SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended:
3/31/96
Commissioner file number: 0-19852
GREAT AMERICAN HOTELS & RESORTS, INC.
(Exact name of small business issuer
as specified in its charter)
Georgia 58-1956846
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 Firestone Pointe, Suite 100, Duluth, Georgia 30155
(Address of principal executive offices)
(770) 476-3936
(Issuer's telephone number)
(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___ No _X_
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13, or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by court. Yes __ No __
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,712,090 shares of Class A Common Stock, no par value
200,000 shares of Class C Common Stock, no par value
78,500 shares of Series A Convertible Preferred Stock
as of August 14, 1996
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
GREAT AMERICAN HOTELS & RESORTS, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 (Unaudited) and JUNE 30, 1995
<CAPTION>
March 1996 June 1995
______________ ______________
<S> <C> <C>
ASSETS
CURRENT
Cash $ 169 $ 605
Restricted Cash 36 87
Accounts Receivable 28 54
Subscriptions Receivable 222
Prepaid Expenses 3
Note Receivable 208
Net Assets from Discontinued
Operations 158
______________ ______________
666 904
PROPERTY AND EQUIPMENT
Land 904 904
Office Building and Improvements 442 442
Hotel and Resort Rental Units 4,614 4,302
Furniture and Equipment 484 474
6,443 6,123
Accumulated Depreciation (344) (221)
______________ ______________
6,099 5,901
OTHER ASSETS
Prepayments and Deposits 196 30
Deposit on Limited Partnership 373 330
Organization Costs 8 7
Debt Issue Costs 89 89
Advances Receivable 1 80
Property and Equipment of Sale 1,687
______________ ______________
667 2,223
TOTAL ASSETS 7,431 9,028
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 175 246
Accrued Expenses (39) 159
Common Stock to be Issued 31
Current Portion of Long-Term Debt 410 342
Provision for Loss from
Discontinued Operations 133
______________ ______________
546 911
LONG-TERM DEBT (Less Current Portion) 4,969 6,258
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY (84) 95
TOTAL LIABILITIES 5,431 7,264
STOCKHOLDERS' EQUITY
Preferred Stock, no par value,
15,000,000 shares authorized,
none issued
Series A Preferred Stock, no par 704 662
value, 4,000,000 shares authorized,
77,500 issued and outstanding:
Liquidating value $19 per share
($775,000 in the aggregate)
Class A Common Stock subscribed, 291 27
net of direct cost of issuance of
$0 and $21,315 and subscriptions
receivable
Common Stock: 4,923 4,377
Class A, no par value; 20,000,000
shares authorized, 2,528,276 issued,
2,503,272 outstanding as of
March 31, 1996
Class B, no par value; 2,000,000
shares authorized; 0 issued
Class C, no par value; 2,000,000 100 100
shares authorized; 200,000 shares
issued and outstanding
Treasury Stock, 25,004 shares as of
March 31, 1996 and June 30, 1995
Additional Paid-in Capital 405 405
Accumulated Deficit (4,323) (3,707)
STOCKHOLDERS' EQUITY 2,000 1,764
TOTAL LIABILITIES AND EQUITY 7,431 9,028
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
GREAT AMERICAN HOTELS & RESORTS, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(Amounts in thousands)
<CAPTION>
Three months ended Nine months ended
March 31 March 31
__________________ _________________
1996 1995 1996 1995
______ ______ ______ ______
<S> <C> <C> <C> <C>
REVENUES
Rental $ 122 $ 177 $ 525 $ 457
Travel Agency 12 303 22 933
Securities Brokerage 0 169 0 478
Other Income 23 0 69
______ ______ ______ ______
157 648 616 1,868
OPERATING EXPENSES
Rental 225 210 742 571
Travel Agency 16 15 29 58
Securities Brokerage 0 81 0 217
Salaries and Wages
(excluding Travel Agency) 23 127 79 278
General and Administrative
(excluding Travel Agency) (47) 266 389 734
Depreciation and
Amortization 32 66 123 164
______ ______ ______ ______
INCOME(LOSS) FROM OPERATIONS (91) (118) (745) (154)
GAIN ON SALE OF PROPERTY 459 0 524 0
GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS 216 0 216 0
OTHER INCOME (EXPENSE) 0 4 (33) 6
MINORITY INTEREST IN INCOME
(LOSS) OF CONSOLIDATED
SUBSIDIARY (15) (14) 45 (15)
INTEREST INCOME (EXPENSE) (136) 0 (435) 0
NET INCOME (LOSS) 432 (128) (428) (163)
NET INCOME (LOSS) PER SHARE
OF COMMON STOCK $0.17 ($0.08) ($0.19) ($0.10)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUT-
