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, 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)
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, 2001: Common Stock, $.04 par value - 4,424,007 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [X]
INDEX
<Table>
<Caption>
Page #
------
Part I - Financial Information
1. Financial Statements:
Condensed Balance Sheets at
February 28, 2001 and November 31, 2001 1
Condensed Statements of Operations
For the Three and Nine Months Ended November 30,
2000 and 2001 2
Statements of Cash Flows
For the Nine Months Ended November 30, 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
4. Submission of Matters to a Vote of Security Holders 12
6. Exhibits and Reports on Form 8-K 13
Signatures 13
</Table>
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 "Part I - 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
ASSETS
<Table>
<Caption>
As of As of
February 28, 2001 November 30, 2001
----------------- -----------------
Current assets: (Unaudited)
Cash and cash equivalents $ 3,337,950 $ 3,413,699
Trade accounts receivable 186,463 100,104
Investment securities 203,604 241,734
Deferred tax asset 194,103 180,006
Prepaid expenses and other 103,580 94,793
------------ ------------
Total current assets 4,025,700 4,030,336
------------ ------------
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 $5,652,576 on November 30, 2001 1,358,417 1,211,101
Coal and gravel properties, net of accumulated depletion and depreciation
of $7,990,861 on February 28, 2001 and $ 8,005,452 on November 30, 2001 321,346 306,755
Real estate held for development 2,797,323 2,824,693
Other property and equipment, net of accumulated depreciation
of $351,822 on February 28, 2001 and $349,760 on Novmeber 30, 2001 122,094 129,579
Other noncurrent assets 947,111 952,111
------------ ------------
$ 9,571,991 $ 9,454,575
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,706 $ 46,138
Accrued expenses 84,409 59,480
------------ ------------
Total current liabilities 131,115 105,618
Reserve for reclamation costs 413,000 413,000
Deferred Federal income taxes 188,400 173,544
------------ ------------
Total liabilities 732,515 692,162
------------ ------------
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 17,291,859
Unrealized loss on investment securities
available for sale, net of income taxes (63,910) (39,876)
Less treasury stock, at cost, 5,694,180 shares on February 28, 2001
and 5,733,796 on November 30, 2001 (9,596,982) (9,700,974)
------------ ------------
Total stockholders' equity 8,839,476 8,762,413
------------ ------------
$ 9,571,991 $ 9,454,575
============ ============
</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 November 30, 9 Months Ended November 30,
2000 2001 2000 2001
----------- ----------- ----------- -----------
Revenues:
Oil and gas $ 488,378 $ 240,492 $ 1,423,756 $ 919,274
Coal and gravel 24,504 32,655 67,273 72,390
----------- ----------- ----------- -----------
Total revenues 512,882 273,147 1,491,029 991,664
----------- ----------- ----------- -----------
Operating expenses:
Oil and gas 203,897 192,122 687,962 676,558
Coal and gravel 17,722 20,866 53,544 45,937
Real estate development 5,188 9,103 19,342 41,910
General and administrative 99,824 100,899 370,156 361,246
----------- ----------- ----------- -----------
Total operating expenses 326,631 322,990 1,131,004 1,125,651
----------- ----------- ----------- -----------
Income (loss) from operations 186,251 (49,843) 360,025 (133,987)
----------- ----------- ----------- -----------
Other income:
Interest and dividend income 54,658 36,527 153,355 134,042
Gain on sale of oil and gas properties 1,480 1,833 13,069 1,953
Other, net 0 0 68,624 2,585
----------- ----------- ----------- -----------
Total other income 56,138 38,360 235,048 138,580
----------- ----------- ----------- -----------
Income before income taxes 242,389 (11,483) 595,073 4,593
----------- ----------- ----------- -----------
Income tax expense (benefit) 89,611 (4,245) 219,998 1,698
----------- ----------- ----------- -----------
Net income (loss) $ 152,778 $ (7,238) $ 375,075 $ 2,895
=========== =========== =========== ===========
Basic and diluted income (loss)
per common share $ 0.03 $ (0.00) $ 0.08 $ 0.00
=========== =========== =========== ===========
Weighted average shares outstanding 4,472,123 4,429,361 4,481,732 4,446,304
=========== =========== =========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
2
Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
For 9 Months For 9 Months
Ended Ended
November 30, 2000 November 30, 2001
----------------- -----------------
Cash flows from operating activities:
Net income $ 375,075 $ 2,895
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion and depreciation 257,762 177,922
Gain on sales of property and equipment (141,114) (2,120)
Loss on sale of investment securities 59,424 0
Deferred federal income taxes 205,201 (14,856)
Net changes in assets and liabilities:
Trade accounts receivable (11,463) 86,359
Prepaid expenses and other current assets 78,630 29,595
Accounts payable (34,786) (568)
Accrued expenses (17,758) (24,929)
----------- -----------
Net cash provided by operating activities 770,971 254,298
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (426,126) (21,308)
Additions to real estate held for development (41,770) (38,109)
Additions to other property and equipment 0 (16,411)
Investment in partnership (15,000) (5,000)
Proceeds from sale of oil and gas properties 13,385 4,271
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 (190,097) (74,557)
----------- -----------
Cash flows from financing activities:
Purchases of treasury stock (106,194) (103,992)
----------- -----------
Net cash used in financing activities (106,194) (103,992)
----------- -----------
Net increase in cash and cash equivalents 474,680 75,749
Cash and cash equivalents at beginning of period 2,672,543 3,337,950
----------- -----------
Cash and cash equivalents at end of period $ 3,147,223 $ 3,413,699
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 0 $ 0
Taxes paid $ 23,792 $ 16,554
</Table>
Recognition in Stockholders' Equity of the net unrealized holding gain on
available for sale securities of $70,092 net of tax effect of $41,112 during
the nine months ended November 30, 2000 and $24,034 net of tax effect of
$14,097 during the nine months ended November 30, 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 nine
month periods ended November 30, 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 set forth in the
foregoing financial statements.
