**INDEX**


UNITED
STATESSECURITIES AND EXCHANGE COMMISSION
 **Washington,
D.C. 20549**
 ____________
 
 **FORM
10-QSB**
 (Mark
One)
  x
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended **March 31,
      2005**o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934For 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.
      Employerincorporation
      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 o
 11,078,105
shares of the issuer’s common stock, par value $.01 per share, were issued and
outstanding at the close of business on April 30, 2005.
 
 Transitional
Small Business Disclosure Format (check one):  Yes o No x
 
  **INDEX**
  **STRATFORD AMERICAN CORPORATION**
 
 **INDEX**
 
 
 PagePART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTS
    
    3Consolidated Balance Sheet as of March 31, 2005
      (unaudited)
    
    3Consolidated Statements of Operations for the three
      months ended March 31, 2005 and 2004 (unaudited)
    
    4Consolidated Statements of Cash Flows for the three
      months ended March 31, 2005 and 2004 (unaudited)
    
    5Notes to Consolidated Financial Statements
      (unaudited)
    
    6ITEM 2.
    
    MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    12ITEM 3.
    
    CONTROLS AND PROCEDURES
    
    15PART II.
    
    OTHER INFORMATIONITEM 6.
    
    EXHIBITS
    
    16SIGNATURES
    
    17
  2
 **INDEX**
  **PART I.   FINANCIAL INFORMATION**
 
 **ITEM 1.  FINANCIAL STATEMENTS**
 
 **STRATFORD AMERICAN CORPORATION AND
SUBSIDIARIES**
 **CONSOLIDATED
BALANCE SHEET**
 **March
31, 2005**
 (unaudited)
  **ASSETS**Cash
      and cash equivalents
    
    $
    6,586,000Receivables:Oil
      and gas
    
    
    153,000Related
      party
    
    
    14,000Other
    
    
    20,000Oil
      and gas interests, net
    
    
    1,230,000Other
      assets
    
    
    126,000$
    8,129,000**LIABILITIES
      AND SHAREHOLDERS’ EQUITY**Accounts
      payable
    
    
    107,000Accrued
      liabilities
    
    
    72,000Net
      liabilities of discontinued operations
    
    
    368,000Minority
      interest
    
    
    76,000Total
      liabilities
    
    
    623,000Commitments
      and contingencies (See Note 6)
    
    
    0Shareholders’
      equity:Non-redeemable
      preferred stock, par value $.01 per share; authorized 50,000,000 shares,
      none issuedCommon
      stock, par value $.01 per share; authorized 100,000,000 shares; issued and
      outstanding 11,078,105 shares
    
    
    111,000Additional
      paid-in capital
    
    
    28,511,000Accumulated
      deficit
    
    
    (21,105,000
    )Treasury
      stock, 1,967 shares at cost
    
    
    (11,000
    )7,506,000$
    8,129,000
 
 See
accompanying notes to consolidated financial statements.
 3
 **INDEX**
  **STRATFORD AMERICAN CORPORATION AND
SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF OPERATIONS**
 (unaudited)
 
 **For
      the three months ended**
      **March
      31,**
    ********
    ****
    **2005**
    ****
    **2004**REVENUES:Oil
      & gas revenue
    
    $
    269,000
    
    $
    183,000Interest
      and other income
    
    
    39,000
    
    
    2,000308,000
    
    
    185,000EXPENSES:General
      and administrative
    
    
    139,000
    
    
    141,000Depreciation,
      depletion and amortization
    
    
    78,000
    
    
    74,000Oil
      & gas operations
    
    
    72,000
    
    
    64,000289,000
    
    
    279,000Income (loss) from continuing operations before income
      taxes
    
    
    19,000
    
    
    (94,000
    )Income
      tax expense
    
    
    0
    
    
    1,000Income
      (loss) from continuing operations
    
    
    19,000
    
    
    (95,000
    )DISCONTINUED
      OPERATIONS:Income
      from operations
    
    
    —
    
    
    105,000Minority
      interest share of net income
    
    
    —
    
    
    (19,000
    )Income
      from discontinued operations
    
    
    —
    
    
    86,000Net
      income (loss)
    
    $
    19,000
    
    $
    (9,000
    )Basic
      net income (loss) per share:Income
      (loss) from continuing operations
    
    $
    0.00
    
    $
    (0.01
    )Income
      from discontinued operations
    
    
    —
    
    
    0.01Basic
      net income (loss) per share
    
    $
    0.00
    
    $
    (0.00
    )Weighted
      average number of common shares - basic
    
    
    11,078,105
    
    
    11,078,105Diluted
      net income (loss) per share:Income
      (loss) from continuing operations
    
    $
    0.00
    
    $
    (0.01
    )Income
      from discontinued operations
    
    
    —
    
    
    0.01Diluted
      net income (loss) per share
    
    $
    0.00
    
    $
    (0.00
    )Weighted
      average number of common shares - diluted
    
    
    11,178,105
    
    
    11,078,105
 
 See
accompanying notes to consolidated financial statements.
 
