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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly Period Ended JUNE 30, 2000
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 #)
259 Plaza Drive, Suite D
Oviedo, FL 32765
(Address of Principal Executive Offices)
(formerly 6314 Aspen Cove Court Sugar Land, TX 77479)
(281) 565-7300
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
There were 7,111,706 shares of Common Stock, $.001 Par Value at
June 30, 2000 after adjustment for announced 2 for 1 split.
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INDEX
Page
Part I. Financial Information
Item 1. Financial Statements . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis . . . . 12
Part II: Other information
Item 6: Exhibits and Reports on Form 8-K . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . 14
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GOLDEN TRIANGLE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 522,497 $ 66,199
Accounts receivable 454,545 604,624
Inventory-land and homes 8,123,243 -
Inventory-sand & gravel and oil - 238,930
Marketable securities - 270,587
Deferred income taxes ` - 557,288
Prepaid expenses 368,951 15,000
----------- -----------
Total Current Assets 9,469,236 1,752,628
----------- -----------
PROPERTY AND EQUIPMENT 252,164 5,144,010
Accumulated depreciation, depletion
and amortization (26,853) (1,287,649)
----------- -----------
Net Property and Equipment 225,311 3,856,361
----------- -----------
OTHER ASSETS
Deferred income tax assets - 126,306
Investment - at equity 1,234,939 -
Other 87,508 646,471
----------- -----------
Total Other Assets 1,322,447 772,777
----------- -----------
TOTAL ASSETS $11,016,994 $ 6,381,766
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 667,501 $ 67,827
Accrued expenses 246,380 11,050
Short term notes and lines of credit 7,315,214 266,200
Loans from stockholders 140,976 -
----------- -----------
Total Current Liabilities 8,370,071 345,077
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value (1,000,000
shares authorized)
Class A (1,154 and 2,114 outstanding) 115 211
Class B (1,032 and 80,864 outstanding) 103 8,086
Common stock, $.001 par value (100,000,000 shares
authorized; 7,110,706 and 1,522,060 outstanding) 7,111 1,522
Additional paid-in capital 3,193,453 7,542,654
Unrealized (loss) on marketable securities - 55,676
Accumulated deficit (553,859) (1,571,460)
----------- -----------
Total Stockholders' Equity 2,646,923 6,036,689
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,016,994 $ 6,381,766
=========== ===========
See accompanying selected information.
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GOLDEN TRIANGLE INDUSTRIES, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months Six Months
2000 1999 2000 1999
---------- ---------- ---------- ----------
OPERATING REVENUES $3,731,956 $ - $3,731,956 $ -
COST OF REVENUES 2,942,345 - 2,942,345 -
---------- ---------- ---------- ----------
GROSS PROFIT 789,611 - 789,611 -
SELLING AND ADMINISTRATIVE
EXPENSES 357,906 - 366,602 -
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 431,705 - 423,009 -
OTHER INCOME/(EXPENSES)
Interest expense (146,561) - (146,561) -
Transfer fees 1,488 2,148 2,923 4,323
Equity in loss of investee (52,309) - (52,309) -
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 234,323 2,148 227,062 4,323
Income tax expense 117,364 - 114,677 -
---------- ---------- ---------- ----------
NET INCOME FROM CONTINUING
OPERATIONS 116,959 2,148 112,385 4,323
Income/(loss) from discontinued
operations (net of income tax
effects) - (130,049) 905,216 (387,136)
---------- ---------- ---------- ----------
NET INCOME/(LOSS) 116,959 (127,901) 1,017,601 (382,813)
Other comprehensive income, net
of tax effects
Unrealized gains/(losses)
on securities - (2,904) - (7,293)
---------- ---------- ---------- ----------
COMPREHENSIVE INCOME $ 116,959 $ (130,805) $1,017,601 $ (390,106)
========== ========== ========== ==========
Earnings per Common Share
Income from continuing
operations $ 0.07 $ 0.00 $ 0.07 $ 0.00
Net Income 0.07 (0.10) 0.63 (0.31)
Earnings per Common Share -
Assuming Dilution
Income from continuing
operations $ 0.07 $ 0.00 $ 0.07 $ 0.00
Net income 0.07 (0.10) 0.62 (0.31)
See accompanying selected information.
