1
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 September30, 1999
[ ] 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)
(661) 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 September 30,
1999 was 19,201,248.
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5
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 September 30 1999 and
December 31, 1998. . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for the nine
months ended September 30, 1999 and 1998 . . . . . . . 6
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998 . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 9
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 13
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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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Sept. 30, 1999 Dec. 31, 1998
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Current Assets
Cash. . . . . . . . . . . . . . . $ 8,062,669 $ 191,226
Accounts receivable, trade. . . . 136,125 307,573
A/R Related Parties . . . . . . . 3,750 -
Prepaid expenses. . . . . . . . . 2,029 2,029
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Total Current Assets. . . . . . 8,204,573 625,828
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Property and Equipment, Net . . . . 864,318 1,038,237
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Other Assets
Deposits. . . . . . . . . . . . . 100,000 100,000
Note Receivable . . . . . . . . . 125,000 125,000
Acquisition Costs . . . . . . . . 194,102 183,342
Investments in partnerships . . . 10,686 10,686
Other . . . . . . . . . . . . . . 13,913 13,913
Well Database (net of accumulated
amortization of $32,705 at
Sept 30, 1999 and $31,550
at December 31, 1998. . . . . . 74,407 61,561
Goodwill (net of accumulated
amortization of $197,035 at
Sept 30, 1999 and $188,901
at December 31, 1998. . . . . . 236,818 244,952
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Total Other Assets. . . . . . 754,926 614,454
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Total Assets. . . . . . . . . $ 9,823,817 $ 2,278,519
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Sept. 30, 1999 Dec. 31, 1998
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CURRENT LIABILITIES
Notes and contracts payable. . . . . $ 8,335 $ 9,641
Trade accounts payable . . . . . . . 328,947 582,533
Amounts payable to joint venture
participants . . . . . . . . . . . 109,440 244,664
Advances from joint venture
participants . . . . . . . . . . . 7,821,563 135,032
Due to related parties . . . . . . . - 5,712
Accrued expenses and
other liabilities . . . . . . . . . - -
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Total Current Liabilities. . . . . 8,268,285 977,582
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Long-term Portion of Notes and
Contracts Payable. . . . . . . . . . 6,012 8,527
Investor Payable . . . . . . . . . . - -
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Commitments
Shareholders' Equity
Common stock, $.001 par value:
50,000,000 shares authorized;
19,201,248 and 19,088,248 issued
and outstanding at Sept 30, 1999
and Dec. 31, 1998, respectively. . 19,179 19,088
Less: Common stock in treasury,
at cost, 173,825 shares . . . . . . (44,369) (41,061)
Capital in excess of par value . . . 8,218,565 8,177,655
Accumulated deficit. . . . . . . . . (6,643,855) (6,863,272)
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Total Shareholders' Equity . . . . 1,549,520 1,292,410
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Total Liabilities and
Shareholders' Equity . . . . . . $ 9,823,817 $ 2,278,519
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The accompanying notes are an integral part of these
condensed financial statements.
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months For the Nine Months
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenues
Sale of oil and gas . . . . . . . . . . . $ 113,157 $ 197,037 $ 404,026 $ 636,753
Sale of Property. . . . . . . . . . . . . 1,832,291 -0- 1,907,291 -0-
Other income. . . . . . . . . . . . . . . 8,146 8,454 28,682 69,632
Interest income . . . . . . . . . . . . . 3,273 11,514 10,121 62,307
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Total Revenues. . . . . . . . . . . . . 1,956,867 217,005 2,350,120 768,692
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Cost and Expenses
Oil and gas operating expense. . . . . . 19,364 25,545 68,936 81,692
Lease expense . . . . . . . . . . . . . . 108,836 -0- 108,836 -0-
Mining Exploration Expenses . . . . . . . 51,879 35,644 142,511 169,377
Cost of Sale of Property. . . . . . . . . 942,077 -0- 942,077 -0-
Depletion, depreciation and amortization. 38,850 38,291 116,552 114,874
Interest. . . . . . . . . . . . . . . . . 6,305 799 13,871 4,246
General administrative. . . . . . . . . . 210,358 411,703 737,923 1,269,373
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Total Cost and Expenses . . . . . . . . 1,377,669 511,982 2,130,706 1,639,562
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Net Profit/(Loss) . . . . . . . . . . . . . $ 579,198 $ (294,977) $ 219,414 $ (870,870)
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Net Income (Loss) per Common Share. . . . . $ .03 $ (.02) $ .01 $ (.05)
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Weighted Average Number of Shares . . . . . 19,174,208 19,063,248 19,174,248 19,063,248
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
For the Nine Months
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Ended September 30,
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1999 1998
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Cash Flows from Operating Activities
Net loss. . . . . . . . . . . . . . . . . . . $ 219,414 $ (870,870)
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization. 116,552 (114,874)
Changes in operating capital:
Amounts receivable. . . . . . . . . . . . 171,448 391,312
Deposits. . . . . . . . . . . . . . . . . - -
Trade accounts payable. . . . . . . . . . (253,586) 442,899
Amounts payable to joint venture
participants and related parties. . . . (135,224) (418,594)
Advances from joint venture
participants. . . . . . . . . . . . . . 7,686,531 (1,827,903)
Accrued expenses and other liabilities. . - -
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Net Cash Used by Operating Activities . . . . . 7,805,135 (2,398,030)
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Cash Flows from Investing Activities
Capital expenditures. . . . . . . . . . . . . 104,001 (102,785)
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Cash Flows from Financing Activities
Investor payable. . . . . . . . . . . . . . . - (103,000)
Principal payments on long-term debt. . . . . - (89,845)
Proceeds from issuance of common stock. . . . (37,693) 103,952
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Net Cash Provided by Financing Activities (37,693) (88,893)
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Net Increase in Cash and Cash Equivalents . . . 7,871,443 (2,589,708)
Cash and Cash Equivalents at Beginning
Of Period . . . . . . . . . . . . . . . . . . 191,226 2,778,592
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Cash and Cash Equivalents at
End of Period . . . . . . . . . . . . . . . . $8,062,669 $ 188,884
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10
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(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
nine months period ended September 30, 1999, 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, 1998.