 ****
 
 4
 **INDEX**
 ****
 **STRATFORD AMERICAN CORPORATION AND
SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
 (unaudited)
 
 **For
      the three months ended**
      **March
      31,**
    ********
    ****
    **2005**
    ****
    **2004**
    ****CASH
      FLOWS FROM CONTINUING OPERATING ACTIVITIES:Net
      income (loss) from continuing operations
    
    $
    19,000
    
    $
    (95,000
    )Adjustments
      to reconcile net income (loss) to net cash used in continuing operating
      activities:Depreciation,
      depletion and amortization
    
    
    78,000
    
    
    74,000Changes
      in assets and liabilities:Decrease
      (increase) in oil and gas, related party and other
    receivables
    
    
    6,000
    
    
    (24,000
    )Increase
      in oil and gas interests
    
    
    (131,000
    )
    
    (46,000
    )Decrease
      in other assets
    
    
    10,000
    
    
    11,000Increase
      (decrease) in accounts payable
    
    
    28,000
    
    
    (10,000
    )Increase
      (decrease) in accrued liabilities
    
    
    (31,000
    )
    
    9,000NET CASH USED IN CONTINUING OPERATING
      ACTIVITIES
    
    
    (21,000
    )
    
    (81,000
    )CASH
      FLOWS FROM CONTINUING INVESTING ACTIVITIES:Purchases
      of property and equipment
    
    
    (1,000
    )
    
    0NET
      CASH USED IN CONTINUING INVESTING ACTIVITIES
    
    
    (1,000
    )
    
    0NET
      CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
    
    
    (88,000
    )
    
    33,000NET
      DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (110,000
    )
    
    (48,000
    )CASH
      AND CASH EQUIVALENTS, beginning of period
    
    
    6,696,000
    
    
    705,000CASH
      AND CASH EQUIVALENTS, end of period
    
    $
    6,586,000
    
    $
    657,000SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid during the period
    
    $
    0
    
    $
    323,000Taxes
      paid during the period
    
    $
    100,000
    
    $
    5,000
 
 
 See
accompanying notes to consolidated financial statements.
 
 5
 **INDEX**
  **STRATFORD AMERICAN CORPORATION AND
SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 (unaudited)
 
  Note 1 -
Basis of Presentation
 
 The accompanying unaudited consolidated
financial statements of Stratford American Corporation and subsidiaries (the
“Company”) have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not contain all of the information and footnotes required by U.S.
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments consisting of a normal and recurring
nature considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2005, may not necessarily
be indicative of the results that may be expected for the year ended December
31, 2005.
 
 The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make certain estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. These interim financial statements should be
read in conjunction with the consolidated financial statements and accompanying
notes included in the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2004 as filed with the Securities and Exchange
Commission.
 
 Certain prior-year amounts in the
accompanying unaudited financial statements for the three months ended March 31,
2004 have been reclassified to conform with the presentation for the three
months ended March 31, 2005 to reflect the discontinued operations of the real
estate segment as discussed further in Note 2, with no effect on net income
(loss).
 
 Note 2 -
Discontinued Operations
 
 On August
30, 2004, Scottsdale Thompson Peak, LLC (“STP”), entered into a Purchase and
Sale Agreement (“the Agreement”) with Holualoa Thompson Peak, LLC, an Arizona
limited liability company (“Holualoa”) to sell the Company’s real estate
segment, which consisted primarily of an office building located in Scottsdale,
Arizona (“the Property”). The Agreement called for the closing of the sale of
the Property by the end of November 2004 at a price of $31,400,000. The
transaction closed on November 9, 2004. Debt service obligations of $23,401,000,
which were inclusive of the $20,000,000, 5.9% loan, the $2,500,000, 6% loan and
the $1,800,000, 10% loan, were paid out of the cash proceeds from the sale of
the Property. Discontinued operations in the consolidated statements of
operations reflect the results of operations of the Property sold in November
2004, including allocated interest expense for the periods presented. Interest
expense was allocated to discontinued operations based on the outstanding debt
specifically identified above. Net cash proceeds from the November 9, 2004 sale
of the Property to STP, of which the Company owns 80% of the membership
interests in, were $7,468,000. The Company’s 80% share of the proceeds was
approximately $5,974,000. The Company has not made any decisions as to the use
of the proceeds of the sale of the Property and is currently evaluating the best
use of these proceeds.
 