STANDING DURING PERIOD 2,470 1,627 2,214 1,587
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
GREAT AMERICAN HOTELS & RESORTS, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(Amounts in thousands, except per share data)
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $ (428) $ (163)
Adjustments to reconcile net
loss to net cash used in continuing
activities:
Depreciation and Amortization 123 164
Stock issued for services and
settlement of claims 31 40
Minority interest in income (loss)
of consolidated subs. 45 15
Changes in operating assets and
liabilities, net of acquisitions
of businesses:
Decrease in Restricted Cash 51 7
(Increase)decrease in accounts
receivable, trade 26 (616)
(Increase)decrease in prepaid and
other current assets (3) (66)
(Increase)decrease in prepayments
and deposits (167) (31)
Increase in accounts payable (70) 29
Increase in accrued expenses (198) 169
NET CASH USED IN OPERATING ACTIVITIES (590) (451)
<PAGE>
INVESTING ACTIVITIES
Purchase and construction of pro-
perty and equipment (320) (953)
Gain on sale of stock in subsidiary 62
Payment of organization costs (1)
Payment of advances receivable 79
Payment on deposit from limited
partnership acquisition (43)
Proceeds from sale of HH units
(21 units) 524
Activities of discontinued opera-
tions, net 25
NET CASH USED IN INVESTING ACTIVITIES 264 (891)
FINANCING ACTIVITIES
Proceeds from Mortgage Notes pay-
able and long-term debt net of
debt issue costs 1,416
Principal payments on mortgage
notes payable and long-Term debt (1,221) (31)
Proceeds from issuance of Series
A preferred stock, net of stock
issuance costs 42 299
Proceeds from issuance of Class A
common stock, net of stock
issuance costs 546 18
Proceeds from Class A common stock
subscribed 264
Proceeds from subscription re-
ceivable 56
Payment of deferred debt offering
cost (96)
Proceeds from preferred stock
subscribed, net of costs and
dividend reserve 109
Increase in subscriptions receivable 222
Decrease in Goodwill 8
Other 37
NET CASH PROVIDED BY FINANCING
ACTIVITIES (110) 1,779
INCREASE(DECREASE) IN CASH AND CASH
EQUIVALENTS (436) 437
CASH AND CASH EQUIVALENTS, BEGINNING 605 19
CASH AND CASH EQUIVALENTS, ENDING 169 456
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
GREAT AMERICAN HOTELS & RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements do not include
all information and footnotes necessary for a fair presentation
of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles.
However, in the opinion of the Company, the financial statements
contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position
as of March 31, 1996, and the results of operations and changes
in cash flows for the periods then ended.
2. ORGANIZATION
Great American Hotels & Resorts, Inc. ("GAHR") was incorporated
under the laws of the State of Georgia on July 29, 1991. The
Company was formed for the purpose of engaging in the business of
purchasing, developing, and managing properties in the overnight
resort rental unit market in resort areas throughout the world.
Through December 31, 1992, the Company was considered to be in
the development stage. Since the quarter ended March 31, 1993,
the Company was no longer considered to be in the development
stage.
GAHR has five wholly-owned subsidiaries -- Great American Travel
Network, Inc. ("GATN"), Great American Casinos, Inc. ("GAC"),
Great American Resorts of Florida, Inc. ("GAROF"), The Great
American Honeymoon Resort, Inc. ("GAHR"), and Great American
Hotels & Resorts of Biloxi, Inc. ("GARB") (GAHR, GATN, GAC,
GAROF, GAHR and GARB shall collectively be referred to as the
"Company")
The accompanying balance sheet, statements of operations and cash
flows include the accounts of GAHR, GATN, GAROF, GAHR, GAC and
GARB.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fixed Assets - Property, improvements and equipment are recorded
at cost. Expenditures for repairs and maintenance are charged to
expense as incurred and additions and improvements that
significantly extend the lives of assets are capitalized. Upon
sale or other retirement of depreciable property, the cost and
accumulated depreciation are removed from the related accounts
and any gain or loss is reflected in operations. Depreciation is
calculated using the straight-line method over the estimated
useful lives of the depreciable assets ranging from five to
thirty-nine years.
