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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange
Act of 1934 for the Fiscal Year Ended July 31, 1995 [Fee
Required] or
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act
of 1934 [No Fee Required]
Commission File No. 2-67096
TRI-VALLEY CORPORATION
(Exact Name of Registrant as Specified in its
Charter)
Delaware
84-0617433
(State or Other Jurisdiction of (I.R.S. Employer
Identification
Number)
Incorporation or Organization)
230 South Montclair Street, Suite 101, Bakersfield,
California 93309
(Address of Principal Executive Offices)
Registrant's Telephone Number Including Area Code: (805) 837-9300
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each
Exchange on Which
Registered
Common Electronic
Bulletin Board Nasdaq
$0.01 Par Value Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12
months (or for such shorter period that the registrant was required
to file such reports),
and (2) has been subject to such filing requirement for the past 90
days.
Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation
S-B contained in this Form, and no disclosure will be contained to
the best of the
registrant's knowledge, in definitive proxy or information
statements incorporated by
reference in Part III of this Form 10-K, if applicable, or any
amendment to this Form
10-K. X Yes No
Indicate by check mark whether the Registrant has filed all
documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed
by the Court.
Yes No
As of May 20, 1996, 7,337,248 common shares were outstanding, and
the aggregate
market value of the common shares of Tri-Valley Corporation held by
non-affiliates was
approximately $800,000.
Documents incorporated by reference: None
The total number of pages in this Form 10-K are 70.
The Index of Exhibits included in this Form 10-K is located at page
65.
PART I
ITEM 1. BUSINESS
Tri-Valley Corporation (formerly Tri-Valley Oil & Gas Corporation),
a Delaware
corporation, hereinafter referred to as "Company," "Registrant",
"Parent" or "Tri-
Valley", has been engaged in the business of exploring, acquiring,
developing and
dealing in prospective and producing petroleum and mineral
properties and interests
therein. Precious metal activity has been carried on directly by
the Parent and oil and
gas activities through its wholly owned subsidiary, Tri-Valley Oil
& Gas Company
(TVOG).
TVOG was organized as a California corporation in 1963. TVOG, the
subsidiary, effects
exploration relationships with various major oil companies such as
Phillips Petroleum
Company (Houston Regional Office), Occidental USA and Texaco USA
with whom it
has co-ventured on a 50-50 basis to use their proprietary data to
generate exploration
plays in the Sacramento Valley. This relationship involves a TVOG
submittal procedure
wherein the major company has a short period to accept or reject
plays generated by
TVOG in the area of mutual interest (AMI). If it accepts, it joins
up to 50% under the
terms of the agreement involved. TVOG is operator for these
co-ventures.
Historically an oil and gas exploration and production company
emphasizing the
Sacramento Valley natural gas province, the Company added precious
metals exploration
in fiscal 1987. The precious metal properties are located in
interior Alaska, known as the
Richardson, Alaska property. Precious metal activity has been an
exploratory activity
since inception. In February 1991, Tri-Valley signed an agreement
with the Moscow
based Central Research Institute of Geological Prospecting for Base
and Precious Metals
(TsNIGRI) to demonstrate their proprietary technology for
evaluating large areas of
covered sub-Arctic terrain for precious metals on Tri-Valley's then
64 square mile lode
gold claim block at Richardson, Alaska. Based on the results of
this study, Tri-Valley
management believes it to be prudent for the Company to continue to
develop the
precious metals segment of the Company. At present, this is only a
prognostic resource
and not a proven reserve.
Chapter 11 Proceedings
Certain Developments
On January 30, 1996, Tri-Valley Corporation ("TVC") and its wholly
owned subsidiary,
Tri-Valley Oil & Gas Co. ("TVOG") filed voluntary petitions in the
United States
Bankruptcy Court (the "Bankruptcy Court") for the Eastern District
of California sitting
in Fresno seeking to reorganize under Chapter 11 of the Federal
Bankruptcy Code (the
"Code"). The companies are currently operating as
debtors-in-possession under the Code.
The Chapter 11 cases of TVC and TVOG have been substantially
consolidated under
TVC, and TVC continues to file consolidated tax and SEC reports.
ITEM 1. BUSINESS (Continued)
Chapter 11 Reorganization
In March, April and September 1995, the Company arranged borrowings
of $100,000,
$400,000 and $120,000, respectively, totaling $620,000 from Frank
Agar, an individual
of Midland Texas. Terms of the loans were on a six month note with
a 30 day call
paying 10% annual interest and collateralized by all of TVOG's
producing gas properties
in the Sacramento Valley of California. The purpose of the loans
was to consolidate
increasingly short term obligations and provide short term
operating capital enabling the
Company to accommodate two years of heavy losses due to production
declines and gas
prices plunging to unforeseen 20 year lows.
At the time of the loans, the Company's management anticipated
hooking up a major
discovery, and drilling an offset well to accelerate production
revenues. With this
enhancement and some third party collateral it appeared take out
financing from a
conventional institution could be arranged. Permit delays and
freezing of credit lines due
to a merger between banks eliminated that approach. As the six
month financing period
ended, the board of directors met with the secured lender and
worked out a 90 day
standstill in order to sell the reserves and preserve the
stockholder equity above the
lender's interest.
Three substantial offers from capable parties were received. The
lead offer exceeded the
loan principal by approximately $1 million and the Company
proceeded toward
acceptance. One day before the close the offerer abruptly
terminated citing several
unacceptable conditions. The Company believed none of the
conditions were items that
affected the economic value of the deal and none that could not be
handled in the closing
and post closing stages.
The Company immediately contacted its other two backup buyers. One
could not
arrange financing before the foreclosure date. The other pulled
out one day before the
foreclosure citing a "wait and see" position. On the day of the
foreclosure deadline,
discussions with the secured lender promised to "work something
out", but were not
attended by any forbearance in writing. The Company obviously
could not negotiate
without such written forbearance and advised its only alternative
was to file for
protection under chapter 11 of the Federal Bankruptcy Code. Given
no alternative, the
filing was made 30 minutes before the deadline on January 30, 1996.
The ability of the Company to effect a successful reorganization
under Chapter 11 of the
Bankruptcy Code will depend, in significant part, upon the
Company's ability to
formulate a reorganization plan that is approved by the Bankruptcy
Court and meets the
standards for plan confirmation under the Bankruptcy Code. In a
chapter 11
reorganization plan, the rights of the Company's creditors and
stockholders may be
substantially altered. Creditors may realize substantially less
than the full face amount
of their claim. Equity interests of the Company's stockholders may
be diluted or even
canceled. Investment in any security of the Company, therefore,
should be regarded as
highly speculative. It is impossible at this time to predict the
actual recovery that
different classes of creditors and stockholder might ultimately
realize.
ITEM 1. BUSINESS (Continued)
Operations During Chapter 11 Reorganization
The Company became debtor-in-possession and was approved for use of
the cash
collateral to continue operations while preparing a plan of
reorganization. Pursuant to
the Code, transactions outside the ordinary course of business
require the approval, after
notice and hearing, of the Bankruptcy Court and liabilities arising
prior to the filing of
petitions under Chapter 11 of the Code may not be paid without
prior approval of the
Bankruptcy Court. Offers for the reserves revived; however, the
Company was made
aware of an opportunity to acquire very substantial assets in the
burgeoning
telecommunications industry through a "roll up" of partnership
interests owned by
approximately 1,000 investors looking for publicly traded stock in
exchange for their
partnership interests.
After preliminary due diligence, including visits to the physical
facilities and trade areas
in New York state, the Company is proceeding to prepare and file a
plan of
reorganization and disclosure statement aimed at consummating this
business combination
in a manner that will satisfy TVC creditors and equity security
holders and be approved
by the court. As a back up, the Company would proceed to sell its
reserves.
Since the filing of petitions under Chapter 11 of the Code, the
Company has successfully
arranged $900,000 in cash. The first $150,000 was raised and
approved by the court on
April 25, 1996, for use by the Company. The loan is secured by
producing properties
of the Company and has a stated interest rate of 10%, interest only
for two years with
the outstanding balance due and payable at the end of two years.
The remaining $750,000
has been arranged through 29 individuals. As of May 20, 1996, this
amount had not been
deposited; however, the checks are in the name of the Company and
held by the
Company's President. These funds will be held outside of the
Bankruptcy Court until
either the Company's reorganization plan is confirmed or the Court
allows the Company
to establish a trust account with the specific purpose of the funds
identified to pay-off the
Agar loan in full. Stated interest rate is 10%. Interest only for
two years with the
principal due and payable at the end of two years. The loans are
secured by the
producing properties of the Company. In the event the new lenders
and loan terms are
not approved by the Court, this money will be returned.
The Company is also the target of an attempt by a dissident
minority to discredit and
remove the existing board and management and replace them with a
group which post
petition purchased 25,570 shares (less than 4/10ths of 1% of the
outstanding shares). The
Company has advised shareholders that this effort is an attempt to
grab several million
dollars in assets for little more than the cost of postage. The
majority of shareholders did
not side with the dissidents in a solicitation they conducted in
March and April of 1996.
The Company will hold a shareholder meeting on or before July 31,
1996 to present its
plan of reorganization and other matters of concern, including who
should manage the
Company.
ITEM 1. BUSINESS (Continued)
Operations During Chapter 11 Reorganization (continued)
At July 31, 1995, the Company records total balance sheet assets of
$3,825,053 and
liabilities of $2,111,428 for a net worth of $1,713,625. The
Company has an offer to
purchase its off balance sheet reserves of approximately $2.1
million for a total of
$3,813,625 net value as of July 31, 1995. (Consummation of this
offer is not assured).
The Company's management believes that completion of its two main
projects could
greatly increase that figure. Completion of these projects is
dependent on securing the
requisite capital and the Company believes that will occur if its
plan of reorganization
is confirmed.
Company liabilities include the secured lender, a number of
unsecured creditors and
dozens of executory contracts that are primarily oil and gas
mineral leases, mineral
claims, and leases or purchase contracts on office space, equipment
and real property.
Pursuant to the orders of the Bankruptcy Court, the Official Equity
Security Holders
Committee of TVC and the Creditors Committee have been appointed by
the U.S.
Trustee with authority to obtain counsel and other professionals
whose fees are being
paid by the Debtor. Reorganization related professional fees are
being recorded as
incurred. The first filing by Debtor's counsel through May 30, 1996
amount to $27,000.
The Company has not been advised of any other professional fees at
this time.
Transfers of assets, including cash payments, prior to the
commencement of the Chapter
11 cases could be revised by the Bankruptcy Court if they were
determined to constitute
preferential transfers or fraudulent conveyances under certain
sections of the Code.
Upon the reversal of a transaction, the assets returned would be
part of the bankruptcy
estate of the Debtor and would be subject to the claims of the
Debtor's creditors. If any
assets are returned to the Debtor, the entity from which the assets
are recovered would
have an unsecured claim against the debtor in the amount of the
value of the assets
transferred by the Debtor to such entity. Since Pre-petition
transfers were in the ordinary
course of business the Company does not believe any preferential
treatment occurred.
The Chapter 11 filings by the Company operate as an automatic stay
against
commencement or continuation of any judicial, administrative or
other proceedings
against the Company; any act to obtain possession of property of or
from the Company;
or any act to create, perfect or enforce any lien against the
Company, any act to obtain
possession of property of the estate or of property from the estate
or to exercise over the
property of the estate. The Company believes certain acts of
dissidents and certain
creditors may have violated the automatic stay and other sections
as set forth in the
Code, various securities rules and regulations and corporate law
and has reserved the
right to pursue such parties for various torts.
ITEM 1. BUSINESS (Continued)
Operations During Chapter 11 Reorganization (continued)
The Company is the subject of various motions by the U.S. Trustee,
the Official Equity
Security Holders Committee and other parties of interest seeking to
replace the Debtors-
In-Possession with a trustee. The hearing is scheduled for May 30,
1996 regarding such
matters. Management believes such moves are demonstrably counter to
shareholder
interest as the Company is currently profitable, is moving forward
on its projects, is
experiencing a quadrupling of its stock market price, and has
arranged $900,000 on
excellent terms of which $150,000 has been approved for use by the
Court and the
remainder is available to pay off the secured lender. In other
words, the Company is a
going business, is garnering investor support, and has attractive
prospects. Such motions
and legal onslaughts have forced the Company to retain multiple
counsel to help deal
with such actions while it otherwise conducts business in the
ordinary course. The
Company expects to prevail in the action and succeed in its
rejection of the various
adversarial motions.
Reorganization
The Company is developing a plan of reorganization that includes
the acquisition of
wireless communication assets through "roll up" of limited
partnership interests into TVC
common stock with warrants. The book value of the assets is
approximately
$15,000,000 (unaudited), which are owned by approximately 1,000
partners who would
become TVC shareholders. If the plan is confirmed, TVC will have
achieved a number
of important goals in one event and emerge a much larger company,
nearly free of debt,
diversified into a very rapidly growing segment of the economy,
with strong capital
formation ability to handle projects in a more timely and efficient
manner to obtain the
benefits therefrom, and qualify the Company for listing on larger
exchanges to enhance
shareholder liquidity.
Under this Plan, when completed and confirmed, if more than 50% of
the successor
corporation is owned by new shareholders, the Reorganized Company,
upon emergence
from bankruptcy, will adopt "fresh start" reporting in accordance
with the American
Institute of Certified Public Accountants' Statement of Position
90-7 ("SOP 90-7") -
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code."
A fall back plan is to sell the producing gas reserves which should
more than satisfy the
current financial obligations and provide a sum of cash to continue
operations in its
present lines of business.