 6
 **INDEX**
 
 The
Company recognized a gain of $5,326,000, net of tax of $430,000, from the sale
of the Property. The real estate segment has been accounted for as a
discontinued operation and, accordingly, its net liabilities, results of
operations and cash flows are segregated for all periods presented in the
accompanying consolidated financial statements.
 
 The components of net liabilities of
discontinued operations as of March 31, 2005 consist of state income taxes
payable of $342,000 and accounts payable of $26,000.
 
 Following is a summary of the operating
results of the discontinued operations for the three months ended March 31,
2004.
 
 Revenues
    
    $
    616,000Expenses
    
    
    511,000Income
      from discontinued operations
    
    $
    105,000
 
 Had the sale of the Property been
completed as of January 1, 2004, the Company would have reported the following
for the three months ended March 31, 2004:
 (Unaudited)Total
      revenue
    
    $
    185,000Net
      income (loss)
    
    $
    (95,000
    )Basic
      and diluted net income (loss) per share
    
    $
    (0.01
    )Pro
      Forma weighted average shares outstanding:Basic
    
    
    11,078,105Diluted
    
    
    11,078,105
 
 Note 3 -
Net Income (Loss) Per Common Share
 
 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. Diluted
income (loss) per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the income of the Company. In calculating diluted net income per share for
the three month period ended March 31, 2005, 100,000 dilutive securities
equivalents consisting of stock options have been included. In calculating
diluted net loss per share for the three month period ended March 31, 2004,
480,000 dilutive securities equivalents consisting of stock options have been
excluded because their inclusion would have been antidilutive.
 
 7
 **INDEX**
 
 Note 4 -
Employee Stock Options
 
 The Company has elected to follow
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES (APB 25) and related interpretations in accounting for its employee
stock options and to adopt the “disclosure only” alternative treatment under
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR
STOCK-BASED**COMPENSATION (SFAS 123). SFAS 123 requires the use of
fair value option
valuation models that were not developed for use in valuing employee stock
options. Under SFAS No. 123, deferred compensation is recorded for the excess of
the fair value of the stock on the date of the option grant, over the exercise
price of the option. The deferred compensation is amortized over the vesting
period of the option.
 
 Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company’s pro forma net income (loss) would have been:
 
 For
      the three months ended
      March
      312005
    
    2004Net
      income (loss) - as reported
    
    $
    19,000
    
    $
    (9,000
    )Less:Total
      stock based employee compensation expense determined under fair value
      method for stock options
    
    
    0
    
    
    0Net
      income (loss) - pro forma
    
    $
    19,000
    
    $
    (9,000
    )Basic
      and diluted income (loss) per share - as reported
    
    $
    0.00
    
    $
    (0.00
    )Basic
      and diluted income (loss) per share - pro forma
    
    $
    0.00
    
    $
    (0.00
    )
 
 Note 5 -
Oil and Gas Interests
 
 The Company, through its wholly owned
subsidiary Stratford American Energy Corporation (“SAEC”), purchased working
interests in 23 oil and gas properties located in Oklahoma and Texas, effective
April 1, 2002. Subsequent to the 2002 purchase, the Company has participated in
the successful drilling of new producing wells, and as of March 31, 2005 has
working interests in 31 oil and gas properties. During the first quarter of
2005, the Company paid $9,000 in equipment costs for existing producing
properties and $38,000 for drilling costs on three development wells the Company
elected to participate in during the fourth quarter of 2004. These development
wells are expected to be completed in the second quarter of 2005.
 
 8
 **INDEX**
 
 The
Company also elected to participate in the drilling of two development wells
during the three months ended March 31, 2005, and has prepaid $59,000 in costs.
The funds came from Company cash. Total capitalized costs of the SAEC properties
and accumulated depletion and amortization are as follows:
 
 March
      31, 2005Oil
      and gas interests
    
    $
    985,0002005
      development cost and equipment additions
    
    
    106,000Less
      accumulated depletion and amortization
    
    
    (332,000
    )Net
      oil and gas interests
    
    $
    759,000
 
 The Company recognized depletion
expense of $34,000 and $28,000 for the three month periods ended March 31, 2005
and 2004, respectively.
 
 In addition to the oil and gas
interests, acquisition costs of $68,000 are being amortized equally over a
seven-year period, which is the estimated life of the wells. The Company
recognized amortization expense of $2,000 for each of the three month periods
ended March 31, 2005 and 2004, respectively. Total accumulated amortization of
acquisition costs at March 31, 2005 is $29,000, leaving net acquisition costs of
$39,000 on the books of the Company, which are reported within other assets in
the accompanying consolidated balance sheet.
 
