires Amount
------- ------
Net operating loss 2003-2010 $ 12,100,000
Investment tax credits 1998-2000 190,000
If certain substantial changes in the Company's ownership should occur, there
would be an annual limitation on the amount of the carryforwards which can be
utilized, which could potentially impair the ability to utilize the full amount
of the carryforward.
There are no deferred tax assets or liabilities reflected in the accompanying
Consolidated Balance Sheet as of December 31, 1997. The tax effect associated
with the types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that exist as of December 31,
1997 are as follows:
Property and equipment, due to differences
in depreciation $ (55,000)
Allowance for mining interest impairment 370,000
Net operating loss carryforwards and
investment tax credits 4,235,000
Other 86,000
----------
4,636,000
Valuation allowance (4,636,000)
----------
Net deferred tax asset $ 0
==========
The valuation allowance offsets the deferred tax asset due to the taxable losses
the Company has experienced in recent years. The valuation allowance increased
by $597,000 in 1997, but had no effect on net loss.
20
<PAGE>
STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 16 - LEASE COMMITMENTS
Stratford American Car Rental Systems, Inc., an 80% owned subsidiary of the
Company ("SCRS"), leases various facilities for its satellite and airport
operations for Dollar Rent A Car pursuant to operating leases with terms ranging
from month to month through ten years. The Phoenix Sky Harbor Airport location
is subject to the most significant lease, which requires minimum annual lease
payments of $1,150,000 and a maximum of 10% of specified airport revenues. SCRS
also leases its Dollar Rent A Car service facility pursuant to an operating
lease with an option to purchase. The lease expires in May 1999 and contains a
five year extension option. Total rental expense on all facilities was
$1,554,000 in 1997 and $1,720,000 in 1996.
The aggregate future minimum lease commitments under operating leases with
noncancelable terms in excess of one year are as follows:
Year ending December 31:
1998 $1,335,000
1999 1,262,000
2000 961,000
2001 2,000
----------
Total: $3,560,000
==========
21
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- --------------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
The Company has not changed its accountants nor had any
disagreements with accountants on matters of accounting principles or practices,
financial disclosures, or auditing scope or procedure in its two most recent
fiscal year audits.
PART III
ITEMS 9, 10, 11 AND 12
- ----------------------
The information called for by Part III (Items 9, 10, 11 and 12) is
incorporated herein by reference from the material included under the captions
"Elections of Directors," "Principal Shareholders," and "Executive Compensation"
in Stratford American Corporation's definitive proxy statement (to be filed
pursuant to Regulation 14A) for its Annual Meeting of Shareholders to be held
July 8, 1998 (the "1998 Proxy Statement"), except that the information regarding
executive officers called for by Item 401 of Regulation S-B is included in Part
I of this report on page 4. The 1998 Proxy Statement is being prepared and is
expected to be filed with the Securities and Exchange Commission in definitive
form on or about April 30, 1998 and is expected to be furnished to shareholders
on or about June 1, 1998.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
- -----------------------------------------------
(a) Financial Statements and Financial Statement Schedules - See "Item 7 -
Financial Statements and Supplementary Data" above.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the year ended
December 31, 1997.
(c) Exhibits - See index beginning on page 28
(d) Financial Statement Schedules - See "Item 7 - Financial Statements and
Supplementary Data."
22
<PAGE>
Signatures
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STRATFORD AMERICAN CORPORATION
Registrant
Date: March 31, 1998 By /s/ David H. Eaton
--------------------------------------
David H. Eaton, Chairman of the Board
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Date: March 31, 1998 By /s/ David H. Eaton
--------------------------------------
David H. Eaton, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: March 31, 1998 By /s/ Mel L. Shultz
--------------------------------------
Mel L. Shultz, President and Director
Date: March 31, 1998 By /s/ Gerald J. Colangelo
--------------------------------------
Gerald J. Colangelo, Director
Date: March 31, 1998 By /s/ Timothy A. Laos
--------------------------------------
Timothy A. Laos, Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
23
<PAGE>
EXHIBITS INDEX
Exhibits 27.1 through 27.3 are the only exhibits originally filed with this
report. The Company hereby incorporates all other exhibits by reference pursuant
to Rule 12b-32, each of which (except Exhibits 3.3, 10.11, 10.15 through 10.37)
was filed as an exhibit to the Company's Registration on Form 10 which was filed
July 22, 1988, and amended on October 7, 1988, and December 8, 1988. Exhibit 3.3
was filed with the Company's Registration Statement on Form S-1 on June 12,
1989, with the Securities and Exchange Commission. Exhibit 10.11 was filed as
Exhibit 10.30 to the 10-K for the four months ended December 31, 1988, which was
filed with the Securities and Exchange Commission on April 11, 1989. Exhibits
10.15 and 10.16 were filed as Exhibits 10.1 and 10.2 to the Company's Form 10-Q
for the Quarterly Period Ended June 30, 1990, which was filed on August 14,
1990, with the Securities and Exchange Commission. Exhibits 10.17 and 10.18 were
filed as Exhibits 10.44 and 10.46 to the Company's Registration on Form S-1
which was filed with the Securities and Exchange Commission on October 1, 1990,
and amended on November 8, 1990. Exhibit 10.19 was filed as Exhibit 10.1 to the
Company's Form 10-QSB for the Quarterly Period Ended September 30, 1993, which
was filed with the Securities and Exchange Commission on November 11, 1993.
