SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1 TO
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000 Commission File No. 0-6119
TRI-VALLEY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 84-061743
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Identification Number)
Organization)
230 South Montclair Street, Suite 101, Bakersfield, California 93309
(Address of Principal Executive Offices)
Registrant's Telephone Number Including Area Code: (661) 837-9300
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of Class)
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 requirement for the past 90 days. Yes [X] No[ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB, if applicable, or any amendment to this Form 10-KSB. [X]
The issuer's revenues for the most recent fiscal year were $2,197,369.
As of January 25, 2001, 19,653,748 common shares were issued and
outstanding, and the aggregate market value of the common shares of Tri-
Valley Corporation held by non-affiliates on that date was approximately
$29,078,340.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one): Yes [ ]; No[X]
Exhibit Index appears on page 37.
PART I
ITEM 1. BUSINESS
Tri-Valley Corporation, a Delaware corporation, is in the business of
exploring, acquiring and developing prospective and producing petroleum and
precious metals properties and interests therein. Tri-Valley has two
wholly owned subsidiaries. Tri-Valley Oil & Gas Company ("TVOG") operates
the oil & gas activities. TVOG derives the majority of its revenue from
gas production. Tri-Valley Power Corporation is the other wholly owned
subsidiary. However, this subsidiary is inactive at the present time. The
precious metals activity is operated directly by Tri-Valley Corporation.
TVOG primarily generates its own exploration prospects from its internal
database, and also screens prospect submittals from other geologists and
companies. TVOG generates these geological "plays" within a certain
geographic area of mutual interest ("AMI"). The prospect is then presented
to potential co-venturers. The company deals with both sophisticated
individual investors and energy industry companies. TVOG is the operator
of these co-ventures.
In 1987, the Company acquired precious metals claims on Alaska state lands.
The Company has conducted exploration operations on these properties and
has reduced its original claims to a block of approximately 38,760 acres
(60.6 square miles). The Company has conducted trenching, core drilling,
bulk sampling and assaying activities to date and has reason to believe
that mineralization exists to justify additional exploration and
development activities. However, to date, the Company has not identified
probable mineral reserves on these properties. There is no assurance that
a commercially viable mineral deposit exists on any of these above-
mentioned mineral properties. Further exploration is required before a
final evaluation as to the economic and legal feasibility can be
determined.
ITEM 2. PROPERTIES
The Company's headquarters and administrative offices are located at 230
South Montclair Street, Suite 101, Bakersfield, California 93309. The
Company leases approximately 2,500 square feet of office space at that
location. The principal properties of the Company consist of proven and
unproven oil and gas and precious metal properties, maps and geologic
records related to prospective oil and gas and precious metal properties,
office and other equipment. TVOG has a worldwide geologic library with
data on every continent except Antarctica including over 700 leads and
prospects in California, the Company's present area of emphasis. This is
further supported by a database of over 20,000 line miles of 2-D seismic.
OIL AND GAS OPERATIONS
The oil and gas properties in which the Company holds interests are
primarily located in the area of central California known as the Sacramento
Valley. The Company also leases exploration acreage in the San Joaquin and
Santa Maria Valleys. The Company contracts for the drilling of all its
wells and does not own any drilling equipment, bulk storage facilities,
transportation pipelines or refineries.
The company has retained the services of Cecil Engineering, an independent
engineer, for the purposes of estimating the Company's net share of proved
developed oil and gas reserves on all the Company's oil and gas properties
at December 31, 2000. The Company does not include any undeveloped reserves
in these reserve studies and, accordingly, only proved developed reserves
are reported herein. Price is a material factor in the stated reserves of
the Company, because higher prices permit relatively higher-cost reserves
to be produced economically. Higher prices generally permit longer
recovery, hence larger reserves at higher values. Conversely, lower prices
generally limit recovery to lower-cost reserves, hence smaller reserves.
The process of estimating oil and gas reserve quantities is inherently
imprecise. Ascribing monetary values to those reserves, therefore, yields
imprecise estimated data at best.
The estimated future net recoverable oil and gas reserves from proved
developed properties as of December 31, 2000, December 31, 1999 and
December 31, 1998 were as follows:
2
ITEM 2. PROPERTIES
BBL MCF
December 31, 2000 Condensate 299 Natural Gas 1,842,672
December 31, 1999 Condensate 185 Natural Gas 1,540,003
December 31, 1998 Condensate 234 Natural Gas 1,434,539
Using year-end oil and gas prices and current levels of lease operating
expenses, the estimated present value of the future net revenue to be
derived from the Company's proved developed oil and gas reserves,
discounted at 10%, was $12,920,069 at December 31, 2000, $1,308,178 at
December 31, 1999,and $1,213,400 at December 31, 1998. Reference is made
to the unaudited supplemental information of the consolidated financial
statements for further information on oil and gas reserves and estimated
values.
The following table sets forth the net quantities of natural gas and crude
oil produced by Registrant during:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2000 1999 1998
Natural Gas (MCF) 249,011 210,333 277,946
Crude Oil (BBL) 50 119 137
The following table sets forth the average sales price and average
production (lifting) cost per unit of oil and gas produced by registrant
during:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2000 1999 1998
Gas (Mcf) Oil (Bbl*) Gas (Mcf) Oil (Bbl*) Gas (Mcf)
Sales Price $3.99 $19.98 $2.39 $11.57 $2.20
Production Costs .29 0 .67 0 .20
Net Profit $3.70 $19.98 $1.72 $11.57 $2.00
* Amount represents total sales price of associated condensate, unable to
determine price per barrel.
As of December 31, 2000, the Company had the following gross and net
position in wells and developed acreage:
WELLS (1) ACRES (2)
Gross Net Gross Net
11 4.537 2192 645
3
(1) "Gross" wells represent the total number of producing wells in which
the Company has a working interest. "Net" wells represent the number
of gross producing wells multiplied by the percentages of the working
interests therein by the Company. "Net wells" recognizes only those
wells in which the Company holds an earned working interest. Working
interests earned at payout have not been included.
(2)"Gross" acres represent the total acres in which the Company has
a working interest; "net" acres represent the aggregate of the
working interests of the Company in the gross acres.
The Company drilled one exploratory well in 2000, but as of March 15, 2001,
the Company has not determined whether this well is capable of commercial
production. SEE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION - PETROLEUM ACTIVITIES, PAGE 8.
ITEM 2. PROPERTIES
The following table sets forth the number of productive and dry exploratory
and development wells drilled by the Company during:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2000 1999 1998
Exploratory 2*
Producing -0- -0- -0-
Dry 1** -0- -0-
Total -0- -0- -0-
Development
Producing -0- -0- -0-
Dry -0- -0- -0-
Total -0- -0- -0-
*At December 31, 2000 , one well, the Ekho #1, had been drilled but not yet
completed. The Sunrise Mayel #1 was still drilling.
**During 2000 we plugged and abandoned one well that had been drilled in
1998 but had never produced hydrocarbons in commercial quantities.
The following table sets forth information regarding undeveloped oil and
gas acreage in which the Company had an interest on December 31, 2000.
STATE GROSS ACRES NET ACRES
California 25,564 20,890
Nevada 14,575 14,575
Some of the Company's undeveloped acreage is held pursuant to leases from
landowners. Such leases have varying dates of execution and generally
expire one to five years after the date of the lease. In the next three
years, the following lease gross acreage expires:
Expires in 2001 150 acres
Expires in 2002 5,852 acres
Expires in 2003 7,843 acres
4
PRECIOUS METALS
The precious metals properties are located in interior Alaska. They are
comprised of 898 40-acre claims and 16 160-acre prospecting sites, of which
84 claims are leased from others, located solely on State open lands
requiring annual assessment work, and an annual per claim fee. All fees
are current.
The mining claim block covers about 60.6 square mils or 38,760 acres of
land, all of which is owned by the State of Alaska. The claims lie within
T-5-6-7 S, R 6-7-8 E, Fairbanks Meridian (Plate 1), immediately north of
the Richardson Highway, an all-weather paved highway that connects
Fairbanks, Alaska, with points south and east. Fairbanks is approximately
65 miles northwest of Richardson, and Delta Junction, also on the highway,
is about 30 miles to the southeast. The Trans Alaska Pipeline corridor is
near the northeastern edge of the claim block and the service road along
the pipeline provides access to the claims from the north. Numerous good
to fair dirt roads traverse the claims.
