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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, 1997.
[ ] 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 [ ]
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, 1997: Common Stock, $.04 par value - 4,943,009 shares;
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [ X ]
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INDEX
Page #
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Part I - Financial Information
1. Financial Statements:
Condensed Balance Sheets at
February 28, 1997 and August 31, 1997 1
Condensed Statements of Operations
for the Three Months Ended August 31, 1996 and 1997 and
for the Six Months Ended August 31, 1996 and 1997 2
Statements of Cash Flows
for the Six Months Ended August 31, 1996 and 1997 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 11
(i)
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Part I - Financial Information
Item 1. Financial Statements.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
ASSETS
As of As of
February 28, 1997 August 31, 1997
----------------- ---------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 195,631 $ 75,805
Trade accounts receivable 807,005 603,378
Other receivables 29,558 29,274
Investment securities 1,399,344 1,517,690
Current maturities of long-term notes receivable 4,760 4,953
Federal income tax receivable 230,602 210,862
Deferred tax asset 44,303 74,456
Prepaid expenses and other 27,571 13,734
------------ ------------
Total current assets 2,738,774 2,530,152
------------ ------------
Investment securities 1,347,663 1,052,006
Long-term notes receivable, net of current maturities 27,894 25,368
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$2,864,407 on February 28, 1997 and $3,317,811 on August 31, 1997 3,180,284 3,627,477
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,330,649 on February 28, 1997 and $8,339,259 on August 31, 1997 404,130 395,672
Real estate held for development 2,275,977 2,410,179
Other property and equipment, net of accumulated depreciation
of $733,429 on February 28, 1997 and $646,180 on August 31, 1997 172,611 159,102
Other assets 1,213,043 1,278,502
------------ ------------
$ 11,360,376 $ 11,478,458
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 239,906 $ 219,484
Accrued expenses 56,008 53,388
Other liabilities -- 17,505
Federal income tax payable -- 29,500
------------ ------------
Total current liabilities 295,914 319,877
------------ ------------
Deferred federal income taxes 481,238 601,238
------------ ------------
Total liabilities 777,152 921,115
------------ ------------
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 17,188,379 17,639,361
Net unrealized loss on investment securities available for sale (86,002) (144,534)
------------ ------------
18,313,781 18,706,231
Less treasury stock, at cost; 5,074,444 shares on February 28, 1997
and 5,214,794 on August 31, 1997 (7,730,557) (8,148,888)
------------ ------------
Total stockholders' equity 10,583,224 10,557,343
------------ ------------
$ 11,360,376 $ 11,478,458
============ ============
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, 1996 August 31, 1997 August 31, 1996 August 31, 1997
--------------- --------------- --------------- ---------------
Revenues:
Oil and gas $ 388,625 $ 998,392 $ 785,319 $ 1,897,367
Coal and gravel 14,947 18,447 29,779 28,789
Other 11,250 10,650 21,900 21,300
----------- ----------- ----------- -----------
Total revenues 414,822 1,027,489 836,998 1,947,456
----------- ----------- ----------- -----------
Operating expenses:
Oil and gas 426,572 474,785 715,764 1,041,567
Coal and gravel 32,978 31,836 51,111 56,212
Real estate development (33,078) 40,678 15,364 57,192
General and administrative 137,665 106,882 236,159 235,578
----------- ----------- ----------- -----------
Total operating expenses 564,137 654,181 1,018,398 1,390,549
----------- ----------- ----------- -----------
Income (loss) from operations (149,315) 373,308 (181,400) 556,907
----------- ----------- ----------- -----------
Other income (expense):
Interest and dividend income 74,155 49,414 149,339 99,909
Interest expense (20,352) (6,575) (29,615) (10,182)
Other, net 14,745 27,739 14,745 37,422
----------- ----------- ----------- -----------
Total other income 68,548 70,578 134,469 127,149
----------- ----------- ----------- -----------
Income (loss) before income taxes (80,767) 443,886 (46,931) 684,056
----------- ----------- ----------- -----------
