1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-QSB
/X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
/ / For the quarterly period ended September 30, 2002
OR
Transition report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-5525
-------------------------
PYRAMID OIL COMPANY
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-0787340
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2008 - 21ST. STREET,
BAKERSFIELD, CALIFORNIA 93301
(Address of principal executive offices) (Zip Code)
(661) 325-1000
(Registrant's telephone number, including area code)
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 periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
COMMON STOCK WITHOUT PAR VALUE 2,494,430
(Class) (Outstanding at September 30, 2002)
2
FINANCIAL STATEMENTS
PYRAMID OIL COMPANY
BALANCE SHEETS
ASSETS
September 30, December 31,
2002 2001
(Unaudited) (Audited)
------------ ------------
CURRENT ASSETS:
Cash $ 575,480 $ 614,416
Short-term investments 850,000 850,000
Trade accounts receivable 149,331 109,993
Interest receivable 50,524 51,488
Crude oil inventory 61,406 47,555
Prepaid expenses 61,968 93,590
Deferred income taxes 19,680 15,490
------------ ------------
TOTAL CURRENT ASSETS 1,768,389 1,782,532
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Oil and gas properties and equipment
(successful efforts method) 10,304,514 10,293,558
Drilling and operating equipment 2,793,672 2,872,762
Land, buildings and improvements 936,681 936,681
Automotive, office and other
property and equipment 930,368 933,090
------------ ------------
14,965,235 15,036,091
Less: accumulated depletion,
depreciation, amortization
and valuation allowance (13,524,770) (13,497,392)
------------ ------------
1,440,465 1,538,699
------------ ------------
$3,208,854 $3,321,231
============ ============
See Accompanying Notes to Financial Statements.
3
PYRAMID OIL COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2002 2001
(Unaudited) (Audited)
------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 45,639 $ 54,057
Accrued professional fees 17,257 15,500
Accrued taxes, other than income taxes 43,206 30,717
Accrued payroll and related costs 40,801 36,351
Accrued royalties payable 67,349 59,548
Accrued insurance 978 40,689
Current maturities of long-term debt 13,334 15,409
------------ ------------
TOTAL CURRENT LIABILITIES 228,564 252,271
------------ ------------
LONG-TERM DEBT, net of current maturities 14,445 24,445
------------ ------------
DEFERRED INCOME AND OTHER TAXES 19,680 15,490
------------ ------------
COMMITMENTS (note 3)
STOCKHOLDERS' EQUITY:
Common stock-no par value;
10,000,000 authorized shares;
2,494,430 shares issued and
outstanding 1,071,610 1,071,610
Retained earnings 1,874,555 1,957,415
------------ ------------
2,946,165 3,029,025
------------ ------------
$3,208,854 $3,321,231
============ ============
See Accompanying Notes to Financial Statements.
4 PYRAMID OIL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
REVENUES $439,354 $445,698 $1,149,724 $1,377,634
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 274,233 259,837 778,122 793,337
Exploration costs 2,942 983 6,717 42,788
General and administrative 94,513 90,722 311,972 269,522
Taxes, other than income
and payroll taxes 13,877 11,241 42,417 33,001
Provision for depletion,
depreciation and
amortization 42,602 43,110 126,582 130,179
Other costs and expenses 7,584 3,760 12,998 14,086
--------- --------- --------- ---------
435,751 409,653 1,278,808 1,282,913
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 3,603 36,045 (129,084) 94,721
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 8,477 17,904 28,888 44,344
Gain on settlement -- -- -- 395,708
Gain on sale of assets 300 48,922 300 74,860
Loss on disposal of assets -- (10,100) --
Other income 3,600 3,600 28,313 30,698
Interest expense -- ( 699) (52) (2,943)
--------- --------- --------- ---------
12,377 69,727 47,349 542,667
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAX PROVISION 15,980 105,772 ( 81,735) 637,388
Income tax provision -- -- 1,125 1,025
--------- --------- --------- ---------
NET INCOME (LOSS) $ 15,980 $ 105,772 $( 82,860) $ 636,363
========= ========= ========= =========
BASIC INCOME (LOSS)
PER COMMON SHARE $0.01 $0.04 ($0.03) $0.26
========= ========= ========= =========
DILUTED INCOME (LOSS)
PER COMMON SHARE $0.01 $0.04 ($0.03) $0.26
========= ========= ========= =========
Weighted average number of
common shares outstanding 2,494,430 2,494,430 2,494,430 2,494,430
========= ========= ========= =========
See Accompanying Notes to Financial Statements.
