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 August 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 August 31, 1996: Common Stock, $.04 par value -5,102,270 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [ X ]
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INDEX
Page #
Part I - Financial Information ------
1. Financial Statements:
Condensed Balance Sheets at
February 29, 1996 and August 31, 1996 1
Condensed Statements of Operations
For the Three Months Ended August 31, 1995 and 1996 and
for the Six Months Ended August 31, 1995 and 1996 2
Statements of Cash Flows
For the Six Months Ended August 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
4. Submission of Matters to a Vote of Security Holders 9
6. Exhibits and Reports on Form 8-K 9
Signatures 10
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
ASSETS
As of As of
February 29, 1996 August 31, 1996
----------------- ---------------
Current assets: (Unaudited)
Cash and cash equivalents $44,300 $115,433
Trade accounts receivable 314,717 413,238
Other receivables 45,327 44,842
Investment securities (note 3) 2,506,448 2,627,424
Current maturities of long-term notes receivable 4,395 4,574
Federal income tax receivable 528,618 768,654
Prepaid expenses and other 26,675 15,653
----------- -----------
Total current assets 3,470,480 3,989,818
----------- -----------
Investment securities (note 3) 2,055,136 1,775,412
Long-term notes receivable, net of current maturities 32,654 30,321
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 $2,495,141 on August 31, 1996 1,943,997 2,656,339
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,316,008 on February 29, 1996 and $8,323,752 on August 31, 1996 395,153 409,848
Real estate held for development 2,129,819 2,207,755
Other property and equipment, net of accumulated depreciation
of $770,845 on February 29, 1996 and $754,960 on August 31, 1996 172,043 186,959
Other assets 888,994 888,994
----------- -----------
$11,088,276 $12,145,446
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $284,612 $294,462
Accrued expenses 67,735 48,305
Other liabilities 77,233 1,053,483
Deferred federal income taxes 50,915 49,710
----------- -----------
Total current liabilities 480,495 1,445,960
----------- -----------
Deferred federal income taxes 235,156 459,235
----------- -----------
Total liabilities 715,651 1,905,195
----------- -----------
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 16,615,632
Net unrealized gain on investment securities available for sale (note 3) 98,833 96,495
----------- -----------
17,999,184 17,923,531
Less treasury stock, at cost; 5,030,758 shares on February 29, 1996
and 5,055,533 on August 31, 1996 (7,626,559) (7,683,280)
----------- -----------
Total stockholders' equity 10,372,625 10,240,251
----------- -----------
$11,088,276 $12,145,446
=========== ===========
The accompanying notes are an integral part of these financial statements.
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Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For 3 Months For 3 Months For 6 Months For 6 Months
Ended Ended Ended Ended
August 31, 1995 August 31, 1996 August 31, 1995 August 31, 1996
--------------- --------------- --------------- ---------------
Revenues:
Oil and gas $72,049 $388,625 $152,265 $785,319
Coal and gravel 24,899 14,947 41,039 29,779
Other 10,650 11,250 22,200 21,900
--------- --------- --------- ---------
Total revenues 107,598 414,822 215,504 836,998
--------- --------- --------- ---------
Operating expenses:
Oil and gas 343,804 426,572 491,890 715,764
Coal and gravel 26,537 32,978 45,254 51,111
Real estate development 5,489 (33,078) 5,489 15,364
General and administrative 134,340 137,665 248,663 236,159
--------- --------- --------- ---------
Total operating expenses 510,170 564,137 791,296 1,018,398
--------- --------- --------- ---------
Loss from operations (402,572) (149,315) (575,792) (181,400)
--------- --------- --------- ---------
Other income (expense):
Interest income 119,284 74,155 240,981 149,339
Interest expense 0 (20,352) 0 (29,615)
Other, net 6,411 14,745 6,581 14,745
--------- --------- --------- ---------
Total other income 125,695 68,548 247,562 134,469
--------- --------- --------- ---------
Loss before income taxes (276,877) (80,767) (328,230) (46,931)
--------- --------- --------- ---------