(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>
3 Months Ended November 30, 9 Months Ended November 30,
2000 2001 2000 2001
------------- ------------- ------------- -------------
Business segment revenue:
Oil and gas $ 488,378 $ 240,492 $ 1,423,756 $ 919,274
Gravel 24,504 32,655 67,273 72,390
------------- ------------- ------------- -------------
$ 512,882 $ 273,147 $ 1,491,029 $ 991,664
------------- ------------- ------------- -------------
Business segment profit (loss):
Oil and gas $ 284,481 $ 48,370 $ 735,794 $ 242,716
Coal and gravel 6,782 11,789 13,729 26,453
Real estate development (5,188) (9,103) (19,342) (41,910)
General corporate (99,824) (100,899) (370,156) (361,246)
------------- ------------- ------------- -------------
Income (loss) from operations 186,251 (49,843) 360,025 (133,987)
Interest and dividend income 54,658 36,527 153,355 134,042
Gain on sales of oil and gas properties 1,480 1,833 13,069 1,953
Other, net 0 0 68,624 2,585
------------- ------------- ------------- -------------
Income before income taxes $ 242,389 $ (11,483) $ 595,073 $ 4,593
------------- ------------- ------------- -------------
</Table>
4
<Table>
<Caption>
As of As of
February 28, 2001 November 30, 2001
----------------- -----------------
Total assets:
Oil and gas $ 5,411,122 $ 5,282,229
Coal and gravel 321,346 306,755
Real estate development 2,797,323 2,824,693
General corporate 1,042,200 1,040,898
---------------- ----------------
$ 9,571,991 $ 9,454,575
---------------- ----------------
</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 a net loss of $7,238 ($.00 per share) in the
three months ended November 30, 2001 compared to net income of $152,778 ($.03
per share) in the three months ended November 30, 2000. In the nine-month 2001
period, the Company had net income of $2,895 ($.00 per share) compared to net
income of $375,075 ($.08 per share) in the 2000 nine-month period. As was the
case in the preceding two quarters of the fiscal year, significantly lower oil
and gas revenues were primarily responsible for the net loss in the three-month
2001 period and the material decline in net income that occurred in the
nine-month 2001 period. Lower "other income" also contributed to the results in
both 2001 periods.
Oil and gas revenues decreased approximately $247,900 (50.8%)
and $504,500 (35.4%) in the three and nine-month periods ended November 30,
2001, respectively, due to the continued decline in the Company's oil and gas
production sales volumes and significant reductions in the Company's oil and gas
prices received in both periods as oil and gas prices nationwide continued their
calendar 2001 retreat. Workovers performed in the North Texas area in the two
prior quarters did, however, result in an oil production increase in this area
during the three months ended November 30, 2001.