5 PYRAMID OIL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended September 30,
---------------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $( 82,860) $ 636,363
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Provision for depletion,
depreciation and amortization 126,582 130,179
Exploration costs 6,717 42,788
Gain on sale of assets (300) (74,860)
Loss on disposal of fixed assets 10,100 --
Changes in assets and liabilities:
Decrease (increase) in trade accounts
and interest receivable (38,374) 5,046
Increase in crude oil inventory (13,851) (2,185)
Decrease in prepaid expenses 31,622 6,132
Decrease in accounts payable
and accrued liabilities (21,632) (21,949)
--------- ---------
Net cash provided by operating activities 18,004 721,514
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 45,165) (125,380)
Proceeds from sales of assets 300 114,600
Net change in short-term investments -- (600,000)
--------- ---------
Net cash used in investing activities ( 44,865) (610,780)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (12,075) (55,054)
Proceeds from issuance of long-term debt -- 15,000
--------- ---------
Net cash used in financing activities (12,075) (40,054)
--------- ---------
Net (decrease) increase in cash ( 38,936) 70,680
Cash at beginning of period 614,416 151,727
--------- ---------
Cash at end of period $575,480 $222,407
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the nine months for interest $52 $2,943
========= =========
Cash paid during the nine months for income taxes $1,125 $1,025
========= =========
See Accompanying Notes to Financial Statements.
6 PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements include the accounts of Pyramid Oil Company (the
Company). Such financial statements included herein have been prepared by the
Company, without an audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
A summary of the Company's significant accounting policies is contained in its
December 31, 2001 Form 10-KSB which is incorporated herein by reference. The
financial data presented herein should be read in conjunction with the
Company's December 31, 2001 financial statements and notes thereto, contained
in the Company's Form 10-KSB.
In the opinion of the Company, the unaudited financial statements, contained
herein, include all adjustments necessary to present fairly the Company's
financial position as of September 30, 2002 and the results of its operations
and its cash flows for the nine month periods ended September 30, 2002 and
2001. The results of operations for an interim period are not necessarily
indicative of the results to be expected for a full year.
(2) DIVIDENDS
No cash dividends were paid during the nine months ended September 30, 2002
and 2001.
(3) COMMITMENTS
During 1998, the Company entered into a joint venture project, with several
other oil and gas companies, to explore for and develop potential natural gas
reserves in the Solano County area of California. This project is employing
3-D seismic technology and exploratory drilling, in hopes of finding and
developing natural gas reserves on approximately 3,200 acres of leased ground.
The Company's position is that of a non-operator.
Drilling operations on the first well began early in the first quarter of
2000. This well encountered substantial mechanical problems prior to reaching
its intended depth and was abandoned due to these problems. The Company
participated in the drilling of a second well on this lease in the fourth
quarter of 2000. This well was abandoned due to insufficient gas reserves.
The Company has not made any decisions about participating in any future
proposed exploration wells on this project. The Company expended
approximately $18,000 for its share of costs on the first well during 1999,
and expended an additional $15,000 during 2000. The Company expended
approximately $18,000 for its share of costs on the second well during 2000.
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These costs are recorded in Costs and Expenses on the Statements of
Operations.
The Company agreed to participate in the drilling of a third natural gas well
in conjunction with the same operator in a new prospect area located in
Solano County. This well commenced drilling in the fourth quarter of 2001 and
was abandoned due to inadequate gas reserves. The Company's share of the
prospect fee and drilling costs for this new well were approximately $36,000
during the fourth quarter of 2001 and $3,800 in the first nine months of 2002.
The costs for the third well are recorded in Costs and Expenses on the
Statements of Operations. A fourth well has not been proposed by the joint
venture operator.
During the second quarter of 2001, the Company entered into a new joint
venture project with several other independent oil and gas companies, to
explore for and develop potential oil reserves in the Gap Mountain area of
Nevada. The Company's position is that of a non-operator. During the second
quarter of 2001, the Company's share of the prospect fee for this project was
approximately $48,000.
