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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended JUNE 30, 1998
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 INDUSTRIES, 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)
(505) 856-5075
Registrant's Telephone Number Including Area Code
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 [X] Yes [ ] NO
592,005 Shares, Common Stock, $.001 Par Value
Number of shares outstanding of each of the issuer's classes
of common stock, as of June 30, 1998<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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<PAGE>
GOLDEN TRIANGLE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
June 30 December 31
1998 1997
(Unaudited)
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 185,188 $ 95,648
Accounts receivable - trade 1,259,010 741,380
Accounts receivable - other 75,807 87,805
Amounts receivable - officers 20,000 20,000
Inventory 229,530 199,627
Marketable securities 28,499 83,579
Prepaid expenses 13,500 24,969
---------- ----------
Total Current Assets 1,811,534 1,253,008
PROPERTY AND EQUIPMENT 7,008,005 6,645,320
Accumulated depreciation, depletion and
amortization (1,888,084) (1,664,197)
----------- ----------
Net Property and Equipment 5,119,921 4,981,123
OTHER ASSETS
Notes receivable - long term 269,649 275,129
Advances to related parties 63,613 79,091
Deferred tax assets 167,572 184,000
Other 22,566 24,501
---------- ----------
Total Other Assets 523,400 562,721
---------- ----------
TOTAL ASSETS $7,454,855 $6,796,852
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 100,928 $ 76,586
Accrued expenses 139,773 18,146
Line of credit 171,200 76,000
---------- ----------
Total Current Liabilities 411,901 170,732
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value (1,000,000
authorized) Series A (3,371 outstanding) 337 337
Series B (53,903 outstanding) 5,390 5,390
Common stock, $.001 par value (100,000,000
shares authorized; 592,005 and 580,398
outstanding) 592 580
Additional paid-in capital 7,484,482 7,350,571
Unrealized (loss) on marketable securities (37,588) (31,437)
Accumulated deficit (410,259) (699,321)
---------- ----------
Total Stockholders' Equity 7,042,954 6,626,120
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,454,855 $6,796,852
========== ==========
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<PAGE>
<PAGE>
GOLDEN TRIANGLE INDUSTRIES, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
1998 1997 1998 1997
---------- ---------- ---------- ----------
OPERATING REVENUES
Disposal & service fees $ 445,616 $ 573,071 $ 877,562 $1,200,469
Oil reclamation, sand & water
sales 151,929 - 367,511 -
Oil and gas production 50,882 125,526 163,452 261,026
Rental income 184,387 2,353 419,560 2,353
Gain on sale - operating assets - 25,862 - 25,862
Miscellaneous 405 1,837 405 1,852
---------- ---------- ---------- ----------
Total Operating Revenues 833,219 728,649 1,828,490 1,491,562
COST OF REVENUES
Skim oil purchases 105,348 - 267,179 -
Australian marketing costs 23,299 37,358 54,449 73,218
Production expenses and taxes 395 1,796 2,622 2,484
Contract services 15,934 13,166 23,718 25,294
Direct materials and supplies 59,931 36,065 118,648 84,042
Lease costs 24,047 36,537 53,814 86,253
Utilities 7,990 11,476 16,535 24,894
Depreciation, depletion
amortization 117,325 112,708 237,749 221,918
---------- ---------- ---------- ----------
Total Costs of Revenues 354,269 249,106 774,714 518,103
---------- ---------- ---------- ----------
GROSS PROFIT 478,950 479,543 1,053,776 973,459
OPERATING EXPENSES
Personnel costs 117,847 72,820 225,899 135,902
Advertising and public relations 58,304 93,622 89,590 102,724
Repairs and maintenance 72,446 22,178 105,686 58,407
Professional fees 20,784 11,890 88,323 36,327
Rent 2,400 4,144 4,562 10,487
Taxes 10,092 14,706 29,160 19,527
Other expenses 51,774 49,223 127,880 96,499
---------- ---------- ---------- ----------
Total Operating Expenses 333,647 268,583 671,100 459,873
