UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to.
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Commission File No. 1-6336
Tri-Valley Corporation
(Exact name of registrant as specified in its charter)
Delaware No. 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)
(805) 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.
[X] [ ]
No Yes
The number of shares of Registrant's common stock outstanding at December 2,
1996 was 14,158,248.
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TRI-VALLEY CORPORATION
INDEX
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Page
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PART I - FINANCIAL INFORMATION
Item 1 - Unaudited Consolidated Financial Statements
Consolidated Balance Sheets April 30, 1996 and July 31, 1995 3
Consolidated Statements of Operations for the three months
ended April 30, 1996 and 1995 5
Consolidated Statements of Cash Flows for the three months
ended April 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION 10
SIGNATURES 11
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PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
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April 30, 1996 July 31, 1995
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Current Assets
Cash $ 491,457 $ 228,704
Accounts receivable, trade 339,182 295,340
Prepaid expenses 11,141 10,841
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Total Current Assets 841,780 534,885
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Property and Equipment, Net 3,010,756 2,915,070
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Other Assets
Deposits 100,241 100,241
Investments in partnerships (7,152) (7,152)
Goodwill (net of accumulated
amortization of $159,979 at
April 30, 1996 and $151,844
at July 31, 1995 273,874 282,009
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Total Other Assets 366,963 375,098
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Total Assets $ 4,219,499 $ 3,825,053
================ ===============
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The accompanying notes are an integral part of these
condensed financial statements.
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LIABILITIES AND SHAREHOLDERS' EQUITY
April 30, 1996 July 31, 1995
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Current Liabilities
Notes and contracts payable $ 694,279 $ 556,279
Trade accounts payable 176,131 125,370
Investor accounts payable 150,000 -
Amounts payable to joint
venture participants 687,601 419,169
Advances from joint
venture participants 479,400 627,811
Due to related parties 123,758 137,300
Accrued expenses and
other liabilities 205,042 209,712
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Total Current Liabilities 2,516,211 2,075,641
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Long-term Portion of Notes
and Contracts Payable 35,787 35,787
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Shareholders' Equity
Convertible preferred stock,
$1.00 par value: 5,000,000
shares authorized; 300,000
shares subscribed 300,000 300,000
Common stock, $.01 par
value: 25,000,000 shares
authorized; 7,337,248 issued
and outstanding at April 30,
1996 and July 31, 1995 73,372 73,372
Less: Common stock in treasury,
at cost, 156,925 shares (28,639) (28,639)
Stock options outstanding 191,100 191,100
Capital in excess of par value 3,284,653 3,284,653
Accumulated deficit (2,152,985) (2,106,861)
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Total Shareholders' Equity 1,667,501 1,713,625
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Total Liabilities and
Shareholders' Equity $ 4,219,499 $ 3,825,053
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The accompanying notes are an integral part of these
condensed financial statements.
The accompanying notes are an integral part of these condensed financial
statements.
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months For the Nine Months
Ended April 30, Ended April 30,
1996 1995 1996 1995
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Revenues
Sale of oil and gas $ 199,394 $ 73,885 $ 530,057 $ 310,472
Precious metals income - - - 9,338
Sale of oil and gas prospects - - - 25,519
Other income 10,909 13,109 25,529 13,246
Interest income 1,205 849 5,552 6,627
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Total Revenues 211,508 87,843 561,138 365,202
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Cost and Expenses
Leases sold, relinquished and impaired - - - 7,890
Oil and gas lease expense 72,019 17,085 224,081 53,026
Depletion, depreciation and amortization 10,134 15,212 30,402 45,636
Interest 16,033 28,004 16,033 67,189
General administrative 79,129 134,547 336,743 397,517
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Total Cost and Expenses 177,315 194,848 607,259 571,258
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Income (Loss) Before Income Taxes 34,193 (107,005) (46,121) (206,056)
Income Taxes - (4,169) - (6,594)
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Net Income (Loss) $ 34,193 $ (111,174) $ (46,121) $ (212,650)
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Net Income (Loss) per Common Share $ - $ - $ - $ (.03)
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Weighted Average Number of Shares 7,071,126 7,030,995 7,071,126 6,958,585
========== =========== =========== ===========
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The accompanying notes are an integral part of these
condensed financial statements.
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Nine Months
Ended April 30,
1996 1995
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Cash Flows from Operating Activities
Net loss $ (46,121) $(212,650)
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation, depletion and amortization 30,402 45,636
Loss on disposal of lease - 7,890
Changes in operating working capital:
Amounts receivable (43,842) 110,185
Prepaid (300) (2,178)
Deposits - 10,260
Accounts payable 50,761 (75,408)
Payable to joint venture participants
and related parties 254,890 (204,749)
Advances from joint venture participants (148,412) 209,657
Payable to investors 150,000 -
Accrued expenses and other liabilities (4,670) 24,539
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Net Cash Provided (Used) by Operating Activities 242,708 (86,818)
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Cash Flows from Investing Activities
Capital expenditures (117,955) -
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Cash Flows from Financing Activities
Principal payment of debt - (47,550)
Long-term debt borrowed 138,000 41,000
Proceeds from issuance of common stock - 43,835
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Net Cash Provided by Financing Activities 138,000 37,285
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Net Increase (Decrease) in Cash and
Cash Equivalents 262,753 (122,811)
Cash and Cash Equivalents at
Beginning of Period 228,704 187,937
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Cash and Cash Equivalents at
End of Period $ 491,457 $ 65,126
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TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
APRIL 31, 1996 AND 1995
(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 nine month period ended April 30, 1996, 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 July 31, 1995.
Certain reclassifications have been made to the 1995 financial statements to
conform to the presentation used in 1996.
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.