ITEM 1. BUSINESS (Continued)
Claims Against Officers and Directors
On April 22, 1996, Alfred Ainsworth III, ESQ., and The Tri-Valley
Committee for New
Management sued Tri-Valley Corporation; F. Lynn Blystone; Earl H.
Beistline; Dennis
P. Lockhart; Milton J. Carlson; Terrance L. Stringer; Loren J.
Miller (all of the
foregoing being directors of Tri-Valley and F. Lynn Blystone also
being president and
chief executive officer), Ed Moss (Tri-Valley's largest shareholder
of record) for
securities violations and corporate law violations seeking
declaratory judgement and
injunctive relief.
Mr. Ainsworth III, Esq. and his Committee have filed objections to
the responses by Tri-
Valley to what Tri-Valley, from information, believes to be an
illegal proxy solicitation
by Mr. Ainsworth and his committee and which material Tri-Valley
believes contained
numerous false and misleading statements. The Company believes it
was duty bound to
respond to the Ainsworth material by providing shareholders with
additional information,
which it has done.
Mr. Ainsworth III, Esq. and his Committee (which owns 106,810
shares directly, less
than 1.5% of the outstanding shares of the Company's 7,337,248
shares outstanding,
with another 267,180 shares not beneficially owned but voted,
bringing the total shares
declared to 373,990 shares or about 5.1% of the outstanding) have
declared their intent
to remove present management and seek to replace the present board
with a group that
has acquired 25,572 shares of the Company's 7,337,248 outstanding
shares (less than
4/10ths of 1%) after Tri-Valley filed its Chapter 11 petition. In
contrast, present Tri-
Valley board and Management directly own 533,034 shares (7.3%) and
Mr. Moss, a
supporter of present management, directly owns 572,857 shares
(7.8%) and disclaims
beneficial ownership of an additional 119,467 - 1.6% - totalling
9.4%. While present
management is aware that there is dissent to its policies and
operations from time to
time, it is confident the broad majority of shareholders
understands the conditions in
which Tri-Valley operates and the efforts, ambition and potentials
of the Company. In
the past, the overwhelming majority of shares has supported
management.
ITEM 2. PROPERTIES
The Company's headquarters and administrative offices are located
at 230 South
Montclair Street, Suite 101, Bakersfield, California 93309. The
Company leases
approximately 2,500 square feet of office space at that location
for a monthly rental of
$1,350.
The principal properties of the Company consist of proven and
unproven oil and gas and
precious metal properties, maps and geologic records related to
prospective oil and gas
and precious metal properties, office and other equipment. The oil
and gas properties
in which the Company holds interests are primarily located in the
area of central
California known as the Sacramento Valley. The Company contracts
for the drilling of
all its wells and does not own any drilling equipment, bulk storage
facilities,
transportation pipelines or refineries. The precious metal
properties are located in
interior Alaska. They are comprised of leased claims on State
lands, leased patented
claims, direct claims of the Company on State open lands requiring
annual assessment
work and, in the case of State of Alaska lands, an annual per claim
fee. All fees are
current, however, the Company reduced its claim block, in Alaska,
subsequent to
November 30, 1995, to concentrate on the most advanced targets.
During 1995, the Company borrowed a total of $620,000 from Frank
Agar to consolidate
short-term obligations and provide short-term operating capital.
The loan is secured by
all of TVOG's producing gas properties in the Sacramento Valley of
California. For full
description see Item 1. "Business -Chapter 11 Reorganization."
For the years ended July 31, 1991 through 1995, the Company
retained the services of
an independent engineer for the purposes of estimating the
Company's net share of
proved developed oil and gas reserves on all the Company's
properties.
For this year, the Company retained independent engineering of its
reserves by Cecil
Engineering, a long established consulting engineering firm which
does SEC reserve
calculations. The Company does not include any undeveloped
reserves in these reserve
studies and, accordingly, only proved developed reserves are
reported herein. Price is
a material factor in the stated reserves of the Company. Higher
prices generally permit
longer recovery, hence larger reserves at higher values.
Conversely, lower prices
generally limit recovery, hence smaller reserves in that event. In
the latter part of FY 95,
gas prices plunged temporarily to 20 year lows that drastically
downsized Tri-Valley
reserve values at July 31, 1995. The Company believes its July 31,
1995 reserve report,
which was required under SEC Regulations to use this price
aberration in its calculations,
is not representative of the current values of its reserves,
especially since the gas price
has risen substantially since July 1995 and a large new well has
been put on production.
ITEM 2. PROPERTIES (Continued)
The estimated future net recoverable oil and gas reserves from
proved developed
properties as of July 31, 1995, 1994, 1993, 1992, and 1991, were as
follows:
BBL
MCF
1995 Condensate 367 Natural Gas
1,888,231
1994 Condensate 378 Natural Gas
2,233,805
1993 Condensate 253 Natural Gas
2,048,846
1992 Condensate 1,069 Natural Gas
2,816,986
1991 Condensate 3,655 Natural Gas
1,828,526
The process of estimating oil and gas reserve quantities is
inherently imprecise.
Ascribing monetary values to those reserves, therefore, yields
imprecise estimated data
at best.
Using year-end oil and gas prices and current levels of lease
operating expenses, the
estimated present value of the future net revenue to be derived
from the Company's
proved developed oil and gas reserves, discounted at 10%, was
$835,771, $1,577,027,
$1,343,270, $2,027,700, and $2,392,409, at July 31, 1995, 1994,
1993, 1992, and
1991, respectively. Reference is made to the supplemental
information of the
consolidated financial statements for further information on oil
and gas reserves and
estimated values.
Registrant filed no estimates of total proved net oil or gas
reserves with, or included in
reports to, any other Federal authority or agency since the
beginning of the last fiscal
year, except for estimates filed with the U.S. Bankruptcy Court..
As yet, few reserve
estimates are available for the Company's precious metal properties
as they were all
acquired as geologic plays with minimal testing and assay to date.
TVC does not project
any ore reserve tons of its Richardson, Alaska property. However,
TVC has recovered
over 3,000 raw ounces of gold from a 30,000 ton bulk sampling of
one 20-acre area and
from trenching, core and RVC drilling, bulk sampling and assaying.
The Company has
reason to believe that much larger commercially recoverable
reserves may be exposed
by its subsequent programs. The future recovery of raw ounces on a
per ton basis is
purely speculative at this time.
ITEM 2. PROPERTIES (Continued)
The following table sets forth the net quantities of natural gas
and crude oil produced by
Registrant during the last five fiscal years:
Year Ended July 31,
1995 1994 1993 1992
1991
Natural Gas (MCF) 247,414 264,109 366,486
495,215 153,648
Crude Oil (BBL) 107 87 314
759 418
Year Ended July 31,
1995 1994 1993
1992 1991
Natural gas (per MCF) $ 1.35 $ 1.80 $ 1.95 $
2.07 $ 2.26
Production costs
(per MCF) .20 .20 .20
.10 .10
Net Profit per MCF $ 1.15 $ 1.60 $ 1.75 $
1.97 $ 2.16
As of July 31, 1995, the Company had the following gross and net
position in wells and
developed acreage:
Wells Acres
Gross Net Gross Net
8.0000 3.0892 3,250 3,122
(1) "Gross" acres represents total acres in which the Company
has a working interest;
"net" acres represents the aggregate of the working
interests of the Company
in the gross acres.
(2) "Gross" wells represents the total number of producing wells
in which the
Company has a working interest or overriding royalty. "Net"
wells represents
the number of gross producing wells multiplied by the
percentages of the working
interests or royalty interests therein by the Company.
ITEM 2. PROPERTIES (Continued)
The following table sets forth the number of net productive and dry
exploratory and
development wells drilled by the Company during fiscal years ending
July 31, 1995,
1994, 1993, 1992 and 1991:
1995 1994 1993
1992 1991
Exploratory
Producing 2.0 1.0 1.0
-0- 1.0
Dry -0- -0- -0-
1.0 2.0
Total 2.0 1.0 1.0
1.0 3.0
Development
Producing -0- -0- 1.0
-0- 1.0
Dry -0- -0-
1.0 -0- -0-
Total -0- -0- 2.0
-0- 1.0
The above table, regarding net wells, recognizes only those wells
in which the Company
holds an overriding royalty interest or an earned working interest.
Working interests to
be earned at payout have not been included. Tri-Valley changed its
farmout terms in
1987 to allow for the Company to participate in the completion of
promoted prospects
and thereby retain a larger working interest in wells.
The Company continues to deal primarily with industry partners on
its oil, gas and
precious metals projects.
The Company continually screens geologically prospective acreage as
to its availability
for leasing. Oil and gas and precious metals prospects developed
by the Company's own
staff and by other sources are regularly evaluated.
The following table sets forth information regarding undeveloped
acreage in which the
Company had an interest on May 20, 1996.
State Gross
Acres Net Acres
California oil and gas 2,469.65
2,262.00
Alaska minerals 24,000.00
23,300.00
Some of the Company's undeveloped acreage is held pursuant to
leases from landowners.
Such leases have varying dates of execution and generally expire
one to five years after
the date of the lease.
ITEM 2. PROPERTIES (Continued)
The Company is obligated to pay varying annual delay rentals to the
lessors on such
properties in order to prevent the leases from expiring. Mineral
properties claimed on
open state lands require minimum annual assessment work of $100
worth per State of
Alaska claim. The Company had no Federal claims and 1,678 State of
Alaska claims
and 10 prospecting sites totaling 66,281 net acres as of July 31,
1995. Subsequent to
November 30, 1995, the Company reduced its claim block to 606
claims and prospecting
sites totaling over 24,000 acres (over 37.5 square miles) to
concentrate on the most
advanced targets. Expenditures on the Richardson, Alaska acreage
have already carried
forward annual assessment requirements more than four years on all
Alaska claims.
ITEM 3. LEGAL PROCEEDINGS
On January 30, 1996, Tri-Valley and its wholly owned subsidiary,
Tri-Valley Oil & Gas
Co. filed voluntary petitions in the United State Bankruptcy Court
for the Eastern District
of California sitting in Fresno seeking to reorganize under Chapter
11 of the Federal
Bankruptcy Code. The following discussion provides general
background information
regarding the chapter 11 case, but is not intended to be an
exhaustive summary.
Since the petition date, the debtors have continued in possession
of their properties and,
as debtors in possession, are authorized to operate and manage
their respective businesses
and enter into all transactions (including obtaining services,
supplies and inventories) that
each could have entered into in the ordinary course of their
business had there been no
bankruptcy. Although each debtor is authorized to operate its
business as a debtor in
possession, it may not engage in transactions outside the ordinary
course of business
without first complying with the notice and hearing provisions of
the Bankruptcy Code
and obtaining Bankruptcy Court approval where necessary.
An official unsecured creditors' committee (the "Creditors'
Committee") was appointed
by the Office of the United States Trustee pursuant to section 1102
of the Bankruptcy
Code. The Creditors' Committee has the right to review and object
to certain business
transactions and is expected to participate in the negotiation of
any plan of
reorganization. The Company is required to pay certain expenses of
the Creditors'
Committee, including counsel fees, to the extent allowed by the
Bankruptcy Court.
Unless otherwise noted, since the filing by the Company of the
Chapter 11 petitions,
prosecutions of all pre-petition claims against the Company have
been stayed by the
automatic stay imposed by the Code. Leave to lift the stay and
allow the actions to
proceed may be sought from the Bankruptcy Court by the Company or
other affected
parties. For a description of the Company's Plan see Item 1.
"Business -
Reorganization".
ITEM 3. LEGAL PROCEEDINGS (Continued)
In general, the following lawsuits (other than those that have been
settled) seek damages
that, in management's opinion, would constitute only a general
unsecured claim against
the Company. However, in certain cases, the plaintiffs could claim
that their recovery,
if any, would be entitled to priority treatment as an
administrative claim. Once finalized,
management believes that if the Reorganization Plan is confirmed,
none of the following
lawsuits will have a material effect on the reorganized company's
financial position and
results of operations. (It is impossible at this time to predict
the actual recovery that
different classes of creditors and stockholders might ultimately
realize).
There is presently a lawsuit pending between the Company and Carl
Mitchell for
payment of advance royalties allegedly due the Estate of John R.
Mitchell on the
Richardson, Alaska property as well as a reimbursement of certain
expenses allegedly
incurred for the benefit of the Richardson property. The Company
disputes the claim.
The amount claimed is not material to the Company.
Subsequent to December 31, 1995, a lawsuit between the Company and
Helen L.
O'Brien, former TVC\TVOG vice president and secretary-treasurer
concerning her claim
for additional compensation from the Employee Overriding Royalty
Program was settled
(see Note 7). The settlement amount is not material to the Company.
In fiscal year 1995, the Company settled a dispute with Armstrong
Petroleum
Corporation without commencement of litigation in exchange for the
transfer of an
interest which was not material to the Company.
To the best of management's knowledge, there are no other material
pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1992, the Company submitted its
Proxy Statement and
the Notice of Annual Meeting of Shareholders dated May 2, 1992 to
all shareholders of
record on March 16, 1992. The Proxy Statement contained three
items for the
shareholders' vote at the fiscal 1992 meeting held on May 2, 1992.
Management cast a minimum of 3,790,067 votes on all items and was
pleased to declare
that all three items on the agenda were approved. The final number
of votes cast for
each item on the agenda are as follows:
1. Re-elect management slate of directors:
3,927,764 shares for, out of 5,565,445 shares voting
(71% of votes cast)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Continued)
2. Re-appoint Brown Waits & Armstrong Accountancy Corporation
as independent accountants:
5,326,101 shares for, out of 5,565,445 shares voting
(96% of votes cast)
3. Authorize management to transact other business at the
meeting:
4,917,644 shares for, out of 5,565,445 shares voting
(88% of votes cast)
It was moved, seconded and carried that the actions of the board of
directors and
executive actions of the president since the last meeting be
ratified.
