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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 0-8532
OAKRIDGE ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
Utah 87-0287176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4613 Jacksboro Highway
Wichita Falls, Texas 76302
(Address of principal executive offices)
(940) 322-4772
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 outstanding of each of the issuer's classes of common
equity, as of November 30, 1999: Common Stock, $.04 par value - 4,517,173 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [ X ]
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INDEX
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Part I - Financial Information
1. Financial Statements:
Condensed Balance Sheets at
February 28, 1999 and November 30, 1999 1
Condensed Statements of Operations
For the Three Months Ended November 30, 1998 and 1999 2
For the Nine Months Ended November 30, 1998 and 1999
Statements of Cash Flows
For the Nine Months Ended November 30, 1998 and 1999 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation 5
Part II - Other Information
5. Other Information 9
6. Exhibits and Reports on Form 8-K 9
Signatures 9
Part I of this Report contains forward looking statements that involve risks and
uncertainties. Accordingly, no assurances can be given that the actual events
and results will not be materially different than the anticipated results
described in the forward looking statements. See "Item 2. - Management's
Discussion and Analysis or Plan of Operation" for a description of various
factors that could materially affect the ability of the Company to achieve the
results described in the forward looking statements.
(i)
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ITEM 1. FINANCIAL STATEMENTS.
OAKRIDGE ENERGY, INC.
CONDENSED BALANCE SHEETS
ASSETS
As of As of
February 28, 1999 November 30, 1999
----------------- -----------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,614,499 $ 2,625,281
Trade accounts receivable 139,556 188,167
Investment securities 425,350 323,514
Deferred tax asset 303,784 284,291
Prepaid expenses and other 74,372 100,510
----------------- -----------------
Total current assets 3,557,561 3,521,763
----------------- -----------------
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$4,447,294 on February 28, 1999 and $4,536,512 on November 30, 1999 2,283,691 2,005,552
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,384,397 on February 28, 1999 and $8,401,005 on November 30, 1999 353,199 336,591
Real estate held for development 2,704,381 2,761,358
Other property and equipment, net of accumulated depreciation
of $686,404 on February 28, 1999 and $355,902 on November 30, 1999 183,260 151,004
Other assets 1,082,826 1,070,791
----------------- -----------------
$ 10,164,918 $ 9,847,059
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 106,380 $ 121,900
Accrued expenses 80,243 57,602
----------------- -----------------
Total current liabilities 186,623 179,502
Deferred Federal income taxes 464,917 414,904
----------------- -----------------
Total liabilities 651,540 594,406
----------------- -----------------
Stockholders' equity:
Common stock, $.04 par value, 20,000,000
shares authorized, 10,157,803 shares issued 406,312 406,312
Additional paid-in capital 805,092 805,092
Retained earnings 17,598,645 17,583,479
Unrealized loss on investment securities
available for sale, net of income taxes (123,700) (85,859)
Less treasury stock, at cost, 5,540,199 shares on February 28, 1999
and 5,640,630 on November 30, 1999 (9,172,971) (9,456,371)
----------------- -----------------
Total stockholders' equity 9,513,378 9,252,653
----------------- -----------------
$ 10,164,918 $ 9,847,059
================= =================
The accompanying notes are an integral part of these financial statements.
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Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
3 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended
November 30, 1998 November 30, 1999 November 30, 1998 November 30, 1999
----------------- ----------------- ----------------- -----------------
Revenues:
Oil and gas $ 310,549 $ 402,140 $ 1,061,898 $ 1,113,331
Coal and gravel 30,202 25,460 71,471 68,228
Other 10,650 9,750 31,950 29,250
----------------- ----------------- ----------------- -----------------
Total revenues 351,401 437,350 1,165,319 1,210,809
----------------- ----------------- ----------------- -----------------
Operating expenses:
Oil and gas 401,775 237,615 1,114,513 928,962
Coal and gravel 22,589 15,580 76,411 47,128
Real estate development 11,444 6,445 67,585 22,428
General and administrative 114,003 99,059 375,075 340,651
----------------- ----------------- ----------------- -----------------
Total operating expenses 549,811 358,699 1,633,584 1,339,169
----------------- ----------------- ----------------- -----------------
Income (loss) from operations (198,410) 78,651 (468,265) (128,360)
----------------- ----------------- ----------------- -----------------
Other income (expense):
Interest and dividend income 51,907 42,827 158,752 126,158
Gain (loss) on sale of oil and gas properties 43,945 (8,166) 1,560,908 6,386
Other, net (163,506) (7,672) (285,145) (1,660)
----------------- ----------------- ----------------- -----------------
Total other income (expense) (67,654) 26,989 1,434,515 130,884
----------------- ----------------- ----------------- -----------------
Income (loss) before income taxes (266,064) 105,640 966,250 2,524
----------------- ----------------- ----------------- -----------------
Income tax expense (benefit) (51,273) 52,520 367,175 17,690
----------------- ----------------- ----------------- -----------------
Net income (loss) $ (214,791) $ 53,120 $ 599,075 $ (15,166)
================= ================= ================= =================
Basic and diluted income (loss)
per common share $ (0.05) $ 0.01 $ 0.13 $ (0.00)
================= ================= ================= =================
Weighted average shares outstanding 4,660,860 4,588,354 4,770,091 4,607,574
================= ================= ================= =================
The accompanying notes are an integral part of these financial statements.