ITEM 2. PROPERTIES
The following table sets forth the information regarding the acreage
position the Company has under lease in Alaska as of December 31, 2000:
STATE GROSS ACRES NET ACRES
Alaska 38,760 37,966
Mineral properties claimed on Open State land require minimum annual
assessment work of $100 worth per State of Alaska claim. In 1999, the
Company staked 40 160-acre prospecting sites. In July 2000, the Company
converted 24 prospecting sites into 96 new claims and staked an additional
32 claims to bring its land position to approximately 40,640 acres (63.5
square miles). These additional 128 claims were subsequently dropped in
November 2000. Also in 2000, Kinross Gold Co., successor to Cyprus Amax
Mining Co., quitclaimed 81 claims to Tri-Valley, bringing its present land
position to approximately 38,760 acres (60.6 square miles). Expenditures
on the Richardson, Alaska acreage have already carried forward annual
assessment requirements more than four years on all its claims. The
Company has no Federal claims.
Tri-Valley has had a joint scientific research agreement with TsNIGRI, the
Central Research Institute of Geological Prospecting for Base and Precious
Metals, based in Moscow, Russia since 1991. The proprietary technology
they use for evaluating large areas of covered sub-arctic terrain has been
impressive and encouraging to our efforts. Minute amounts of gold have
been found at 60 locations along a 20-mile swath and over 1,000 samples
have been assayed by Bondar-Clegg, a respected assay house. We believe we
have a great potential and intend to continue our exploration of these
properties.
ENVIRONMENTAL
The Company's energy operations are subject to a number of regulations
relating to environmental protection, as are all exploration and production
companies. However, the Company believes it is in full compliance with all
environmental related rules and regulations.
ITEM 3. LEGAL PROCEEDINGS
During 2000, we settled one lawsuit between the Company and a former
consultant, which had been pending from 1997. We were not party to any
other material legal proceedings during 2000.
5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 16, 2000, the Company held its annual meeting. The matters
submitted to a vote of the security holders included the election of
directors, restated Certificate of Incorporation , and the election by the
Company to be governed by section 203 of the Delaware General Corporation
Laws. The shareholders elected all of the nominees for director who were
recommended by the board. They approved the restated Certificate of
Incorporation and approved the proposal to be governed by section 203 of
the Delaware General Corporation Law.
The shareholder votes were as follows:
Measure #1 - Election of Directors
FOR AGAINST ABSTAIN
Earl H. Beistline 18,260,785 127,325
F. Lynn Blystone 18,264,680 123,430
Milton J. Carlson 18,266,485 121,625
Dennis P. Lockhart 18,266,485 121,625
Loren J. Miller 18,266,485 121,625
Measure #2 - Approved restated Certificate of Incorporation.
FOR AGAINST ABSTAIN
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.
FOR AGAINST ABSTAIN
14,318,398 189,213 4,002,124
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Shares of Tri-Valley Corporation stock are traded over-the-counter on the
Electronic Bulletin Board under the symbol "TRIL". The following table
shows the high and low bid and asked prices of Tri-Valley stock for the
quarterly periods indicated as reported by the OTC Stock Journal:
BID PRICES ASKED PRICES
HIGH LOW HIGH LOW
2000:
First Quarter $ 3.438 $ 1.44 $ 3.63 $ 1.43
Second Quarter $ 4.125 $ 2.03 $ 4.53 $ 1.88
Third Quarter $ 3.188 $ 1.75 $ 3.38 $ 1.72
Fourth Quarter $ 1.938 $ 1.13 $ 2.06 $ 1.06
BID PRICES ASKED PRICES
HIGH LOW HIGH LOW
1999:
First Quarter $ .470 $ .34 $ .56 $ .34
Second Quarter $ 1.063 $ .38 $ 1.12 $ .38
Third Quarter $ 1.188 $ .72 $ 1.31 $ .63
Fourth Quarter $ 1.969 $ 1.19 $ 2.16 $ 1.19
As of December 31, 2000, the Company estimates that its common stock was
held by approximately 2,000 shareholders of record in 40 states and at
least 4 foreign countries.
The Company historically has paid no dividends, and at this time does not
plan to pay any dividends in the immediate future. Rather, the Company
strives to add share value through discovery success. As of January 22,
2001, we had 13 market makers for our stock. In 2000, trading volume
exceeded 14 million shares.
RECENT SALES OF UNREGISTERED SECURITIES
During 2000 there were 14,000 shares issued at $0.50 each from the exercise
of stock options held by one director and one former employee.
Additionally, 194,500 shares were sold to individuals in private placement,
55,000 at a price of $1.25 per share and 139,500 at a price of $1.50 per
share, all exempt under Section 4(2) of the Securities Act of 1933. Also
in 2000, 40,000 shares were awarded to outside directors for past services
and 5,000 shares were issued to F. Lynn Blystone according to the terms of
his employment agreement.
6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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.
OVERVIEW
We believe that, after 20 years of downsizing in the petroleum industry,
increased oil and natural gas prices during the past year have created a
favorable environment for renewed growth. Production from existing
reserves continues to decline, while demand increases. While the trend for
demand to outstrip available supplies is
worldwide as well as national, we believe that it is particularly acute in
California, our primary venue for exploration and production, which imports
53% of its oil and 85% of its natural gas demand. According to Liam McGee,
the President of Bank of America, California is the world's fifth largest
economy. Oil prices tend to be set based on worldwide supplies and prices,
while natural gas prices seem to be more dependent on local conditions.
Over the past year, natural gas prices in California have risen
dramatically, and our revenue due to oil and gas sales has risen with the
price of gas. We expect that gas prices will hold steady or possibly
increase over the next year. If has prices should fall, for instance due
to new regulatory measures or the discovery of new and easily producible
reserves, our revenue from oil and gas sales would also fall.
We are now grading and prioritizing our geologic library, which contains
over 700 leads and prospects, for exploratory drilling. We use our library
to decide where we should seek oil and gas leases for future explorations.
Of course, we cannot be sure that any future prospect can be obtained at an
attractive lease price or that any exploration efforts would result in a
commercially successful well.
Management is confident that the Company inventory and projects can deliver
exceptional value to shareholders and partners if we can fund a velocity of
drilling to make the discoveries among the inevitable dry holes of the
exploration business.. We seek to fund and drill enough exploratory wells
for commercial discoveries to make up for the cost of the inevitable dry
holes that we can expect, in the exploration business. Our future results
will depend on our success in finding new reserves and commercial
production, and there can be no assurance what revenue we can ultimately
expect from any new discoveries.
NATURAL GAS ACTIVITIES
The Company generally sells a percentage of production on a fixed contract
price and the remainder at the monthly spot price. In times when we expect
the price of gas to weaken, we try to increase the amount we sell under
fixed prices. When we expect the price of gas to rise, we seek to sell
more gas in the spot market. In 2000, we sold 49% of our production under
fixed price contracts and 51% on the spot market. Because we expect gas
prices to continue to rise, we intend to sell 100% of our production on the
spot market in 2001. Because we plan to sell only on the spot market in
2001, a drop in the price of gas would have a more adverse impact on us
than if we entered into some fixed price contracts for sale of future
production.
Our hydrocarbon reserves were valued by independent engineers at a net
present value of $11,887,320 at December
31, 2000, an increase of $10,670,021 from December 31, 1999 after taking
into account the SEC mandatory 10% discount rate and also taking into
consideration the effect of income tax. This was due primarily to the
increase in gas prices. Estimates such as these are subject to numerous
uncertainties inherent in the estimation of quantities of proved reserves.
This value does not appear on the balance sheet because accounting rules
require discovered reserves to be carried on the balance sheet at the cost
of obtaining them rather than the actual future net revenue from producing
them.
7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
(continued)
Tri-Valley arranges to be carried, (we don't have to pay for our interest),
in the test wells on prospects. Under these arrangements, we usually
minimize the Company's cost to drill and also receive relatively little
value from the reserves we discover. On the other hand, we occasionally
incur extra expenses for drilling or development that we choose, in our
discretion, not to pass on to other venture participants. This occurred in
2000, when we incurred dry hole expenses of $440,228 that we elected not to
charge to our co-venturers.
PETROLEUM ACTIVITIES
We began drilling the Ekho No. 1 on February 7, 2000. This is the first of
three test wells in a program to test deep mapped structure approximately
26 miles long and four to five miles wide and north of Bakersfield, where
Tri-Valley Oil and Gas (TVOG) is headquartered. The Ekho No. 1 reached
total depth of 19,085 feet in only 80 drilling days. We hoped to drill
into naturally fractured area of the target formation to achieve natural
flow potential. The well did encounter oil that is 48.6 API gravity and
1,460 Btu gas with no H{2}S, CO{2}, nitrogen or water. However, the
borehole encountered "tight" sands, which will require artificial
fracturing to provide avenues for the oil and gas to flow at higher rates.