No matters were submitted to a vote of the security holders in
fiscal years 1993, 1994
and 1995.
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
Shares of Tri-Valley Corporation stock have been traded in the
over-the-counter market.
The following table shows the high and low bid and asked prices of
Tri-Valley stock for
the quarterly periods indicated as reported by the OTC Stock
Journal:
Bid
Prices Asked Prices
High Low High
Low
1995:
First Quarter
$.2875 $.10$
.3125 $ .125
Second Quarter
$.2875 $.10$
.3125 $ .125
Third Quarter $.2875
$ .10$.3125 $.125
Fourth Quarter
$.2875 $.10$
.3125 $ .125
As of July 31, 1995, the Company estimates 800 shareholders in 39
states and 4 foreign
countries of record of Tri-Valley Corporation common stock.
The Company historically has paid no dividends, and at this time
does not plan to pay
any dividends in the immediate future. Currently, the Company is
prohibited from
making cash dividend payments under its debtor in possession
financing.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data
The following table summarizes selected financial data for the
Company and should be
read in connection with the Consolidated Financial Statements,
related notes and other
financial information appearing elsewhere in this report.
1995 1994 1993
1992 1991
Revenues $ 432,377 $ 663,960 $
753,126 $ 1,130,998 $ 554,431
Income (loss) before
extraordinary item $ (306,844) $ (294,016) $
9,291 $ 239,139 $ 61,166
Net income (loss) $ (306,844) $ (294,016) $
14,091 $ 382,139 $ 102,641
Income (loss) before
extraordinary item
per common share $ (.04) $ (.04) $
- - $ .04 $ .01
Net income (loss)
per common share $ (.04) $ (.04) $
- - $ .06 $ .02
ITEM 6. SELECTED FINANCIAL DATA
At year-end:
Total assets $ 3,825,053 $ 3,852,315 $
4,190,116 $ 3,914,461 $ 2,803,767
Shareholders' equity $ 1,713,625 $ 1,931,849 $
2,003,365 $ 1,859,689 $ 1,086,900
Long-term debt, excluding
current portion $ 35,787 $ 37,755 $
92,238 $ 49,000 $ 31,000
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
Entering its 33rd year of business, the Company is primarily
involved in exploration and
production of natural gas and gold. Fiscal 1995 saw Tri-Valley
suffer from severe cash flow
constraints attributable to significant operating losses stemming
from a short-term plunge in gas
prices to 20 year lows and declined production from depleting
zones.
On January 30, 1996, Tri-Valley Corporation and its wholly owned
subsidiary, Tri-Valley Oil
& Gas Co. filed voluntary petitions under Chapter 11 of the Federal
Bankruptcy Code seeking
to reorganize under the Code. The reasons are detailed in Part I,
Item I of the Form 10-K.
Because of the ongoing nature of the reorganization, the
discussions and consolidated financial
statements contained herein are subject to material uncertainties.
The consolidated financial
statements may not be indicative of the results of future
operations. The Company has
experienced significant operating losses in the last two years
stemming from production decline
and a temporary plunge in gas prices to 20 year lows. Both
production and price have since
increased and management expects significant liquidity concerns
will be substantially resolved
upon emergence from Chapter 11 and the consummation of the proposed
plan of reorganization.
In the long term, the reorganized Company's viability will be
dependent on its ability to achieve
successful future operations.
(On May 24, 1996, a Reorganization Plan was submitted but is not
yet confirmed by the
Bankruptcy Court. There can be no guarantee that a Reorganization
Plan will be confirmed or
that the Company will be able to successfully reorganize.)
The consolidated financial statements do not reflect any
adjustments relating to the recoverability
and classification of recorded asset amounts or the amounts and
classification of liabilities that
might be necessary should the Company be unable to continue in
existence nor do the
consolidated financial statements reflect adjustments required by
"fresh start" reporting. The
consolidated financial statements do not reflect the amount of
creditors' claims filed, the ultimate
settlement of liabilities and contingencies which may be allowed in
Chapter 11 reorganization
cases or the effect of any changes, including changes in the
company's operations, which may
result from a plan of reorganization.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
(Continued)
Results of Operations
Tri-Valley's natural gas discoveries and production raised it into
the top 10% of 193 California
dry gas operators. Among U.S. petroleum companies ranked annually
by the Oil & Gas
Journal, Tri-Valley rose to 225th place giving it a total gain over
the past eight years of 169
places.
At the same time, Tri-Valley experienced a dislocation in cash flow
when some seemingly
assured prospect sales failed to materialize due to abrupt shifts
of domestic exploration budgets
to foreign venues even as the Company invested heavily in preparing
its projects for sale. Thus,
anticipated revenue failed to materialize to reimburse forward
investment in major projects and
significant operating capital was temporarily locked up in unsold
inventory. This was dealt with
broadly, including reducing overhead, reducing project activity,
drawing on unsecured and
secured credit lines, and redoubled efforts to market inventory.
During fiscal 1995, Tri-Valley fully extinguished its bank credit
line which peaked at $225,000
and eliminated numerous other short-term obligations by
consolidation into a financing secured
by its producing properties. This is the first secured financing in
over 15 years.
After 13 consecutive profitable quarters, revenues plunged during
1994 due to production and
a steep drop in natural gas prices ultimately to 20 year lows in
1995. As a producing zone
depletes it is operated until it is no longer profitable before
plugging it and opening a new zone
for flush production. Unless the Company has alternate revenue to
offset such declines it creates
losses and due to the combination of production and price declines
the losses were severe.
Adding to the frustration is the fact that in November 1994,
Tri-Valley completed the most
significant California on shore dry gas discovery of the year with
over 147 net feet of pay in the
Webb Tract No. 1 which is still awaiting hook up due to pipeline
delays. Thus the Company
(and its partners) has been denied substantial revenue during this
period. The only positive aspect
is that the gas prices were very low during shut in.
In August 1995, Tri-Valley completed another very substantial well
with 113 net feet of pay.
This well was hooked up and at the end of 1995 was selling about 3
million cubic feet of gas
per day from one zone and the revenue was beginning to restore the
Company's basic cash flow
needs.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
(Continued)
Results of Operations (continued)
It should not be overlooked that a very substantial value of
Tri-Valley does not appear on its
balance sheet. The Company's hydrocarbon reserves at September 30,
1995 were valued by
independent engineers at a net present value of $1,501,000
including the SEC mandatory 10%
discount rate up from the July 31, 1995 value of $835,771.
Accounting rules require discovered
reserves to be carried on the balance sheet at cost of obtaining
them rather than the actual future
net revenue from producing them. Since Tri-Valley arranges to be
carried in the test wells on
prospects, it incurs very little cost and, therefore, very little
value of discovered reserves appears
on the balance sheet despite the fact that reserves are a most
important value of the Company,
especially from an industry point of view. Also not on the balance
sheet, is significant value
resulting from more than $1,500,000 in outside investment by third
parties who did not earn an
interest in the Richardson, Alaska property. These values, in
management's opinion, constitute
a significant part of the value of the Company even though it is
now unrecognized on the balance
sheet.
Over $485,000 of Tri-Valley capital is invested in the North Tracy
Triad Play composed of three
separate prospects with an aggregate reserve target of over 500
billion cubic feet of natural gas.
This play is generated off of Phillips Petroleum Company and
Tri-Valley proprietary data and
drilling the test well is dependent on Tri-Valley securing other
working interest partners.
Normally, major companies and large independents would be the
candidates but there has been
a massive shift of exploration budgets from U.S. on-shore to
overseas just as Tri-Valley brought
the first prospect to drillable status. This has denied the
Company timely return of capital from
sale of the play. Management believes the play offers the chance
of exceptional upside to the
Company and is dedicated to getting it sold and drilled.
Similarly, Tri-Valley has invested $1,680,000 (the equivalent of
less than 4,500 ounces of gold
at today's price) in its Richardson, Alaska lode gold exploration
project. A substantial part of
this is represented by contract payments of 300,000 shares of
Tri-Valley preferred stock,
convertible one-for-one into common, to TsNIGRI, the Moscow based
Central Research Institute
of Geological Prospecting for Base and Precious Metals. TsNIGRI
has performed over 1,000
line miles of ground traverses for geological, geochemical,
biochemical, hydrochemical sampling
and geophysical profiles throughout 225 square miles of
Tri-Valley's claim block and
surroundings. Over 5,000 samples have been run through a variety
of laboratory analysis
including over 1,000 samples assayed by Bondar-Clegg, an industry
accepted assay house.
Physical gold has been found at 60 locations wide spread over a 20
mile swath on the claims and
TsNIGRI has increased their forecast to over 2 million ounces of
recoverable gold. At present,
this is only a prognostic resource and not a proven reserve. Since
1993, Tri-Valley has spent
time assimilating this vast amount of new data to define more
specific targets for field
confirmation in the future.
Management believes it has demonstrated that the Company possesses
a superior mineral
property which could reward the shareholders dramatically from
discovery success with little
downside exposure at present.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION
(Continued)
In Natural Gas
After very strong predictions of political and supply/demand
factors supporting firming of prices
for natural gas, the price actually declined due to unseasonably
warm winters that left storage
stocks high. In the spring and summer of 1995, the west coast gas
prices plummeted to 20 year
lows. This, coupled with declines in production from existing
zones, created severe
revenue/expense imbalances for the Company.
Prices began a recovery in the fall of 1995 but are still weak
compared to two years ago.
In Gold
The gold price has remained relatively stable as a physical use
commodity and does not seem
to function significantly as a financial instrument to the extent
it did formerly. For instance,
international crises do not affect the price substantially. For
some years, physical consumption
demand has exceeded the newly mined supplies but selling forward by
producers and sales into
the physical market from central bank hoards has capped any great
price increase.
Recently, two items of note that bode well for improving prices and
even tighter supply/demand
ratio are:
1. In October 1995, Anglo-American of South Africa, LTD.,
operator of the
world's largest gold mines, announced it could no longer
sustain previous
production levels and would begin closing shafts,
restructuring and laying off.
2. The lease rate for borrowing gold which normally stays in
a range of .8% to
1% skyrocketed to its highest rates in history peaking
briefly at 12% in
December 1995, although it has since settled well below
the peak..
It remains to be seen if a rapidly necessary and sustained price
will follow.
The Company has proposed a core and reverse circulation drilling
program for the three most
advanced targets on its Richardson, Alaska lode gold exploration
project. The Company was
actively seeking investment to fund the program prior to the filing
of Chapter 11 petitions. The
purpose was to drill prove reserves at the John Mitchell Lode at
the Democrat Dike and drill
infer geologic resources at the Banner/Buckeye and Buck/ Shamrock
anomalies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
(Continued)
Comparison of Fiscal Years Ended July 31, 1995 and 1994
Revenues
As productive zones depleted and natural gas prices plunged,
Company revenues declined by
35% from $663,960 at July 31, 1994 to $432,377 at July 31, 1995.
Costs and expenses were
reduced similarly and a net loss of $306,844 was recorded in fiscal
1995, slightly more than the
$294,016 loss reported in fiscal 1994.
General and administrative costs declined about 7% from $536,086 in
fiscal 1994 to $498,421
in fiscal 1995. Costs of oil and gas leases increased 35% from
$75,257 in fiscal 1994 to
$116,285 in fiscal 1995.
Financing the revenue decline largely through borrowing increased
interest expense by $24,558
to $65,438 for fiscal 1995 versus $40,880 for fiscal 1994. During
fiscal 1995, the Company
arranged its first loan secured by its reserves. There being no
local institutions making reserve
based loans, the financing was arranged through a west Texas oilman
from his personal
resources. The interest rate was 10%. The six month term was
extended for 90 days through
January 30, 1996. Several plans to sell Company reserves and/or
raise additional investor
capital to pay-off the loan failed. The Company filed voluntary
petitions to reorganize under
Chapter 11 of the Code on January 30, 1996. See further
descriptions in Part I, Item I of the
Form 10-K.
The above loss contributed to a further decline in the gross assets
from $3,852,315 in fiscal 1994
to $3,825,053 in fiscal 1995. Stockholder equity declined more
sharply from $1,931,849 in
fiscal 1994 to $1,713,625 in fiscal 1995.
While natural gas prices remained relatively firm, production
revenue declined from depleting
zones by $142,163 from $476,365 in fiscal 1994 to $334,202 in
fiscal 1995, a drop of 30%.
Costs and Expenses
Costs and expenses soared 32% to $956,376 in fiscal 1994 largely
due to the Company writing
down $252,119 in non-productive oil and gas leases and California
Mining Claims impacted by
the East Mojave Desert National Park Act. G&A rose slightly due to
activities on site at the
Company's gold exploration project at Richardson, Alaska.
Overall, this contributed to a net loss of $294,016, the bulk of
which was for write-off of
California mining claims.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION
(Continued)
Comparison of Fiscal Years Ended July 31, 1994 and 1993
Revenues
Revenues declined mainly from production declines. However large
write-offs of $252,119 in
fiscal 1994 exacerbated the situation creating a loss of $294,016
in fiscal 1994 versus a net profit
of $14,091 in fiscal 1993.
While natural gas prices remained relatively firm, production
declined from depleting zones by
$154,542 from $630,907 in fiscal 1993 to $476,365 in fiscal 1994,
a drop of 25%. Overall
revenue declined form $753,126 in fiscal 1993 to $663,960 in fiscal
1994, a drop of $89,166
or about 12%.
