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 June 30, 2000.
[ ] 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
---------
GOLDEN OPPORTUNITY DEVELOPMENT CORPORATION
-------------------------------------------
(Exact name of small business issuer as specified in its charter)
Louisiana 87-00067813
----------- ------------
(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
---------------------------------------------------------
(Address of principal executive office) (Zip Code)
(801) 575-8073
------------------------
(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
The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of June 30, 2000 was 255,423.
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 6. EXHIBITS AND REPORTS ON FORM 8-K......................................6
SIGNATURES.....................................................................7
INDEX TO EXHIBITS..............................................................8
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Golden Opportunity
Development Corporation, a Louisiana corporation, and its subsidiaries and
predecessors unless otherwise indicated. Consolidated, unaudited, condensed
interim financial statements including a balance sheet for the Company as of the
quarter ended June 30, 2000 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.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
1
Golden Opportunity Development Corporation
Condensed Balance Sheet
June 30, 2000 December 31,
(Unaudited) 1999
------------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,631 $ 10,027
Deposits 4,052 4,052
Prepaid Expenses 4,333 4,333
Other 616 -
------------ -----------
Total current assets 12,632 18,412
Property and Equipment (net of depreciation) 2,520,656 2,556,526
TOTAL ASSETS $ 2,533,288 $ 2,574,938
============ ===========
LIABILITIES AND STOCK HOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 16,249 $ 30,126
Accounts payable-related party 384,800 215,908
Taxes payable - -
Current portion of Long Term Obligations 20,961 27,098
------------ -----------
Total current liabilities 422,010 273,132
Long Term Obligations (net of current portion) 1,797,185 1,808,938
------------ -----------
TOTAL LIABILITIES 2,219,195 2,082,070
Stockholders' equity
Common stock $.001 par value shares,
10,000,000 shares authorized;
255,423 shares issued and outstanding
on March 31, 2000 and
December 31, 1999, 255 255
Additional paid in capital 1,041,330 1,041,330
Retained Earnings (Deficit) (727,492) (548,717)
------------ -----------
Total stockholders' equity 314,093 492,868
------------ -----------
TOTAL LIABILITIES AND EQUITY $ 2,533,288 $ 2,574,938
============ ============
See notes to financial statements
F-1
Golden Opportunity Development Corporation
Unaudited Condensed Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
REVENUE
Hotel Revenue $ 67,242 $ 97,008 134,878 183,747
Lease Revenue 9,685 541 23,005 1,580
---------------- -------------- -------------- --------------
Total Revenue 76,927 97,549 157,883 185,327
EXPENSES
Hotel Direct Costs 100,832 89,026 223,870 165,161
Selling, general & administrative 10,054 4,783 20,494 8,262
Depreciation 25,757 12,888 36,181 23,628
Interest Expense 27,451 27,872 56,107 55,874
---------------- -------------- -------------- --------------
Total Operating Expenses 164,094 134,569 336,652 252,925
---------------- -------------- -------------- --------------
NET LOSS $ (87,167) $ (37,020) (178,769) (67,598)
================ ============== ============== ==============
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.34) $ (0.16) (0.70) (0.43)
---------------- -------------- -------------- --------------
BASIC AND DILUTED
WEIGHTED AVERAGE
SHARES OUTSTANDING 255,423 236,473 255,423 158,762
See notes to financial statements
F-2
Golden Opportunity Development Corporation
Unaudited Condensed Statements of Cash Flows
Six Months Six Months
Ended Ended
June 30, 2000 June 30, 1999
------------------ ------------------
------------------ ------------------
CASH FLOWS FROM OPERATION ACTIVITIES
Net loss $ (178,769) $ (67,598)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization 36,181 23,628
Changes in operating assets and liabilities (net of effect from
acquisitions)
Deposits - -
Other Assets (616) -
Accounts Payable (13,887) (44,691)
Accounts Payable-Related Parties 168,892 76,883
Accrued Expenses - 39,068
------------ ------------
Total adjustments 190,570 94,888
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 11,801 27,290
------------ ------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
Purchase of additional building improvements (307) (8,100)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Notes (17,890) (15,475)
------------ ------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (17,890) (15,475)
------------ ------------
NET INCREASE (DECREASE) IN CASH EQUIVALENTS (6,396) (3,715)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 10,027 6,468
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,631 $ 2,753
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ 56,107 $ 55,874
------------ ------------
See notes to financial statements
F-3
Golden Opportunity Development Corporation
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2000
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, 1999. 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, 2000.
