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 May 31, 2002.
[ ] 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)
The number of shares outstanding of each of the issuer's classes of common
equity, as of May 31, 2002: Common Stock, $.04 par value, 4,416,540 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, 2002 and May 31, 2002 1
Condensed Statements of Operations
For the Three Months Ended May 31, 2001 and 2002 2
Statements of Cash Flows
For the Three Months Ended May 31, 2001 and 2002 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 10
Signatures 10
</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.
ITEM 1. FINANCIAL STATEMENTS.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
ASSETS
<Table>
<Caption>
February 28, 2002 May 31, 2002
----------------- -------------
Current assets: (Unaudited)
Cash and cash equivalents $ 3,424,261 $ 3,408,502
Trade accounts receivable 79,296 116,640
Federal income taxes receivable 321,739 321,739
Investment securities available for sale 239,304 248,968
Prepaid expenses and other 17,062 13,762
------------- -------------
Total current assets 4,081,662 4,109,611
------------- -------------
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$5,858,985 on February 28, 2002 and $5,913,195 on May 31, 2002 1,002,056 953,313
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,005,561 on February 28, 2002 and $8,008,772 on May 31, 2002 306,646 303,435
Real estate held for development 2,839,668 2,869,170
Other property and equipment, net of accumulated depreciation
of $353,192 on February 28, 2002 and $337,032 on May 31, 2002 135,199 129,360
Other non-current assets 886,858 886,858
------------- -------------
$ 9,252,089 $ 9,251,747
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 78,178 $ 115,613
Accrued expenses 85,621 67,160
Deferred federal income taxes 13,682 17,205
------------- -------------
Total current liabilities 177,481 199,978
Reserve for reclamation costs 409,430 408,470
Deferred federal income taxes 144,545 133,099
------------- -------------
Total liabilities 731,456 741,547
------------- -------------
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 17,000,873 16,990,036
Unrealized gain on investment securities
available for sale, net of income taxes 23,242 29,333
Less treasury stock, at cost, 5,739,096 shares on February 28, 2002
and 5,741,263 on May 31, 2002 (9,714,886) (9,720,573)
------------- -------------
Total stockholders' equity 8,520,633 8,510,200
------------- -------------
$ 9,252,089 $ 9,251,747
============= =============
</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 3 Months Ended
May 31, 2001 May 31, 2002
-------------- --------------
Revenues:
Oil and gas $ 372,136 $ 264,945
Gravel 16,127 20,023
------------- -------------
Total revenues 388,263 284,968
------------- -------------
Operating expenses:
Oil and gas 276,883 221,574
Coal and gravel 13,566 9,740
Real estate development 9,482 5,094
General and administrative 148,670 120,215
------------- -------------
Total operating expenses 448,601 356,623
------------- -------------
Loss from operations (60,338) (71,655)
------------- -------------
Other income:
Interest and other, net 55,275 54,463
Gain on sale of oil and gas properties 120 0
------------- -------------
Total other income 55,395 54,463
------------- -------------
Loss before income taxes (4,943) (17,192)
------------- -------------
Income tax benefit (1,854) (6,355)
------------- -------------
Net loss $ (3,089) $ (10,837)
============= =============
Basic and diluted loss per common share (0.00) (0.00)
============= =============
Weighted average shares outstanding 4,457,050 4,417,045
============= =============
</Table>
The accompanying notes are an integral part of these financial statements.
2
Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
3 Months Ended 3 Months Ended
May 31, 2001 May 31, 2002
-------------- --------------
Cash flows from operating activities:
Net loss $ (3,089) $ (10,837)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depletion and depreciation 63,306 64,640
Gain on sale of oil and gas properties (120) 0
Gain on sale of other property and equipment (2,000) (37,800)
Deferred federal income taxes (7,456) (11,496)
Net changes in assets and liabilities:
Trade accounts receivable 5,009 (37,344)
Prepaid expenses and other current assets 23,160 3,300
Accounts payable 63,908 37,435
Accrued expenses (17,042) (18,461)
Reclamation costs 0 (960)
------------- -------------
Net cash provided by (used in) operating activities 125,676 (11,523)
------------- -------------
Cash flows from investing activities:
Additions to oil and gas properties (9,504) (5,467)
Additions to real estate held for development (19,103) (33,082)
Additions to other property and equipment (7,462) 0
Investments in partnership (5,000) 0
Proceeds from sale of oil and gas properties 2,438 0
Proceeds from sale of other property and equipment 2,000 40,000
------------- -------------
Net cash provided by (used in) investing activities (36,631) 1,451
------------- -------------
Cash flows from financing activities:
Purchases of treasury stock (20,344) (5,687)
------------- -------------
Net cash used in financing activities (20,344) (5,687)
------------- -------------
Net increase (decrease) in cash and cash equivalents 68,701 (15,759)
Cash and cash equivalents at beginning of period 3,337,950 3,424,261
------------- -------------
Cash and cash equivalents at end of period $ 3,406,651 $ 3,408,502
============= =============
Supplemental disclosures of cash flow information:
Income taxes paid $ 19,373 $ 21,116
</Table>
Recognition in Stockholders' Equity of the net unrealized holding gain on
available for sale securities of $25,198, net of tax effect of $14,780 during
the quarter ended May 31, 2001 and $6,091, net of tax effect of $3,573 during
the quarter ended May 31, 2002.