After five consecutive years of asset and net asset gain, the
losses contributed to a drop from
$4,190,116 of gross assets in fiscal 1993 to $3,852,315 in fiscal
1994. Stockholder equity
declined from $2,003,365 in fiscal 1993 to $1,931,849 in fiscal
1994.
Cost and Expenses
Fiscal 1994 saw G & A expenses increase over fiscal 1993 as
management strove to bring
projects to completion or at least produce revenue. This included
additional gold sample efforts
at Richardson, Alaska to reclaim saleable gold as well as useful
data. Frequent equipment
breakdown denied sufficient volume to be processed to produce
either. G & A rose from
$513,660 in fiscal 1993 to $536,086 in fiscal 1994, an increase of
4%. Interest expense
remained about the same.
Comparison of Fiscal Years Ended July 31, 1993 and 1992
Revenues
Due primarily to declined production, sale of natural gas revenues
fell sharply by $377,872 to
$753,126 from the record high of $1,130,998 the previous year, a
drop of 33%. Specifically,
income from gas sales dropped $356,325 to $630,907 from last year's
$987,232 a decrease of
36%.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
(Continued)
Comparison of Fiscal Years Ended July 31, 1993 and 1992 (continued)
Costs and Expenses
During fiscal 1993 the Company made a concerted effort to advance
its two major prospects to
saleable status which inhibited its ability to reduce overhead.
Nevertheless, G & A still
decreased slightly down to $513,660 from $527,960 the previous
year. Interest on loans
increased substantially from $23,359 the previous year to $40,572
in fiscal 1993 and represents
the bulk of the increase in operating costs from $712,859 to
$723,635 in fiscal 1993. Much of
this increase was saved in the form of investment in prospects
which the Company may
recapture at some future date.
Finally, earnings were further impacted by exceptional tax policy
by the State of California.
Reacting to the effect of recessionary economy on state revenues,
California temporarily
suspended NOL and percentage depletion which resulted in higher
state tax rate for the period
amounting to approximately $16,000.
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Tri-Valley Corporation
Bakersfield, California
We have audited the accompanying consolidated balance sheets of
Tri-Valley
Corporation as of July 31, 1995 and 1994, and the related
consolidated statements
of operations, changes in shareholders' equity and cash flows for
each of the
three years in the period ended July 31, 1995. These financial
statements are the
responsibility of the Company's management. Our responsibility is
to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audits to obtain
reasonable assurance about whether the financial statements are
free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes
assessing the accounting principles used and significant estimates
made by
management, as well as evaluating the overall financial statement
presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly in all
material respects, the consolidated financial position of
Tri-Valley Corporation
at July 31, 1995 and 1994, and the results of its consolidated
operations and its
cash flows for each of the three years in the period ended July 31,
1995 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the
Company will continue as a going concern. As discussed in the notes
to the consolidated
financial statements, the Company has experienced significant
operating losses in the past two
fiscal years. Furthermore, the Company is subject to additional
uncertainties, including
significant liquidity concerns, which management expects will be
substantially resolved upon
emergence from bankruptcy. The Company is currently developing a
plan of reorganization.
If a plan of reorganization is not approved by the bankruptcy
court, there is substantial doubt
about the Company's ability to continue as a going concern. In the
event a plan of
reorganization is approved by the bankruptcy court, the reorganized
company plans to adopt
fresh start reporting; however, in the long-term, the reorganized
company's viability will be
dependent upon its ability to achieve successful future operations.
As discussed in the notes to
the consolidated financial statements, the accompanying
consolidated financial statements do not
include any adjustments relating to the recoverability and
classification of recorded asset amounts
or the amounts and classification of liabilities that might be
necessary should the Company be
unable to continue in existence nor do the consolidated financial
statements reflect the
adjustments required by fresh start reporting.
BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION
Bakersfield, California
October 20, 1995, except for Notes 1, 5, 7, 9, 11, & 12
which are dated May 20, 1996
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
July 31,
1995 1994
CURRENT ASSETS
Cash $
228,704 $ 183,478
Accounts receivable, trade (Note 6)
295,340 473,167
Prepaid expenses
10,841 2,519
Total Current Assets
534,885 659,164
PROPERTY AND EQUIPMENT, NET (Notes 1 and 2)
2,915,070
2,796,947
OTHER ASSETS
Deposits
100,241 110,501
Investments in partnerships (Note 1)
(7,152) (7,152)
Goodwill (net of accumulated amortization
of $151,844 at July 31, 1995 and $140,998
at July 31, 1994 (Note 1)
282,009 292,855
Total Other Assets
375,098 396,204
TOTAL ASSETS $
3,825,053 $ 3,852,315
LIABILITIES AND SHAREHOLDERS' EQUITY
July 31,
1995 1994
CURRENT LIABILITIES
Notes and contracts payable (Note 3) $
556,279 $ 226,843
Trade accounts payable
125,370 193,009
Amounts payable to joint venture
participants
419,169 773,363
Advances from joint venture participants
627,811 256,322
Due to related parties
137,300 187,061
Accrued expenses and other liabilities
209,712 246,113
Total Current Liabilities
2,075,641 1,882,711
LONG-TERM PORTION OF NOTES AND
CONTRACTS PAYABLE
35,787 37,755
COMMITMENTS (Note 9)
SHAREHOLDERS' EQUITY
Convertible preferred stock, $1.00 par value:
5,000,000 shares authorized; 300,000
shares subscribed
300,000 300,000
Common stock, $.01 par value:
25,000,000 shares authorized;
7,337,248 and 7,160,284 issued and
outstanding at July 31, 1995 and 1994,
respectively
73,372 71,603
Less: Common stock in treasury, at cost,
156,925 shares
(28,639) (28,639)
Stock options outstanding
191,100 191,100
Capital in excess of par value
3,284,653 3,197,802
Accumulated deficit
(2,106,861) (1,800,017)
Total Shareholders' Equity
1,713,625 1,931,849
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $
3,825,053 $ 3,852,315
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year
Ended July 31,
1995
1994 1993
REVENUES
Sale of oil and gas $ 334,202
$ 476,365 $ 630,907
Sale of oil & gas prospects 25,519
38,224 80,000
Precious metals revenue 9,338
81,078 -
Operator fees 41,952
62,05038,066
Interest income 8,257
6,243 4,153
Other 13,109
- -
432,377
663,960 753,126
COST AND EXPENSES
Leases sold, relinquished & impaired 9,048
252,119 -
Oil and gas leases 116,285
75,257 89,303
General & administrative 498,421
536,086 513,660
Depreciation, depletion & amortization 48,429
52,034 80,100
Interest 65,438
40,880 40,572
737,621
956,376 723,635
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (305,244)
(292,416) 29,491
INCOME TAXES (Note 5) 1,600
1,600 20,200
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (306,844)
(294,016) 9,291
EXTRAORDINARY ITEM - TAX BENEFIT FROM NET
OPERATING LOSS CARRYFORWARD (Note 5) -
- 4,800
NET INCOME (LOSS) $ (306,844)
$ (294,016) $ 14,091
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) before extraordinary item $ (.04)
$ (.04) $ -
Extraordinary item -
- -
NET EARNINGS (LOSS) $ (.04)
$ (.04) $ -
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 7,071,126
6,911,130 6,476,168
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
Capital
in
Stock
Par Excess of
Accumulated Treasury Preferred Options Shareholders'
Shares Value Par Value
Deficit Stock Stock Outstanding Equity
Balance at July 31, 1992 6,444,677 $ 64,447 $2,930,239
$(1,520,092) $ (6,000) $200,000 $191,100 $1,859,694
Issuance of common stock to officers,
directors and employees 55,600 556 29,024
- - - - 29,580
Issuance of common stock to investors - - -
- - 100,000 - 100,000
Net income - - -
14,091 - - - 14,091
Balance at July 31, 1993 6,500,277 65,003 2,959,263
(1,506,001) (6,000) 300,000 191,100 2,003,365
Issuance of common stock to investors660,007 6,600 238,539
- - - - 245,139
Treasury stock (acquired) - - -
- (30,139) - - (30,139)
Treasury stock sold - - -
- 7,500 - - 7,500
Net loss - - -
(294,016) - - - (294,016)
Balance at July 31, 1994 7,160,284 71,603 3,197,802
(1,800,017) (28,639) 300,000 191,100 1,931,849
Issuance of common stock to officers,
directors and employees 141,564 1,415 69,505
- - - - 70,920
Issuance of common stock to investors35,400 354 17,346
- - - - 17,700
Net loss - - -
(306,844) - - - (306,844)
Balance at July 31, 1995 7,337,248 $ 73,372 $3,284,653
$(2,106,861) $ (28,639) $ 300,000 $ 191,100 $1,713,625
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year
Ended July 31,
1995
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (306,844)
$ (294,016) $ 14,091
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation, depletion and amortization 48,429
52,034 80,100
(Increase) decrease in accounts receivable 177,827
53,152 304,133
Decrease (increase) in prepaid expenses (8,322)
7,830 5,599
Decrease (increase) in deposits 10,260
4,740 (30,000)
Increase (decrease) in trade accounts payable (67,639)
6,249 39,018
(Decrease) in amounts payable to joint
venture participants and related parties (402,020)
(116,733) (506,668)
(Decrease) increase in advances from joint
venture participants 371,489
(123,444) 307,963
(Decrease) increase in accrued expenses (9,475)
70,100 37,950
(Decrease) increase in other liabilities (28,861)
35,301 -
(Decrease) increase in income taxes payable
- (15,400)
15,400
Impairment, dry hole and other disposals of property
and equipment 137,667
257,226 1,128
Net Cash Provided (Used) by Operating Activities (77,489)
(62,961) 268,714
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (293,373)
(387,113) (739,396)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt 540,810
5,000 285,223
Principal payments on long-term debt (213,342)
(127,358) (49,000)
Proceeds from issuance of common stock 1,769
6,600 556
Proceeds from issuance of preferred stock -
- 100,000
Purchase of treasury stock -
(30,139) -
Proceeds from issuance of treasury stock -
7,500 -
Additional paid in capital 86,851
238,539 29,025
Net Cash Provided by Financing Activities 416,088
100,142 365,804
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 45,226
(349,932) (104,878)
CASH AT BEGINNING OF YEAR 183,478
533,410 638,288
CASH AT END OF YEAR $ 228,704
$ 183,478 $ 533,410
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year
Ended July 31,
1995
1994 1993
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest Paid $ 65,438
$ 40,880 $ 63,479
Income Taxes Paid $ 1,600
$ 1,600 $ 1,100
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES
Non-cash additions to mineral properties:
Subscription of preferred stock $ -
$ - $ 100,000
Unrestricted common stock exchanged for restricted
common stock used to acquire property and
retire a note payable:
Retirement of note payable -
15,000 -
Treasury shares acquired -
(30,139) -
Treasury shares issued -
7,500 -
TRI-VALLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995, 1994 AND 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Tri-Valley
Corporation is presented to
assist in understanding the Company's financial statements. The
financial statements and
notes are representations of the Company's management, which is
responsible for their
integrity and objectivity. These accounting policies conform to
generally accepted accounting
principles and have been consistently applied in the preparation
of the financial statements.
Business Combinations
The information contained in the financial statements and
accompanying notes is that of Tri-
Valley Corporation with which the subsidiary company (Tri-Valley
Oil & Gas Co.) has been
consolidated.
Chapter 11 Reorganization
On January 30, 1996, Tri-Valley Corporation ("TVC") and its
wholly owned subsidiary, Tri-
Valley Oil & Gas Co. ("TVOG") filed voluntary petitions in the
United States Bankruptcy
Court (the "Bankruptcy Court") for the Eastern District of
California sitting in Fresno seeking
to reorganize under Chapter 11 of the Federal Bankruptcy Code
(the "Code"). The companies
are currently operating as debtors-in-possession under the Code.
The Chapter 11 cases of
TVC and TVOG have been substantially consolidated under TVC, and
TVC continues to file
consolidated tax and SEC reports.
The Company is developing a plan of reorganization. Under this
Plan, when completed and
confirmed, the Reorganized Company, upon emergence from
bankruptcy, will adopt "fresh
start" reporting in accordance with the American Institute of
Certified Public Accountants'
Statement of Position 90-7 ("SOP 90-7") - "Financial Reporting
by Entities in Reorganization
Under the Bankruptcy Code." These financial statements and
notes thereto do not reflect any
adjustment or disclosure since a plan of reorganization has not
been filed and/or confirmed
by the bankruptcy court.
A fall back plan is to sell the producing gas reserves.
Both courses of action provide for full payment of all allowed
administrative and priority
claims and the distribution of shares of common stock in a
reorganized company to unsecured
creditors of the Debtor in satisfaction of their allowed claims.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Chapter 11 Reorganization (continued)
The Company plans to submit a Reorganization Plan to the
Bankruptcy Court on May 24,
1996. There can be no guarantee that a Reorganization Plan will
be confirmed or that the
Company will be able to successfully reorganize.
Since the filing of the Chapter 11 case, the Company has been
authorized to operate their
business as debtors-in-possession. Pursuant to the Code,
transactions outside the ordinary
course of business require the approval, after notice and
hearing, of the Bankruptcy Court and
liabilities arising prior to the filing of the petitions under
Chapter 11 of the Code may not be
paid without prior approval of the Bankruptcy Court.
Pursuant to the orders of the Bankruptcy Court, the Official
Equity Security Holders
Committee of TVC and the Creditors Committee have been appointed
by the U.S. Trustee
with authority to obtain counsel and other professionals whose
fees are being paid by the
Debtor. Reorganization related professional fees are being
recorded as incurred with the first
filing by Debtor's counsel through May 20, 1996 amounting to
$27,000. The Company has
not been advised of any other professional fees at this time.
