1
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, 1996.
[ ] 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)
(817) 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 [ ]
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
YES [ X ] NO [ ]
The number of shares outstanding of each of the issuer's classes of common
equity, as of May 31, 1996: Common Stock, $.04 par value - 5,117,270 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [ X ]
2
INDEX
Page #
------
Part I - Financial Information
1. Financial Statements:
Condensed Balance Sheets at
February 29, 1996 and May 31, 1996 1
Condensed Statements of Operations
For the Three Months Ended May 31, 1995 and 1996 2
Statements of Cash Flows
For the Three Months Ended May 31, 1995 and 1996 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 9
Signatures 10
(i)
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
ASSETS
As of As of
February 29, 1996 May 31, 1996
----------------- ------------
Current assets: (Unaudited)
Cash and cash equivalents $ 44,300 $ 51,403
Trade accounts receivable 314,717 492,166
Other receivables 45,327 69,059
Investment securities (note 3) 2,506,448 2,559,663
Current maturities of long-term notes receivable 4,395 4,483
Federal income tax receivable 528,618 701,831
Prepaid expenses and other 26,675 20,142
------------ ------------
Total current assets 3,470,480 3,898,747
------------ ------------
Investment securities (note 3) 2,055,136 2,024,570
Long-term notes receivable, net of current maturities 32,654 31,500
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$2,156,926 on February 29, 1996 and $2,326,145 on May 31, 1996 1,943,997 2,550,603
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,316,008 on February 29, 1996 and $8,319,343 on May 31, 1996 395,153 414,257
Real estate held for development 2,129,819 2,129,819
Other property and equipment, net of accumulated depreciation
of $770,845 on February 29, 1996 and $779,722 on May 31, 1996 172,043 168,754
Other assets 888,994 888,994
------------ ------------
$ 11,088,276 $ 12,107,244
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 284,612 $ 338,211
Accrued expenses 67,735 57,265
Other liabilities 77,233 880,505
Deferred federal income taxes 50,915 57,011
------------ ------------
Total current liabilities 480,495 1,332,992
------------ ------------
Deferred federal income taxes 235,156 419,874
------------ ------------
Total liabilities 715,651 1,752,866
------------ ------------
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 16,688,947 16,681,837
Net unrealized gain on investment securities available for sale (note 3) 98,833 110,667
------------ ------------
17,999,184 18,003,908
Less treasury stock, at cost; 5,030,758 shares on February 29, 1996
and 5,040,533 on May 31, 1996 (7,626,559) (7,649,530)
------------ ------------
Total stockholders' equity 10,372,625 10,354,378
============ ============
$ 11,088,276 $ 12,107,244
============ ============
The accompanying notes are an integral part of these financial statements.
1
4
Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For 3 Months For 3 Months
Ended Ended
May 31, 1995 May 31, 1996
------------ ------------
Revenues:
Oil and gas $ 80,216 $ 396,694
Coal and gravel 16,140 14,832
Other 11,550 10,650
------------ ------------
Total revenues 107,906 422,176
------------ ------------
Operating expenses:
Oil and gas 148,086 289,192
Coal and gravel 18,717 18,133
Real estate development 0 48,442
General and administrative 114,323 98,494
------------ ------------
Total operating expenses 281,126 454,261
------------ ------------
Loss from operations (173,220) (32,085)
------------ ------------
Other income (expense):
Interest income 121,697 75,184
Interest expense 0 (9,263)
Other, net 170 0
------------ ------------
Total other income 121,867 65,921
------------ ------------
Income (loss) before Federal income taxes (51,353) 33,836
------------ ------------
Provision for (benefit of) income taxes (19,314) 40,946
------------ ------------
Net loss $ (32,039) $ (7,110)
============ ============
Net loss per common share $ (0.01) $ (0.00)
============ ============
Weighted average shares outstanding 5,430,716 5,126,833
============ ============
The accompanying notes are an integral part of these financial statements.
2
5
Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
For 3 Months For 3 Months
Ended Ended
May 31, 1995 May 31, 1996
------------ ------------
Cash flows from operating activities:
Net loss $ (32,039) $ (7,110)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depletion and depreciation 27,730 181,430
Abandoned leaseholds 17,859 0
Accretion on investment securities, net (16,740) (4,720)
Gain on sales of other property and equipment (11,777) 0
Deferred federal income taxes 0 184,718
Net changes in assets and liabilities:
Trade accounts receivable 4,628 (177,449)
Other accounts receivable 33,280 (23,732)
Federal income tax receivable (19,314) (173,213)
Prepaid expenses and other current assets 4,066 6,533
Accounts payable (2,087) 53,599
Accrued expenses (7,255) (10,470)
State income taxes payable (99,300) 0
------------ ------------
Net cash provided by (used in) operating activities (100,949) 29,586
------------ ------------
Cash flows from investing activities:
Additions to oil and gas properties (243,888) (775,823)
Additions to coal and gravel properties 0 (22,439)
Additions to other property and equipment (15,022) (5,588)
Proceeds from sale of other property and equipment 15,000 0
Proceeds from sale of investments available for sale 448,471 0
Purchases of investments available for sale (536,311) 0
Principal payments received on notes receivable 20,676 1,066
------------ ------------
Net cash used in investing activities (311,074) (802,784)
------------ ------------
Cash flows from financing activities:
Other liabilities 0 803,272
Purchases of treasury stock (140,512) (22,971)
------------ ------------
Net cash provided by (used in) financing activities (140,512) 780,301
------------ ------------
Net increase (decrease) in cash and cash equivalents (552,535) 7,103
Cash and cash equivalents at beginning of period 982,079 44,300
------------ ------------
Cash and cash equivalents at end of period $ 429,544 $ 51,403
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 0 $ 7,345
Income taxes paid $ 99,300 $ 29,382
Recognition in Stockholders' Equity of the net unrealized holding gains (losses) on available
for sale securities of $(60,764), net of tax effect of $(20,660) during the quarter ended
May 31, 1995 and $167,677, net of tax effect of $57,010 during the quarter ended May 31, 1996.
