<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washimgton, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Quarterly Period Ended September 30, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commissioner file number: 0-19852
GREAT AMERICAN HOTELS & RESORTS, INC.
(Name of small business issuer in its charter)
Georgia 58-1956846
(State or other jurisdiction of (IRS employer identification number)
incorporation or organization)
3300 Holcomb Bridge Road, Suite 290, Norcross, Georgia 30092
(Address of principal executives' offices) (Zip code)
(770) 798-8500
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Title of Class: Class A Common Stock, no par value.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
Yes No X
-------- --------
The registrant had 3,510,571 shares of common stock outstanding as of
February 28, 1998.
1
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GREAT AMERICAN HOTELS AND RESORTS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Part I. Financial Information Page No.
--------
Item 1. Condensed Consolidated Financial Statements
Consolidated Balance Sheets -- 3
September 30, 1996 (unaudited) and June 30, 1996
Consolidated Statements of Income -- 5
Three Months Ended September 30, 1996 (unaudited) and 1995
Consolidated Statements of Cash Flow -- 6
Three Months Ended September 30, 1996 (unaudited) and 1995
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition 10
And Results of Operations
Part II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GREAT AMERICAN HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1996 (unaudited) and June 30, 1996
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 245,021 $ 513,199
Restricted cash 0 38,188
Note receivable 0 206,859
Stock subscription receivable 229,326 229,326
Deposits 0 236,601
Accounts receivable 157,205 43,436
Property and equipment held for sale 0 89,730
------------------ -------------
TOTAL CURRENT ASSETS 631,552 1,357,339
Property and Equipment:
Land 1,981,066 884,981
Resort rental units 4,544,925 4,440,030
Furniture and equipment 605,935 599,925
Office building and improvements 441,715 441,715
------------------ -------------
Accumulated depreciation (506,901) (441,142)
------------------ -------------
NET PROPERTY AND EQUIPMENT 7,066,740 5,925,509
Other assets:
Deferred acquisition costs 573,324 513,322
Debt issue costs, net 120,300 139,866
Prepayments and deposits 4,628 8,817
------------------ -------------
TOTAL OTHER ASSETS 698,252 662,005
------------------ -------------
TOTAL ASSETS $8,396,544 $7,944,853
------------------ -------------
</TABLE>
3
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GREAT AMERICAN HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1996 (unaudited) and June 30, 1996
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 424,724 $ 288,714
Accrued expenses 59,107 112,593
Common stock to be issued 180,579 0
Current maturities of long term debt 780,403 671,232
------------------ -----------
TOTAL CURRENT LIABILITIES 1,444,813 1,072,539
Long term debt less current maturities 6,053,695 5,356,138
----------------- -----------
TOTAL LIABILITIES $ 7,498,508 $ 6,428,677
----------------- -----------
Stockholders' equity:
Preferred stock, no par value,
16,000,000 shares authorized, none issued -- --
Series A preferred stock, no par value,
4,000,000 shares authorized, 81,000 issued
and outstanding, liquidation value of
$10 per share 761,935 766,680
Common stock Class A, no par value,
20,000,000 shares authorized, 2,623,519
issued, 2,598,515 outstanding 5,569,181 5,565,538
Common stock Class B, no par value,
10,000,000 shares authorized, none issued -- --
Common stock Class C, no par value,
2,000,000 shares authorized, 200,000 issued
and outstanding 100 100
Treasury stock, 25,004 shares, at cost -- --
Additional paid in capital 250,875 211,875
Accumulated deficit (5,684,055) (5,028,017)
-------------- ----------
TOTAL STOCKHOLDERS' EQUITY 898,036 1,516,176
-------------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,396,544 $ 7,944,853
-------------- -----------
</TABLE>
4
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GREAT AMERICAN HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 1996 (unaudited) and 1995
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
REVENUES
Rental $ 246,959 $ 231,815
Travel agency 28,158 6,169
Other income 18,031 24,291
---------- ----------
293,148 262,275
OPERATING EXPENSES
Rental 309,191 230,042
Travel agency 28,746 (1,134)
Salaries & wages * 61,870 36,900
General & administrative * 238,163 325,437
Depreciation & amortization 85,381 45,301
---------- ----------
723,351 636,546
INCOME (LOSS) FROM OPERATIONS (430,203) (374,271)
GAIN (LOSS) ON THE SALE
OF PROPERTY (70,751) 52,074
OTHER INCOME (EXPENSE) 0 0
MINORITY INTEREST IN LOSS