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 145,303 210,960 382,676 513,586
OTHER INCOME/(EXPENSES)
Interest and dividend income 8,408 12,819 17,240 21,452
Interest expense (4,096) (518) (4,468) (518)
Transfer fees 2,732 3,748 5,507 4,908
Gain/(loss) on sale of assets 1,799 - 38,778 7,887
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 154,146 227,009 439,733 547,315
Australian income taxes 3,963 20,119 23,456 45,112
Income taxes - federal and state 43,918 172,699 111,049 313,365
Deferred income taxes 5,720 (181,421) 16,166 (179,453)
---------- ---------- ---------- ----------
NET INCOME $ 100,545 $ 215,612 $ 289,062 $ 368,291
Other comprehensive income,
net of tax:
Unrealized gains/(losses)
on securities (6,774) 2,866 (6,151) 2,372
---------- ---------- ---------- ----------
COMPREHENSIVE INCOME $ 93,771 $ 218,478 $ 282,911 $ 370,663
========== ========== ========== ==========
Basic Earnings per Common Share $ 0.17 $ 0.39 $ 0.50 $ 0.66
Diluted Earnings per Common Share 0.16 0.37 0.47 0.62
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<PAGE>
<PAGE>
GOLDEN TRIANGLE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase/(Decrease) in Cash and Cash Equivalents
(Unaudited)
Six Months Ended June 30
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 289,062 $ 368,291
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 237,749 221,918
(Gain) on sale of assets (38,778) (33,746)
Stock issued for services 187 -
(Increase) in receivables (500,152) (266,420)
(Increase) in inventory (29,903) (200,000)
(Increase)/decrease in amounts due
from/to related parties 15,478 (4,807)
Decrease in prepaid expenses and other 11,469 50
Increase in trade accounts payable 24,342 39,877
Increase in accrued expenses 125,860 73,819
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 135,314 198,982
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (364,024) (1,051,827)
Purchase of marketable securities (74,482) (51,108)
Proceeds from sale of assets 174,796 724,688
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (263,710) (378,247)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing stock 122,736 74,147
Retirement of stock - (122,475)
Loan to related parties - (98,000)
Repayment from related parties - 98,000
Borrowing under line of credit 171,200 -
Repayments on line of credit (76,000) -
---------- ----------
NET CASH PROVIDED/(USED) IN FINANCING ACTIVITIES 217,936 (48,328)
---------- ----------
NET INCREASE/(DECREASE) IN CASH 89,540 (227,593)
CASH AT BEGINNING OF YEAR 95,648 298,521
---------- ----------
CASH AT END OF PERIOD $ 185,188 $ 70,928
=========== ==========
Supplemental Disclosures - Non-cash Investing and Financing Transactions
Cash paid for interest $ 4,468 $ 518
Cash paid for income taxes 39,398 59,187
Stock to be issued for fixed assets 11,000 -
Stock issued for services 187 -
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<PAGE>
<PAGE>
GOLDEN TRIANGLE INDUSTRIES, INC.
SELECTED INFORMATION FOR CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with 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, 1997. In the opinion of Management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six month period ended June 30,
1998, are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998.
NOTE 2: SALE OF PROPERTY AND ACQUISITION OF PROPERTY
During June 1997, the Company sold its Amando salt water disposal facility and
all related fixtures and equipment and purchased a 2,881.8 acre property near
Houston, Texas known as the Altair property. The Company has continued to
purchase additional equipment related to the business being carried on based
at this property.
These transactions have changed the mix of available revenue sources when
comparing the first two quarters of the two years. The Amando facility
contributed a significant amount of salt water disposal revenues during 1997.
During 1998, operations from the Altair property have generated oil field
service revenues, rental income, and income from the sale of fresh water and
reclaimed skim oil which have exceeded the Amando revenues of 1997.