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.
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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 has
received responses from all of its vendors affirming that they are compliant
with the Y2K issue. The funds spent to make this determination were less than
fifty dollars.
Petroleum Activities
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We finalized an agreement with a consortium of 9 Canadian companies to drill the
Ekho well No. 1, our deep exploration play in the south San Joaquin Valley of
California. The project was completely funded in September, contracts and other
issues are being completed. Of the funds received for this well $7,821,563 was
booked in the Current Asset as Cash and in the Current Liabilities as Advances
from joint venture participants. We recorded $1,832,291 on the income statement
as revenue from the sale of property and recorded the related expenses under
Costs and Expenses. We anticipate the well activities to begin immediately.
Tri-Valley has a 12 1/2 percent carried interest to completion at which time we
will begin to pay our 12 1/2 percent interest. When the well pays out we will
back in for another 12 1/2 percent working interest. This has the potential to
be one of the largest discoveries made in California in many years.
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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
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We continued to explore our mining exploration activities at our Richardson,
Alaska mining claim with the geoscientists from Russia as described in our
second quarter report on form 10-QSB. The season work activity was concluded in
September.
Placer Dome began their work commitment in May and concluded their work in
September. The project has survived the first cut on Placer Dome's retention
list of world wide projects. PDUS has until December 31, 1999 to declare their
intentions for 2000.
Three Months Ended Sept 30, 1999 as compared with Three Months ended Sept 30,
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1998
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The company had revenues of $1,956,867 for the three months ended September 30,
1999. This was an increase of $1,739,862 from the same period last year and was
due primarily to the gross revenue generated by the sale of property associated
with project EKHO well No. 1. The oil and gas sales decreased by $83,880 due to
decline in production.
Operating expenses for the quarter ended September 30, 1999, increased by
$865,687 (169%) to $1,377,669 from $511,982 in the same quarter in 1998. Our
expenses increased mainly because we incurred costs in preparation of the Ekho
No. 1 project, including lease acquisition and costs associated with selling the
joint venture interests.
General and Administrative costs decreased $201,345 from the same period last
year, this decrease was due to the decrease in legal costs associated with the
lawsuit. We had profit of $579,198 for the three month period ending September
30, 1999 compared to a loss of $294,977 for the same period in 1998.
We are expecting to be profitable for the year ending December 31, 1999.
Capital Resources and Liquidity
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At September 30, 1999, we had current assets totaling $8,204,573 and current
liabilities totaling $8,268,285. Because of the receipt of capital to drill the
Ekho No. 1 in the third quarter, our total assets increased to $9,823,817 at
September 30, 1999, an increase of $7,545,298 (331%) from $2,278,519 at December
31, 1998.
Operating Activities. For the nine months ended September 30, 1999, cash
provided by operating activities totaled $7,871,443 compared to a deficit at
September 30, 1998, $2,589,708 cash used by operating activities. The cash
provided will be reduced as the funds are spent to drill and complete this well.
Financing Activities. For the nine months ended September 30, 1999, $37,693 was
used by financing activities. This represents costs associated with our
issuance of common stock to employees as compensation for their services. This
compares to a net of $88,893 used by financing activities in the same period in
1998
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PART II - OTHER INFORMATION
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13
ITEM 1. LEGAL PROCEEDINGS
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We began foreclosure proceedings against the Third Mobile of Central New York to
try to recover in full the funds that were loaned to that partnership in 1997.
This loan matured and was due and payable in November of 1997. However, we
extended the repayment date for an additional six months. No effort has been
made to repay any of this debt. This partnership as asserted a counterclaim in
the amount of five million dollars. We have a general release from the
counterclaimant and believe this to be a frivolous and merit less claim. We
intend to vigorously defend this to whatever degree necessary to prevail.
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.
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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)
November 12, 1999 /s/ F. Lynn Blystone
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F. Lynn Blystone
President and Chief Executive Officer
