<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 0-8532
OAKRIDGE ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
Utah 87-0287176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4613 Jacksboro Highway
Wichita Falls, Texas 76302
(Address of principal executive offices)
(940) 322-4772
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
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 [X] NO [ ]
The number of shares outstanding of each of the issuer's classes of common
equity, as of November 30, 1998: Common Stock, $.04 par value, 4,623,004 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [X]
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INDEX
<TABLE>
<CAPTION>
Page #
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<S> <C>
Part I - Financial Information
1. Financial Statements:
Condensed Balance Sheets at
February 28, 1998 and November 30, 1998 1
Condensed Statements of Operations
For the Three Months Ended November 30, 1997 and 1998 2
For the Nine Months Ended November 30, 1997 and 1998
Statements of Cash Flows
For the Nine Months Ended November 30, 1997 and 1998 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation 5
Part II - Other Information
6. Exhibits and Reports on Form 8-K 9
Signatures 9
</TABLE>
(i)
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Part I - Financial Information
ITEM 1. FINANCIAL STATEMENTS.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, 1998 November 30, 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 877,006 $ 2,392,943
Trade accounts receivable 386,353 171,963
Investment securities 1,637,047 699,887
Deferred tax asset 81,729 225,566
Prepaid expenses and other 36,117 21,550
------------ ------------
Total current assets 3,018,252 3,511,909
------------ ------------
Investment securities 326,667 0
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$3,863,233 on February 28, 1998 and $3,491,120 on November 30, 1998 3,734,904 3,370,457
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,347,878 on February 28, 1998 and $8,370,393 on November 30, 1998 388,233 365,871
Real estate held for development 2,474,309 2,685,167
Other property and equipment, net of accumulated depreciation
of $647,603 on February 28, 1998 and $676,477 on November 30, 1998 188,876 190,892
Other assets 1,272,354 1,154,452
------------ ------------
$ 11,403,595 $ 11,278,748
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 281,209 $ 139,457
Accrued expenses 53,687 59,027
Income tax payable 5,507 95,058
------------ ------------
Total current liabilities 340,403 293,542
Deferred Federal income taxes 722,299 800,351
------------ ------------
Total liabilities 1,062,702 1,093,893
------------ ------------
Stockholders' equity:
Common stock, $.04 par value, 20,000,000 shares authorized,
10,157,803 shares issued 406,312 406,312
Additional paid-in capital 805,092 805,092
Retained earnings 17,599,170 18,198,245
Unrealized loss on investment securities available for sale,
net of income taxes (100,993) (68,562)
Less treasury stock, at cost, 5,286,194 shares on February 28, 1998
and 5,534,799 on November 30, 1998 (8,368,688) (9,156,232)
------------ ------------
Total stockholders' equity 10,340,893 10,184,855
------------ ------------
$ 11,403,595 $ 11,278,748
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended
November 30, 1997 November 30, 1998 November 30, 1997 November 30, 1998
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas $ 1,114,235 $ 310,549 $ 3,011,602 $ 1,061,898
Coal and gravel 19,148 30,202 47,937 71,471
Other 10,650 10,650 31,950 31,950
----------- ----------- ----------- -----------
Total revenues 1,144,033 351,401 3,091,489 1,165,319
----------- ----------- ----------- -----------
Operating expenses:
Oil and gas 667,040 401,775 1,708,607 1,114,513
Coal and gravel 35,629 22,589 91,841 76,411
Real estate development 9,653 11,444 66,845 67,585
General and administrative 109,264 114,003 344,842 375,075
----------- ----------- ----------- -----------
Total operating expenses 821,586 549,811 2,212,135 1,633,584
----------- ----------- ----------- -----------
Income (loss) from operations 322,447 (198,410) 879,354 (468,265)
----------- ----------- ----------- -----------
Other income (expense):
Interest and dividend income 44,283 51,907 144,192 158,752
Interest expense (1,177) 0 (11,359) 0
Gain on sale of oil and gas properties 0 43,945 0 1,560,908
Other, net 133 (163,506) 37,555 (285,145)
----------- ----------- ----------- -----------
Total other income (expense) 43,239 (67,654) 170,388 1,434,515
----------- ----------- ----------- -----------
Income (loss) before income taxes 365,686 (266,064) 1,049,742 966,250
----------- ----------- ----------- -----------
Income taxes 100,059 (51,273) 333,133 367,175
----------- ----------- ----------- -----------
Net income (loss) $ 265,627 $ (214,791) $ 716,609 $ 599,075
=========== =========== =========== ===========
Basic and diluted income (loss) per
common share $ 0.05 $ (0.05) $ 0.14 $ 0.13
=========== =========== =========== ===========
Weighted average shares outstanding 4,939,072 4,660,860 4,973,408 4,770,091
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For 9 Months For 9 Months
Ended Ended
November 30, 1997 November 30, 1998
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 716,609 $ 599,075
Adjustments to reconcile net income to net cash used in
operating activities:
Depletion and depreciation 730,459 505,338
Abandoned leaseholds 107,055 0
Accretion on investment securities, net (13,163) (5,066)
Gain on sales of oil and gas properties (133) (1,527,731)
Gain on sales of other property and equipment (30,051) (33,177)
Other than temporary loss on investment securities 0 294,362
Deferred federal income taxes 245,000 (59,777)
Net changes in assets and liabilities:
Trade accounts receivable (76,785) 214,390
Other accounts receivable 7,044 0
Federal income tax receivable 230,602 0
Prepaid expenses and other current assets 17,686 14,565
Accounts payable 121,484 (141,752)
Accrued expenses (11,891) 5,340
Federal income tax payable 4,500 89,551
----------- -----------
Net cash provided by (used in) operating activities 2,048,416 (44,882)
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (1,632,048) (1,600,351)
Additions to real estate held for development (187,664) (222,031)
Additions to other property and equipment (470) (30,891)
(Increase) decrease in other assets (82,471) 50,343
Proceeds from sale of oil and gas properties 11,734 3,049,600
Proceeds from sale of other property and equipment 30,051 0
Proceeds from sale of other assets 0 100,736
Purchases of investments available for sale (152,156) 0
Maturities/calls of investments available for sale 500,000 1,000,959
----------- -----------
Net cash provided by (used in) investing activities (1,513,024) 2,348,365
----------- -----------
Cash flows from financing activities:
Purchases of treasury stock (458,232) (787,546)
----------- -----------
Net cash (used in) financing activities (458,232) (787,546)
----------- -----------
Net increase in cash and cash equivalents 77,160 1,515,937
Cash and cash equivalents at beginning of period 195,631 877,006
----------- -----------
Cash and cash equivalents at end of period $ 272,791 $ 2,392,943
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 11,359 $ 0
Income taxes paid $ 63,893 $ 319,998
Recognition in Stockholders' Equity of the net unrealized holding gain (loss)
on available for sale securities of ($154,927), net of tax effect of
$79,811 during the nine months ended November 30, 1997, and $32,432 net of
tax effect of ($6,006) during the nine months ended November 30, 1998.
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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OAKRIDGE ENERGY, INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) The accompanying unaudited financial statements for three and
nine-month periods ended November 30, 1997 and 1998 reflect, in the
opinion of management, all adjustments, which are of a normal and
recurring nature, necessary for a fair presentation of the results for
such periods.
(2) The foregoing financial statements should be read in conjunction with
the annual financial statements and accompanying notes for the fiscal
year ended February 28, 1998.
(3) In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, Reporting Comprehensive Income and SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information. SFAS No. 130
established standards for reporting and display of comprehensive income
and its components in financial statements. SFAS No. 131 established
annual and interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services,
geographic areas and major customers. Adoption of these statements will
not impact the Company's financial position, results of operations or
cash flows, and any effect will be limited to the form and content of
its disclosures. Both statements are effective for fiscal years
beginning after December 15, 1997.
(4) The "Year 2000" issue is the result of computer programs being written
using two digit rather than four to define the applicable year. The
Company has been responsible in the stewardship of its computer system
through the replacement of its computers, updating of its software and
network systems; however, the Company reports to and communicates with
other computer systems in the private industry and government reporting
agencies. Interdependence between systems and dependence on civilian
power systems could possibly result in the failure of one system
disrupting the other. The complexity of the Y2K task at hand for
civilian and government systems may have an impact on the Company's
business operations although the Company has been responsible in the
stewardship of its computer system. We believe that our replacements
systems are "Year 2000" compliant.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with Items 6 and
7 of the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1998 and the Notes to Condensed Financial Statements contained in
this report.
RESULTS OF OPERATIONS
The Company had a net loss of $214,791 ($.05 per share) in the three
months ended November 30, 1998 compared to net income of $265,627 ($.05 per
share) during the three months ended November 30, 1997. During the nine-month
period ended November 30, 1998, the Company had net income of $599,075 ($.13 per
share) compared to net income of $716,609 ($.14 per share) in the 1997
nine-month period. Although the Company again incurred a loss from operations in
both 1998 periods, gains realized by the Company on the sale of oil and gas
properties, principally its Limestone County, Texas gas property (the "Limestone
County property"), resulted in the Company's being profitable in the nine-month
period.