This additional cost came at a time when the Canadian partners in the joint
venture encountered national market conditions that precluded them from
raising sufficient funds to stay in the project and all but one of the
Canadian partners dropped out. Tri-Valley is in the process of
repartnering the project with stronger partners to assure that the project
can go forward through completion of the Ekho No. 1 and into drilling the
Ekho No. 2 and No. 3 test wells.
PRECIOUS METALS ACTIVITY
The price of gold has fluctuated in the last 12 months from a high of
$316.20 per oz. to a low of $262.80 per oz. However, the Company believes
its properties contain deposits that can produce the gold at a cost that
will still allow a significant profit.
Tri-Valley and Placer Dome U.S., Inc., entered into an agreement on March
22, 1999, whereby they would explore part of our claim block. They
performed field exploration work in the summer of 1999 and 2000. However
due to the depressed prices of gold, Placer Dome on September 18, 2000,
notified us that they were not going to go further on the agreement. Tri-
Valley retains rights to 60.6 square miles of claims and prospecting sites.
We are confident that other parties will be willing to participate when the
price of gold recovers. Kennecott Exploration has signed a
confidentiality/non-compete agreement on Tri-Valley's entire claim block
plus another 50 square miles surrounding.
TELECOMMUNICATIONS
We loaned a general partnership $125,000.00 in 1997 which was secured by
the assets of the partnership. The note is in default and the Company is
trying to collect on this note. The managing general partner is alleging
the assets belong to an L.L.C., which is in bankruptcy. The underlying
licenses are being sold and the proceeds will be put in escrow until the
bankruptcy court determines the rightful owner. We feel that we will
prevail and be successful in recovering our claim.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999
BALANCE SHEET
The Company had $1,373,570 cash on hand at December 31, 2000 compared to
$8,050,469 at December 31, 1999. This decrease was the result of the
Company spending funds that had been advanced by our joint venture partners
to drill Ekho #1. Trade accounts receivable are $663,177 (427% greater)
for the year ended December 31, 2000 compared to the same period last year.
This was the result of increased production due to re-working of some of
our wells and the increase of natural gas prices. Trade accounts payable
were $189,913 (48% greater) in the year ended December 31, 2000 due to
invoices to be paid related to drilling the Sunrise-Mayel#1 well. Accounts
payable to joint venture participants is larger this year due to accrued
revenue at year-end on their behalf. The decrease in advances from
joint venture participants is because at year end 1999 we had funds on
deposit for the Ekho #1 that were paid out over 2000 as the well was drilled.
8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
(Continued)
REVENUES
Oil and Gas sales of $1,045,013 for the year ended 2000 compared to
$522,591 for the year ended 1999, a 199% increase. This $522,422 increase
was due to increased production and the increase in natural gas prices.
The decrease of $928,791 in sale of oil and gas properties was because the
prospect we sold in 2000 was smaller than the prospect sold in 1999.
Interest income increased by $66,881 (207%) in 2000 to $99,234, from
$32,353 in 1999. The increased interest income came from funds the company
had on account.
Other income dropped to $34,862 in 2000 from $261,460 in 1999, because
Placer Dome USA, paid the Company $225,000 pursuant to our option agreement
signed in 1999, discussed in PRECIOUS METALS ACTIVITY.
COSTS AND EXPENSES
Costs and expenses are $900,287 greater for the fiscal year 2000, a 34%
increase. The oil and gas lease expenses were $440,428 larger due to the
write off of a well that was drilled in a previous year. Cost of oil and
gas prospects sold are $276,051 (26%) less this year because this prospect
was smaller than the one sold in 1999. General and administrative expenses
are $928,847 (107%) greater due to legal costs and the settlement of a
lawsuit filed in 1997.
In 1999, we recorded $148,334 for impairment of acquisition costs, as we
wrote down the value of previously acquired properties. We incurred no
such impairment expense in 2000.
FINANCIAL CONDITION
Operating Activities
Tri-Valley had a negative cash flow from operations during 2000. This was
due in large part to a one-time charge to settle the lawsuit. Also, the
Company incurred a write-off of a well deemed to be non-commercial. The
Company expects to have a positive cash flow in the fiscal year 2001 due to
the increased natural gas prices.
Investing Activities
In 2000, we spent $293,489 on capital expenditures, compared to $105,713 in
1999 - a 177% increase. The capital expenditures were incurred in
connection with leasing activities. Our proceeds from sale of property
increased by $74,760 (93%) in 2000 to $154,760, compared to $80,000 in
1999. Overall, our cash used by investing activities rose to $155,782 in
2000 from $27,033 in 1999, a $128,749 (476%) increase.
9
Financing Activities
Cash used by financing activities was ($5,111,663) in fiscal year 2000
compared to cash provided financing activities of $7,918,906 for fiscal
year ended 1999. In 1999, joint venture participants advanced $7,742,568
for the Ekho #1 well. In 2000, we recorded a decrease of funds advanced of
$5,359,863 as we expended the funds to drill the well.
The Company in recent years has financed a portion of its operations by the
sale of the Company's common stock in private placement transactions. In
2000, we raised $285,000 from private placements of common stock, compared
to $171,307 in 1999.
The overall increase in all activity related to our cash flows in 2000 were
directly related to the large size of the Ekho project, for which funds
were largely raised in 1999 and spent in 2000, on the first Ekho well.
10
ITEM 7: FINANCIAL STATEMENTS
TRI-VALLEY CORPORATION
INDEX
PAGE(S)
Report of Brown Armstrong Randall Reyes Paulden & McCown,
Independent Auditor's Report.......................................12
Consolidated Balance Sheets at December 31, 2000 and 1999............13
Consolidated Statements of Operations for the Years Ended
December 31, 2000 and 1999.........................................14
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 2000 and 1999.............................15
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000 and 1999.........................................16
Notes to Consolidated Financial Statements...........................17
Supplemental Information about Oil and Gas Producing
Activities (Unaudited).............................................26
11
REPORT OF INDEPENDENT AUDITOR'S
The Board of Directors
Tri-Valley Corporation
Bakersfield, California
We have audited the accompanying consolidated balance sheets of Tri-Valley
Corporation as of December 31, 2000 and 1999, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows
for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly in all material respects the financial position of Tri-
Valley Corporation at December 31, 2000 and 1999, and the results of their
operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
BROWN ARMSTRONG RANDALL
REYES PAULDEN & MCCOWN
ACCOUNTANCY CORPORATION
Bakersfield, California
February 9, 2001
12
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2000 1999
----------- ------------
ASSETS
------
Current Assets
Cash $ 1,373,570 $ 8,050,469
Accounts receivable, trade 818,361 155,184
Prepaid expenses 12,029 2,029
-------------- ---------------
Total Current Assets 2,203,960 8,207,682
-------------- ---------------
Property and Equipment, Net (Notes 1 and 2) 1,306,689 1,059,755
-------------- ---------
Other Assets
Deposits 100,105 100,000
Note receivable (Note 9) 125,000 125,000
Acquisition costs (Note 1) 51,270 50,000
Investments in partnerships (Note 1) 29,059 12,006
Well Database (net of accumulated amortization
of $44,788 and $37,755 at December 31, 2000
and 1999, respectively) 63,862 70,895
Goodwill (net of accumulated amortization
of $210,593 and $199,747 at December 31, 2000
and 1999, respectively)(Note 1) 223,260 234,106
Other 13,914 13,914
------------- ----------------
Total Other Assets 606,470 605,921
-------------- ----------------
TOTAL ASSETS $ 4,117,119 $ 9,873,358
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------
Current Liabilities
Notes payable (Note 3) $ 10,672 $ 10,554
Trade accounts payable 581,017 391,104
Amounts payable to joint venture participants 540,142 95,986
Advances from joint venture participants,
net (Note 1) 2,517,737 7,877,600
-------------- ---------------
Total Current Liabilities 3,649,568 8,375,244
-------------- ---------------
Long-Term Portion of Notes Payable (Note 3) 12,038 21,055
-------------- ---------------
Shareholders' Equity
Common stock, $.001 par value; 100,000,000
shares authorized; 19,554,748 and 19,301,248,
issued and outstanding at December 31, 2000
and 1999, respectively 19,555 19,281
Less: common stock in treasury, at cost,
163,925 and 179,425 shares at December 31, 2000
and 1999, respectively (21,913) (45,163)
Capital in excess of par value 8,666,688 8,344,462
Accumulated deficit (8,208,817) (6,841,521)
--------------- --------------
Total Shareholders' Equity 455,513 1,477,059
-------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,117,119 $9,873,358
================ ===============
The accompanying notes are an integral part of these financial statements.
