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 August 31, 2001.
[ ] 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)
<Table>
Utah 87-0287176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</Table>
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 August 31, 2001: Common Stock, $.04 par value - 4,431,873 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [ X ]
INDEX
<Table>
<Caption>
Page #
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Part I - Financial Information
1. Financial Statements:
Condensed Balance Sheets at
February 28, 2001 and August 31, 2001 1
Condensed Statements of Operations
For the Three and Six Months Ended August 31, 2000 and 2001 2
Statements of Cash Flows
For the Six Months Ended August 31, 2000 and 2001 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation 6
Part II - Other Information
6. Exhibits and Reports on Form 8-K 11
Signatures 11
</Table>
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)
ITEM 1. FINANCIAL STATEMENTS.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
<Table>
<Caption>
ASSETS
As of As of
February 28, 2001 August 31, 2001
----------------- ---------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 3,337,950 $ 3,406,218
Trade accounts receivable 186,463 130,602
Investment securities 203,604 235,218
Deferred tax asset 194,103 182,415
Prepaid expenses and other 103,580 98,168
--------------- ---------------
Total current assets 4,025,700 4,052,621
--------------- ---------------
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$5,508,910 on February 28, 2001 and $5,608,831 on August 31, 2001 1,358,417 1,248,300
Coal and gravel properties, net of accumulated depletion and depreciation
of $7,990,861 on February 28, 2001 and $ 7,998,000 on August 31, 2001 321,346 314,208
Real estate held for development 2,797,323 2,821,446
Other property and equipment, net of accumulated depreciation
of $351,822 on February 28, 2001 and $347,501 on August 31, 2001 122,094 126,693
Other noncurrent assets 947,111 952,111
--------------- ---------------
$ 9,571,991 $ 9,515,379
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,706 $ 61,726
Accrued expenses 84,409 71,199
--------------- ---------------
Total current liabilities 131,115 132,925
Reserve for reclamation costs 413,000 413,000
Deferred Federal income taxes 188,400 183,262
--------------- ---------------
Total liabilities 732,515 729,187
--------------- ---------------
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 17,288,964 17,299,097
Unrealized loss on investment securities
available for sale, net of income taxes (63,910) (43,983)
Less treasury stock, at cost, 5,694,180 shares on February 28, 2001
and 5,725,930 on August 31, 2001 (9,596,982) (9,680,326)
--------------- ---------------
Total stockholders' equity 8,839,476 8,786,192
--------------- ---------------
$ 9,571,991 $ 9,515,379
=============== ===============
</Table>
The accompanying notes are an integral part of these financial statements.
1
Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
3 Months Ended August 31, 6 Months Ended August 31,
2000 2001 2000 2001
----------- ----------- ----------- -----------
Revenues:
Oil and gas $ 469,777 $ 306,646 $ 935,378 $ 678,782
Gravel 27,176 23,608 42,769 39,735
----------- ----------- ----------- -----------
Total revenues 496,953 330,254 978,147 718,517
----------- ----------- ----------- -----------
Operating expenses:
Oil and gas 235,418 207,553 484,065 484,436
Coal and gravel 16,648 11,505 35,822 25,071
Real estate development 3,768 23,325 14,154 32,807
General and administrative 124,456 111,677 270,332 260,347
----------- ----------- ----------- -----------
Total operating expenses 380,290 354,060 804,373 802,661
----------- ----------- ----------- -----------
Income (loss) from operations 116,663 (23,806) 173,774 (84,144)
----------- ----------- ----------- -----------
Other income (expense):
Interest and dividend income 51,736 44,240 98,697 97,515
Gain (loss) on sale of oil and gas properties (317) 0 11,589 120
Other, net (59,421) 585 68,624 2,585
----------- ----------- ----------- -----------
Total other income (expense) (8,002) 44,825 178,910 100,220
----------- ----------- ----------- -----------
Income before income taxes 108,661 21,019 352,684 16,076
----------- ----------- ----------- -----------
Income tax expense 46,636 7,797 130,387 5,943
----------- ----------- ----------- -----------
Net income $ 62,025 $ 13,222 $ 222,297 $ 10,133
=========== =========== =========== ===========
Basic and diluted earnings per common share $ 0.01 $ 0.00 $ 0.05 $ 0.00
=========== =========== =========== ===========
Weighted average shares outstanding 4,479,415 4,452,319 4,486,485 4,454,684
=========== =========== =========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
2
Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
6 Months Ended 6 Months Ended
August 31, 2000 August 31, 2001
--------------- ---------------
Cash flows from operating activities:
Net income $ 222,297 $ 10,133