Oil and gas revenues declined approximately $803,700 (72.1%) and
$1,949,700 (64.7%) in the three and nine months ended November 30, 1998,
respectively. Revenues in both periods continued to be adversely affected by the
absence of any production from the Limestone County property, declines in
production from the Company's Madison County, Texas oil property (the "Madison
County property") and low oil prices. The Limestone County property contributed
approximately $190,800 and $534,100 to revenues during the three and nine months
ended November 30, 1997, respectively, but none in the 1998 periods. Revenues
from the Madison County property decreased approximately $591,700 and $1,340,300
in the three and nine-month 1998 periods, respectively, as the Company produced
approximately 19,300 and 41,300 fewer barrels of oil from the property during
such periods. The decline in production was primarily due to the decision of the
operator of the property to restrict production voluntarily as a result of low
oil prices.
The Company's average oil price received declined in excess of $6.55
per barrel (over 34%) in both 1998 periods. Although the Company's average oil
price received during the three months ended November 30, 1998 increased over
$1.00 per barrel as compared to that received during the preceding fiscal
quarter, it remains uncertain when any significant improvement will occur in
such price. The Company's average gas price received fell significantly
(approximately $1.06 per MCF) in the three months ended November 30, 1998 but
only slightly ($.19 per MCF) in the nine-month 1998 period. During the 1997
three-month period, the
5
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Company's average gas price was aided during two months of such period by the
receipt of in excess of $3.50 per MCF for the gas produced from the Madison
County property, but no such high-priced gas was sold in the 1998 period.
In an effort to replace a portion of the gas revenues lost from the
sale of the Limestone County property, during the three months ended November
30, 1998 the Company acquired an undivided 25% interest in a 1,245 acre
exploratory gas prospect in Panola County of East Texas operated by Barrow
Shaver Resources Co., the operator of the Company's Madison County property, and
participated in the drilling of an initial well on the prospect. The well was
recently completed and, although production from the well has not yet
stabilized, it is currently producing approximately 700 MCF of gas per day.
Production from the well should benefit revenues during the last fiscal quarter.
Gravel revenues increased approximately $11,100 (57.7%) and $23,500
(49.1%) in the three and nine months ended November 30, 1998, respectively, due
to the higher level of gravel sales from the Company's Colorado property
resulting from construction activity in the Durango area. Rentals received by
the Company from the property were the same in the 1997 and 1998 periods.
The expenses of the Company's oil and gas operations declined
approximately $265,300 (39.8%) and $594,100 (34.8%) in the three and nine months
ended November 30, 1998 as most categories of such expenses were lower in both
periods. Depletion and depreciation expense decreased approximately $131,700 and
$324,900, production and ad valorem taxes fell a combined approximately $80,900
and $100,100 and lease operating expense declined $37,400 and $33,700 in the
respective 1998 periods primarily due to the absence of any such expenses and
taxes from the Limestone County property sold effective as of the start of the
nine-month period and the effect of lower oil and gas expenses from the
remainder of the Company's properties, principally its Madison County property.
Geological and geophysical expenses declined approximately $38,800 and $19,800
in the three and nine-month 1998 periods due to the Company's lower level of
exploratory activities. Dry hole costs and abandoned leasehold expense increased
approximately $15,600 in the three months ended November 30, 1998 due to
unsuccessful drilling activity in North Texas, but such expenses declined
approximately $123,400 in the nine-month 1998 period. Lease impairment charges
increased slightly in both 1998 periods due to the Company's decision to
transfer the costs associated with its Utley well in Freestone County, Texas to
such category.
The expenses of the Company's coal and gravel operations declined
approximately $13,000 (36.6%) and $15,400 (16.8%) in the three and nine months
ended November 30, 1998,
6
<PAGE> 9
respectively, due to declines in most categories of such expenses. The only
expense showing an increase during the 1998 periods was depletion and
depreciation expense. Real estate development expenses increased slightly in
both 1998 periods due to higher depreciation expense on the Company's heavy
equipment. The increase in such expenses in the nine-month period was largely
offset by significantly lower heavy equipment repair expense as compared to the
1997 period.
General and administrative expenses increased approximately $4,700
(4.3%) and $30,200 (8.8%) in the three and nine-month 1998 periods as the
Company incurred higher payroll, regulatory reporting, general depreciation and
miscellaneous expenses in both periods. The nine-month period was also affected
by the payment of $12,200 in fees for renewing letters of credit supporting land
reclamation bonds required for the Company's coal permit in Colorado. The
Company did not incur any comparable expense in the nine-month 1997 period.