 On April 19, 2001, the Company
purchased 100% of the capital stock of SA Oil and Gas Corporation (“SA Oil”),
from the shareholders of SA Oil, in exchange for 755,948 shares of common stock
of the Company. SA Oil owns working and/or royalty interests in 87 oil and gas
properties located in Oklahoma and Texas. Total capitalized costs of the SA Oil
properties and accumulated depletion and amortization are follows:
 
 March
      31, 2005Oil
      and gas interests
    
    $
    3,673,0002005
      development cost and equipment additions
    
    
    25,000Less
      accumulated depletion and amortization
    
    
    (3,227,000
    )Net
      oil and gas interests
    
    $
    471,000
 
 
 Oil and
gas interests are being depleted equally over a seven-year period, which is the
estimated life of the wells. The Company recognized depletion expense of $33,000
and $34,000 for the three month periods ended March 31, 2005 and 2004,
respectively. The Company recorded amortization on intangible drilling costs and
depreciation on equipment of $5,000 and $3,000 for the three month periods ended
March 31, 2005 and 2004, respectively.
 
 In addition to the oil and gas
interests, acquisition costs of $48,000 are being amortized equally over a
seven-year period. The Company recognized amortization expense of $2,000 for
each of the three month periods ended March 31, 2005 and 2004, respectively.
Total accumulated amortization of the acquisition costs at March 31, 2005 is
$28,000 leaving net acquisition costs of $20,000 on the books of the
Company.
 
 9
 **INDEX**
 
 Stratford
American Resource Corporation (“SARC”) originally paid $38,000 for a nominal
working interest in four oil and gas wells. The wells were fully depleted at
March 31, 2005.
 
 Total net
oil and gas interests at March 31, 2005 are $1,230,000. Total net acquisition
costs relating to the oil and gas properties are $59,000 and are recorded within
other assets at March 31, 2005.
 
 For each
of the oil and gas interests described above, the Company is a minority
participant (an average of less than 3.0%) in joint interest operations and as
such is not subject to disclosure requirements for oil and gas
operations.
 
 Note 6 -
Related Party Transactions
During
the quarter ended March 31, 2005, the Company received $17,000 from two
companies that are partially owned by four of the Company’s executives or
directors. These receipts were reimbursements for administrative expenses
incurred by the Company on behalf of the related parties. These are recorded as
a reduction of general and administrative expense for the three months ended
March 31, 2005. At March 31, 2005, $14,000 of these reimbursements are recorded
as related party receivables in the accompanying consolidated balance
sheet.

Effective
November 1, 2003, the Company entered into a month-to-month sublease of the
Company’s offices with a company that is owned by a majority shareholder of the
Company. The monthly rent is $2,000, which is at market rate. The Company
received $6,000 for each of the three month periods ended March 31, 2005 and
2004, respectively. These receipts from the sublease were recorded as a
reduction in rental expense, included in general and administrative expense. At
March 31, 2005, all of the sublease payments had been
received.
 
 Note 7
- Commitments and Contingencies
 
 The Company has adopted the disclosure
provisions of the Financial Accounting Standards Board Interpretation No. 45,
GUARANTOR’S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS. Interpretation 45 requires
disclosures about obligations under certain guarantees the guarantor has issued.
While the Company has various indemnity obligations included in contracts
entered into in the normal course of business, these obligations are primarily
in the form of indemnities that could result in immaterial increases of future
costs, but do not represent significant commitments or contingent liabilities of
the indebtedness of others.
 
 Note 8
- Recent Accounting Pronouncements
 
 Recently
Issued Accounting Pronouncements
 
 In
December 2004, the FASB issued Revised Statement No. 123, ACCOUNTING FOR
SHARE-BASED PAYMENT (“SFAS No. 123(R)”). This statement requires the Company to
recognize the grant-date fair value of stock options in the statement of
operations. This Statement requires that companies account for these share-based
transactions using the fair-value-based method, and eliminates a company’s
ability to account for these transactions using the intrinsic value method of
accounting in APB Opinion No. 25. For small business issuers, Statement No.
123(R) is effective as of the beginning of the first interim or annual reporting
period that begins after December 15, 2005. The Company has not yet determined
the exact impact the new standard will have on its consolidated financial
statements. The disclosure included in Note 4 to the consolidated financial
statements discloses the impact on the Company’s results of operations as if it
had applied the fair value based method and recognition provisions of Statement
No. 143 to stock-based employee compensation to the current reporting
periods.
 
 10
 **INDEX**
 
 Recently
Adopted Accounting Pronouncements
 
 In May 2003, FASB Statement No. 150,
ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY, was issued. This Statement establishes standards for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. The Statement also includes
required disclosures for financial instruments within its scope. For the
Company, the Statement was effective for instruments entered into or
modified after May 31, 2003 and otherwise became effective as of January 1,
2004, except for certain mandatorily redeemable financial instruments. For
certain mandatorily redeemable financial instruments, the Statement became
effective for the Company on January 1, 2005. The effective date has been
deferred indefinitely for certain other types of mandatorily redeemable
financial instruments. The Company currently does not have any financial
instruments that are within the scope of this Statement.
 