OF CONSOLIDATED SUBSIDIARY 0 32,719
INTEREST INCOME (EXPENSE) (139,860) (153,406)
---------- ----------
NET INCOME (LOSS) ($640,814) ($442,884)
---------- ----------
NET INCOME (LOSS) PER SHARE
OF COMMON STOCK ($0.24) ($0.27)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING PERIOD 2,684,999 1,660,990
</TABLE>
* Excludes travel agency
5
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GREAT AMERICAN HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOW
For the Three Months Ended September 30, 1996 (unaudited) and 1995
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($640,814) ($442,884)
Adjustments to reconcile net loss to
cash used by operating activities:
Depreciation and amortization 85,381 45,301
Stock issued for services and settlements 12,643 --
Minority interest in loss of
Consolidated subsidiary -- 32,719
Loss on the sale of property held for sale 70,751 --
Changes in operating assets and liabilities:
(Inc) dec. in accounts receivable 93,090 (18,170)
(Inc) dec. in prepaid and other 19,566 (6,958)
(Inc) dec. in accounts payable 136,010 42,414
(Inc) dec. in accrued expenses (53,486) 24,235
---------- ---------
NET CASH USED IN
OPERATING ACTIVITIES (276,859) (323,343)
INVESTING ACTIVITIES:
Purchase and construction of property
and equipment (1,206,990) (80,949)
Proceeds from sale of property and
equipment held for sale 21 43,578
Payment of organization costs -- (655)
Payment of advances receivable -- (249,000)
Proceeds (payments) on deposits 180,790 (82,585)
---------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (1,026,179) (369,611)
</TABLE>
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GREAT AMERICAN HOTELS & RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOW
For the Three Months Ended September 30, 1996 (unaudited) and 1995
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
FINANCING ACTIVITIES:
Change in restricted cash 38,188 (6,292)
Proceeds from mortgage notes payable and
long term debt, net of debt-issue costs 900,500 --
Principal payments on mortgage notes
payable and long term debt (93,772) (339,896)
Proceeds from issuance of Series A Preferred
Stock, net of issue costs -- 41,945
Proceeds from issuance of Class A Common
Stock, net of issue costs 184,222 --
Proceeds from subscription receivable -- --
Increase in subscriptions receivable -- 382,500
Other 5,722 (10,020)
---------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,034,860 68,237
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (268,178) (624,717)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 513,199 604,923
---------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 245,021 ($19,794)
---------- --------
</TABLE>
7
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GREAT AMERICAN HOTELS & RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 (unaudited)
1. PRESENTATION OF INTERIM FINANCIAL INFORMATION
In the opinion of the management of Great American Hotels & Resorts, Inc.
and subsidiaries (the "Company"), the accompanying "unaudited" consolidated
financial statements include all normal adjustments considered necessary to
present fairly the financial position as of September 30, 1996, and the results
of operations for the three months ended September 30, 1996 and 1995, and cash
flows for the three months ended September 30, 1996 and 1995. Interim results
are not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10Q, and do not contain certain information included in the
Company's audited consolidated financial statements and notes for the fiscal
year ended June 30, 1996.
2. ORGANIZATION
Great American Hotels & Resorts, Inc. ("GAR") 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 market in areas throughout the world.
The accompanying financial statements include the accounts of Great American
Hotels & Resorts, Inc. and its six wholly owned subsidiaries: Great American
Honeymoon Resorts, Inc., Great American Travel Network, Inc., Great American
Resorts of Florida, Inc., Great American Casinos, Inc., Great American Resorts
of Biloxi, Inc. and Gold Coast Security Trust Properties, Inc. All significant
intercompany balances, transactions and stockholdings have been eliminated.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS--For purposes of the statements, the Company
considers all money market accounts and highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT--Property, improvements and equipment are recorded at
cost. Expenses for repairs and maintenance are charged to expense as incurred
and additions and improvements that significantly extend the lives of assets are
capitalized. Upon the sale or other retirement of depreciated property, the
costs and accumulated depreciation are removed from the related accounts and any
gain or loss is reflected in operations.
