SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-17018
STRATFORD AMERICAN CORPORATION
(Exact name of small business issuer as specified 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)
Issuer's telephone number, including area code: (602) 956-7809
(Former name, former address and former fiscal year,
if changed since last report.)
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 [ ]
At July 31, 2000, 6,371,787 shares of the issuer's common stock were issued and
outstanding.
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STRATFORD AMERICAN CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of June 30, 2000 3
Condensed Consolidated Statements of Operations for the three and
six months ended June, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
Signatures 11
2
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 2,197,000
Receivables:
Trade, less allowance for doubtful accounts of $2,000 8,000
Mortgage 46,000
------------
54,000
Oil and gas interests, net 32,000
Other assets 51,000
------------
$ 2,334,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 18,000
Notes payable and other debt 55,000
Accrued liabilities 41,000
------------
Total liabilities 114,000
Shareholders' equity:
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 6,371,787 shares 64,000
Additional paid-in capital 27,313,000
Retained earnings (deficit) (25,146,000)
Treasury stock, 1,967 shares at cost (11,000)
------------
2,220,000
------------
$ 2,334,000
============
See accompanying notes to condensed consolidated financial statements.
3
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
---------------------- ----------------------
June 30 June 30
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Interest and other income $ 29,000 $ 57,000 $ 70,000 $ 113,000
--------- --------- --------- ---------
EXPENSES:
General and administrative 170,000 185,000 354,000 318,000
Depreciation and depletion 5,000 7,000 11,000 15,000
Interest 2,000 9,000 4,000 20,000
Minority interest 1,000 2,000
--------- --------- --------- ---------
177,000 202,000 369,000 355,000
--------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS (148,000) (145,000) (299,000) (242,000)
DISCONTINUED OPERATIONS:
Loss from operations of Dollar Rent A Car (16,000)
Minority interest 3,000
--------- --------- --------- ---------
Loss from discontinued operations (13,000)
NET LOSS (148,000) (145,000) (299,000) (255,000)
========= ========= ========= =========
Basic and diluted net loss per share:
Loss from continuing operations (0.02) (0.02) (0.05) (0.04)
Loss from discontinued
operations (0.00)
--------- --------- --------- ---------
Basic and diluted net loss per share (0.02) (0.02) (0.05) (0.04)
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Loss from continuing operations $ (299,000) $ (242,000)
Adjustments to reconcile loss from continuing operations
to net cash used for continuing operating activities:
Depreciation and depletion 11,000 15,000
Minority interest in consolidated subsidiary 2,000
Changes in assets and liabilities:
Decrease in accounts and mortgages receivable 87,000 165,000
Decrease in other assets 16,000 14,000
Increase (decrease) in accounts payable (30,000) 6,000
Decrease in accrued liabilities (2,000) (109,000)
----------- -----------
NET CASH USED FOR CONTINUING OPERATING ACTIVITIES (217,000) (149,000)
----------- -----------
CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Redemption of minority interest (459,000)
Purchases of property and equipment (11,000)
----------- -----------
NET CASH USED FOR CONTINUING INVESTING ACTIVITIES (470,000)
----------- -----------
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Payments on notes payable and other debt (6,000) (238,000)
Proceeds from issuance of common stock 500,000
----------- -----------
NET CASH PROVIDED BY (USED FOR) CONTINUING INVESTING
ACTIVITIES (6,000) 262,000
NET CASH USED FOR DISCONTINUED OPERATIONS (30,000)
----------- -----------
NET DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS (693,000) 83,000
CASH AND CASH EQUIVALENTS, beginning of period 2,890,000 2,111,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period 2,197,000 2,194,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 3,000 $ 20,000
=========== ===========
Taxes paid during the period $ 82,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(unaudited)
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the financial
position as of June 30, 2000, and the results of operations and cash flows
for the six months ended June 30, 2000 and 1999. The accompanying condensed
consolidated financial statements and notes do not include all disclosures
considered necessary for a fair presentation in conformity with generally
accepted accounting principles. Therefore, it is recommended that these
accompanying statements be read in conjunction with the notes to
consolidated financial statements appearing in the Company's Form 10-KSB
for the year ended December 31, 1999.