13
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
December 31, December 31,
2000 1999
----------- ------------
Revenues
Sale of oil and gas $ 994,553 $ 504,072
Royalty 11,406 4,968
Partnership income 39,053 13,820
Gain on sale of property 154,760 77,434
Interest income 99,234 32,353
Sale of oil and gas prospects 863,500 1,792,291
Other income 34,862 261,460
--------------- ---------------
Total Revenues 2,197,369 2,686,129
--------------- ---------------
Costs and Expenses
Mining exploration costs 162,741 193,069
Oil and gas leases 74,497 141,237
Well workover 35,502 4,086
Severed Acreage 1,026 16,195
Well write-off 490,921 -
Cost of oil and gas prospects sold 784,710 1,060,761
General and administrative 1,931,105 1,002,258
Depreciation, depletion and amortization 64,433 80,946
Interest 19,730 17,492
Impairment of acquisition costs - 148,334
--------------- ---------------
Total Costs and Expenses 3,564,665 2,664,378
--------------- ---------------
Net Income (Loss) before Income Taxes (1,367,296) 21,751
Tax Provision (Note 5) - -
---------------- ---------------
Net Income (Loss) $ (1,367,296) $ 21,751
=============== =================
Basic Earnings (Loss) per Common Share $ (.07) $ .00
============== =================
Diluted Earnings (Loss) per Common Share $ N/A $ .00
============== =================
Weighted Average Number of Shares Outstanding 19,293,188 18,957,278
================ ================
The accompanying notes are an integral part of these financial statements.
14
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
Capital in
Excess of Accumulated Treasury Shareholder
Shares Par Value Par Value Deficit Stock Equity
---------- --------- ----------- ----------- -------- ------------
Balance at
December 31, 1998 19,088,248 $19,088 $8,177,655 $(6,863,272) $(41,061) $1,292,410
Issuance of common
stock 193,000 193 171,307 - (4,102) 167,398
Stock issuance
costs - - (4,500) - - (4,500)
Net income - - - 21,751 - 21,751
---------- --------- ----------- ----------- -------- ------------
Balance at
December 31, 1999 19,281,248 19,281 8,344,462 (6,841,521) (45,163) 1,477,059
Issuance of common
stock 273,500 274 373,376 - 23,250 396,900
Stock issuance
costs - - (51,150) - - (51,150)
Net income (loss) - - - (1,367,296) - (1,367,296)
---------- --------- ----------- ----------- -------- ------------
Balance at
December 31, 2000
19,554,748 $19,555 $8,666,688 $(8,208,817) $(21,913) $ 455,513
========== ========= =========== =========== ======== ============
The accompanying notes are an integral part of these financial statements.
15
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,367,296) $ 21,751
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation, depletion, and
amortization 64,433 80,946
(Gain) on sale of property (154,760) (77,434)
Non-employee stock compensation 88,650 -
Impairment, dry hole and other
disposals of property and equipment - 164,529
Changes in operating capital:
(Increase) decrease in accounts
receivable (663,177) 152,389
Increase in prepaids (10,000) -
Increase in deposits and other assets (1,375) (28,992)
Increase (decrease) in trade accounts
payable 189,915 (191,431)
Increase (decrease) in amounts payable
to joint venture participants and
related parties 444,156 (154,390)
------------ ------------
Net Cash Used by Operating Activities (1,409,454) (32,632)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property 154,760 80,000
Capital expenditures (293,489) (105,713)
Investment in partnerships (17,053) (1,320)
------------ ------------
Net Cash Used by Investing Activities (155,782) (27,033)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in advances from joint
venture participants (5,359,863) 7,742,568
Principal payments on long-term debt (8,900) (5,134)
Proceeds from issuance of common stock 274 192
Additional paid in capital 284,726 171,307
Purchase of treasury stock - (4,102)
Sale of treasury stock 23,250 -
Proceeds from loan - 18,575
Stock issuance costs (51,150) (4,500)
------------ ------------
Net Cash Provided (Used) by Financing
Activities (5,111,663) 7,918,906
Net Increase (Decrease) in Cash and Cash
Equivalents (6,676,899) 7,859,241
Cash at Beginning of Year 8,050,469 191,226
------------ ------------
Cash at End of Year $ 1,373,570 $ 8,050,469
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 19,730 $ 17,492
Income taxes paid $ 15,756 $ 4,662
The accompanying notes are an integral part of these financial statements.
16
TRI-VALLEY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Tri-Valley Corporation
is presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Tri-Valley Oil & Gas Co. All material
intercompany accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosures at the date of the financial statements as well as the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the estimate of Company oil and gas reserves prepared by an
independent engineering consultant. Such estimates are subject to numerous
uncertainties inherent in the estimation of quantities of proved reserves.
Estimated reserves are used in the calculation of depletion, depreciation
and amortization as well as the Company's assessment of proved oil and gas
properties for impairment.
HISTORY AND BUSINESS ACTIVITY
Historically an oil and gas exploration and production company, emphasizing
the Sacramento Valley natural gas province and now very active in the south
San Joaquin Valley. In 1987, the Company added precious metals
exploration. The Company conducts its oil and gas business primarily
through its wholly owned oil and gas subsidiary, Tri-Valley Oil & Gas
Company ("TVOG"). TVOG is engaged in the exploration, acquisition and
production of oil and gas properties . At present, the precious metals
exploration activities are conducted directly by the parent, Tri-Valley
Corporation ("TVC"). TVC has traditionally sought acquisition or merger
opportunities within and outside of petroleum and mineral industries.
CASH EQUIVALENT AND SHORT-TERM INVESTMENTS
Cash equivalents include cash on hand and on deposit, and highly liquid
debt instruments with original maturities of three months or less.
GOODWILL
The consolidated financial statements include the net assets purchased of
Tri-Valley Corporation's wholly owned oil and gas subsidiary, TVOG. Net
assets are carried at their fair market value at the acquisition date. The
excess of acquisition costs over the fair value of assets acquired is
included in and has been allocated to goodwill. Goodwill of $433,853 is
being amortized on a straight-line basis over 40 years. The carrying amount
of goodwill is evaluated periodically. Factors used in the evaluation
include the Company's ability to raise capital as a public company and
anticipated cash flows from operating and non-operating mineral properties.
Tri-Valley Corporation has not established an allowance for the impairment
of goodwill which may be realized should the Company be acquired or merged
with another organization.
17
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACQUISITION COSTS
In prior years, the Company capitalized costs as a part of a potential
acquisition of 26 wireless communication licenses held by five
partnerships. As discussed in Note 9, the licenses and equipment, which the
Company may eventually acquire, are included in a security agreement as
collateral between the debtor and the Company. During 1999, $148,334 of
previously capitalized acquisition costs were considered impaired.
DRILLING AGREEMENTS/JOINT VENTURES
Tri-Valley frequently participates in drilling agreements whereby it acts
as operator of drilling and producing activities. As operator, TVOG is
contingently liable for the activities of these ventures. The Company owns
a carried interest and/or overriding royalty interest in such ventures,
earning a working interest at payout.
Receivables from and amounts payable to these related parties (as well as
other related parties) have been segregated in the accompanying financial
statements. In the event the Company has expended funds for a project in an
amount greater than the original contribution from investors, the Company
cash-calls the participants for additional funds. Excess project funding is
held until it is determined that no further requirement exists for
abandonment or plugging back of project wells, at which time the funds are
refunded. In 2000, the Company expensed $490,861 worth of joint venture
project costs attributed to a dry hole project.
SALE OF OIL AND GAS PROSPECTS
The Company sells the rights to oil and gas prospects to the joint ventures
created for drilling and exploration activities. These amounts represent
the Company's costs of leasing and acquiring the prospects, and other
geological and geophysical costs (hereafter referred to as "GGLA") plus a
profit to the Company. The Company recognizes gain on the sale of prospect
GGLA at the point when the joint venture is fully funded, as the portion of
the project cost attributed to GGLA is nonrefundable upon completion of
project funding.
OIL AND GAS PROPERTY AND EQUIPMENT (SUCCESSFUL EFFORTS)
The Company accounts for its oil and gas exploration and development costs
on the successful efforts method. Under this method, costs to acquire
mineral interests in oil and gas properties, to drill and complete
exploratory wells that find proved reserves and to drill and complete
development wells are capitalized. Exploratory dry-hole costs, geological
and geophysical costs and costs of carrying and retaining unproved
properties are expensed when incurred, except those GGLA expenditures
incurred on behalf of joint venture drilling projects, which the Company
defers until the GGLA is sold at the completion of project funding.
Depletion, depreciation and amortization of oil and gas producing
properties are computed on an aggregate basis using the units-of-production
method.