Organization Costs - Organization costs include professional fees
relating to incorporating and organizing the Company. These
costs will be amortized over a five-year period.
Goodwill - Goodwill represents the excess of the purchase price
over the estimated fair market value of identifiable net assets
acquired through business combinations accounted for as a
purchase and is being amortized to expense over a five year
period.
Security Transactions - Security transactions, including the
resulting commission revenue and expenses, are recorded on a
trade-date basis.
Interest - The Company reports interest expense on its unsecured
notes and mortgage indebtednes as other income (expense). In
prior years, the Company reported interest expense on mortage
indebtedness as a general and administrative expense.
Income Taxes - Income taxes are computed based upon the
provisions of SFAS 109, Accounting for Income Taxes. Deferred tax
assets and liabilities are recognized for the estimated future
tax effects attributed to temporary differences between book and
tax bases of assets and liabilities and for carryforward items.
The measurement of current and deferred tax liabilities and
assets is based upon enacted tax law. Deferred tax assets are
reduced, if necessary, by a valuation allowance for the amount of
tax benefits that are not expected to be realized.
Net Gain/Loss Per Share of Common Stock - Net gain/loss per share
is computed by dividing the net gain/loss for the period by the
weighted-average number of shares of common stock outstanding
during the period. Common stock is considered outstanding upon
issuance of the certificates by the stock transfer agent. Common
equivalent shares from stock warrants were excluded from the
computation because their effect is antidilutive for the periods
presented.
4. ISSUANCE OF STOCK IN PRIVATE TRANSACTIONS
During the quarter ended March 31, 1996, the Company issued 5,016
shares of its Class A Common Stock in two transactions to settle
complaints from shareholders. In addition, the Company issued
27,550 shares of Class A Common Stock to settle an account
payable in the amount of $40,800.
5. OCALA HOLIDAY INN
On June 30, 1995, the Company entered into a Purchase Agreement
to acquire a 51% limited partnership interest and a 50% general
partnership interest in Landcom-Ocala, Ltd., a Florida limited
partnership ("Ocala"). In addition, the Company agreed to invest
additional funds to bring its limited partnership interest up to
85%. Ocala's principal asset consists of a Holiday Inn-
franchised hotel in Ocala, Florida, which has 272 rooms, a
restaurant, lounge, conference facilities and pool. Completion
of the transaction was conditional on all of the existing
partners in Ocala consenting to the transaction. However, four
limited partners, including one limited partner holding a
majority of the limited partnership interests in Ocala, did not
consent to the transaction, and therefore the Purchase Agreement
terminated. The Company is currently negotiating with the
majority limited partner regarding an acquisition by the Company
of an interest in Ocala, but any such acquisition would not be on
terms comparable to those contained in the June 30, 1995 Purchase
Agreement.
6. RENO HOTEL
On January 20, 1995, the Company acquired the Ramada Hotel and
Casino (formerly known as the Cheers Hotel and Casino) in Reno,
Nevada (the "Reno Hotel"), and simultaneously employed an
unaffiliated management company to manage the Reno Hotel.
Effective September 24, 1995, the Company terminated the
management company which managed the Reno Hotel. The Reno Hotel
is now managed by the Company's inhouse property division. The
management company has failed and refused to turnover certain
business and accounting records relating to the operation of the
Reno Hotel during the period of its management, and to provide
documentation to support certain expenditures which it made to
insiders of the management company on behalf of the Reno Hotel.
Accordingly, the Company has initiated legal action against the
management company and its principles.
On February 27, 1996, the Reno Hotel received verbal approval to
begin operating as a Ramada Inn franchisee, and began operating
as a Ramada Inn franchisee on that date. The Company recently
completed renovations to the inside of the Reno Hotel, including
the rooms, suites, common areas, and restaurant. The Company
plans to begin renovations to the outside of the Reno Hotel in
August 1996, which include new a stucco exterior and new signage.
The Company anticipates that the exterior renovation will take
about 60 days. Operating results from the Reno Hotel have
improved significantly since it began operating as a Ramada Inn
franchisee, and the company believes that completion of exterior
renovations and continued marketing efforts will result in
significantly improved operating results.
7. CLASSIC MERGER AND SPINOFF
On June 30, 1995, the Company and Casinos International, Inc.
