FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 0-8301
GOLDEN TRIANGLE ROYALTY & OIL, INC.
(Exact Name of Registrant as Specified in its Charter)
State of Colorado 25-1302097
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification #)
8504 Sonoma Valley N.E.
Albuquerque, NM 87122
(Address of Principal Executive Offices)
Registrant's Telephone Number Including Area Code: (505) 856-5075
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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 filed such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] NO
3,939,531 Shares, Common Stock, $.001 Par Value
Number of shares outstanding of each of the issuer's classes
of common stock, as of May 15, 1996
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<PAGE>
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Golden Triangle Royalty & Oil, Inc.
Albuquerque, New Mexico
We have reviewed the accompanying consolidated balance sheet of Golden
Triangle Royalty & Oil, Inc. and Subsidiaries as of March 31, 1996,
and the related consolidated statements of operations and cash flows
for the three months ended March 31, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical
review procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December 31,
1995, and the related consolidated statements of operations, retained
earnings and cash flows for the year then ended (not presented herein);
and in our report dated March 15, 1996, we expressed an unqualified opinion
on those. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1995 is fairly
stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
/s/ROBERT EARLY & COMPANY, P.C.
Robert Early & Company, P.C.
Abilene, Texas
May 15, 1996
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<PAGE>
<TABLE>
BALANCE SHEET
The following table sets for the balances sheets for the periods
indicated.
<CAPTION>
GOLDEN TRIANGLE ROYALTY & OIL, INC.
CONSOLIDATED BALANCE SHEETS
March 31 December 31
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 59,558 $ 86,255
Accounts receivable - trade 1,090,279 958,436
Accounts / notes receivable - other 3,657 3,888
Amounts receivable from officers 96,320 92,997
Marketable securities at lower of
aggregate cost or market 4,628 5,427
Prepaid expenses 48,650 61,150
Total Current Assets 1,303,092 1,208,153
PROPERTY AND EQUIPMENT
Land 532,454 532,454
Oil and gas properties (full
cost method) 2,777,138 2,774,003
Production equipment 2,098,891 1,959,525
Well leasehold and water rights 259,872 259,872
Office furniture and equipment 47,735 40,681
Accumulated depreciation, depletion
and amortization (1,181,219) (1,099,991)
Net Property and Equipment 4,534,871 4,466,544
OTHER ASSETS
Cash - restricted 580 580
Investment in subsidiary 5,000 5,000
Deferred tax assets 329,770 363,454
Notes receivable -long term 79,639 82,470
Other 28,811 29,824
Total Other Assets 443,800 481,328
TOTAL ASSETS $ 6,281,763 $ 6,156,025
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 151,551 $ 101,094
Accrued payroll, taxes and other 4,876 23,167
Income taxes payable 55,125 21,743
Deferred income taxes - current 249,313 300,359
Notes payable-current portion - 5,436
Total Current Liabilities 460,865 451,799
Notes payable (net of current
portion) - 19,486
Deferred income taxes - non-current 71,453 52,895
SHAREHOLDERS' EQUITY
Common stock, $.001 par value
(100,000,000 shares authorized;
3,939,531 and 3,832,931 outstanding) 3,940 3,833
Additional paid-in capital 7,122,164 6,938,200
Stock to be issued 11,250 195,320
Treasury stock (84,738) (71,780)
Unrealized gain/(loss) on marketable
securities (5,474) (5,015)
Accumulated deficit (1,297,697) (1,428,713)
Total Shareholders' Equity 5,749,445 5,631,845
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 6,281,763 $ 6,156,025
</TABLE>
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<PAGE>
<TABLE>
RESULTS OF OPERATIONS
The following table sets forth the results of operations for the
periods indicated in detail.
<CAPTION>
GOLDEN TRIANGLE ROYALTY & OIL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31
1996 1995
<S> <C> <C>
OPERATING REVENUES
Disposal fees $ 537,840 $ 428,897
Oil and gas production 53,610 60,155
Miscellaneous 40 823
Total Operating Revenues 591,490 489,875
COST OF REVENUES
Australian marketing costs 14,245 21,042
Production expenses and taxes 2,051 1,443
Contract services 7,892 14,744
Direct materials and supplies 61,316 43,043
Lease costs 39,068 14,502
Utilities 15,381 11,169
Total Costs of Revenues 139,953 105,943
GROSS PROFIT 451,537 383,932
OPERATING EXPENSES
Depreciation, depletion and
amortization 82,894 50,599
Ranch operations - 13,700
Personnel costs 66,456 65,303
Advertising and public relations 31,522 28,860
Repairs and maintenance 16,812 31,468
Professional fees 36,907 18,319
Rent 5,319 10,825
Taxes 7,616 3,763
Other expenses 41,584 37,430
Total Operating Expenses 289,110 260,267
INCOME FROM OPERATIONS 162,427 123,665
OTHER INCOME/(EXPENSES)
Interest and dividend income 556 113
Equity in subsidiary's net loss - (8,209)
Interest expense (14) (2,598)
Transfer fees 3,174 3,780
Unrealized gains/(losses) on
marketable securities - (1,897)
Gain/(loss) on sale of securities (40) -
INCOME/(LOSS) BEFORE INCOME TAXES 166,103 114,854
Australian income taxes 5,868 7,109
Income taxes 28,022 69,048
Deferred income taxes 1,197 (2,912)
NET INCOME/(LOSS) $ 131,016 $ 41,609
INCOME/(LOSS) PER SHARE $ 0.03 $ 0.01
Weighted Average Shares Outstanding 3,921,866 3,830,286
</TABLE>
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<PAGE>
<TABLE>
CASH FLOWS
THE FOLLOWING TABLE SETS FORTH THE CASH FLOWS FOR THE PERIOD
INDICATED.