During the first six months of 1998, the Company has acquired heavy equipment,
as well as trucks and trailers for use in operations based out of the Altair
property. The Company has also sold 282 acres out of the Apache Ranch in
New Mexico. However, the sale of the land did not convey grazing rights and
the Company continues to have full use of this acreage at the present time.
NOTE 3: PROCEEDS FROM ISSUING STOCK
The Company has issued 5,736 common shares under its Dividend Reinvestment
Plan during 1998 for proceeds of $65,430. The Company's warrants offering to
stockholders, discussed at Note 5 below, resulted in proceeds of $57,363 for
4,856 shares.
NOTE 4: ACCOUNTS RECEIVABLE
During the second quarter of 1998, accounts receivable have increased by
$306,489. This increase is largely due to an increase in the receivables from
TransTexas Gas Corporation, the Company's largest customer. At June 30, 1998,
TransTexas owed the Company $872,299. However, approximately $290,000 of this
has been collected during July 1998 and other significant collections are
expected during the remainder of the third quarter.
NOTE 5: GAIN ON SALES OF ASSETS
During the first quarter of 1998, the Company was a beneficiary of efforts to
revive a publicly traded entity which the Company had invested in during the
early 1980s. The investment had been written off in the late 1980s as being
worthless. This entity has been revived by third parties and the Company was
able to sell its holdings for $36,721.
During the second quarter of 1998, the Company sold 282 acres out of its
Apache Ranch in New Mexico, while retaining grazing rights, at a gain of
$1,799.
NOTE 6: WARRANTS ISSUED
During March 1998, the Company registered 200,000 warrants (and underlying
common shares) for issuance to existing stockholders. This effort was
designed to offer existing stockholders the opportunity to increase their
holdings in the Company based on one warrant for each four shares held. There
was no market for these warrants. The warrants were to be exchanged for
registered common shares on a one for one basis. The exercise price of the
warrants was $11.8125 per share. This offering has closed and its results are
presented at Note 3.
NOTE 7: EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per common share (EPS) for the three and six months ended June 30 as
indicated.
Three Months Six Months
1998 1997 1998 1997
--------- --------- --------- ---------
Numerator:
Net income $ 100,545 $ 215,612 $ 289,062 $ 368,291
Less preferred stock dividends - - - -
--------- --------- --------- ---------
Numerator for basic EPS 100,545 215,612 289,062 368,291
Effect of dilutive preferred
stock dividends - - - -
--------- --------- --------- ---------
Numerator for diluted EPS $ 100,545 $ 215,612 $ 289,062 $ 368,291
========= ========= ========= =========
Denominator:
Basic weighted average
shares outstanding 586,425 541,821 583,443 556,609
Convertible preferred shares 33,710 33,710 33,710 33,710
--------- --------- --------- ---------
Denominator for diluted EPS 620,135 575,531 617,153 590,319
========= ========= ========= =========
Basic EPS $ 0.17 $ 0.39 $ 0.50 $ 0.66
Diluted EPS 0.16 0.37 0.47 0.62
NOTE 8: COMPREHENSIVE INCOME
Other comprehensive income is comprised of unrealized gains/losses on
marketable securities. Changes in unrealized gains/losses on marketable
securities for 1998 are as follows:
Balance at December 31, 1997 $ (31,437)
Change during 1998 (6,151)
----------
Current balance $ (37,588)
==========
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<PAGE>
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
During the first two quarters of 1998, the Company has begun to realize
significant revenues from the potential that was seen when the Altair
property was acquired in 1997. New business activity developed as a direct
result of having established a presence in the area includes rental of
facilities and heavy equipment, trucking services, establishment of an oil
reclamation facility, and the development of a new salt water disposal
facility near El Campo, Texas. With activities begun during the last half of
1997 having been fairly well established and contributing to revenues, and
with the addition of new equipment in the first half of 1998, management
expects the Company to see further improvements in revenues and net income as
the year progresses.