Depreciation is provided using the straight line and accelerated methods
based upon the useful lives of the depreciable assets ranging from five to
thirty nine years.
DEFERRED ACQUISITION COSTS--Deferred acquisition costs include professional
fees and other direct costs related to the evaluation of prospective property
acquisitions. If the acquisitions are completed, the costs are included as
property costs. If a prospective property is not acquired, the costs are
expensed.
DEBT ISSUE COSTS--Debt issue costs represent the direct costs of issuing
debt securities. These costs are amortized over the term of the related
debt.
INCOME TAXES--The Company accounts for incomes taxes under Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"). Temporary differences
are differences between the tax basis of
8
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assets and liabilities and their reported amounts in the financial statements
that will result in taxable or deductible amounts in future years.
NET LOSS PER SHARE OF COMMON STOCK--Net loss per share is computed by
dividing the net loss after deducting preferred stock dividends for the period
by the weighted average number of shares of common stock outstanding during the
period.
4. STOCK SUBSCRIPTION RECEIVABLE
The Company issued 400,000 shares of Class A common stock to Caragh Holdings
during August 1995 as a deposit on the purchase of a parcel of land. Such
purchase was later cancelled by mutual consent of the parties. Caragh Holdings
may purchase the shares by paying $2.00 per share to the Company until December
31, 1997, at which time any non-purchased shares will be returned to the
Company. In related agreements, Caragh Holdings agreed to purchase an
additional 300,000 shares of Class A common stock, 200,000 for $3.20 per share
and 100,000 for $2.00 per share or $840,000. The Company issued the 300,000
shares of stock to Caragh Holdings in September 1995 and has received $610,674
from Caragh Holdings towards the subscription. As of September 30, 1996, the
Company had recorded a $229,326 stock subscription receivable.
5. SUBSEQUENT EVENTS
During September 1996, the Company formed a wholly owned subsidiary, Gold
Coast Security Trust Properties, Inc. ("Gold Coast"), a Florida corporation. In
a private placement, Gold Coast offered to sell 1,000 shares of its Class A 20%
cumulative participating preferred shares for $1,000 per share. Through February
28, 1998, Gold Coast had sold 940 shares for gross proceeds of approximately
$939,768.
On May 1, 1997, Gold Coast acquired a 65% interest in the issued and
outstanding stock of Jacjon, Inc. ("Jacjon"), a Florida corporation. The
remaining 35% interest was acquired by an outside investor. The purchase price
was $1,261,617 in cash, $3,233,090 in mortgage and notes payable and $396,000 in
acquisition costs. Jacjon owns the 229 room Days Inn / Super 8 and the attached
restaurant in Vero Beach, Florida. The acquisition was recorded using the
purchase method of accounting by which the assets are valued at fair market
value at the date of acquisition. The purchase price allocation is as follows:
<TABLE>
<CAPTION>
<S> <C>
Land $ 671,347
Buildings 3,790,246
Furniture, fixtures, etc. 276,214
Other assets 152,900
----------
$4,890,707
</TABLE>
In June 1997, the Company formed a majority owned subsidiary, Orlando
Security Trust, Ltd. ("Orlando"). The Company owns 74.25% of the limited partner
interest and 100% of the general partner interest for a total ownership
percentage of 75.25%. On June 27, 1997, Orlando purchased 100% of the issued and
outstanding shares of ASIG, Inc. ("ASIG"), a Florida corporation. ASIG owns the
56 room Ramada Limited in Orlando, Florida. The purchase price was $479,388 in
cash, $1,979,651 in mortgage and notes payable and $242,789 in acquisition
costs. The acquisition was recorded using the purchase method of accounting by
which the assets are valued at fair market value at the date of acquisition. The
purchase price allocation is as follows:
<TABLE>
<CAPTION>
<S> <C>
Land $ 354,263
Buildings 2,025,116
Furniture, fixtures, etc. 264,375
Other assets 58,074
---------
$2,701,828
</TABLE>
9
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 1996 was a deficit of
($813,261) as compared to a surplus of $284,800 for the year ended June 30,
1996. Contributing to the reduction working capital was the Company's net loss
for the period of ($640,814) which was only partially offset by other factors
affecting working capital, accounts receivable, accounts payable, deposits, etc.