NOTE 3 - SUBSEQUENT EVENTS
The Company made a motion to be dismissed from the Chapter 11 Bankruptcy
Proceedings discussed in the Form 10(k) for the year ended July 31, 1995. The
motion was granted by the court on November 1, 1996.
The Company raised $2,239,100 from various investors and, in return, various
stocks and warrants were issued. The first $1,360,000 was collected from the
sale of 1,360,000 units. Each unit consisted of two and a half shares of
Tri-Valley common stock plus two A warrants, one B warrant, and one C warrant
exercisable at $.50, $1.00 and $1.50 per share, respectively. As of the report
date, no warrants had been exercised. The remaining cash will be raised
through two separate issuances of Tri-Valley Corporation common stock.
Issuances of 2,080,000 shares and 798,000 shares will raise an additional
$520,000 and $359,100, respectively. As of the report date, 325,000 of the
798,000 shares remain unissued. Upon the execution of the remaining
transactions, the Company will have 14,483,248 shares of common stock issued
and outstanding.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
BUSINESS REVIEW
Natural Gas Activities
The Company borrowed $150,000 with the approval of the U.S. Bankruptcy Court
for the purpose of funding the progress for the eventual hook up of the Webb
Tract No. 1 and the leasing of key parcels of the Tracy gas play for eventual
drilling. Also, the City of Tracy is annexing the portion of San Joaquin
County where the drill site is located thus adding a new layer of permitting.
The Company expects all of this to be favorably resolved.
Precious Metal Activities
No Direct activity occurred on the Company's gold exploration project at
Richardson, Alaska, during this third quarter of fiscal year 1996. All lease
payments were caught up from a portion of the $150,000 the Company was
authorized to borrow.
FINANCIAL CONDITION
Revenues from natural gas production and other sources rose slightly from new
production and some price improvement. The primary benefit from a strong, new
well began in the second quarter. The Martins-Severin No. 5, a step out from
our main producing area, is flowing approximately 2,900,000 cubic feet per day
of high BTU natural gas which commands a premium price.
The Company continued to out perform its peers. As noted in the September 4,
1995 issue of The Oil & Gas Journal, Tri-Valley climbed another 8 spots to
number 225 in the annual listing of top U.S. petroleum companies. In the past
8 years, Tri-Valley has ascended 169 places in the rankings.
During the last four quarters, the Company has searched for financing to
handle increasingly short-term obligations resulting from revenues too
diminished to service demands. In order to service these obligations, the
Company turned to a hard money lender who has taken all of the Company's
producing natural gas reserves as collateral for a loan principal of $620,000
bearing 10% annual interest on a six-month note with a 30 day call. The
Company strived to bring on additional revenue which could enable it to
structure alternate takeout financing but was unsuccessful due to plunging
prices and permit delays which then delayed new drilling/production/revenue.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS (Continued)
FINANCIAL CONDITION (continued)
The secured lender indicated that he would begin foreclosure on the Company's
producing natural gas reserves worth several times what was owed. The Company
felt it could receive a much better price if it was allowed to solicit its own
bids and negotiated a 90 day standstill agreement with the lender in order to
do that. The Company received three acceptable bids and moved to conclude the
best. Two days before moving to close, the buyer pulled out after talking with
the secured lender. Subsequent efforts with the other prospective buyers
experienced a pull back after they spoke with the secured lender, leaving the
Company without buyers at the end of the standstill agreement on January 30,
1996.
On January 30, 1996, after all efforts to extend the standstill or effect
settlement failed, the Company field for protection under Chapter 11 of the
U.S. Bankruptcy Code just minutes before the window closed. During the
bankruptcy, Tri-Valley settled all its rightfully owed obligations 100 cents
on the dollar, including the secured lender's principal, interest, and
attorney fees and was dismissed from bankruptcy on November 1, 1996.
RESULTS OF OPERATIONS
Three Months Ended April 30, 1996, as Compared with Three Months Ended April
30, 1995
Natural gas income for the third quarter ending April 30, 1996 was $199,394,
up from $73,885 for the same period last year. Total revenue was $211,508, up
from $87,843 for the same quarter last year. Costs and expenses declined from
$194,848 in last year's third quarter to $177,315 for this year's third
quarter despite a strong reduction in general and administrative expenses from
$134,547 to $79,129 for the respective periods. The reason is because of
greater write down of oil and gas leases - $72,019 for the third quarter of
fiscal year 1996 compared to $17,085 for the third quarter of fiscal year
1995.
All of this posted a profit of $34,193 in the third quarter of fiscal year
1995 compared to a loss of $111,174 in the third quarter of fiscal year 1996.
While assets increased $514,737 from $3,704,762 in the third quarter of fiscal
year 1995 to $4,219,499 in the third quarter of fiscal year 1996, stockholder
equity declined from $1,882,929 to $1,667,501 for the same periods.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to nor is its property the subject of any material
legal proceedings other than ordinary routine litigation incidental to its
business, or which is covered by insurance, except as previously disclosed in
the Company's Annual Report on Form 10-K for the year ended July 31, 1995.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None.
(b) Reports on Form 8-K: none were filed for the period.
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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)
F. Lynn Blystone
President and Chief Executive Officer
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 491,457
<SECURITIES> 0
<RECEIVABLES> 339,182
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 841,780
<PP&E> 3,010,756
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<TOTAL-ASSETS> 4,219,499
<CURRENT-LIABILITIES> 2,516,211
<BONDS> 0
300,000
0
<COMMON> 73,732
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,219,499
<SALES> 530,057
<TOTAL-REVENUES> 561,138
<CGS> 224,081
<TOTAL-COSTS> 591,266
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 16,033
<INCOME-PRETAX> (46,121)
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<EXTRAORDINARY> 0
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<NET-INCOME> (46,121)
<EPS-PRIMARY> 0
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