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion and depreciation 178,903 120,885
Gain on sales of property and equipment (139,634) (2,120)
Loss on sale of investment securities 59,424 0
Deferred federal income taxes 120,353 (5,138)
Net changes in assets and liabilities:
Trade accounts receivable (53,377) 55,861
Prepaid expenses and other current assets 66,419 26,220
Accounts payable 37,365 15,020
Accrued expenses (4,551) (13,209)
--------------- ---------------
Net cash provided by operating activities 487,199 207,652
--------------- ---------------
Cash flows from investing activities:
Additions to oil and gas properties (368,958) (12,930)
Additions to real estate held for development (16,953) (31,282)
Investment in partnership (15,000) (5,000)
Increase in other assets 0 (11,266)
Proceeds from sale of oil and gas properties 11,906 2,438
Proceeds from sale of other property and equipment 139,980 2,000
Proceeds from investments available for sale 139,434 0
--------------- ---------------
Net cash used in investing activities (109,591) (56,040)
--------------- ---------------
Cash flows from financing activities:
Purchases of treasury stock (106,194) (83,344)
--------------- ---------------
Net cash used in financing activities (106,194) (83,344)
--------------- ---------------
Net increase in cash and cash equivalents 271,414 68,268
Cash and cash equivalents at beginning of period 2,672,543 3,337,950
--------------- ---------------
Cash and cash equivalents at end of period $ 2,943,957 $ 3,406,218
=============== ===============
Supplemental disclosures of cash flow information:
Interest paid $ -- $ --
Taxes paid $ 23,792 $ 19,178
</Table>
Recognition in Stockholders' Equity of the net unrealized holding gain on
available for sale securities of $85,631, net of tax effect of $50,224
during the six months ended August 31, 2000 and $19,927, net of tax effect
of $11,688 during the six months ended August 31, 2001.
The accompanying notes are an integral part of these financial statements.
3
OAKRIDGE ENERGY, INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) The accompanying unaudited financial statements for the three and six
month periods ended August 31, 2000 and 2001 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, 2001.
(3) On March 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change
in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings. Adoption of SFAS No. 133 did not have any impact on the
operating results or financial position of the Company.
(4) The Company's operating segments are set forth in the annual financial
statements and accompanying notes for the fiscal year ended February
28, 2001.
Information regarding operations and assets by segment is as follows:
<Table>
<Caption>
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
August 31, 2000 August 31, 2001 August 31, 2000 August 31, 2001
--------------- --------------- --------------- ---------------
Business segment revenue:
Oil and gas $ 469,777 $ 306,646 $ 935,378 $ 678,782
Gravel 27,176 23,608 42,769 39,735
--------------- --------------- --------------- ---------------
$ 496,953 $ 330,254 $ 978,147 $ 718,517
--------------- --------------- --------------- ---------------
Business segment profit (loss):
Oil and gas $ 234,359 $ 99,093 $ 451,313 $ 194,346
Coal and gravel 10,528 12,103 6,947 14,664
Real estate development (3,768) (23,325) (14,154) (32,807)
General corporate (124,456) (111,677) (270,332) (260,347)
--------------- --------------- --------------- ---------------
Income (loss) from operations 116,663 (23,806) 173,774 (84,144)
Interest and dividend income 51,736 44,240 98,697 97,515
Gain on sales of oil and gas properties (317) 0 11,589 120
Other, net (59,421) 585 68,624 2,585
--------------- --------------- --------------- ---------------
Income before income taxes $ 108,661 $ 21,019 $ 352,684 $ 16,076
--------------- --------------- --------------- ---------------
</Table>
4
<Table>
<Caption>
As of As of
February 28, 2001 August 31, 2001
------------------ ------------------
Total assets:
Oil and gas $ 5,411,122 $ 5,338,338
Coal and gravel 321,346 314,208
Real estate development 2,797,323 2,821,446
General corporate 1,042,200 1,041,387
------------------ ------------------
$ 9,571,991 $ 9,515,379
------------------ ------------------
</Table>
5
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, 2001 and the Notes to Condensed Financial Statements
contained in this report.
RESULTS OF OPERATIONS
The Company had net income of $13,222 ($.00 per share) in the
three months ended August 31, 2001 compared to net income of $62,025 ($.01 per
share) in the three months ended August 31, 2000. In the six-month 2001 period,
the Company had net income of $10,133 ($.00 per share) compared to net income of
$222,297 ($.05 per share) in the 2000 six-month period. Significantly lower oil
and gas revenues were primarily responsible for the decline in net income in
both 2001 periods. Lower "other, net" income also contributed to the 2001
six-month results.