Provision for (benefit of) income taxes (95,161) (14,562) (114,475) 26,384
--------- --------- --------- ---------
Net loss ($181,716) ($66,205) ($213,755) ($73,315)
========= ========= ========= =========
Net loss per common share ($0.03) ($0.01) ($0.04) ($0.01)
========= ========= ========= =========
Weighted average shares outstanding 5,365,330 5,110,547 5,427,272 5,118,690
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
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Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
For 6 Months For 6 Months
Ended Ended
August 31, 1995 August 31, 1996
--------------- ---------------
Cash flows from operating activities:
Net loss ($213,755) ($73,315)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depletion and depreciation 54,575 362,326
Abandoned leaseholds 132,060 0
Accretion on investment securities, net (36,889) (9,796)
Gain on sales of other property and equipment (16,333) (14,745)
Deferred federal income taxes 0 224,079
Net changes in assets and liabilities:
Trade accounts receivable (46,637) (98,521)
Other accounts receivable 81,246 485
Federal income tax receivable (114,534) (240,036)
Prepaid expenses and other current assets (20,103) 11,022
Other assets 28,406 0
Accounts payable 122,214 9,850
Accrued expenses (12,477) (19,430)
State income taxes payable (99,300) 0
-------- --------
Net cash provided by (used in) operating activities (141,527) 151,919
-------- --------
Cash flows from investing activities:
Additions to oil and gas properties (393,657) (1,056,555)
Additions to coal and gravel properties 0 (22,439)
Additions to real estate held for development 0 (77,936)
Additions to other property and equipment (15,022) (31,284)
Proceeds from sale of oil and gas properties 0 6,000
Proceeds from sale of other property and equipment 20,000 14,745
Proceeds from sale of investments available for sale 448,471 0
Purchases of investments available for sale (536,311) 0
Maturities of investments held to maturity 300,000 165,000
Principal payments received on notes receivable 21,210 2,154
-------- --------
Net cash used in investing activities (155,309) (1,000,315)
-------- --------
Cash flows from financing activities:
Other liabilities 0 976,250
Purchases of treasury stock (211,138) (56,721)
-------- --------
Net cash provided by (used in) financing activities (211,138) 919,529
-------- --------
Net increase (decrease) in cash and cash equivalents (507,974) 71,133
Cash and cash equivalents at beginning of period 982,079 44,300
-------- --------
Cash and cash equivalents at end of period $474,105 $115,433
======== ========
Supplemental disclosures of cash flow information:
Interest paid $0 $28,848
Income taxes paid $99,359 $42,341
Recognition in Stockholders' Equity of the net unrealized holding gains on
available for sale securities of $11,768 net of tax effect of $6,062
during the six months ended August 31, 1995 and $2,338 net of tax effect
of $1,205 during the six months ended August 31, 1996
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 the three and
six-month periods ended August 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
August 31, 1996. In the case that investment securities are sold,
gains and losses are computed under the specific identification
method.
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The amortized cost and fair values of investment securities as of
August 31, 1996 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
Available for sale:
-------------------
Equity mutual fund $999,989 119,367 - 1,119,356
Corporate notes 248,303 2,892 - 251,195
U.S. Treasury notes 999,788 6,772 - 1,006,560
U.S. Government agency
bonds 249,704 609 - 250,313
---------- ------- --- ---------
Total current 2,497,784 129,640 - 2,627,424
---------- ------- --- ---------
Corporate notes,
due within 5 years 1,539,976 13,669 - 1,553,645
U.S. Government agency
bonds, due within
5 years 218,871 2,896 - 221,767
---------- ------- --- ---------
Total noncurrent 1,758,847 16,565 - 1,775,412
---------- ------- --- ---------
Total $4,256,631 146,205 - 4,402,836
========== ======= === =========
(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.
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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 29, 1996 and the Notes to Condensed Financial Statements contained in
this report.