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 month
periods ended May 31, 2001 and 2002 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, 2002.
(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 a significant 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, 2002.
Information regarding operations and assets by segment is as follows:
<Table>
<Caption>
For the three For the three
months ended months ended
May 31, 2001 May 31, 2002
------------- -------------
Business segment revenue:
Oil and gas $ 372,136 $ 264,945
Gravel 16,127 20,023
------------- -------------
$ 388,263 $ 284,968
------------- -------------
Business segment profit (loss):
Oil and gas $ 95,253 $ 43,371
Coal and gravel 2,561 10,283
Real estate development (9,482) (5,094)
General corporate (148,670) (120,215)
------------- -------------
Income (loss) from operations (60,338) (71,655)
</Table>
4
<Table>
<Caption>
For the three For the three
months ended months ended
May 31, 2001 May 31, 2001
------------- -------------
Business segment profit (loss) (continued):
Interest income and other, net 55,275 54,463
Gain on sales of oil and gas properties 120 0
------------- -------------
Income (loss) before income taxes $ (4,943) $ (17,192)
------------- -------------
</Table>
<Table>
<Caption>
As of As of
February 28, 2002 May 31, 2002
----------------- -------------
Total assets:
Oil and gas $ 4,815,249 $ 4,797,756
Coal and gravel 306,646 303,435
Real estate development 2,839,668 2,869,170
General corporate 1,290,526 1,281,386
------------- -------------
$ 9,252,089 $ 9,251,747
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</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, 2002 (the "2002 10-KSB") and the Notes to Condensed Financial
Statements contained in this report.
RESULTS OF OPERATIONS
The Company had a net loss of $10,837 ($.00 per share) in the
three months ended May 31, 2002 compared to a net loss of $3,089 ($.00 per
share) during the three months ended May 31, 2001. Although oil and gas revenues
were significantly lower in the 2002 period, the Company was able to reduce its
operating expenses in a corresponding fashion and other income remained at
substantially the same level as during the 2001 period.
Oil and gas revenues declined approximately $107,200 (28.8%)
in the three months ended May 31, 2002 primarily due to the continued decline in
production sale volumes from substantially all of the Company's properties. Oil
volumes decreased approximately 1,500 barrels (14.6%) in the 2002 period, and
gas volumes declined approximately 2,800 MCF (19.4%). The Company's principal
property in Madison County, Texas was responsible for approximately $87,800 of
the $107,200 decline in revenues as oil and gas volumes and average prices
received from this property in the 2002 period all fell materially from their
2001 levels. As previously indicated, the Company anticipates that sales volumes
from this property will continue to decline pending implementation of a proposed
secondary recovery project. A hearing has been set by the Texas Railroad
Commission for August 2, 2002 to determine whether the project will be approved.
Approval by the Texas Railroad Commission is a condition to the start of the
project by the operator of the property.
Overall, the Company's average oil price received fell
approximately $2.00 a barrel (7.5%) to $24.76 per barrel in the three-month
period ended May 31, 2002, and its average gas price received declined
approximately $2.58 per MCF (47.3%) to $2.87 per MCF. The Madison County, Texas
property was particularly hard hit on its average gas price received as such
price declined to $3.19 per MCF in the 2002 period from $6.07 per MCF in the
2001 period. The Company believes its average prices received during the 2002
period simply reflected the continuing
6
instability and uncertainty in pricing affecting the oil and gas industry
nationwide.
Revenues from the Company's gravel operations in La Plata
County, Colorado increased approximately $3,900 (24.2%) in the three months
ended May 31, 2002 due to a rise in the Company's royalty income resulting from
the higher level of gravel sales made by Four Corners Materials, Inc. ("Four
Corners"), the Company's lessee, from the Company's property during the quarter.
