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 June 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 June 30, 2000
was 19,529,248.
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TRI-VALLEY CORPORATION
INDEX
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Page
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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. . . . . . 8
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . 11
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 12
To the Board of Directors
Tri-Valley Corporation
Bakersfield, California
We have reviewed the accompanying balance sheet of Tri-Valley Corporation as of
June 30, 2000, and related statements of income and cash flows for the six
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
July 31, 2000
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4
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
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(Unaudited) (Audited)
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Current Assets
Cash. . . . . . . . . . . . . . . $ 2,932,485 $ 8,050,469
Accounts receivable, trade. . . . 215,394 155,184
A/R Related Parties . . . . . . . 3,750 -0-
Prepaid expenses. . . . . . . . . 2,029 2,029
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Total Current Assets. . . . . . 3,153,658 8,207,682
------------ -----------
Property and Equipment, Net . . . . 1,156,752 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 . . . . . . . . . . . . . . 13,914 13,914
Well Database (net of accumulated
amortization of $38,525 at
June 30, 2000 and $37,755
at December 31, 1999. . . . . . 70,125 70,895
Goodwill (net of accumulated
amortization of $205,170 at
June 30, 2000 and $199,747
at December 31, 1999. . . . . . 228,683 234,106
------------ -----------
Total Other Assets. . . . . . 601,103 605,921
------------ -----------
Total Assets. . . . . . . . . $ 4,911,513 $ 9,873,358
============ ===========
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June 30, 2000 Dec. 31, 1999
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The accompanying notes are an integral part of these
condensed financial statements.
7
LIABILITIES AND SHAREHOLDERS' EQUITY
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June 30, 2000 Dec. 31, 1999
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CURRENT LIABILITIES
Notes and contracts payable. . . . . $ 10,554 $ 10,554
Trade accounts payable . . . . . . . 1,351,934 391,104
Amounts payable to joint venture
participants . . . . . . . . . . . 149,834 95,986
Advances from joint venture
participants . . . . . . . . . . . 1,348,539 7,877,600
--------------- ---------------
Total Current Liabilities. . . . . 2,860,861 8,375,244
--------------- ---------------
Long-term Portion of Notes and
Contracts Payable. . . . . . . . . . 16,700 21,055
--------------- ---------------
Commitments
Shareholders' Equity
Common stock, $.001 par value:
50,000,000 shares authorized;
19,529,248 and 19,301,248 issued
and outstanding at June 30, 2000
and Dec. 31, 1999, respectively. . 19,492 19,281
Less: Common stock in treasury,
at cost, 157,925 shares . . . . . . (45,163) (45,163)
Capital in excess of par value . . . 8,594,851 8,344,462
Accumulated deficit. . . . . . . . . (6,535,228) (6,841,521)
--------------- ---------------
Total Shareholders' Equity . . . . 2,033,952 1,477,059
--------------- ---------------
Total Liabilities and
Shareholders' Equity . . . . . . $ 4,911,513 $ 9,873,358
=============== ===============
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Six Months
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Ended June 30,
----------------
2000 1999
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Revenues
Sale of oil and gas. . . . . . . $ 339,084 $ 290,870
Other income . . . . . . . . . . 1,428,277 95,535
Interest income. . . . . . . . . 42,862 6,849
----------- ------------
Total Revenues . . . . . . . . 1,810,223 393,254
----------- ------------
Cost and Expenses
Oil and gas lease expense. . . . 62,710 49,572
Mining exploration expense . . . 49,903 90,633
Project geology, geophysics,
Land & administration. . . . . 321,323 -0-
Depletion, depreciation and
amortization . . . . . . . . . 39,722 77,701
Interest . . . . . . . . . . . . 7,798 7,566
General and administrative . . . 628,239 527,565
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Total Cost and Expenses. . . . 1,503,935 753,037
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Net (Loss)/Profit. . . . . . . . . $ 306,288 $ (359,783)
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Net (Loss)/Profit per Common Share $ .02 $ (.01)
=========== ============
Weighted Average Number of Shares. 19,335,915 19,088,248
=========== ============
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TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Six Months
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Ended June 30,
----------------
2000 1999
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Cash Flows from Operating Activities
Net loss/profit. . . . . . . . . . . . . . . . . . . $ 306,288 $ (359,783)
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization . . . . 39,722 77,701
Changes in operating capital:
Amounts receivable . . . . . . . . . . . . . . . (60,210) 101,614
Deposits . . . . . . . . . . . . . . . . . . . . (105) -
Trade accounts payable . . . . . . . . . . . . . 960,830 (122,651)
Amounts payable to joint venture
participants and related parties . . . . . . . 53,848 (85,449)
Advances from joint venture
participants . . . . . . . . . . . . . . . . . (6,529,061) 480,757
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Net Cash Used by Operating Activities. . . . . . . . . (5,228,583) (92,189)
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Cash Flows from Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . (135,640) (116,671)
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Cash Flows from Financing Activities
Principal payments on long-term debt . . . . . . . (4,361) 0
Proceeds from issuance of common stock . . . . . . . 250,600 (3,308)
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Net Cash Provided (used) by Financing Activities 246,239 (3,308)
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Net Decrease in Cash and Cash Equivalents. . . . . . . (5,117,984) (27,790)
Cash and Cash Equivalents at Beginning
Of Period. . . . . . . . . . . . . . . . . . . . . . 8,050,469 191,226
------------ -----------
Cash and Cash Equivalents at
End of Period. . . . . . . . . . . . . . . . . . . . $ 2,932,485 $ 163,436
============ ===========
Supplemental Information:
Cash paid for interest . . . . . . . . . . . . . . . $ 7,798 $ 7,566
Cash paid for taxes. . . . . . . . . . . . . . . . . $ 6,678 $ 1,330
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9
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 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
six month period ended June 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.