In addition, during September 1996, the Company purchased land in Hawaii, which
required a cash outlay of approximately $160,000 and resulted in an increase of
current debt of $167,000. The Company anticipates having to raise additional
funds through private securities offerings to finance its operations, meet
delinquent obligations (See Part II, Item 3, Defaults Upon Senior Securities)
and carry out its business plan, which includes future acquisitions.
RESULTS OF OPERATIONS
For the quarter ended September 30, 1996, the Company incurred losses from
continuing operations of ($570,063) and a loss on sale of property of ($70,751)
for a total net loss of ($640,814). Rental revenues totaled $246,959, an
increase of 6.5% over the prior year. Though the Company lost room-nights as a
result of the sale of the Hilton Head cottages, renovations in Reno were moving
toward completion adding capacity in the hotel. The Company continues to
recognize operating losses from the Reno property and is currently making
changes to management, marketing strategies and other areas in an attempt to
enhance the performance of the hotel. Salaries and wages increased
significantly over prior year as the Company employed two professionals to
assist with future acquisitions. Depreciation expense increased as a result of
new depreciation charges on the completed renovations to the Reno property.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On November 17, 1995, RRR, INC. d/b/a MAXimum Resort Rentals, Inc., filed a
lawsuit in the Beauford County, South Carolina against the Company. The
plaintiff was retained by the Company to manage the Company's cottages (sold
fiscal 1996) located in Hilton Head, South Carolina. The lawsuit alleges that
the Company breached its agreement with the plaintiff when the Company entered
into agreements to sell the cottages. The lawsuit seeks actual damages of
$3,000,000 plus unspecified punitive damages. The Company believes this lawsuit
is without merit and intends to defend it vigorously. The Company is currently
in the deposition process and expects the matter to go to trial within the next
90 days. The Company has counterclaimed for $110,000.
ITEM 2 - CHANGES IN SECURITIES
None.
10
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ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
As of February 28, 1998, the Company was delinquent on interest payments
amounting to $155,994, dividend payments on preferred stock of $180,410 and
principal payments on notes to individuals totaling $924,549.
<TABLE>
<CAPTION>
Due Date Principal Obligation
-------- --------------------
<S> <C>
06/30/96 $ 11,000
02/06/97 20,000
03/17/97 6,000
04/04/97 63,000
05/31/97 23,000
06/30/97 94,333
08/30/97 12,000
12/01/97 20,000
12/31/97 523,216
01/31/98 142,000
02/16/98 10,000
--------
Total $924,549
--------
</TABLE>
The Company intends to renegotiate all past due amounts. The Company has
successfully negotiated with several of the individual noteholders to extend and
arrange payment plans.
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
Exhibits - None.
The Company did not file any reports on form 8-K during the quarter ended
September 30, 1996.
11
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused the report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREAT AMERICAN HOTELS AND RESORTS, INC.
Date: By:
------------------- ------------------------------------
Edward L. Bates, President
Date: By:
------------------ -------------------------------------
David T. Potts, Chief Operating
Officer
Date: By:
------------------ ------------------------------------
Rob A. Turner, Chief Financial
Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 245,021
<SECURITIES> 0
<RECEIVABLES> 386,531
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 631,552
<PP&E> 7,573,641
<DEPRECIATION> 506,901
<TOTAL-ASSETS> 8,396,544
<CURRENT-LIABILITIES> 1,444,813
<BONDS> 0
0
761,935
<COMMON> 5,569,181
<OTHER-SE> (5,433,080)
<TOTAL-LIABILITY-AND-EQUITY> 8,396,544
<SALES> 275,117
<TOTAL-REVENUES> 293,148
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 794,102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,860
<INCOME-PRETAX> (640,814)
<INCOME-TAX> 0
<INCOME-CONTINUING> (640,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (640,814)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> 0
</TABLE>
