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 January 31, 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 January 31, 1996 and July 31, 1995 3
Consolidated Statements of Operations for the three months
ended January 31, 1996 and 1995 5
Consolidated Statements of Cash Flows for the three months
ended January 31, 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 11
SIGNATURES 12
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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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January 31, 1996 July 31, 1995
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Current Assets
Cash $ 332,442 $ 228,704
Accounts receivable, trade 393,925 295,340
Prepaid expenses 10,841 10,841
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Total Current Assets 737,208 534,885
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Property and Equipment, Net 3,000,886 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 $157,267 at
January 31, 1996 and $151,844
at July 31, 1995 276,586 282,009
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Total Other Assets 369,675 375,098
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Total Assets $ 4,107,769 $ 3,825,053
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LIABILITIES AND SHAREHOLDERS' EQUITY
January 31, 1996 July 31, 1995
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CURRENT LIABILITIES
Notes and contracts payable $ 694,279 $ 556,279
Trade accounts payable 175,939 125,370
Amounts payable to joint
venture participants 765,071 419,169
Advances from joint
venture participants 474,584 627,811
Due to related parties 123,758 137,300
Accrued expenses and
other liabilities 205,042 209,712
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Total Current Liabilities 2,438,673 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 January 31, 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 (2,187,177) (2,106,861)
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Total Shareholders' Equity 1,633,309 1,713,625
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Total Liabilities and
Shareholders' Equity $ 4,107,769 $ 3,825,053
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months For the Six Months
Ended January 31, Ended January 31,
1996 1995 1996 1995
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Revenues
Sale of oil and gas $ 191,730 $ 135,634 $ 330,663 $ 236,587
Precious metals income - - - 7,038
Sale of oil and gas prospects - - - 25,519
Other income 3,871 137 14,620 137
Interest income 1,286 3,305 4,347 5,778
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Total Revenues 196,887 139,076 349,630 275,059
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Cost and Expenses
Leases sold, relinquished and impaired - 7,890 - 7,890
Oil and gas lease expense 73,428 23,805 152,062 35,941
Depletion, depreciation and amortization 10,134 15,212 20,268 30,424
Interest - 21,355 - 39,185
General administrative 175,213 130,051 257,614 262,970
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Total Cost and Expenses 258,775 198,313 429,944 376,410
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Income (Loss) Before Income Taxes (61,888) (59,237) (80,314) (101,351)
Income Taxes - 1,600 - 2,425
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Net Loss $ (61,888) $ (60,837) $ (80,314) $ (103,776)
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Net Income (Loss) per Common Share $ - $ - $ - $ (0.01)
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Weighted Average Number of Shares 7,071,126 6,934,768 7,071,126 6,922,903
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Six Months
Ended January 31,
1996 1995
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Cash Flows from Operating Activities
Net loss $ (80,314) $(103,776)
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation, depletion and amortization 20,268 30,424
Loss on disposal of lease - 7,890
Changes in operating working capital:
Amounts receivable (163,618) (181,421)
Prepaid - (5,981)
Deposits - 5,000
Accounts payable 60,729 (87,868)
Payable to joint venture participants
and related parties 345,902 (42,134)
Advances from joint venture participants (166,769) 228,510
Accrued expenses and other liabilities (4,670) 53,219
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Net Cash Provided (Used) by Operating Activities 11,528 (96,137)
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Cash Flows from Investing Activities
Capital expenditures (100,663) (64,036)
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Cash Flows from Financing Activities
Principal payment of debt - (34,369)
Long-term debt borrowed 138,000 20,594
Proceeds from issuance of common stock - 25,000
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Net Cash Provided by Financing Activities 138,000 11,225
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Net Increase in Cash and Cash Equivalents 48,865 (148,948)
Cash and Cash Equivalents at
Beginning of Period 228,704 187,937
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Cash and Cash Equivalents at
End of Period $ 277,569 $ 38,989
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TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JANUARY 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 six month period ended January 31, 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
Hook-up of the Martins-Severin No. 5 gas well occurred October 6, 1995, and
production was progressively increased to a stabilized rate of 2,900,000 cubic
feet of premium BTU natural gas per day, creating an increase in second
quarter revenue.
Efforts to hook up the Webb Tract No. 1 continued through the permitting
process with bureaucracies.
Tri-Valley received its drilling permit from San Joaquin County for the Tracy
play. However, it appears that the City of Tracy will annex the drill site
area, thus requiring additional permitting and creating more delays.
Gas prices are strengthening from severe lows of the previous two quarters and
the Company has committed its gas for relatively decent prices.
Precious Metal Activities
Following a recommendation by its consulting geologist, as well as corporate
economic realities, the Company dropped approximately 1,000 40-acre claims and
prospect sites on its gold exploration project at Richardson, Alaska. This
left the Company with 626 claims holding the most advanced targets on the
remaining approximately 37 square mile land position. This relieves the
Company of approximately $40,000 in annual cash and $100,000 in annual work
holding costs of land which may hold significant targets but requires
considerable expenditure to identify and qualify them. Dropping the claims
will probably stimulate other companies to pick up the ground and explore it,
thus raising the profile of the area amongst the industry.
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.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS (Continued)
FINANCIAL CONDITION (continued)
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.
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.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
Three Months Ended January 31, 1996, as Compared with Three Months Ended
January 31, 1995
Natural gas income for the second quarter ending January 31, 1996 was
$191,730, up from $135,634 for the same period last year. Total revenue was
$196,887, up from $139,076 for the same quarter last year. Costs and expenses
increased from $198,313 in last year's second quarter to $258,775 for this
year's second quarter.
In the second quarter, the Company terminated the Secretary-Treasurer who also
functioned as the internal accountant. An extra effort was made to catch up
the accounting and the accrued payables resulting in a surge in general and
administrative costs which rose to $175,213 for the second three months in
fiscal year 1996 versus $130,051 for the same period in fiscal year 1995.
The loss for the second quarter of fiscal year 1996 was $61,888 versus a loss
of $59,237 for the same period in fiscal year 1995.
While assets increased $133,015 from $3,974,754 in the second quarter of
fiscal year 1995 to $4,107,769 in the second quarter of fiscal year 1996,
stockholder equity declined from $1,974,852 to $1,633,309 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 - FX-27, Financial Data Schedule
(B) REPORTS ON FORM 8-K
December 4, 1995 - Helen O'Brien, Chief Financial Officer,
was effectively terminated from her position.
January 26, 1996 - J. Bruce Carruthers II resigned as
Director of Tri-Valley Corporation due to press of business.
January 30, 1996 - Tri-Valley Corporation and its wholly
owned subsidiary filed for protection and reorganization
under Chapter 11 of the Bankruptcy Code.
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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)
Deember 5, 1996 F. Lynn Blystone
Date President and Chief Executive Officer
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<ARTICLE> 5
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 332,442
<SECURITIES> 0
<RECEIVABLES> 393,925
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 737,208
<PP&E> 3,000,886
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,107,769
<CURRENT-LIABILITIES> 2,438,673
<BONDS> 0
300,000
0
<COMMON> 73,372
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,107,769
<SALES> 330,663
<TOTAL-REVENUES> 349,630
<CGS> 152,062
<TOTAL-COSTS> 429,944
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (80,314)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (80,314)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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