SECURITIES 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 1934 for the quarterly period ended September 30, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number:000-27691
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GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0067813
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
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(Address of principal executive office) (Zip Code)
(801) 575-8073
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(Issuer's telephone number)
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 XX No
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The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of November 7, 2001 was 7,969,280.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............2
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................6
SIGNATURES.....................................................................7
INDEX TO EXHIBITS..............................................................8
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ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Golden Opportunity Development
Corporation, a Nevada corporation, and its subsidiaries and predecessors unless
otherwise indicated. Unaudited, condensed interim financial statements including
a balance sheet for the Company as of the quarter ended September 30, 2001 and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-4 and are incorporated herein by
this reference.
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1
Golden Opportunity Development Corporation
Condensed Balance Sheet
September 30, 2001
(Unaudited)
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ASSETS
Current Assets:
Cash and cash equivalents $ 202
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Total current assets 202
Property and Equipment 2,552,449
Less: Accumulated Depreciation (212,129)
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Total fixed assets (net) 2,340,320
TOTAL ASSETS $ 2,340,522
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LIABILITIES AND STOCK HOLDERS' EQUITY
Current Liabilities:
Contingent liabilities - Ernest money deposits (see Note 3) $ 25,500
Accounts payable-related party 392,526
Taxes payable 36,545
Current portion of Long Term Obligations 29,941
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Total current liabilities 484,512
Long Term Obligations (net of current portion) 1,760,492
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TOTAL LIABILITIES 2,245,004
Stockholders' equity
Common stock $.001 par value shares, 100,000,000 shares authorized;
7,969,280 shares issued and outstanding on September 30, 2001 7,970
Additional paid in capital 1,307,971
Retained Earnings (Deficit) (1,220,423)
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Total stockholders' equity 95,518
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TOTAL LIABILITIES AND EQUITY $ 2,340,522
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See notes to financial statements
F-1
Golden Opportunity Development Corporation
Unaudited Condensed Statements of Operations
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
REVENUE
Motel Revenue $ 50,979 $ 59,134 $ 161,640 $ 194,012
Lease Revenue 8,500 10,435 9,314 33,440
---------------- -------------- -------------- --------------
Total Revenue 59,479 69,569 170,954 227,452
EXPENSES
Motel Direct Costs 58,377 108,624 220,351 332,494
Selling, general & administrative 9,523 8,904 24,343 29,401
Depreciation 12,479 12,478 37,124 48,659
Impairment loss (Note 3) 117,946 - 117,946 -
Interest Expense 26,935 26,982 81,108 83,089
---------------- -------------- -------------- --------------
Total Operating Expenses 225,260 156,988 480,872 493,643
---------------- -------------- -------------- --------------
NET LOSS $ (165,781) $ (87,419) $ (309,918) $ (266,191)
---------------- -------------- -------------- --------------
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.02) $ (0.01) $ (0.04) $ (0.06)
---------------- -------------- -------------- --------------
BASIC AND DILUTED
WEIGHTED AVERAGE
SHARES OUTSTANDING 7,969,000 7,754,000 7,969,000 4,365,000
See notes to financial statements
F-2
Golden Opportunity Development Corporation
Unaudited Condensed Statements of Cash Flows
Nine Months Nine Months
Ended Ended
September 30, September 30,
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (309,918) $ (266,191)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization 37,124 48,659
Impairment loss on markdown of buildings (note 3) 117,946 -
Changes in operating assets and liabilities
Other Assets - (616)
Accounts receivable trade - (1,182)
Accounts Payable (6,504) (10,209)
Accounts Payable-Related Parties 121,340 206,891
Stock issued for services 4,000 -
Contingent liabilities - Ernest money 25,500 -
Accrued Expenses 25,034 16,113
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Total adjustments 324,440 259,656
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NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 14,522 (6,535)
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CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
Purchase of additional building improvements - (307)
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NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES - (307)
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Notes (21,416) (25,082)
Common stock issued for debt - 25,013
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NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (21,416) (71)
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NET INCREASE (DECREASE) IN CASH EQUIVALENTS (6,894) (6,913)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 7,096 10,027
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 202 $ 3,114
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ 81,108 $ 83,089
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See notes to financial statements
F-3
Golden Opportunity Development Corporation
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2001
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have been
prepared by management in accordance with the instructions in Form 10-QSB and,
therefore, do not include all information and footnotes required by generally
accepted accounting principles and should, therefore, be read in conjunction
with the Company's Annual Report to Shareholders on Form 10-KSB for the fiscal
year ended December 31, 2000. These statements do include all normal recurring
adjustments which the Company believes necessary for a fair presentation of the
statements. The interim operations results are not necessarily indicative of the
results for the full year ended December 31, 2001.