LIQUIDITY AND CAPITAL RESOURCES
Management is pleased to report total assets of $7,454,855 for June 30, 1998,
an increase of $658,003 over $6,796,852 on December 31, 1997, and an increase
of $341,803 over March 31, 1998. These significant increases are shown in
the rise in cash balances and accounts receivable augmented by the addition of
equipment. Equipment additions consisted primarily of the purchase of trucks
and trailers to further develop the oil field services, skim oil purchasing,
and trucking operations based out of the Altair property.
Current assets were up when comparing June 30, 1998 to both December 31, 1997
and June 30, 1997. Current assets increased because of increased cash
generated by the new Altair operations. Accounts receivable has increased
primarily due to the increased activities. (The Company does a high
percentage of this business with TransTexas Gas Corporation, as discussed
below.) Current liabilities were reduced slightly when comparing the current
balances to the balances at the end of the same quarter in 1997, but were up
when compared to balances at December 31, 1997. The increase is due primarily
to an increase in accrued income taxes and utilization of a line of credit
facility. The borrowings, under the existing lines of credit were made
initially to participate in an oil and gas lease project. When that project
failed to materialize, the funds were used to acquire vacuum trucks and
trailers. These loans are expected to be repaid before year end. It is
important to note that the Company has no long-term bank debt and that its
property and equipment are free from liens.
The Company's oil field services and rental revenues are derived largely from
TransTexas Gas Corporation. (Business with TransTexas represented 48% of the
Company's total revenues during the six months ended June 30, 1998.) The
Company has not experienced any significant problems ultimately collecting its
receivables from TransTexas and believes that these obligations will continue
to be paid as they have in the past. It is expected that the volume of
activity and receivables from TransTexas will continue to be significant.
Should TransTexas become unable to pay its bills, the Company's related assets
and earnings would be adversely impacted. Subject to this consideration, the
Company is not aware of any trends or demands that would be likely to reduce
its ability to continue its relationship with TransTexas. Management believes
that the Company would be able to generate sufficient cash flow to meet its
obligations should such adversity occur.
During March 1998, the Company issued warrants to existing stockholders to
allow them to expand their holdings through the purchase of additional shares
of the Company's unissued common stock. Proceeds from the exercise of
warrants totaled $57,363. Additionally, proceeds from the Company's Dividend
Reinvestment Plan have totaled $65,430 during the first six months of 1998.
These proceeds were utilized in further development of resources and
opportunities available from the Altair property.
RESULTS OF OPERATIONS
A large portion of the basic start-up operations were completed on the Altair
property during the last half of 1997 with a favorable impact on revenues
reflected in the first two quarters of 1998. Management reports total
operating revenues of $1,828,490 for the first six months of 1998, which is an
increase of $336,928 over the first six months of 1997. This increase is
primarily attributable to the Company's new leasing and oil reclamation
operations at the Altair property. The Company received income from trucking
and equipment services consisting of equipment moving, vacuum truck services,
oil transportation, and pad construction. In addition, portions of the
property were leased out as "lay-down yards" where drilling companies and
operators could store their equipment. When comparing the quarter ended June
30, 1998 to the previous quarter (March 31, 1998) and to the same quarter in
1997, oil and gas production revenues were down because of lower oil prices
and a reduced exchange rate from Australia to the United States. In addition,
skim oil purchases and sales at the oil reclamation plant were not as high in
the second quarter as previously anticipated due to lower oil prices.
Costs of revenues increased when comparing the second quarter of 1998 to the
second quarter of 1997 primarily because of the skim oil purchases at the
Company's skim oil reclamation plant. Salt water for disposal contains
residual amounts of oil which can be skimmed and sold to refineries. In
addition to skimming the oil from the salt water brought to the Company's own
salt water disposal facilities, the Company has been purchasing oil generated
from operators of other salt water disposal facilities. Gross margin from oil
reclamation is approximately $4 per barrel, excluding transportation costs.