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Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
For 9 Months For 9 Months
Ended Ended
November 30, 1998 November 30, 1999
----------------- -----------------
Cash flows from operating activities:
Net income (loss) $ 599,075 ($ 15,166)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depletion and depreciation 505,338 421,404
Accretion/amortization on investment securities, net (5,066) 14
Gain on sales of oil and gas properties (1,527,731) (6,386)
Loss (gain) on sales of other property and equipment (33,177) 2,172
Other than temporary loss on investment securities 294,362 0
Deferred federal income taxes (59,777) (50,013)
Net changes in assets and liabilities:
Trade accounts receivable 214,390 (48,610)
Prepaid expenses and other current assets 14,565 17,771
Accounts payable (141,752) 15,520
Accrued expenses 5,340 (22,641)
Federal income tax payable 89,551 (42,987)
----------------- -----------------
Net cash provided by (used in) operating activities (44,882) 271,078
----------------- -----------------
Cash flows from investing activities:
Additions to oil and gas properties (1,600,351) (93,567)
Additions to real estate held for development (222,031) (68,984)
Additions to other property and equipment (30,891) 0
Decrease in other assets 46,516 0
Proceeds from sale of oil and gas properties 3,049,600 9,887
Proceeds from sale of other property and equipment 0 5,500
Proceeds from sale/relinquishment of other assets 100,736 59,155
Principal payments received on notes receivable 3,827 11,113
Maturities/calls of investments available for sale 1,000,959 100,000
----------------- -----------------
Net cash provided by investing activities 2,348,365 23,104
----------------- -----------------
Cash flows from financing activities:
Purchases of treasury stock (787,546) (283,400)
----------------- -----------------
Net cash used in financing activities (787,546) (283,400)
----------------- -----------------
Net increase in cash and cash equivalents 1,515,937 10,782
Cash and cash equivalents at beginning of period 877,006 2,614,499
----------------- -----------------
Cash and cash equivalents at end of period $ 2,392,943 $ 2,625,281
================= =================
Supplemental disclosures of cash flow information:
Interest paid $ 0 $ 74
Income taxes paid $ 319,998 $ 91,633
Recognition in Stockholders' Equity of the net unrealized holding gain on
available for sale securities of $32,432 net of tax effect of ($6,006) during
the nine months ended November 30, 1998, and $37,840 net of tax effect of
$19,494 during the nine months ended November 30, 1999.
The accompanying notes are an integral part of these financial statements.
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OAKRIDGE ENERGY, INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) The accompanying unaudited financial statements for three and nine
month periods ended November 30, 1998 and 1999 reflect, in the opinion
of management, all adjustments, which are of a normal and recurring
nature, necessary for a fair presentation of the results for such
periods.
(2) The foregoing financial statements should be read in conjunction with
the annual financial statements and accompanying notes for the fiscal
year ended February 28, 1999.
(3) In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, Reporting Comprehensive Income and SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information. SFAS No. 130
established standards for reporting and display of comprehensive income
and its components in financial statements. SFAS No. 131 established
annual and interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services,
geographic areas and major customers. Adoption of these statements will
not impact the Company's financial position, results of operations or
cash flows, and any effect will be limited to the form and content of
its disclosures. Both statements are effective for fiscal years
beginning after December 15, 1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with Items 6 and
7 of the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 1999 and the Notes to Condensed Financial Statements contained in
this report.
RESULTS OF OPERATIONS
The Company had income from operations of $78,651 and net income of
$53,120 ($.01 per share) in the three months ended November 30, 1999 compared to
a net loss of $214,791 ($.05 per share) during the three months ended November
30, 1998. The 1999 three-month period was the first quarter that the Company had
income from operations in some time. In the nine months ended November 30, 1999,
the Company incurred a net loss of $15,166 ($.00 per share) compared to net
income of $599,075 ($.13 per share) in the 1998 nine-month period. As was the
case in the preceding quarter ended August 31, 1999, improved product prices and
reduced operating expenses were the primary reasons for the Company's net income
in the 1999 three-month period and the reduction of the Company's net loss for
the nine-month period. In the nine months ended November 30, 1998, the Company's
net income was attributable to the approximate $1,504,100 gain the Company
realized from the sale of its Limestone County, Texas property (the "Limestone
County property").