Income tax expense (benefit) (14,562) 146,840 26,384 233,074
----------- ----------- ----------- -----------
Net income (loss) ($ 66,205) $ 297,046 ($ 73,315) $ 450,982
=========== =========== =========== ===========
Income (loss) per common share ($ 0.01) $ 0.06 ($ 0.01) $ 0.09
=========== =========== =========== ===========
Weighted average shares outstanding 5,110,547 4,965,137 5,118,690 4,990,389
=========== =========== =========== ===========
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, 1996 August 31, 1997
--------------- ---------------
Cash flows from operating activities:
Net income (loss) ($ 73,315) $ 450,982
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion and depreciation 362,326 477,898
Accretion on investment securities, net (9,796) (9,218)
Gain on sales of other property and equipment (14,745) (30,051)
Deferred federal income taxes 224,079 120,000
Net changes in assets and liabilities:
Trade accounts receivable (98,521) 203,627
Other receivable 485 284
Federal income tax receivable (240,036) 19,740
Prepaid expenses and other current assets 11,022 13,837
Accounts payable 9,850 (20,422)
Accrued expenses (19,430) (2,620)
Federal income taxes payable 0 29,500
----------- -----------
Net cash provided by operating activities 151,919 1,253,557
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (1,056,555) (912,198)
Additions to coal and gravel properties (22,439) 0
Additions to real estate held for development (77,936) (136,729)
Additions to other property and equipment (31,284) 0
Increase in other assets 0 (65,459)
Proceeds from sale of oil and gas properties 6,000 11,601
Proceeds from sale of other property and equipment 14,745 30,051
Purchases of investments available for sale 0 (152,156)
Maturities of investments held to maturity 165,000 0
Maturities of investments available for sale 0 250,000
Principal payments received on notes receivable 2,154 2,333
----------- -----------
Net cash used in investing activities (1,000,315) (972,557)
----------- -----------
Cash flows from financing activities:
Other liabilities 976,250 17,505
Purchases of treasury stock (56,721) (418,331)
----------- -----------
Net cash provided by (used in) financing activities 919,529 (400,826)
----------- -----------
Net increase (decrease) in cash and cash equivalents 71,133 (119,826)
Cash and cash equivalents at beginning of period 44,300 195,631
----------- -----------
Cash and cash equivalents at end of period $ 115,433 $ 75,805
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 28,848 $ 10,182
Income taxes paid $ 42,341 $ 63,834
Recognition in Stockholders' Equity of the net unrealized holding gains
(losses) on available for sale securities of $2,338, net of tax effect of
$1,205 during the six months ended August 31, 1996 and ($58,532), net of
tax effect of ($30,153), during the six months ended August 31, 1997.
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, 1996 and 1997 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, 1997.
(3) In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings
per Share" ("SFAS No. 128"), which is required to be adopted by the
Company on February 28, 1998. At that time, the Company will be
required to change its presentation of earnings per share ("EPS") to
replace primary EPS with a presentation of basic EPS and to restate
EPS for all prior periods presented. Basic EPS is computed by
dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
The adoption of SFAS No. 128 is not expected to have a material impact
on the Company's financial statements.
In February 1997, the FASB also issued Statement of Financial
Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" ("SFAS No. 129"). SFAS No. 129 establishes standards for
disclosing information about an entity's capital structure and applies
to all entities. This statement continues the previous requirements
to disclose certain information about an entity's capital structure
found in APB Opinions No. 10, Omnibus Opinion-1966, and 15, Earnings
per Share, and FASB Statement of Financial Accounting Standards No.
47, "Disclosure of Long-Term Obligations", for entities that were
subject to the requirements of those standards. SFAS No. 129
supersedes specific disclosure requirements of APB Opinions 10 and 15
and SFAS No. 47 and consolidates them for ease of retrieval and for
greater visibility to non-public entities. SFAS No. 129 is effective
for financial statements for periods ending after December 15, 1997.