<CAPTION>
GOLDEN TRIANGLE ROYALTY & OIL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) $ 131,016 $ 41,609
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization 95,394 63,097
Unrealized losses/(gains) on marketable
securities - 1,897
Loss/(gain) on sale of securities 40 -
Equity in subsidiary's net loss/(income) - 8,209
(Increase)/decrease in restricted cash - 4,000
(Increase)/decrease in accounts receivable (128,781) 66,569
Increase/(decrease) in accounts payable 32,166 (201)
Increase/(decrease) in amounts due to/
from related parties (3,323) 107,980
Increase/(decrease) in tax liabilities 34,578 66,512
NET CASH PROVIDED BY OPERATING ACTIVITIES 161,090 359,672
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (174,905) (581,858)
Purchase of treasury stock (12,958 -
Proceeds from sale of assets 24,998 -
NET CASH USED BY INVESTING ACTIVITIES (162,865) (581,858)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short swing profits rules - 15,000
Repayment of debt (24,922) -
Repayment of capital lease liability - (1,784)
NET CASH PROVIDED/(USED) BY FINANCING
ACTIVITIES (24,922) 13,216
NET INCREASE/(DECREASE) IN CASH (26,697) (208,970)
CASH AT BEGINNING OF YEAR 86,255 236,235
CASH AT END OF PERIOD $ 59,558 $ 27,265
Supplemental Disclosures - Non-cash Investing and Financing Transactions
Cash paid for interest $ 14 $ 2,598
Cash paid for income taxes 5,868 7,109
</TABLE>
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<PAGE>
GOLDEN TRIANGLE ROYALTY & OIL, INC.
SELECTED INFORMATION
(Unaudited)
March 31, 1996
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the generally accepted accounting principles for interim
financial information and with instructions to Form 10-01 of Regulation
S-X. They do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, except as disclosed herein, there has been no material change
in the information included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995. In the opinion of Management, all adjust-
ments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The report of Robert Early & Company,
P.C. commenting on their review accompanies the condensed financial state-
ments included in Item 1 of Part 1. Operating results for the three month
period ended March 31, 1996, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996.
NOTE 2: AMORTIZATION OF EXPENSES
During December 1993 and January 1994 the Company entered into agreements
with Hunter Equities, Inc. and others for marketing, public relations, and
other management services. Under the terms of these agreements, these
services were to be provided over a three year period. Pursuant to the
terms of these agreements, certain expenses were prepaid. This situation
requires amortization of the expense over the term of the agreement.
Amortization of these expenses (included in "Advertising and public
relations") totaled $12,500 for this quarter.
NOTE 3: CONSTRUCTION OF WATER PLANTS
During the first quarter, the Company substantially completed construction
of two fresh water delivery sites. The total cost of these locations at
March 31, 1996 was $58,456. These plants were placed in service early in
the second quarter.
NOTE 4: SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the Company purchased an existing salt
water disposal site for a total of $750,000 from TransTexas Gas Corporation
(a significant customer). This purchase was paid for with cash and credits
against current receivables from TransTexas. This facility is expected to
throughput in excess of 150,000 barrels of water per month and generate a
monthly return on investment of approximately two percent beginning in May
1996. It is located in an area in which the Company has had no competing
disposal sites and essentially has no nearby competition. The Company
financed this transaction partially through internal cash balances and
largely through short-term loans from officers and directors.
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<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
GENERAL DISCUSSION
The first quarter of 1996 was the best quarter for disposal and service
revenues since GTRO acquired the south Texas operations in 1993. Disposal
and service revenues were $537,840. Of this, approximately $51,000 was
from the sale of skim oil. Skim oil is residual oil collected from the
holding tanks for water which has been delivered to the disposal sites for
injection. Disposal and service revenues for the first quarter of 1995
were $428,897 and were $529,026 for the fourth quarter of 1995. Management
expects disposal and service revenues to continue at record levels in the
second quarter.
Both oil and gas prices began to improve during the latter part of the
first quarter. Wellhead oil prices increased to as high as $23.50 per
barrel from $16.50. Gas was $2.50 per MCF which was up from $1.35. These
increases are beneficial to the Company's disposal operations through
increased gas production at the wells operated and serviced by the
Company's customers.