2. Related Party Transaction
During the nine months ended September 30, 2001, the Company's parent and/or
related entities advanced $121,340 to cover operating deficiencies. The amount
received back during the quarter ended September 30, 2001, was $760. The total
amount payable owed to related parties at September 30, 2001 was $392,526.
3. Significant Events and Impairment Loss
On June 10, 2001, the Company entered into a sales agreement to sell the General
LaFayette Inn and its surrounding land to LaFayette Development Holding LLC
(buyer) for $2,332,000. Pursuant to the agreement, the buyer has made
non-refundable earnest money deposits in the amount of $25,500 through September
30, 2001 and an additional $29,500 on October 11, 2001. These amounts are shown
on the balance sheet as contingent liabilities in the event the sale falls
through, although the company is confident the likelihood of that occurring is
very slim. The buyer has completed their due diligence and has committed to
proceed with the sale (see exhibit 10(iv) Amendment to Sales Agreement). The
sale is scheduled to close on December 7, 2001. On that date, the Company will
have sold all its assets except cash in the bank and resolved a majority of its
liabilities except the related party payable. It is anticipated that a loss of
approximately $117,946 will be booked on the sale. Accordingly, the Company has
booked an impairment loss on the market value of the building for the same
amount. For more information on the sale and the agreement, see exhibit 10(iii)
attached to the June 30, 2001 Form 10QSB filed August 13, 2001.
4. Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material changes in
the information disclosed in the notes to the financial statements included in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.
Therefore, those footnotes are included herein by reference.
F-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
As used herein the term "Company" refers to Golden Opportunity Development
Corporation, its subsidiaries and predecessors, unless the context indicates
otherwise. The Company was incorporated in Louisiana on May 7, 1997 for the
purpose of engaging in any lawful activity for which corporations may be formed
under the Business Corporation Law of Louisiana. On October 5, 2000, the Company
merged with Golden Opportunity Development Corporation, a Nevada corporation,
for the purpose of changing its domicile from the State of Louisiana to the
State of Nevada.
The Company is currently engaged in the business of operating and acquiring
hospitality property. The Company currently owns a 134 unit motel, a restaurant
facility and four adjacent office retail buildings in Baton Rouge, Louisiana
(the "Motel"). The Motel is located next to the Mississippi River, three blocks
from a river boat dock, at 427 Lafayette Street, Baton Rouge, Louisiana. The
Company is also actively seeking to acquire other hospitality properties.
The Company's operations are largely being overseen by Diversified Holdings I,
Inc., a subsidiary of Axia Group, Inc a majority shareholder, (the "Parent
Company") by way of a Management Agreement entered into on April 30th, 1999
between the Company and the Parent Company. The Company agreed to compensate
Diversified Holdings I, Inc. $10,000 per month plus 5% of net income, if any, in
excess of $5,000 in return for management services provided by Diversified
Holdings I, Inc.
The Company listed the property for sale with Brooks Hearn, a real estate broker
in Baton Rouge, Louisiana, for a listed sale price of $2,500,000. On June 10,
2001 the Company received and accepted an offer to buy the motel for $2,332,000.
The closing of the sale is pending (scheduled for December 7, 2001) subject to
the terms and conditions set forth in the sales agreement. (see exhibit 10(iii)
of Form 10QSB for the period ended June 30, 2001, filed on August 13, 2001).