It is not expected that the Company will experience any material
revision in its disclosures when SFAS No. 129 is adopted.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general purpose financial statements. SFAS
No. 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. It does not require a
specific format for that financial statement but requires
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that an enterprise display an amount representing total comprehensive
income for the period in that financial statement. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided
for comparative purposes is required. SFAS No. 130 will have no
impact on the financial condition or results of operations of the
Company, but will require changes in the Company's disclosure
requirements.
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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 28, 1997 and the Notes to Condensed Financial Statements contained in
this report.
RESULTS OF OPERATIONS
During the three and six-month periods ending August 31, 1997, the
Company had net income of $297,046 ($.06 per share) and $450,982 ($.09 per
share) compared to net losses of $66,205 ($.01 per share) and $73,315 ($.01 per
share) in the matching 1996 periods. The principal reason for the improved
performance was substantially increased oil and gas revenues from the Company's
Madison County, Texas property.
Oil and gas revenues increased approximately $609,800 (156.9%) and
$1,112,000 (141.6%) during the three and six months ended August 31, 1997,
respectively. Virtually all of the increased revenues in both periods was
attributable to increased production from the Company's Madison County, Texas
property. The following table reflects the changes in the levels of production
from this property between the 1996 and 1997 periods:
Three-Month Three-Month
Period Ending Period Ending
August 31, 1996 August 31, 1997 Increase
--------------- --------------- --------
Oil(Bbls.) 6,468 35,323 28,855
Gas(MCF) - 35,165 35,165
Six-Month Six-Month
Period Ending Period Ending
August 31, 1996 August 31, 1997 Increase
--------------- --------------- --------
Oil(Bbls.) 13,137 66,631 53,494
Gas(MCF) - 69,274 69,274
During the three months ended August 31, 1997, the Company drilled three gross
(.75 net) wells in Madison County; two (.50 net) of such wells were productive,
and one (.25 net) was a dry hole. At August 31, 1997, the Company had 22 gross
(5.50 net) productive
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wells in Madison County and was participating in the drilling of one additional
(.25 net) well.
The increase in oil and gas revenues during the 1997 periods was
accomplished despite significantly lower average oil and gas prices received by
the Company. The Company's average oil prices received in the three and
six-month 1997 periods were $18.15 and $18.75 per barrel, respectively, down
approximately 11% from such prices received in the 1996 periods. The Company's
average gas price received increased approximately $.12 per MCF (5.6%) in the
1997 three-month period but fell approximately $.13 per MCF (6.0%) in the
six-month period.
Gravel revenues increased $3,500 (23.4%) in the three months ended August
31, 1997 due to a slight increase in sales from the Company's Colorado
property. In the six-month 1997 period, gravel revenues were approximately
$1,000 lower. Other income (overhead fees received by the Company as operator
in the North Texas area) declined $600 in both 1997 periods.
The expenses of the Company's oil and gas operations increased
approximately $48,200 (11.3%) and $325,800 (45.5%) in the three and six-month
1997 periods, respectively. Such expenses typically consist of depletion and
depreciation expense, lease operating expense, production taxes and dry hole
costs. The first three categories of such expenses rose substantially
primarily due to the increased level of operations in the East Texas area
during both periods. Dry hole costs declined approximately $83,300 (59.3%) in
the three months ended August 31, 1997 but increased approximately $56,900
(33.1%) in the six-month period. The Company incurred approximately $32,800 in
geological and geophysical expense in the 1996 periods but had no comparable
expense in the 1997 periods. No abandoned leaseholds expense was incurred in
any of the periods.
