UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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 January 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
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(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 March 14,
1997 was 14,413,248.
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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, 1997 and July 31, 1996 3
Consolidated Statements of Operations for the three months
ended January 31, 1997 and 1996 5
Consolidated Statements of Cash Flows for the three months
ended January 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
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PART I - FINANCIAL INFORMATION
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ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
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<CAPTION>
. . . . . . . . . . . . . . . . . January 31, 1997. July 31, 1996
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<S> <C> <C>
Current Assets
Cash $ 755,434 $ 258,924
Accounts receivable, trade 612,906 277,586
Prepaid expenses 2,029 2,029
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Total Current Assets 1,370,369 538,539
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Property and Equipment, Net 3,308,054 3,085,825
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Other Assets
Deposits 62,000 61,000
Investments in partnerships (7,152) (7,152)
Aquisition costs 62,815 -
Goodwill (net of accumulated
amortization of $168,113 at
January 31, 1997 and $162,690
at July 31, 1996 265,740 271,163
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Total Other Assets 383,403 325,011
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Total Assets $ 5,061,826 $ 3,949,375
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LIABILITIES AND SHAREHOLDERS' EQUITY
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<CAPTION>
January 31, 1997 July 31, 1996
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<S> <C> <C>
CURRENT LIABILITIES
Notes and contracts payable $ 31,893 $ 77,992
Trade accounts payable 29,547 226,057
Amounts payable to joint venture
participants 567,372 505,690
Advances from joint venture
participants 537,014 483,413
Due to related parties 204,392 204,392
Accrued expenses and
other liabilities 113,859 134,908
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Total Current Liabilities 1,484,077 1,632,452
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Long-term Portion of Notes and
Contracts Payable 16,757 16,757
Convertible Notes Payable - 900,000
Investors Payable 853,772 -
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Shareholders' Equity
Common stock, $.01 par value:
25,000,000 shares authorized;
14,102,473 and 8,027,248 issued
and outstanding at January 31, 1997
and July 31, 1996, respectively 141,312 80,272
Less: Common stock in treasury,
at cost, 156,925 shares (28,639) (28,639)
Capital in excess of par value 5,319,260 3,772,753
Accumulated deficit (2,724,713) (2,424,220)
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Total Shareholders' Equity 2,707,220 1,400,166
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Total Liabilities and
Shareholders' Equity $ 5,061,826 $ 3,949,375
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended January 31, Ended January 31,
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues
Sale of oil and gas $ 206,362 $ 191,730 $ 385,820 $ 330,663
Other income 5 3,871 9,588 14,620
Interest income 4,736 1,286 5,885 4,347
------------ ----------- ------------ -----------
Total Revenues 211,103 196,887 401,295 349,630
------------ ----------- ------------ -----------
Cost and Expenses
Oil and gas lease expense 85,216 73,428 132,844 152,062
Depletion, depreciation and amortization 13,431 10,134 26,862 20,268
Interest 6,782 - 36,934 -
General administrative 282,712 175,213 505,145 257,614
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Total Cost and Expenses 388,141 258,775 701,785 429,944
------------ ----------- ------------ -----------
Net Loss $ (177,038) $ (61,888) $ (300,492) $ (80,314)
============ =========== ============ ===========
Net Income (Loss) per Common Share $ (.02) $ - $ (.03) $ -
============ =========== ============ ===========
Weighted Average Number of Shares 10,191,230 7,071,126 10,191,230 7,071,126
============ =========== ============ ===========
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
For the Six Months
Ended January 31,
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1997 1996
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Cash Flows from Operating Activities
Net loss $ (300,492) $ (80,314)
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation, depletion and amortization 26,862 20,268
Changes in operating working capital:
Amounts receivable (335,320) (163,618)
Deposits 1,000 -
Accounts payable (196,510) 60,729
Payable to joint venture participants
and related parties 61,682 345,902
Advances from joint venture participants 53,601 (166,769)
Accrued expenses and other liabilities (21,409) (4,670)
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Net Cash Provided (Used) by Operating Activities (710,586) 11,528
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Cash Flows from Investing Activities
Capital expenditures (308,124) (100,663)
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Cash Flows from Financing Activities
Principal payment of debt (946,099) -
Long-term debt borrowed - 138,000
Investor payable 853,772 -
Proceeds from issuance of common stock 1,607,547 -
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Net Cash Provided by Financing Activities 1,515,220 138,000
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Net Increase in Cash and Cash Equivalents 496,510 48,865
Cash and Cash Equivalents at Beginning of Period 258,924 228,704
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Cash and Cash Equivalents at End of Period $ 755,434 $ 277,569
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TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JANUARY 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 six month period ended January 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 July 31, 1996.
Certain reclassifications have been made to the 1996 financial statements to
conform to the presentation used in 1997.
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 - INVESTOR PAYABLE
-----------------
As of the balance sheet date, the Company had an investor payable totalling
$853,772. This is money which the Company had received from investors for
common stock, which, as of the quarter's end, had not been issued. The
unissued common stock consisted of 1,360,500 "A" warrants exercised at various
prices and 575,775 shares purchased at $.45 per share. Subsequent to the
quarter's end, 310,775 shares of the $.45 stock were issued. The balance of
these shares and warrants will be issued subsequent to the shareholders
meeting on March 22, 1997.
