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 September 30, 2001 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)
5555 BUSINESS PARK SOUTH, SUITE 200, BAKERSFIELD, CALIFORNIA 93309
(Address of principal executive offices)
(661) 864-0500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X ] No [ ]
The number of shares of Registrant's common stock outstanding at September 30,
2001 was 19,689,748.
TRI-VALLEY CORPORATION
INDEX
Page
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PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3
Item 1. Consolidated Financial Statements . . . . . . . . 3
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
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2001. Dec. 31, 2000
(Unaudited) (Audited)
------------ -----------
Current Assets
Cash. . . . . . . . . . . . . . . $ 673,919 $ 1,373,570
Accounts receivable, trade. . . . 127,089 813,611
A/R Related Parties . . . . . . . 1,000 4,750
Prepaid expenses. . . . . . . . . 12,029 12,029
------------ -----------
Total Current Assets. . . . . . 814,037 2,203,960
------------ -----------
Property and Equipment, Net . . . . 1,932,107 1,306,689
------------ -----------
Other Assets
Deposits. . . . . . . . . . . . . 104,705 100,105
Note Receivable . . . . . . . . . 125,000 125,000
Acquisition Costs . . . . . . . . 51,270 51,270
Investments in partnerships . . . 29,059 29,059
Other . . . . . . . . . . . . . . 13,913 13,914
Well Database (net of accumulated
amortization of $50,062 at
Sept. 30, 2001 and $44,788
at December 31, 2000. . . . . . 58,588 63,862
Goodwill (net of accumulated
amortization of $218,728 at
Sept 30, 2001 and $210,593
at December 31, 2000. . . . . . 215,125 223,260
------------ -----------
Total Other Assets. . . . . . 597,660 606,470
------------ -----------
Total Assets. . . . . . . . . $ 3,343,804 $ 4,117,119
============ ===========
The accompanying notes are an integral part of these
condensed financial statements.
3
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2001 Dec. 31, 2000
-------------------- ---------------
CURRENT LIABILITIES
Notes and contracts payable. . . . . $ 10,554 $ 10,672
Trade accounts payable . . . . . . . 165,743 581,017
Amounts payable to joint venture
participants . . . . . . . . . . . 95,074 540,142
Advances from joint venture
participants . . . . . . . . . . . 2,408,698 2,517,737
-------------------- ---------------
Total Current Liabilities. . . . . 2,680,069 3,649,568
-------------------- ---------------
Long-term Portion of Notes and
Contracts Payable. . . . . . . . . . 6,934 12,038
-------------------- ---------------
Commitments
Shareholders' Equity
Common stock, $.001 par value:
100,000,000 shares authorized;
19,689,748 and 19,554,748 issued
and outstanding at Sept 30, 2001
and Dec. 31, 2000, respectively. . 19,689 19,555
Less: Common stock in treasury,
at cost, 163,925 shares . . . . . . (21,913) (21,913)
Capital in excess of par value . . . 8,723,554 8,666,688
Accumulated deficit. . . . . . . . . (8,064,529) (8,208,817)
-------------------- ---------------
Total Shareholders' Equity . . . . 656,801 455,513
-------------------- ---------------
Total Liabilities and
Shareholders' Equity . . . . . . $ 3,343,804 $ 4,117,119
==================== ===============
The accompanying notes are an integral part of these
condensed financial statements.