Oil and gas revenues increased approximately $91,600 (29.5%) and
$51,400 (4.8%) in the three and nine months ended November 30, 1999,
respectively, due to significantly improved average oil and gas prices received
by the Company. The following tables show the Company's average oil and gas
prices received during each of the 1998 and 1999 periods and the dollar amounts
and percentages of increase in such prices between the periods:
AVERAGE AVERAGE
PRICE PRICE
3 MONTHS 3 MONTHS PERCENTAGE
ENDED 11/30/98 ENDED 11/30/99 $INCREASE INCREASE
-------------- -------------- ----------- ----------
Oil/bbl. $12.54 $22.76 $10.22 81.5%
Gas/MCF 1.81 3.03 1.22 67.4
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AVERAGE AVERAGE
PRICE PRICE
9 MONTHS 9 MONTHS PERCENTAGE
ENDED 11/30/98 ENDED 11/30/99 $INCREASE INCREASE
-------------- -------------- --------- ----------
Oil/bbl. $12.22 $18.55 $ 6.33 51.8%
Gas/MCF 2.10 2.41 .31 14.8
The increases in oil and gas revenues were achieved despite fairly substantial
declines in both oil and gas production from the Company's principal property in
Madison County, Texas (the "Madison County property"). As previously reported,
the Madison County property is now fully developed and at the stage in its
production history where declines are expected, although certain of the wells
are flowing and production from them should increase when they quit flowing and
are placed on pumping units. In addition, other wells operate with low volume
pumping units and are capable of greater production levels.
Revenues from the Company's gravel operations declined approximately
$4,700 (15.7%) and $3,200 (4.5%) in the three and nine-month 1999 periods,
respectively, after posting gains in the preceding quarter and the six-month
1999 period as the level of gravel sales made by Durango Construction, Inc. from
the Company's Colorado gravel property fell in the third quarter of the 1999
period as compared to the 1998 period. Rentals received by the Company from its
surface lease to such corporation remained constant in all comparable periods.
The Company had no coal revenues in any of the periods.
The expenses of the Company's oil and gas operations declined
approximately $164,200 (40.9%) and $185,600 (16.6%) in the three and nine-month
1999 periods, respectively. Principal reasons for the declines were the absence
of any lease impairment charges in both 1999 periods and the absence of any dry
hole costs in the three-month period and a sharp reduction in such costs in the
nine- month period. During both 1998 periods, the Company incurred approximately
$115,200 in lease impairment charges. In addition, ad valorem taxes were
significantly lower in both 1999 periods and geological and geophysical expense
fell approximately $25,600 in the nine-month period. Depletion and depreciation
expense remained at approximately the same levels in both 1998 and 1999 periods
as lower expense on the Madison County property was offset by higher expense
from new Gregg and Panola County, Texas leases. The only category of expense to
increase significantly in the 1999 nine- month period was lease operating
expense, which rose approximately $15,400 (4.4%) due to higher operating
expenses on certain of the
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Madison County property wells and expenses associated with the new Gregg and
Panola County, Texas leases.
The expenses of the Company's coal and gravel operations were
approximately $7,000 (31.0%) and $29,300 (38.3%) lower, respectively, in the
three and nine months ended November 30, 1999 as virtually all categories of
expense continued to decline. The only expense category reflecting an increase
in either period was testing and permitting expense in the nine-month period,
which resulted from required reclamation work. The expenses of the Company's
real estate held for development decreased approximately $5,000 (43.7%) and
$45,200 (66.8%) in the three and nine-month 1999 periods, respectively, as the
Company continued the cutback of its operations in this area.
In the three and nine months ended November 30, 1999, general and
administrative expense declined approximately $14,900 (13.1%) and $34,400
(9.2%). In the three-month period, the principal reasons for the decline were
lower auditing and tax accounting fees and general depreciation expense. In the
nine- month period, significantly lower independent petroleum engineering
expense incurred with respect to the Company's yearend oil and gas reserve
report, the absence of any letter of credit fees for reclamation bonds due to a
timing difference, lower employee benefits expense and reduced miscellaneous
expense were the main reasons for the reduced general and administrative
expense.
Other income (expense) was an approximate $67,700 expense item in the
three months ended November 30, 1998 but turned into an approximate $27,000
income item in the comparable 1999 period. The Company wrote down the carrying
value of the Company's investment in an equity security in both the three and
nine-month 1998 periods, and this was the principal reason for other income
(expense) being an expense item in the three-month 1998 period. In the nine
months ended November 30, 1998, however, the Company sold its Limestone County
property to Mitchell Energy Corporation and recorded an approximate $1,504,100
gain from such sale, which more than offset the equity security writedowns
during the period. Other income (expense) declined approximately $1,303,600
(90.9%) in the nine months ended November 30, 1999 as the Company recorded gains
from property sales of only $6,400 in such period. Interest and dividend income
was greater in both 1998 periods as compared to the 1999 periods due to the
maturing of corporate bonds in 1999, the proceeds of which were reinvested at a
lower rate of interest.
