SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 Commission File Number 0-29644
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SIERRA-ROCKIES CORPORATION
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(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0300193
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation ororganization)
2 North Cascade Avenue, Suite 330, Colorado Springs, Colorado 80903
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (719)520-1800
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) Yes ___
of the Securities Exchange Act of 1934 during the pre-
ceding 12 months (or for such shorter period that the No _X_
registrant was required to file such reports), and (2)
has been subject to such filing requirements for the
past 90 days.
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
Number of shares outstanding
Class at June 30, 1997
- ------------------------------- ----------------------------
Common stock, $.001 par value 17,393,048
shares ----------------------------
<PAGE>
FORM 10-Q
2nd QUARTER
INDEX
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PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements -
Balance Sheets - June 30, 1997 (Unaudited ........................ 3
Statements of Operations - Three months ended
June 30, 1997 and June 30, 1996 and Six months ended
June 30, 1997 and June 30, 1996 (Unaudited) ................... 4
Statement of Cash Flows - Six months ended
June 30, 1997 and June 30, 1996 (Unaudited) ...................... 5
Notes to Financial Statements (Unaudited) ........................ 6
Item 2. Management's Discussion and Analysis (Unaudited) ........ 8
PART II - OTHER INFORMATION
Items 1 through 6 ............................................... 9
SIGNATURES ....................................................... 10
- The accompanying financial statements are not covered by an independent
certified public accountant's report.
-2-
<PAGE>
Part I. Item 1. Financial Information
SIERRA ROCKIES CORPORATION
<TABLE>
<CAPTION>
Condensed Consolidated Balance Sheet
June 30, 1997
ASSETS
<S> <C>
Accounts Receivable - related Party ............................... $ 8,765
Cost in excess of billings on uncompleted contracts ............... 58,357
Total current assets 67,122
Land .............................................................. 2,150,000
Property & equipment, net ......................................... 5,999
Construction in progress .......................................... 14,836
Notes receivable - related party .................................. 1,476,266
Allowance for doubtful notes receivable ........................... (1,476,266)
-----------
Total assets $ 2,259,380
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable - trade .......................................... $ 307,885
Accounts payable - related party .................................. 240,000
Other, due to related party ....................................... 251,184
Billings in excess of costs on uncompleted contracts .............. 24,661
Notes payable - related party ..................................... 491,839
Notes payable ..................................................... 690,960
-----------
Total current liabilities 2,006,529
-----------
Convertible debentures ............................................ 20,000
Common stock ...................................................... 17,146
Additional paid in capital ........................................ 5,404,010
Deferred gain-transactions with parties under common control ...... 784,232
Costs in excess of net assets acquired-related party .............. (116,533)
Retained deficit .................................................. (5,383,663)
Current loss ...................................................... (472,341)
-----------
Total liabilities and shareholders' equity ........................ $ 2,259,380
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
SIERRA ROCKIES CORPORATION
<TABLE>
<CAPTION>
Condensed Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
---------- --------
1997 1996 1997 1996
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Construction contract revenues earned ........... $ 53,541 $ -0- $ 90,934 $ -0-
Cost of construction contract revenues earned ... 46,816 -0- 76,849 -0-
------------ --------
Gross profit .................................... 6,725 -0- 14,085 -0-
Operating Expenses
Management fees ............................ 120,000 80,000 240,000 80,000
General and administrative fees ............ 60,593 55,840 120,888 90,447
------------ ------------ ------------ --------
180,593 135,840 360,888 170,447
Loss from operations ............................ (173,868) (135,840) (346,803) (170,447)
Other Income (Expense)
Loss on equity investment-subsidiaries ... -0- (119,088) -0- (123,106)
Buyout of former president's mgmt contract (350,000) (350,000)
Interest expense ......................... (60,742) (51,124) (127,053) (95,055)
Interest income .......................... 16,431 33,098
Other, net ............................... (1,191) 500 1,515 871
------------ ------------ ------------ ------------
