-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K3/Y/ovCL7aOCSgB3HdJnRQFiZF3ijrKMt4C3WspI3ndpANs456OSEBo/R64Y62R xNAqc1BTBNmjZ/p9iZgbRw== 0000912057-96-002311.txt : 19960216 0000912057-96-002311.hdr.sgml : 19960216 ACCESSION NUMBER: 0000912057-96-002311 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRATAMERICA CORP CENTRAL INDEX KEY: 0000810829 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 870368170 STATE OF INCORPORATION: UT FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15399 FILM NUMBER: 96517010 BUSINESS ADDRESS: STREET 1: 42-620 CAROLINE COURT STREET 2: GARDEN STE CITY: PALM DESERT STATE: CA ZIP: 92211 BUSINESS PHONE: 6197761010 MAIL ADDRESS: STREET 2: 1776 NORTH STATE STREET SUITE 130 CITY: OREM STATE: UT ZIP: 84057 10QSB 1 10QSB - COVER, 1-11 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended December 31, 1995 ------------------------------------------------ Commission file number 0-15399 ------------------------------------------- StratAmerica Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Utah 87-0368170 ------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 42-620 Caroline Court, Palm Desert, California 92211 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) (619) 776-1010 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, including area code) N/A - -------------------------------------------------------------------------------- Former Address from Previous Form 10-Q 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 such filing requirements for the past 90 days. Yes X No ----- ------ 10,000,000(1) Common Shares, $0.05 par value, were issued and outstanding as of February 1, 1996. Transitional Small Business Disclosure Format. Yes No X ----- ------ ____________________ (1) Calculated without reference to Regulation 240.13d-3. ITEM 1 - FINANCIAL STATEMENTS STRATAMERICA CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in Thousands) (unaudited)
December 31, March 31, ASSETS 1995 1995 ------ ------------ ---------- Current assets: Cash $ 1 $ 237 Restricted cash - 35 Trade accounts receivable 63 23 Interest receivable - related party - 15 Inventories 175 161 Prepaid expenses 345 75 -------- -------- Total current assets 584 546 Notes receivable - related party - 611 Property and equipment, net 1,005 1,204 Goodwill, net 303 550 Other assets 81 80 -------- -------- $ 1,973 $ 2,991 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 911 $ 765 Accrued liabilities 3,776 3,338 Current portion of long-term debt and capital lease obligations 1,200 1,872 Notes payable 2,673 2,193 Deferred franchise fees 85 120 Deposit 246 246 -------- -------- Total current liabilities 8,891 8,534 Long-term debt and capital lease obliga- tions, less current portion 252 417 Accumulated losses in excess of investment in unconsolidated subsidiary 121 121 Deferred revenue 378 378 Minority interest in consolidated susidiary 350 350 -------- -------- 9,992 9,800 -------- -------- Shareholders' equity: Common stock, $.05 par value - authorized 10,000,000 shares; 10,000,000 shares issued and outstanding 500 500 Capital in excess of par value 7,936 7,936 Accumulated deficit (16,455) (15,245) -------- -------- (8,019) (6,809) -------- -------- $ 1,973 $ 2,991 -------- -------- -------- --------
See notes to consolidated financial statements. -1- STRATAMERICA CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in Thousands, except per share amounts) (unaudited)
THREE MONTHS ENDED DECEMBER 31, 1995 1994 ------- ------- Revenues: Restaurant $ 2,719 $ 3,051 Retail 47 106 Franchise fees and royalties 196 152 Other - 4 Interest - - Equity in gain of unconsolidated subsidiary - 9 ------- ------- 2,962 3,322 ------- ------- Expenses: Restaurant cost of sales, excluding depreciation 1,786 1,936 Restaurant rent 304 318 Other restaurant occupancy and operating expense 443 647 Retail cost of sales 32 16 Retail operating expense 60 31 General and administrative expense 382 277 Depreciation and amortization 139 182 Interest 106 149 Loss on restaurant closure - - ------- ------- 3,252 3,556 ------- ------- Net loss $ (290) $ (234) ------- ------- ------- ------- Net loss per share $ (0.03) $ (0.02) ------- ------- ------- -------
See notes to consolidated financial statements. -2- STRATAMERICA CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in Thousands, except per share amounts) (unaudited)
NINE MONTHS ENDED DECEMBER 31, 1995 1994 ------- ------- Revenues: Restaurant $ 9,227 $10,468 Retail 191 186 Franchise fees and royalties 399 439 Other 1 40 Interest 63 136 ------- ------- 9,881 11,269 ------- ------- Expenses: Restaurant cost of sales, excluding depreciation 6,136 6,634 Restaurant rent 1,032 1,092 Other restaurant occupancy and operating expense 1,641 2,136 Retail cost of sales 128 40 Retail operating expense 153 70 General and administrative expense 1,174 1,077 Depreciation and amortization 468 595 Interest 359 511 Equity in loss of unconsolidated subsidiary - 11 Loss on restaurant closure - 641 ------- ------- 11,091 12,807 ------- ------- Net loss $(1,210) $(1,538) ------- ------- ------- ------- Net loss per share $ (0.12) $ (0.15) ------- ------- ------- -------