The Financial Accounting Standards Board (FASB), Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and/or Long-Lived Assets to be Disposed of," requires
that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. It establishes guidelines for determining
recoverability based on future net cash flows from the use of the asset and
for the measurement of the impairment loss. Impairment loss under SFAS No.
121 is calculated as the difference between the carrying amount of the
asset and its fair value. Any impairment loss is recorded in the current
period in which the recognition criteria are first applied and met. Under
the successful efforts method of accounting for oil and gas operations, the
Company periodically assesses its proved properties for impairments by
comparing the aggregate net book carrying amount of all proved properties
with their aggregate future net cash flows. The statement requires that the
impairment review be performed on the lowest level of asset groupings for
which there are identifiable cash flows. In the case of the Company, this
results in a field by field impairment review.
Upon the sale of oil and gas reserves in place, costs less accumulated
amortization of such property are removed from the accounts and resulting
gain or loss on sale is reflected in operations. Upon abandonment of
properties, the reserves are deemed fully depleted and any unamortized
costs are recorded in the statement of operations under leases sold,
relinquished and impaired.
18
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
GOLD MINERAL PROPERTY
The Company has invested in several gold mineral properties with
exploration potential. All mineral claim acquisition costs and exploration
expenditures are charged to expense as incurred. The Securities and
Exchange Commission permits capitalization of acquisition and exploration
costs only after persuasive engineering evidence is obtained to support
recoverability of these costs (ideally upon determination of proven and/or
probable reserves based upon dense drilling samples and feasibility studies
by a recognized independent engineer). Although the Company has performed
drilling samples, and an independent engineer has deemed the gold
properties contain profitable reserves, management has chosen to follow the
more conservative method of accounting by expensing gold mineral costs in
the period the expense is incurred.
PROPERTIES AND EQUIPMENT
Properties and equipment are depreciated using the straight-line method
over the following estimated useful lives:
Office furniture and fixtures 3 - 7 years
Building 40 years
Leasehold improvements are amortized over the life of the lease.
Maintenance and repairs, which neither materially add to the value of the
property nor appreciably prolong its life, are charged to expense as
incurred. Gains or losses on dispositions of property and equipment other
than oil and gas are reflected in operations.
CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
As discussed in Note 6, the Company sells oil, gas and natural gas liquids
to primarily one purchaser located in the northern California region.
The Company places its temporary cash investments with high credit quality
financial institutions and limits the amount of credit exposure to any one
financial institution.
Fair value of financial instruments are estimated to approximate the
related book value, unless otherwise indicated, based on market information
available to the Company. The fair value of the Company's note receivable
is estimated based on the discounted value of the future cash flows
expected to be received, and considers the length of time the note has been
in default. The present value is estimated to be $94,000 at December 31,
2000.
EARNINGS (LOSS) PER SHARE (SFAS 128)
Financial Accounting Standards Board (FASB), Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share", was adopted
by the Company for the year ended December 31, 1997. SFAS 128 replaces the
presentation of primary earnings per share with a presentation of basic
earnings per share based upon the weighted average number of common shares
for the period. It also requires dual presentation of basic and diluted
earnings per share for companies with complex structures.
RECLASSIFICATION
Certain amounts in the financial statements have been reclassified to be
consistent and comparable from year-to-year.
ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 which summarizes certain of the staff's views
in applying generally accepted accounting principles to revenue recognition
in financial statements. The Company does not anticipate a material impact
on its financial position or results of operations.
19
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In April 2000, the FASB issued Financial Interpretation Number (FIN) 44,
Accounting for Certain Transactions Involving Stock Compensation--an
Interpretation of Accounting Principles Board No. 25. FIN 44 clarifies the
application of Opinion No. 25. This Interpretation was effective
immediately and all issues are to be handled prospectively. The adoption of
FIN 44 did not have a material impact on the Company's financial position
or results of operations.
NOTE 2 - PROPERTY AND EQUIPMENT
Oil and gas properties, and equipment and fixtures consist of the
following:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
OIL AND GAS - CALIFORNIA
Proved properties, net of accumulated depletion
of $525,916 and $496,282 at December 31, 2000
and 1999 respectively $ 226,790 $ 200,104
Unproved properties 990,089 762,521
------------ ------------
Total Oil and Gas Properties 1,216,879 962,625
------------ ------------
OTHER PROPERTY AND EQUIPMENT
Land 11,281 11,281
Building, net of accumulated depreciation
$9,495 and $8,367 at December 31, 2000 and
1999, respectively 35,629 36,758
Office equipment, vehicle, and leasehold
improvements net of accumulated depreciation
of $142,348 and $125,427 at December 31,
2000 and 1999, respectively 42,900 49,091
------------ ------------
Total Other Property and Equipment 89,810 97,130
------------ ------------
Property and Equipment (Net) $ 1,306,689 $ 1,059,755
============ ============
NOTE 3 - NOTES PAYABLE
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Note payable to National Bank of Alaska dated
August 27, 1992; secured by property; payable
in monthly installments of $539 including
interest. Interest rate at 12.00%, December
31, 2000, and December 31, 1999. $ 2,706 $ 8,460
Note payable to Imperial Premium Finance, Inc.,
dated June 9, 1997; secured by contractual
policy; interest at 12.00%; payable in monthly
installments of $680 including interest. 4,574 4,574
Note payable to Union Bank, dated January 15, 2000;
secured by a vehicle; interest at 8.5%; payable
in 60 monthly installments of $380. 15,430 18,575
------------ ------------
22,710 31,609
Less current portion 10,672 10,554
------------ ------------
Long-Term Portion of Notes Payable $ 12,038 $ 21,055
============ ============
20
NOTE 3 - NOTES PAYABLE (Continued)
Maturities of long-term debt for the years subsequent to December 31, 2000
are as follows:
Year Ended
DECEMBER 31,
2001 $ 10,672
2002 3,691
2003 4,017
2004 4,330
$ 22,710
NOTE 4 - RELATED PARTY TRANSACTIONS
EMPLOYEE STOCK OPTIONS
The Company has a qualified and a nonqualified stock option plan which
provide for the granting of options to key employees, consultants, and
nonemployee directors of the Company. The option price, number of shares
and grant date are determined at the discretion of the Company's board of
directors. Options granted under the plans are exercisable immediately,
however, the plan expires in August 2008.
The Company has elected to account for the stock option plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
for Employees," and related interpretations. Accordingly, no compensation
expense has been recognized for the stock option plans.
The fair value of each option grant is estimated on the date of granting
using the Black-Scholes American option-pricing model with the following
weighted-average assumptions used for grants in 2000 and 1999,
respectively. Expected volatility of 89.28 and 89.97 percent for 2000 and
84.02 and 82.05 for 1999 and risk-free interest rates of 5.25 and 7.25
percent, respectively.
A summary of the status of the Company's fixed stock option plan as of
December 31, 2000 and 1999, and changes during the years ending on those
dates is presented below:
2000 1999
------------------------ -------------------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
-------- --------------- -------- ---------------
Fixed Options
Outstanding at
beginning of year 1,248,000 $0.77 666,000 $0.71
Granted 1,410,000 $1.57 600,000 $0.63
Exercised (14,000) $0.50 (18,000) $0.50
Cancelled - -
Outstanding at
end of year 2,644,000 $1.20 1,248,000 $0.77
Options exercisable
at year-end 2,644,000 1,248,000
Weighted-average fair
value of options
granted during the year $ 1.30 $ 0.53
21
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
The following table summarizes information about fixed stock options
outstanding at December 31, 2000:
Options Outstanding and Exercisable
Weighted-Average
Number Outstanding Remaining Weighted-Average
------------------ --------- ----------------
Range of Exercise Prices at December 31, 2000 Contractual Life Exercise Price
------------------------ -------------------- --------------- --------------
$.50 - $2.43 2,644,000 7.65 $ 1.20
A summary of option transactions during the years ended December 31, 2000 and
1999 is presented below:
Number Weighted-Average
------------- -----------------
Outstanding at December 31, 1998 666,000 $ 0.71
Issued 600,000 0.63
Exercised (18,000) 0.50
--------- -----
Outstanding at December 31, 1999 1,248,000 0.77
Issued 1,410,000 1.57
Exercised (14,000) 0.50
--------- -----
Outstanding at December 31, 2000 2,644,000 1.20
========== =====
Exercisable at December 31, 2000 2,644,000 1.20
========== =====
Available for Issuance at December 31, 2000 995,000
==========
BENEFICIAL OWNERS
The following is known to the Company to be the only beneficial owner of 5%
or more of the Company's outstanding common stock at December 31, 2000:
OWNERSHIP SHARES PERCENTAGE
Dennis Vaughan 1,009,200 5.2%
PARTNERSHIPS
Tri-Valley is a general partner and operator of the Tri-Valley Oil & Gas
Exploration Programs 1971-1 and Martins-Severin Partnerships. Income
derived from these activities follows:
December 31, December 31,
2000 1999
Partnership income, net of expenses $ 140,833 $ 73,463
ISSUANCE OF STOCK
In April of 2000, the Company issued 5,000 shares to the President and CEO
of TVC and 10,000 shares to each of the four Board of Directors in lieu of
cash payments for services rendered to the Company. These transactions have
been recorded at the fair value of the Company's stock at the date of the
award, which amount to $88,650.