The accompanying notes are an integral part of these financial statements.
3
6
OAKRIDGE ENERGY, INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) The accompanying unaudited financial statements for the three-month
periods ended May 31, 1995 and 1996 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 29, 1996.
(3) Investment securities are accounted for in accordance with the
provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("Statement No. 115").
Statement No. 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair
values and all investments in debt securities.
In accordance with Statement No. 115, these investments are classified
at the time of purchase into one of three categories as follows:
- Held to Maturity Securities - Debt securities that
the Company has the positive intent and ability to
hold to maturity are reported at amortized cost.
- Trading Securities - Debt and equity securities that
are bought and held principally for the purpose of
selling them in the near term are to be reported at
fair value, with unrealized gains and losses included
in earnings.
- Available for Sale Securities - Debt and equity
securities not classified as either held to maturity
securities or trading securities are reported at fair
value, with unrealized gains and losses excluded from
earnings and reported as a separate component of
stockholders' equity (net of tax effects).
The Company does not have any securities classified as trading as of
May 31, 1996. In the case that investment securities are sold, gains
and losses are computed under the specific identification method.
4
7
The amortized cost and fair values of investment securities as of May
31, 1996 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ---------
Available for sale:
-------------------
Equity mutual fund $999,989 133,477 - 1,133,466
Corporate notes 249,507 818 - 250,325
U.S. Treasury notes 999,627 11,313 - 1,010,940
---------- ---------- ------- -----------
Total current 2,249,123 145,608 - 2,394,731
---------- ---------- ------- -----------
Corporate notes,
due within 5 years 2,002,501 22,069 - 2,024,570
---------- --------- ------- ---------
Total noncurrent 2,002,501 22,069 - 2,024,570
---------- --------- ------- ---------
Total $4,251,624 167,677 - 4,419,301
========== ========= ======= =========
Held to maturity:
-----------------
Municipal bonds $164,932 201 - 165,133
---------- ---------- ------- ----------
Total current 164,932 201 - 165,133
---------- ---------- ------- ----------
Total $164,932 201 - 165,133
========== ========== ======= ==========
(4) The Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("Statement No. 121") effective March 1,
1996. Statement No. 121 provides guidance for recognition and
measurement of impairment of long-lived assets, certain identifiable
intangibles and goodwill related both to assets to be held and used by
an entity and disposed of. The adoption of Statement No. 121 did not
have a material impact on the Company's financial position.
5
8
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 29, 1996 and the Notes to Condensed Financial Statements
contained in this report.
RESULTS OF OPERATIONS
During the three months ended May 31, 1996, the Company had a
net loss of $7,110 ($.00 per share) compared to a net loss of $32,039 ($.01 per
share) during the three months ended May 31, 1995. The principal reason for
the reduced loss during the 1996 period was a substantial increase in oil and
gas revenues resulting from new oil and gas production established in New
Mexico and Colorado and a material increase in oil and gas production from the
East Texas area.
Oil and gas revenues during the three months ended May 31,
1996 increased approximately $316,500 (394.5%) as compared to the 1995 period.
During the 1995 period, the Company had no oil and gas revenues from the States
of New Mexico and Colorado and only minimal oil revenues from the East Texas
area. During the 1996 period, oil and gas revenues from New Mexico and
Colorado totaled approximately $99,300, and production from the East Texas area
added another approximately $227,600 in revenues. These revenues resulted from
two gross (.49 net) oil and gas wells in New Mexico, one gross (.02 net) gas
well in Colorado and 14 gross (2.90 net) oil and gas wells in Limestone and
Madison Counties in East Texas. The wells in New Mexico were completed and
brought on stream in the 1996 period, and the Company also received its first
revenues from the Colorado well during the period. All but one of the wells in
East Texas were added subsequent to the 1995 period, primarily during the last
half of the year ended February 29, 1996 and in the three months ended May 31,
1996. At May 31, 1996, the Company had three additional gross wells (.16 net)
in Limestone County, Texas from which the Company had not received any
revenues. In addition, one additional gross (.20 net) exploratory well was
drilling in New Mexico, and one additional gross (.10 net) development well was
drilling in Limestone County, Texas.