RESULTS OF OPERATIONS
During the three and six-month periods ended August 31, 1996, the
Company had net losses of $66,205 ($.01 per share) and $73,315 ($.01 per share)
compared to net losses of $181,716 ($.03 per share) and $213,755 ($.04 per
share) in the matching 1995 periods. The principal reason for the reduced
losses in the 1996 periods was a substantial increase in oil and gas revenues,
primarily from the New Mexico and East Texas areas.
Oil and gas revenues increased approximately $316,600 (439.4%)
and $633,100 (415.8%) during the three and six months ended August 31, 1996,
respectively. During the 1995 periods, the Company had no oil and gas revenues
from New Mexico and only minimal oil revenues from the East Texas area. During
the three and six-month 1996 periods, however, oil and gas revenues from New
Mexico totaled approximately $19,900 and $104,100, respectively, and production
from the East Texas area added another approximately $297,400 and $525,000 in
revenues. These revenues resulted from two gross (.49 net) oil and gas wells
in New Mexico and 15 gross (3.05 net) oil and gas wells in Limestone and
Madison Counties in East Texas. All of the wells in New Mexico were completed
and brought on stream in the 1996 periods, and all but one of the wells in East
Texas were added subsequent to the 1995 periods. At August 31, 1996, the
Company had three additional gross gas wells (.20 net) in Limestone County,
Texas from which the Company had not received any revenues, and two additional
gross (.35 net) development wells were drilling in the East Texas area.
Oil and gas revenues in the 1996 periods were also aided by the
receipt of significantly higher product prices. The Company's average oil
price received increased approximately $3.93 per barrel (23.8%) in the
three-month period and $3.70 per barrel (21.5%) in the six-month period. In
addition, increases of approximately $1.03 per MCF (93.7%) and $1.02 per MCF
(90.6%) were sustained in the Company's average gas prices received during such
periods. The Company's new gas production in New Mexico and East Texas
commands substantially higher prices than the Company's minor other gas
production in the North Texas area.
Gravel revenues declined approximately $10,000 (40.0%) and
$11,300 (27.4%) during the three and six months ended August 31, 1996,
respectively, due to decreased gravel sales from the Company's Colorado
property resulting from a decline in product demand in the area as rentals
received from the property remained
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constant at the 1995 levels. Other income (overhead fees received by the
Company as operator in the North Texas area) increased slightly (5.6%) in the
three-month 1996 period but declined nominally (1.4%) in the six-month period.
The expenses of the Company's oil and gas operations increased
approximately $82,800 (24.1%) during the three months ended August 31, 1996 and
$223,900 (45.5%) in the six-month period, primarily due to a higher level of
activity. Such expenses consist of depletion and depreciation expense, lease
operating expense, production taxes, abandoned leaseholds and dry hole costs.
All categories of such expenses, other than abandoned leaseholds and dry hole
costs, increased significantly in both 1996 periods due to the new operations
being conducted in New Mexico and East Texas as all of such expenses declined
in the North Texas area. The Company did not incur any abandoned leaseholds
expense in either of the 1996 periods as compared to approximately $114,200 and
$132,100 of such expense incurred in the three and six-month 1995 periods. Dry
hole costs declined approximately $33,200 and $73,900 in the three and six
months ended August 31, 1996, respectively, due to the higher amount of
unsuccessful drilling activity in the 1995 periods.
The expenses of the Company's coal and gravel operations
increased approximately $6,400 (24.3%) and $5,900 (12.9%) in the three and
six-month 1996 periods, respectively, due to higher engineering and testing and
permitting expenses incurred to amend the amount of acreage included in the
Company's coal permit and greater ad valorem taxes.
In August 1996 La Plata County, Colorado granted the Company a
land use permit, with certain conditions attached, which will allow the Company
to commence preliminary site work on the golf course the Company plans to build
on approximately 170 acres of the Company's 2,025 acres of land in such county.
