2
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 June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to.
Commission File No. 0-6119
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Tri-Valley Corporation
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(Exact name of registrant as specified in its charter)
Delaware No. 84-0617433
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(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 June 30, 1998
was 19,063,248.
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 June 30 1998 and
December 31, 1997. . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the six
months ended June 30, 1998 and 1997. . . . . . . . . . 5
Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997. . . . . . . . . . 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
3
</TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
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<CAPTION>
June 30, 1998 Dec. 31, 1997
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<S> <C> <C>
Current Assets
Cash. . . . . . . . . . . . . . . $ 950,787 $ 2,778,592
Accounts receivable, trade. . . . 380,443 696,758
Note Receivable . . . . . . . . . 125,000 125,000
Prepaid expenses. . . . . . . . . 2,029 2,029
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Total Current Assets. . . . . . 1,458,259 3,602,379
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Property and Equipment, Net . . . . 910,237 821,614
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Other Assets
Deposits. . . . . . . . . . . . . 100,000 100,000
Acquisition Costs . . . . . . . . 174,252 119,007
Investments in partnerships . . . 8,421 8,421
Other . . . . . . . . . . . . . . 13,908 13,908
Well Database (net of accumulated
amortization of $2,308 at
June 30, 1998 and $1,539
at December 31, 1997. . . . . . 92,341 93,111
Goodwill (net of accumulated
amortization of $183,478 at
June 30, 1998 and $178,055
at December 31, 1997. . . . . . 250,375 255,798
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Total Other Assets. . . . . . 639,297 590,245
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Total Assets. . . . . . . . . $ 3,007,793 $ 5,014,238
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LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1998 Dec. 31, 1997
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<S> <C> <C>
CURRENT LIABILITIES
Notes and contracts payable. . . . $ 34,877 $ 90,667
Trade accounts payable . . . . . . 196,215 74,796
Amounts payable to joint venture
participants . . . . . . . . . . 313,362 605,431
Advances from joint venture
participants . . . . . . . . . . 677,208 1,845,064
Due to related parties . . . . . . 63,532 96,532
Accrued expenses and
other liabilities . . . . . . . . 0 0
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Total Current Liabilities. . . . 1,285,194 2,712,490
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Long-term Portion of Notes and
Contracts Payable. . . . . . . . . 13,950 13,950
Investor Payable . . . . . . . . . - 103,000
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Commitments
Shareholders' Equity
Common stock, $.001 par value:
50,000,000 shares authorized;
19,063,248 and 18,922,248 issued
and outstanding at June 30, 1998
and Dec. 31, 1997, respectively. 19,055 18,922
Less: Common stock in treasury,
at cost, 159,425 shares . . . . . (36,133) (28,639)
Capital in excess of par value . . 8,162,935 8,048,331
Accumulated deficit. . . . . . . . (6,437,208) (5,853,816)
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Total Shareholders' Equity . . . 1,708,649 2,184,798
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Total Liabilities and
Shareholders' Equity . . . . . $ 3,007,793 $ 5,014,238
=============== ===============
The accompanying notes are an integral part of these
condensed financial statements.
7
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues
Sale of oil and gas . . . . . . . . . . . $ 220,233 $ 149,444 $ 439,716 $ 305,376
Other income. . . . . . . . . . . . . . . 22,712 11,926 61,178 23,011
Interest income . . . . . . . . . . . . . 25,882 34,133 50,793 42,674
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Total Revenues. . . . . . . . . . . . . 268,827 195,503 551,687 371,061
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Cost and Expenses
Oil and gas lease expense. . . . . . . . 12,517 8,651 56,147 40,829
Mining Exporation Expenses. . . . . . . . 22,101 -0- 133,733 -0-
Depletion, depreciation and amortization. 38,291 17,580 76,583 35,159
Interest. . . . . . . . . . . . . . . . . 1,421 4,628 3,447 8,925
General administrative. . . . . . . . . . 496,554 187,948 857,670 557,744
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Total Cost and Expenses . . . . . . . . 570,884 218,807 1,127,580 642,657
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Net Loss. . . . . . . . . . . . . . . . . . $ (302,057) $ (23,304) $ (575,893) $ (271,596)
============ ============ ============ ============
Net Income (Loss) per Common Share. . . . . $ (.02) $ (.02) $ (.03) $ (.03)
============ ============ ============ ============
Weighted Average Number of Shares . . . . . 19,063,248 17,957,915 19,063,248 17,957,915
============ ============ ============ ============
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Six Months
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Ended June 30,
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1998 1997
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<S> <C> <C>
Cash Flows from Operating Activities
Net loss. . . . . . . . . . . . . . . . . . . $ (575,893) $ (271,596)
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization. (76,583) (35,159)
Changes in operating capital:
Amounts receivable. . . . . . . . . . . . 316,315 (187,679)
Deposits. . . . . . . . . . . . . . . . . 0 -
Trade accounts payable. . . . . . . . . . 121,419 (589)
Amounts payable to joint venture
participants and related parties. . . . (325,069) (122,491)
Advances from joint venture
participants. . . . . . . . . . . . . . (1,167,856) 296,736
Accrued expenses and other liabilities. . 0 0
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Net Cash Used by Operating Activities . . . . . (1,707,667) (250,460)
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Cash Flows from Investing Activities
Capital expenditures. . . . . . . . . . . . . (68,591) (357,412)
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Cash Flows from Financing Activities
Investor payable. . . . . . . . . . . . . . . (103,000) (662,680)
Principal payments on long-term debt. . . . . (55,790) 131,515
Proceeds from issuance of common stock. . . . 107,243 2,124,653
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Net Cash Provided by Financing Activities (51,547) 1,593,488
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Net Increase in Cash and Cash Equivalents . . . (1,824,805) 985,616
Cash and Cash Equivalents at Beginning
Of Period . . . . . . . . . . . . . . . . . . 2,778,592 894,365
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Cash and Cash Equivalents at
End of Period . . . . . . . . . . . . . . . . $ 950,787 $1,879,981
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</TABLE>
10
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
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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 months period ended June 30, 1998, 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, 1997.