Pursuant to the sales agreement the Company has received $55,000 in
non-refundable earnest money deposits with $25,500 being received by September
30, 2001 and the remaining $29,500 received on October 10, 2001.
Results of Operations
Revenues
Revenues for the quarter ended September 30, 2001, decreased to $59,479 from
$69,569 for the quarter ended September 30, 2000, a decrease of 14.5%. The
decrease in revenues was attributable to a decrease in commercial tenant and
retail rental occupancy.
Revenues for the nine month period ended September 30, 2001 were $170,954
compared to $227,452 for the corresponding period ended September 30, 2000.
Losses
Net losses for the quarter ended September 30, 2001, increased to $165,781 from
$87,419 for the quarter ended September 30, 2000, an increase of 90%. The
increase in losses is attributable to a $117,946 markdown of property value due
to the recently signed sale agreement partially offset by a decrease in repair
costs and a
2
large decrease in general and administrative expenses. The Company has made
significant strides in decreasing overhead and direct costs at the Motel through
reductions in work force and streamlining operations.
Net losses for the nine months ended September 30, 2001, increased to $309,918
from $266,191 for the nine months ended September 30, 2000, an increase of 16%.
The increase in losses is attributable to a $117,946 markdown of property value
due to the recently signed sale agreement mostly offset by decrease in repair
costs and a dramatic decrease in general and administrative expenses. The
Company has made significant strides in decreasing overhead and direct costs at
the Motel through reductions in work forces and elimination of unnecessary
costs.
The Company expects to continue to incur losses at least through fiscal 2001 and
there can be no assurance that the Company will achieve or maintain
profitability or that its revenue can be sustained in the future. It is
anticipated that upon the sale of the Motel, the Company will incur a long term
capital loss of approximately $117,946 and has booked a corresponding impairment
loss to offset this.
Expenses
General and administrative expenses for quarters ended September 30, 2001, and
September 30, 2000, were $9,523 and $8,904, respectively. General and
administrative expenses for nine months ended September 30, 2001 and September
30, 2000, were $24,343 and $29,401, respectively.
Depreciation and amortization expenses for the quarters ended September 30,
2001, and September 30, 2000, were $12,479 and $12,478 , respectively.
Depreciation for the nine months ended September 30, 2001 and 2000 was $37,124
and $48,659, respectively. The difference is due to a recalculation of
depreciation schedules and also an elimination of equipment and fixtures
previously being depreciated.
The Company had a charge for impairment of fixed assets of $117,946 for the
quarter ended September 30, 2001, pursuant to the Company's impairment policy in
which it was determined that the carrying value of the Motel was less than the
anticipated value to the Company as evidenced by the purchase agreement.
For the quarters ended September 30, 2001 and September 30, 2000, the Motel's
direct operating costs were $58,377 and $108,624 respectively, a decrease of
$50,247. This decrease is primarily attributable to a decrease expenses relating
to payroll and repairs and general maintenance costs.
Liquidity and Capital Resources
Cash flow provided by operations was $14,522 for the nine months ended September
30, 2001, compared to cash flow used by operating activities of $6,535 for the
nine months ended September 30, 2000.
Cash flow used in financing activities was $21,416 for the nine months ended
September 30, 2001, compared to $71 for the nine months ended September 30,
2000. The Company's cash flow used in financing activities increased due to the
fact that the Company did not issue stock for debt resolution to offset payments
on mortgages as it did in the previous year.
The Company has funded its cash needs from inception through September 30, 2001,
with revenues generated from its operations and advances from its Parent
Company. In addition, the Company may issue additional shares of its common
stock pursuant to a private placement or registered offering, if necessary to
raise
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additional capital.
Capital Expenditures
The Company has a working capital deficiency at September 30, 2001, in the
amount of $484,310. However, $392,526 of this working capital deficiency is owed
to the Company's Parent. The Company intends to fund the Motel's operations over
the course of the year with cash infusions until the property is sold or if the
sale falls through, with long term bank financing, increasing rental revenues
from increased occupancy rates and/or equity financing in the form of a private
placement offering.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past two years. The Company believes that it can offset inflationary
increases in the cost of materials and labor by increasing sales and improving
operating efficiencies.
