1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended Sept. 30, 2000 Commission File No.0-6119
TRI-VALLEY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 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
(Address of principal executive offices)
(661) 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. Yes [X ] No [ ]
The number of shares of Registrant's common stock outstanding at September 30,
2000 was 19,553,748.
<PAGE>
TRI-VALLEY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S><C>
PART I - FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 4
Item 1. Consolidated Financial Statements.. . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 9
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 13
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 13
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
To the Board of Directors
Tri-Valley Corporation
Bakersfield, California
We have reviewed the accompanying balance sheet of Tri-Valley Corporation as of
September 30, 2000, and related statements of income and cash flows for the nine
months then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Tri-Valley Corporation.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, with the exception of the matters described in the
following paragraph, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Management has elected to omit, in accordance with SEC regulations pertaining to
the filing of the 10-QSB, substantially all of the disclosures and the
statement of shareholders' equity required by generally accepted accounting
principles. If the omitted disclosures and the statement of shareholders' equity
were included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
BROWN ARMSTRONG RANDALL
REYES PAULDEN & McCOWN
ACCOUNTANCY CORPORATION
Bakersfield, California
November 6, 2000
<PAGE>
4
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Sept. 30, 2000 Dec. 31, 1999
(Unaudited) (Audited)
------------ -----------
<S> <C> <C>
Current Assets
Cash. . . . . . . . . . . . . . . $ 2,562,421 $ 8,050,469
Accounts receivable, trade. . . . 278,223 155,184
A/R Related Parties . . . . . . . 3,750 -0-
Prepaid expenses. . . . . . . . . 2,029 2,029
------------ -----------
Total Current Assets. . . . . . 2,846,423 8,207,682
------------ -----------
Property and Equipment, Net . . . . 1,210,778 1,059,755
------------ -----------
Other Assets
Deposits. . . . . . . . . . . . . 100,105 100,000
Note Receivable . . . . . . . . . 125,000 125,000
Acquisition Costs . . . . . . . . 51,270 50,000
Investments in partnerships . . . 12,006 12,006
Other . . . . . . . . . . . . . . 13,913 13,914
Well Database (net of accumulated
amortization of $38,910 at
Sept. 30, 2000 and $37,755
at December 31, 1999. . . . . . 69,741 70,895
Goodwill (net of accumulated
amortization of $207,882 at
Sept 30, 2000 and $199,747
at December 31, 1999. . . . . . 225,971 234,106
------------ -----------
Total Other Assets. . . . . . 598,006 605,921
------------ -----------
Total Assets. . . . . . . . . $ 4,655,207 $ 9,873,358
============ ===========
</TABLE>
<PAGE>
The accompanying notes are an integral part of these
condensed financial statements.
7
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, 2000 Dec. 31, 1999
-------------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Notes and contracts payable. . . . . $ 10,554 $ 10,554
Trade accounts payable . . . . . . . 810,699 391,104
Amounts payable to joint venture
participants . . . . . . . . . . . 201,575 95,986
Advances from joint venture
participants . . . . . . . . . . . 1,746,854 7,877,600
-------------------- ---------------
Total Current Liabilities. . . . . 2,769,682 8,375,244
-------------------- ---------------
Long-term Portion of Notes and
Contracts Payable. . . . . . . . . . 14,466 21,055
-------------------- ---------------
Commitments
Shareholders' Equity
Common stock, $.001 par value:
100,000,000 shares authorized;
19,553,748 and 19,301,248 issued
and outstanding at Sept 30, 2000
and Dec. 31, 1999, respectively. . 19,503 19,281
Less: Common stock in treasury,
at cost, 157,925 shares . . . . . . (45,163) (45,163)
Capital in excess of par value . . . 8,600,340 8,344,462
Accumulated deficit. . . . . . . . . (6,703,621) (6,841,521)