Exhibits 10.20 through 10.23 were filed as Exhibits 1 through 4 to the Company's
Form 8-K which was filed with the Securities and Exchange Commission on June 14,
1994 and amended on August 9, 1994. Exhibit 10.21 was refiled as Exhibit 10.2 to
the Company's Form 10-QSB for the Quarterly Period Ended September 30, 1994,
which was filed with the Securities and Exchange Commission on November 15,
1994. Exhibit 10.24 was filed as Exhibit 10.44 to the Company's Form 10-KSB for
the year ended December 31, 1994, which was filed with the Securities and
Exchange Commission on April 14, 1995. Exhibit 10.25 was filed as Exhibit 10.1
to the Company's Form 10-QSB for the Quarterly Period Ended June 30, 1995, which
was filed with the Securities and Exchange Commission on August 14, 1995.
Exhibit 10.26 was filed as Exhibit 16.1 to the Company's Form 8-K which was
filed with the Securities and Exchange Commission on February 22, 1996. Exhibits
10.27 through 10.29 were filed as Exhibits 10.52 through 10.54 to the Company's
Form 10-KSB for the year ended December 31, 1995, which was filed with the
Securities and Exchange Commission on April 15, 1996. Exhibits 10.30 through
10.37 were filed as Exhibits 10.55 through 10.62 to the Company's Form 10-KSB
for the year ended December 31, 1996, which was filed with the Securities and
Exchange Commission on March 31, 1997. Exhibit 22.1 was filed with Form 10-KSB
for the year ended December 31, 1996, which was filed with the Securities and
Exchange Commission on March 31, 1997.
<TABLE>
<CAPTION>
Number Description Page
- ------ ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation N/A
3.2 By-laws N/A
3.3 Articles of Amendment to Articles of Incorporation N/A
4.1 Form of Common Stock Certificate N/A
4.2 Form of Series "A" Preferred Stock Certificate N/A
4.3 Article IV of the Articles of Incorporation N/A
4.4 Article III of the Bylaws N/A
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10.1 Indemnification Agreement, dated as of May 19, 1988,
between the Company and Mel L. Shultz N/A
10.2 Schedule of Omitted Indemnification Agreements N/A
10.3 Indemnification Agreement, dated as of February 19, 1988,
relating to guarantees N/A
10.4 Indemnification Agreement, dated as of May 10, 1988,
relating to guarantees N/A
10.5 Registration Agreement, dated as of February 19, 1988, N/A
10.6 Agreement, dated as of February 18, 1988, relating to
restrictions against preferred shares N/A
10.7 Trust Agreement, dated as of June 18, 1987 N/A
10.8 Joint Venture Agreement, dated as of July 2, 1985,
between Night Hawk Resources Corporation and
Cornwall Pacific Alaska, Inc. N/A
10.9 Settlement Agreement and Release, effective July 1, 1988 N/A
10.10 Settlement Agreement, dated as of July 18, 1988 N/A
10.11 Judgment in Action No. CB72760, dated September 13, 1988 N/A
10.12 Assignment of Joint Venture Interest N/A
10.13 Agreement made September 13, 1988, among Golden Zone
Zone, Inc., Cornwall Pacific Alaska, Inc., Stratford American
Resource Corporation, and Thor Gold Alaska, Inc. N/A
10.14 Share Sale and Registration Agreement, dated January 31, 1989 N/A
10.15 Joint Operating Agreement, dated February 1, 1988 N/A
10.16 Promissory Note, dated March 15, 1990 N/A
10.17 Stratford American Corporation Convertible Debenture
Note dated March 15, 1990 N/A
10.18 Agreement, dated as of July 24, 1990, with Minco American
Corporation N/A
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10.19 Master Loan Modification and Extension Agreement dated
September 28, 1993 N/A
10.20 Sale and Purchase Agreement between Stratford American Car
Rental Systems, Inc. and The John Douglas Corporation, Douglas
F. and Bette Jane Mitchell and John Rector, Jr. dated May 19, 1994 N/A
10.21 License Agreement between Dollar Systems, Inc. and Stratford
American Car Rental Systems, Inc. effective June 1, 1994 N/A
10.22 Promissory Note between Dollar Systems, Inc. and Stratford
American Car Rental Systems, Inc. effective June 1, 1994 N/A
10.23 Registrant's Press Release dated June 2, 1994 N/A
10.24 Assignment dated September 1, 1994 from Stratford American
Energy Corporation to Tenison Oil Company N/A
10.25 Assistance Agreement between Stratford American Car Rental
Systems, Inc. and Dollar Systems, Inc. dated May 16, 1995 N/A
10.26 Letter of Price Waterhouse LLP dated February 15, 1996 N/A
10.27 Continuing Guaranty from Stratford American Corporation
to Ford Motor Credit Company dated July 14, 1995 N/A
10.28 Guaranty Agreement from Stratford American Corporation
to Nissan Motor Acceptance Corporation dated August 9, 1995 N/A