Another advantage of the higher energy prices, in conjunction with the
rainy season being over, is that it has encouraged the Australian operators
to drill new wells. Santos completed the Tarbat No. 4, which tested 1,222
barrels of oil per day in initial tests, on ATP 299. The Tarbat No. 5 is
currently being drilled and the Tarbat No. 6 has been announced for
drilling following the No. 5 well. Another new well has been completed in
the Talgeberry field. The Company holds a 1.463% override under ATP 299.
There are now a total of 32 oil wells on this concession which covers
861,000 acres. The Company expects additional drilling to occur during the
second quarter.
ASSETS
The total assets of the Company grew $125,738 during the current quarter to
$6,281,763 from $6,156,025 on December 31, 1995. This increase is
principally due to the purchase of disposal equipment and increased
accounts receivable. Total assets as of March 31, 1995 were $5,213,780.
Current assets were $1,303,092 on March 31, 1996 compared to $770,577 on
March 31, 1995. Current assets also increased when compared to the
December 31, 1995 number ($1,208,153), primarily due to an increase in
accounts receivable from $958,436 to $1,090,279.
The ratio of current assets to current liabilities represents GTRO's
liquidity. The liquidity ratio on March 31, 1996 was 2.83:1 compared to
2.67:1 on December 31, 1995 and 3.52:1 on March 31, 1995. A significant
portion of these current assets are accounts receivable due to the
Company's disposal and services.
Property and equipment increased during the current quarter by $139,366.
This increase is due to the purchase of equipment to add to the efficiency
of the south Texas operations.
Stockholders' equity continued to build for GTRO to $5,749,445 on March 31,
1996. This is up $117,600 over December 31, 1995. Stockholders' equity on
March 31, 1995 was $4,984,471.
REVENUES
The financial statements accompanying this report are consolidated with
subsidiaries for all periods reported.
Total operating revenues were $591,490 for the first quarter of 1996. Of
this, 91% were attributable to disposal and service fees. The addition of
the Chihuahua disposal facility during the fourth quarter of 1995 was one
of the leading factors in increasing revenues during the first quarter of
1996. The Chihuahua facility is a part of OCR Investments, one of the
wholly owned subsidiaries.
The increase in natural gas prices during the first quarter caused
producers in the south Texas area, serviced by the disposal facilities, to
produce record quantities of salt water as they opened their wells in order
to increase gas production to take advantage of the rise in prices. In
turn, increased quantities of water were delivered for injection at the
Company's disposal facilities. Revenues rose as a function of the increase
in disposal activity.
Subsequent to the end of the first quarter, the Company entered into an
agreement with TransTexas Gas Corporation (a significant customer) to
purchase and operate a TransTexas disposal facility. This significant
asset purchase bore a cost of $750,000. This facility is expected to
generate $30,000-$40,000 per month in gross operating revenues for the
Company.
Second quarter revenues are projected to continue to increase due to the
addition of the TransTexas disposal. The Company also expects to complete
the construction of two fresh water supply plants during the second
quarter.
Costs of revenues were $139,953 for the quarter ended March 31, 1996
compared to $105,943 for the same period in 1995. The principal areas that
had the most increase were materials & supplies and lease costs. These
increases are directly related to upgrading and expanding existing disposal
equipment and facilities.
OPERATING EXPENSES
The operating expenses for the three months ended March 31, 1996 were
$289,110 compared to March 31, 1995 of $260,267. This increase of $28,843
was primarily attributable to an increase in depreciation, depletion, and
amortization related to the addition of significant depreciable assets
during the second, third, and fourth quarters of 1995. Professional fees
increased $18,588 compared to the same quarter of 1995. The majority of
this increase was for accounting and auditing fees.
Income from operations was $162,427 for March 31, 1996 compared to $123,665
for the same period in 1995. The income from operations was modified by
other income and expenses to $166,103 and $114,854 for the quarters ended
March 31, 1996 and 1995, respectively.
Net income for the quarter ended March 31, 1996 was $131,016, representing
$0.03 per share, compared to net income of $41,609 for the quarter ended
March 31, 1995, representing $0.01 per share net income.
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PART II
Item 6. Exhibits and Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended MARCH 31, 1996.
SIGNATURES
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.
GOLDEN TRIANGLE ROYALTY & OIL, INC.
(Registrant)
/s/ IVAN WEBB
(Signature)
Ivan Webb, Chief Financial Officer
Principal Financial Officer
Principal Accounting Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Golden Triangle Royalty & Oil, Inc. for the period
ended March 31, 1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000042284
<NAME> GOLDEN TRIANGLE ROYALTY & OIL, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 59558
<SECURITIES> 4628
<RECEIVABLES> 1093936
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1303092
<PP&E> 5716090
<DEPRECIATION> (1181219)
<TOTAL-ASSETS> 6281763
<CURRENT-LIABILITIES> 460865
<BONDS> 0
0
0
<COMMON> 3940
<OTHER-SE> 5745505
<TOTAL-LIABILITY-AND-EQUITY> 6281763
<SALES> 591450
<TOTAL-REVENUES> 591490
<CGS> 139953
<TOTAL-COSTS> 139953
<OTHER-EXPENSES> 289110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 166103
<INCOME-TAX> 35087
<INCOME-CONTINUING> 131016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131016
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