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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
---------------------
On February 7, 2000 we began drilling the EKHO #1well and reached our total
depth objective of just over 19,000 feet in 80 drilling days. It is anticipated
that the drilling costs will be under budget. We ran various logs to gather
data as to the commercial ability of the well. Target zones of interest appear
as anticipated. The Company is currently completion testing the well.
The Sunrise project has been sold and we are in the process of contracting and
permitting, to enable us to begin drilling in the third quarter of this year.
We had anticipated that we would be able to begin drilling in the second
quarter. However, the permitting process has been changed and it is now
expected to take from two to six months to get permitted compared to
approximately 5 days permitting time in the past.
As funds are received from our joint venture participants the funds are placed
in our cash account in our current assets and into advances from joint venture
participants in our current liabilities. As these funds are expended for the
appropriate project the cash is reduced and the amount in our advances from
joint venture participants is reduced in a like amount.
We anticipate recompleting the Martin-Severins #5, #6 and the Hanson #3 in the
third quarter of 2000.
Precious Metals
----------------
Placer Dome crews began their second season of exploration on May 15, 2000.
Again this season, the Russian scientists from TsNIGRI, the Russian mineral
institution, have returned to continue their excellent exploration activities on
the Company's behalf.
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10
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
--------------
Six Months Ended June 30, 2000 as compared with Six Months ended June 30, 1999
--------------------------------------------------------------------------------
The Company had total revenues of $1,810,223 for the six months ended June 30,
2000 compared to revenues of $393,254 for the same period in 1999. This
increase was due in large part to the selling of our Sunrise Prospect.
Additionally, our gas revenue increased because of increased production from
Hanson #1 well which has been reworked and the increase in gas prices. Interest
income increased due to cash in interest bearing accounts which was the result
of the sale of the Sunrise prospect. Depletion, depreciation and amortization
decreased because of declining production.
Costs and expenses were $1,503,935 for the six months ended June 30, 2000
compared to $753,037 for the same period in 1999. This increase was related to
the sale of the Sunrise prospect which included land acquisition and geological
costs.
General and Administrative costs were $628,239 for this six month period
compared to $527,565 for the comparable period in 1999. This increase was due
in part to increased legal expenses and consulting expenses.
Capital Resources and Liquidity
----------------------------------
At June 30, 2000, we had current assets totaling $3,153,658 compared to
$8,207,682 for the six months ended June 30, 1999. Current liabilities were
$2,860,861 for the current period compared to $8,375,244 for the same period
last year. These decreases were due to reduction in cash and reduction in
advances from joint venture partners. This was because of paying the costs
related to drilling the EKHO #1.
Operating Activities. Cash provided by operations were a deficit of $5,228,583
for the six months ended June 30, 2000 compared to a deficit of $92,189 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
$249,547 for the period ended June 30, 2000 over the same period in 1999 due to
the sale of the Company's common stock in private transactions.
Advances from joint venture participants. The $1,348,539 advances from joint
venture participants at June 30, 2000, for the most part represents funds
advanced for the Sunrise Project. The $7,877,600 at December 31, 1999
represents funds that were advanced for the EKHO project.
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12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
We are still proceeding with the foreclosure proceedings regarding Third Mobile
of Central New York. A third party, who has filed Chapter 11 bankruptcy, is
claiming ownership of the assets securing our Promissory Note and Security
Agreement. We are defending our claim to these assets and believe their
allegations are without merit and we are confident that we will prevail in our
efforts.
ITEM 1. CHANGES IN SECURITIES
-----------------------
During the second quarter of 2000, we issued 186,800 shares of our common stock
to 7 individuals in private transactions pursuant to the exemption contained in
Section 4(2) of the Securities Act of 1933, for aggregate consideration of
$219,250. 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 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits
(27) Financial Data Schedule
(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)
August 4, 2000 /s/ F. Lynn Blystone
------------------------
F. Lynn Blystone
President and Chief Executive Officer
August 4, 2000 /s/ Thomas J. Cunningham
---------------------------
Thomas J. Cunningham
Secretary, Treasurer, Chief Financial Officer