Known Trends, Events, or Uncertainties
Lodging Industry Operating Risks. The Company is subject to all operating risks
common to the lodging industry. These risks include, among other things, (i)
competition for guests from other hotels, a number of which may have greater
marketing and financial resources than the Company, (ii) increases in operating
costs due to inflation and other factors, which increases may not have been
offset in recent years, and may not be offset in the future, by increased room
rates, (iii) dependance on business and commercial travelers and tourism, which
business may fluctuate and be seasonal, (iv) increase in energy costs and other
expenses of travel which may deter travelers, and (v) adverse effects of general
and local economic and weather conditions.
Capital Requirements and Availability of Financing. The Company's business is
capital intensive, and it will have significant capital requirements in the
future. The Company's leverage could affect its ability to obtain financing in
the future to undertake remodeling or refinancing on terms and subject to
conditions deemed acceptable to the Company. In the event that the Company's
cash flow and working capital are not sufficient to fund the Company's
expenditures or to service its indebtedness, it would be required to raise
additional funds through the sale of additional equity securities, the
refinancing of all or part of its indebtedness or the sale of assets. There can
be no assurances that any of these sources of funds would be available in an
amount sufficient for the Company to meet its obligations. Moreover, even if the
Company were able to meet its obligations, its leveraged capital structure could
significantly limit its ability to finance its remodeling program and other
capital expenditures to compete effectively or to operate successfully under
adverse economic conditions. Additionally, financial and operating restrictions
contained in the Company's existing indebtedness may limit the Company's ability
to secure additional financing, and may prevent the Company from engaging in
transactions that might otherwise be beneficial to the Company and to holders of
the Company's common stock. The Company's ability to satisfy its obligations
will also be dependant upon its future performance, which is subject to
prevailing economic conditions and financial, business and other factors beyond
the Company's control.
General Real Estate Investment Risks. The Company's investments are subject to
varying degrees of risk generally incident to the ownership of real property.
Real estate values and income from the Company's current properties may be
adversely affected by changes in national or local economic conditions and
neighborhood characteristics, changes in interest rates and in the availability,
cost and terms of mortgage funds, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for
4
capital improvements, changes in governmental rules and fiscal policies, civil
unrest, acts of God, including earthquakes and other natural disasters which may
result in uninsured losses), acts of war, adverse changes in zoning laws and
other factors which are beyond the control of the Company.
Value and Illiquidity of Real Estate. Real estate investments are relatively
illiquid. The ability of the Company to vary its ownership of real estate
property in response to changes in economic and other conditions is limited. If
the Company must sell an investment, there can be no assurance that the Company
will be able to dispose of it in the time period it desires or that the sales
price of any investment will recoup the amount of the Company's investment.
Property Taxes. The Company's property is subject to real property taxes. The
real property taxes on this property may increase or decrease as property tax
rates change and as the property is assessed or reassessed by taxing
authorities. If property taxes increase, the Company's operations could be
adversely affected.
Investment in Single Industry/Property. The Company is subject to risks inherent
in investments in a single industry/property. The effects on the Company's
revenues resulting from a downturn in the lodging industry would be more
pronounced than if the Company had diversified its investments outside of the
lodging industry.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits on page 7 of this Form
10-QSB, and are incorporated herein by this reference.
(b) Reports on Form 8-K The Company filed three reports on Form 8-K
during the quarter for which this report is filed.
(1) On September 17, 2001, the Company filed a Form 8K disclosing
the resignation of Mantyla McReynolds as independent auditors
for the company.
(2) On September 27, 2001, the Company filed a Form 8K/A amending
the previously filed Form 8K on September 17, 2001, to clarify
language and include an attached letter indicating Mantyla
McReynolds' review of the Form 8-KA and agreement with the
statements made therein, as requested by the SEC.
(3) On October 9, 2001, the Company filed a Form 8K disclosing the
retention of Tanner and Company as the Company's new
independent auditors.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this 8th day of November 2001.