The Company has entered into various employment agreements with key executive
employees. In the event the key executives are dismissed, the Company would
incur approximately $1,042,000 in costs.
(4) OTHER INCOME
In 1996, the Company filed a lawsuit in Kern County Superior Court, against
Mr. Russell R. Simonson, alleging a breach of a contractual agreement. The
lawsuit went to trial in 1997 and the trial court ruled that the Defendant
twice breached terms of an agreement, and the court awarded the Company
damages, interest and attorney's fees. The Defendant appealed the trial
court's decision and the matter was reviewed by the California Appeals Court.
In November 2000, the Appeals Court again ruled in favor of the Company,
upholding the original award of damages, interest and attorney's fees. On
March 5, 2001, the Company recorded a gain and received payment from the
Defendant in the amount of $395,708, concluding this matter.
The Company sold various surplus equipment and it's interest in a
non-producing oil and gas lease during the first quarter of 2001 for a gain of
$16,900. These assets had little or no net book value. During the second
quarter of 2001, the Company sold certain fixed assets for a gain of $7,800
and surplus used tubing supplies for a gain of approximately $7,000. The
Company also recorded a one-time gain of $10,000 for the sublease of certain
deep drilling rights on some of its oil and gas properties. During the third
quarter of 2001, the Company sold certain fixed assets for a combined net gain
of $48,900. During the nine months ended September 30, 2001, the Company had
other income of $15,000 from the rental of office space and the leasing of
cattle grazing rights on certain real property.
8
The Company disposed of a well servicing rig in the first quarter of 2002
with a net book value of $10,100. The Company received approximately $16,000
as a settlement of lease oil antitrust litigation, also during the first
quarter of 2002. During the nine months ended September 30, 2002, the Company
had other income of $12,000 from the rental of office space and the leasing of
cattle grazing rights on certain real property.
(5) PROPOSED ACQUISITION
The Company has agreed to acquire the remaining 36.5% working interest in
three oil and gas properties that the Company operates in the Carneros Creek
field (the Company currently owns approximately 63.5% of the working interest)
for a fair market value of approximately $217,000, effective April 1, 2002.
The 36.5% working interest is being acquired from a group of investors that
acquired the working interest through the settlement of litigation with the
prior working interest owner and immediately offered the working interests to
the Company. Mr. John H. Alexander, an officer and Director of the Company,
has a minority interest in the group of investors, which acquired the
interests through the litigation settlement. Mr. Alexander did not
participate in any voting on this issue during the Board meeting concerning
the acquisition of this working interest.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
IMPACT OF CHANGING PRICES
The Company's revenue is affected by crude oil prices paid by the major oil
companies. Average crude oil prices for the third quarter of 2002 increased
by approximately $3.60 per equivalent barrel when compared with the same
period for 2001. Average crude oil prices for the first nine months of 2002
decreased by approximately $1.10 per equivalent barrel when compared with the
same period for 2001. At the end of the third quarter of 2002, crude oil
prices have increased by approximately $11.75 per barrel when compared with
crude oil prices at December 31, 2001. The Company cannot predict the future
course of crude oil prices.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased by $38,936 for the nine months ended September 30, 2002.
During the first nine months of 2002, operating activities provided cash of
$18,004. Capital expenditures of $45,165 and principal payments on long-term
debt of $12,075 reduced cash for the first nine months of 2002. See the
Statements of Cash Flows for additional detailed information. A $100,000 line
of credit, unused at September 30, 2002, provided additional liquidity during
the first nine months of 2002.
9
FORWARD LOOKING INFORMATION
The Company's average crude oil price has decreased by approximately $5.10 per
barrel since September 30, 2002.
Portions of the Quarterly Report, including Management's Discussion and
Analysis, contain forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the Company's actual results
and performance in future periods to be materially different from any future
results or performance suggested in forward-looking statements in this
release. Such forward-looking statements speak only as of the date of this
report and the Company expressly disclaims any obligation to update or revise
any forward-looking statements found herein to reflect any changes in Company
expectations or results or any change in events. Factors that could cause
results to differ materially include, but are not limited to: the timing and
extent of changes in commodity prices of oil, gas and electricity,
environmental risk, drilling and operational costs, uncertainties about
estimates of reserves and government regulations.