Oil and gas revenues decreased approximately $163,100 (34.7%)
and $256,600 (27.4%) in the three and six-month periods ended August 31, 2001,
respectively, due to the continued decline in the Company's oil and gas
production sales volumes and significant reductions in the Company's average oil
price received in both periods and in the Company's average gas sales price
received during the three-month period as oil and gas prices nationwide
retreated from highs achieved earlier in the calendar year. The following tables
compare the revenues and average prices received by the Company and its
production sales volumes during the three and six-month 2001 periods with those
of the 2000 periods:
<Table>
<Caption>
THREE MONTHS THREE MONTHS
ENDED ENDED PERCENTAGE
AUGUST 31, 2000 AUGUST 31, 2001 DIFFERENCE
--------------- --------------- ----------
Oil:
Revenues $ 356,850 $ 246,319 (31.0)%
Production (Bbls.) 11,748 9,560 (18.6)
Average Price (per Bbl.) $ 30.37 $ 25.77 (15.2)
Gas:
Revenues $ 92,674 $ 47,476 (48.8)%
Production (MCF) 20,112 14,425 (28.3)
Average Price (per MCF) $ 4.61 $ 3.29 (28.6)
</Table>
6
<Table>
<Caption>
SIX MONTHS SIX MONTHS
ENDED ENDED PERCENTAGE
AUGUST 31, 2000 AUGUST 31, 2001 DIFFERENCE
--------------- --------------- ----------
Oil:
Revenues $ 732,498 $ 521,899 (28.8)%
Production (Bbls.) 25,247 19,860 (21.3)
Average Price (per Bbl.) $ 29.01 $ 26.28 (9.4)
Gas:
Revenues $ 163,377 $ 126,631 (22.5)%
Production (MCF) 44,649 28,963 (35.1)
Average Price (per MCF) $ 3.66 $ 4.37 19.5
</Table>
Non-material amounts of natural gas liquids revenues and production for all
periods are excluded from the foregoing tables.
Revenues from the Company's principal property in Madison
County, Texas tracked overall results in both 2001 periods, decreasing
approximately $125,100 (36.7%) in the three-month period and $210,800 (30.9%) in
the six-month period due to lower production sales volumes and average oil and
gas prices received. Oil production sales volumes from the property in the
three-month period ended August 31, 2001 were only slightly less, however, than
such volumes in the preceding fiscal quarter ended May 31, 2001 and gas
production sales volumes in such preceding quarter were marginally higher. The
proposed secondary recovery project for this property has been held up pending
approval from the final royalty owners.
Revenues from the Company's gravel operations in La Plata
County, Colorado decreased approximately $3,600 (13.1%) and $3,000 (7.1%) in the
three and six-month 2001 periods, respectively. Although rentals received by the
Company from its surface lease to Four Corners Materials, Inc. ("Four Corners")
were higher in both periods than in the 2000 periods due to an increase
initiated at the start of the fiscal year, the rentals increase was not
sufficient to offset a decline in the Company's royalty income resulting from
lower levels of gravel sales made by Four Corners during both 2001 periods from
the Company's property.
The expenses of the Company's oil and gas operations declined
approximately $27,900 (11.8%) in the three months ended August 31, 2001 but
increased marginally (approximately $400,
7
.1%) in the six-month 2001 period. Depletion and depreciation expense,
production taxes and ad valorem taxes all decreased in both 2001 periods.
Depletion and depreciation expense fell approximately $18,200 (28.0%) and
$46,400 (31.7%) in the three and six-month periods, respectively, due to the
Company's lower production sales volumes, and production taxes declined
approximately $9,800 (41.6%) and $13,700 (30.0%) in such periods for the same
reason. Ad valorem taxes were approximately $3,700 (54.2%) and $7,300 (53.8%)
lower in the 2001 periods because accruals for this expense for fiscal 2002 are
based on lower property valuations received at the start of the year. Lease
operating expense, the highest dollar component of the Company's oil and gas
operations expense category, declined approximately $9,300 (7.0%) in the
three-month 2001 period despite an approximate $11,000 increase in such expense
in the North Texas area primarily due to workover expense incurred on multiple
wells. In the six-month 2001 period, lease operating expense increased
approximately $35,100 (13.4%) as such expense increased approximately $30,200
(75.7%) in the North Texas area and approximately $8,000 (4.1%) with respect to
the Madison County, Texas property due to workover expenses incurred in an
attempt to increase production levels. The Company also incurred approximately
$13,000 of repair expense to its oil and gas workover rig in both 2001 periods
for which there were no comparable expenses in the 2000 periods. Engineering
expense was at roughly the same levels in both 2001 periods as in the prior year
periods, but dry hole expense was approximately $19,700 higher in the 2001
six-month period than in the prior year period due to a dry hole in Wilbarger
County, Texas in which the Company participated during the first three months of
the six-month 2001 period. The Company incurred no dry hole expense in either of
the 2000 periods or in the three months ended August 31, 2001.
