UNITED STATES 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 AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to.
Commission File No. 2-67096
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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
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(Address of principal executive offices)
(805) 837-9300
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(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 April 30,
1997 was 17,781,248.
TRI-VALLEY CORPORATION
INDEX
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<CAPTION>
Page
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PART I - FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets March 31, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 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
</TABLE>
PART I - FINANCIAL INFORMATION
3
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, 1997 Dec. 31, 1996
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<S> <C> <C>
Current Assets
Cash $ 3,070,722 $ 894,365
Accounts receivable, trade 474,511 278,110
Prepaid expenses 2,029 2,029
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Total Current Assets 3,547,262 1,174,504
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Property and Equipment, Net 3,320,428 3,182,860
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Other Assets
Deposits 62,000 62,000
Acquisition Costs 29,753
Investments in partnerships 20,682 20,682
Goodwill (net of accumulated
amortization of $169,921 at
March 31, 1997 and $167,209
at December 31, 1996 263,932 266,644
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Total Other Assets 346,614 379,079
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Total Assets $ 7,214,304 $ 4,736,443
=============== ==============
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
5
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, 1997 Dec. 31, 1996
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<S> <C> <C>
CURRENT LIABILITIES
Notes and contracts payable $ 10,215 $ 11,042
Trade accounts payable 143,815 57,566
Amounts payable to joint venture
participants 1,187,277 484,008
Advances from joint venture
participants 502,132 196,527
Due to related parties 200,407 196,142
Accrued expenses and
other liabilities 0 0
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Total Current Liabilities 2,043,846 945,285
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Long-term Portion of Notes and
Contracts Payable 37,608 37,608
Investor Payable - 662,680
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Commitments
Shareholders' Equity
Common stock, $.01 par value:
50,000,000 shares authorized;
14,379,867 and 14,102,473 issued
and outstanding at March 31, 1997
and Dec. 31, 1996, respectively 199,799 141,024
Less: Common stock in treasury,
at cost, 156,925 shares (28,639) (28,639)
Capital in excess of par value 7,744,526 5,495,726
Accumulated deficit (2,782,836) (2,517,241)
---------------- ---------------
Total Shareholders' Equity 5,132,850 3,090,870
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Total Liabilities and
Shareholders' Equity $ 7,214,304 $ 4,736,443
================ ===============
</TABLE>
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
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Ended March 31,
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1997 1996
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<S> <C> <C> <C>
Revenues
Sale of oil and gas $ 155,932 $ 140,005
Other income 11,085 4,131
Interest income 8,542 1,778
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Total Revenues 175,559 145,914
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Cost and Expenses
Oil and gas lease expense 49,481 33,951
Depletion, depreciation and
amortization 17,580 10,653
Interest 28,789 10,745
General and administrative 345,303 96,406
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Total Cost and Expenses 441,153 151,755
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Net Loss $ (265,594) $ (5,841)
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Net Loss per Common Share $ (.01) $ -
============ = ===========
Weighted Average Number of Shares 14,257,861 7,071,126
============ ===========
</TABLE>
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
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Ended March 31,
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1997 1996
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<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (265,594) $ (5,841)
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization 17,580 10,653
Changes in operating capital:
Amounts receivable (196,401) 119,776
Deposits - -
Trade accounts payable 86,249 29,547
Amounts payable to joint venture
participants and related parties 707,534 (91,012)
Advances from joint venture
participants 305,605 18,357
Accrued expenses and other liabilities - -
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Net Cash Used by Operating Activities 654,973 81,480
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Cash Flows from Investing Activities
Capital expenditures (122,684) (17,292)
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Cash Flows from Financing Activities
Investor payable (662,680) -
Principal payments on long-term debt (827) -
Proceeds from issuance of common stock 2,498,315 -
Stock offering costs (190,740) -
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Net Cash Provided by Financing Activities 1,644,068 -
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Net Increase in Cash and Cash Equivalents 2,176,357 64,188
Cash and Cash Equivalents at Beginning
Of Period 894,365 246,316
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Cash and Cash Equivalents at
End of Period $3,070,722 $310,504
=========== =========
</TABLE>
10
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
(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, 1997, 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, 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
------------------
During the quarter ending March 31, 1997 investors exercised warrants which
resulted in the issuance of 3,368,000 restricted shares of common stock. The
current number of issued and outstanding shares of common stock is 17,781,248
as of April 30, 1997.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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BUSINESS REVIEW
Change in Year End
- ---------------------
The Company changed its fiscal year end from July 31 to December 31.
