U.S. Securities and Exchange
Commission Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2004.
[ ] TRANSITION REPORT UNDER 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
(State or other jurisdiction of
incorporation or organization)
87-0287176
(I.R.S. Employer
Identification No.)
4613 Jacksboro Highway
Wichita Falls, Texas 76302
(Address of principal executive offices)
(940) 322-4772 (Issuer's
telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
The number of shares outstanding of each of the issuer's classes of common
equity, as of May 31, 2004: Common Stock, $.04 par value, 4,293,117 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [X]
INDEX
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Page #
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Part I - Financial Information
1. Financial Statements
Condensed Balance Sheets at
February 29, 2004 and May 31, 2004 1
Condensed Statements of Operations
For the Three Months Ended May 31, 2003 and 2004 2
Statements of Cash Flows
For the Three Months Ended May 31, 2003 and 2004 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation 5
3. Controls and Procedures 10
Part II - Other Information
6. Exhibits and Reports on Form 8-K 11
Signatures 11
Index to Exhibits 12
Part I of this Report contains forward looking statements that involve risks and
uncertainties. Accordingly, no assurances can be given that the actual events
and results will not be materially different than the anticipated results
described in the forward looking statements. See "Item 2. - Management's
Discussion and Analysis or Plan of Operation" for a description of various
factors that could materially affect the ability of the Company to achieve the
results described in the forward looking statements.
Item 1. Financial Statements.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
ASSETS
February 29, May 31,
2004 2004
------------ ------------
Current assets: (Unaudited)
Cash and cash equivalents $ 2,853,798 $ 2,372,587
Trade accounts receivable 150,564 172,472
Investment securities available for sale 436,378 410,880
Prepaid expenses and other 20,698 15,699
------------ ------------
Total current assets 3,461,438 2,971,638
------------ ------------
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$6,195,590 on February 29, 2004 and $6,233,717 on May 31, 2004 685,894 732,112
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,046,348 on February 29, 2004 and $8,048,390 on May 31, 2004 265,859 263,817
Real estate held for development 2,986,658 2,996,729
Other property and equipment, net of accumulated depreciation
of $376,406 on February 29, 2004 and $382,446 on May 31, 2004 138,540 132,500
Deferred tax asset -- 132,667
Other non-current assets 865,809 865,809
------------ ------------
$ 8,404,198 $ 8,095,272
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 67,492 $ 101,311
Accrued expenses 49,473 46,268
Deferred federal income taxes 86,490 77,064
------------ ------------
Total current liabilities 203,455 224,643
Reserve for reclamation costs 158,879 158,645
Deferred federal income taxes 11,457 --
------------ ------------
Total liabilities 373,791 383,288
------------ ------------
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 16,800,307 16,562,126
Accumulated other comprehensive income 147,457 131,386
Less treasury stock, at cost, 5,851,724 shares on February 29, 2004
and 5,864,686 on May 31, 2004 (10,128,761) (10,192,932)
------------ ------------
Total stockholders' equity 8,030,407 7,711,984
------------ ------------
$ 8,404,198 $ 8,095,272
============ ============
The accompanying notes are an integral part of these financial statements.
1
Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
3 Months Ended May 31,
2003 2004
---------- ----------
Revenues:
Oil and gas 248,982 273,100
Gravel 31,141 18,585
---------- ----------
Total revenues 280,123 291,685
---------- ----------
Operating expenses:
Oil and gas 223,487 205,589
Coal and gravel 15,873 24,188
Real estate development 1,677 74
General and administrative 122,890 449,027
---------- ----------
Total operating expenses 363,927 678,878
---------- ----------
Loss from operations (83,804) (387,193)
Other income (loss) (9,664) 9,308
---------- ----------
Loss before income taxes (93,468) (377,885)
Income tax benefit (34,555) (139,704)
---------- ----------
Net loss (58,913) (238,181)
========== ==========
Basic and diluted loss per common share (0.01) (0.06)
========== ==========
Weighted average shares outstanding 4,368,642 4,301,574
========== ==========
The accompanying notes are an integral part of these financial statements.