2. Related Party Transaction
During the six months ended June 30, 2000, the Company's parent and/or related
entities advanced $168,892 to cover operating deficiencies. The amount advanced
during the quarter ended June 30, 2000, was $68,001. The total amount payable
owed to related parties at June 30, 2000 was $384,800.
3. 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, 1999.
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.
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 Motel
The Motel was acquired on May 31, 1997 by San Pedro Ltd. and the Smith Family
Trust for the purpose of subsequently transferring the property to the Company
for a 100% interest in the Company. The Company acquired the Motel for a One
Million Nine Hundred Thousand Dollar ($1,900,000) note. Principal and interest
on the mortgage are payable in 359 monthly installments of Eleven Thousand Three
Hundred Ninety-One Dollars and Forty-Six Cents ($11,391.46) until July 1, 2027,
when the remaining principal and interest is due in full. These payments are
made to the General Lafayette Inc. c/o James A. Thom III, M.D. and his wife,
Evelyn M Thom 130 Main Street, Baton Rouge, Louisiana, 70081. Additional
consideration paid by the Company for the acquisition of the Motel included
75,000 shares of SynFuel Technology stock. No other liens or encumbrances on the
Motel exist other than the note. The Motel is located in the Parish of East
Baton Rouge, State of Louisiana. The assessed value of the property and the
Motel when it was acquired by the Company in May of 1997 was $200,000. The
current assessed value of the property and Motel remains approximately $200,000.
The Motel currently has an occupancy rate of approximately 58% of its rentable
rooms. However, the Company expects this rate to increase once the renovations
are complete and the Motel becomes a Villager Lodge. The Motel generates average
monthly rental revenues of approximately Twenty-Two Thousand Five Hundred
Forty-Five Dollars ($22,545) and approximately Four Thousand Four Hundred Forty
Dollars ($4,440) are generated from leases on other property . The Motel's
current occupancy rate, based upon the number of available rooms, is as
mentioned above, approximately 58%. The current number of available rooms is 74.
The Motel's low occupancy rate is due in part to the fact that the Motel is in
need of substantial repairs including repairs to sixty (60) rooms that are not
rentable. If these sixty (60) unrentable rooms are added into the calculation of
the Motel's occupancy rate, the Motel would have an occupancy rate of only 32%.
The Company is in the process of renovating approximately one room a month until
it obtains sufficient financing to renovate the entire Motel. At the time the
Company acquired the Motel, approximately 40 rooms were rentable out of a total
of 134 rooms. The neighborhood in which the Motel is located was considered
economically depressed prior to the Company's acquisition of the Motel. However,
the neighborhood over the last couple of years has been in the process of being
revitalized. The Company suspects that the Motel's poor condition was the result
of the Motel's prior inability to generate sufficient revenues to make the
necessary upgrades, repair and improvements to properly maintain the property.
The Motel's inability to generate sufficient revenues historically was most
likely the result of the formerly depressed local economy. The Company has been
unable to find adequate financing to fully renovate the Motel to date.