 In December 2003, the FASB issued FASB
Interpretation No. 46 (revised December 2003), CONSOLIDATION OF VARIABLE
INTEREST ENTITIES (FIN 46R), which addressed how a business enterprise should
evaluate whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate the entity.
The Company applies FIN 46R to variable interests in variable interest entities
created after December 31, 2003. For variable interests in variable interest
entities created before January 1, 2004, the Interpretation will be applied
beginning on January 1, 2005. For any variable interest entities that must be
consolidated under FIN 46R that were created before January 1, 2004, the assets,
liabilities and noncontrolling interests of the variable interest entity
initially would be measured at their carrying amounts with any differences
between the net amount added to the balance sheet and any previously recognized
interest being recognized as the cumulative effect of an accounting change. If
determining the carrying amounts is not practicable, fair value at the date FIN
46R first applies may be used to measure the assets, liabilities and
noncontrolling interest of the variable interest entity.
 
 The Company currently does not have any
variable interest entities that are within the scope of the
statement.
 
 Note 9
- Income Taxes
 
 The Company recorded income tax expense
from continuing operations of $0 and $1,000 for the three months ended March 31,
2005 and 2004, respectively. The effective tax rate was 0.00% and (1.06)% for
the three month periods ended March 31, 2005 and 2004, respectively. In
determining the effective tax rates, the Company utilizes net operating loss
carryforwards for which valuation allowances have previously been
provided.
 
 11
 **INDEX**
 
 **ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
 
 Forward
Looking Statements
 
 This
quarterly report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 (forward-looking statements) that involve certain risks and
uncertainties. The following discussion and analysis should be read in
conjunction with our consolidated financial statements and notes thereto
appearing elsewhere in this report. Except for the historical information
contained herein, any statements that refer to expectations, projections or
other characterization of future events or circumstances, and especially those
which include variations of the words “believes,” “intends,” “estimates,”
“anticipates,” “expects,” “plans,” or similar words or variations thereof, are
likely to be forward-looking statements, and as such, are likely to concern
matters involving risk, uncertainty, unpredictability and other factors that
could materially and adversely affect the outcome or results indicated by or
inferred from the statements themselves. Such factors include, among others, the
following: the risk that the working interests in the SAEC oil and gas
properties and the operations of SA Oil may not be profitable; the risk that the
Company will recognize losses from operations; 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. Therefore, the reader is advised
that the following discussion should be considered in light of the discussion of
risks and other factors contained in this quarterly report on Form 10-QSB and in
the Company’s other filings with the Securities and Exchange Commission, and
that no statements contained in the following discussion or in this Form 10-QSB
should be construed as a guarantee or assurance of future performance or future
results, and the reader is cautioned to not place undue reliance on such
forward-looking statements. The forward-looking statements made herein are only
made as of the date of this quarterly report on Form 10-QSB, and we undertake no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
 
 General
 
 On
November 9, 2004, the Company, through its 80% owned subsidiary, Scottsdale
Thompson Peak, LLC, sold the property located at 20225 North Scottsdale Road,
Scottsdale, Arizona. The total sales price for the property was $31,400,000.
Following the payment of debt service obligations and related interest due of
$23,401,000, which were inclusive of the $20,000,000, 5.9% loan, the $2,500,000,
6% loan and $1,800,000, 10% loan, and the payment of closing costs and
pro-rations of $531,000, cash proceeds to Scottsdale Thompson Peak, LLC were
$7,468,000. The Company’s 80% share of the net proceeds was $5,974,000. This
transaction represents the sale of the Company’s real estate segment.
Accordingly, the results of operations of this segment are recorded within
income from discontinued operations for all periods presented in the
accompanying consolidated financial statements. See Note 2 to the accompanying
consolidated financial statements of the Company for additional information
related to the sale of the discontinued operations.
 
 The Company owns working interests in
oil and gas properties primarily located in Oklahoma and Texas as discussed in
Note 5 of the accompanying consolidated financial statements of the
Company.
 