22
NOTE 5 - INCOME TAXES
At December 31, 2000, the Company had available net operating loss carry
forwards for financial statements and federal income tax purposes of
approximately $2,100,000. These loss carry forwards expire between 2001 and
2014.
The components of the net deferred tax assets were as follows:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Deferred Tax Assets:
Net operating loss carry forwards $ 802,644 $ 1,160,000
Statutory depletion carry forwards 259,233 215,000
------------ ------------
Total Deferred Tax Assets 1,061,877 1,375,000
Valuation Allowance (1,061,877) (1,375,000)
------------ ------------
Net Deferred Tax Assets $ - $ -
============ ============
A full valuation allowance has been established for the deferred tax assets
generated by net operating loss and statutory depletion carry forwards due
to the uncertainty of future utilization.
NOTE 6 - MAJOR CUSTOMERS
OIL AND GAS
The Company received in excess of 10% of its oil and gas revenue from
various sources as follows:
A OTHER
--------- ---------
Period Ended:
December 31, 1999 $ 491,573 $ 31,018
December 31, 2000 $ 994,553 $ 50,460
All oil and gas sales have occurred in the northern California gas market.
NOTE 7 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
The Company adopted SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information in 1998 which changes the way the
Company reports information about its operating segments.
The Company identifies reportable segments by product and country, although
the Company currently does not have foreign country segments. The Company
includes revenues from both external customers and revenues from
transactions with other operating segments in its measure of segment profit
or loss. The Company also includes interest revenue and expense, DD&A, and
other operating expenses in its measure of segment profit or loss.
The accounting policies of the reportable segments are the same as those
described in the Summary of Significant Accounting Principles (see Note 1).
The Company's operations are classified into two principal industry
segments. Following is a summary of segmented information for 2000 and
1999:
23
NOTE 7 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS (Continued)
Oil and Gas Precious Metals Total
------------ --------------- -----
YEAR ENDED DECEMBER 31, 2000
Revenues from External Customers $ 1,045,013 $ - $ 1,045,013
Interest Revenue $ 99,234 $ - $ 99,234
Interest Expense $ 19,730 $ - $ 19,730
Expenditures for Segment Assets $ 293,489 $ - $ 293,489
Depreciation, Depletion,
and Amortization $ 64,433 $ - $ 64,433
Total Assets $ 4,117,119 $ - $ 4,117,119
Net Loss $ (1,204,555) $ (162,741) $ (1,367,296)
YEAR ENDED DECEMBER 31, 1999
Revenues from External Customers $ 522,591 $ - $ 522,591
Interest Revenue $ 32,353 $ - $ 32,353
Interest Expense $ 17,492 $ - $ 17,492
Expenditures for Segment Assets $ 105,713 $ - $ 105,713
Depreciation, Depletion,
and Amortization $ 80,946 $ - $ 80,946
Total Assets $ 9,873,358 $ - $ 9,873,358
Net Income (Loss) $ 214,820 $ (193,069) $ 21,751
NOTE 8 - COMMON STOCK
During 2000 the Company issued 194,500 shares of unregistered, restricted
common stock in private placement transactions, 45,000 shares to officers
and directors, 14,000 issued to employees exercising options, and reissued
15,500 shares of treasury stock.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
LITIGATION
During the year ended 1997, the Company filed an action in Contra Costa
Superior Court against an unrelated Corporation (defendant) for breach of
contract, declaratory relief, breach of confidence, deceit, negligent
misrepresentation, interference with prospective economic advantage, unfair
competition, and constructive trust. The matter proceeded to trial on
January 19, 1999, and resulted in a judgement for defendants. The judgement
was entered in favor of defendants on July 26, 1999. Thereafter,
defendants filed a motion for their attorney fees pursuant to California
Civil Code. On December 21, 1999, the Court issued an order awarding
attorneys' fees to defendants. On January 19, 2000, the Company filed its
appeal of the order. In November 2000, the matter was settled and the
Company paid $600,000, which is included in general and administrative
expenses as reported in results of operations for the year ended December
31, 2000.
24
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
On May 7, 1998, the Company executed a note receivable with 3{rd} Mobile in
the amount of $125,000, and a Security Agreement dated May 9, 1997 which
secured the note. The Security Agreement indicates that the Company holds
a security interest in all assets and personal property of 3{rd} Mobile
including, but not limited to, all accounts receivable, office equipment,
automobiles, communications towers and business facilities and equipment,
customer lists, FCC licenses (known and unknown), pending customer orders,
and work product in progress, together with the proceeds thereof (the
Collateral). The Collateral secures the amounts due under the $125,000
note, including interest, in addition to all costs and fees, including
attorneys' fees, in regard to enforcement against the Collateral. During
1998, the note receivable went into default. An action was filed by the
Company against 3{rd} Mobile on June 23, 1999 in the New York Supreme
Court, Onondaga County to foreclose on the Collateral. Subsequent to June
23, 1999, the Company learned that the Collateral was included as listed
assets of Central New York Mobile Systems, L.C., whom had filed Chapter 11
bankruptcy in Sacramento, California. The Company believes that it
properly and legally secured its interest in the Collateral and is awaiting
the results of disposition from the bankruptcy court.
MINING ACTIVITIES
On March 22, 1999, the Company and Placer Dome U.S., Inc. (PDUS), executed
a definitive agreement for PDUS to explore approximately 36 square miles of
the Company's then 61.5-square mile claim block at Richardson, Alaska.
Terms of the agreement called for PDUS to expend a minimum of $6.5 million
in work on the property and partially reimburse the Company for some of its
previous exploration, all within five years, in order for PDUS to earn 51%
interest in the property. The Company received payments from PDUS totaling
$0 and $225,000 during 2000 and 1999, respectively, which has been recorded
as other revenue. After spending $750,000, PDUS terminated this agreement
on September 18, 2000, and the 36 square miles has reverted back to the
Company. Kennecott Exploration has signed a confidentiality/non-compete
agreement on Tri-Valley's entire claim block plus another 50 square miles
surrounding.
CONTINGENCIES
The Company is subject to possible loss contingencies pursuant to federal,
state and local environmental laws and regulations. These include existing
and potential obligations to investigate the effects of the release of
certain hydro-carbons or other substances at various sites; to remediate or
restore these sites; and to compensate others for damages and to make other
payments as required by law or regulation. These obligations relate to
sites owned by the Company or others, and are associated with past and
present oil and gas operations. The amount of such obligations is
indeterminate and will depend on such factors as the unknown nature and
extent of contamination, the unknown timing, extent and method of remedial
actions which may be required, the determination of the Company's liability
in proportion to other responsible parties, and the state of the law.
LEASES
The Company leases its office space on a month to month basis.
25
TRI-VALLEY CORPORATION
SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED)
The following estimates of proved oil and gas reserves, both developed and
undeveloped, represent interests owned by the Company located solely in the
United States. Proved oil and gas reserves are the estimated quantities of
crude oil, natural gas, and natural gas liquids which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
the future years from known reservoirs under existing economic and
operating conditions, i.e., prices and costs as of the date the estimate is
made. Proved developed oil and gas reserves are reserves that can be
expected to be recovered through existing wells, with existing equipment
and operating methods. Proved undeveloped oil and gas reserves are reserves
that are expected to be recovered from new wells on undrilled acreage, or
from existing wells where a relatively major expenditure is required for
completion.
Disclosures of oil and gas reserves which follow are based on estimates
prepared by independent engineering consultants for the year ended December
31, 2000 and 1999. Such analyses are subject to numerous uncertainties
inherent in the estimation of quantities of proved reserves and in the
projection of future rates of production and the timing of development
expenditures. These estimates do not include probable or possible reserves.
These estimates are furnished and calculated in accordance with
requirements of the Financial Accounting Standards Board and the Securities
and Exchange Commission ("SEC"). Because of unpredictable variances in
expenses and capital forecasts, crude oil and natural gas price changes,
largely influenced and controlled by U.S. and foreign government actions,
and the fact that the basis for such estimates vary significantly,
management believes the usefulness of these projections is limited.
Estimates of future net cash flows presented do not represent management's
assessment of future profitability or future cash flows to the Company.