The expenses of the Company's coal and gravel operations decreased
approximately $1,100 (3.5%) in the three months ended August 31, 1997 but
increased approximately $5,100 (10.0%) in the six-month 1997 period due to
higher payroll expense and mining fees. Real estate development expenses were
approximately $40,700 and $57,200 in the three and six months ended August 31,
1997, respectively, as compared to approximately $(33,100) and $15,400 in the
three and six- month 1996 periods. The principal reason for the increases in
the 1997 periods was the higher level of activity on the golf course the
Company is building on approximately 170 acres of the 2,025 acres of land the
Company owns in La Plata County, Colorado. The Company's permitted
capitalization in the three and six-months 1996 periods of amounts expensed in
a prior 1996 period also had the effect of making the amount of the increases
in the 1997 periods larger than otherwise would have been the case.
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General and administrative expense declined approximately $30,800 (22.3%)
in the three months ended August 31, 1997 but was roughly the same in the
six-month 1997 period as in the prior year period. Lower payroll expense and
the absence in the three-month 1997 period of substantial expenses incurred in
the 1996 period for the annual independent petroleum engineering report
obtained with respect to the Company's proven oil and gas reserves, letters of
credit fees and litigation were the principal reasons for the decline in the
three-month period. In the six-month 1997 period, the increased expense of the
engineering report incurred in the first three months of the year and higher
tax accounting expense offset the absence during the period of any letter of
credit fees and litigation expense and the effect of lower payroll expense.
Interest and dividend income decreased approximately $24,700 (33.4%) and
$49,400 (33.1%) in the three and six- month 1997 periods, respectively. Prior
to February 28, 1997, the Company paid in full its margin account borrowings,
which had been used to fund the Company's operations for most of the year,
primarily with proceeds from sales and maturities of investment securities.
This resulted in a significant reduction in the funds the Company had invested
in the 1997 periods. Interest expense declined approximately $13,800 (67.7%)
and $19,400 (65.6%) in the three and six months ended August 31, 1997,
respectively. Although the Company again used margin account borrowings to
fund a portion of its operations in the 1997 periods, the level of such
borrowings was not as great as in the 1996 periods. The "other, net" category
of other income and expense was an income item totaling approximately $27,700
and $37,400 in the three and six-month 1997 periods, respectively, and resulted
primarily from gains on the sale of other property and equipment.
Income tax expense increased approximately $161,400 and $206,700 in the
three and six-month 1997 periods, respectively, due to the Company's pre-tax
losses in the 1996 periods and the level of pre-tax income in the 1997 periods.
In the 1996 six-month period, the Company incurred income tax expense of
approximately $26,400 notwithstanding its pre-tax loss due to the combination
of franchise taxes paid the State of Texas and federal income taxes.
The Company's average weighted shares outstanding declined approximately
2.8% and 2.5% in the three and six months ended August 31, 1997, respectively.
The Company purchased a total of 46,300 shares in the three-month period and an
additional 94,050 shares in the six-month period. 61,250 of the shares
purchased in the six-month period were from an affiliate and an employee. The
balance of the shares purchased by the Company in the 1997 periods was from
unaffiliated shareholders.
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FINANCIAL CONDITION AND LIQUIDITY
During the first half of fiscal 1998, the Company's operating activities
provided approximately $1,253,600 in funds; however, the Company's investing
activities (principally additions to oil and gas properties and to real estate
held for development, reduced by net investment proceeds) and financing
activities (the excess of funds used for purchases of shares of the Company's
stock over margin account borrowings) required approximately $972,600 and
$400,800 in funds, respectively, resulting in a decrease in the Company's cash
and cash equivalents by approximately $119,800.
Notwithstanding the substantial increase in the Company's oil and gas
revenues which occurred in the first half of the fiscal year and which the
Company expects to continue for at least the remainder of the year, the Company
continues to expect that its activities in the oil and gas business and real
estate development during the remainder of fiscal 1998 will be net users of
cash. To the extent that the needed funds are not provided by the Company's
operating activities, the Company anticipates funding such activities from a
combination of further margin account borrowings and the sale and maturities of
its investment securities. At August 31, 1997, the Company held investment
securities totaling approximately $2,569,700.
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PART II - Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - Financial Data Schedule for the six months ended August
31, 1997 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, 1997.
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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, 1997 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.