The accompanying consolidated financial statements have been
prepared on a going concern
basis. As discussed herein, the Company has experienced
significant operating losses in the
last two fiscal years. Furthermore, the Company is subject to
additional uncertainties
including liquidity concerns which management expects will be
substantially resolved upon
emergence from bankruptcy and the consummation of a plan of
reorganization. In the long-
term, the reorganized company's viability will be dependent upon
its ability to achieve
successful future operations.
The consolidated financial statements do not include any
adjustments relating to the
recoverability and classification of recorded asset amounts or
the amounts and classification
of liabilities that might be necessary should the Company be
unable to continue in existence
nor do the consolidated financial statements reflect the
adjustments required by fresh start
reporting. The consolidated financial statements do not reflect
the amount of creditors' claims
filed, the ultimate settlement of liabilities and contingencies
which may be allowed in the
Chapter 11 reorganization cases or the effect of any changes,
including changes in the
Company's operations, which may result from a plan of
reorganization.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Chapter 11 Reorganization (continued)
Transfers of assets, including cash payments, prior to the
commencement of the Chapter 11
cases could be revised by the Bankruptcy Court if they were
determined to constitute
preferential transfers or fraudulent conveyances under certain
sections of the Code. Upon the
reversal of a transaction, the assets returned would be part of
the bankruptcy estate of the
Debtor and would be subject to the claims of the Debtor's
creditors. If any assets are
returned to the Debtor, the entity from which the assets are
recovered would have an
unsecured claim against the debtor in the amount of the value of
the assets transferred by the
Debtor to such entity. Since Pre-petition transfers were in the
ordinary course of business
the Company does not believe any preferential treatment
occurred.
The Chapter 11 filings by the Company operate as an automatic
stay against commencement
or continuation of any judicial, administrative or other
proceedings against the Company; any
act to obtain possession of property of or from the Company; or
any act to create, perfect or
enforce any lien against the Company, any act to obtain
possession of property of the estate
or of property from the estate or to exercise over the property
of the estate.
The consolidated operating results of the Company for the three
years ended July 31, 1995
are not comparable to operations since the filing of bankruptcy
petitions on January 30, 1996.
Cash resources available for existing operations remain
significantly limited. There can be
no assurance that sufficient liquidity can be generated in the
event the plan of reorganization,
once developed and confirmed, is initiated or that successful
operations can be achieved. The
Company's ability to maintain its current level of liquidity
will depend, in part, upon its
ability to achieve improved financial results and its ability,
if such becomes necessary, to sell
assets.
History and Business Activity
Historically an oil and gas exploration and production company
emphasizing the Sacramento
Valley natural gas province, the Company added precious metals
exploration in fiscal 1987.
The Company conducts its oil and gas business primarily through
its 33 year old wholly
owned oil and gas subsidiary, Tri-Valley Oil & Gas Company
(TVOG). TVOG is engaged
in the exploration, acquisition and production of oil and gas
properties. At present, the
precious metals exploration activities are conducted directly by
the parent, Tri-Valley
Corporation (TVC). TVC has traditionally sought acquisition or
merger opportunities within
and without the petroleum and minerals industries.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Accounting
The Company prepares its financial statements using the accrual
basis of accounting in
conformity with generally accepted accounting principles
consistently applied. Oil and gas
and mining activities are recorded using the successful efforts
method of accounting. See
discussion below.
Substantially all of the Company's exploration, development and
production activities are
conducted jointly with others and, accordingly, the financial
statements reflect only the
Company's proportionate interest in such activities.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported
amount of assets and liabilities, and disclosure of contingent
liabilities at the date of the
financial statements, and the reported amount of revenues and
expenses during the reporting
period.
Cash Equivalent and Short-Term Investments
Cash equivalents consist of highly liquid debt instruments such
as certificates of deposit,
commercial paper, and money market accounts purchased with an
original maturity date of
three months or less.
Goodwill
The consolidated financial statements include the net assets
purchased of Tri-Valley
Corporation's wholly owned subsidiary. Net assets are carried at
their fair market value at
the acquisition date. The excess of acquisition costs over the
fair value of assets acquired is
included in and has been allocated to goodwill. Goodwill of
$433,853 is being amortized on
a straight-line basis over 40 years. The carrying amount of
goodwill is evaluated periodically.
Factors used in the evaluation include anticipated cash flows
from operating and non-operating
mineral properties, as the goodwill originally attached to
extractive industry properties. Tri-
Valley Corporation has not established an allowance for the
impairment of goodwill which
may be realized should the Company be acquired or merged with
another organization.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Drilling Agreements/Joint Ventures
Tri-Valley frequently participates in drilling agreements
whereby it acts as operator of drilling
and producing activities. As operator, TVOG is contingently
liable for the activities of these
ventures. The Company owns a carried interest and/or overriding
royalty interest in such
ventures, earning a working interest at payout.
Receivables from and amounts payable to these related parties
(as well as other related
parties) have been segregated on the accompanying financial
statements. Transactions with
these parties are within the ordinary course of business.
Oil and Gas Property and Equipment (Successful Efforts)
The Company accounts for its oil and gas exploration and
development costs on the successful
efforts method. Under this method, costs to acquire mineral
interests in oil and gas
properties, to drill and complete exploratory wells that find
proved reserves and to drill and
complete development wells are capitalized. Exploratory
dry-hole costs, geological and
geophysical costs and costs of carrying and retaining unproved
properties are expensed when
incurred. Depletion, depreciation and amortization of oil and
gas producing properties are
computed on an aggregate basis using the units-of-production
method.
The net capitalized costs of proved oil and gas properties are
limited to the aggregate
undiscounted future net revenues related to such properties. If
net capitalized costs exceed the
undiscounted future net revenues, the excess will be charged to
operations. At July 31, 1995
and 1994, no such excess existed.
Upon the sale of oil and gas reserves in place, costs less
accumulated amortization of such
property are removed from the accounts and resulting gain or
loss on sale is reflected in
operations. Upon abandonment of properties, the reserves are
deemed fully depleted and any
unamortized costs are recorded in the statement of operations
under leases sold, relinquished
and impaired.
Mineral Property
All costs related to mineral properties with development
potential, including mineral claim
acquisition costs and exploration and development expenditures
are deferred until the related
mineral claims are abandoned, sold or achieve commercial
production. At that time, the costs
will be either amortized against income from future mining
operations or written off.
Grassroots exploration costs are charged to expense as incurred.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mineral Property
The amount shown for mineral properties and development
represents costs to date and does
not necessarily reflect present or future values. The full
recovery of the above mentioned
deferred cost depends on a combination of different factors,
including (i) future metal prices
(ii) the results of future exploration, and discovery and
development of ore reserves and (iii)
to the extent necessary, the procurement of additional capital
and financing to carry out future
activities. The carrying amount of mineral properties, proved
and unproved, is evaluated at
least annually and reduced if these properties are impaired.
Capitalization of Interest
Interest cost is capitalized on construction and development
programs until placed into
operation.
Properties and Equipment
Property and equipment are depreciated using the straight-line
method over the following
estimated useful lives:
Office furniture and fixtures 3 - 7 years
Building 40 years
Leasehold improvements are amortized over the life of the lease
(3 years).
Maintenance and repairs, which neither materially add to the
value of the property nor
appreciably prolong its life, are charged to expense as
incurred. Gains or losses on
dispositions of property and equipment other than oil and gas
are reflected in operations.
Concentration of Credit Risk
The Company sells oil, gas and natural gas liquids to various
oil and gas purchasers primarily
in the northern California region. Credit is extended based on
an evaluation of the customer's
financial condition, and generally collateral is not required.
Transactions with major
customers are discussed in detail in Note 6.
The Company places its temporary cash investments with high
credit quality financial
institutions and limits the amount of credit exposure to any one
financial institution.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
On January 1, 1994, the Company began accounting for income
taxes in accordance with
SFAS No. 109 which became effective for the year ended July 31,
1994. There was no
material affect on the financial statements upon adoption.
Pursuant to SFAS No. 109, income
taxes are provided based on the liability method of accounting.
The provision for income
taxes is based on pretax financial accounting income. Deferred
tax assets and liabilities are
recognized for future expected tax consequences of temporary
differences between income tax
and financial reporting, and principally, relate to differences
in the tax bases of assets and
liabilities and their reported amounts, using enacted tax rates
in effect for the year in which
differences are expected to reverse. If it is more likely than
not that some portion or all of
a deferred tax asset will not be realized, a valuation allowance
is recognized.
Net Income (Loss) Per Common Share
The calculation of net income/loss per common share is based on
the weighted average
number of common stock shares outstanding during each period.
The effect of convertible
preferred stock on the net income/loss per share ratio is
considered anti-dilutive and was not
included in the computation of earnings per common share for any
of the three years
presented.
Reclassification
Certain amounts in the financial statements have been
reclassified to be consistent and
comparable from year-to-year.
NOTE 2 - PROPERTY AND EQUIPMENT
Oil and gas properties, and equipment and fixtures consist of
the following:
July 31,
1995 1994
Oil and Gas - California
Proved properties, net of accumulated
depletion of $196,741 at July 31, 1995
and $178,007 at July 31, 1994 $
248,631 $ 276,390
Unproved properties, net of valuation
provision at July 31, 1995 and 1994(*)
646,692 722,416
Total Oil and Gas Properties
895,323 998,806
A summary of other property and equipment follows:
Mining prospects(*)
1,958,273 1,720,205
Land
11,281 11,281
Building net of accumulated depreciation
of $3,384 at July 31, 1995 and $2,257 at
July 31, 1994
41,740 42,869
Office equipment and leasehold
improvements net of accumulated
depreciation of $81,241 at July 31,
1995 and $79,133 at July 31, 1994
8,453 23,786
Total Other Property and Equipment
2,019,747 1,798,141
PROPERTY AND EQUIPMENT (NET) $
2,915,070 $ 2,796,947
(*)Certain unproved oil and mining properties were considered to
be impaired at July
31, 1995 and 1994. Leases sold, relinquished and impaired
expense for the year
ended July 31, 1995 and 1994, was $9,048 and $252,119,
respectively. Properties
were evaluated and those that have been drilled unsuccessfully
or which management
does not plan to drill or mine have been recorded as impaired.
NOTE 3 - NOTES AND CONTRACTS PAYABLE
Repetition long-tern debt included in Estimated Liabilities
Subject to Chapter 11
Reorganization Proceedings at July 31, 1995 and 1994 is
summarized below:
July 31,
1995 1994
Note payable to Estate of John R. Mitchell
dated April 1, 1991, interest at 12.00%,
July 31, 1995 and 1994, unsecured;
monthly payments of $1,000 plus
interest at 12.00% on the unpaid
principal. $
9,000 $ 12,000
Note payable to California Republic Bank dated
January 16, 1993, at 10.15% secured by 1991
Chevy Blazer; payable in monthly
installments of $489 including interest.
- 2,749
Note payable to Valliwide Bank dated
October 26, 1992; unsecured; variable
interest rate; 1% greater than West Coast
Prime Rate (7.25% at July 31, 1994);
monthly payments are $2,750
principal and accrued interest. Stated
annual percentage rate is currently 8.25%.(*)
- 13,761
Note payable to Valliwide Bank dated
March 24, 1993; unsecured; variable
interest rate; 1% greater than West Coast
Prime Rate (7.25% at July 31, 1994);
monthly payments are $3,000
principal and accrued interest. Stated
annual percentage rate is currently 8.25%.
Renewed July 15, 1994 and extended to
March 15, 1995.(*)
- 26,505
Note payable to Valliwide Bank dated
December 20, 1993; unsecured; variable
interest rate; 1% greater than West Coast
Prime Rate (7.25% at July 31, 1994);
monthly payments are $2,030 principal
and accrued interest. Stated annual percentage
rate at 8.25%.(*)
- 35,014
NOTE 3 - NOTES AND CONTRACTS PAYABLE (Continued)
July 31,
1995 1994
Note payable to Valliwide Bank dated
April 8, 1994; unsecured; variable interest
rate; 1% greater than West Coast Prime
Rate (7.25% at July 31, 1994);
monthly payments are $3,000 principal
and accrued interest. Stated annual
percentage rate at 8.25%.(*)
- 39,000
Note payable to National Bank of Alaska dated
August 27, 1992; secured by property; payable
in monthly installments of $539 including
interest. Interest rate at 12.00%, July 31,
1995 and 1994.
27,255 30,569
Note payable to Bandera Land Company dated
December 4, 1992; unsecured; interest at
10.0%, July 31, 1995 and 1994; interest only
payable on outstanding balance.
17,950 15,000
Note payable to Rudolph C. or Muriel T. Hudson
dated May 27, 1993; unsecured; interest at
12%, monthly interest payable with principal
balance paid in full May 27, 1994.
- 50,000
Note payable to Union Bank dated December 18,
1992; secured by CD's; variable interest rate at
2.5% greater than West Coast Prime Rate
(7.25% July 31, 1994); interest only payable
on outstanding balance. Stated annual percentage
rate at 9.75%.
- 40,000
Note payable to Edgar Moss dated February 22,
1995; unsecured; interest at 7.20%, monthly
interest payable with principal balance due
August 22, 1995. Balance plus interest remain
outstanding at October 20, 1995, the audit
report date.
16,000 -
NOTE 3 - NOTES AND CONTRACTS PAYABLE (Continued)
July 31,
1995 1994
Note payable to Laurence B. Flood dated
July 19, 1995; unsecured; interest at 10.00%,
monthly interest payable in cash or Tri-
Valley Corporation unregistered common
stock at $.30 per share, principal balance
due July 19, 1999.