NOTE 4 - DETERMINATION TO CHANGE YEAR END
------------------------------------
It was determined on March 10, 1997, that Tri-Valley Corporation, and its
wholly owned subsidiary Tri-Valley Oil and Gas Corporation, will change from a
July 31 year end to a December 31 year end. A transition report will be filed
on a Form 10-KSB, no later than ninety days from the determination date,
showing the change.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
--------------
BUSINESS REVIEW
Change in Year End
- ---------------------
This will be the last Form 10-Q filed for a July 31 fiscal year end as we are
changing to a December 31 fiscal year end.
Petroleum Activities
- ---------------------
After two years of diligent effort, numerous industry, regulatory, geographic
and mechanical obstacles were overcome to hook up the Webb Tract No. 1. A
major dry gas discovery, it began producing nearly 5 million cubic feet per
day from a dual completion. The gas is contracted to Tosco with 60% on a fixed
price and 40% on the spot market as agreed among the working interest
partners. The working interest partners have been cash called to drill the WT
No. 2 development well this spring followed by a WT no. 3 step out well.
The Company announced two new pool discoveries in its Pimentel I-15 well in
the City of Tracy. The Company is methodically testing the extensive
indications of hydrocarbon bearing zones to complete the well for optimum
deliverability. 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 this year.
Working interest partners in the Martin-Severin production unit have been cash
called to drill the M-S 6 development well. In all, the Company expects to
substantially increase its reserves, production, and revenue from new wells
this fiscal year.
Looking to the future, Tri-Valley Oil and Gas acquired for cash and Tri-Valley
Corporation stock, the extensive geologic and seismic data base of San Carlos
Oil and Gas Corporation which was assembled over nearly 50 years by San Carlos
president, Charles W. Hatten. While much of it is concentrated in California
it also includes several other venues in North America, South America, Africa,
the Middle East and the Far East. Mr. Hatten, who built Great Basins Petroleum
into an international petroleum and minerals company has joined TVOG as a
consultant.
Precious Metal Activities
- ---------------------------
The Company is in discussions with a major mining company over a proposed
joint venture of its Richardson, Alaska gold project. Additionally, the
Company has been approached by several smaller mining concerns and is also
considering continuing its own exploration using internal funds.
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS (Continued)
--------------
BUSINESS REVIEW (Continued)
Telecommunications
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After nearly a year of due diligence, Tri-Valley Corporation is preparing to
propose acquisition of 26 wireless communication licenses held by five
partnerships by exchanging TVC unregistered stock for partnership interests.
At this time it appears to represent an attractive business opportunity that
would strengthen the Company's balance sheet, revenue sources, and access to
capital. A majority of the partners in the partnerships have voted to be
acquired by Tri-Valley in the even that Company proceeds with the transaction.
Financial Condition
- --------------------
The financial condition of the Company continued to strengthen from increased
revenues and new capital from private placement. Heavy legal and accounting
expenses were incurred from catching up on S.E.C. filing of the forms 10K and
10Q. The Company's balance sheet continues to improve as current assets
increased from $737,208 January 31, 1996 to $1,370,369 period ending January
31, 1997.
Three Months Ended January 31, 1997 as Compared with Three Months Ended
- ------------------------------------------------------------------------------
January 31, 1996
- ------------------
Revenues continued to increase as natural gas prices firmed so that gas sales
in the second quarter ending January 31, 1997 generated $206,362 versus
$191,730 for the same period in 1996. Overall revenue was $211,103 for the
second quarter ending January 31, 1997 versus $196,887 for the same period in
1996.
Costs and expenses were greater in the second quarter ending January 31, 1997
due to general administrative expenses of $107,499 over the comparable quarter
ending January 31, 1996 due in part to increased postage, printing, and
supplies associated with filing and getting current with required S.E.C.
reports. Mr. Blystone began taking a salary in the current quarter. He
deferred salary in the same quarter last year. Travel expenses, directors fees
and professional fees also accounted for this increase in costs. This resulted
in a net loss of $177,038 for the second quarter ending January 31, 1997,
versus a loss of $61,888 for the same period the previous year.
The Company expects the legal and accounting costs to begin to reduce in
subsequent quarters while prices appear to remain firm as it aims for
profitable operations.
The balance sheet showed dramatic improvement as the Company paid off its
obligations with proceeds from private placements of its unregistered stock.
Total assets increased $954,057 from $4,107,769 January 31, 1996, to
$5,061,826 January 31, 1997. Further, stockholder equity increased $1,073,911
from $1,633,309 January 31, 1996 to $2,707,220 for the period ending January
31, 1997. Additional capital to increase the net worth if forthcoming from the
exercise of warrants attached to the private placement stock.
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PART II - OTHER INFORMATION
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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 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, 1996.
ITEM 2. CHANGES IN SECURITIES
-----------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 5. OTHER INFORMATION
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None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(A) EXHIBITS - NONE.
(B) REPORTS ON FORM 8-K: None
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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
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President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JAN-31-1997
<CASH> 755,434
<SECURITIES> 0
<RECEIVABLES> 612,906
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,370,369
<PP&E> 3,308,054
<DEPRECIATION> 36,934
<TOTAL-ASSETS> 5,061,826
<CURRENT-LIABILITIES> 1,484,077
<BONDS> 0
0
0
<COMMON> 141,312
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,061,826
<SALES> 385,820
<TOTAL-REVENUES> 401,293
<CGS> 132,844
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 505,145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,934
<INCOME-PRETAX> (300,492)
<INCOME-TAX> 0
<INCOME-CONTINUING> (300,492)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300,492)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