Shareholders Meeting
- ---------------------
Tri-Valley Corporation held its annual shareholder meeting March 22, 1997 in
the conference room at the Pepper Tree Inn located in Santa Barbara, CA. The
meeting was attended by approximately 100 shareholders. One of the items
voted on was to increase the common share authority to 50,000,000 shares.
This will enable the Company to have the flexibility of using its common stock
to take advantage of business opportunities as they arise.
Petroleum Activities
- ---------------------
In January 1997, Tri-Valley Oil & Gas, a wholly owned subsidiary of Tri-Valley
Corporation, hooked up the Webb Tract No. 1. A major dry gas discovery, it
began producing nearly 5 million cubic feet of gas per day from a dual
completion. The working interest partners have been cash called to drill the
Webb Tract No. 2, which should begin drilling in the second fiscal quarter.
The Webb Tract No. 3 is a step out well and should be drilled this summer.
The working interest partners in the Martin-Severin production unit have been
cash called to drill the MS No. 6 development well. This well should be
drilled immediately after drilling of the Webb Tract No. 2. The delay in
drilling these wells is due to the lack of drilling rigs because of increased
drilling activity in the state of California.
Two new pool discoveries were announced after the drilling of the Pimentel
1-15 well in the city of Tracy, CA. Testing is continuing to determine the
extent of hydrocarbon bearing zones so the well can be completed with the
optimum production. The company expects to drill multiple locations to
develop the discovery and is considering additional seismic shooting to
further define the field as well as enhance a deeper, larger target for
drilling later this year. The aggressive drilling program should increase
companys' reserves, production and revenue from new wells this fiscal year.
In February, Tri-Valley Oil & Gas acquired an extensive geologic and seismic
database from San Carlos Oil & Gas Corporation, which was assembled over
nearly 50 years by San Carlos President, Charles W. Hatten. Much of the data
is concentrated in California, it also includes other areas of North America,
South America, Africa, the Middle East and the Far East.
Tri-Valley Oil & Gas has licensed the largest comprehensive seismic database
in the State of California from GEOONE Corporation. The information packet
contains over 20,000 line miles of seismic data located throughout all of the
California oil and gas provinces and coastal basins. This data along with the
data base acquired from San Carlos Oil and Gas puts the company in a very
unique position to react rapidly and definitively on any area in the State at
a time when interest in petroleum exploration and production is increasing.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS (Continued)
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BUSINESS REVIEW (continued)
Precious Metals Activities
- ----------------------------
The Company is continuing its discussions with a major mining company on a
proposed joint venture of the gold mining claim near Richardson, Alaska. The
Company is also considering continuing its own exploration and development of
a portion of this claim using internal funds.
Telecommunications
- ------------------
Tri-Valley Corporation is finalizing its due diligence regarding the
acquisition of a number of FCC licenses, management contracts and options to
buy licenses held by five partnerships. The interests acquired would be an
all stock and warrant acquisition. As previously reported the partnerships
were balloted and the partners voted to be acquired by Tri-Valley in the event
that Tri-Valley proceeds with the transaction.
Financial Condition
- --------------------
The financial condition of the Company continued to strengthen from new
capital from private placement. The Company's balance sheet continued to
improve as current assets more than tripled from $1,174,504 at fiscal year
ending December 31, 1996 to $3,547,262 for the first quarter of FY 1997 ending
March 31. The number of issued and outstanding shares increased from
14,102,473 for the period ending December 31, 1996 to 17,781,248 as of April
30, 1997. This increase was due to the issuance of restricted shares of
common stock due to the exercise of warrants related to the private placement
of stock.