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GOLDEN TRIANGLE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase/(Decrease) in Cash and Cash Equivalents
(Unaudited)
Six Months Ended June 30,
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) $ 1,017,601 $ (382,813)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 69,576 237,341
(Gain) on sale of assets and securities (1,317,753) (16,500)
Allowance for bad debts adjustment - 115,257
Equity in loss of investee 52,309 -
Receivables (163,891) (138,385)
Inventory 491,581 (42,702)
Prepaid expenses (72,679)
Amounts due from/to related parties - -
Other assets 14,264 -
Accounts payable and accrued expenses (304,606) 68,419
Accrued and deferred taxes 418,912 (31,046)
----------- -----------
NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES 205,314 (190,429)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (227,011) (481,648)
Purchase of marketable securities 15,079 (11,203)
Investment in subsidiaries - (2,112)
Proceeds from sale of securities 1,406,082 16,500
Cash from Whitemark Homes, Inc. acquisition 241,315 -
Cash to discontinued operations (1,131,693) -
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES 303,772 (478,463)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing stock 22,709 35,523
Loan (to) related parties (1,976) (8,347)
Loan from related parties 123,000 70,395
Repayment from related parties 84,668 27,397
Short term borrowings (14,989) -
Borrowing under line of credit - 95,000
Repayments on line of credit (266,200) -
Proceeds from long-term debt - 300,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (52,788) 519,698
----------- -----------
Increase/(Decrease) in Cash 456,298 (148,924)
Cash at Beginning of Year 66,199 160,204
----------- -----------
CASH AT END OF PERIOD $ 522,497 $ 11,280
=========== ===========
Supplemental Disclosures - Non-cash Investing and Financing Transactions
Cash paid for interest $ 6,492 $ 11,986
Cash paid for income taxes - -
See accompanying selected information.
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GOLDEN TRIANGLE INDUSTRIES, INC.
SELECTED INFORMATION FOR CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2000
NOTE 1: BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include the
accounts of Golden Triangle Industries, Inc. and all subsidiaries in which a
controlling interest is held (the ACompany@). The Company=s investments in
entities in which a significant, but less than controlling, interest is held
are accounted for by the equity method. All significant intercompany
transactions and balances have been eliminated.
These 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 by management. They
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read
in conjunction with the December 31, 1999 audited financial statements in
the Company's Annual Report on Form 10-K for the year then ended. However,
in the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for fair presentation of the accompanying
consolidated condensed financial statements have been made. Certain prior
year amounts in the financial statements have been reclassified to conform
with the current period presentation.
The Company historically has experienced, and expects to continue to
experience, variability in quarterly results. The consolidated condensed
statements of earnings for the three and six months ended June 30, 2000 are
not necessarily indicative of the results to be expected for the year ended
December 31, 2000.
SIGNIFICANT TRANSACTIONS
Acquisition of Whitemark Homes, Inc.
Effective April 1, 2000, the Company acquired Whitemark Homes Inc. in a
transaction in which Whitemark Homes' stockholders received a total of
2,783,760 shares of the Company's common stock. Whitemark Homes is a real
estate residential developer and homebuilder, with operations in Orlando and
the central Florida area. Whitemark Homes had total revenues of $13.4
million and net income of $.4 million in 1999, and delivered 134 homes
during that year.
The acquisition was accounted for using the purchase method of accounting.
In connection with the transaction, the Company acquired assets with a fair
value of $35 million and assumed liabilities with a fair value of $7
million. However, due to the change in control of the Company and the
significant interest in these asets retained by the owners of Whitemark
Homes, these assets were recorded on the Company's books at cost rather than
fair value. Revenues and net earnings on an unaudited pro forma basis were
$6,694,770 and $265,094, respectively, for the six months ended June 30,
2000 and $5,434,200 and $92,455, respectively, for the six months ended June
30, 1999. The pro forma information indicates the activities of the Company
as though significant transactions had occurred at the beginning of 1999.
They give effect to actual operating results prior to the acquisition,
adjusted for the pro forma effect of interest expense, and certain other
adjustments, together with their related income tax effect. The pro forma
information does not purport to be indicative of the results of operations
which would have actually been reported had the acquisition occurred on
January 1, 1999.
Disposition of Oil and Gas, Salt Water Disposal, Sand and Gravel Businesses
and Other Activities
Simultaneously with the acquisition of Whitemark Homes, the Company entered
into an exchange with Kenneth Owens, its President for all of his 39,916
shares (399,160 common shares equivalent) of Series B Preferred stock. All
of the oil and gas, the remaining salt water disposal, and all of the sand
and gravel assets along with the Altair property were transferred to Mr.
Owens with the County Line SWD, Inc. and Jim Wells SWD, Inc. subsidiaries.
The remaining financial assets, cash, marketable securities, receivables,
office fixed assets, and administrative accounts payable were transferred to
a newly created subisidiary, Golden Square Industries, Inc. of which Mr.
Owens received 60% ownership and the Company retained 40%.
Business Segments
Following the significant transactions of the second quarter of 2000, the
Company has three business segments: Homebuilding, Financial Services and
Other Assets.