The expenses of the Company's coal and gravel operations
decreased approximately $5,100 (30.9%) and $10,800 (30.0%) in the three and six
months ended August 31, 2001 due to lower testing and permitting and
depreciation expenses in both periods and also due to lower payroll expense in
the six-month period. Ad valorem taxes were at approximately the same levels in
all comparable periods.
Real estate development expense increased approximately
$19,600 (519.0%) in the three months ended August 31, 2001 and approximately
$18,600 (131.8%) in the six-month 2001 period reflecting the increasing amount
of attention the Company's management is devoting to the Company's proposed
8
"Oakridge at Durango" planned real estate development outside of Durango,
Colorado. Although the Company is still waiting on further action by the City of
Durango on its annexation application with respect to the approximately 1,100
acres of land involved in the development, during the three and six-month 2001
periods the Company incurred approximately $12,800 in expenses relating to
preparing and printing a brochure to be used to identify and market the proposed
development and approximately $4,400 in location maintenance expenses. There
were no comparable expenses incurred in the 2000 periods. In addition, during
the first half of the six-month 2001 period, legal expense related to the
proposed development was significantly higher.
General and administrative expense decreased approximately
$12,800 (10.3%) and $10,000 (3.7%) in the three and six months ended August 31,
2001, respectively. The Company incurred lower auditing, tax accounting,
governmental reporting and depreciation charges in both 2001 periods than in the
comparable 2000 periods, although these lower charges were partially offset by
higher accounting consulting and shareholders reporting expenses in both
periods. Travel expense in the three-month 2001 period was also significantly
lower than in the prior year. With respect to the six-month 2001 period, the
Company was able to lower its payroll and consulting engineering expenses but
these reductions were offset by increased legal expense and remodeling expenses
to the Company's offices.
Other income (expense) changed from an approximate $8,000
expense item in the three months ended August 31, 2000 to an approximate $44,800
income item in the comparable 2001 period. In the 2000 period, the Company
incurred an approximate $59,400 loss on the partial sale of an equity security
held for investment, and the absence of such a loss in the 2001 period was the
reason for the turnaround between the periods as interest and dividend income
declined approximately $7,500 in the 2001 period due to the effect of lower
rates. In the six-month 2001 period, other income (expense) was positive but
declined approximately $78,700 (44.0%) in amount due to the lack of any
significant gains on the sale of oil and gas properties as interest and dividend
income in the 2001 period was only slightly less than that received in the 2000
period. In the 2000 six-month period, the Company had an approximate $11,600
gain from the sale of one North Texas area well and equipment from a Madison
County, Texas well that was plugged and abandoned and had "other, net" income of
approximately $68,600 resulting
9
from the sale of surplus coal equipment and a right of way from a portion of the
Company's Colorado land that more than covered the equity security loss which
occurred during the last half of the period.
The Company's weighted average shares outstanding decreased
approximately 27,100 and 31,800 shares in the three and six months ended August
31, 2001, respectively, due to continued purchases of the Company's common stock
made by the Company since the end of the 2000 periods.
FINANCIAL CONDITION AND LIQUIDITY
During the first half of fiscal 2002, the Company's operating
activities continued to fund the Company's investing and financing activities,
resulting in an approximate $68,300 increase in cash and cash equivalents at
August 31, 2001, all of which was generated during the first quarter. The
Company's operating activities contributed approximately $207,600 in funds
despite the decline in the Company's oil and gas revenues compared to the first
half of fiscal 2001; however, the Company's investing activities used
approximately $56,000 in funds, primarily for additions to real estate held for
development and to oil and gas properties. In addition, the Company's financing
activities (entirely purchases of the Company's common stock) used approximately
$83,300 in funds. At August 31, 2001, the Company had no indebtedness and cash,
cash equivalents and investment securities available for sale totaling
approximately $3,641,400.
The Company expects to fund its contemplated operations and
any stock purchases it makes during the third quarter and the remainder of
fiscal 2002 from its cash and cash equivalents, sales of all or a portion of its
investment securities available for sale and the cash flow from its oil and gas
properties. Due to the declines in oil and gas prices that have occurred, the
Company will restrict its oil and gas operations for the remainder of fiscal
2002.
10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K - No reports on Form 8-K were filed by the
Company during the three months ended August 31, 2001.
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: October 15, 2001 By /s/ Sandra Pautsky
-----------------------------------------
Sandra Pautsky, President
By /s/ Carol J. Cooper
-----------------------------------------
Carol J. Cooper, Chief Accounting Officer
11