Item 4. CONTROLS AND PROCEDURES
Based on their evaluation of the Company's disclosure controls and
procedures as of a date within 90 days of the filing of this Report, the Chief
Executive Officer and Chief Financial Officer have concluded that such
controls and procedures are effective. There were no significant changes in
the Company's internal controls or in other factors that could significantly
affect such controls subsequent to the date of their evaluation.
ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 2002
COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 2001
REVENUES
Oil and gas revenues decreased by 1.4% for the three months ended September
30, 2002 when compared with the same period for 2001. The Company's net
revenue share of crude oil production decreased by approximately 3,200 barrels
(35 barrels per day) for the third quarter of 2002. The decline in crude oil
production for the third quarter of 2002 created a decline in revenues of
15.5% when compared with the same period for 2001. The decline in crude oil
production is attributable to five oil and gas leases. This was offset by an
increase in revenues due to higher crude oil prices. Oil and gas revenues
increased by 14.1% due to higher average crude oil prices for the third
quarter of 2002. The average price of the Company's oil and gas for the third
quarter of 2002 increased by approximately $3.60 per equivalent barrel when
compared to the same period of 2001.
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OPERATING EXPENSES
Operating expenses increased by 5.5% for the third quarter of 2002. The cost
to produce an equivalent barrel of crude oil increased by approximately $3.10
for the third quarter of 2002 when compared with the third quarter of
2001. The increase in operating expenses is composed of offsetting increases
and decreases in a number of different expense categories. During the third
quarter of 2002, the cost of abandoning two wells increased operating expenses
by approximately 3.5%. No costs were incurred during the third quarter of
2001 for well abandonments.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased by approximately 4% for the
quarter ended September 30, 2002. Professional services increased by
approximately 3.5% for the third quarter of 2002.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization decreased by
approximately 1% for the third quarter of 2002, when compared with the same
period for 2001. Depletion decreased by 9%, which is due to a decrease in the
depletion rate and the decline in crude oil production. The depletion rate
decreased as a result of the estimated oil and gas reserves decreasing in an
amount much less than the decline in the depletable base of the oil and gas
properties. The estimated reserves did not decline in relation to the
depletable base due to revisions to these estimates which offset the decline
in production. This was offset by an increase of 8% in the depreciation of
fixed assets, primarily trucks that were acquired in the second half of 2001.
INTEREST INCOME
Interest income decreased by approximately $9,400 during the third quarter of
2002, when compared with the same period for 2001. The decrease in interest
income is due primarily to a decline in interest rates.
GAIN ON SALE OF ASSETS
During the third quarter of 2001, the Company sold certain fixed assets for a
combined net gain of $48,900.
INCOME TAX PROVISION
The Company's income tax provision consists mainly of current minimum taxes
for California and New York. The Company is utilizing its significant net
operating loss carryforwards to offset Federal income taxes.
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RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2001
REVENUES
Oil and gas sales decreased by 16.5% for the nine months ended September 30,
2002 when compared with the same period for 2001. The Company's net revenue
share of crude oil production decreased by approximately 7,500 barrels
(27 barrels per day) for the nine months ended September 30, 2002. The
decline in crude oil production created a decline in revenues of 12.5% when
compared with the same period for 2001. The decline in crude oil production
is attributable to five oil and gas leases. Oil and gas sales decreased
by 4% due to lower average crude oil prices for the first nine months of
2002. The average price of the Company's oil and gas for the first nine
months of 2002 decreased by approximately $1.10 per equivalent barrel
when compared with the same period for 2001.
OPERATING EXPENSES
Operating expenses decreased by approximately 2% for the nine months ended
September 30, 2002. The cost to produce an equivalent barrel of crude oil
increased by approximately $1.60 per barrel for the nine months ended
September 30, 2002. The decrease in operating expenses is composed of
offsetting increases and decreases in a number of different expense
categories. The cost to produce an equivalent barrel of crude oil increased
due to the decline in crude oil production. Although expenditures declined,
the reduction did not correlate with the decline in crude oil production.
Expenditures were made to enhance or maintain prior levels of production.
However, these activities were ultimately unsuccessful in maintaining
production levels during the first nine months of 2002.