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The Company recorded income tax expense of approximately $17,700 in the
nine months ended November 30, 1999 although its pre-tax income was only
approximately $2,500 due to the effect of franchise taxes in the states where
the Company operates.
The Company's weighted average shares outstanding declined
approximately 1.6% and 3.4%, respectively, in the three and nine-month periods
ended November 30, 1999 primarily due to purchases of the Company's common stock
made by the Company during and prior to the 1999 periods. The Company purchased
86,300 shares of its common stock during the three months ended November 30,
1999, including 75,000 shares purchased from the Estate of Noel Pautsky, and
purchased an additional 14,131 shares during the remainder of the nine-month
1999 period. The Company does not anticipate purchasing any additional shares
from the Estate of Noel Pautsky in the immediate future.
FINANCIAL CONDITION AND LIQUIDITY
During the first nine months of fiscal 2000, the Company's operating
and investing activities funded its financing activities as had been the case in
the first half of the year. As a result, cash and cash equivalents increased
approximately $10,800 at November 30, 1999. Operating activities, principally
through non-cash depletion and depreciation expense, contributed approximately
$271,100 in funds and investing activities provided an additional approximate
$23,100. Cash from the Company's investing activities came primarily from the
maturity of an investment available for sale and proceeds from the
sale/relinquishment of other assets and more than offset additions to oil and
gas properties and real estate held for development. The Company's financing
activities during the nine months ended November 30, 1999 consisted solely of
purchases of treasury stock and used approximately $283,400 in funds. At
November 30, 1999, the Company had no indebtedness and held cash, cash
equivalents and investment securities available for sale totaling approximately
$2,949,000.
The Company expects to fund its contemplated operations and any
treasury stock purchases it makes during the remainder of fiscal 2000 from its
cash and cash equivalents, sales of all or a portion of its investment
securities available for sale and any cash flow from its oil and gas properties.
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On January 14, 2000, the Board of Directors of the Company selected the
firm of Whitley Penn as the independent public accountants to examine the
financial statements of the Company for the fiscal year ending February 29,
2000. The firm has not previously served as the Company's accountants. The firm
of KPMG LLP ("KPMG") examined the financial statements of the Company for the
fiscal years ended February 29, 1992 through February 28, 1999. KPMG resigned as
the independent public accountants of the Company on July 6, 1999, and such
event was reported in the Company's Report on Form 8-K (as amended) of such
date.
Prior to the engagement of Whitley Penn, neither the Company nor anyone
on its behalf had consulted with such firm regarding either the application of
accounting principles to a specific transaction, either completed or
contemplated, or the type of audit opinion that might be rendered on the
Company's financial statements. In addition, prior to KPMG's resignation, the
Company had no disagreements with KPMG on any matter of accounting principles or
practice, financial statement disclosure or auditing scope or procedure and no
events identified in paragraph (a)(1)(iv) of Item 304 of Regulation S-B
occurred during the KPMG engagement. Consequently, there was no need for the
Company to consult with Whitley Penn regarding any such disagreement or event.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - Financial Data Schedule for the nine months ended
November 30, 1999 filed as Exhibit 27.
(b) Reports on Form 8-K - No reports on Form 8-K were filed by the
Company during the three months ended November 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
OAKRIDGE ENERGY, INC.
(Registrant)
Date: January 14, 2000 By /s/ Sandra Pautsky
-------------------------------------------
Sandra Pautsky, President
By /s/ Carol J. Cooper
-------------------------------------------
Carol J. Cooper, Chief Accounting Officer
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INDEX TO EXHIBITS
The exhibits filed herewith are filed in accordance with the
requirements of Item 601 to Regulation S-B for filings on Form 10-QSB. For
convenient reference, each exhibit is listed according to the number assigned to
it in the Exhibit Table of such Item 601.
(2) - Plan of acquisition, reorganization, arrangement,
liquidation or succession - not applicable.
(3) - (i) Articles of Incorporation - not applicable.
(ii) Bylaws - not applicable.
(4) - Instruments defining the rights of security holders,
including indentures - not applicable.
(10) - Material contracts - not applicable.
(11) - Statement re computation of per share earnings - not
applicable.
(15) - Letter on unaudited interim financial information -
not applicable.
(18) - Letter on change in accounting principles - not
applicable.
(19) - Reports furnished to security holders - not
applicable.
(22) - Published report regarding matters submitted to vote
- not applicable.
(23) - Consents of experts and counsel - not applicable.
(24) - Power of Attorney - not applicable.
(27) - Financial Data Schedule - filed herewith.
(99) - Additional exhibits - not applicable.