Management's investment and operating decisions are based upon reserve
estimates that include proved reserves prescribed by the SEC as well as
probable reserves, and upon different price and cost assumptions from those
used here.
It should be recognized that applying current costs and prices and a 10
percent standard discount rate does not convey absolute value. The
discounted amounts arrived at are only one measure of the value of proved
reserves.
Capitalized costs relating to oil and gas producing activities and related
accumulated depletion, depreciation and amortization were as follows:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Aggregate capitalized costs:
Proved properties $ 752,706 $ 696,386
Unproved properties 990,089 762,521
Accumulated depletion, depreciation and
amortization (525,916) (496,282)
------------ ------------
Net Capitalized Assets $ 1,216,879 $ 962,625
============ ============
The following sets forth costs incurred for oil and gas property
acquisition, exploration and development activities, whether capitalized or
expensed, during:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Acquisition of producing properties and
productive and non-productive acreage $ 56,320 $ 80,398
============ ============
Exploration costs $ 227,568 -
============ ============
26
RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES
The results of operations from oil and gas producing activities are as
follows:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Sales to unaffiliated parties $ 1,045,013 $ 521,271
Production costs (601,946) (161,518)
Depletion, depreciation and amortization (29,634) (51,596)
------------ ------------
413,433 308,157
Pro forma statutory income tax expense (144,489) (103,431)
------------ ------------
Results of operations from activities before
extraordinary items(excluding blending
operations, corporate overhead and
interest costs) $ 268,944 $ 204,726
============ ============
CHANGES IN ESTIMATED RESERVE QUANTITIES
The net interest in estimated quantities of proved developed and
undeveloped reserves of crude oil and natural gas at December 31, 2000 and
1999, and changes in such quantities during each of the years then ended,
were as follows:
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------
Oil Gas Oil Gas
(BBL) (MCF) (BBL) (MCF)
----- ----- ----- -----
Proved developed and
undeveloped reserves:
Beginning of year 185 1,540,004 234 1,434,499
Revisions of previous
estimates 92 389,309 70 308,085
Acquisitions of minerals in
place - 59,135 - 7,753
Extensions and discoveries 72 103,235 - -
Production (50) (249,011) (119) (210,333)
----- --------- ------ ---------
End of year 299 1,842,672 185 1,540,004
===== ========= ====== =========
Proved developed reserves:
Beginning of year 185 1,540,004 234 1,434,499
===== ========= ====== =========
End of year 299 1,842,672 185 1,540,004
===== ========= ====== =========
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED
OIL AND GAS RESERVES
A standardized measure of discounted future net cash flows is presented
below for the year ended December 31, 2000 and 1999.
The future net cash inflows are developed as follows:
(1)Estimates are made of quantities of proved reserves and the future
periods during which they are expected to be produced based on year-end
economic conditions.
(2)The estimated future production of proved reserves is priced on the
basis of year-end prices.
(3)The resulting future gross revenue streams are reduced by estimated
future costs to develop and to produce proved reserves, based on year
end cost estimates.
(4)The resulting future net revenue streams are reduced to present
value amounts by applying a ten percent discount.
27
Disclosure of principal components of the standardized measure of
discounted future net cash flows provides information concerning the
factors involved in making the calculation. In addition, the disclosure of
both undiscounted and discounted net cash flows provides a measure of
comparing proved oil and gas reserves both with and without an estimate of
production timing. The standardized measure of discounted future net cash
flows relating to proved reserves reflects income taxes. There are no
future development costs.
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Future cash in flows $ 25,127,878 $ 3,265,995
Future production and development costs (1,975,633) (875,081)
Future income tax expenses (7,951,963) (122,128)
------------ ------------
Future net cash flows 15,200,282 2,268,786
10% annual discount for estimated timing of
cash flows 6,716,556 1,051,537
------------ ------------
Standardized measure of discounted future net
cash flow $ 8,483,726 $ 1,217,249
============ ============
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOW FROM
PROVED RESERVE QUANTITIES
This statement discloses the sources of changes in the standardized measure
from year to year. The amount reported as "Net changes in prices and
production costs" represents the present value of changes in prices and
production costs multiplied by estimates of proved reserves as of the
beginning of the year. The "accretion of discount" was computed by
multiplying the ten percent discount factor by the standardized measure as
of the beginning of the year. The "Sales of oil and gas produced, net of
production costs" is expressed in actual dollar amounts. "Revisions of
previous quantity estimates" is expressed at year-end prices. The "Net
change in income taxes" is computed as the change in present value of
future income taxes.
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Standardized measure - beginning of period $ 1,217,249 $ 1,178,295
Sales of oil and gas produced, net of
production costs (443,067) (260,215)
Revisions of estimates of reserves provided in
prior years:
Net changes in prices and production costs 10,411,028 40,691
Revisions of previous quantity estimates 3,186,723 354,958
Extensions and discoveries 694,792 -
Purchases of minerals in place 842,668 -
Accretion of discount 1,306,674 221,930
Changes in production rates (timing) and other (902,506) (381,372)
Net change in income taxes (7,829,835) 62,962
------------ ------------
Net increase 7,266,477 38,954
------------ ------------
Standardized measure - end of period $ 8,483,726 $ 1,217,249
28
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is furnished with respect to each director and
executive officer:
Year First
Became Director or Position With
Name of Director Age Executive Officer Company
----------------------- --- ------------------ ---------------------------
F. Lynn Blystone 65 1974 President, CEO, Director,TVC
CEO and Director, TVOG
President, CEO, Director, TVPC
Dennis P. Lockhart(1) 54 1982 Director
Milton J. Carlson(1) 70 1985 Director
Earl H. Biestline 84 1992 Director
Loren J. Miller(1) 56 1992 Director
C. Chase Hoffman 78 2000 Director
Thomas J. Cunningham 58 1997 Treasurer, Chief Financial Officer
and Secretary, TVC, TVOG, and TVPC
Joseph R. Kandle 58 1999 President, TVOG
(1)- Member of Audit Committee
F. LYNN BLYSTONE - 65 President and Chief Executive 1974
Officer of Tri-Valley Corporation
and Tri-Valley Power Corporation,
and CEO of Tri-Valley Oil & Gas
Company, which are two wholly owned
subsidiaries of Tri-Valley Corporation,
Bakersfield, California
Mr. Blystone became president of Tri-Valley Corporation in October, 1981,
and was nominally vice president from July to October, 1981. His
background includes institution management, venture capital and various
management functions for a mainline pipeline contractor including the Trans
Alaska Pipe-line Project. He has founded, run and sold companies in
several fields including Learjet charter, commercial construction,
municipal finance and land development. He is also president of a family
corporation, Bandera Land Company, Inc., with real estate interests in
Kern, Riverside and Orange Counties California. A graduate of Whittler
College, California, he did graduate work at George Williams College,
Illinois in organization management. He gives full time to Tri-Valley.
DENNIS P. LOCKHART - 54 President 1982
Heller International Group, Inc.
Chicago, Illinois
Mr. Lockhart is a senior officer and Director of Heller Financial Inc. and
President of Heller's international subsidiary which operates in 18
countries. Heller Financial is a NYSE company active in various lines of
commercial finance. He has been President of Heller International Group
since 1988. Prior to 1988, Mr. Lockhart was an officer of
Citicorp/Citibank and held a number of corporate banking and management
positions in the U.S. and overseas. He is a graduate of Stanford
University and The John Hopkins University School of Advanced International
Studies. He also attended the Senior Executive Program at the Sloan School
of Management, Massachusetts Institute of Technology.
29
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MILTON J. CARLSON - 70 Investor, Kalispell, Montana 1985
Mr. Carlson is a principal in Earthsong Corporation which, in part,
consults on environmental matters and performs environmental audits for
government agencies and public and private concerns. Until its merger with
another firm, Mr. Carlson formerly was vice president and corporate
secretary of Union Sugar Company, a $100 million unit of Sara Lee
Corporation. He was involved in representing industrial end users of
energy tthrough the California Manufacturers Association as the former
chairman of the CMA steering committee of the standing energy and
environmental committees. Mr. Carlson was also the energy and
environmental representative with Sara Lee energy advisory group and
monitored related matters before the California Public Utilities Commission
and Energy Commission as well as serving as the legislative representative
in Sacramento and Washington, D.C. Mr. Carlson attended the University of
Colorado at Boulder and the University of Denver.
LOREN J. MILLER, CPA - 56 Treasurer, The Jankovich Company 1992
San Pedro, California
Mr. Miller has served in a treasury and chief financial officer capacity as
Vice president successively of Hershey Oil Corporation and Mock Resources,
Inc. Prior to that he was vice president and general manager of Tosco
Production Finance Corporation and formerly a senior auditor with Touche
Ross & Co. He is experienced in exploration, production, product trading,
refining and distribution as well as corporate finance. He holds a B.S. in
accounting and a M.B.A. in finance from the University of Southern
California.
