1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001 Commission File No.
0-6119
TRI-VALLEY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 84-0617433
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
230 SOUTH MONTCLAIR STREET, SUITE 101, BAKERSFIELD, CALIFORNIA 93309
(Address of principal executive offices)
(661) 837-9300
(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. Yes [X ] No [ ]
The number of shares of Registrant's common stock outstanding at March 31, 2001
was 19,664,748.
TRI-VALLEY CORPORATION
INDEX
Page
----
PART I - FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2001 Dec. 31, 2000
(Unaudited) (Audited)
------------ -----------
Current Assets
Cash. . . . . . . . . . . . . . . $ 995,718 $ 1,373,570
Accounts receivable, trade. . . . 623,653 813,611
A/R Related Parties . . . . . . . 3,776 4,750
Prepaid expenses. . . . . . . . . 12,029 12,029
------------ -----------
Total Current Assets. . . . . . 1,635,176 2,203,960
------------ -----------
Property and Equipment, Net . . . . 1,433,491 1,306,689
------------ -----------
Other Assets
Deposits. . . . . . . . . . . . . 100,105 100,105
Note Receivable . . . . . . . . . 125,000 125,000
Acquisition Costs . . . . . . . . 51,270 51,270
Investments in partnerships . . . 29,059 29,059
Other . . . . . . . . . . . . . . 13,914 13,914
Well Database (net of accumulated
amortization of $46,546 at
March 31, 2001 and $44,788
at December 31, 2000. . . . . . 62,104 63,862
Goodwill (net of accumulated
amortization of $213,305 at
March 31, 2001 and $210,593
at December 31, 2000. . . . . . 220,548 223,260
------------ -----------
Total Other Assets. . . . . . 602,000 606,470
------------ -----------
Total Assets. . . . . . . . . $ 3,670,667 $ 4,117,119
============ ===========
The accompanying notes are an integral part of these
condensed financial statements.
6
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2001 Dec. 31, 2000
---------------- ---------------
CURRENT LIABILITIES
Notes and contracts payable. . . . . $ 10,554 $ 10,672
Trade accounts payable . . . . . . . 202,548 581,017
Amounts payable to joint venture
participants . . . . . . . . . . . 504,677 540,142
Advances from joint venture
participants . . . . . . . . . . . 2,185,830 2,517,737
---------------- ---------------
Total Current Liabilities. . . . . 2,903,609 3,649,568
---------------- ---------------
Long-term Portion of Notes and
Contracts Payable. . . . . . . . . . 9,790 12,038
---------------- ---------------
Commitments
Shareholders' Equity
Common stock, $.001 par value:
50,000,000 shares authorized;
19,664,748 and 19,554,748 issued
and outstanding at March 31, 2001
and Dec. 31, 2000, respectively. . 19,655 19,555
Less: Common stock in treasury,
at cost, 163,925 shares . . . . . . (21,913) (21,913)
Capital in excess of par value . . . 8,716,089 8,666,688
Accumulated deficit. . . . . . . . . (7,956,563) (8,208,817)
---------------- ---------------
Total Shareholders' Equity . . . . 757,268 455,513
---------------- ---------------
Total Liabilities and
Shareholders' Equity . . . . . . $ 3,670,667 $ 4,117,119
================ ===============
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
-----------------------
Ended March 31,
-----------------
2001 2000
----------- -----------
Revenues
Sale of oil and gas . . . . . . $ 729,114 $ 134,180
Other income. . . . . . . . . . 9,436 356,545
Interest income . . . . . . . . 11,260 15,331
----------- -----------
Total Revenues. . . . . . . . 749,810 506,056
----------- -----------
Cost and Expenses
Oil and gas lease expense . . . 95,626 23,801
Mining exploration expense. . . 33,796 35,424
Ekho geology, geophysics,
Land & administration . . . . 16,138 14,173
Sunrise geology, geophysics,
Land & administration . . . . 81,833 111,470
Depletion, depreciation and
amortization. . . . . . . . . 16,101 19,861
Interest. . . . . . . . . . . . 2,321 2,669
General and administrative. . . 251,741 281,249
----------- -----------
Total Cost and Expenses . . . 497,556 488,647
----------- -----------
Net Income. . . . . . . . . . . . $ 252,254 $ 17,409
=========== ===========
Net Income per Common Share . . . $ .01 $ .00
=========== ===========
Weighted Average Number of Shares 19,661,081 19,335,915
=========== ===========
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
-----------------------
Ended March 31,
-----------------
2001 2000
----------- ------------
Cash Flows from Operating Activities
Net income. . . . . . . . . . . . . . . . . . $ 252,254 $ 17,409
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization. 16,101 19,861
Changes in operating capital:
Amounts receivable. . . . . . . . . . . . 190,932 (24,043)
Deposits. . . . . . . . . . . . . . . . . -0- (105)
Trade accounts payable. . . . . . . . . . (378,587) 665,791
Amounts payable to joint venture
participants and related parties. . . . (35,465) 35,071
Advances from joint venture
participants. . . . . . . . . . . . . . (331,907) (1,599,224)
----------- ------------
Net Cash Used by Operating Activities . . . . . (286,672) (885,240)
----------- ------------
Cash Flows from Investing Activities
Capital expenditures. . . . . . . . . . . . . (138,433) (40,806)
----------- ------------
Cash Flows from Financing Activities
Principal payments on long-term debt. . . . (2,248) (2,168)
Proceeds from issuance of common stock. . . . 49,501 82,960
----------- ------------
Net Cash Provided by Financing Activities 47,253 80,792
----------- ------------
Net Increase in Cash and Cash Equivalents . . . (377,852) (845,254)
Cash and Cash Equivalents at Beginning
Of Period . . . . . . . . . . . . . . . . . . 1,373,570 8,050,469
----------- ------------
Cash and Cash Equivalents at
End of Period . . . . . . . . . . . . . . . . $ 995,718 $ 7,205,215
=========== ============
Supplemental Information:
Cash paid for interest. . . . . . . . . . . . $ 2,321 $ 2,669
----------- ------------
Cash paid for taxes . . . . . . . . . . . . . $ -0- $ 5,958
----------- ------------
7
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2001 AND 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
-----------------------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The results of operations for the
three month period ended March 31, 2001, are not necessarily indicative of the
results to be expected for the full year.