2
Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
3 Months Ended May 31,
2003 2004
----------- -----------
Cash flows from operating activities:
Net loss (58,913) (238,181)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depletion and depreciation 55,113 46,209
Gain on sale of oil and gas properties (238) --
Loss on sale of other property and equipment 18,602 --
Deferred federal income taxes (38,829) (144,124)
Net changes in assets and liabilities:
Trade accounts receivable 122,377 (21,908)
Prepaid expenses and other current assets 4,961 4,999
Accounts payable (11,945) 33,819
Accrued expenses 15,126 (3,205)
Reclamation costs (157,546) (234)
----------- -----------
Net cash used in operating activities (51,292) (322,625)
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (26,341) (84,344)
Additions to real estate held for development (14,313) (10,071)
Proceeds from sale of oil and gas properties 238 --
Proceeds from sale of other property and equipment 25,000 --
----------- -----------
Net cash used in investing activities (15,416) (94,415)
----------- -----------
Cash flows from financing activities:
Purchases of treasury stock (36,500) (64,171)
----------- -----------
Net cash used in financing activities (36,500) (64,171)
----------- -----------
Net decrease in cash and cash equivalents (103,208) (481,211)
Cash and cash equivalents at beginning of period 3,375,427 2,853,798
----------- -----------
Cash and cash equivalents at end of period $ 3,272,219 $ 2,372,587
=========== ===========
Supplemental disclosures of cash flow information:
Income taxes paid $ 19,765 $ 16,252
Recognition in Stockholders' Equity of the net unrealized holding gain (loss) on
available for sale securities of $10,164 net of tax effect of $5,962 during the
quarter ended May 31, 2003 and ($16,071) net of tax effect of ($9,426) during
the quarter ended May 31, 2004.
3
OAKRIDGE ENERGY, INC.
Notes to Condensed Financial Statements
---------------------------------------
(Unaudited)
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial statements and with the instructions to Form
10-QSB of Regulation S-B for the three month periods ended May 31, 2003 and 2004
and 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. The foregoing financial statements do not include all
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. However,
except as disclosed herein, there has been no material change in the information
disclosed in the notes to the financial statements for the year ended February
29, 2004 included in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission. The interim unaudited financial statements
should be read in conjunction with the annual financial statements and
accompanying notes. Operating results for the three months ended May 31, 2004
are not necessarily indicative of the results that may be expected for the year
ending February 28, 2005. The Company's operating segments are set forth in the
annual financial statements and accompanying notes for the fiscal year ended
February 29, 2004.
Information regarding operations and assets by segment is as follows:
For the three months ended May 31,
2003 2004
----------- -----------
Business segment revenue:
Oil and gas $ 248,982 $ 273,100
Gravel 31,141 18,585
----------- -----------
$ 280,123 $ 291,685
----------- -----------
Business segment profit (loss):
Oil and gas $ 25,495 $ 67,511
Coal and gravel 15,268 (5,603)
Real estate development (1,677) (74)
General corporate (122,890) (449,027)
----------- -----------
Loss from operations (83,804) (387,193)
Interest income and other, net (9,664) 9,308
----------- -----------
Loss before income taxes $ (93,468) $ (377,885)
----------- -----------
As of As of
February 29, May 31,
2004 2004
----------- -----------
Total assets:
Oil and gas $ 4,175,917 $ 3,870,001
Coal and gravel 265,859 263,817
Real estate development 2,986,658 2,996,729
General corporate 975,764 964,725
----------- -----------
$ 8,404,198 $ 8,095,272
----------- -----------
4
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, 2004 and the Notes to Condensed Financial Statements contained in
this report.
Results of Operations
- ---------------------
The Company had a net loss of $238,181 ($.06 per share) in the three
months ended May 31, 2004 (the "2004 period") compared to a net loss of $58,913
($.01 per share) in the three months ended May 31, 2003 (the "2003 period"). A
$315,000 bonus paid to the Company's Chief Executive Officer in April 2004 for
her extraordinary services over a number of years with respect to the Company's
proposed Colorado real estate development project was the principal reason for
the greater loss as the Company's oil and gas revenues increased during the 2004
period.
Oil and gas revenues increased approximately $24,100 (9.7%) in the 2004
period due to a significant increase in the Company's average oil price received
as oil and gas production sales volumes and the Company's average gas price
received all declined. The following table compares the Company's oil and gas
revenues and average prices received and its sales volumes of oil and gas during
the three months ended May 31, 2004 with those during the three months ended May
31, 2003:
Three Months Three Months
Ended Ended Percentage
May 31, 2004 May 31, 2003 Difference
------------ ------------ ----------
Oil:
Revenues $228,869 $190,293 + 20.3%
Volume (Bbls.) 6,177 6,628 - 6.8
Average Price
(per Bbl.) $ 37.05 $ 28.71 + 29.1
Gas:
Revenues $ 34,256 $ 48,947 - 30.0%
Volume (MCF) 6,361 7,609 - 16.4
Average Price
(per MCF) $ 5.38 $ 6.43 - 16.3
5
Non-material amounts of natural gas liquids revenues and sales are excluded from
the foregoing table.
