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, 1998.
[ ] 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 August 31, 1998: Common Stock, $.04 par value 4,742,559 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 28, 1998 and August 31, 1998 1
Condensed Statements of Operations
For the Three Months Ended August 31, 1997 and 1998 2
For the Six Months Ended August 31, 1997 and 1998
Statements of Cash Flows
For the Six Months Ended August 31, 1997 and 1998 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation 5
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
(i)
3
Item 1. Financial Statements
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
Part I - Financial Information
ASSETS February 28, 1998 August 31, 1998
------------ ------------
Current assets: (Unaudited)
Cash and cash equivalents $ 877,006 $ 2,834,195
Trade accounts receivable 386,353 183,959
Investment securities 1,637,047 1,155,761
Deferred tax asset 81,729 231,863
Prepaid expenses and other 36,117 24,373
------------ ------------
Total current assets 3,018,252 4,430,151
------------ ------------
Investment securities 326,667 0
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$3,863,233 on February 28, 1998 and $3,576,330 on August 31, 1998 3,734,904 3,107,312
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,347,878 on February 28, 1998 and $8,360,757 on August 31, 1998 388,233 375,507
Real estate held for development 2,474,309 2,645,410
Other property and equipment, net of accumulated depreciation
of $647,603 on February 28, 1998 and $666,541 on August 31, 1998 188,876 200,828
Other Assets 1,272,354 1,215,017
------------ ------------
$ 11,403,595 $ 11,974,225
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 281,209 336,180
Accrued expenses 53,687 86,770
Income tax payable 5,507 182,563
------------ ------------
Total current liabilities 340,403 605,513
Deferred Federal income taxes 722,299 714,716
------------ ------------
Total liabilities 1,062,702 1,320,229
------------ ------------
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 17,599,170 18,413,036
Unrealized loss on investment securities available for sale,
net of income taxes (100,993) (188,815)
Less treasury stock, at cost, 5,286,194 shares on February 28, 1998
and 5,415,244 on August 31, 1998 (8,368,688) (8,781,629)
------------ ------------
Total stockholders' equity 10,340,893 10,653,996
------------ ------------
$ 11,403,595 $ 11,974,225
============ ============
The accompanying notes are an integral part of these financial statements.
4
Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
3 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended
August 31, 1997 August 31, 1998 August 31, 1997 August 31, 1998
----------- ----------- ----------- -----------
Revenues:
Oil and gas $ 998,392 $ 345,638 $ 1,897,367 $ 751,349
Gravel 18,447 23,794 28,789 41,269
Other 10,650 10,650 21,300 21,300
----------- ----------- ----------- -----------
Total revenues 1,027,489 380,082 1,947,456 813,918
----------- ----------- ----------- -----------
Operating expenses:
Oil and gas 474,785 347,712 1,041,567 712,738
Coal and gravel 31,836 23,948 56,212 53,822
Real estate development 40,678 19,880 57,192 56,141
General and administrative 106,882 119,052 235,578 261,072
----------- ----------- ----------- -----------
Total operating expenses 654,181 510,592 1,390,549 1,083,773
----------- ----------- ----------- -----------
Income (loss) from operations 373,308 (130,510) 556,907 (269,855)
----------- ----------- ----------- -----------
Other income (expense):
Interest and dividend income 49,414 65,511 99,909 106,845
Interest expense (6,575) 0 (10,182) 0
Gain on sale of oil and gas properties 0 12,890 0 1,516,963
Other, net 27,739 (23,909) 37,422 (121,639)
----------- ----------- ----------- -----------
Total other income (expense) 70,578 54,492 127,149 1,502,169
----------- ----------- ----------- -----------
Income (loss) before income taxes 443,886 (76,018) 684,056 1,232,314
----------- ----------- ----------- -----------
Income taxes 146,840 (19,437) 233,074 418,448
----------- ----------- ----------- -----------
Net income (loss) $ 297,046 $ (56,581) $ 450,982 $ 813,866
=========== =========== =========== ===========
Income (loss) per common share $ 0.06 $ (0.01) $ 0.09 $ 0.17
=========== =========== =========== ===========