NOTE 2 - PER SHARE COMPUTATIONS
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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.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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BUSINESS REVIEW
Notice Regarding Forward-Looking Statements
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This report contains forward-looking statements. The words, "anticipate,"
"believe," "expect," "plan," "intend," "estimate," "project," "could," "may,"
"foresee," and similar expressions are intended to identify forward-looking
statements. These statements include information regarding expected development
of the Company's business, lending activities, relationship with customers, and
development in the oil and gas industry. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, actual
results may vary materially and adversely from those anticipated, believed,
estimated or otherwise indicated.
Computer Issues for the Year 2000
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The Company is aware of the issues associated with the programming code in
existing systems as the millennium (Year 2000) approaches. The Company has
examined the computer software and is confident it will accommodate the Year
2000 issue. Additionally, the company is contacting its appropriate vendors to
determine if they are equipped to handle the Year 2000 issue. The company
expects to have all the responses from these vendors by the end of the third
quarter of its fiscal year (9/30/98). The funds spent to make this
determination are less than fifty dollars.
Petroleum Activities
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The Company drilled and completed the Pimental 1-15 in 1997. Due to delays in
acquiring part of an existing pipeline which included rights of way, the
construction of the remaining portion of the pipeline was delayed. However, the
pipeline section has been acquired and the remaining portion is being
constructed. It is expected that this project will be completed in August.
In the first two quarters of this year the company drilled the Holly Sugar No. 1
and the Kantzer-Fox 1-24. These wells have been completed and we are evaluating
these wells to determine the reservoir quality and production potential.
Tri-Valley is continuing to look for suitable producing properties or companies
to acquire. Management feels there is an opportunity in the industry today for
sound acquisitions due to the current low prices vis a vis the long term
outlook.
Precious Metals Activities
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The Company has signed an option agreement with Red Star Resources Corporation
to explore and develop approximately 25 square miles of the Company's 45 square
mile claim block in the Richardson Gold District of Alaska. Red Star will work
on the Buck Trend on which Tri-Valley has delineated possible very large
pluton-related gold system targets.
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)
Red Star Resources, a mining company based in Vancouver, B.C., can earn a 51%
interest in the Buck property by carrying out $6,300,000 in work expenditures
over the next five years, including $300,000 in the current year. The company
must also pay Tri-Valley at least $700,000, including $25,000 on signing the
agreement and $75,000 on approval by the Vancouver Stock Exchange, in staged
payments as partial reimbursement for Tri-Valley's previous exploration costs.
The agreement will also give Red Star right of first refusal in the event that
Tri-Valley decides to divest itself of its interest in its adjoining 20 square
mile claim block, which includes the four mile long Democrat Dike. Tri-Valley
is currently bulk sampling up to 100,000 tons of ore from a test pit in one of
the Democrat Dike zones. The Company has contracts in place with
sub-contractors to perform these activities.
Again this year Tri-Valley is utilizing the expertise of senior scientists from
TsNIGRI, the principal mineral research institute in Moscow.
Telecommunications
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The Company has been continuing its due diligence to determine if it will be
able to make this acquisition. Currently an evaluation/report is being
concluded to assist management of Tri-Valley in making this determination. The
Company intends to have its decision no later than the end of the third quarter.
Three Months Ended June 30, 1998 as compared with Three Months ended June 30,
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1997
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Revenues were $70,789 greater for the quarter ended June 30, 1998, compared to
the same period last year. Total revenue was $268,827 for the period ending
June 30, 1998, compared to $195,503 for the period ending June 30, 1997.
Costs and expenses increased this quarter due to increased lease expenses, and
the cost of carrying the lawsuit which has entered its most expensive stage.
Trial is set for August 11, 1998. Mining activity is now expensed as incurred,
and our depletion, depreciation and amortization is more. The Company added to
its staff this quarter when we hired a petroleum engineer, to screen producing
properties and companies for possible acquisition.
PART II - OTHER INFORMATION
13
ITEM 1. LEGAL PROCEEDINGS
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The company is plaintiff in a lawsuit against a consulting geologist and a
former officer of Tri-Valley Oil & Gas Company for fraud and theft of trade
secrets.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(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)
June 12, 1998 /s/ F. Lynn Blystone
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F. Lynn Blystone
President and Chief Executive Officer