2. The Company has no significant operations.
3. On October 1, 1998 (the "Closing Date"), Stratford American Car Rental
Systems, Inc. ("SCRS"), a subsidiary of the Company, sold its Phoenix
Dollar Rent A Car franchise to Dollar Rent A Car Systems, Inc., an Oklahoma
corporation ("Dollar"). In January 1999, Dollar and SCRS finalized all post
closing obligations between each party. In September 1999, SCRS and Dollar
reached an agreement whereby Dollar will retain a remaining $25,000
holdback as settlement for a $63,000 invoice from Dollar inadvertently
excluded from the final post close settlement in January 1999, as well as
any and all other claims.
On the Closing Date, SCRS exercised an option to purchase the property
which includes the Phoenix Dollar Rent A Car base operation facilities.
Simultaneously, Dollar entered into a long term lease with SCRS to utilize
the base operations. On December 29, 1999, the Company sold the leased
property at a price of $1,440,000.
The vehicle rental business of SCRS has been accounted for as a
discontinued operation in 1999 and, accordingly, its results of operations
and cash flows are segregated in the consolidated financial statements.
On February 14, 2000, the Company paid all minority interest holders of
SCRS 100% of their proportionate share of the outstanding minority interest
liability as of December 31, 1999, in exchange for 100% redemption of their
stock held in SCRS.
6
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STRATFORD AMERICAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(unaudited)
4. The Company calculates basic and diluted net income (loss) per share in
accordance with the provisions of Statement of Financial Accounting
Standards No. 128 "Earnings Per Share." Basic net income (loss) per share
is computed using the weighted average number of common shares outstanding
during each period (6,371,787 shares for both the three and six month
periods ended June 30, 2000 and 6,371,787 and 6,139,743 shares for the
three and six month periods ended June 30, 1999, respectively). Diluted net
loss per share is the same as basic net loss per share for the three and
six month periods ended June 30, 2000 and 1999 due to the antidilutive
effect of common stock equivalents on loss from continuing operations.
5. On March 26, 1999, 500,000 shares of the Company's common stock were issued
to certain private investors, at $1 per share.
6. General and administrative expenses for the first three months of 1999 were
allocated to discontinued operations in accordance with applicable revenue
generated and corporate resources utilized. Management believes this
allocation methodology is reasonable.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company incurred a consolidated loss from continuing operations for the
second quarter of 2000. The Company presently has no significant operations, and
expects such losses to continue unless and until the Company is able to make
profitable acquisitions. There can be no assurance that the Company will be able
to make such acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
As previously reported, Stratford American Car Rental Systems, Inc.
("SCRS"), a subsidiary of the Company, sold its rental car business to Dollar
Rent A Car Systems, Inc. ("Dollar") on October 1, 1998. In January 1999, Dollar
and SCRS finalized all post-closing obligations between each party. As provided
by the Post-Closing Statement agreement, $75,000 from a holdback fund was
remitted to SCRS with a remaining $25,000 related to any obligations, or
indemnities, to be held by Dollar until October 1, 1999. In September 1999, SCRS
and Dollar reached an agreement whereby Dollar will retain the remaining $25,000
holdback as settlement for a $63,000 invoice from Dollar inadvertently excluded
from the final post-close settlement in January 1999, as well as any and all
other claims.
On the same day that SCRS sold the rental car business, SCRS exercised an
option to purchase the property which includes the Phoenix Dollar Rent A Car
base operation facilities located near Sky Harbor International Airport.
Simultaneously, Dollar entered into a long-term lease with SCRS to utilize such
base operation facilities. On December 29, 1999, the Company sold the real
estate property for a price of $1,440,000, recognizing a gain on sale of real
estate totaling $826,000.