Rentals received by the Company from its surface lease to Four Corners were the
same in the 2002 and 2001 periods. The terms of the proposed extension of Four
Corners' gravel mining contract discussed in the 2002 10-KSB, which called for
an increase in the royalty rate to be paid to the Company by Four Corners for
tonnage mined, a new road usage fee to be paid the Company by Four Corners and a
reduction in the amount of rentals paid the Company by Four Corners under the
surface lease, have not yet been implemented.
The expenses of the Company's oil and gas operations decreased
approximately $55,300 (20.0%) during the three months ended May 31, 2002
primarily due to lower lease operating expense and the absence of any dry hole
costs during the period. Lease operating expense was approximately $34,100, or
19.6%, less, principally due to reductions occurring on the Madison County,
Texas property and in the North Texas area. The Company incurred approximately
$19,700 in dry hole costs during the 2001 period with respect to a well drilled
in Wilbarger County, Texas. Depletion expense was slightly higher in the 2002
period, notwithstanding the oil and gas production declines, primarily due to a
higher per barrel amortization rate on the Madison County, Texas property
resulting from the lower level of proven developed reserves estimated for this
property by the Company's independent petroleum engineers at February 28, 2002.
Production taxes declined in the 2002 period in line with the sales volumes
decreases.
The expenses of the Company's coal and gravel operations
decreased approximately $3,800 (28.2%) in the three months ended May 31, 2002
due to the absence of any payroll expense as the duties of the Company's sole
employee working in this area were assumed by Four Corners after the end of the
2001 period. Real estate development expenses were approximately $4,400 (46.3%)
lower in the 2002 period due to decreased legal expense as compared to the prior
year period. A determination has not yet been made by Mercy Medical Center
("Mercy") as to whether a portion of the Company's proposed "Oakridge at
7
Durango" development will be chosen as the site for the construction of a new
hospital in Durango, Colorado by Mercy.
General and administrative expense dropped approximately
$28,500 (19.1%) during the three months ended May 31, 2002 due to substantially
lower auditing, engineering, legal, tax accounting and governmental reporting
expenses. The amount of the decrease was partially offset by the cost of
retaining a marketing firm to assist with shareholder reporting.
Other income decreased slightly in the 2002 period as interest
and other, net income fell less than $1,000. The Company also did not have any
gain from the sale of oil and gas properties during the period, as compared to a
nominal gain in the 2001 period.
The Company's weighted average shares outstanding declined by
approximately 40,000 shares (.9%) in the 2002 period due to purchases of the
Company's common stock made by the Company during the year ended May 31, 2002.
The Company purchased 2,167 shares of its common stock from unaffiliated parties
during the three-month 2002 period.
FINANCIAL CONDITION AND LIQUIDITY
During the first quarter of fiscal 2003, the Company had a
negative cash flow of approximately $11,500 from its operations. That negative
cash flow, which was the first in many quarterly periods for the Company, was
the primary reason for an approximate $15,800 decrease in cash and cash
equivalents at May 31, 2002 as a slight positive cash flow from the Company's
investing activities resulting from the proceeds of the sale of the Company's
workover rig was not sufficient to offset the cash flow deficits from the
Company's operating and financing activities. At May 31, 2002, the Company had
no indebtedness and cash, cash equivalents and investment securities available
for sale totaling $3,657,500.
The Company expects to fund its contemplated operations and
any stock purchases it makes during the second quarter and the remainder of
fiscal 2003 from its cash and cash equivalents and sales of all or a portion of
its investment securities available for sale. Barring any significant increases
in oil and gas prices from current levels, the Company does not anticipate
having a positive cash flow from its operations as it expects its oil and gas
sales production volumes to continue to decline.
8
If the Company's site is selected by Mercy to build its new
hospital in Durango, Colorado, the proceeds from Mercy's purchase of the
hospital site and the Company's cash funds should be sufficient to fund the
construction of all infrastructure to the medical park of which the new hospital
would be a part. If additional funds are required, the Company expects either to
obtain bank financing or proceeds from the sale of additional sites within the
medical park to doctors and others who desire to locate adjacent to the new
hospital. In the event Mercy does not choose Oakridge at Durango as the site for
its new hospital, infrastructure costs for the first phase of the development
may require bank financing in addition to the Company's cash funds. The Company
could also explore selling portions of the property to other companies who would
develop specific portions of the property. There can be no assurances that any
of these financing options will be available to the Company when needed.
9
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 May 31, 2002.
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: July 15, 2002 By /s/ Sandra Pautsky
-------------------------------------------
Sandra Pautsky, President
By /s/ Carol J. Cooper
-------------------------------------------
Carol J. Cooper, Chief Accounting Officer
10