See notes to consolidated financial statements. -3- STRATAMERICA CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands) (unaudited)
NINE MONTHS ENDED DECEMBER 31, 1995 1994 ------- ------- Cash flows from operating activities: Cash received from customers $ 9,758 $11,194 Cash paid to suppliers and employees (9,928) (11,355) Interest received 63 579 Interest paid (359) (770) ------- ------- Net cash used by operating activities (466) (352) ------- ------- Cash flows from investing activities: Purchase of property and equipment (22) (45) Collection on notes receivable - 1,738 Other (2) (5) ------- ------- Net cash (used in) provided by investing activities (24) 1,688 ------- ------- Cash flows from financing activities: Principal payments on long-term debt and capital lease obligation (226) (2,128) Proceeds from borrowings 480 695 ------- ------- Net cash provided by (used in) financing activities 254 (1,433) ------- ------- Net decrease in cash (236) (97) Cash at the beginning of period 237 117 ------- ------- Cash at end of period $ 1 $ 20 ------- ------- ------- -------
(continued) See notes to consolidated financial statements. -4- STRATAMERICA CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands) (unaudited) (continued)
NINE MONTHS ENDED DECEMBER 31, 1995 1994 ------- ------- Net loss $(1,210) $(1,538) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 468 595 Equity in losses of subsidiary - 9 Change in assets and liabilities: Increase in receivables (40) (54) Increase in other receivables 15 443 Increase in inventories (14) (8) Increase in prepaid expenses (270) (177) Increase in accounts payable and accrued liabilities 584 384 Change in deferred revenue, deposits and other 1 (6) ------- ------- Net cash used by operating activities $ (466) $ (352) ------- ------- ------- -------
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: None. See notes to consolidated financial statements. -5- STRATAMERICA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - UNAUDITED FINANCIAL STATEMENTS: Information as of December 31, 1995 and for the three months and nine months ended December 31, 1995 and 1994 is unaudited. The information in the unaudited financial statements reflects all adjustments which are, in the opinion of management, necessary to a fair presentation of the financial statements so as not to be misleading. These adjustments are of a normal recurring nature. These financial statements are prepared in accordance with the requirements of Form 10-Q and consequently may not include all the disclosures normally required by generally accepted accounting principles or those normally made in the annual Form 10-K filing. Any required information omitted is either insignificant or is not applicable. NOTE 2 - LOSS PER SHARE: Loss per share amounts are based on the weighted average shares outstanding of 10,000,000 for the three months and nine months ended December 31, 1995 and 1994, respectively. NOTE 3 - INVENTORY: Inventory consists primarily of food and beverage inventories sold through its restaurant business. NOTE 4 - SALE OF SUBSIDIARY: During June 1995, the Company entered into a letter of intent to sell Shari's Franchise Corporation, a wholly-owned subsidiary, to Shari's Management Corporation. This transaction is subject to obtaining shareholder approval. NOTE 5 - COMMITMENTS AND CONTINGENCIES: The Company has guaranteed five store lease obligations of third party and former employee franchisees of Dreams Franchise Corporation, which are in default at December 31, 1995. The total future minimum lease payments related to the leases in default is approximately $750 at December 31, 1995. The Company has accrued for the estimated cost of settling these guarantees. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Total revenues for the nine months ended December 31, 1995 were $9,881,000 compared to $11,269,000 for the nine months ended December 31, 1994, representing a decrease of $1,388,000. This decrease is due primarily to a decrease in restaurant revenues of $1,241,000, resulting from a decrease in restaurant revenues at B.B. O'Briens, Inc. of $808,000 and a decrease in restaurant revenues at Shari's Franchise Corporation of $434,000 during the nine months ended December 31, 1995 compared to the nine months ended December 31, 1994. The decrease at Shari's Franchise Corporation is due to the October 1994 closure of a Shari's restaurant located in Palm Springs, California of $181,000 and the remaining decrease is due to overall sales decreases at existing restaurants. The decrease in restaurant revenues at B.B. O'Briens, Inc. is due to closure of this restaurant during July 1995. Franchise fees at Dreams Franchise Corporation were $55,000 less during the nine months ended December 31, 1995 compared to the nine months ended December 31, 1994 due to fewer franchise sales in 1995. Royalties during the nine months ended December 