-------------------- ---------------
Total Shareholders' Equity . . . . 1,871,059 1,477,059
-------------------- ---------------
Total Liabilities and
Shareholders' Equity . . . . . . $ 4,655,207 $ 9,873,358
==================== ===============
</TABLE>
<PAGE>
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
2000 1999 2000 1999
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues
Sale of oil and gas . . . . . . . . . . . $ 231,055 $ 113,157 $ 570,139 $ 404,026
Other income. . . . . . . . . . . . . . . 103,164 1,840,437 1,531,441 1,935,973
Interest income . . . . . . . . . . . . . 29,948 3,273 72,810 10,121
------------ ----------- ----------- ------------
Total Revenues. . . . . . . . . . . . . 364,167 1,956,867 2,174,390 2,350,120
------------ ----------- ----------- ------------
Cost and Expenses
Oil and gas lease expense . . . . . . . . 22,379 19,364 85,089 68,936
Mining Exploration Expenses . . . . . . . 73,719 51,879 123,622 142,511
Project geology, geophysics,
Land & administration . . . . . . . . . 74,668 108,836 395,991 108,836
Cost of Sale of Asset . . . . . . . . . . -0- 942,077 394,240 942,077
Depletion, depreciation and amortization. 19,860 38,850 59,582 116,552
Interest. . . . . . . . . . . . . . . . . 4,783 6,305 12,581 13,871
General administrative. . . . . . . . . . 337,151 210,358 965,390 737,923
------------ ----------- ----------- ------------
Total Cost and Expenses . . . . . . . . 532,560 1,377,669 2,036,495 2,130,706
------------ ----------- ----------- ------------
Net Income/(Loss) . . . . . . . . . . . . . $ (168,393) $ 579,198 $ 137,895 $ 219,414
============ =========== =========== ============
Net Income (Loss) per Common Share. . . . . $ (.01) $ .03 $ .01 $ (.01)
============ =========== =========== ============
Weighted Average Number of Shares . . . . . 19,548,081 19,174,208 19,548,081 19,174,248
============ =========== =========== ============
</TABLE>
<PAGE>
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
----------------------
Ended Sept. 30,
-----------------
2000 1999
------------ -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss/profit. . . . . . . . . . . . . . . . . . . $ 137,895 $ 219,414
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization . . . . 59,582 116,552
Changes in operating capital:
Amounts receivable . . . . . . . . . . . . . . . (123,039) 171,448
Deposits . . . . . . . . . . . . . . . . . . . . (105) -
Trade accounts payable . . . . . . . . . . . . . 419,595 (253,586)
Amounts payable to joint venture
participants and related parties . . . . . . . 105,589 (135,224)
Advances from joint venture
participants . . . . . . . . . . . . . . . . . (6,130,746) 7,686,531
------------ -----------
Net Cash Used by Operating Activities. . . . . . . . . (5,531,229) 7,805,135
------------ -----------
Cash Flows from Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . (206,330) 104,001
------------ -----------
Cash Flows from Financing Activities
Principal payments on long-term debt . . . . . . . (6,589) 0
Proceeds from issuance of common stock . . . . . . . 256,100 (37,693)
------------ -----------
Net Cash Provided (used) by Financing Activities 249,511 (37,693)
------------ -----------
Net Decrease in Cash and Cash Equivalents. . . . . . . (5,488,048) 7,871,443
Cash and Cash Equivalents at Beginning
Of Period. . . . . . . . . . . . . . . . . . . . . . 8,050,469 191,226
------------ -----------
Cash and Cash Equivalents at
End of Period. . . . . . . . . . . . . . . . . . . . $ 2,562,421 $8,062,669
============ ===========
Supplemental Information:
Cash paid for interest . . . . . . . . . . . . . . . $ 12,581 $ 13,871
Cash paid for taxes. . . . . . . . . . . . . . . . . $ 6,678 $ 4,206
</TABLE>
<PAGE>
8
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
(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
nine month period ended Sept. 30, 2000, 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, 1999.
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.
<PAGE>
14
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS
--------------
BUSINESS REVIEW
Notice Regarding Forward-Looking Statements
----------------------------------------------
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.