The Company's current plans are to renovate the Motel in compliance with the
requirements of the Villager Franchise Systems, Inc. uniform franchise offering
circular. The Company has retained the services of an architectural firm in its
effort to begin renovations and thereby, comply with requirements of becoming a
Villager Lodge Extended Stay Living Franchise. In July, 1999, the Company signed
a Franchise Agreement with Villager Lodge. The Company is in the process of
obtaining the necessary financing to begin operations as a Villager Lodge. The
Company expects
2
that the source of such financing will be bank or institutional financing,
equity offerings and/or private placements. As mentioned above, the Company is
currently financing renovations on a room by room basis with operating cash
flows. The Company expects that initial costs to renovate the Motel in
compliance with the Villager Lodge franchise agreement will be approximately
$2,000 per room during the first year of operation as a Villager Lodge. The
Company expects that after the first year of operations as a Villager Lodge,
additional renovations will need to be made at a cost of approximately $2,000 to
$3,000 per room.
Villager Lodge is a national chain with over ninety (90) locations throughout
the country. Villager Lodge has a toll free 800 number for national reservations
and directory assistance for Villager Lodge locations nation wide. Additionally,
Villager Lodge maintains a national advertising campaign and an Internet website
upon which potential guests can view the Villager Lodge national directory and
make reservations at any Villager Lodge nation wide. Villager lodge has an
Internet web site located at http://www.villager.com.
The estimated minimal initial costs to begin operations as a Villager Lodge is
$250,000. The Company believes that it will need an additional $250,000 to fully
complete the renovation requirements for the Village Lodge. The completion of
renovations and the successful retention of the Villager Lodge franchise is
expected to significantly increase the Motel's rental revenues. However, there
is no guarantee that the Company will obtain the necessary financing to make the
renovations required under the Licensing Agreement with Villager Lodge. In the
event the Company does not obtain the necessary financing, the Company may not
be able to operate as a Villager Lodge franchisee. In the event the Company is
unable to comply with the requirement of the Villager Lodge Franchise Agreement
because of a lack of financing, the Company will continue to operate its Motel
as the General Lafayette Inn. Villager Lodge has agreed to release the Company
from any liability under the Franchise Agreement, if the Company is unable to
obtain sufficient financing.
Results of Operations
Revenues
Revenues for the three and six month periods ended June 30, 2000, were $76,927
and $157,883 respectively as compared to $97,549 and $185,327 for the same
periods in 1999, a decrease of 21% and 15% respectively. The decrease in
revenues was attributable to a decrease in occupancy.
Losses
Net losses for the three and six month periods ended June 30, 2000, were $87,167
and $178,769 respectively as compared to $37,020 and $67,598 for the same
periods in 1999, an increase of $50,147 and $111,170 respectively. The increase
in losses is attributable to a decrease in revenue in conjunction with an
increase in repair expenses as well as a one time charge to correct depreciation
schedules to amended useful life adjustments.
The Company expects to continue to incur losses at least through fiscal 2000 and
there can be no assurance that the Company will achieve or maintain
profitability or that its revenue growth can be sustained in the future.
Expenses
General and administrative expenses for three and six month periods ended June
30, 2000 were $10,054 and $20,494 respectively as compared to $4,783 and $8,262
for the same periods in 1999. The reason for the $5,271 increase in the three
month period ended June 30, 2000 is primarily attributable to audit costs
incurred to meet the reporting requirements of the Securities Exchange Act of
1934.
Depreciation and amortization expenses for the three and six month periods ended
June 30, 2000 were $25,757 and $36,181, respectively as compared to $12,888 and
$23,628 for the same periods in 1999. The increase was due to
3
recalculation of depreciation lives and adjustments in amortization schedules
and valuations.
The Company expects increases in expenses through 2000 as the Company steps up
its effort to acquire additional properties and works towards finalizing its
efforts to begin operating as a Villager Lodge franchisee.
For the quarters ended June 30, 2000, and June 30, 1999, the Motel's direct
operating costs were $100,832 and $89,026 respectively, an increase of $11,806.