15,000 -
Note payable to Frank Agar dated April 20,
1995; secured by properties; interest at
10.00%; quarterly interest payable with
principal balance due October 18, 1995.
100,000 -
Note payable to Frank Agar dated May 5,
1995; secured by properties; interest at
10.00%; quarterly interest payable with
principal balance due November 1, 1995.
400,000 -
Note payable to Imperial Premium Finance,
Inc., dated June 21, 1995; secured by
contractual policy; interest at 12.00%;
payable in monthly installments of
$654 including interest.
6,861 -
592,066 264,598
Less current portion
556,279 226,843
Long-Term Portion of Notes and Contracts Payable $
35,787 $ 37,755
NOTE 3 - NOTES AND CONTRACTS PAYABLE (Continued)
Maturities of long-term debt for the five years succeeding July
31, 1995 are as follows:
July 31,
1996 $
556,279
1997
6,468
1998
6,468
1999
6,468
2000
16,383
Thereafter
-
$
592,066
(*) Line of Credit - As of July 31, 1995 and 1994, there was
$0 and $114,280, respectively,
outstanding under the line of credit.
As a result of the Chapter 11 filing, certain of the Company's
pre-petition debt and lease
obligations are in default under the terms of the applicable
loan and lease agreements and note
agreements.
NOTE 4 - RELATED PARTY TRANSACTIONS
The following were known to the Company to be beneficial owners
of 5% or more of the
Company's outstanding common stock at July 31, 1995:
Ownership
Shares
Percentage
Edgar L. Moss
482,857 6.6%
F. Lynn Blystone
431,998 5.9%
Victor Millar
400,000 5.5%
Tri-Valley is a general partner and operator of the Tri-Valley
Oil and Gas exploration
Programs 1971-1 and Martins-Severin Partnerships. Income derived
from these activities
follows:
Year Ended July 31,
1995
1994 1993
Partnership income $ 166,731
$ 267,124 $ 393,227
Operator fees 19,726
33,097 29,667
$ 147,005
$ 234,027 $ 363,560
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
On December 4, 1992, the Company entered an agreement to borrow
$15,000 from Bandera
Land Company which is owned by F. Lynn Blystone and other
members of the Blystone
Family. Interest at 10.0% is payable on the outstanding balance
with no stated due date. The
balance outstanding at July 31, 1995 and 1994, was $17,950 and
$15,000, respectively
On July 19, 1995, the Company entered an agreement to borrow
$15,000 from Laurence B.
Flood, a shareholder of the Company. Interest at 10% is payable
every two months in cash
or Tri-Valley Corporation unregistered common stock at $.30 per
share at the sole discretion
of the Company. The note matures on July 19, 1999. Other terms
of the agreement involve
the following:
Principal amount convertible into TVC unregistered common
stock at $.30 per
share at any time.
Options on 15,000 shares of TVC unregistered shares at
$.50 per share
exercisable through July 19, 1999.
TVC may force exercise of said options if the market
quotes a bid price of
$1.00 per share or higher for at least twenty consecutive
trading days.
On February 25, 1995, the Company's Board of Directors
authorized F. Lynn Blystone to
receive 100,000 shares of Tri-Valley Corporation common stock at
$.50 per share and to
reduce F. Lynn Blystone's deferred compensation payable account
by the commensurate
dollar amount.
Due to related parties of $137,300 and $187,061 at July 31, 1995
and 1994, respectively,
consist of payroll payable to F. Lynn Blystone and other
employees of the Company.
NOTE 5 - INCOME TAXES
At July 31, 1995, the Company had available net operating loss
carryforwards for financial
statement and federal income tax purposes of approximately
$1,600,000. These loss
carryforwards expire between 1998 and 2009.
The Company has reported income tax losses of approximately
$1,600,000 in prior years. In
general, income tax losses are carried forward to future years
to reduce future income taxes.
A valuation allowance of approximately $700,000 has been
provided to offset the benefit of
approximately $700,000 from the remaining $1,600,000 loss
carryforwards. This valuation
allowance is necessary because at July 31, 1995, the available
benefits are more likely than
not to expire before they can be used. There was not a material
change in the tax benefit or
the valuation allowance from 1994 to 1995.
NOTE 5 - INCOME TAXES (Continued)
In general, Section 382 of the Internal Revenue Code includes
provisions which severely
limits the amount of net operating loss carryforwards and other
tax attributes that may be used
annually in the event that a greater than 50% ownership change
(as defined) takes place in
any three year period. As of July 31, 1995, the Company had not
experienced such a change
for purposes of Section 382, however, it is feasible that a
change in ownership may occur
once a plan of reorganization is finalized and confirmed by the
court which could limit the
use of loss carryforwards in future periods.
In the past, the Company has been unable to utilize all of the
statutory percentage depletion
available for Federal income tax purposes. At July 31, 1995,
approximately $520,000 of
unused statutory percentage depletion is available to reduce
taxable income in future periods.
There is no expiration date for this carryover.
Investment tax credits, which have been insignificant, have been
available to reduce federal
income taxes in certain years where there was taxable income.
NOTE 6 - MAJOR CUSTOMER
Oil and Gas
The Company received in excess of 10% of its revenue from
various sources (oil and gas
sales and mineral royalties) as follows:
Company
A B
C D
Year Ended:
July 31, 1993 149,537 224,306
209,998 *
July 31, 1994 * 350,249
78,929 *
July 31, 1995 * 213,284
65,693 52,190
* Not a major source during the year.
Revenues are received from Company B under contractual agreement
and management does
not anticipate a termination of this relationship. Accounts
receivable at July 31, 1995, 1994,
and 1993 were $9,524, $56,635, and $31,017, respectively.
All oil and gas sales have occurred in the northern California
gas market.
NOTE 6 - MAJOR CUSTOMER (Continued)
Precious Metals
The Company received all of its precious metals revenue from the
following sources:
Year Ended: Company A
Company B
July 31, 1993 *
*
July 31, 1994 *
81,078
July 31, 1995 9,338
*
*Not a major source during the year.
NOTE 7 - EMPLOYEE OVERRIDING ROYALTY PAYABLE
From time to time the Company negotiates an overriding royalty
for the benefit of its
employees on plays it sells to third parties. The override is
effective only on producing
properties. Distribution was originally determined by the
Tri-Valley CEO, but in 1992 and
1993, the compensation committee of the Board of Directors of
the Company determined
shares of specific officers and the CEO determined the rest.
Subsequent to July 31, 1990, the
Company and the Company's employees participated in one of the
major gas discoveries in
the Sacramento Valley in some years. From an old farmout, TVOG
retained a 2% ORRI and
the employee's retained a 1.5% ORRI.
Further gas discoveries in 1990, 1991, 1993 and 1995 temporarily
increased the employee
override revenue. As industry conditions limited the amount of
interest the Company could
keep in its deals, the employee override became a less effective
bonus program and
management terminated it on new leases. An employee/officer of
the Company instituted legal
proceedings to claim an additional share of undistributed
employer overriding royalty from
the period September 1991 to August 1992. This case was settled
prior to the bankruptcy
filing for an amount immaterial to the Company (see Note 9).
The financial statements at July 31, 1995 and 1994, include a
liability for unpaid employee
overriding royalty of $77,884 and $68,315, respectively. This
liability will be eliminated in
the second quarter of fiscal year 1996, when the case was
settled for a diminimus amount.
The program was terminated on January 1, 1996, with an effective
date of December 1, 1995
which will result in addition to income of $77,884 in the second
quarter ending January 31,
1996.
NOTE 8 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS AND
CLASSES OF
Products or Services
The company's operations are classified into two principal
industry segments. Following is
a summary of segmented information for 1995, 1994, and 1993:
Precious
Oil & Gas
Metals Total
Year Ended July 31, 1995
Total Revenues $ 423,039 $
9,338 $ 432,377
Income (Loss) Before Taxes $ (314,582) $
9,338 $ (305,244)
Income Taxes 1,600
- 1,600
Net Income (Loss) $ (316,182) $
9,338 $ (306,844)
Property, Plant and
Equipment Additions, Net $ (97,914) $
191,663 $ 93,749
Depreciation, Depletion and
Amortization $ 48,429 $
- $ 48,429
Total Assets $ 2,145,038 $
1,680,015 $ 3,825,053
Year Ended July 31, 1994
Total Revenues $ 582,882 $
81,078 $ 663,960
Income (Loss) Before Taxes $ (373,494) $
81,078 $ (292,416)
Income Taxes 1,600
- 1,600
Net Income (Loss) $ (375,094) $
81,078 $ (294,016)
Property, Plant and
Equipment Additions, Net $ (93,310) $
(8,653) $ (101,963)
Depreciation, Depletion and
Amortization $ 52,034 $
- $ 52,034
Total Assets $ 2,363,963 $
1,488,352 $ 3,852,315
NOTE 8 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS AND
CLASSES OF (Continued)
Products or Services (Continued)
Precious
Oil & Gas
Metals Total
Year Ended July 31, 1993
Total Revenues $ 753,126 $
- $ 753,126
Income Before Taxes 29,491
- 29,491
Income Taxes (15,400)
- (15,400)
Net Income $ 14,091 $
- $ 14,091
Property, Plant and
Equipment Additions, Net $ 300,114 $
422,602 $ 722,716
Depreciation, Depletion and
Amortization $ 80,100 $
- $ 80,100
Total Assets $ 2,693,110 $
1,497,006 $ 4,190,116
NOTE 9 - COMMITMENTS
On May 2, 1992 the Board of Directors approved the following
compensatory stock option
plans for directors, officers and employees:
Outside directors - awarded purchase options for up to
30,000 shares each at
$.50 per share and an additional 40,000 shares each at $.55
per share, with an
expiration date of September 14, 1995. The expiration date
was extended to
September 14, 1997, by the Board of Directors.
Officer - awarded purchase options for up to 100,000
shares at $.50 per share.
On August 29, 1992, the Board of Directors of Tri-Valley
Corporation awarded to Blystone,
an employee, the option to purchase 100,000 shares of Tri-Valley
Corporation stock at $.50
per share with such option price increasing to $.60 per share on
any outstanding options
effective September 14, 1992, and to $.75 per share on any
outstanding options on September
14, 1994. Any stock purchases through this option will be
unregistered common stock and
subject to Rule 144. The option will be effective only while
Blystone is employed by Tri-
Valley and shall terminate in any event, September 14, 1997.
NOTE 9 - COMMITMENTS (Continued)
Pursuant to corporate resolutions, the Board of Directors
granted the president authority to
sell the following unregistered stock of Tri-Valley Corporation
for not less than the amount
indicated. All resolutions were approved in prior years, except
Authority V which occurred
during the year ended July 31, 1995. As of July 31, 1995, the
following shares remained
under authority to sell:
Shares Minimum
Shares
Authority Approved Price
Remaining
I 1,000,000 $ .35
47,311
II 1,000,000 $ .55
-
III 1,000,000 $ .50
-
IV 1,000,000 $ .50
440,823
V 1,000,000 $ .25
1,000,000
The Company conducts its operations from leased facilities. The
lease, which is for one year,
is classified as an operating lease and expires on July 1, 1996,
with two one year options to
renew.
The following is a schedule, by years, of future minimum rental
payments required under this
lease as of July 31, 1995:
July 31, 1996 $ 14,850
Total minimum payments required $ 14,850
In February, 1991, Tri-Valley signed an agreement with the
Moscow based Central Research
Institute of Geological Prospecting for Base and Precious Metals
(TsNIGRI). The agreement
called for TsNIGRI to demonstrate their proprietary technology
for evaluating large areas of
covered sub-arctic terrain for precious metals on Tri-Valley's
then 64 square mile lode gold
claim block at Richardson, Alaska.
The agreements called for Tri-Valley to pay the Institute in
convertible preferred stock of Tri-
Valley Corporation. TsNIGRI has earned, and Tri-Valley has paid
200,000 shares for FY
92/93 work and paid another 100,000 shares for FY 93/94 work
upon receiving the report
of most recent activity.
The Company is paying TsNIGRI $1,500 per month as compensation
for not converting the
preferred stock into common stock.
NOTE 9 - COMMITMENTS (Continued)
Litigation
Unless otherwise noted, since the filing by the Company of the
Chapter 11 petitions,
prosecutions of all pre-petition claims against the Company have
been stayed by the automatic
stay imposed by the Code. Leave to lift the stay and allow the
actions to proceed may be
sought from the Bankruptcy Court by the Company or other
affected parties.
In general, the following lawsuits (other than those that have
been settled) seek damages that,
in management's opinion, would constitute only a general
unsecured claim against the
Company. However, in certain cases, the plaintiffs could claim
that their recovery, if any,
would be entitled to priority treatment as an administrative
claim. Once finalized,
management believes that if the Reorganization Plan is
confirmed, none of the following
lawsuits will have a material effect on the reorganized
company's financial position and
results of operations.
There is presently a lawsuit pending between the Company and
Carl Mitchell for payment of
advance royalties allegedly due the Estate of John R. Mitchell
on the Richardson, Alaska
property as well as a reimbursement of certain expenses
allegedly incurred for the benefit of
the Richardson property. The Company disputes the claim. The
amount claimed is not
material to the Company.
Subsequent to December 31, 1995, a lawsuit between the Company
and Helen L. O'Brien,
former TVC\TVOG vice president and secretary-treasurer
concerning her claim for additional
compensation from the Employee Overriding Royalty Program was
settled (see Note 7). The
settlement amount is not material to the Company.