("Casinos"), a former subsidiary of the Company, entered into an
Agreement and Plan of Share Exchange, as amended on September 6,
1995 and December 22, 1995, with Classic Restaurants
International, Inc. Under the Agreement, Casinos agreed to
acquire all of the issued and outstanding common stock of Classic
by issuing one share of its Class A Common Stock for each share
of Class A Common Stock and Class A Preferred Stock of Classic
and one share of its Class B Common Stock for each share of Class
B Common Stock of Classic. Simultaneously with the acquisition
of Classic, Casinos agreed to convey all of its interest in GAC
to the Company in return for the Company's common stock interest
in Casinos, cancellation of any intercompany claim and a mutual
release of liability. In addition, two directors of Casinos --
Dr. Edward L. Bates and M. James Herbic -- agreed to return any
shares of stock which they own in Casinos to Casinos for
cancellation as part of the transaction. The shareholders of the
Company and Classic approved the transaction on January 24, 1996,
and the transaction was consummated on January 31, 1996. As a
result of the transaction, the Company does not have any interest
in Casinos, but owns 100% ownership of the Reno Hotel through its
ownership of GAC. The Company reported a gain of $215,736 during
the quarter ended March 31, 1996 from the transaction.
8. CARAGH HOLDINGS AGREEMENT
The Company has agreed to sell up to 700,000 shares of Class A
Common Stock to Caragh Holdings, Ltd. for $3.20 per share at any
time until December 31, 1996. The agreement entered on September
13, 1995, as amended on October 6, 1995, originally contemplated
the purchase of certain undeveloped land in Ireland by the
Company for 950,000 Irish Pounds, which amount was payable in
150,000 Irish Pounds and 400,000 shares of Class A Common Stock
of the Company. The agreement also granted Caragh the option to
purchase up to 300,000 shares of Class A Common Stock for $3.20
per share at any time before December 31, 1996. The shares have
already been issued to the seller as an earnest money deposit,
but are subject to a restrictive legend which prevents the seller
from disposing of the shares until they are actually paid for.
Pursuant to an option contained in the agreement, the parties
have rescinded the agreement insofar as it relates to the
Company's purchase of land in Ireland, and agreed that Caragh may
purchase the 400,000 shares allocated to the purchase of land for
$3.20 per share at any time before December 31, 1996. As of
August 15, 1996, Caragh had paid the Company $610,674 in
consideration for such stock.
9. SHIPYARD PLANTATION
On March 20, 1993, the Company closed on the purchase of 23
cottages located within Shipyard Plantation, Hilton Head Island,
South Carolina. In August and September 1995, the Company
entered into contracts to sell 21 of the 23 cottages. The sales
prices are $107,000 each for 10 of the cottages and $112,925 each
for the other 11 cottages. Brokerage commissions and closing
costs are paid from the sales proceeds under each of the
contracts. The Company has closed on six of the contracts.
Closings are scheduled under the remaining seventeen contracts
through May 1996. Subsequently, the Company agreed to sell all
but one of the cottages for a total price of approximately
$1,778,000, payable $460,000 in cash, the assumption of the
existing first mortgage indebtedness on the cottages in the
approximate amount of $1,048,800, and a second mortgage on the
cottages in the amount of $207,500 which is payable in full with
interest at 8% per annum on June 27, 1996. In April 1996,
closing occurred under the contract effective March 15, 1996.
The Company recognized a capital gain from the disposition of 22
of the cottages in the approximate amount of $524,450. In August
1996, the Company sold the final cottage for $112,925, less
closing costs and brokerage commissions. The Company leased the
final cottage for nominal rent through December 1996 for use by
the Company's shareholders.