On February 14, 2000, the Company paid all minority interest holders of
SCRS 100% of their proportionate share of the outstanding minority interest
liability, totaling $459,000 as of December 31, 1999, in exchange for 100%
redemption of their stock held in SCRS.
On March 26, 1999, 500,000 shares of the Company's common stock were issued
to certain private investors, at $1 per share.
The Company anticipates that with its current cash position due to the sale
of the car rental business in 1998, the related sale of real estate property in
December 1999 and the sale of shares in March 1999, it should meet its
operational cash flow needs for the remainder of 2000. However, due to any
unforeseen circumstances that could occur outside the Company's control, there
can be no assurance that adequate cash flows from the Company's present cash
position and operations will be achieved.
The Company continues to aggressively seek potential acquisitions in
establishing its future direction. There can be no assurance that it will be
able to locate suitable acquisition candidates or make any such acquisitions, or
that any acquisitions that are made will be profitable for the Company.
RESULTS OF OPERATIONS - THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000,
COMPARED WITH THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999.
The Company reported a net loss of $148,000 and $299,000 during the three
and six month periods ended June 30, 2000, respectively, compared to a net loss
of $145,000 and $255,000 during the three and six month periods ended June 30,
8
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1999, respectively. The six month period results ended June 30, 1999 include a
net loss of $13,000 from discontinued operations, which primarily consists of
adjustments to previous estimates of discontinued operation expenses determined
upon final reconciliation of contractual obligations to and from Dollar upon
sale of the Dollar operations in October 1, 1998. Interest and other income
decreased from $57,000 and $113,000 during the three and six month periods ended
June 30, 1999, respectively, to $29,000 and $70,000 during the three and six
month periods ended June 30, 2000, respectively, primarily due to rental income
received on property leased to Dollar in 1999 as compared to no rental income
received in 2000 following the sale of the Phoenix Dollar Rent A Car facilities
property in December 1999. Interest expense decreased from $9,000 and $20,000
during the three and six month periods ended June 30, 1999, respectively, to
$2,000 and $4,000 during the three and six month periods ended June 30, 2000,
respectively, due to the significant reduction in debt from the sale of the
Phoenix Dollar Rent A Car facilities property in December 1999.
General and administrative expenses for the first three months of 1999 were
allocated to discontinued operations in accordance with proportionate revenue
generated and corporate resources utilized during that period of time.
Management believes this methodology is reasonable. There was no such allocation
in 2000. Total preallocated general and administrative expense for the first six
months of 1999 is $353,000, which includes $35,000 of general and administrative
expense allocated to discontinued operations in the first quarter of 1999.
OTHER ACTIVITIES
The Company sold its remaining significant real estate property in December
1999. The Company owns a nominal interest in several oil and gas wells in
Arkansas and Oklahoma that generate insignificant revenues. The Company has no
other interest in any oil and gas properties.
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.
9
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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: the fact that the Company, following the
sale of assets to Dollar, has no significant operations; the risk that the
Company will not be able to complete any profitable acquisitions to re-establish
significant operations; the risk that the Company will continue to recognize
losses from continuing operations unless and until the Company is able to make
profitable acquisitions; the risk that all of the foregoing factors or other
factors could cause fluctuations in the Company's operating results and 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.
PART II. OTHER INFORMATION
Responses to Items 1 through 5 are omitted since these items are either
inapplicable or the response thereto would be negative.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See index beginning on page 12
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
June 30, 2000.
10
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
STRATFORD AMERICAN CORPORATION
Registrant
Date: August 14, 2000 By /s/ Mel L. Shultz
------------------------------------------
Mel L. Shultz, President and Director
Date: August 14, 2000 By /s/ Timothy A. Laos
------------------------------------------
Timothy A. Laos, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
11
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EXHIBITS INDEX
Exhibit 27.1 is the only exhibit originally filed with this report. The Company
hereby incorporates all other exhibits by reference pursuant to Rule 12b-32,
each of which (except Exhibit 3.3) 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.
Number Description Page
------ ----------- ----
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
27.1 Financial Data Schedule - June 30, 2000 13
12