The Company received approximately $2,990,400 in proceeds from the sale
of its Limestone County property. The approximate $1,530,800 gain realized on
such sale, which is reflected in other income (expense) for the nine months
ended November 30, 1998 in the Company's Condensed Statements of Operations, was
the principal reason for the Company's profitability in the nine-month 1998
period as the Company incurred an approximate $468,300 loss from operations
during such period. Interest and dividend income increased in both 1998 periods
primarily due to interest earned on proceeds from the sale of the Limestone
County property. The Company did not incur any interest expense in either of the
1998 periods. Other income (expense), net changed from an income item to an
expense item in both 1998 periods due to writedowns aggregating approximately
$297,400 in the carrying value of the Company's investment in an equity
security. The writedowns were made as of May 31, August 31 and November 30, 1998
following further declines in the fair value of the security from February 28,
1998.
The Company's weighted average shares outstanding declined
approximately 4.1% during the nine months ended November 30, 1998 as compared to
such shares outstanding at November 30, 1997 due to continuing share purchases
made by the Company. Purchases made by the Company in the nine-month 1998 period
totaled 248,600 shares, 158,000 of which were made from affiliates. 78,000 of
such 158,000 shares were purchased from or for the account of a shareholder
owning in excess of 5% of the Company's common stock who is not a member of the
Noel Pautsky family. The remaining 90,600 shares purchased by the Company were
from unaffiliated shareholders. The Company anticipates that it will purchase a
material amount of its shares from the Estate of Noel Pautsky prior to the end
of its fiscal year on February 28, 1999.
7
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FINANCIAL CONDITION AND LIQUIDITY
Notwithstanding the Company's loss from operations during the first
nine months of fiscal 1999, such period saw a substantial increase in the
Company's cash flows primarily as a result of the sale of the Limestone County
property. During the period, the Company's investing activities provided
approximately $2,348,400 of funds after the expenditure of approximately
$1,822,400 on additions to the Company's oil and gas properties and real estate
held for development. The Company's financing activities, which consisted
entirely of purchases of the Company's common stock, and its operating
activities used approximately $832,400 in funds, resulting in a net increase in
the Company's cash and cash equivalents at the end of the period of
approximately $1,516,000. At November 30, 1998, the Company had no indebtedness
and also held investment securities aggregating $700,000.
The Company expects its contemplated operations during the remainder of
fiscal 1999 and its anticipated purchase of shares of the Company's common stock
from the Estate of Noel Pautsky to be a significant net user of cash and plans
to fund such operations and purchase from a combination of its existing cash and
cash equivalents and sales or maturities of a portion of its investment
securities available for sale or margin account borrowings against their value.
8
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Part II - Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - Financial Data Schedule for the nine months ended
November 30, 1998 filed as Exhibit 27.
(b) Reports on Form 8-K - No reports on Form 8-K were filed by the
Company during the three months ended November 30, 1998.
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.
OAKRIDGE ENERGY, INC.
(Registrant)
DATE: January 14, 1999 By /s/ Sandra Pautsky
----------------------------------
Sandra Pautsky, President
By /s/ Carol J. Cooper
----------------------------------
Carol J. Cooper, Chief Accounting
Officer
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INDEX TO EXHIBITS
The exhibits filed herewith are filed in accordance with the
requirements of Item 601 to Regulation S-B for filings on Form 10-QSB. For
convenient reference, each exhibit is listed according to the number assigned to
it in the Exhibit Table of such Item 601.
(2) - Plan of acquisition, reorganization, arrangement,
liquidation or succession - not applicable.
(3) - (i) Articles of Incorporation - not applicable.
(ii) Bylaws - not applicable.
(4) - Instruments defining the rights of security holders,
including indentures - not applicable.
(10) - Material contracts - not applicable.
(11) - Statement re computation of per share earnings -
not applicable.
(15) - Letter on unaudited interim financial information -
not applicable.
(18) - Letter on change in accounting principles - not
applicable.
(19) - Reports furnished to security holders - not
applicable.
(22) - Published report regarding matters submitted to vote
- not applicable.
(23) - Consents of experts and counsel - not applicable.
(24) - Power of attorney - not applicable.
(27) - Financial Data Schedule - filed herewith.
(99) - Additional exhibits - not applicable.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OAKRIDGE ENERGY, INC. AS OF AND FOR THE PERIOD ENDED
NOVEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> NOV-30-1998
<CASH> 2,392,943
<SECURITIES> 699,887
<RECEIVABLES> 171,963
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,511,909
<PP&E> 19,150,377
<DEPRECIATION> 12,537,990
<TOTAL-ASSETS> 11,278,748
<CURRENT-LIABILITIES> 293,542
<BONDS> 0
0
0
<COMMON> 406,312
<OTHER-SE> 9,778,543
<TOTAL-LIABILITY-AND-EQUITY> 11,278,748
<SALES> 1,165,319
<TOTAL-REVENUES> 1,165,319
<CGS> 1,258,509
<TOTAL-COSTS> 1,633,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 966,250
<INCOME-TAX> 367,175
<INCOME-CONTINUING> 599,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 599,075
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