EXPLORATION COSTS
During the second quarter of 2001, the Company entered into a new joint
venture project with several other independent oil and gas companies, to
explore for and develop potential oil reserves in the Gap Mountain area of
Nevada. The Company's position is that of a non-operator. During the second
quarter of 2001, the Company's share of the prospect fee for this project was
approximately $48,000. During the fourth quarter of 2001, the Company
received a full and complete refund of the prospect fee. This prospect was
cancelled by the operator after additional structural geology work and
analysis. Approximately $42,000 recorded as Exploration Costs in the nine
months ended September 30, 2001 was reversed in the fourth quarter of 2001 as
the Company was reimbursed for these costs due to the abandonment of an
exploration project.
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GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by approximately 16% for the
first nine months of 2002 when compared with the same period for 2001. Legal
services increased by 15% during 2002 due to activities related to certain
transactions contemplated by the Board of Directors for the acquisition of the
Company's common stock from its major shareholders.
PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION
The provision for depletion, depreciation and amortization decreased by 3%
for the nine months ended September 30, 2002, when compared with the same
period for 2001. Depletion decreased by 11%, which is due to a decrease in the
depletion rate and the decline in crude oil production. The depletion rate
decreased as a result of the estimated oil and gas reserves decreasing in an
amount much less than the decline in the depletable base of the oil and gas
properties. The estimated reserves did not decline in relation to the
depletable base due to revisions to these estimates which offset the decline
in production. This was offset by an increase of 8% in the depreciation of
fixed assets, primarily trucks that were acquired in the second half of 2001.
INTEREST INCOME
Interest income decreased by approximately $15,500 during the nine months
ended September 30, 2002, when compared with the same period for 2001. The
decrease in interest income is due primarily to a decline in interest rates.
GAIN ON SETTLEMENT
In 1996, the Company filed a lawsuit in Kern County Superior Court, against
Mr. Russell R. Simonson, alleging a breach of a contractual agreement. The
lawsuit went to trial in 1997 and the trial court ruled that the Defendant
twice breached terms of an agreement, and the court awarded the Company
damages, interest and attorney's fees. The Defendant appealed the trial
court's decision and the matter was reviewed by the California Appeals Court.
In November 2000, the Appeals Court again ruled in favor of the Company,
upholding the original award of damages, interest and attorney's fees. On
March 5, 2001, the Company recorded a gain and received payment from the
Defendant in the amount of $395,708, concluding this matter.
GAIN ON SALE OF ASSETS
During the nine months ended September 30, 2001, the Company sold certain
surplus equipment for a gain of approximately $16,000 and it's interest in a
non-producing oil and gas lease during the first quarter of 2001 for a gain of
approximately $10,000. These assets had little or no net book value. During
the third quarter of 2001, the Company sold certain fixed assets for a
combined net gain of $48,900
13
LOSS ON DISPOSAL OF ASSETS
The Company disposed of a well servicing rig in the first quarter of 2002 with
a net book value of $10,100.
INCOME TAX PROVISION
The Company's income tax provision consists mostly of current minimum taxes
for California and New York. The Company is utilizing its significant net
operating loss carryforwards to offset Federal income taxes.
RECENT ACCOUNTING DEVELOPMENTS
In June 2001, the FASB issued Statements of Financial Accounting Standards No.
141 ("FAS 141") "Business Combinations" and No. 142 ("FAS 142") "Goodwill and
Other Intangible Assets". These statements eliminate the pooling of interests
method of accounting for business combinations as of June 30, 2001 and
eliminate the amortization of goodwill for all fiscal years beginning after
December 15, 2001. Goodwill will be accounted for under an impairment-only
method after this date. The Company is required to adopt FAS 141 and 142 with
respect to existing goodwill on January 1, 2002. The adoption of these
Statements did not have any significant impact on the Company's financial
position, results of operations or cash flows.
In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143 ("FAS 143") "Accounting for Asset Retirement Obligations". This Statement
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated retirement
costs. Asset retirement obligations will be initially measured at fair value.
These obligations will be discounted and accretion expense will be recognized
using the credit adjusted risk-free interest rate. The Company is required to
adopt FAS 143 on January 1, 2003. The Company is assessing the impact FAS 143
will have on its financial statements.
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 ("FAS 144") "Accounting for the Impairment or Disposal of Long-Lived
Assets". This Statement supercedes previous statements related to impairment.