Golden Opportunity Development
Corporation
November 8, 2001
By: s/ Richard Surber
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Richard Surber
Its: President, Chief Executive Officer and
Director
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INDEX TO EXHIBITS
Exhibit
No. Page No. Description
2(i) * Articles of Incorporation of the Company dated May
7, 1997. (Incorporated by reference filed with the
Company's Form 10-SB/A-2 on May 2, 2000).
2(ii) * Amended Articles of Incorporation of the Company
dated April 26, 1999. (Incorporated by reference
filed with the Company's Form 10-SB/2 on May 2,
2000).
2(iv) * By-laws of the Company. (Incorporated by reference
filed with the Company's Form 10-SB/A-2 on May
2, 2000).
Material Contracts
Exhibit
No. Page No. Description
10(i) * Management Agreement between the Company and
Diversified Holdings, I, Inc. dated April 30, 1999.
(Incorporated by reference filed with the Company's
Form 10-SB/A-2on May 2, 2000).
10(ii) * Listing Contract between Brooks Hearn, Broker and
Golden Opportunity Development Corporation regarding
the General Lafayette Hotel in Baton Rouge,
Louisiana. (Incorporated by reference filed with the
Company's Form 10QSB for the period ended March
31, 2001 on May 10, 2001)
10(iii) * Sales Agreement between LaFayette Development
Holdings LLC and Golden Opportunity Development
Corporation for the sale of the General LaFayette
Motel in Baton Rouge, Louisiana (Incorporated by
reference filed with the Company's Form 10QSB for the
period ended June 30, 2001 on August 13, 2001)
10(iv) 8 Amendment to sales agreement between LaFayette
Development Holdings LLC and Golden Opportunity
Development Corporation for the sale of the General
LaFayette Motel in Baton Rouge, Louisiana
* Previously filed as indicated and incorporated herein by
reference from the referenced filings previously made by the
Company.
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Exhibit 10(iv)
ADDENDUM
to
PURCHASE AGREEMENT
Now comes Golden Opportunity Development Corporation, "Seller" and
Lafayette Development Holding, LLC, "Purchaser" all of the parties to that
certain Purchase Agreement dated June 10, 2001. Providing for the sale and
purchase of certain property known as the General Lafayette Hotel, located in
downtown Baton Rouge, Louisiana.
Whereas, since the date of signing of the Purchase Agreement the parties
have come to the following additional agreements and to the extent any of them
change or modify the terms set forth by the Purchase Agreement they are by the
following written agreement of the parties modified as set forth herein below;
and
Whereas, the actions and due diligence conducted by the parties has
indicated that all contingencies to a closing have been or appear to be ready to
be met on or before the following proposed date for closing and that each party
anticipates that it will be prepared to close on that date; now therefore the
parties agree as follows:
1. The parties agree that closing of the sale shall take place on December 7,
2001, provide Purchaser shall have made all required payments for such an
extension of the closing date as required by the Purchase Agreement.
2. Seller shall be allowed until the 30th day of November, 2001 to terminate
existing tenants rights of occupancy and continued rights to occupy rooms or
space in the Property.
3. Tenants of two retail buildings with existing month-to-month lease shall be
allowed to remain until closing, rentals shall be pro-rated as provided for in
the contract and Purchaser shall assume the obligations of landlord of these two
tenants effective the date of closing.
4. Purchase is to be allowed the right to contact and negotiate agreements for
post closing use of the property by current lessees of parking spaces.
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4. Seller shall have until the 6th day of December 2001, to terminate existing
employees working on the premises of the property and this date shall also serve
as the date of termination for all other contracts, reservations and service
obligations as provided for in Article 3, of the Purchase Agreement.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Addendum to
be executed this 10th day of October, 2001.
Seller: Purchaser:
GOLDEN OPPORTUNITY LAFAYETTE DEVELOPMENT
DEVELOPMENT CORPORATION HOLDING, LLC
By: s/ Richard D. Surber By: s/ Richard Pries
---------------------------------- --------------------------
Richard D. Surber, President Richard Pries,
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