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 October 31, 1995
[ ] 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
incorporation or organization) No.)
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 October 31, 1995
and July 31, 1995 3
Consolidated Statements of Operations
for the three months ended October 31, 1995 and 1994 5
Consolidated Statements of Cash Flows
for the three months ended October 31, 1995 and 1994 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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October 31, 1995 July 31, 1995
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CURRENT ASSETS
Cash $ 249,874 $ 228,704
Accounts receivable, trade 437,110 295,340
Prepaid expenses 10,841 10,841
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Total Current Assets 697,825 534,885
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PROPERTY AND EQUIPMENT, NET 2,959,176 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 $154,556 at
October 31, 1995 and $151,844
at July 31, 1995 279,297 282,009
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Total Other Assets 372,386 375,098
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TOTAL ASSETS $ 4,029,387 $ 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
October 31, 1996 July 31, 1995
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CURRENT LIABILITIES
Notes and contracts payable $ 694,279 $ 556,279
Trade accounts payable 108,238 125,370
Amounts payable to joint venture
participants 566,928 419,169
Advances from joint venture participants 587,771 627,811
Due to related parties 133,133 137,300
Accrued expenses and other liabilities 208,051 209,712
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Total Current Liabilities 2,298,400 2,075,641
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LONG-TERM PORTION OF NOTES AND
CONTRACTS PAYABLE 35,787 35,787
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COMMITMENTS
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 October 31, 1995 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 (2,125,286) (2,106,861)
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Total Shareholders' Equity 1,695,200 1,713,625
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,029,387 $ 3,825,053
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months
Ended October 31,
1995 1994
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REVENUES
Sale of oil and gas $ 138,933 $ 100,953
Sale of oil and gas prospects - 25,519
Precious metals revenue - 7,038
Other income 10,749 -
Interest income 3,061 2,473
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TOTAL REVENUES 152,743 135,983
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COST AND EXPENSES
Oil and gas lease expense 78,634 12,137
Depletion, depreciation and amortization 10,134 15,212
Interest - 17,830
General and administrative 82,401 132,918
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TOTAL COST AND EXPENSES 171,169 178,097
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INCOME (LOSS) BEFORE INCOME TAXES (18,426) (42,114)
INCOME TAXES - (825)
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NET LOSS $ (18,426) $ (42,939)
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NET INCOME (LOSS) PER COMMON SHARE $ - $ -
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WEIGHTED AVERAGE NUMBER OF SHARES 7,071,126 6,915,277
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Three Months
Ended October 31,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (18,426) $(42,939)
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation, depletion and amortization 10,134 15,212
Changes in operating capital:
Amounts receivable (141,770) 98,498
Prepaid expenses - (8,500)
Trade accounts payable (17,132) (30,971)
Amounts payable to joint venture participants
and related parties 143,592 (57,835)
Advances from joint venture participants (40,040) 343,366
Accrued expenses and other liabilities (1,661) 22,369
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Net Cash Provided (Used) by Operating Activities (65,303) 339,200
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (51,527) (30,056)
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CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt borrowed 138,000 -
Principal payments on long-term debt - (12,340)
Proceeds from issuance of common stock - 7,500
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Net Cash Provided (Used) by Financing Activities 138,000 (4,840)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 21,170 304,304
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 228,704 187,937
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 249,874 $492,241
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TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
OCTOBER 31, 1995 AND 1994
(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 October 31, 1995, 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 1994 financial statements to
conform to the presentation used in 1995.
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 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
Tri-Valley added significantly to its reserves with the drilling of the
Martins-Severin No. 5 well in its main producing area. The well was put on
production during October of this first quarter of fiscal year 1996 with
production stabilizing in the range of 2,800,000 to 2,900,000 cubic feet per
day. Because of the multiple producing horizons encountered in the drilling,
the Company expects to drill a Martins-Severin No. 6 well to tap shallower
zones and accelerate production of the discovery.
In November 1994, Tri-Valley completed one of the most significant anchor
California dry gas discoveries, the Webb Tract No. 1, approximately 3,000 feet
northwest of its Martins-Severin production in the Sacramento River Delta.
However, numerous obstacles arose to delay what had been thought to be a
routine hook-up. The Company is working diligently on the mechanics,
engineering, geography, and permit problems to up this on-line.
Precious Metal Activities
Tri-Valley adjusted its land position on its gold exploration project at
Richardson, Alaska, in the wake of an airborne geophysical survey of the
Richardson Mining District by the State of Alaska, recommendations by its
consulting geologist, and in light of its present economic realities. The
Company intends to concentrate on the most advanced targets including three
ready to drill - one to prove reserves and two to indicate geologic resources.
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.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
FINANCIAL CONDITION (continued)
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.
RESULTS OF OPERATIONS
Three Months Ended October 31, 1995, as Compared with Three Months Ended
October 31, 1995
Natural gas income for the first quarter ending October 31, 1995 was $138,933,
up from $100,953 for the same period last year. Total revenue was $152,743, up
from $135,983 for the same quarter last year. Costs and expenses declined only
slightly from $178,097 in last year's first quarter to $171,169 for this
year's first quarter despite a strong reduction in general and administrative
expenses from $132,919 to $82,401 for the respective periods. The reason is
because of greater write down of oil and gas leases - $78,634 for the first
quarter of fiscal year 1996 compared to $12,137 for the first quarter of
fiscal year 1995.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
Three Months Ended April 30, 1996, as Compared with Three Months Ended April
30, 1995
All of this reduced the loss from $42,939 in the first quarter of fiscal year
1995 to a loss of $18,426 in the first quarter of fiscal year 1996.
While assets increased $204,334 from $3,825,053 in the first quarter of fiscal
year 1995 to $4,029,387 in the first quarter of fiscal year 1996, stockholder
equity declined from $1,713,625 to $1,695,000 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)
December 6, 1996 F. Lynn Blystone
Date President and Chief Executive Officer
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 249,874
<SECURITIES> 0
<RECEIVABLES> 437,110
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 697,825
<PP&E> 2,959,176
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,029,387
<CURRENT-LIABILITIES> 2,298,400
<BONDS> 0
300,000
0
<COMMON> 73,372
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,029,387
<SALES> 138,933
<TOTAL-REVENUES> 152,743
<CGS> 0
<TOTAL-COSTS> 78,634
<OTHER-EXPENSES> 92,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,426)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,426)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