The Company's principal producing oil and gas property in Madison
County, Texas is in the process of being waterflooded. Revenues from the
property increased very slightly in the 2004 period, rather than declining as
had been the case in recent years, due to the increase in the Company's average
oil price received from the property. The encouraging news with respect to the
property is that production sales volumes for both oil and gas were higher or at
roughly the same levels in the three months ended May 31, 2004 as in each of the
preceding two fiscal quarters. The Company is optimistic that this is a sign
that production volumes from the property are stabilizing. The operator has
recently installed two pumping units on formerly flowing oil wells and this
should help the stabilization process in fiscal 2005. Any significant increase
in oil production volumes from the property is not expected to occur until
fiscal 2006 due to the substantial lag time for the buildup of sufficient water
volumes to push the incremental secondary oil reserves to producing wells and
the actual production of the incremental reserves.
The Company's gravel revenues declined approximately $12,600 (40.3%) in
the 2004 period as a result of reduced gravel sales and road usage fees and the
lack of any rentals for surface use. A dispute developed in fiscal 2004 between
the Company and Four Corners Materials, which at the time was conducting gravel
mining operations on the Company's Colorado property, that was detailed in the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 29,
2004. As a result of such ongoing dispute, Four Corners Materials is no longer
mining the property and the only gravel sales made during the 2004 period were
from stockpiles of gravel accumulated prior to the cessation of mining. The
Company is uncertain how much longer it will take Four Corners Materials to
deplete the stockpiles through sales. The Company would lease the property again
for gravel operations but has no intention of conducting any operations itself.
6
The expenses of the Company's oil and gas operations decreased
approximately $17,900 (8.0%) in the three months ended May 31, 2004 as all
categories of such expense (depletion and depreciation expense, lease operating
expense, production and ad valorem taxes, engineering expense and field payroll
expense) either declined or were no greater in amount than in the 2003 period.
Depletion and depreciation expense declined approximately $7,000 (15.6%). Such
decline was primarily attributable to the Madison County, Texas property and was
due to lower sales production volumes than in the 2003 period and a reduced per
barrel amortization rate resulting from the lower quantity of proven oil and gas
reserves for the property at the fiscal 2004 year end as compared to the prior
year. Lease operating expense declined approximately $8,400 (5.9%) during the
2004 period as reduced expense from the Madison County, Texas property resulting
from the lack of any single major expenditure and the absence of any significant
workover expense on the Vivian Parker #2 well in Gregg County, Texas
(approximately $23,100 was incurred in the 2003 period) more than offset an
increase in lease operating expense in the North Texas area and workover expense
incurred in the 2004 period on the Hunt #1 well in Panola County, Texas.
Production taxes declined approximately $2,400 (19.3%) in the 2004 period
notwithstanding the increase in oil and gas revenues due to a correction of
prior period overcharges on the oil severance tax made by the operator of the
Madison County, Texas property and a further change in the mix of sales toward
oil, which has a lower percentage tax than gas. The Company did not incur any
exploration expense, dry hole expense or leasehold abandonment charges during
either the 2004 period or the 2003 period.
The expenses of the Company's coal and gravel operations increased
approximately $8,300 (52.4%) in the three months ended May 31, 2004 compared to
the 2003 period primarily as a result of legal expense incurred in connection
with the dispute with Four Corners Materials and ad valorem tax expense that
more than doubled. Real estate development expenses declined approximately
$1,600 (95.6%) in the 2004 period due to the absence of any depreciation expense
after a trailer formerly used in the Company's operations was sold during the
2003 period. The Company incurred virtually no expense (as opposed to
capitalized costs) in the 2004 period after the Company made the decision during
the period to attempt to sell its proposed "Oakridge at Durango" project.
7
General and administrative expenses increased approximately $326,100
(265.4%) in the three months ended May 31, 2004 primarily as a result of the
previously mentioned $315,000 bonus paid to Sandra Pautsky in April 2004 and the
employer portion of payroll taxes associated with such bonus. An increase in
shareholder reporting expense of approximately $6,800 during the 2004 period due
to a timing difference was offset by declines in a number of other categories of
general and administrative expenses. The bonus paid to Ms. Pautsky will
adversely affect the Company's results of operations for the remaining year to
date periods to be reported for fiscal 2005 and the comparison of general and
administrative expenses for such periods with the comparable fiscal 2004
periods.