Loss before taxes ............................... (235,801) (639,121) (472,341) (704,639)
Income taxes .................................... -0- -0- -0- -0-
Net loss ........................................ $ (235,801) $ (639,121) $ (472,341) $ (704,639)
============ ============ ============ ============
Net loss per share .............................. $ (.01) $ (.04) $ (.03) $ (.05)
Weighted average shares outstanding ............. 17,393,048 15,516,681 17,393,048 15,516,681
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
SIERRA ROCKIES CORPORATION
<TABLE>
<CAPTION>
Condensed Consolidated Statements of Cash Flows
Six Months Ended
June 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows provided from operating activities ........ $ 33,272 $ 131,261
--------- ---------
Cash flows (used in)/provided by investing activities:
Proceeds from sale of property ................... -0- 150,000
Purchase of equipment ............................ (962) -0-
--------- ---------
Net cash (used in)/provided by investing activities .. (962) 150,000
--------- ---------
Cash flows used in financing activities
Debt refinancing costs ........................... (36,846) -0-
Debt repayments, net ............................. -0- (281,237)
Advances/repayments from/to related party, net ... 3,546 -0-
--------- ---------
Net cash used in financing activities ................ (32,310) (281,327)
--------- ---------
Net increase in cash ................................. -0- 24
Cash, beginning of year .............................. -0- 303
Cash, end of period .................................. -0- 327
========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
SIERRA ROCKIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1997
Note A: Basis of presentation
---------------------
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its annual 10-KSB report dated
December 31, 1996 and should be read in conjunction with the notes thereto.
The condensed consolidated statement of cash flows presented in the annual
10-KSB report dated December 31, 1996 was presented in accordance with Statement
of Financial Accounting Standard No. 95 "Statement of Cash Flows", using the
direct method versus the indirect method which management chose to present in
the interim financial statements for the six months ended June 30, 1997.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited.
Note B: Income taxes
------------
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Income tax benefit
due to continuing net operating losses during the quarter ended June 30, 1997
were offset by an increase to the valuation allowance, bringing the net deferred
tax asset balance to $0.
Note C: Related party transactions
--------------------------
Construction sales to Eclipse Corporation ("Eclipse"), an affiliate, for the six
months ended June 30, 1997 were approximately $90,000. Throughout the period,
advances of approximately $80,000 were received from Innercircle Group, Inc.
("IGI"), a corporation that provides management services to the Company. Total
management fees incurred and payable to IGI for the six months ended June 30,
1997 totalled $240,000.
Note D: Notes payable
-------------
The Company entered into a promissory note, face value of $690,960 with an
unrelated party, bearing interest at 15.5%, with interest payments of $8,924.90,
commencing February 14, 1997, due monthly, and principal and any unpaid interest
due February 14, 1998. This note replaced four notes payable to various
shareholders and affiliates totalling $662,000. Proceeds from the note, paid off
the related party notes and all accrued interest due as of date of
extinquishment.
6
<PAGE>
SIERRA ROCKIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1997
Note E: Going concern
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As shown in the accompanying financial statements, the Company has incurred
recurring losses from operations and has a deficit in working capital. As a
result, the Company has experienced severe liquidity problems and has been
forced to restructure a portion of its long-term debt. These factors raise
substantial doubt about its ability to continue as a going concern.
Management is working with its primary lenders to monitor the status of its
indebtedness and further restructuring of its long-term debt is expected. In
addition, management has commenced operations in the hospitality segment and is
currently evaluating plans to reduce staffing and other costs. Management is
also planning to commence collection efforts on certain related party notes
receivable.
There can be no assurance that management will be successful in its efforts to
restructure debt, reduce costs, operate profitably, or collect amounts due. If
the Company is unsuccessful in its efforts, it may be necessary to undertake
such other actions as may be appropriate to preserve asset value. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
7
<PAGE>
SIERRA-ROCKIES CORPORATION
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
GENERAL:
- --------
The Company's financial condition and results of operations are directly
affected by the following transactions.