EARL H. BEISTLINE, LLD. - 84 Mining Consultant 1992
Fairbanks, Alaska
Dr. Beistline is a past chairman of the Alaska State Minerals Commission
and Dean Emeritus of the School of Mineral Industry of the University of
Alaska. Born in Juneau, he has achieved a special position in Alaska
during its transition from territorial status into statehood. He has
numerous honors from local, state and federal governments, academia,
professional and civic organizations and the mineral industry. An active
miner in the Central-Circle Mining District, Dr. Beistline also serves as a
director of one of the state's primary companies, Usibelli Coal Mines, Inc.
He holds a Bachelor of Mining Engineering, Engineer of Mines and Honorary
Doctor of Law degree from the University of Alaska.
C. CHASE HOFFMAN - 78 Owner, Hoffman Farms 2000
Tulare, California
Mr. Hoffman has owned and operated a milk cow dairy since 1965. He was a
Senior Vice President and General Manager for Knudsen for the State of
California. He has been a land and housing developer in California and
Hawaii. Mr. Hoffman also sits as a director for these other companies,
Seine River Resources, Vancouver, British Columbia, with California gold
operations and Guatemala oil properties, and Power House Corporation, a
British Columbia, Canada, hydroelectric project..
THOMAS J. CUNNINGHAM - 58 Secretary, Treasurer and Chief Financial 1997
Officer of Tri-Valley Corporation, and its
wholly owned subsidiaries, Tri-Valley Oil &
Gas Company and Tri-Valley Power
Corporation, Bakersfield, California
Named as Tri-Valley Corporation's Treasurer and Chief Financial Officer in
February 1997, and as Corporate Secretary on December 21, 1998. Mr.
Cunningham has over 25 years experience in corporate finance, Securities
and Exchange Commission public company reporting, shareholder relations,
and employee benefits. In his career he served as Staff Accountant for
Forest Oil, Supervisor for Tesoro Petroleum, Controller for Tucker
Drilling, Inc., and as Executive Vice President, Chief Financial Officer
and Director for Star Resources, Inc. Most recently he was a Management
Consultant in finance, marketing and human resource matters including
employee benefit planning. He received his education in accounting and
business administration from Angelo State University, Texas.
30
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
JOSEPH R. KANDLE - 58 President and Chief Operating Officer 1998
Tri-Valley Oil & Gas Company, wholly
owned subsidiary of Tri-Valley Corporation
Bakersfield, California
Mr. Kandle was named as President of Tri-Valley Oil & Gas Co. February 1,
1999 after having joined Tri-Valley Oil & Gas on June 1, 1998, as Vice
President - Engineering. Mr. Kandle is a 1965 graduate of the Montana
school of mines with a B.S. degree in Petroleum Engineering. Mr. Kandle has
34 years of experience in drilling, production, and operations starting
with Mobil in 1965 where he specialized in deep drilling. After Mobil, he
has held positions of V.P. & Chief Engineer of Great Basins Petroleum, V.P.
- Engineering with Star Resources and V.P.- Engineering with Atlantic Oil
Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 and Securities and
Exchange Commission regulations require that the Company's directors,
certain officers, and greater than 10 percent shareholders must file
reports of ownership and changes in ownership with the SEC and must furnish
the Company with copies of all such reports they file. Based solely on the
information furnished to the Company, we believe that no person failed to
file required Section 16(a) reports on a timely basis during or in respect
of 2000.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes the compensation of the chairman of the
board and the president of the Company and its subsidiaries, F. Lynn
Blystone (the "Named Officer"), for the fiscal year ended December 31,
2000, 1999, and 1998.
Long Term
Compensation
Annual Compensation Awards
--------------------------- ------------------
(a) (b) ( c ) (d) (e)
Other Securities
Name Period Covered Salary Compensation Underlying Options
------------ ------------------ ------------- ----------------- ---------------------
F. Lynn FYE 12/31/00 $ 95,870 $9,850(2)
Blystone, CEO FYE 12/31/99 $ 95,712
FYE 12/31/98 $156,000(1)
(1) Includes salary that was deferred when Mr. Blystone took a reduced
salary in 1996.
(2) Includes value of common shares awarded pursuant to Mr. Blystone's
employment contract.
AGGREGATED 2000 OPTION EXERCISES AND YEAR-END VALUES
The following table summarizes the number and value of all unexercised
stock options held by the Named Officer and the Directors at the end of
2000.
31
ITEM 10. EXECUTIVE COMPENSATION
( A ) ( B ) ( C )
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options/SARs at
Options/SARs at FY-End (#) FY-End ($)*
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------- ------------------------- -------------------------
F. Lynn Blystone 595,000/0 0/0
Dennis P. Lockhart 220,000/0 0/0
Milton J. Carlson 218,000/0 0/0
Loren J. Miller 220,000/0 0/0
Earl H. Beistline 198,000/0 0/0
C. Chase Hoffman 150,000/0 0/0
*Based on a fair market value of $1.47 per share, which was the
closing bid price of the Company's Common Stock in the NASD National Market
System on December 31, 2000.
COMPENSATION OF DIRECTORS
The Company compensates non-employee directors for their service on the
board of directors. On 4/3/00, four non-employee directors were issued
10,000 shares of common stock valued at fair market value of $1.97. These
shares were awarded at the 1999 Annual Meeting and Mr Hoffman was not a
director at that time. On 9/16/00, each non-employee director received
50,000 stock options with an exercise price of $2.43 per option. On
11/10/00, each non-employee director received 100,000 stock options with an
exercise price of $1.22 per option. The following tables sets forth
information regarding the cash compensation paid to outside directors in
2000.
(A) (B)
NAME FEES
---- ----
Earl Beistline $2,650
Milton Carlson $2,650
Dennis P. Lockhart $1,800
Loren J. Miller $2,650
C. Chase Hoffman $850
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 2000, there were 19,554,748 shares of the Company's
common stock outstanding. The following persons were known by the Company
to be the beneficial owners of more than 5% of such outstanding common
stock:
32
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Number of Percent of
Name and Address Shares Total
------------------------- -------------------- ---------------
F. Lynn Blystone 1,024,264(1) 5.1%
P.O. Box 1105
Bakersfield, CA 93302
Dennis Vaughan 1,009,200(1) 5.2%
2298 Featherhill Road
Santa Barbara, CA 93108
(1) Includes 595,000 shares of stock Mr. Blystone has the right to acquire
upon the exercise of options within 60 days after December 31, 2000, and
30,200 shares held in the name of Bandera Land Company, Inc., a family
corporation of which Mr. Blystone is the president.
The following table sets forth the beneficial ownership of the Company's
common stock as of December 31, 2000 by each director, by each of the
executive officers named in Item 11, and by the executive officer named in
Item 10 and directors as a group:
Number of Percent of
Directors Shares(1) Total(2)
------------------------- -------------------- ---------------
F. Lynn Blystone 1,024,264(3) 5.1%
Dennis P. Lockhart 282,091(3) 1.4%
Milton J. Carlson 289,000(3) 1.4%
Loren J. Miller 255,300(3) 1.3%
Earl H. Beistline 248,000(3) 1.3%
C. Chase Hoffman 197,500(3) 1.0%
TOTAL GROUP (all directors and
Executive officers - 6
persons) 2,295,955(3) 10.9%
(1) Includes shares which the listed shareholder has the right to acquire,
from options, within 60 days after Decmeber 31, 2000, as follows:
Dennis P. Lockhart 220,000; Milton J. Carlson 218,000; Loren J. Miller
220,000 and Earl H. Beistline198,000. F. Lynn Blystone has 595,000.
(2) Based on total outstanding shares of 19,554,748 as of December 31,
2000. The persons named herein have sole voting and investment power
with respect to all shares of common stock shown as beneficially
owned by them, subject to community property laws where applicable.
(3) Includes 30,200 shares held in the name of Bandera Land Company, Inc.,
a family corporation of which Mr. Blystone is the president.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
33
ITEM 13. EXHIBITS, LISTS, AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description of Exhibit Page
3.1 Amended and Restated Certificate of Incorporation
21.1 Financial Data Schedule
(b) Reports on Form 8-K
None
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: May 30, 2001 By: ______/s/ _______________________
F. Lynn Blystone
President, Chief Executive Officer and
Director
Date: May 30, 2001 By: _____/s/ _________________________
Thomas J. Cunningham
Secretary, Treasurer, and Chief
Financial Officer