1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 June 30, 2001
was 19,684,748.
TRI-VALLEY CORPORATION
INDEX
Page
----
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
3
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
------------ -----------
Current Assets
Cash. . . . . . . . . . . . . . . $ 792,501 $ 1,373,570
Accounts receivable, trade. . . . 424,738 813,611
A/R Related Parties . . . . . . . 1,976 4,750
Prepaid expenses. . . . . . . . . 12,029 12,029
------------ -----------
Total Current Assets. . . . . . 1,231,244 2,203,960
------------ -----------
Property and Equipment, Net . . . . 1,545,341 1,306,689
------------ -----------
Other Assets
Deposits. . . . . . . . . . . . . 100,105 100,105
Note Receivable . . . . . . . . . 125,000 125,000
Acquisition Costs . . . . . . . . 51,270 51,270
Investments in partnerships . . . 29,059 29,059
Other . . . . . . . . . . . . . . 13,914 13,914
Well Database (net of accumulated
amortization of $48,304 at
June 30, 2001 and $44,788
at December 31, 2000. . . . . . 60,346 63,862
Goodwill (net of accumulated
amortization of $216,016 at
June 30, 2001 and $210,593
at December 31, 2000. . . . . . 217,837 223,260
------------ -----------
Total Other Assets. . . . . . 597,531 606,470
------------ -----------
Total Assets. . . . . . . . . $ 3,374,116 $ 4,117,119
============ ===========
June 30, 2001 Dec. 31, 2000
The accompanying notes are an integral part of these
condensed financial statements.
5
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2001 Dec. 31, 2000
--------------- ---------------
CURRENT LIABILITIES
Notes and contracts payable. . . . . $ 10,554 $ 10,672
Trade accounts payable . . . . . . . 121,301 581,017
Amounts payable to joint venture
participants . . . . . . . . . . . 273,175 540,142
Advances from joint venture
participants . . . . . . . . . . . 2,134,824 2,517,737
--------------- ---------------
Total Current Liabilities. . . . . 2,539,854 3,649,568
--------------- ---------------
Long-term Portion of Notes and
Contracts Payable. . . . . . . . . . 7,790 12,038
--------------- ---------------
Commitments
Shareholders' Equity
Common stock, $.001 par value:
100,000,000 shares authorized;
19,684,748 and 19,554,748 issued
and outstanding at June 30, 2001
and Dec. 31, 2000, respectively. . 19,684 19,555
Less: Common stock in treasury,
at cost, 163,925 shares . . . . . . (21,913) (21,913)
Capital in excess of par value . . . 8,721,059 8,666,688
Accumulated deficit. . . . . . . . . (7,892,358) (8,208,817)
--------------- ---------------
Total Shareholders' Equity . . . . 826,472 455,513
--------------- ---------------
Total Liabilities and
Shareholders' Equity . . . . . . $ 3,374,116 $ 4,117,119
=============== ===============
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
2001 2000 2001 2000
----------- ----------- ----------- -----------
Revenues
Sale of oil and gas . . . . . . . . . . . $ 544,648 $ 204,904 $ 1,273,762 $ 339,084
Other income. . . . . . . . . . . . . . . 64,256 1,071,732 73,692 1,428,277
Interest income . . . . . . . . . . . . . 5,242 27,531 16,502 42,862
----------- ----------- ----------- -----------
Total Revenues. . . . . . . . . . . . . 614,146 1,304,167 1,363,956 1,810,223
----------- ----------- ----------- -----------
Cost and Expenses
Oil and gas lease expense. . . . . . . . 146,918 38,909 242,544 62,710
Mining Exploration Expenses . . . . . . . 21,586 14,479 55,382 49,903
Project geology, geophysics,
Land & administration . . . . . . . . . 103,983 195,680 201,954 321,323
Cost of Sale of Asset . . . . . . . . . . -0- 394,240 -0- 394,240
Depletion, depreciation and amortization. 13,631 19,861 29,732 39,722
Interest. . . . . . . . . . . . . . . . . 435 5,129 2,756 7,798
General administrative. . . . . . . . . . 263,387 346,990 515,128 628,239
----------- ----------- ----------- -----------
Total Cost and Expenses . . . . . . . . 549,940 1,015,288 1,047,496 1,503,935
----------- ----------- ----------- -----------
Net Income. . . . . . . . . . . . . . . . . $ 64,206 $ 288,879 $ 316,460 $ 306,288
=========== =========== =========== ===========
Diluted Earnings per Share. . . . . . . . . $ .00 $ .01 $ .02 $ .02
=========== =========== =========== ===========