The permit is for construction of the golf course only, and clubhouse, pump and
waterline construction will require a revised permit and master plan approval
or annexation and approval by the City of Durango, Colorado. As a result of
the granting of such permit, the Company capitalized certain expenses that it
had previously expensed in the three months ended May 31, 1996, which resulted
in a credit (rather than an expense) of approximately $33,000 for the Company's
real estate development operations during the three months ended August 31,
1996. In the six-month 1996 period, however, real estate development expenses
increased approximately $9,900 due to equipment repairs. As a result of the
conditions attached to the permit which must be satisfied and the oncoming
winter season which will make any significant work on the golf course very
difficult, the Company does not expect to expend significant funds on golf
course construction during the remainder of the fiscal year ending February 28,
1997. The Company plans on using its existing heavy equipment and employees to
perform as much of the work as possible. See "Financial Condition and
Liquidity," below.
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General and administrative expense increased approximately $3,300
(2.5%) in the three months ended August 31, 1996 but declined approximately
$12,500 (5.0%) in the six-month 1996 period. Generally, in both periods,
independent petroleum engineering and governmental and shareholder reporting
expenses were higher and payroll expense was substantially lower.
Interest income decreased approximately $45,100 (37.8%) in the
1996 three-month period and approximately $91,600 (38.0%) in the 1996 six-month
period due to the lower level of funds the Company had invested during the
periods, as compared to 1995 periods. The Company primarily funded the deficit
cash flow from its operations during the 1995 periods and for the remainder of
the 1995-1996 year from maturities and sales of its investment securities. The
Company incurred interest expense of $20,352 and $29,615 in the three and
six-month 1996 periods, respectively, due to the Company's election to fund its
operations during such periods principally from margin account borrowings
against its investment securities available for sale rather than from any
further sale of such securities.
Due to the net loss from operations incurred in the three months
ended August 31, 1996, the Company's income tax provision resulted in a benefit
to the Company of approximately $14,600; however, notwithstanding the net loss
from operations in the six-month 1996 period also, the Company's tax provision
was a $26,400 charge due to franchise taxes paid the State of Texas and
quarterly federal income tax estimate payments.
The Company's average weighted shares outstanding declined
approximately 4.7% and 5.6%, respectively, in the three and six-month 1996
periods primarily due to the Company's purchase of shares during and subsequent
to the 1995 periods. The Company purchased 15,000 shares during the 1996
three-month period and 24,775 shares during the six-month period.
FINANCIAL CONDITION AND LIQUIDITY
During the first half of fiscal 1997, the Company's investing
activities (principally additions to its oil and gas properties) used
approximately $1,000,300 in cash funds. The Company's financing activities
provided approximately $919,500 in funds during the period, and the Company's
operating activities provided an additional approximate $151,900 in funds.
Consequently, the Company's cash and cash equivalents increased by
approximately $71,100 at the end of the period.
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 August 31, 1996,
outstanding borrowings in the account totaled
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approximately $1,053,500 and the Company had additional borrowing capacity of
approximately $2,268,200 in such account.
Notwithstanding the increase in the Company's oil and gas
revenues which has occurred in fiscal 1997 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 August 31, 1996, the Company held total investment securities
of approximately $4,402,800.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Company's 1996 Annual Meeting of Shareholders (the "Meeting")
was held on June 27, 1996.
(b) At the Meeting, Noel Pautsky, Sandra Pautsky, Danny Croker and
Randy Camp were elected as directors of the Company to serve until the 1997
Annual Meeting of Shareholders or until their successors are elected.
(c) A total of 4,359,993 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 stockholders at the Meeting. The following sets forth the
results of the vote:
NUMBER OF SHARES NUMBER OF SHARES
NAME OF NOMINEE VOTED FOR AUTHORITY WITHHELD
--------------- ---------------- ------------------
Noel Pautsky 4,358,793 1,200
Sandra Pautsky 4,358,793 1,200
Danny Croker 4,357,793 2,200
Randy Camp 4,358,793 1,200
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - Financial Data Schedule for the six months
ended August 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 August 31, 1996.
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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, 1996 By /s/ Sandra Pautsky
------------------------------
Sandra Pautsky, Executive Vice
President and 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.