 12
 **INDEX**
  Other
than the transactions described above, the Company has no significant operations
and there can be no assurance that the Company’s operations will be profitable.
With the sale of the real estate segment, management is currently evaluating the
future direction of the business in order to maximize shareholder return.
Potential courses of action for the Company are to continue to look for
investment opportunities, most likely in either oil and gas interests or real
estate, or to consider liquidation and dissolution of the operations of the
Company with a liquidating dividend to the shareholders of the Company. In
determining potential courses of action, management will be considerate of
several factors including the management’s outlook for the Company’s current
operations, potential future investment opportunities, the existence of
competitors in our industry with greater resources at their disposal and the
regulatory and reporting environment of the Company.
 Critical
Accounting Policies and Estimates
 
 The consolidated balance sheet and
consolidated statements of operations have been prepared in accordance with U.S.
generally accepted accounting principles. The preparation of these financial
statements requires the Company to make certain estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an on-going basis,
the Company evaluates its estimates, including those related to oil and gas
interests, contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
 
 The Company believes the following
critical accounting policies affect its more significant judgments and estimates
used in the preparation of its consolidated financial statements. The Company
accrues production income and expense based upon historical performance, costs,
and prices received for oil and gas. Revisions in profit estimates are charged
to income in the period in which the facts that give rise to the revision become
known. Future adverse
changes in market conditions or poor operating results could result in losses or
an inability to recover the carrying value of our oil and gas interests, thereby
possibly requiring an impairment charge in the future.
 
 Liquidity
and Capital Resources
 
 At March 31, 2005, the Company had
$6,586,000 in available cash resources. A significant amount of the cash
available at March 31, 2005 was generated from the one-time sale of the Property
held by the Company’s 80% subsidiary, STP. Proceeds to the Company from the
November 9, 2004 sale of the Property by STP were $5,974,000.
 
 During the three months ended March 31,
2005, Company used $131,000 in cash to fund development costs and capital
additions for the oil and gas interests. Future costs to complete the five
development wells, as discussed in Note 5, should they prove to be producing
properties, will be approximately $86,000 and will be funded from Company
cash.
 
 The
Company maintains its excess cash funds in interest-bearing deposits. The
Company believes that its current cash and cash equivalents will be sufficient
to meet its forecasted operating cash needs for 2005. 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 current activity will be achieved. No prediction can be made as to
the future prices the Company will receive from oil and gas sales. Additionally
there can be no assurance that the Company’s operations will be
profitable.
  13
 **INDEX**
 
 Results
of Operations - Three Month Period Ended March 31, 2005, Compared with Three
Month Period Ended March 31, 2004
 
 The
Company reported net income of $19,000 for the three months ended March 31,
2005, in comparison to a net loss of $9,000 for the three months ended March 31,
2004. The 2004 results include income of $86,000 from discontinued operations,
as discussed above in Note 2.
 
 Oil
and Gas Revenues. For the three months ended March 31, 2005, oil and gas
revenues were $269,000, increasing $86,000, or 47%, from $183,000 for the three
months ended March 31, 2004. Oil and gas revenues accounted for 87% of the total
revenue from continuing operations for the three months ended March 31, 2005.
The increase in revenues results from higher prices being received for oil and
gas products and to the addition of five new producing properties.
 
 Separately,
SA Oil properties generated $156,000 and $111,000 in revenue for the three
months ended March 31, 2005 and 2004, respectively. The working interests in the
SAEC oil and gas properties generated $110,000 and $70,000 in revenue for the
three months ended March 31, 2005 and 2004, respectively. The SARC oil and gas
properties generated $3,000 and $2,000 in revenues for the three months ended
March 31, 2005 and 2004, respectively.
 
 Oil and
gas activities are the major part of the Company’s continuing operations. The
Company sells its gas in the spot market, which is highly seasonal and volatile.
Oil prices will continue to be affected by world markets and
conditions.
 
 Interest
and Other Income. Interest and other income increased from $2,000 for the
three months ended March 31, 2004 to $39,000 for the three months ended March
31, 2005. The increase is primarily due to interest earned on higher balances in
the Company’s cash accounts at March 31, 2005. The higher balances are a result
of the receipt, in November 2004, of $5,974,000, which represented the Company’s
80% share of the proceeds from the sale of the real estate segment.
 
 General
and Administrative Expenses. General and administrative expenses decreased
from $141,000 for the three months ended March 31, 2004 to $139,000 for the
three months ended March 31, 2005. The decrease can be attributed to a decrease
of $6,000 in rent expense for the Company’s corporate office space, a general
decrease in associated overhead costs of $3,000, offset by an increase in
professional fees of $2,000 and an increase in insurance expense of
$5,000.
 
 Depreciation,
Depletion and Amortization. Depreciation, depletion and amortization expense
increased from $74,000 for the three months ended March 31, 2004 to $78,000 for
the three months ended March 31, 2005. The increase in expense is due to
depletion expense of $6,000 recognized during the three months ended March 31,
2005, on the SAEC development wells completed during the last three quarters of
2004, offset by a decrease in depletion recognized on SARC wells of $2,000,
which as of March 31, 2004 were fully depleted.
 