Basic Earnings per Share. . . . . . . . . . $ .00 $ .01 $ .02 $ .02
=========== =========== =========== ===========
Weighted Average Number of Shares . . . . . 19,661,081 19,335,915 19,661,081 19,335,915
=========== =========== =========== ===========
7
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
---------------------
Ended June 30,
----------------
2001 2000
----------- ------------
Cash Flows from Operating Activities
Net loss/profit. . . . . . . . . . . . . . . . . . . $ 316,460 $ 306,288
Adjustments to reconcile net income
to net cash used from operating activities:
Depreciation, depletion and amortization . . . . 29,732 39,722
Changes in operating capital:
Amounts receivable . . . . . . . . . . . . . . . 391,647 (60,210)
Deposits . . . . . . . . . . . . . . . . . . . . -0- (105)
Trade accounts payable . . . . . . . . . . . . . (459,834) 960,830
Amounts payable to joint venture
participants and related parties . . . . . . . (266,967) 53,848
Advances from joint venture
participants . . . . . . . . . . . . . . . . . (382,913) (6,529,061)
----------- ------------
Net Cash Used by Operating Activities. . . . . . . . . (371,875) (5,228,583)
----------- ------------
Cash Flows from Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . (259,446) (135,640)
----------- ------------
Cash Flows from Financing Activities
Principal payments on long-term debt . . . . . . . (4,248) (4,361)
Proceeds from issuance of common stock . . . . . . . 54,500 250,600
----------- ------------
Net Cash Provided (used) by Financing Activities 50,252 246,239
----------- ------------
Net Decrease in Cash and Cash Equivalents. . . . . . . (581,069) (5,117,984)
Cash and Cash Equivalents at Beginning
Of Period. . . . . . . . . . . . . . . . . . . . . . 1,373,570 8,050,469
----------- ------------
Cash and Cash Equivalents at
End of Period. . . . . . . . . . . . . . . . . . . . $ 792,501 $ 2,932,485
=========== ============
Supplemental Information:
Cash paid for interest . . . . . . . . . . . . . . . $ 2,756 $ 7,798
Cash paid for taxes. . . . . . . . . . . . . . . . . $ 7,779 $ 6,678
TRI-VALLEY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 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
six-month period ended June 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-K 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.
12
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS
--------------
BUSINESS REVIEW
Notice Regarding Forward-Looking Statements
----------------------------------------------
This report contains forward-looking statements. The words, "anticipate,"
"believe," "expect," "plan," "intend," "estimate," "project," "could," "may,"
"foresee," and similar expressions are intended to identify forward-looking
statements. These statements include information regarding expected development
of the Company's business, lending activities, relationship with customers, and
development in the oil and gas industry. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, actual
results may vary materially and adversely from those anticipated, believed,
estimated or otherwise indicated.
Petroleum Activities
---------------------
We are continuing our research and additional in-depth testing program at the
Ekho No. 1. We are consulting with a team of worldwide industry experts and are
pleased with the initial results. Efforts are continuing in this project to
complete the well as a producer
Discussions continue with various parties - oil & gas industry companies, power
companies, accredited investor/groups - to join in developing our Sunrise
Natural Gas Project near Delano, California.
Additionally, we are awaiting our drill permit for our Sonata gas prospect,
which is west of the Sunrise project Area.
Natural gas prices began the year at historic highs but have more recently
fallen. We sold gas for as much as $14.64 per Mmbtu early in the year, but in
the second quarter we also sold for a low as $9.44. We believe that natural gas
prices will continue to be volatile (especially in California) for the remainder
of 2001 and possible for years. We cannot be sure we will be able to obtain the
same price for our production in the second half of 2001 as we did during the
first half.