The following tables compare the revenues and average prices
received by the Company and its production sales volumes during the three and
nine-month 2001 periods with those of the 2000 periods:
6
<Table>
<Caption>
THREE MONTHS THREE MONTHS
ENDED ENDED PERCENTAGE
NOVEMBER 30, 2000 NOVEMBER 30, 2001 DIFFERENCE
----------------- ----------------- ------------------
Oil:
Revenues $ 377,392 $ 194,954 (48.3)%
Production (Bbls.) 11,384 9,086 (20.2)%
Average Price (per Bbl.) $ 33.15 $ 21.46 (35.3)%
Gas:
Revenues $ 93,566 $ 31,263 (66.6)%
Production (MCF) 18,341 13,163 (28.2)%
Average Price (per MCF) $ 5.10 $ 2.38 (53.3)%
<Caption>
NINE MONTHS NINE MONTHS
ENDED ENDED PERCENTAGE
NOVEMBER 30, 2000 NOVEMBER 30, 2001 DIFFERENCE
----------------- ----------------- ------------------
Oil:
Revenues $ 1,109,889 $ 716,853 (35.4)%
Production (Bbls.) 36,631 28,946 (21.0)%
Average Price (per Bbl.) $ 30.30 $ 24.77 (18.2)%
Gas:
Revenues $ 256,943 $ 157,894 (38.5)%
Production (MCF) 62,990 42,126 (33.1)%
Average Price (per MCF) $ 4.08 $ 3.75 (8.1)%
</Table>
Non-materials 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 again tracked overall results in both 2001 periods, decreasing
approximately $191,600 (55.5%) in the three-month period and $402,400 (39.2%) in
the nine-month period due to lower production sales volumes and average oil and
gas prices received. As has been the case for most of calendar 2001, 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 increased approximately $8,200 (33.3%) and $5,100 (7.6%) in the
three and nine-month 2001 periods, respectively. Rentals received by the Company
from its surface lease to Four Corners Materials, Inc. ("Four Corners") were
higher in both 2001 periods than in the 2000 periods due to an
7
increase initiated at the start of the fiscal year. In addition, the Company's
royalty income from Four Corners' gravel sales made from the Company's property
during the three months ended November 30, 2001 was approximately 30% higher
than in the 2000 three-month period; however, royalty income for the nine-month
2001 period still lagged behind that of the prior year period.
The expenses of the Company's oil and gas operations declined
approximately $11,800 (5.8%) and $11,400 (1.7%) in the three and nine-month 2001
periods, respectively, primarily due to significantly lower depletion expense
and production taxes in both periods. Depletion expense decreased approximately
$18,200 (29.3%) and $64,600 (31.0%) and production taxes fell approximately
$12,200 (51.8%) and $25,900 (37.4%) in the three and nine months ended November
30, 2001, respectively, due to the Company's lower production sales volumes
during the periods. The effects of the lower depletion expense and production
taxes were partially offset by higher lease operating expense and ad valorem
taxes in both 2001 periods. Lease operating expense increased approximately
$3,600 (3.3%) in the three-month 2001 period primarily due to higher well
operating expenses for the Madison County, Texas property as it matures. Lease
operating expense rose approximately $38,600 (10.4%) in the nine-month 2001
period due to well workover expenses incurred in the North Texas area during the
first part of the period and the higher Madison County, Texas well operating
expenses. Ad valorem taxes increased approximately $14,700 in the three months
ended November 30, 2001 primarily due to over-accruals that were made for such
taxes on the Madison County, Texas property in the first six months of the nine
months ended November 30, 2000 which were corrected with a credit in the last
three months of the 2000 period. The resulting credit magnified the amount of
the increase in ad valorem taxes for the three months ended November 30, 2001.
Ad valorem taxes increased approximately $7,400 (60.8%) in the nine-month 2001
period due to accruals during the period being based upon the taxing
authorities' evaluations of the Company's oil and gas properties as of January
1, 2001 when oil and gas prices were higher than on the evaluation date used for
the 2000 period. The Company expects that ad valorem taxes for the fiscal year
ending February 28, 2003 should be reduced based on the lower oil and gas prices
in effect on the January 1, 2002 evaluation date.
8
The engineering expense component of oil and gas operating
expense was at approximately the same levels in the 2000 and 2001 three-month
periods and in the 2000 and 2001 nine-month periods. The Company did not incur
any expenses for rig repairs or dry hole costs in either of the three-month 2000
and 2001 periods or in the nine months ended November 30, 2000; however, during
the first six months of the nine-month 2001 period, the Company incurred
expenses of approximately $13,000 for workover rig repairs and $19,700 for a dry
hole drilled in Wilbarger County, Texas in which the Company participated and
these expenses partially offset the amount of the decline in oil and gas
operating expenses in the nine-month 2001 period.
The expenses of the Company's coal and gravel operations
increased approximately $3,100 (17.7%) in the three months ended November 30,
2001 but declined approximately $7,600 (14.2%) in the nine-month 2001 period.