Weighted average shares outstanding 4,965,137 4,796,064 4,990,389 4,824,118
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
2
5
Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
6 Months Ended 6 Months Ended
August 31, 1997 August 31, 1998
----------- -----------
Cash flows from operating activities:
Net income $ 450,982 $ 813,866
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion and depreciation 477,898 299,060
Accretion on investment securities, net (9,218) (4,459)
Gain on sales of property and equipment (30,051) (1,516,963)
Deferred federal income taxes 120,000 (89,761)
Other than temporary loss on investment securities 0 130,676
Net changes in assets and liabilities:
Trade accounts receivable 203,911 202,394
Federal income tax receivable 19,740 0
Prepaid expenses and other current assets 16,170 11,742
Accounts payable (20,422) 54,971
Federal income tax payable 29,500 177,056
Accrued expenses (2,620) 33,083
----------- -----------
Net cash provided by operating activities 1,255,890 111,665
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (912,198) (1,154,046)
Additions to real estate held for development (136,729) (178,271)
Additions to other property and equipment 0 (30,890)
Increase in other assets (65,459) (10,222)
Proceeds from sale of oil and gas properties 11,601 3,005,199
Proceeds from sale of other property and equipment 30,051 100,736
Purchases of investments available for sale (152,156) 0
Maturities/calls of investments available for sale 250,000 525,959
----------- -----------
Net cash provided by (used in) investing activities (974,890) 2,258,465
----------- -----------
Cash flows from financing activities:
Other liabilities 17,505 0
Purchases of treasury stock (418,331) (412,941)
----------- -----------
Net cash (used in) financing activities (400,826) (412,941)
----------- -----------
Net increase (decrease) in cash and cash equivalents (119,826) 1,957,189
Cash and cash equivalents at beginning of period 195,631 877,006
----------- -----------
Cash and cash equivalents at end of period $ 75,805 $ 2,834,195
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 10,182 $ --
Income taxes paid $ 63,834 $ 319,939
Recognition in Stockholders' Equity of the net unrealized holding loss on
available for sale securities of $56,180, net of tax effect of $1,205
during the six months ended August 31, 1997 and $87,822 net of tax
effect of $67,956 during the six months ended August 31, 1998.
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 three and six-month
periods ended August 31, 1997 and 1998 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, 1998.
(3) Comprehensive Income - In June 1997, the Financial Accounting Standards
Board issued SFAS No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income and
its components. Components of comprehensive income are net income and all
other nonowner changes in equity such as the change in the cumulative
translation adjustment. This statement requires that an enterprise: (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in
the equity section of a balance sheet. SFAS No. 130 is effective for
financial statements issued for periods beginning after December 15, 1997,
which for the Company is the six months ended August 31, 1998. Presentation
of comprehensive income for earlier periods provided for comparative
purposes is required and has been presented in these financial statements.
(4) The "Year 2000" issue is the result of computer programs being written
using two digits rather than four to define the applicable year. The
Company assessed and is implementing plans to address "Year 2000" issues
potentially affecting the Company's operating systems. Based on these
plans, the Company does not expect the total cost to have a material impact
on the Company's business, operations and financial condition. The Company
anticipates its "Year 2000" remediation efforts to be completed by December
31, 1998. The Company is not able to determine, however, whether any of its
suppliers will need to make any such software modifications or replacements
or whether the failure to make such software corrections will have any
effect on the Company's operations or financial condition.
4
7
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, 1998 and the Notes to Condensed Financial Statements
contained in this report.