 Oil
and Gas Operations. Oil and gas operations expense increased from $64,000
for the three months ended March 31, 2004 to $72,000 for the three months ended
March 31, 2005. Operating expense for the SA Oil properties increased by $8,000,
due to expense incurred for workovers of existing producing
properties.
 
 14
 **INDEX**
 
 Discontinued
Operations. Property rental income, which is included in the income from
operations of discontinued operations for the three months ended March 31, 2004,
consists of scheduled rental income of $524,000, deferred rent of $92,000,
depreciation expense of $133,000 and interest expense of $378,000. As previously
discussed above in Note 2, the Property was sold by STP to Holualoa, effective
November 9, 2004 and has been accounted for as a discontinued operation.
 
 Related
Party Transactions
 
 Related
party transactions are discussed in Note 6 of the accompanying consolidated
financial statements of the Company.
  Capital
Requirements
 
  During
the three months ended March 31, 2005, the Company used $131,000 in cash to fund
development costs and capital additions for the oil and gas interests. Future
costs to complete the five development wells, as discussed above in Note 5,
should they prove to be producing properties, will be approximately $86,000 and
will be funded from Company cash.
 
 Other than the capital requirements
described above, 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.
 
 Off-Balance
Sheet Arrangements
 
 The Company has no off-balance sheet
arrangements as defined by Item 303(c) of Regulation S-B.
 
 **ITEM 3.  CONTROLS AND
PROCEDURES**
 
 Our Chief Executive Officer, our
President and our Controller, based on the evaluation of our disclosure controls
and procedures (as defined in rules 13a-15(e) or 15d-15(e) of the Securities
Exchange Act of 1934, as amended) required by paragraph (b) of Rule 13a-15 or
Rule 15d-15, have concluded that, as of March 31, 2005, our disclosure controls
and procedures were effective to ensure that the information we are required to
disclose in reports that we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms. During the
three months ended March 31, 2005 there was no change in our internal control
over financial reporting identified in connection with the evaluation required
by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
 
 15
 **INDEX**
 
 **PART II.  OTHER INFORMATION**
 
 Responses
to Items 1 through 5 are omitted since these items are not
applicable.
 
  **ITEM 6.  EXHIBITS**
 
 (a)
    Exhibits
 
 See index beginning on page 18.
 
 
 16
 **INDEX**
 
 **Signatures**
 
 In accordance with the requirements of
Securities Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
 
 **STRATFORD
      AMERICAN CORPORATION**
      RegistrantDate: May
      16, 2005
    By:
    /s/ 
      Mel L. ShultzMel
      L. Shultz, President and Director
 Date: May
      16, 2005
    By:
    /s/ 
      David H. EatonDavid
      H. Eaton, Chief Executive Officer
      and
      Chairman of the Board
Date: May
      16, 2005
    By:
    /s/ 
      Daniel E. MatthewsDaniel
      E. Matthews, Controller, Secretary
      and
      Treasurer
 17
 **INDEX**
  **EXHIBITS INDEX**
 
 Exhibits
31.1, 31.2, 31.3 and 32 are filed with this report. The Company hereby
incorporates all other exhibits by reference pursuant to Rule 12b-32, each of
which (except Exhibits 3.3, 10.9, 10.10, 10.11, 10.12, 10.13, 10.14, 10.15,
10.16, 10.17, 10.18, 10.19, 10.20, 10.21, 14.1 and 21.1) 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, with the
Securities and Exchange Commission. Exhibit 10.9 was filed as Exhibit 2.1 to the
Company’s Form 8-K, which was filed with the Securities and Exchange Commission
on October 28, 1998. Exhibit 10.10 was filed as Exhibit 10.39 to the Company’s
form 10-KSB for the year ended December 31, 1998, which was filed with the
Securities and Exchange Commission on March 31, 1999. Exhibits 10.11, 10.12, and
10.13 were filed with the Company’s Form 10-KSB for the year ended December 31,
1999 which was filed with the Securities and Exchange Commission on March 30,
2000. Exhibit 10.14 was filed with the Company’s Form 10-KSB for the year ended
December 31, 2000, which was filed with the Securities and Exchange Commission
on March 30, 2001. Exhibit 10.15 was filed as Exhibit 2.1 to the Company’s Form
8-K, which was filed with the Securities and Exchange Commission on May 2, 2001.
Exhibit 10.16 was filed as Exhibit 2.1 to the Company’s Form 8-K, which was
filed with the Securities and Exchange Commission on June 18, 2002. Exhibit
10.17 was filed as Exhibit 2.1 to the Company’s Form 8-K, which was filed with
the Securities and Exchange Commission on December 26, 2002. Exhibit 10.18 was
filed as Exhibit 10.1 to the Company’s Form 8-K, which was filed with the
Securities and Exchange Commission on December 26, 2002. Exhibit 10.19 was filed
with Form 10-KSB for the year ended December 31, 2002, which was filed with the
Securities and Exchange Commission on March 31, 2003. Exhibit 10.20 was filed
with the Company’s Definitive Proxy Statement (Schedule 14A) for its annual
meeting of shareholders held on July 8, 1998, which was filed with the
Securities and Exchange Commission on April 28, 1998. Exhibit 10.21 was filed as
Exhibit 99.2 to the Company’s Form 8-K, which was filed with the Securities and
Exchange Commission on November 15, 2004. Exhibit 14.1 was filed as Exhibit A
with the Company’s Definitive Proxy Statement (Schedule 14A) for its annual
meeting of shareholders held on June 20, 2004, which was filed with the
Securities and Exchange Commission on April 29, 2004. Exhibit 21.1 was filed
with the Company’s Form 10-KSB for the year ended December 31, 2003, which was
filed with Securities and Exchange Commission on March 31, 2004.
 