The increase in the three-month 2001 period was due to the expense of obtaining
a required updated engineering report with respect to the sediment pond located
on the site of the Company's former coal operations that has not yet been
reclaimed and higher depletion expense resulting from Four Corners' increased
sales from the Company's gravel property during the period. Although the expense
of the engineering report also adversely affected the nine-month 2001 period
coal and gravel operations expenses, decreases in all of the other components of
such expenses more than offset the expense of the engineering report.
Real estate development expense increased approximately $3,900
(75.5%) and $22,600 (116.7%) in the three and nine-month periods ended November
30, 2001 as the Company's management attempted to move the Company's proposed
"Oakridge at Durango" planned real estate development outside of Durango,
Colorado ahead on a number of fronts. Due to recent developments, the Company is
encouraged that approval of the "area plan" in which the Company's development
is centered should take place no later than March 2002. Area plan approval is a
required step before the City of Durango can take action on the Company's
annexation application with respect to the approximately 1,100 acres of land
involved in the planned development. Legal fees incurred by the Company in its
negotiations with respect to a prospective lead buyer of a portion of the
development and ad valorem taxes were responsible for the increase in the
Company's real estate development expense in the three-month 2001 period and
legal expense, location maintenance expenses and expenses related to preparing
and printing a brochure to be used to identify and market the
9
proposed development were responsible for the rise in the 2001 nine-month period
expense.
General and administrative expenses increased approximately
$1,100 (1.1%) in the three months ended November 30, 2001 but fell approximately
$8,900 (2.4%) in the nine-month 2001 period. Increased travel expense related to
the Company's Colorado operations, higher payroll expense resulting from the
Company's customary annual bonus to its employees and greater utility expenses
negated the impact of significantly lower depreciation expense and ad valorem
taxes in the three-month period. In the nine-month period, lower depreciation
expense, auditing fees and governmental reporting expense overcame the effect of
higher travel and shareholders reporting expenses and legal and accounting
consulting fees.
Other income declined approximately $17,800 (31.7%) and
$96,500 (41.0%) in the three and nine months ended November 30, 2001,
respectively. Interest and dividend income decreased approximately $18,100
(33.2%) and $19,300 (12.6%) in the three and nine-month 2001 periods,
respectively, due to the effect of lower rates. In addition to the dividend and
interest income decline, other income in the nine-month 2001 period was hurt by
only minimal levels of gain on the sale of oil and gas properties and "other,
net" income. During the nine-month 2000 period, the Company had an approximate
$13,100 gain primarily 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 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 an equity security loss which occurred during the period.
The Company's weighted average shares outstanding decreased
approximately 42,800 (1.0%) and 35,400 (.8%) shares in the three and nine months
ended November 30, 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 nine months of fiscal 2002, the Company's
operating activities continued to fund the Company's investing and financing
activities, resulting in an approximate $75,700 increase in cash and cash
equivalents at November 30, 2001. The Company's operating activities contributed
approximately $254,300 in funds despite the substantial decline
10
in the Company's oil and gas revenues compared to the first nine months of
fiscal 2001; however, the Company's investing activities used approximately
$74,600 in funds for additions to real estate held for development, oil and gas
properties and other property and equipment. In addition, the Company's
financing activities (entirely purchases of the Company's common stock) used
approximately $104,000 in funds. At November 30, 2001, the Company had no
indebtedness and cash, cash equivalents and investment securities available for
sale totaling approximately $3,655,400.
The Company expects to fund its contemplated operations and
any stock purchases it makes during the last quarter 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 in fiscal 2002, the
Company restricted its oil and gas operations in the third quarter of fiscal
2002 and will continue such restrictions for at least the remainder of the
fiscal year.
11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's 2001 Annual Meeting of Shareholders (the "Meeting")
was held on September 6, 2001.
(b) At the Meeting, Sandra Pautsky, Danny Croker and Randy Camp were
elected as directors of the Company to serve until the 2002 Annual Meeting of
Shareholders or until their successors are elected.
(c) A total of 3,712,422 shares were represented in person or by proxy
at the Meeting. The election of directors was the only matter voted upon by the
Company's shareholders at the Meeting. The following sets forth the results of
the vote:
<Table>
<Caption>
NUMBER OF SHARES NUMBER OF SHARES
NAME OF NOMINEE VOTED FOR AUTHORITY WITHHELD
--------------- ---------------- -------------------
Sandra Pautsky 3,711,847 575
Danny Croker 3,711,847 575
Randy Camp 3,711,747 675
</Table>
12
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 November 30, 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: January 14, 2002 By /s/ Sandra Pautsky
----------------------------------------
Sandra Pautsky, President
By /s/ Carol J. Cooper
----------------------------------------
Carol J. Cooper, Chief Accounting Officer
13