On May 29, 1997, the Company's subsidiary, Sierra Hospitality Services, Inc.,
entered into a management contract with Barrington Hotel, Donald Schofield,
Robert Schofield and Jodie Wood to provide management services for The
Barrington Hotel located in Branson, Missouri. The hotel is a 149-room, limited
service hotel. Under the terms of a previous letter of intent, Sierra
Hospitality Services, Inc., began management of the hotel on June 1, 1997.
On June 9, 1997, the Company's subsidiary, Sierra Hospitality Services, Inc.,
entered into a management contract with Great Southern Bank FSB to provide
management services for Brighton Place Motel located in Branson, Missouri. The
motel is a 78-room, limited service motel. Sierra Hospitality Services, Inc.,
began management of the motel on June 11, 1997. Approximately $2,500 of
management fee income was earned as of June 30, 1997.
On May 28, 1997, the Board accepted the effective resignation of Raymond
Bouchard as a Director of the Corporation due to his non-participation in
corporate affairs.
The Company's construction subsidiary, Sierra-Rockies Development Corporation,
contributed $(173,868) to corporate operations during the quarter ending June
30, 1997. The construction subsidiary is a company specializing in the
installation of manufactured houses.
The Company is continuing to pursue its Wandering Star Hotel & Casino project
located in Cripple Creek, Colorado.
FINANCIAL CONDITION
- -------------------
The Company's financial condition remains unchanged from the previous report in
its March 31, 1997 Form 10-QSB.
The Company holds certain promissory notes secured by real estate in Cripple
Creek, Colorado, as a result of its sale of said property to Colorado Escrow,
Inc., in June of 1996. These promissory notes have previously been written down.
In June of 1997 the holder of the first mortgage upon said project commenced a
foreclosure, which resulted in the sale of said property at foreclosure sale on
June 18, 1997. The Company, by virtue of its secured position through deeds of
trust, holds an equity redemption upon said foreclosure which expires on or
about 9/22/97. Management has not determined whether to exercise its equity
redemption in order to reacquire said property.
8
<PAGE>
RESULT OF OPERATIONS:
- ---------------------
The Company incurred net (losses)/profits of $(235,801), and $(639,121) for the
three months ended June 30, 1997 and 1996, respectively.
PART II - OTHER INFORMATION
- ---------------------------
Item 1 Through 5 - No response required.
Item 6 - Exhibits and reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
- A Form 8-K was filed April 21, 1997 regarding a change in
Registrant's certifying accountant.
9
<PAGE>
SIGNATURE
Pursuant to 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.
SIERRA-ROCKIES CORPORATION
--------------------------
(Registrant)
DATE: 8/28/97 BY: /s/ Kenneth M. Cahill
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KENNETH M. CAHILL, PRESIDENT
DATE: 8/28/97 BY: /s/ J. Royce Renfrow
------------ -------------------------------------
J. ROYCE RENFROW, SECRETARY
DATE: 8/28/97 BY: /s/ James A. Humpal
------------ -------------------------------------
JAMES A. HUMPAL, TREASURER
Principal Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM SIERRA-ROCKIES CORPORATION AND IT
SUBSIDIARIES UNAUDITED BALANCE SHEET AS OF JUNE 30, 1997 AND
THE RELATED STATEMENT OF INCOME FOR THE NINE MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 8,765
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,122
<PP&E> 5,999
<DEPRECIATION> 696
<TOTAL-ASSETS> 2,259,380
<CURRENT-LIABILITIES> 2,006,529
<BONDS> 0
0
0
<COMMON> 17,146
<OTHER-SE> 215,705
<TOTAL-LIABILITY-AND-EQUITY> 2,259,380
<SALES> 90,934
<TOTAL-REVENUES> 90,934
<CGS> 76,849
<TOTAL-COSTS> 437,737
<OTHER-EXPENSES> (1,515)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127,053
<INCOME-PRETAX> (472,341)
<INCOME-TAX> 0
<INCOME-CONTINUING> (472,341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (472,341)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