4
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
2001 2000 2001 2000
------------ ------------ ----------- -----------
Revenues
Sale of oil and gas . . . . . . . . . . . . . . . . . $ 177,904 $ 231,055 $ 1,451,666 $ 570,139
Other income. . . . . . . . . . . . . . . . . . . . . 116,351 103,164 190,043 1,531,441
Interest income . . . . . . . . . . . . . . . . . . . 4,305 29,948 20,807 72,810
------------ ------------ ----------- -----------
Total Revenues. . . . . . . . . . . . . . . . . . . 298,560 364,167 1,662,516 2,174,390
------------ ------------ ----------- -----------
Cost and Expenses
Oil and gas lease expense . . . . . . . . . . . . . . 45,765 22,379 288,309 85,089
Mining exploration expenses . . . . . . . . . . . . . 70,347 73,719 125,729 123,622
Project geology, geophysics,
land & administration . . . . . . . . . . . . . . . 54,137 74,668 256,091 395,991
Cost of sale of asset . . . . . . . . . . . . . . . . -0- -0- -0- 394,240
Depletion, depreciation and amortization. . . . . . . 16,102 19,860 45,834 59,582
Interest. . . . . . . . . . . . . . . . . . . . . . . 690 4,783 3,446 12,581
General administrative. . . . . . . . . . . . . . . . 283,691 337,151 798,819 965,390
------------ ------------ ----------- -----------
Total Cost and Expenses . . . . . . . . . . . . . . 470,732 532,560 1,518,228 2,036,495
------------ ------------ ----------- -----------
Net Income/(Loss) . . . . . . . . . . . . . . . . . . . $ (172,172) $ (168,393) $ 144,288 $ 137,895
============ ============ =========== ===========
Net Income (Loss) per Common Share. . . . . . . . . . . $ (.01) $ (.01) $ .01 $ .01
============ ============ =========== ===========
Weighted Average Number of Shares . . . . . . . . . . . 19,689,748 19,548,081 19,689,748 19,548,081
============ ============ =========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
5
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
----------------------
Ended Sept. 30,
-----------------
2001 2000
----------- ------------
Cash Flows from Operating Activities
Net loss/profit. . . . . . . . . . . . . . . . . . . $ 144,288 $ 137,895
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization . . . . 45,834 59,582
Changes in operating capital:
Amounts receivable . . . . . . . . . . . . . . . 690,272 (123,039)
Deposits . . . . . . . . . . . . . . . . . . . . (4,600) (105)
Trade accounts payable . . . . . . . . . . . . . (420,496) 419,595
Amounts payable to joint venture
participants and related parties . . . . . . . (445,068) 105,589
Advances from joint venture
participants . . . . . . . . . . . . . . . . . (109,039) (6,130,746)
----------- ------------
Net Cash Used by Operating Activities. . . . . . . . . (98,809) (5,531,229)
----------- ------------
Cash Flows from Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . (652,738) (206,330)
----------- ------------
Cash Flows from Financing Activities
Principal payments on long-term debt . . . . . . . (5,104) (6,589)
Proceeds from issuance of common stock . . . . . . . 57,000 256,100
----------- ------------
Net Cash Provided (used) by Financing Activities 51,896 249,511
----------- ------------
Net Decrease in Cash and Cash Equivalents. . . . . . . (699,651) (5,488,048)
Cash and Cash Equivalents at Beginning
Of Period. . . . . . . . . . . . . . . . . . . . . . 1,373,570 8,050,469
----------- ------------
Cash and Cash Equivalents at
End of Period. . . . . . . . . . . . . . . . . . . . $ 673,919 $ 2,562,421
=========== ============
Supplemental Information:
Cash paid for interest . . . . . . . . . . . . . . . $ 3,446 $ 12,581
=========== ============
Cash paid for taxes. . . . . . . . . . . . . . . . . $ 7,779 $ 6,678
=========== ============
The accompanying notes are an integral part of these
condensed financial statements.
6
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
-----------------------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The results of operations for the
nine-month period ended September 30, 2001, 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-KSB for the year ended December 31, 2000.
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.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
----------------------------------
In July 2001 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets." This standard becomes effective for fiscal years beginning after
December 15, 2001. Beginning in the first quarter of fiscal 2002, goodwill will
no longer be amortized but will be subject to annual impairment tests. All
other intangible assets will continue to be amortized over their estimated
useful lives. Goodwill existing at September 30, 2001, will continue to be
amortized through the end of fiscal 2001. Through the end of fiscal 2001, the
company will test goodwill for impairment using the current method, which uses
an un-discounted cash flow test.
ITEM 2. MANAGEMENT'S 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
---------------------
For the nine months ended September 30, 2001 we have continued to evaluate the
Ekho No. 1 with the assistance of a team of expertsWe currently are in the
process of finding interested parties to invest in the project to hopefully
bring it into completed, producing status.
We continue to endeavor to bring the appropriate parties into the Sunrise
Natural Gas Project. Our efforts will require one or more horizontal wells to
be drilled. We anticipate initially four wells will be drilled to determine the
aerial extent of the project. Ultimately this project could require as many as
forty wells for full development.
We are planning on drilling at least one well in our Sonata gas prospect this
year, which is west of the Sunrise Project Area. With the Sunrise and Sonata
projects, Tri-Valley has over 12,000 acres in the middle of the McClure Shale.
Natural gas prices began the year at historic highs but have more recently
fallen. We sold gas for as much as $14.64 per Mcf early in the year, but in the
third quarter we also sold for as low as $2.71. We believe that natural gas
prices will continue to be volatile (especially in California) for the remainder
of 2001 and possibly for years.