Homebuilding operations include the sale and construction of single-family
attached and detached homes in the Orlando, Florida area by Whitemark Homes,
Inc. These activities also include the purchase, development, and sale of
residential land by the Company. Sales of the Company=s homes are generally
made pursuant to a standard contract which requires a down payment of up to
10% of the sales price. The contract includes a financing contingency which
permits the customer to cancel in the event mortgage financing at prevailing
interest rates (including financing arrangements by the Company) is
unobtainable within a specified period, typically four to six weeks. The
Company reports an undelivered home sale as part of its backlog upon
execution of the sales contracts and receipt of the down payment. Revenue
is recognized only upon the closing and delivery of a home. The Company
estimates that the average period between the execution of a purchase
agreement for a home and delivery is approximately six months. The
Company's backlog at June 30, 2000 and 1999 was $7,400,000 (74 units) and
$11,800,000 (118 units), respectively.
Financial Services activities are conducted primarily through Home Funding
Corp. which provides mortgage financing, title insurance, and closing
services for Whitemark Homes' homebuyers. The Financial Services Division
packages and resells residential mortgage loans and performs mortgage loan
servicing activities.
Other assets consists primarily of the Company's equity in its 40% of Golden
Square Industries, Inc. which is carried on the equity basis. This
subsidiary's primary assets are marketable securities, real estate and cash
as presented in the following summarized financial statements.
Summarized Balance sheet
Cash and cash equivalents $ 540,703
Marketable securities (net) 270,422
Accounts receivable 1,718,397
Fixed assets 591,793
Accounts and accrued payables (33,967)
---------
Net Equity $ 3,087,348
==========
Significant Accounting Policies
Land and Home Inventory -- Land and home inventory is stated at the lower of
cost or market value, with cost determined using the specific identification
method. Costs include land purchases, direct project development costs,
direct home construction costs, and indirect development and construction
costs. Indirect costs are allocated to each residential property based on
relative sales value of the home and lot. Direct costs include construction
period interest.
Equity method in vestees -- The equity method of accounting is used when the
Company has a 20% to 50% interest in other entities. Under the equity
method, original investments are recorded at cost and adjusted by the
Company's share of undistributed earnings or losses of these entities.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
NOTE 2: SALE OF MARKETABLE SECURITIES
During the first quarter of 2000, the Company sold all of its holdings in
Broadband Wireless Communications, Inc. (formerly known as Black Giant Oil
Company). These holdings were acquired during the early 1980's prior to a
period of dormancy. A group took control of the dormant entity during 1999
and began the combination of several communications entities under the
Broadband name. The Company took the opportunity during the first quarter
to convert its holdings to cash as indicated in the Statements of Operations
and Cash Flows.
The Company also sold approximately 60% of its holdings in Clearworks.net,
Inc. during the first quarter.
As noted above, the marketable securities were transferred to Golden Square
effective April 1, 2000.
NOTE 3: STOCK TRANSACTIONS
The Company has issued 3,746 common shares under its Dividend Reinvestment
Plan during 2000 for proceeds of $12,854.
The Company has also accepted the conversion of 480 shares of Class A and 8
shares of Class B preferred into 4,880 common shares on the basis of ten
common shares for each preferred share tendered.
As discussed above, Kenneth Owens (the Company's former president) returned
a controlling block of 39,916 Series B Preferred shares in exchange for
certain assets and liabilities of the Company.
Also as discussed above, the Company issued 2,783,780 common shares for the
acquisition of Whitemark Homes, Inc. and related land and home inventories.
The Board of Directors approved a 2 for 1 forward stock split with a record
date of August 25, 2000. All share amounts and per share amounts in the
financial statements have been adjusted to reflect this split with the
exception of those listed above in this Note 3.
NOTE 4: COMPREHENSIVE INCOME
Other comprehensive income is comprised of unrealized gains/losses on
marketable securities and dividends paid. Changes in unrealized
gains/losses on marketable securities for 2000 are as follows:
Balance at December 31, 1999 $ 55,676
Change during 2000 (55,676)
-------
Current balance $ -
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NOTE 5: EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per common share (EPS) for the three months ended March 31 as
indicated.