The accompanying consolidated financial statements do not include footnotes and
certain financial presentations normally required under generally accepted
accounting principles; and, therefore, should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
NOTE 2 - PER SHARE COMPUTATIONS
------------------------
Per share computations are based upon the weighted average number of common
shares outstanding during each year. Common stock equivalents are not included
in the computations since their effect would be anti-dilutive.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS
--------------
BUSINESS REVIEW
Notice Regarding Forward-Looking Statements
----------------------------------------------
This report contains forward-looking statements. The words, "anticipate,"
"believe," "expect," "plan," "intend," "estimate," "project," "could," "may,"
"foresee," and similar expressions are intended to identify forward-looking
statements. These statements include information regarding expected development
of the Company's business, lending activities, relationship with customers, and
development in the oil and gas industry. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, actual
results may vary materially and adversely from those anticipated, believed,
estimated or otherwise indicated.
Petroleum Activities
---------------------
We drilled the Ekho No. 1 well in the fiscal year 2000. However we encountered
"tight" sands that require artificial fracturing of the oil-bearing zones to
enable the well to be completed as a commercial well. All but one of our
Canadian partners were financially unable to continue with this project and
unfortunately were forced to withdraw. Consequently, we are in the process of
attracting new partners to participate in completing this project.
We drilled the Sunrise-Mayel No. 1 in December of 2000 and during the first
quarter of 2001 we hydraulically fractured, 'frac-ed', a lower zone in the well.
We were not satisfied with those results and in April we fractured another zone
and are analyzing that data. Additionally during the first quarter of 2001 we
reworked the Hanson 3 and 4 to increase production.
Currently we are in the process of permitting for the drilling of a well in our
Sonata prospect. The actual date of drilling will depend on the time it takes
to get a permit and contract a drilling rig. We are not able to contract the
drilling rig until the permit is issued. It has generally been taking 60 days
for this permitting process.
Precious Metals
----------------
There was no exploration activity on our Alaska project in the first quarter.
Normally our activity begins there in late May or early June due to weather
constraints. Again this season, as in years past, a team of Russian scientists
from TsNIGRI, the Russian Mineral Institute, will be performing field research
activities under our joint scientific research agreement.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS
--------------
Three Months Ended March 31, 2001 as compared with Three Months ended March 31,
--------------------------------------------------------------------------------
2000
----
The Company had revenues of $749,810 for the three months ended March 31, 2001
an increase of $506,056 (207%), over revenues of $243,754 for the three months
ended March 31, 2000. For the first quarter of 2001, the Company recorded a net
profit of $252,254 compared to a profit of $17,409 in the first quarter of 2000.
The increase in revenues and profits for the first three months of 2001 resulted
from increased natural gas prices paid for our production in Northern
California. The Company received $729,114 from oil and gas sales in the first
quarter of 2001, an increase of $594,934 (443%) over oil and gas sales of
$134,180 in the first quarter of 2000. In the first quarter of 2000, we sold
interest in a prospect to third parties, therefore our "other income", in 2000
was greater than the comparable period in 2001.
Costs and expenses were $497,556 for the quarter ended March 31, 2001, compared
to $488,647 for the same period for 2000. This increase was due in part to
expenses incurred for the two Hanson wells being reworked. The Sunrise GGL&A
costs were $81,833 for the quarter ended March 31, 2001 due to lease renewals.
In the same quarter in 2000 related costs of $111,470 were recognized as costs
related to the sale of the Sunrise-Mayel prospect.
General and Administrative costs decreased $29,500 for this quarter compared to
the same quarter in 2000. This decrease was due to reduced legal expenses.
Capital Resources and Liquidity
----------------------------------
At March 31, 2001, we had current assets totaling $1,635,176 and current
liabilities totaling $2,903,609. This was a decrease of current assets of
$568,784 from December 31, 2000. This decrease was from expenses incurred and
paid related to the drilling of the Sunrise Mayel #1.
Operating Activities. For the three months ended March 31, 2001, cash provided
by operating activities is a deficit of $286,672 compared to a deficit of
$885,240 at March 31, 2000. This was due to operations related to Sunrise-Mayel
No. 1.
Financing Activities. For the three months ended March 31, 2001, the Company
received $49,501 (net of selling expenses) from selling its common stock in
private transactions.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
None
ITEM 2. CHANGES IN SECURITIES
-----------------------
During the first quarter of 2001, we issued 110,000 shares of our common stock
to 3 individuals in private transactions pursuant to the exemption contained in
Section 4(2) of the Securities Act of 1933, for aggregate consideration of
$50,000. The shares sold are restricted securities which bear a legend
restricting transfer of the shares unless registered or sold under an exemption
from registration requirements under the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRI-VALLEY CORPORATION
(Registrant)
May 10, 2001 /s/ F. Lynn Blystone
------------------------
F. Lynn Blystone
President and Chief Executive Officer
May 10, 2001 /s/ Thomas J. Cunningham
---------------------------
Thomas J. Cunningham
Secretary, Treasurer, Chief Financial Officer