Other income (expense) changed from an approximate $9,700 loss item in
the 2003 period to an approximate $9,300 income item in the 2004 period, an
approximate $19,000 improvement. In the 2003 period, the Company incurred an
approximate $18,400 loss on the sale of a trailer used in the Company's real
estate operations. The Company did not incur any comparable loss in the 2004
period. Interest and dividend income together were slightly higher in the 2004
period than in the 2003 period.
The Company's weighted average shares outstanding decreased
approximately 1.5% during the three months ended May 31, 2004. The Company
purchased approximately 13,000 shares of its stock from unrelated parties during
the period.
Financial Condition and Liquidity
- ---------------------------------
During the first three months of fiscal 2005, all of the Company's
activities again were net users of funds. As a consequence, the Company's cash
and cash equivalents decreased by approximately $481,200 at May 31, 2004.
Despite the fact that the Company did not participate in any exploratory or
development drilling during the period, the Company's operating activities used
approximately $322,600 of funds. Absent the payment of the $315,000 bonus to the
Company's Chief Executive Officer and associated employer payroll taxes, the
Company's operations from a cash flow perspective would have been at an
approximate breakeven point. The Company's investing activities used
approximately $94,400, primarily in additions to oil and gas properties, and the
Company did not receive any funds from sales of oil and gas properties or other
property and equipment during the period. The Company's financing activities
used approximately $64,200, all on purchases of the Company's common stock.
Notwithstanding the net reduction in funds during the period, at May 31, 2004
the Company had no indebtedness and cash, cash equivalents and investment
securities available for sale totaling approximately $2,783,500.
8
The Company expects to fund its contemplated operations and any
purchases of the Company's stock it makes during the remainder of fiscal 2005
from its cash and cash equivalents, sales of all or a portion of its investment
securities available for sale and any cash flow from its operations. Given the
Company's decision to attempt to sell its proposed Colorado real estate
development project, the Company currently does not expect to make any material
expenditures on such project for the remainder of fiscal 2005.
9
ITEM 3. CONTROLS AND PROCEDURES.
The management of the Company, with the participation of Sandra
Pautsky, the Company's President and Principal Executive Officer, and Carol J.
Cooper, the Company's Principal Financial Officer, have evaluated the
effectiveness of the Company's disclosure controls and procedures [as defined in
Rule 13a-15(e) of The Securities Exchange Act of 1934 (the "Act")] as of May 31,
2004, the end of the Company's last fiscal quarter, and have concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
There has been no change in the Company's internal control over
financial reporting in the last fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
(31) Rule 13a-14(a)/Rule 15d-14(a) Certifications:
(i) Certification of Sandra Pautsky, Principal
Executive Officer of the Company, filed
herewith.
(ii) Certification of Carol J. Cooper, Principal
Financial Officer of the Company, filed
herewith.
(32) Section 1350 Certifications - Certifications of
Sandra Pautsky, Principal Executive Officer of the
Company, and Carol J. Cooper, Principal Financial
Officer of the Company, filed herewith.
(b) Reports on Form 8-K - No reports on Form 8-K were filed by the
Company during the three months ended May 31, 2004.
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: May 15, 2004 By /s/ Sandra Pautsky
------------------------------
Sandra Pautsky, President and
Principal Executive Officer
By /s/ Carol J. Cooper
------------------------------
Carol J. Cooper,
Principal Financial Officer
11
INDEX TO EXHIBITS
The exhibits filed with this report are filed in accordance with the
requirements of Item 601 of 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 purchase, sale, reorganization, arrangement,
liquidation, or succession - not applicable.
(3) (i) Articles of Incorporation - not applicable.
(ii)By-laws - 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.
(20) Other documents or statements to security holders or any
document incorporated by reference - not applicable.
(22) Published report regarding matters submitted to vote of
security holders - not applicable.
(23) Consent of experts and counsel - not applicable.
(24) Power of attorney - not applicable.
(31) Rule 13a-14(a)/Rule 15d-14(a) Certifications:
(i) Certification of Sandra Pautsky, Principal Executive
Officer of Oakridge Energy, Inc., filed herewith.
(ii) Certification of Carol J. Cooper, Principal Financial
Officer of Oakridge Energy, Inc., filed herewith.
(32) Section 1350 Certifications - Certification of Sandra Pautsky,
Principal Executive Officer of Oakridge Energy, Inc. and Carol
J. Cooper, Principal Financial Officer of Oakridge Energy,
Inc., filed herewith.
(99) Additional exhibits - not applicable.
12