Precious Metals
----------------
The Russian scientists from TsNIGRI, the Russian Mineral Institute in Moscow
began this years' activity for Tri-Valley the latter part of July. Our efforts
continue to obtain sufficient data to enable a joint venture with a major mining
company for exploration of our Alaska claims, similar to the Placer Dome
arrangement of the previous two years that ended at the end of 2000. Placer
Dome withdrew from the joint venture primarily due to the continued low price
for gold, which led to a reduction in most exploratory project worldwide by
almost all large mining companies.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS, CONTINUED
--------------------------
Three Months Ended Sept. 30, 2001 as compared with Three Months ended Sept. 30,
--------------------------------------------------------------------------------
2000
----
In the quarter ended September 30, 2001 total revenue decreased $65,607 compared
to the same quarter in the year 2000. This decrease was due to a reduction in
natural gas sales in the period ending September 30, 2001. We had oil and gas
sales of $231,055 in the third quarter of 2000 compared to $177,904 for the same
period in 2001 a reduction of $53,151. Other income was $13,187 higher this
period compared to the same period in 2000. Interest income was $25,643 less
for this period versus the same period in 2000 because we had less funds on
deposit in interest bearing accounts, awaiting expenditures on drilling and
completion of wells
Costs and expenses decreased to $470,732 for the quarter ending September 30,
2001 from $532,560 for the same period in 2000. Oil and gas lease expenses were
$23,386 higher in the period ending September 30, 2001, due to work over
expenses on the Hanson wells. Geologic, geophysical, land and administration
costs were $20,531 less this period compared to the same period in 2000.
General and Administrative costs were $53,460 less for this quarter compared to
the same period last year due to reduced legal expenses related to a lawsuit
that ended in 2000.
We had a loss of $172,172 for the three months ended September 30, 2001 compared
to a loss of $168,393 for the same period in 2000.
Nine Months Ended Sept. 30, 2001 as compared to September 30, 2000
-----------------------------------------------------------------------------
We had total revenue of $1,662,516 for the nine months ended September 30, 2001
compared to revenue of $2,174,390 for the same period in 2000. Revenue for the
period in 2000 included revenue from the sale of the Sunrise Prospect in 2000;
we have not had a corresponding sale in 2001. For the nine months ended
September 30, 2001, we had a 254% increase in oil and gas sales due to increased
natural gas prices for the nine months ended September 30, 2001, compared to the
same period in 2000. Other income was $1,341,398 less for the nine months ended
September 30, 2001 compared to the same period last year. This decrease is due
to revenue received in 2000 for the sale of a prospect. We have not sold any
prospects in 2001. Interest income was down $52,003 for the current year to
date nine months because we had less funds on deposit in interest bearing
accounts, awaiting expenditures on drilling and completion of wells.
Costs and expenses were $1,518,228 in the period ending September 30, 2001
compared to $2,036,495 for the same period in 2000. Oil and gas lease expenses
were up for the first nine months due to the Company doing re-works of several
of its wells. Project geology, geophysics, land and administration were
$139,900 less this year due to costs in 200 related to the Sunrise Project.
Cost of sale of assets is $394,240 less this period compared to the same period
in 2000 due to the sale of the Sunrise prospect in 2000. Interest expense is
$9,135 less this period ending September 30, 2001 compared to the same period in
2000. General and Administrative costs were $166,571 less due to reduced legal
expenses related
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS, CONTINUED
--------------------------
to the lawsuit.
Net income, for the nine months ended September 30, 2001, is $144,288 compared
to $137,895 for the same period in 2000.
Capital Resources and Liquidity
----------------------------------
We had current assets at September 30, 2001 of $814,037 compared to $2,203,960
for the period ending December 31,2000. This decrease was due to reduction of
cash and reduction in accounts receivable. Current liabilities were $2,680,069
for the period ended September 30, 2001 compared to $3,649,568 for the year
ending December 31, 2000. This reduction was due to a reduction in accounts
payable and reduction in advances from joint venture participants.
Operating Activities. Cash provided by operations were deficit of $98,809 for
the nine months ended September 30, 2001 compared to a deficit of $5,531,229 for
the same period in 2000. This was due to reduced expenditures of the drilling
operations for the Sunrise well. The $389,169 decrease in advances from joint
venture participants at September 30, 2001 is due to the expenditure of funds
used for the drilling activity on the Sunrise Project and Project Ekho.
Financing Activities. Net cash provided by financing activities decreased
$197,615 for the period ended September 30, 2001, over the same period in 2000
due to the reduced amount of sales of the Company's common stock in private
transactions.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
None
ITEM 2. CHANGES IN SECURITIES
-----------------------
During the quarter ended September 30, 2001, we issued 5,000 shares of our
common stock to one ex-employee who exercised stock options in a private
transaction pursuant to the exemption contained in Section 4(2) of the
Securities Act of 1933, for aggregate consideration of $2,500. The shares
sold/issued 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
None
(b) Reports on Form 8-K:
None
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
November 14, 2001 /s/ F. Lynn Blystone
------------------------
F. Lynn Blystone
President and Chief Executive Officer
November 14, 2001 /s/ Thomas J. Cunningham
---------------------------
Thomas J. Cunningham
Secretary, Treasurer, Chief Financial Officer