Petroleum Activities
---------------------
While the zones in the Ekho #1 are restricted with extremely high quality oil &
gas testing has determined that the Ekho #1 sands are tight and will require
artificial fracturing. This is a common event in which a solution is pumped
under high pressure down the well bore in an attempt to artificially fracture
the reservoirs. The Company has cash called all of the participants and has
been informed that six of the remaining seven Canadian companies have declined
to go forward. This was primarily because they did not have the ability to
raise the required capital. The remaining Canadian company that has decided to
stay with the project is Curlew Lake Resources, a 5% working interest owner.
Tri-Valley's private participant group has decided to go forward. The Company
is in the process of re-partnering the project with stronger partners to assure
the project can go forward through completion of the Ekho #1 well and the
subsequent Ekho #2 and #3 wells as part of the planned three well program to
test the 26 mile long, 4 to 5 mile wide mapped structure.
In our June 10-Q we reported that we anticipated drilling the first Sunrise
prospect well in the third quarter, however, we are still waiting for the permit
to be issued. We plan to begin drilling as soon as practical after this permit
is received by us.
We planned to work over the Martin-Severins #5 & #6 in the third quarter but due
to the demand for work over rigs we were not able to accomplish this in the
third quarter. The rig did move on location October 30, 2000, and is currently
beginning this operation. We anticipate re-completing both wells within 10 to
12 days.
Precious Metals
----------------
At the end of the summer field season Placer Dome concluded their work on their
portion of the Richardson mining claims. They have informed the Company that
they do not intend to do any further work on the project and are dropping their
option. However, they have requested an extension of the confidentiality
agreement in order to look at data from work performed by Tri-Valley on other
areas of Tri-Valley's claim block. Further, Placer
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS
--------------
Dome has paid all holding costs for the 36 square miles of claims formerly under
their
option. Tri-Valley expects a complete data review of its Alaska properties in
December in order to determine its future interests.
Three Months Ended Sept 30, 2000 as compared with Three Months ended Sept 30,
--------------------------------------------------------------------------------
1999
----
Total revenues for the three months ended September 30, 2000, were $364,167,
compared to $1,956,867 for the same period in 1999. The period in 1999 included
revenue we recognized for the sale of working interests in Project Ekho.
Revenue from sale of working interests in the third quarter of 2000, primarily
from our Sunrise project, were much lower. Sale of oil and gas for the third
quarter of 2000 more than doubled from the third quarter of 1999, to $231,055 in
2000, compared to $113,157 in 1999. The increase was due to increased gas
prices and increased production from the Hanson #1 well, which was successfully
reworked. Other income was greater in the third quarter of1999 because we
recognized income from the sale of working interest in Project Ekho. Interest
income increased to $29,948 in the third quarter of 2000, compared to $3,273 in
the same period in 1999, because we received interest on increased cash
reserves which were ultimately expended drilling the first Project Ekho #1.
Total costs were also lower in the third quarter of 2000, mainly due to costs of
Project Ekho that we recognized in the third quarter of 1999. The third quarter
expenses included costs associated with sale of assets, which included project
geology, geophysics, land and administration. The lower expenses we incurred in
the third quarter of 2000 for geology, geophysics, land and administration costs
were primarily associated with our Sunrise and Sonata projects.
Depletion, depreciation and amortization costs decreased by slightly more than
50% in the third quarter of 2000 to $19,860, compared to $38,850 in the third
quarter of 1999, due to declining production in the third quarter of 2000
compared to the same period in 1999.
Mining expenses increased by $21,840 (42%) in the third quarter of 2000 to
$73,719, from $51,879 in the third quarter of 1999 as we increased exploration
efforts on our Richardson, Alaska claim in the summer months. Administrative
expenses increased $126,793 (60%) in the third quarter compared to the third
quarter of 1999, primarily because of increased legal expenses. Overall, we
realized a net loss of $168,393 in the third quarter of 2000, compared to net
income of $579,198 for the third quarter o f 1999.
Nine Months Ended Sept 30, 2000 as compared with Nine Months ended Sept 30, 1999
--------------------------------------------------------------------------------
We had total revenues of $2,174,390 for the nine months ended September 30,
2000, compared to total revenues of $2,350,120 for the same period in 1999. Our
gas revenue increased by 41% to $570,139, from $404,026 in the same period in
1999, due to increased production from the Hanson #1 well and to increased gas
prices. In the nine month period in 2000, we recorded revenue from the sale of
working interests in our Sunrise project among other income. In the same period
in 1999, other income included sales of working interest in Project Ekho.