31, 1995 were $15,000 higher than the nine months ended December 31, 1994 due to increasing franchisee sales in 1995. Interest income during the nine months ended December 31, 1995 was $73,000 less than interest income during the nine months ended December 31, 1994 due to a decrease in related party loans receivable. Total expenses for the nine months ended December 31, 1995 were $11,091,000 compared to $12,807,000 for the nine months ended December 31, 1994, representing a decrease of $1,716,000. Restaurant cost of sales decreased by $498,000 during the nine months ended December 31, 1995 compared to the nine months ended December 31, 1994 due to the closure of the Shari's Franchise Corporation restaurant in Palm Springs, California and the B.B. O'Briens restaurant in Palm Desert, California, as well as decreases due to lower overall sales in the existing restaurants. The percentage of cost of goods sold has increased during the nine months ended December 31, 1995 to 66.5 percent from 63.4 percent during the same period in 1994 due to the non-variable labor costs included in cost of goods sold which do not decrease in the same ratio as decreases in sales. Occupancy costs decreased $90,000 as a result the restaurants which were closed, offset by an increase in occupancy costs of $30,000 in the existing restaurants caused by scheduled rent increases. Restaurant operating costs decreased $397,000 during the nine months ended December 31, 1995 when compared to the same period in 1994 due to the closure of the two restaurants and $84,000 due to a workers compensation premium refund received during 1995. Additionally, there was a loss on restaurant closure of $641,000 during the nine months ended December 31, 1994 and no similar -7- loss during the nine months ended December 31, 1995. The changes in revenues and expenses for the three months ended December 31, 1995 as compared to the three months ended December 31, 1994, reflect differences similar to the differences described above for the nine months ended December 31, 1995 and 1994. -8- LIQUIDITY AND CAPITAL RESOURCES At December 31, 1995, the Company had a working capital deficit of $8,307,000 compared to a working capital deficit of $7,988,000 at March 31, 1995. This increase in the working capital deficit of $319,000 is due primarily to the losses from operations for the nine months ended December 31, 1995. Management has relied primarily on borrowings from related parties to finance ongoing losses from operations but the Company cannot predict what additional financing, related party or other financing, may be available in the future, nor can it predict whether it can substantially improve its future results of operations. The failure of the Company to obtain additional sources of working capital and/or to substantially improve its results of operations will have a significant negative impact on the liquidity and capital resources of the Company and be detrimental to the Company's ongoing future operations. The Registrant has entered into a letter of intent to sell Shari's Franchise Corporation and the Registrant has closed the operations of B.B. O'Briens, Inc. While these transactions will improve working capital, they alone are insufficient to significantly impact the current working capital deficit. In the event that the Company is unable to sell Shari's Franchise Corporation, Shari's Franchise Corporation may file bankruptcy in an attempt to discharge its obligations under leases of poorly performing or closed restaurant locations and eliminate royalties payable to Shari's Management Corporation on Shari's restaurants. This process could result in significant cash requirements to settle damage claims and pay other costs of bankruptcy. -9- PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. On November 15, 1995, sixteen plaintiffs brought an action in the Superior Court in the State of California for the County of Sacramento against Shari's of Sacramento, Inc., a wholly owned subsidiary of Shari's Franchise Corporation, which is a wholly owned subsidiary of Registrant. The plaintiffs allege racial, color and/or age based discrimination at the restaurant located in Sacramento, California. The plaintiffs seek injunctive and declaratory relief, general damages in the amount of $1,000,000, statutory damages, punitive damages, attorney's fees and costs. Shari's of Sacramento denies liability and intends to defend the action. 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. None. -10- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIGNATURES StratAmerica Corporation - -------------------- ------------------------------------ Date President Sam Battistone - -------------------- ------------------------------------ Date Principal Financial Officer Dale E. Larsson -11- EX-27 2 EX-27 - FDS
5 1,000 3-MOS MAR-31-1995 DEC-31-1995 1 0 63 0 175 584 3,088 2,083 1,973 9,091 52 0 0 500 7,936 1,973 9,418 7,881 6,264 11,091 0 0 359 (1,210) 0 (1,210) 0 0 0 (1,210) (.12) 0
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