The requirements to allocate goodwill to long-lived assets to be tested for
impairment is eliminated. A primary asset approach to determine a cash flow
estimation period is established. The Company is required to adopt FAS 144 on
January 1, 2002. The adoption of this Statements did not have any significant
impact on the Company's financial position, results of operations or cash
flows.
In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." SFAS No. 145 updates,
clarifies, and simplifies existing accounting pronouncements. This statement
rescinds SFAS No. 4, which required all gains and losses from extinguishment
of debt to be aggregated and, if material, classified as an extraordinary
14
item, net of related income tax effect. As a result, the criteria in APB No.
30 will now be used to classify those gains and losses. SFAS No. 64 amended
SFAS No. 4 and is no longer necessary as SFAS No. 4 has been rescinded. SFAS
No. 44 has been rescinded as it is no longer necessary. SFAS No. 145 amends
SFAS No. 13 to require that certain lease modifications that have economic
effects similar to sale-leaseback transactions be accounted for in the same
manner as sale-lease transactions. This statement also makes technical
corrections to existing pronouncements. While those corrections are not
substantive in nature, in some instances, they may change accounting practice.
This statement is not applicable to the Company.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." This
statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Under EITF
Issue 94-3, a liability for an exit cost, as defined, was recognized at the
date of an entity's commitment to an exit plan. The provisions of this
statement are effective for exit or disposal activities that are initiated
after December 31, 2002 with earlier application encouraged. This statement
is not applicable to the Company.
In October 2002, the FASB issued SFAS No. 147, "Acquisition of Certain
Financial Institutions." SFAS No. 147 annuls the requirement in SFAS No. 72
and Interpretation 9 thereto, to recognize and amortize any excess of the fair
value of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This
statement requires that those transactions be accounted for in accordance with
SFAS No. 141. In addition, this statement amends SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," to include certain
financial institution-related intangibles. This statement is not applicable
to the Company.
15
PYRAMID OIL COMPANY
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
None
Item 2. - Changes in Securities
None
Item 3. - Defaults Upon Senior Securities
None
Item 4. - Submission of Matters to a Vote of Security Holders
On September 12, 2002, the Company held its Annual Meeting of
Shareholders in Bakersfield, California. Two items were voted on during the
meeting; election of Directors and approval of Auditors. The shareholders
elected J. Ben Hathaway, John H. Alexander, Thomas W. Ladd, Gary L. Ronning
and John E. Turco to serve as the Company's Directors until the next scheduled
Annual Meeting. The shareholders also approved the selection of Singer Lewak
Greenbaum & Goldstein, LLP as auditors for 2002. Each item is fully described
in the Company's Proxy dated July 31,2002.
Item 5. - Other Information
None
Item 6. - Exhibits and Reports on Form 8-K
a. Exhibits
99.1 Certification by Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
b. The Company filed a Form 8-K on July 31, 2002 to report a change in
it's certifying accountants. On May 29, 2002, Arthur Andersen LLP
resigned as the independent public accountants of Pyramid Oil Company
(the "Company"). Arthur Andersen LLP has performed the audit of the
Company's financial statements from 1987 through December 31, 2001.
Arthur Andersen LLP also performed a review of the Company's Form
10-QSB for the quarter ended March 31, 2002. Singer Lewak Greenbaum
& Goldstein, LLP, were approved as its new independent accountants at
it's September 12, 2002 Annual Meeting of Shareholders.
16
SIGNATURES
PURSUANT TO THE REQUIREMENTS 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.
PYRAMID OIL COMPANY
(registrant)
Dated: November 12, 2002 J. BEN HATHAWAY
---------------------
J. Ben Hathaway
President
PAGE <17>
Certification By Principal Executive Officer Pursuant
to Rule 13A-14 or 15D-14 of the SEC Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, J. Ben Hathaway, the President of Pyramid Oil Company (the registrant),
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Pyramid Oil
Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
PAGE <18>
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: November 12, 2002
By: J. BEN HATHAWAY
-----------------------
J. Ben Hathaway
Chief Executive Officer
PAGE <19>
Certification By Principal Financial Officer Pursuant
to Rule 13A-14 or 15D-14 of the SEC Exchange Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Lee G. Christianson, the Chief Financial Officer of Pyramid Oil Company
(the registrant), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Pyramid Oil
Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
PAGE <20>
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: November 12, 2002
By: LEE G. CHRISTIANSON
------------------------
Lee G. Christianson
Chief Financial Officer