In fiscal year 1995, the Company settled a dispute with
Armstrong Petroleum Corporation
without commencement of litigation in exchange for the transfer
of an interest which was not
material to the Company.
NOTE 10 - COMMON STOCK
On April 21, 1995, the Company's Board resolved that common
stock of Tri-Valley
Corporation be increased from 15,000,000 shares authorized to
25,000,000 shares. Shares
may be issued with approval of the Company's Board of Directors.
NOTE 11 - NOTE PAYABLE - OPERATING LOAN
On April 20, 1995, the Company borrowed $100,000 from Frank
Agar. On May 5, 1995,
the Company borrowed an additional $400,000. Proceeds of these
borrowings were used to
pay down the Company's outstanding line of credit and other
liabilities. The remaining
proceeds were used to fund current operations. Interest is
payable quarterly at 10% of the
outstanding balance. The proved oil and gas properties of the
Company have been used to
secure the notes. On September 25, 1995, the Company borrowed an
additional $120,000.
The note dated April 20, 1995 matured on October 18, 1995. The
two additional notes
matured on November 1, 1995.
A 90 day extension was granted by Frank Agar on November 1,
1995, and as of that date
negotiations were ongoing. The Company pursued several
alternatives to satisfy these
obligations prior to seeking protection under Chapter 11 of the
Bankruptcy Code. Once
negotiations with the lender failed and reasonable offers for
the properties owned by the
Company did not fully materialize the Company was forced to file
the voluntary petitions.
NOTE 12 - GOING CONCERN
The Company's financial statements have been presented on the
basis that it is a going
concern, which contemplates the realization of assets and the
satisfaction of liabilities in the
normal course of business. The Company has reported recurring
net losses for the years
ended July 31, 1995 and 1994. As a result, an accumulated
deficit of $2,106,861 has been
reported in the stockholders' equity section at July 31, 1995.
Furthermore, the Company is subject to additional uncertainties,
including significant liquidity
concerns, which management expects will be substantially
resolved upon emergence from
bankruptcy. The Company is currently developing a plan of
reorganization. If a plan of
reorganization is not approved by the bankruptcy court, there is
substantial doubt about the
Company's ability to continue as a going concern. In the event
a plan of reorganization is
approved by the bankruptcy court, the reorganized company plans
to adopt fresh start
reporting; however, in the long-term, the reorganized company's
viability will be dependent
upon its ability to achieve successful future operations. The
accompanying consolidated
financial statements do not include any adjustments relating to
the recoverability and
classification of recorded asset amounts or the amounts and
classification of liabilities that
might be necessary should the Company be unable to continue in
existence nor do the
consolidated financial statements reflect the adjustments
required by fresh start reporting.
NOTE 13 - SUBSEQUENT EVENTS - OIL AND GAS RESERVES
Subsequent to July 31, 1995, Tri-Valley drilled, completed and
placed on production a well
known as Martins-Severin #5. The reserves from this well were
evaluated and estimated as
an addendum to the Company's reserve report prepared by
independent engineering
consultants. Based on the reserve report (unaudited), the
estimated recovery from the new
well is a significant addition to gas reserves determined at the
effective valuation date. The
following represents the estimated reserves for Martins-Severin
#5 well at July 31, 1995, had
the well been completed by that date (unaudited):
Net Proved
Developed Reserves
Future
Category Gas Mcf Liquids bbls Net
Income Present Value
Producing
Company
Operated 329,300 - $
319,500 $ 211,000
Since the above report, one zone of this multizone well has been
placed on production at a
steady 3 million cubic feet per day which could enable the above
reserves future net income
and present value to be substantially increased.
NOTE 14 - PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be
Disposed of (SFAS 121)
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statement of
Financial Accounting Standards (SFAS) No. 121. This statement
requires that long-lived
assets be reviewed for impairment whenever events or changes in
circumstances indicate that
the carrying amount of an asset may not be recoverable. It
establishes guidelines for
determining recoverability based on future net cash flows from
the use of the asset and for
the measurement of the impairment loss. Impairment loss under
SFAS No. 121 is calculated
as the difference between the carrying amount of the asset and
fair value. Any impairment
loss is recorded in the current period in which the recognition
criteria are first applied and
met. Under the Company's capitalization methods, the Company
periodically assessed its
proved properties for impairments by comparing the aggregate net
book carrying amount of
all proved production properties with their aggregate future net
cash flows. The new statement
requires that the impairment review be performed on the lowest
level of asset grouping for
which there are identifiable cash flows. In the case of the
Company, this will result in a
property by property impairment review.
Management is currently assessing the impact, if any, which this
new accounting standard,
when adopted in 1996, will have on the Company.
TRI-VALLEY CORPORATION
SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS
PRODUCING
ACTIVITIES (UNAUDITED)
The following estimates of proved oil and gas reserves, both
developed and undeveloped,
represent interests owned by the Company located solely in the
United States. Proved reserves
represent estimated quantities of crude oil and natural gas which
geological and engineering data
demonstrate to be reasonably certain to be recoverable in the
future from known reservoirs under
existing economic and operating conditions. Proved developed oil
and gas reserves are reserves
that can be expected to be recovered through existing wells, with
existing equipment and
operating methods. Proved undeveloped oil and gas reserves are
reserves that are expected to
be recovered from new wells on undrilled acreage, or from existing
wells for which relatively
major expenditures are required for completion.
Disclosures of oil and gas reserves which follow are based on
estimates prepared by independent
engineering consultants for the three years ended July 31, 1995.
Such analyses are subject to
numerous uncertainties inherent in the estimation of quantities of
proved reserves and in the
projection of future rates of production and the timing of
development expenditures. These
estimates do not include probable or possible reserves.
These estimates are furnished and calculated in accordance with
requirements of the Financial
Accounting Standards Board and the Securities and Exchange
Commission (SEC). Because of
unpredictable variances in expenses and capital forecasts, crude
oil and natural gas price
changes, largely influenced and controlled by U.S. and foreign
government actions, and the fact
that the bases for such estimates vary significantly, management
believes the usefulness of these
projections is limited. Estimates of future net cash flows
presented do not represent
management's assessment of future profitability or future cash
flows to the Company.
Management's investment and operating decisions are based upon
reserve estimates that include
proved reserves prescribed by the SEC as well as probable reserves,
and upon different price
and cost assumptions from those used here.
It should be recognized that applying current costs and prices and
a 10 percent standard discount
rate does not convey absolute value. The discounted amounts arrived
at are only one measure
of the value of proved reserves.
Capitalized costs relating to oil and gas producing activities and
related accumulated depletion,
depreciation and amortization at July 31 are as follow:
Year Ended
July 31,
1995
1994 1993
Aggregate capitalized costs:
Proved properties $ 445,372 $
454,397 $ 445,161
Unproved properties 646,692
722,416 825,502
Accumulated depletion,
depreciation and amortization (196,741)
(178,007) (147,945)
Net capitalized costs $ 895,323 $
998,806 $ 1,122,718
The following sets forth costs incurred for oil and gas property
acquisition, exploration and
development activities, whether capitalized or expensed, during
1995:
Year Ended
July 31,
1995
1994 1993
Acquisition of producing properties
and productive and non-productive
acreage $ 45,748 $
34,855 $ 86,067
Exploration (275)
29,693 30,700
Development -
- -
$ 45,473 $
64,548 $ 116,767
Results of operations from oil and gas producing activities
The results of operations from oil and gas producing activities are
as follows:
Year Ended
July 31,
1995
1994 1993
Sales to unaffiliated parties $ 334,201 $
440,776 $ 630,907
Production costs (116,285)
(75,257) (89,303)
Depletion, depreciation and
amortization (37,582)
(41,189) (80,100)
180,334
324,330 461,504
Income tax expenses (58,438)
(118,761) (163,237)
Results of operations from
activities before extraordinary
items (excluding blending
operations, corporate overhead
and interest costs) $ 121,896 $
205,569 $ 298,267
Changes in estimated reserve quantities
The net interest in estimated quantities of proved developed and
undeveloped reserves of crude
oil and natural gas at July 31, 1995, 1994 and 1993 and changes in
such quantities during each
of the years then ended, were as follows:
1995 1994
1993
Oil Gas Oil Gas
Oil Gas
(BBL) (MCF) (BBL) (MCF)
(BBL) (MCF)
Proved developed and
undeveloped reserves:
Beginning of year 378 2,233,805 253
2,048,846 1,069 2,816,986
Revisions of previous
estimates 96 (301,552) 212
111,296 (502) (401,654)
Extensions, discoveries
and other additions - 203,392 -
337,772 - -
Production (107) (247,414) (87)
(264,109) (314) (366,486)
End of year 367 1,888,231 378
2,233,805 253 2,048,846
Proved developed reserves:
Beginning of year 378 2,233,805 253
2,048,814 1,069 2,816,989
End of year 367 1,888,231 378
2,233,805 253 2,048,846
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves
A standardized measure of discounted future net cash flows is
presented below for the three
years ended July 31, 1995.
The future net cash inflows are developed as follows:
(1) Estimates are made of quantities of proved reserves and the
future periods during
which they are expected to be produced based on year-end
economic conditions.
(2) The estimated future production of proved reserves is priced
on the basis of year-end
prices.*
(3) The resulting future gross revenue streams are reduced by
estimated future costs to
develop and to produce proved reserves, based on year end cost
estimates.
(4) The resulting future net revenue streams are reduced to
present value amounts by
applying a ten percent discount.
*- In July 1995, when Tri-Valley's reserves were calculated, west
coast dry gas prices dipped
briefly to a 20 year low.
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves
(Continued)
Disclosure of principal components of the standardized measure of
discounted future net cash
flows provides information concerning the factors involved in
making the calculation. In
addition, the disclosure of both undiscounted and discounted net
cash flows provides a measure
of comparing proved oil and gas reserves both with and without an
estimate of production
timing. The standardized measure of discounted future net cash
flow relating to proved reserves
reflects income taxes.
1995
1994 1993
Future cash in flows $ 2,097,633 $
4,120,625 $ 3,530,211
Future production and
development costs (713,275)
(1,007,555) (1,216,964)
Future income tax expenses (84,761)
(468,662) (206,818)
Future net cash flows 1,299,597
2,644,408 2,106,429
10% annual discount for
estimated timing of cash
flows 463,826
1,067,381 763,159
Standardized measure of
discounted future net
cash flow $ 835,771 $
1,577,027 $ 1,343,270
Changes in standardized measure of discounted future net cash flow
from proved reserve
quantities
This statement discloses the sources of changes in the standardized
measure from year to year.
The amount reported as "Net changes in prices and production costs"
represents the present
value of changes in prices and production costs multiplied by
estimates of proved reserves as of
the beginning of the year. The "accretion of discount" was
computed by multiplying the ten
percent discount factor by the standardized measure as of the
beginning of the year. The "Sales
of oil and gas produced, net of production costs" is expressed in
actual dollar amounts.
"Revisions of previous quantity estimates" is expressed at year-end
prices. The "Net change in
income taxes" is computed as the change in present value of future
income taxes.
Changes in standardized measure of discounted future net cash flow
from proved reserve
quantities (Continued)
1995
1994 1993
Standardized measure - beginning of year $ 1,577,027 $
1,343,270 $ 1,780,000
Sales of oil and gas produced, net of
production costs (217,916)
(365,519) (541,604)
Revisions of estimates of reserves
provided in prior years:
Net changes in prices and production
costs (779,545)
207,674 (850)
Revisions of previous quantity
estimates (343,769)
(222,590) (801,092)
Extensions, discoveries and improved
recovery 231,867
675,544 -
Accretion of discount (15,794)
200,492 768,289
Net change in income taxes 383,901
(261,844) 138,527
Net increase (decrease) (741,256)
233,757 (436,730)
Standardized measure - end of year $ 835,771 $
1,577,027 $ 1,343,270
PART III
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information, as of July 31, 1995, is furnished
with respect to each director:
Year First
Elected as
Position With
Name of Director Age Director(1) Term Expires
* Company
F. Lynn Blystone 60 1974 August 19
President,
Chief Executive
Officer and
Acting CFO
J. Bruce Carruthers, II(1) 61 1982 August 19
None
Dennis P. Lockhart 48 1982 August 19
None
Terrance L. Stringer 54 1982
August 19 None
Milton J. Carlson 65 1985 August 19
None
Earl H. Beistline 79 1992 August 19
None
Loren J. Miller 50 1992 August 19
None
* - Term as director continues until his successor is duly
elected upon annual shareholders
meeting or duly appointed during the interim.
(1) Resigned, effective January 26, 1996
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(Continued)
The following is a list of Tri-Valley executive officers, their
ages and their positions and
offices, as of July 31, 1995:
Name Age Position and Date
Elected to Position
F. Lynn Blystone 60 President and Chief
Executive Officer, Tri-Valley
Corporation and
Tri-Valley Oil & Gas Company
(October 9, 1981)
Helen L. O'Brien(1) 38 Vice President and
Secretary/Treasurer
(May 2, 1992)
(October 9, 1987)
Tri-Valley Corporation
and Tri-Valley Oil & Gas Co.
(1) On December 4, 1996 Helen O'Brien was terminated for cause.
TRI-VALLEY CORPORATION
DIRECTORS AND EXECUTIVE OFFICERS
JULY 1995
F. Lynn Blystone - 60 President and Chief
Executive Officer 1974
Tri-Valley Corporation,
and its wholly
owned subsidiary,
Tri-Valley Oil & Gas
Co., Bakersfield,
California
Mr. Blystone became president of Tri-Valley Corporation in
October, 1981, and was
nominally vice president from July to October, 1981. His
background includes institution
management, venture capital and various management functions
for a mainline pipeline
contractor including the Trans Alaska Pipe-line Project. He
has founded, run and sold
companies in several fields including Learjet charter,
commercial construction, municipal
finance and land development. He is also president of a family
corporation, Bandera Land
Company, Inc., with real estate interests in Kern, Riverside
and Orange Counties California.