Precious Metals
----------------
Normally our activity, by Russian scientists from TsNIGRI, the Russian Mineral
Institute in Moscow, on our Alaska gold mining claims begins in late May or
early June, depending on the weather. It is very difficult if not impossible
for us to perform our work when the ground is frozen. However, this year was
different, the Russian scientists were contracted by Tri-Valley Corporation to a
third party for most of the months of June and July to evaluate large areas of
Alaska for platinum and palladium. They began this year's 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 similar to the Placer
Dome arrangement, which had been operating for the previous two years and ended
at the end of 2000.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS, CONTINUED
--------------------------
Three Months Ended June 30, 2001 as compared with Three Months ended June 30,
--------------------------------------------------------------------------------
2000
----
In the quarter ended June 30, 2001 revenue decreased $690,021 compared to the
same quarter in the year 2000. However, sale of oil and gas increased by
$339,744 in the second quarter of 2001 due to the increased gas prices we
received in the second quarter. In the quarter ended June 30, 2001 we had other
income of $64,256 compared to revenue of $1,071,732 in the quarter ended June
30, 2000. The difference is due to revenue being recognized from the sale of
the Sunrise Prospect in the second quarter of 2000. Interest income was $22,289
less for this period in 2001 versus the same period in 2000 due to less funds on
deposit awaiting the drilling of the Sunrise Project.
Costs and expenses decreased $465,348, to $549,940 for the quarter ending June
30, 2001 from $1,015,288 for the same period in 2000. In the quarter ending
June 30, 2000 we wrote off expenses relating to the sale of the Sunrise
Prospect. In 2001, the Russian scientists did not begin work for the Company
until July. However, in June 2001, we prepaid their expenses, which caused the
increase in mining expenses to $21,586 in the second quarter of 2001, compared
to $14,479 in the second quarter of 2000.
We had a profit of $64,206 for the period ended June 30, 2001 compared to
$288,879 for the same period in 2000.
Six Months Ended June 30, 2001 as compared to Six Months Ended June 30, 2000
--------------------------------------------------------------------------------
We had total revenue of $1,363,956 for the six months ended June 30, 2001
compared to revenue of $1,810,223 for the same period in 2000. This decrease is
due to our sale of the Sunrise prospect in 2000. For the six months ended June
30, 2001 we had a 376% increase in oil and gas sales due to increased natural
gas prices for the first half of the year 2001. Other income was down
$1,354,585. The decrease represents the sale of our Sunrise Prospect in 2000.
Generally we recognize revenue from the sale of a prospect when the well
drilling begins.
Costs and expenses were $1,047,496 in the period ending June 30, 2001 compared
to $1,503,935 for the same period in 2000. Oil and gas expenses were up for the
first six months due to our re-workings of several existing wells. Project
geology, geophysics, land and administration were $110,369 less this year due to
reduced activity in this area. In the second quarter of 2000 we wrote off costs
relating to the Sunrise Prospect. General and Administrative costs were
$113,111 less due to reduced litigation expenses from a lawsuit that ended.
Net income, for the six months ended June 30, 2001, are $316,460 compared to
$306,288 for the same period in 2000.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
----------------------------------------------------------------------
OF OPERATIONS, CONTINUED
--------------------------
Capital Resources and Liquidity
----------------------------------
We had current assets at June 30, 2001 of $1,231,244 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 $2,539,854 for
the period ended June 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 $371,875 for
the six months ended June 30, 2001 compared to a deficit of $5,228,583 for the
same period in 2000. This was due to reduced expenditures of the drilling
operations. The $6,146,148 decrease in advances from joint venture participants
at June 30, 2001 is due to the expenditure of funds used for the drilling
activity on the Sunrise Project.
Financing Activities. Net cash provided by financing activities decreased
$195,987 for the period ended June 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 June 30, 2001, we issued 20,000 shares of our common
stock to 2 individuals in private transactions pursuant to the exemption
contained in Section 4(2) of the Securities Act of 1933, for aggregate
consideration of $5,000. 10,000 shares were from options exercised at $.50 each
and 10,000 shares were awarded to an employee. 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
(27) Financial Data Schedule
(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
(Registrant)
August 14, 2001 /s/ F. Lynn Blystone
------------------------
F. Lynn Blystone
President and Chief Executive Officer
August 14, 2001 /s/ Thomas J. Cunningham
---------------------------
Thomas J. Cunningham
Secretary, Treasurer, Chief Financial Officer