RESULTS OF OPERATIONS
The Company had a net loss of $56,581 ($.01 per share) in the
three months ended August 31, 1998 compared to net income of $297,046 ($.06 per
share) during the three months ended August 31, 1997. During the six-month
period ended August 31, 1998, the Company had net income of $813,866 ($.17 per
share) compared to net income of $450,982 ($.09 per share) in the 1997 six-month
period. Although the Company incurred a loss from operations in both 1998
periods, the approximate $1,504,100 gain realized by the Company on the sale of
its Limestone County, Texas gas property (the "Limestone County property") at
the beginning of the six-month period resulted in the Company's being profitable
in such period.
Oil and gas revenues declined approximately $652,800 (65.4%)
and $1,146,000 (60.4%) in the three and six months ended August 31, 1998,
respectively. Revenues in both periods were adversely affected by the absence of
any production from the Limestone County property, declines in production from
the Company's Madison County, Texas oil property (the "Madison County property")
and continued low oil prices. The Limestone County property contributed
approximately $178,000 and $343,300 to revenues during the three and six months
ended August 31, 1997, respectively, but none in the 1998 periods. Revenues from
the Madison County property decreased approximately $438,700 and $748,600 in the
three and six-month 1998 periods, respectively, as the Company produced
approximately 14,000 and 22,000 fewer barrels of oil from the property during
such periods. The decline in production was primarily due to the decisions of
the operator of the property to restrict production voluntarily and to delay
adding certain needed equipment as a result of low oil prices.
The Company's average oil price received declined in excess of
$6.65 per barrel (over 35%) in both 1998 periods. Although the Company has not
suffered any further declines in its average oil price received during the
Company's current fiscal quarter ending November 30, 1998, it is uncertain when
any significant improvement will occur in such price. The Company's average gas
price fell slightly (approximately $.04 per MCF) in the three months ended
August 31, 1998 but increased over $.21 per MCF (10.7%) in the six-month 1998
period.
5
8
In an effort to replace a portion of the gas revenues lost
from the sale of the Limestone County property, the Company has agreed to
acquire an undivided 25% interest in a 1245 acre exploratory gas prospect in
Panola County of East Texas being operated by Barrow Shaver Resources Co. ("BSR
Co."). BSR Co. is the operator of the Company's Madison County property.
Drilling has commenced on the initial well on the prospect.
Gravel revenues increased approximately $5,300 (29.0%) and
$12,500 (43.3%) in the three and six months ended August 31, 1998 due to the
higher level of gravel sales from the Company's Colorado property. Rentals
received by the Company from the property were the same in the 1997 and 1998
periods.
The expenses of the Company's oil and gas operations declined
approximately $127,100 (26.8%) and $328,800 (31.6%) in the three and six months
ended August 31, 1998 as lower production taxes, depletion and depreciation
expense and dry hole costs in both periods more than offset higher geological
and geophysical expenses and increased ad valorem taxes. Depletion and
depreciation expense decreased approximately $106,900 and $193,200 and
production taxes fell approximately $28,000 and $46,300 in the respective 1998
periods primarily due to the absence of any such expense and taxes from the
Limestone County property sold effective as of the start of the six-month period
and the effect of lower oil and gas revenues received from the remainder of the
Company's properties, principally its Madison County property. Dry hole expense
was only $3,500 lower in the three months ended August 31, 1998 but
approximately $139,000 lower in the six-month 1998 period as the Company
participated in fewer and less costly dry holes than in the comparable six-month
1997 period. Ad valorem taxes increased in both 1998 periods due to the Madison
County property. The other category of oil and gas operations expense, lease
operating expenses, declined approximately $11,500 in the three-month 1998
period but increased approximately $3,800 in the six-month period. The increase
in lease operating expenses in the six-month period was mainly attributable to
the Madison County property as the number of wells operated on such property and
the property's average per well expense were higher in the 1998 periods.