This increase is primarily attributable to expenses relating to needed repairs
and increase in general maintenance to improve the facility in anticipation of
operation as a Villager Lodge franchisee.
Liquidity and Capital Resources
The Company has expended significant resources on renovating the Motel and
maintenance because of the age and poor condition of the facility. The Company
anticipates spending substantial amounts of capital in an effort to comply with
the requirement of becoming a Villager Lodge franchise.
Cash flow provided by operations were $11,801 for the six months ended June 30,
2000, compared to cash flow provided for operations of $ 27,290 for the six
months ended June 30, 1999. This decrease in cash flows provided in operating
activities for the six months ended June 30, 2000 is primarily attributable to
the increase in losses due to the factors previously discussed.
Cash flow used by investing activities were $307 for the six months ended June
30, 2000, compared to cash flow used by investing activities of $ 8,100 for the
six months ended June 30, 1999. This decrease in cash flows used by investing
activities for the quarter ended June 30, 2000 is primarily attributable to not
performing capital expenditures due to limited funding.
Cash flow used in financing activities was $17,890 for the six months ended June
30, 2000, compared to cash flows used of $15,475 for the six months ended June
30, 1999. The Company's cash flow used in financing activities increased due to
the fact that the Company was able to retire more debt than it could in the
previous year.
The Company has funded its cash needs from inception through June 30, 2000 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 additional
capital.
Capital Expenditures
The Company made $307 and $8,100 in capital expenditures on property or
equipment for the six months ended June 30, 2000 and 1999, respectively.
The Company has a working capital deficiency at June 30, 2000 in the amount of
$409,378. However, $384,800 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 next year with long term bank financing, increasing rental
revenues from increased occupancy rates and/or equity financing in the form of a
private placement offering.
During 2000 the Company expects to spend up to $500,000 or more in capital
improvements on renovations to the Motel. Anticipated capital expenditures will
depend upon financing that is being sought for renovations. It is anticipated
that the cost to make the initial renovations in each room of the Motel will be
approximately $2,000 or $250,000 total. These initial renovations will include
new paint, new carpeting, new door locks and replacing certain fixtures. The
Company anticipates spending an additional $2,000 to $3,000 per room after the
initial renovations are made on new furnishings and updating the exterior of the
building. The Company anticipates the source of these expenditures to come from
equity offerings, bank financing, or loans from insiders and control persons of
the Company. In the event that the Company is unable to obtain the necessary
amount of capital, the Company may choose not to
4
operate as a Villager Lodge and may operate as an independent motel until
financing is obtained.
Income Tax Expense (Benefit)
The Company has an income tax benefit resulting from net operating losses to
offset future operating profit.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three 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 refinancings 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 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
5
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.
Risks of Remodeling / Expansion Strategy. The Company intends to pursue a
strategy of growth through the remodeling of the Motel and may pursue a similar
strategy in acquiring future properties. There can be no assurance that the
Company will obtain adequate financing for the renovations nor can there be any
assurance that renovations undertaken by the Company will be profitable. The
construction of renovations that are not profitable could adversely affect the
Company's profitability. The Company may in the future require additional
financing in order to continue its renovation plans. There is no assurance that
such additional financing, if any, will be available to the Company on
acceptable terms.
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.
Year 2000. The Company has not experienced any Year 2000 related computer
problems as of the date of this filing.
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 10 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. No reports were filed on Form 8-K during the
quarter.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
6
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 10th day of August 10, 2000.
Golden Opportunity Development Corporation
August 10, 2000
By: /s/ Richard Surber
-----------------------------
Richard Surber
Its: President, Chief Executive Officer and
Director
7
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).
27 9 Financial Data Schedule "CE".
Material Contracts
Exhibit
No. Page No. Description
6(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).
6(ii) * Franchise Agreement between the Company and Villager
Franchise Systems, Inc. (Incorporated by reference filed
with the Company's Form 10-SB/A-2 on May 2, 2000).
8