A graduate of Whittier College, California, he did graduate
work at George Williams
College, Illinois in organization management. He gives full
time to Tri-Valley.
J. Bruce Carruthers, II - 61 President, Hexagon
Resources (1)1982
Group, S.A., Flagstaff,
Arizona
After 17 years of service with Occidental Oil & Gas
Corporation, Mr. Carruthers took
voluntary early retirement at the end of 1989 to become
president and chairman of the board
of Hexagon Resources, Inc., a mining exploration and
development company chartered in
Nevada, with mining operations in Guyana, Bolivia and
Argentina. At Occidental, he was
director of international trade and responsible for collection
of over $100 million dollars of
Occidental's receivables in its various international
operations through counter trade, which
involved the trading of a wide variety of commodities
worldwide. His career with
Occidental included planning manager for Occidental's world
wide oil and gas activities,
manager of new ventures and manager of oil movements for the
Cano Limo Field in Bogota,
Colombia. Prior to service with Occidental he was president of
Business Information
Display, Inc., a San Diego energy database publisher. Earlier
he worked for Mobil in New
York and Tripoli, Libya in petroleum supply and distribution
and for Texaco's economics
department in New York. A graduate of Princeton University in
geology, he has a master's
degree in mineral economics from Pennsylvania State University.
(1) Resigned, effective January 26, 1996.
Terrance L. Stringer - 54 Executive Vice
President 1982
Huntway Refining
Company
Wilmington, California
Mr. Stringer is responsible for refinery supply, planning and
intermediate product marketing
of Huntway, a NYSE limited partnership with three refineries in
the United States. Prior
to that he was vice president of supply and marketing of Golden
West Refinery in Santa Fe
Springs, California. He was formerly president of several
subsidiaries of Tosco Corporation
including TPFC which purchases, balances and trades gas
supplies for the Avon Refinery,
Toscogen, Inc. which provides co-generation services, Teorco a
heavy oil producer and was
general manager oil, gas and minerals for Tosco Corporation.
Prior to that he spent 9 years
with Standard Oil of California (now Chevron) in finance,
supply and trading including 3
years in the London Crude trading office. He holds a B.Sc. in
chemical engineering from
the University of Illinois and a M.B.A. from UCLA.
Dennis P. Lockhart - 48 President
1982
Heller International
Group, Inc.
Chicago, Illinois
After service as a corporate banking officer of Citibank since
1971, most recently as vice
president in the Central and South America Group responsible
for debt-to-equity conversions,
Mr. Lockhart has become president of Heller International, an
old line firm now owned by
Fuji Bank Group. Heller provides financing in 20 countries.
While with Citibank, Mr.
Lockhart served the bank's international operations in Jedda
and Riyahd, Saudi Arabia;
Athens, Greece; Beirut, Lebanon; and as executive vice
president of Iranian's Bank of
Tehran, Iran. He then served as vice president and regional
executive for corporate banking
in the seven southeastern states and Puerto Rico for Citicorp
(USA) Inc. A graduate of
Stanford University, he has an M.A. from John Hopkins
University.
Milton J. Carlson - 65 Investor, Kalispell,
Montana 1985
Mr. Carlson is a principal in Earthsong Corporation which, in
part, consults on
environmental matters and performs environmental audits for
government agencies and public
and private concerns. Until its merger with another firm, Mr.
Carlson formerly was vice
president and corporate secretary of Union Sugar Company, a
$100 million unit of Sara Lee
Corporation. He was involved in representing industrial end
users of energy through the
California Manufacturers Association as the former chairman of
the CMA steering committee
of the standing energy and environmental committees. Mr.
Carlson was also the energy and
environmental representative with Sara Lee energy advisory
group and monitored related
matters before the California Public Utilities Commission and
Energy Commission as well
as serving as the legislative representative in Sacramento and
Washington, D.C. Mr.
Carlson attended the University of Colorado at Boulder and the
University of Denver.
Loren J. Miller, CPA - 50 Controller
1992
Petro America, Inc.
Long Beach, California
Mr. Miller has served in a treasury and chief financial officer
capacity as vice president
successively of Hershey Oil Corporation, Mock Resources, Inc.,
and McMullen Oil
Company. Prior to that he was vice president and general
manager of Tosco Production
Finance Corporation and formerly a senior auditor with Touche
Ross & Co. He is
experienced in exploration, production, product trading,
refining and distribution as well as
corporate finance. He holds a B.S. in accounting and an M.B.A.
in finance from the
University of Southern California.
Earl H. Beistline, LLD. - 79 Mining Consultant
1992
Fairbanks, Alaska
Dr. Beistline is chairman of the Alaska State Minerals
Commission and Dean Emeritus of
the School of Mineral Industry of the University of Alaska.
Born in Juneau, he has achieved
a special position in Alaska during its transition from
territorial status into statehood. He
has numerous honors from local, state and federal governments,
academia, professional and
civic organizations and the mineral industry. An active miner
in the Central-Circle Mining
District, Dr. Beistline also serves as a director of one of the
state's primary companies,
Usibelli Coal Mines, Inc. He holds a Bachelor of Mining
Engineering, Engineer of Mines
and Honorary Doctor of Law degree from the University of
Alaska.
STAFF
Helen L. O'Brien - 38 Vice President and
Secretary/Treasurer (1)
Tri-Valley Corporation
Beginning May 14, 1987, Mrs. O'Brien joined the Company as
accounting supervisor and
was appointed secretary-treasurer of the Companies on October
9, 1987. Appointed vice
president of the Companies May 2, 1992. An attendee of the
College of DuPage, Illinois,
Mrs. O'Brien became office manager of Colonial Cold Storage and
then administrative
assistant to the co-owner of Ashley's Ltd., a real estate firm
in Chicago, handling all
financial statements, hiring and training of a staff of 78, all
purchasing, etc. She later served
in the accounting division of the Kern County, California
Sheriff's Department and
subsequently with the Certified Public Accountants firm of
Richardson and Ashland.
(1) Terminated for cause December 4, 1996.
Craig M. Lynch, Esq. - 37 House Counsel
Mr. Lynch is a corporation and business litigation attorney
experienced in petroleum,
minerals, real estate and contract law. He is in petroleum
production purchases. Mr. Lynch
holds a B.A. in history and a J.D. in law from Loyola -
Marymount University. He is a
member of the State Bar of California.
ITEM 11 - MANAGEMENT REMUNERATION AND TRANSACTIONS
The following table and the accompanying notes show the
remuneration paid by Tri-Valley
Company during its last fiscal year to all officers and
directors. No executive officer or
director received remuneration exceeding $100,000 during fiscal
1995, and no officer or
director received contingent remuneration during that year.
Capacities
Name of Individual or in which
Cash
Persons in Group Served Compensation
Other Benefits
Executive Officers (4 persons) (1) $ 246,000
$ 100,000 (2)
Directors (6 persons) 4,400
3,360
(1) Mr. F. Lynn Blystone, President and Chief Executive
Officer (TVC); Mrs. Helen L.
O'Brien, Vice President and Secretary/Treasurer, Dr. Tom
Wilson, Vice-President of
Minerals (TVC); and Mr. Robert Cohan, Vice President of
Operations (TVOG) were
the only officers compensated for their services as
officers.
(2) At July 31, 1992, F. Lynn Blystone was employed under
terms of an employment
contract which provided, among other conditions, rights to
severance pay up to
$100,000 in the event of the sale of the Company. In such
event he could, under the
terms and conditions of his contract, be eligible for
severance pay if he were terminated
within twelve months of such sale, or if authority
subsequent to sale were reduced, be
eligible for severance pay if he resigned. This agreement
was approved by the Board
of Directors and ratified by the shareholders.
ITEM 12 - SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Set forth below is certain information concerning persons
who are known by Tri-Valley
Corporation to own beneficially more than 5% of the
Company's voting shares on July
31, 1995:
Name & Address of
Number of Percent
Title of Class Beneficial Owners
Shares Owned of Class
Common stock, $.01 par value Edgar L. Moss
482,857 6.6%
Common stock, $.01 par value F. Lynn Blystone
431,998 5.9%
Common stock, $.01 par value Victor Millar
400,000 5.5%
(b) The following table sets forth, as of July 31, 1995,
information concerning the
beneficial ownership of equity securities by all directors
and officers of the Company
as a group:
Common Stock
Name of Beneficial Owner $.01 Par Value
Percent of Class
All directors and officers
774,420
10.15%
as a group (10 persons)
(c) Other than the initial Plan of Reorganization filed May
24, 1996, and subject to
confirmation, the Company knows of no contractual
arrangements which may at a
subsequent date result in a change in control of the
Company.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) None.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON
FORM 8-K
Page(s)
(a)1. CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of Tri-
Valley Corporation are included in Part II, Item 8:
Report of independent auditors
24-25
Balance sheets - July 31, 1995 and July 31, 1994
26-27
Statements of operations - years ended July 31, 1995,
1994 and 1993
28
Statements of changes in shareholders' equity -- years
ended July 31, 1995, 1994 and 1993
29
Statements of cash flows -- years ended July 31, 1995,
1994 and 1993
30-31
Notes to financial statements
32-52
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedules of the Company filed
herewith are listed below.
Schedules not included have been omitted because they
are not applicable or the
required information is shown in the consolidated
financial statements and notes
thereto.
Schedule V - Property, Plant & Equipment
Schedule VI - Accumulated Depreciation, Depletion &
Amortization
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON
FORM 8-K (Continued)
3. EXHIBITS
Not applicable.
(b) REPORTS ON FORM 8-K
Robert A. Cohan resigned as vice president, operations,
of Tri-Valley Oil and Gas
Company effective April 14, 1995.
Thomas A. Wilson resigned as vice president, minerals,
of Tri-Valley Corporation
effective June 1, 1994.
Frank M. Agar, resigned as president of Tri-Valley Oil
& Gas Company effective
September 28, 1995.
Helen L. O'Brien, vice president, secretary and
treasurer was terminated effective
December 4, 1995.
J. Bruce Carruthers II, director, resigned January 26,
1996.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Tri-Valley Corporation
Bakersfield, California
The audits referred to in our report to Tri-Valley Corporation
dated October 20,
1995 which is contained in Item 8 of this Form 10-K, included the
audit of the
financial statement schedules contained herein.
In our opinion, such financial statements present fairly the
information set forth
therein.
BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION
Bakersfield, California
October 20, 1995
TRI-VALLEY
CORPORATION
SCHEDULE V - PROPERTY,
PLANT & EQUIPMENT
YEARS ENDED JULY 31,
1995, 1994 AND 1993
Productive Productive Non Productive
Leasehold
Oil & Gas Oil & Gas Oil & Gas Mining
Land Building Equipment
Improvements Leases Leases Prospects Totals
Balances at
July 31, 1991 $ - $ - $ 83,593
$ 5,748 $ 184,511 $ 268,489 $ 623,462 $1,165,803
Additions at
Cost - - 41,238
- 256,041 366,659 486,004 1,149,942
Deletions at
Cost - - 32,538
- - 44,403 35,062 112,003
Balances at
July 31, 1992 - - 92,293
5,748 440,552 590,745 1,074,404 2,203,742
Additions at
Cost 11,281 45,124 5,553
- 23,780 247,658 435,314 768,710
Deletions at
Cost - - 1,210
- 19,171 12,901 12,712 45,994
Balance at
July 31, 1993 11,281 45,124 96,636
5,748 445,161 825,502 1,497,006 2,926,458
Additions at
Cost - - 539
- 9,236 60,087 317,251 387,113
Deletions
at Cost - - -
- - 163,173 94,052 257,225
Balances at
July 31, 1994 11,281 45,124 97,175
5,748 454,397 722,416 1,720,205 3,056,346
Additions at
Cost - - 5,193
- - 50,111 238,068 293,372
Deletions at
Cost - - 18,422
- 9,025 125,835 - 153,282
Balances at
July 31, 1995 $ 11,281 $ 45,124 $ 83,946
$ 5,748 $ 445,372 $ 646,692 $1,958,273 $3,196,436
TRI-VALLEY
CORPORATION
SCHEDULE VI - ACCUMULATED
DEPRECIATION, DEPLETION & AMORTIZATION
YEARS ENDED JULY 31,
1995, 1994 AND 1993
Accumulated
Depreciation Depletion Amortization Totals
Balances at July 31, 1992
54,375 $ 106,482 $ 5,748 $ 166,605
Additions at Cost
11,230 58,024 - 69,254
Retirements at Cost
1,089 16,561 - 17,650
Balances at July 31, 1993
64,516 147,945 5,748 218,209
Additions at Cost
11,126 30,062 - 41,188
Retirements at Cost
- - - - -
Balances at July 31, 1994
75,642 178,007 5,748 259,397
Additions at Cost
11,129 26,454 - 37,583
Retirements at Cost
7,894 7,720 - 15,614
Balances at July 31, 1995 $
78,877 $ 196,741 $ 5,748 $ 281,366
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned,
thereunto duly authorized.
, 1996By:
F. Lynn Blystone
President, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been
signed below by the following persons on behalf of the Registrant
and in the capacities and
on the dates included:
, 1996By:
Earl H. Beistline,
Director
, 1996By:
Milton J. Carlson,
Director
, 1996By:
Dennis P. Lockhart,
Director
, 1996By:
Loren Miller, Director
, 1996By:
Terrance L. Stringer,
Director