Three Months Ended March 31, 1997 as compared with Three Months ended March
- ------------------------------------------------------------------------------
31, 1996
- ---------
Revenues from natural gas production held rather steady. Gas sales in the
first quarter ending March 31, 1997 generated $155,932 versus $140,005 for the
same period in 1996. Overall revenue was $175,559 for the quarter ending
March 31, 1997 versus $145,914 for the same period in 1996.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
---------------------------------------------------------------------
OF OPERATIONS (Continued)
--------------
BUSINESS REVIEW (continued)
Three Months Ended March 31, 1997 as compared with Three Months ended March
- ------------------------------------------------------------------------------
31, 1996 continued
- --------------------
Costs and expenses were greater in the quarter ending March 31, 1997 due to
oil and gas lease expenses increasing from $33,951 for the quarter ending
March 31, 1996 to $49,481 for the current quarter ending March 31, 1997. This
was due to increased drilling activity. General administrative expenses
increased from $96,406 for the quarter ending March 31, 1996 to $345,303 for
the quarter ending March 31, 1997. This increase was due in part to increased
accounting and legal costs associated with the audit relating to the change in
fiscal year end, and the subsequent 10-K filing along with two 10-Q's that we
were required to file. Additional business activity and costs associated with
filing of the annual proxy statement and shareholders meeting also contributed
to these increased costs. The Board of Directors voted to award outside
directors 10,000 shares of restricted common stock each. They also voted to
award the chief executive officer 40,000 shares of restricted stock in
accordance with his employment contract that had been deferred for the
previous two years. The discounted price of these restricted shares resulted
in additional director's expense to the company in the amount of $56,000. The
President, F. Lynn Blystone, took a full salary in this period; he took a
reduced salary for the comparable period last year. These increased costs
resulted in a loss of $265,594 for the quarter ending March 31, 1997 versus a
loss of $5,841 for the quarter ending March 31, 1996.
The Company expects these costs to reduce in subsequent quarters while
revenues should increase due to increased exploration and production
activities. The company expects to return to profitability in the third
quarter.
The balance sheet showed dramatic improvement due to proceeds from private
placement of its unregistered stock. Total assets increased $2,477,861 from
$4,736,443 December 31, 1996 to $7,214,304 March 31, 1997. Stockholder equity
increased $2,041,980 from $3,090,870 December 31, 1996 to $5,132,850 for the
period ending March 31, 1997. Additional capital due to the exercise of
warrants attached to the private placement of stock increased the net worth./
PART II - OTHER INFORMATION
13
ITEM 1. LEGAL PROCEEDINGS
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The Company is not a party to nor is its property the subject of any material
legal proceedings.
ITEM 2. CHANGES IN SECURITIES
-----------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
The Company held its annual shareholders meeting in Santa Barbara, CA on March
22, 1997. The issues submitted to the shareholders to vote on were:
a. Re-elect the incumbent Directors
b. Approve the current independent accountants for another year
c. To amend the Articles of Incorporation to increase the total number of
authorized shares of Common Stock from 15 million, par value $.01 to 50
million, par value $.001.
d. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof
All of these issues were voted on either in person or by proxy and were
approved by the majority vote of the shareholders.
ITEM 5. OTHER INFORMATION
------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K: none were filed for the period.
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 13, 1997 /s/ F. Lynn Blystone
--------------------------------
F. Lynn Blystone
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet at March 31, 1997 and Consolidated
Statement of Operations for the three months ended March 31, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 3071
<SECURITIES> 0
<RECEIVABLES> 476
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3547
<PP&E> 4470
<DEPRECIATION> 803
<TOTAL-ASSETS> 7214
<CURRENT-LIABILITIES> 2081
<BONDS> 0
<COMMON> 171
0
0
<OTHER-SE> 4961
<TOTAL-LIABILITY-AND-EQUITY> 7214
<SALES> 156
<TOTAL-REVENUES> 176
<CGS> 49
<TOTAL-COSTS> 412
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> (266)
<INCOME-TAX> 0
<INCOME-CONTINUING> (266)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (266)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