 
 **Number**
    
    **Description**3.1
    
    Articles
      of Incorporation3.2
    
    By-laws3.3
    
    Articles
      of Amendment to Articles of Incorporation4.1
    
    Form
      of Common Stock Certificate4.2
    
    Form
      of Series “A” Preferred Stock Certificate4.3
    
    Articles
      IV of the Articles of Incorporation4.4
    
    Article
      III of the Bylaws10.1
    
    Indemnification
      Agreement, dated as of May 19, 1988, between the Company and Mel L.
      Shultz10.2
    
    Schedule
      of Omitted Indemnification Agreements
 
 18
 **INDEX**
 **Number**
    
    **Description**10.3
    
    Indemnification
      Agreement, dated as of February 19, 1988, relating to
      guarantees10.4
    
    Indemnification
      Agreement, dated as of May 10, 1988, relating to
  guarantees10.5
    
    Registration
      Agreement, dated as of February 19, 199810.6
    
    Agreement,
      dated as of February 18, 1988, relating to restrictions against preferred
      shares10.7
    
    Trust
      Agreement, dated as of June 18, 198710.8
    
    Share
      Sale and Registration Agreement, dated January 31, 198910.9
    
    Acquisition
      Agreement between Stratford American Car Rental Systems, Inc. and Dollar
      Rent A Car Systems, Inc. dated September 24, 199810.10
    
    Net
      Lease Agreement between Stratford American Car Rental Systems, Inc. and
      Dollar Rent A Car Systems, Inc. dated October 1, 199810.11
    
    Post-Closing
      Statement between Dollar Rent A Car Systems, Inc. and Stratford American
      Car Rental Systems, Inc. dated January 27, 199910.12
    
    Settlement
      Agreement between Stratford American Resource Corporation, Energy
      Investments Advisors, Inc., Oil & Gas Advisors, Inc., Petroleum
      Advisors & Co., Samuel B. Davis, and Hugh J. Davis, dated October 6,
      199910.13
    
    Purchase
      Agreement by and between Foot Creek Corporation of Arizona and Grandilla
      (Arizona), Inc. and Stratford American Car Rental Systems, Inc. dated
      December 29, 199910.14
    
    Operating
      Agreement between DVI Raintree, LLC, Stratford American Corporation and
      Colonial Raintree, LLC dated October 26, 200010.15
    
    Stock
      Purchase Agreement, dated March 22, 2001 by and among SA Oil and Gas
      Corporation, the shareholders of SA Oil and Gas Corporation and Stratford
      American Corporation.10.16
    
    Purchase
      and Sale Agreement, dated June 5, 2002 by and between Crown Energy
      Drilling Production Fund 2001-1 Limited Partnership and Stratford American
      Energy Corporation10.17
    
    Purchase
      and Sale Agreement, dated July 17, 2002, by and between Opus West
      Corporation, a Minnesota corporation, and Stratford American
      Corporation10.18
    
    Letter
      Agreement between Stratford American Corporation, JDMD Investments,
      L.L.C., Diamond Ventures, Inc., Golden Gate Apartments, Ltd., L.P., Auriga
      Properties, Inc., DRD-97 Trust and David Goldstein10.19
    
    Operating
      Agreement of Scottsdale Thompson Peak, LLC10.20
    
    Stratford
      American Corporation 1998 Stock Incentive Plan10.21
    
    Purchase
      and Sale Agreement, dated August 30, 2004, by and between
      Holualoaholualoa,Holualoa
      Arizona, Inc. and Scottsdale Thompson Peak, LLC14.1
    
    Code
      of Ethics21.1
    
    Subsidiaries31.1
    
    Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200231.2
    
    Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200231.3
    
    Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232
    
    Officer
      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002

19