The expenses of the Company's coal and gravel operations
declined approximately $7,900 (24.7%) and $2,400 (4.3%) in the three and six
months ended August 31, 1998 due to across-the-board declines in most categories
of such expenses. The only expenses showing increases during the 1998 periods
were engineering expense resulting from work associated with reclamation of a
portion of the land in the coal permit area and depreciation expense. Real
estate development expenses also
6
9
decreased approximately $20,800 (51.1%) and $1,100 (1.8%) in the 1998 periods
due to significantly lower heavy equipment repair expense as compared to the
1997 periods. Most other categories of real estate development expense increased
due to the higher level of activity in the 1998 periods on the golf course the
Company is constructing on approximately 170 acres of the 2,020 acres of land it
owns in La Plata County, Colorado adjacent to the City of Durango.
General and administrative expenses increased approximately
$12,200 (11.4%) and $25,500 (10.8%) in the three and six-month 1998 periods as
the Company incurred higher payroll, regulatory reporting and miscellaneous
expenses in both periods. The six-month period was also affected by the payment
of $12,200 in fees for renewing letters of credit supporting land reclamation
bonds required for the Company's coal and gravel permits in Colorado. The
Company did not incur any comparable expense in the six-month 1997 period.
The Company received approximately $2,990,400 in proceeds from
the sale of its Limestone County property. The approximate $1,504,100 gain
realized on such sale, which is reflected in other income (expense) for the six
months ended August 31, 1998 in the Company's Condensed Statements of
Operations, was the reason for the Company's profitability in the six-month 1998
period as the Company incurred an approximate $269,900 loss from operations
during such period. Interest and dividend income increased in both 1998 periods
due to interest on the proceeds from the sale of the Limestone County property.
The Company did not incur any interest expense in either of the 1998 periods.
Other income (expense), net changed from an income item to an expense item in
both 1998 periods due to writedowns aggregating $133,800 in the carrying value
of the Company's investment in an equity security. The writedowns were made as
of May 31 and August 31, 1998 following further declines in the fair value of
the security from February 28, 1998.
The Company's weighted average shares outstanding declined
approximately 3.3% during the six months ended August 31, 1998 as compared to
such shares outstanding at August 31, 1997 due to continuing share purchases
made by the Company. Purchases made by the Company in the six-month 1998 period
totaled 129,050 shares, 20,000 of which were made from an affiliate. The
remaining shares purchased by the Company were from unaffiliated shareholders.
FINANCIAL CONDITION AND LIQUIDITY
The first half of fiscal 1999 saw a substantial increase in
the Company's cash flows as a result of the sale of the Limestone County
property. During the period, the Company's
7
10
operating and investing activities provided approximately $2,370,100 of funds
after the expenditure of approximately $1,332,300 on additions to the Company's
oil and gas properties and real estate held for development. The Company's
financing activities, which consisted entirely of purchases of the Company's
common stock, used approximately $412,900 in funds, resulting in a net increase
in the Company's cash and cash equivalents at the end of the period of
approximately $1,957,200. At August 31, 1998, the Company had no indebtedness
and also held investment securities aggregating $1,155,800.
The Company expects contemplated operations during the
remainder of fiscal 1999 to be a net user of cash and plans to fund such
operations from a combination of its existing cash and cash equivalents and
sales or maturities of a portion of its investment securities available for sale
or margin account borrowings against their value.
8
11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's 1998 Annual Meeting of Shareholders (the "Meeting")
was held on August 27, 1998.
(b) At the Meeting, Sandra Pautsky, Danny Croker and Randy Camp were
elected as directors of the Company to serve until the 1999 Annual Meeting of
Shareholders or until their successors are elected.
(c) A total of 4,292,473 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:
NUMBER OF SHARES NUMBER OF SHARES
NAME OF NOMINEE VOTED FOR AUTHORITY WITHHELD
--------------- --------- ------------------
Sandra Pautsky 4,291,523 950
Danny Croker 4,291,123 1,350
Randy Camp 4,291,123 1,350
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - Financial Data Schedule for the six months ended
August 31, 1998 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, 1998.
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: October 15, 1998 By /s/ Sandra Pautsky
--------------------------------------
Sandra Pautsky, President
By /s/ Carol J. Cooper
--------------------------------------
Carol J. Cooper, 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.