10.29 Lease Plan Financing and Security Agreement between Stratford
American Car Rental Systems, Inc. and Nissan Motor Acceptance
Corporation dated August 9, 1995 N/A
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10.30 Credit Agreement by and among Stratford American Corporation,
Stratford American Car Rental Systems, Inc. and Imperial Bank,
dated December 11, 1996 N/A
10.31 Revolving Line of Credit Note by Stratford American Corporation
and Stratford American Car Rental Systems, Inc. to Imperial
Bank, dated December 11, 1996 N/A
10.32 Revolving Line of Credit Note by Stratford American Corporation
and Stratford American Car Rental Systems, Inc. to Imperial
Bank, dated December 11, 1996 N/A
10.33 Security Agreement by Stratford American Corporation and
Stratford American Car Rental Systems, Inc. to Imperial Bank,
dated December 11, 1996 N/A
10.34 Continuing Security Agreement by Stratford American Corporation
and Stratford American Car Rental Systems, Inc. to Imperial Bank,
dated December 11, 1996 N/A
10.35 General Pledge Agreement by Stratford American Corporation
to Imperial Bank, dated December 11, 1996 N/A
10.36 Subordination and Standstill Agreement by and among Stratford
American Corporation, Stratford American Car Rental Systems, Inc.
and Imperial Bank, dated December 11, 1996 N/A
10.37 Subordination Agreement by Dollar Rent A Car Systems, Inc. and
Imperial Bank, dated December 11, 1996 N/A
22.1 Subsidiaries N/A
27.1 Financial Data Schedule 28
27.2 Restated Financial Data Schedule for 12/31/96 29
27.3 Restated Financial Data Schedule for 12/31/95 30
</TABLE>
Note: Shareholders may obtain copies of Exhibits by making written request to
the Secretary of the Corporation and paying copying costs of $0.10 per page,
plus postage.
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1997 AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997
OF STRATFORD AMERICAN CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 168,000
<SECURITIES> 0
<RECEIVABLES> 891,000
<ALLOWANCES> 180,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,060,000
<PP&E> 683,000
<DEPRECIATION> 307,000
<TOTAL-ASSETS> 2,554,000
<CURRENT-LIABILITIES> 4,059,000
<BONDS> 0
0
0
<COMMON> 881,000
<OTHER-SE> (2,683,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,554,000
<SALES> 17,000
<TOTAL-REVENUES> 13,060,000
<CGS> 3,000
<TOTAL-COSTS> 12,704,000
<OTHER-EXPENSES> 974,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 581,000
<INCOME-PRETAX> (1,199,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,199,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,199,000)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996
OF STRATFORD AMERICAN CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 933,000
<SECURITIES> 0
<RECEIVABLES> 835,000
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 976,000
<PP&E> 631,000
<DEPRECIATION> 169,000
<TOTAL-ASSETS> 10,469,000
<CURRENT-LIABILITIES> 7,025,000
<BONDS> 0
0
0
<COMMON> 841,000
<OTHER-SE> (1,524,000)
<TOTAL-LIABILITY-AND-EQUITY> 10,469,000
<SALES> 9,000
<TOTAL-REVENUES> 12,862,000
<CGS> 4,000
<TOTAL-COSTS> 12,088,000
<OTHER-EXPENSES> 645,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 565,000
<INCOME-PRETAX> (436,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (436,000)
<DISCONTINUED> 168,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (268,000)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
<FN>
EPS - Primary and EPS - Diluted have been restated to reflect the adoption of
Financial Accounting Standards Board Statement No. 128, Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1995 AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995
OF STRATFORD AMERICAN CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,121,000
<SECURITIES> 0
<RECEIVABLES> 352,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 809,000
<PP&E> 471,000
<DEPRECIATION> 109,000
<TOTAL-ASSETS> 7,278,000
<CURRENT-LIABILITIES> 4,299,000
<BONDS> 0
0
0
<COMMON> 841,000
<OTHER-SE> (1,401,000)
<TOTAL-LIABILITY-AND-EQUITY> 7,278,000
<SALES> 890,000
<TOTAL-REVENUES> 12,425,000
<CGS> 687,000
<TOTAL-COSTS> 12,037,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 305,000
<INCOME-PRETAX> (576,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (576,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,402,000
<CHANGES> 0
<NET-INCOME> 2,826,000
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<FN>
EPS - Primary and EPS - Diluted have been restated to reflect the adoption of
Financial Accounting Standards Board Statement No. 128, Earnings Per Share.
</FN>
</TABLE>