10. BROADWATER INN PURCHASE
On March 1, 1996, the Company entered into an Agreement of
Purchase and Sale of Real Property with BH Acquisition, Inc.,
under which the Company agreed to purchase a 219 room hotel known
as The Broadwater Inn, 1870 Beach Boulevard, Biloxi, Mississippi
39533. The Company intends to assign the Agreement to GARB. The
purchase price is $5.5 million, $4 million of which is payable in
cash, $500,000 of which is payable in the form of a promissory
note of the Company which is secured by a first mortgage on the
Company's Gatlinburg property, and a $1,000,000 of preferred
stock of GARB. The Agreement is subject to a number of
contingencies, including title acceptable to the Company, the
Company securing first mortgage financing in the amount of at
least $4 million, and an inspection of the property. The Company
was unable to obtain mortgage financing for the property by the
deadline set forth in the Agreement, and therefore the Agreement
was terminated. However, the seller has orally indicated that it
will still sell the property to the Company on the terms set
forth in the Agreement, and therefore the Company is still trying
to arrange financing to complete the purchase of the property.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Company's working capital at March 31, 1996, was $119,279, as
compared to ($7,302) at June 30, 1995. The increase in working
capital was primarily attributable to the proceeds from the
Company's sale of its cottages on Hilton Head Island, South
Carolina, the receipt of proceeds from the Company's sale of
stock to Caragh Holdings, Ltd., and the reduction in the
Company's accounts payable as the result of accounting
adjustments, offset by continued operating losses. The Company
anticipates having to raise additional funds through private
securities offerings to finance improvements to the Reno Hotel,
for general administrative expenses, and for other acquisitions
which the Company plans to make in the next six months.
Results of Operations
The Company reported income of 431,593, or $0.17 per share,
during the quarter ended March 31, 1996, as compared to a loss of
($128,197), or $0.08 per share, for the quarter ended March 31,
1995. During the quarter, the Company experienced significantly
lower rental revenues due to the sale of the Company's cottages
in Hilton Head Island, South Carolina, and the renovations being
made to the Reno Hotel. The Company lower than normal general
and administrative expenses due to accounting adjustments which
resulted in a significant reduction in the amount of the
Company's current liabilities. The Company continued to
experience operating losses at the Reno Hotel, and will continue
to experience additional losses until the planned renovations are
complete. The Company has moved to improve operations at the
Reno Hotel by changing management at the property, by making
renovations to the Property and by entering into agreement to
make the property a Ramada Inns franchisee as of February 27,
1996. During the quarter ended September 30, 1996, the Company
disposed of its securities brokerage subsidiary which had been
unprofitable. The travel agency segment experienced
significantly lower revenues as the result of the failure of a
major distributor to renew its agreement to market the company's
travel card in certain Asian markets.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On October 17, 1994, Vacation Invitations, Inc. ("VII") and
Kegley Travel Network, Inc. ("KTN"), which is affiliated with
VII, filed a lawsuit in the Superior Court of Gwinnett County,
State of Georgia, against GAHR, Schneider Securities, Inc., and
four present and former employees of the Company, Gayle A. Banes,
James Wilcox, Ed Bates and Robert Christian. The complaint
alleged that the defendants conspired to convert and did convert
confidential information from the plaintiffs, misappropriated
trade secrets of the plaintiffs, and tortiously interfered with
the business of the plaintiffs. The complaint sought damages in
excess of $1,000,000, as well as injunctive relief preventing the
defendants from using trade secrets of the plaintiffs and from
contacting any employee or distributor of the plaintiffs for any
reason. Subsequent to the filing of this lawsuit, VII and KTN
both filed for relief under the Chapter 11 of the Bankruptcy
Code, and a trustee was appointed in each of their cases. The
trustee subsequently abandoned the lawsuit to the plaintiffs. On
January 11, 1996, the plaintiffs voluntarily dismissed the action
with prejudice.
On or about November 15, 1995, the Company was sued by RRR, Inc.,
d/b/a MAXimum Resort Rentals, Inc. The plaintiff was retained by
the Company to manage the Company's cottages at Hilton Head
Island, South Carolina. See "Description of Property - Shipyard
Plantation, Hilton Head Island." The lawsuit alleges that the
Company breached its agreement with the plaintiff when the
Company entered into agreements to sell 21 of the cottages. The
lawsuit seeks actual damages of $3,000,000 plus unspecified
punitive damages. The Company believes the lawsuit is without
merit, and has filed a counterclaim seeking damages for the
plaintiff's breach of the agreement.
On February 26, 1996, eight plaintiffs, representing four
neighboring properties of the Company's rental property in
Gatlinburg, Tennessee, filed a lawsuit against the Company for
nuisance relating to runoff from the Company's property. The
lawsuit seeks $140,000 in damages. The Company believes that it
has sufficient insurance to cover any litigation costs or damages
which may be assessed against the Company in the lawsuit.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None.
(b) The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1996.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GREAT AMERICAN HOTELS & RESORTS, INC.
August 27, 1996 \s\Paul R. Smith
Date Paul R. Smith
Chief Operating Officer
August 27, 1996 \s\J. Gordon Lamb
Date J. Gordon Lamb
Chief Financial Officer