Other income was $1,531,441 in the third quarter of 2000 compared to $1,935,973
for the same period in 1999. This primarily is due to the sale of working
interests from the sunrise project in 2000 and the Ekho project in 1999.
Interest income in the nine months ended September 30, 2000 was $72,810,
compared to $10,121 for the nine months ended September 30, 1999. In 2000 we
received interest on funds we held awaiting expenditure on our Sunrise project
and the Ekho project. The Ekho funds have now been expended.
Expenses decreased to $2,036,495 in the first nine months of 2000 compared to
$2,130,706 in the same period in 1999. Our expenses in 2000 for cost of asset
sales and geology, geophysics, land and administration were lower due to the
lower costs of the Sunrise project which we incurred during 2000, compared to
the deeper Project Ekho for which we incurred costs in the first nine months of
1999. General administrative expenses increased 30% to $965,390 in the first
nine months of 2000 compared to $737,923 in the same period in 1999 mainly
because of increased legal expenses and consulting fees in 2000.
Depletion, depreciation and amortization expense decreased by 49% for the first
nine months of 2000 to $59,582 from $116,552 in the same period in 1999. This
decrease was due to declining production.
Our net income for the first nine months of 2000 has been $137,895, compared to
$219,414 in the first three quarters of 1999.
Capital Resources and Liquidity
----------------------------------
At Sept 30, 2000, we had current assets totaling $2,846,423 and current
liabilities of $2,769,682. For the same period in 1999 we had current assets of
$8,062,669 and current liabilities of $8,268,285. The reduction from September
30, 1999 to September 30,2000 was due to the cash on deposit and the offset
liability, Advance from JV participants, as the Ekho drilling expenses were
incurred and paid.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS
--------------
Operating Activities. Cash provided by operations were a deficit of $5,531,229
for the nine months ended Sept 30, 2000 compared to $7,805,135 for the same
period in 1999. This was due to expenditures of the drilling operation related
to the EKHO #1.
Financing Activities. Net cash provided by financing activities increased
$287,204 for the period ended Sept 30, 2000 over the same period in 1999 due to
the sale of the Company's common stock in private transactions.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
There has been no change in our legal proceedings from our report on the last
10-Q and 10-K.
ITEM 1. CHANGES IN SECURITIES
-----------------------
During the third quarter of 2000, we issued 24,500 shares of our common stock to
2 individuals in private transactions pursuant to the exemption contained in
Section 4(2) of the Securities Act of 1933, for aggregate consideration of
$28,000. The shares sold are restricted securities which bear a legend
restricting transfer of the shares unless registered or sold under an exemption
from registration requirements under the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
The Company held its annual meeting on September 16, 2000. The matters
submitted to a vote of the security holders included the election of directors,
to approve the Company's restated Certificate of Incorporation, the election for
the Company to be governed by Section 203 of the Delaware General Corporation
Laws. The shareholders elected all of the nominations for director who were
recommended by the board. They approved the restated Certificate of
Incorporation and elected to be governed by Section 203 of the Delaware General
Corporation Laws. The shareholder votes were as follows:
FOR AGAINST ABSTAIN
Earl H. Beistline 18,260,785 248,950
F.Lynn Blystone 18,264,680 248,055
Milton J. Carlson 18,266,485 243,250
Dennis P. Lockhart 18,266,485 243,250
Loren J. Miller 18,266,485 243,250
Measure #2 - Approve the Company's restated Certificate of Incorporation.
14,352,402 111,309 4,046,024
Measure #3 - Election by the Company to be governed by Section 203 of the
Delaware General Corporation Laws.
14,318,398 189,213 4,002,124
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Reports on Form 8-K:
None
<PAGE>
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 9, 2000 /s/ F. Lynn Blystone
------------------------
F. Lynn Blystone
President and Chief Executive Officer
November 9, 2000 /s/ Thomas J. Cunningham
---------------------------
Thomas J. Cunningham
Secretary, Treasurer, Chief Financial Officer