Oil and gas revenues in the 1996 period were also aided by the
receipt of significantly higher product prices. The Company's average oil and
gas prices received during the period increased approximately $3.42 per barrel
(19.1%) and $1.01 per MCF (88.0%), respectively, as compared to the 1995
period. The Company's new gas production in New Mexico and East Texas receives
a substantially higher price than the Company's minor other gas production.
Gravel revenues declined approximately $1,300 (8.1%) in the
1996 period due to slightly decreased gravel sales from the
6
9
Company's Colorado property as rentals from the property remained constant at
the 1995 level. Other income (overhead fees received by the Company as
operator) declined $900 (7.8%) due to a small decrease in the number of wells
operated by the Company in the North Texas area.
The expenses of the Company's oil and gas operations increased
approximately $141,100 (95.3%) during the three months ended May 31, 1996
primarily due to the substantially higher level of activity during the period.
Such expenses consist of depletion and depreciation expense, lease operating
expense, production taxes, abandoned leaseholds and dry hole costs. Depletion
and depreciation expense, lease operating expense and production taxes
collectively increased a total of approximately $190,600 in the 1996 period due
to the new operations being conducted in New Mexico, Colorado and East Texas as
all of such expenses declined in the North Texas area. During the 1996 period,
however, the Company did not incur any abandoned leaseholds expense (as
compared to approximately $17,900 in the 1995 period) and dry hole costs
declined approximately $40,700 (56.5%) as the Company participated in the
drilling of only one gross (.23 net) dry hole during the period.
The expenses of the Company's coal and gravel operations
remained at approximately the same level in the three months ended May 31, 1996
as in the comparable 1995 period as lower payroll expense, resulting from the
allocation of a portion of an employee's expense to the Company's real estate
development operations, was offset by higher engineering and testing and
permitting expense.
During the three-month 1996 period, the Company incurred
$48,442 in real estate development expenses. All of such expenses (contract
services, engineering, location maintenance, etc.) were incurred in connection
with the Company's preliminary plans to build a golf course on approximately
170 acres of the Company's 2,025 acres of land in La Plata County, Colorado.
The Company has applied for a land use permit from La Plata County which would
allow the Company to commence preliminary site work on the golf course. The
staff of the La Plata County Planning Commission has recently recommended that
the permit be approved, subject to certain conditions, but no action has yet
been taken by La Plata County on the permit and the Company is unable to
predict when any action will be taken.
General and administrative expense declined approximately
$15,800 (13.8%) during the three months ended May 31, 1996 primarily due to
lower payroll, governmental reporting and general depreciation expense.
Interest income decreased approximately $46,500 (38.2%) in the
1996 quarter due to the lower level of funds which the
7
10
Company had invested during the period, as compared to the 1995 quarter, as the
Company primarily funded the deficit cash flow from its operations during and
subsequent to the end of the 1995 period from maturities and sales of its
investment securities. The Company incurred interest expense of $9,263 in the
1996 quarter due to the Company's election to fund its operations during the
period from margin account borrowings against its investment securities
available for sale rather than the further sale of any of such securities. See
"Financial Condition and Liquidity," below.
The Company had income, rather than a loss, before its
provision for taxes during a quarter for the first time since the Company sold
its principal gas producing properties in South Texas during the fiscal year
ended February 28, 1994; however, the Company's provision for taxes exceeded
its pre-tax income level due to the combination of franchise taxes paid the
State of Texas and federal income taxes. As a result, the Company incurred a
small net loss for the 1996 period.
The Company's average weighted shares outstanding declined
approximately 5.6% in the 1996 period, as compared to 1995, primarily due to
the Company's repurchase of shares between June 1, 1995 and March 1, 1996. The
Company purchased 9,775 shares during the 1996 period at the end of the
quarter.
FINANCIAL CONDITION AND LIQUIDITY
During the first quarter of fiscal 1997, the Company's
investing activities (principally additions to its oil and gas properties) used
approximately $802,800 in cash funds. The Company's financing activities
provided approximately $780,300 in funds during the quarter, and the Company's
operating activities provided an additional approximate $29,600 in funds.
Consequently, the Company's cash and cash equivalents increased by
approximately $7,100 at the end of the quarter.
All of the funds provided by the Company's financing
activities were obtained through margin-account borrowings against certain of
the Company's investment securities available for sale. At May 31, 1996,
outstanding borrowings in the account totaled approximately $880,500, and the
Company had additional borrowing capacity of approximately $1,882,000 in such
account.
Notwithstanding the increase in the Company's oil and gas
revenues which has recently occurred and which the Company expects to continue,
the Company anticipates that its activities in the oil and gas business and in
real estate development during the remainder of fiscal 1997 will be net users
of cash. The Company expects to fund such activities from a combination of
further margin account borrowings and the sale of its investment securities.
At May 31, 1996, the Company held total investment securities of approximately
$4,584,200.
8
11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - Financial Data Schedule for the three months ended
May 31, 1996 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 May 31, 1996.
9
12
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, 1996 By /s/ Sandra Pautsky
--------------------------------------
Sandra Pautsky, Executive Vice President
and Chief Accounting Officer
10
13
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.