However, with the significant reduction in oil prices, less skim oil is
available due to the effort required in its collection versus its value.
Total operating expenses increased when comparing the second quarter of 1998
to the second quarter of 1997. The largest increases were in the categories
of personnel costs and repairs and maintenance. Personnel costs increased as
additional employees were hired for the expanding activities based out of the
Altair property. Repairs and maintenance costs increased because of the
expansion of the Altair operations with additional equipment to repair and
maintain. Because of the higher operating expenses, income from operations was
lower for the quarter and six months ended June 30, 1998 than in comparable
periods of 1997.
The Company's net income and earnings per share for the current quarter were
$100,545 and $0.17, a decrease from the same period in 1997 ($215,612 and
$0.39). The net income and earnings per share for the first six months of 1998
also decreased since 1997 - $289,062 and $0.50 for 1998 compared to $368,291
and $0.66 for 1997. This decline had been anticipated due the change in the
Company's mix of revenues from primarily salt water disposal with relatively
low personnel and maintenance costs to the service and oil reclamation
businesses which require greater use of equipment and personnel. Management
has concentrated its efforts in the first half of 1998 on adding to the
Altair operations through purchase of equipment when needed. This has
resulted in increased assets and increased revenues for the Company when
comparing to the first half of 1997.
Cash flows from operations decreased during the first half of 1998 from the
first half of 1997 largely due to decreased net income and increased accounts
receivable as previously discussed. During June 1997, the Company sold the
Amando disposal facility and used those proceeds in the purchase of the Altair
property (which included the $200,000 increase in inventory). The cash flows
for property and equipment in 1998 is primarily for equipment being utilized
in the operations based at the Altair property. The proceeds from issuing
stock in 1997 and about one-half of the proceeds in 1998 are from the
Company's Dividend Reinvestment Program. The other half of the 1998 stock
proceeds was from the warrants offering discussed above.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Where this Form 10-Q includes "forward-looking" statements within the meaning
of Section 27A of the Securities Act, the Company desires to take advantage of
the "safe harbor" provisions thereof. Therefore, the Company is including
this statement for the express purpose of availing itself of the protections
of such safe harbor provisions with respect to all of such forward-looking
statements. The forward-looking statements in this Form 10-Q reflect the
Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ from those
anticipated. In this Form 10-Q, the words "anticipates," "believes,
"expects," "intends," "future" and similar expressions identify
forward-looking statements. The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances
that may arise after the date hereof. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by this section.
YEAR 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue. The
"Year 2000" problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations. The Company believes that all of its software and equipment
are "Year 2000" compliant and that this problem will have no affect on the
Company's internal operations. Should companies with which the Company does
business suffer significant problems within their systems, an adverse impact
could be incurred by the Company. However, the Company has no way of
anticipating or controlling such failure on the part of its customers.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income" which establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Among other disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements.
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 establishes standards for
the way that public companies report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosure regarding products and services,
geographic areas and major customers.
Both SFAS 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any,
they may have on future financial statement disclosures. Results of
operations and financial position, however, will be unaffected by
implementation of these standards.
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<PAGE>
<PAGE>
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
None
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 hereunto duly authorized.
GOLDEN TRIANGLE INDUSTRIES, INC.
August 18, 1998 /s/ Shawna Owens
Shawna Owens, Treasurer
August 18, 1998 /s/ Robert B. Early
Robert B. Early
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Golden Triangle Industries, Inc. for the period
ended JUNE 30, 1998, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000042284
<NAME> GOLDEN TRIANGLE INDUSTRIES, INC.
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 185188
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<ALLOWANCES> 0
<INVENTORY> 229530
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<PP&E> 7008005
<DEPRECIATION> 1888084
<TOTAL-ASSETS> 7454855
<CURRENT-LIABILITIES> 411901
<BONDS> 0
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<CGS> 774714
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<OTHER-EXPENSES> 671100
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