Three Months Six Months
2000 1999 2000 1999
---------- --------- ---------- ----------
Numerator:
Net income from continuing
operations $ 116,959 $ 2,148 $ 112,385 $ 4,323
Income/(loss) from discontinued
operations (net of income tax
effects) - (130,049) 905,216 (387,136)
---------- --------- ---------- ----------
Net income/(loss) 116,959 (127,901) 1,017,601 (382,813)
Less preferred stock dividends - - - -
---------- --------- ---------- ----------
Numerator for basic EPS 116,959 (127,901) 1,017,601 (382,813)
Effect of dilutive preferred
stock dividends - - - -
---------- --------- ---------- ----------
Numerator for diluted EPS $ 116,959 $(127,901) $1,017,601 $ (382,813)
========== ========= ========== ==========
Denominator:
Basic weighted average
shares outstanding 1,604,660 1,222,664 1,680,314 1,216,742
Convertible preferred
shares (1) 21,860 33,740 21,860 33,740
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Denominator for diluted EPS 1,626,520 1,256,404 1,702,174 1,250,482
========== ========= ========== ==========
Earnings/(loss) per share:
Basic:
From continuing operations $ 0.07 $ 0.00 $ 0.07 $ 0.00
Net income/(loss) 0.07 (0.10) 0.61 (0.31)
Assuming Dilution:
From continuing operations $ 0.07 $ 0.00 $ 0.07 $ 0.00
Net income/(loss) 0.07 (0.10) 0.60 (0.31)
NOTE 6: PRO FORMA FINANCIAL DATA REGARDING ACQUISITION OF WHITEMARK HOMES, INC.
Pro Forma Income Statements
Three Months Six Months
2000 1999 2000 1999
---------- ---------- ---------- ----------
OPERATING REVENUES $3,731,956 $3,488,354 $6,694,770 $5,434,200
COST OF REVENUES 2,942,345 2,864,636 5,435,164 4,462,564
---------- ---------- ---------- ----------
GROSS PROFIT 789,611 623,718 1,259,606 971,636
SELLING AND ADMINISTRATIVE
EXPENSES 357,906 338,874 621,659 561,822
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 431,705 284,844 637,947 409,814
OTHER INCOME/(EXPENSES)
Interest expense (146,561) (159,458) (261,099) (262,927)
Transfer fees 1,488 2,148 2,923 4,323
Equity in loss of investee (52,309) - - -
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 234,323 127,534 379,771 151,210
Income tax expense 117,364 50,154 114,677 58,755
---------- ---------- ---------- ----------
NET INCOME FROM CONTINUING
OPERATIONS $ 116,959 $ 77,380 $ 265,094 $ 92,455
========== ========== ========== ==========
Pro Forma Summarized Statements of Cash Flows
Six Months
2000 1999
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NET INCOME $ 265,094 $ 92,455
Adjustments to reconcile net income to
net cash flows from operating activities:
Cash flows from changes in operating
assets and liabilities:
Land and home inventory (26,883) (367,531)
Accounts receivable (269,749) 52,094
Prepaid expenses (63,368) 170,875
Other assets 15,599 (41,086)
Accounts payable (208,443) (36,792)
Accrued expenses 120,956 (157,664)
---------- ----------
Net cash flows from operating activities (166,794) (287,649)
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Cash Flows from Investing Activities:
Purchases of property, plant and equipment (191,482) -
---------- ----------
Cash Flows from Financing Activities:
Proceeds from issuing stock 12,854 -
Proceeds from notes payable 4,927,912 4,124,928
Loans from stockholders 103,001 (85,421)
Repayment of notes payable (4,335,181) (3,809,180)
Distributions (9,000) (32,374)
---------- ----------
Net cash flows from financing activities 699,586 197,953
---------- ----------
Net Increase (Decrease) in Cash 341,310 (89,696)
Cash at Beginning of Period 181,187 352,362
---------- ----------
Cash at End of Period $ 522,497 $ 262,666
========== ==========
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Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Three Monts Ended June 30, 2000 Compared To June 30, 1999
The Company's revenues from home sales for the quarter ended June 30, 2000
increased $244,000 compared to the same period in fiscal 1999. The number
of homes delivered were the same at 35, but the average selling price of
homes delivered increased 10% (to $110,000 from $100,000). The increase of
revenues and homes delivered is primarily attributable to an incerased level
of backlog at the beginning of the current quarter compared to the prior
year period. Management believes that changes in the average selling price
of homes delivered from period to period are attributable to discrete
factors at each of its subdivisions, including product mix and premium lot
availablity and cannot be predicted for future periods with any degree of
certainty.
ACQUISITION AND DISPOSITION AGREEMENTS
In May 2000, the Company finalized an agreement to simultaneously acquire
Whitemark Homes, Inc. in a stock for stock transaction while exchanging
assets which have created auditing problems for the Company for preferred
stock held by the Company's President. The agreement calls for the
issuance of stock to Larry White of Whitemark and the relinquishment of
stock by the Company's President, Kenneth Owens. These stock transactions
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will cause a change in control of the Company as Kenneth Owens has agreed to
resign his position. It is expected that Larry White will be elected
President. The notes to the financial statements contain pro forma financial
statements regarding these simultaneous transactions. In addition, the
Company is preparing a Form 8-K which will contain other required disclosures
and audited financial statements of the Whitemark Homes Group.
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.
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.
May 22, 2000 /s/ Shawna Owens
Shawna Owens, Treasurer
May 22, 2000 /s/ Robert B. Early
Robert B. Early, Chief Financial Officer
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