Tri-Valley Corporation Announces Pending Restatements of Previously Issued Financial Statements
Tri-Valley Corporation (NYSE Amex:TIV) announced today that it has
determined, with the concurrence of its Audit Committee of the Board of
Directors, that the Company′s Annual Report on Form 10-K for the fiscal
year ended December 31, 2010 and its Quarterly Reports on Form 10-Q for
the quarterly periods ended June 30, 2010, September 30, 2010, March 31,
2011 and June 30, 2011, should no longer be relied upon and need to be
restated to correct (i) the valuation of, and accounting for, the common
stock and warrants issued by Company in a registered direct offering
('RDO?) of securities in April 2010, (ii) the accounting for incremental
and direct costs incurred to issue common stock in connection with the
Company′s April 2011 private placement and various at-the-market
offerings of common stock, and (iii) the accounting for the acquisition
of certain steam generator assets from the TVC OPUS Drilling Program,
L.P.
The restatements are not expected to impact the Company's previously
reported total assets, stockholders′ equity, cash, cash equivalents or
net changes in cash and cash equivalents as at and for the year ended
December 31, 2010, and as at and for the six months ended June 30, 2011.
Re-Assessment of Valuation of, and Accounting for, RDO Common Stock
and Warrants
The Company performed a re-assessment of the valuation of common stock
and warrants issued in connection with its April 2010 RDO and concluded
that the values assigned to the common stock and warrants issued were
overstated by $6.5 million. The net proceeds from the April 2010 RDO of
$4.6 million ($5.0 million gross proceeds less $0.4 million of stock
issuance costs) should have been allocated to the common stock and each
series of warrants issued based upon their relative values at the time
of issuance. This $6.5 million decrease in the recorded values of the
common stock and warrants is expected to result in a decrease of an
equal amount in charges made to the results of operations for the year
ended December 31, 2010, as part of the restatements.
The Company also performed a re-assessment of its accounting for the
Series A, B and C warrants issued in connection with its April 2010 RDO
and concluded that the Series A and B Warrants were within the scope of
Accounting Standards Codification 815-40, 'Derivatives and Hedging ?
Contracts in Entity′s Own Equity? ('ASC 815-40?), formerly Emerging
Issues Task Force Issue No. 07-05, 'Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity′s Own Stock.? In sum,
because the Series A and B warrants contained certain anti-dilution,
protective pricing features, the Series A and B warrants should have
been accounted for as derivative financial liabilities (and not as
equity). As derivative financial liabilities, the Series A and B
warrants should have been measured at fair value, with changes in fair
value recognized as a gain or loss for each reporting period thereafter.
The Company is expected to recognize $1.8 million of losses in the
results of operations for the year ended December 31, 2010 on these
derivative instruments as part of the restatements. The Series C
warrants did not have similar protective pricing features and were
appropriately accounted for in equity as originally reported.
All of the Series A and B warrants were either exercised or exchanged
(or contractually committed to be exchanged) prior to December 31, 2010,
and none of the Series A, B or C warrants are currently outstanding.
Re-Assessment of Accounting for Stock Issuance Costs
The Company performed a re-assessment of its accounting for stock
issuance costs incurred in connection with its April 2011 private
placement and various at-the-market offerings of common stock during
certain of the periods covered by the restatements. The Company has
preliminarily determined that $0.2 million and $0.6 million for the year
ended December 31, 2010 and six months ended June 30, 2011,
respectively, of stock issuance costs were incorrectly charged to the
results of operations and should have been recorded as a reduction in
the proceeds received from the sales of common stock (i.e. capital in
excess of par value).
Re-Assessment of Accounting for Certain Asset Acquisitions from OPUS
The Company performed an analysis of equipment in service on its Claflin
property, and determined that steam generators were acquired from the
TVC OPUS 1 Drilling Program, L.P. during the periods covered by the
restatements which had not been recognized in the Company′s consolidated
financial statements, resulting in an overstatement of the accounts
receivable from joint venture partners and an understatement of property
and equipment of $1.7 million in the Company′s consolidated balance
sheet. The Company does not expect any impact to the results of
operations for the year ended December 31, 2010 or six months ended June
30, 2011 related to this correction.
The Company will be restating its consolidated financial statements
included in the Form 10-K and the Form 10-Qs by filing amendments as
soon as reasonably practicable. The Company expects to file such
amendments before November 14, 2011.
The quantification of the effects of the restatements are pending and
subject to final determination but, based on the Company′s preliminary
assessments, should result in a combined reduction in the Company′s
previously reported net losses for the year end December 31, 2010 and
the six months ended June 30, 2011 of $5.5 million, and reductions in
net losses per share of $0.13 and $0.01 for these periods then ended,
respectively.
As noted above, the restatements are not expected to impact the
Company's previously reported total assets, stockholders′ equity, cash,
cash equivalents or net changes in cash and cash equivalents as at and
for the year ended December 31, 2010, and as at and for the six months
ended June 30, 2011. There should be no impact to stockholders′ equity
for the corrections discussed above because the Company expects that the
net reductions in the retained deficit of $4.9 million and $5.5 million
as at December 31, 2010 and June 30, 2011, respectively, as originally
reported, will be offset by equivalent reductions in the capital in
excess of par value or additional paid in capital ? warrants, as part of
the restatements.
The above disclosures concerning the related impact of the restatements
are estimations only, subject to the Company′s finalization of the
restatements, and are subject to change.
In connection with the pending restatements, the Company′s Chief
Executive Officer and Interim Chief Financial Officer are re-evaluating,
with the participation of other members of management, the effectiveness
of the Company′s disclosure controls and procedures and internal control
over financial reporting. They have preliminarily concluded that
material weaknesses existed with respect to the Company′s reporting of
complex, non-routine transactions, and the reconciliation of asset
records, as of the end of the periods covered by the restatements.
Management is working on a plan for the remediation of the underlying
cause of the restatements and for the implementation of appropriate
policies and controls to avoid errors or deficiencies in accounting
procedures and application going forward.
About Tri-Valley
Tri-Valley Corporation explores for and produces oil and natural gas in
California and has two exploration-stage gold properties in Alaska.
Tri-Valley is incorporated in Delaware and is publicly traded on the
NYSE Amex exchange under the symbol 'TIV.? Tri-Valley′s website, which
includes all SEC filings, is www.tri-valleycorp.com.
Special Note Regarding Forward-Looking Statements
All statements contained in this press release that refer to future
events or other non-historical matters are forward-looking statements.
These forward-looking statements include the statements regarding the
potential errors in previously issued financial statements; the nature,
magnitude and scope of potential errors; and Tri-Valley′s investigation
and analysis of such potential errors. Although Tri-Valley does not make
forward-looking statements unless it believes it has a reasonable basis
for doing so, Tri-Valley cannot guarantee their accuracy. These
statements are only predictions based on management′s expectations as of
the date of this press release, and involve known and unknown risks,
uncertainties and other factors, including additional actions resulting
from Tri-Valley′s continuing internal review, as well as the review by
Tri-Valley′s independent auditors, and actions resulting from
discussions with or required by the Securities and Exchange Commission
and/or the NYSE Amex, along with other risks and uncertainties discussed
in our filings with the Securities and Exchange Commission from time to
time, including under 'Part I, Item 1A. Risk Factors? and 'Part II, Item
7. Management′s Discussion and Analysis of Financial Condition and
Results of Operations,? contained in Tri-Valley′s Annual Report on Form
10-K for the year ended December 31, 2010, and under 'Part I, Item 2.
Management′s Discussion and Analysis of Financial Condition and Results
of Operations? and 'Part II, Item 1A. Risk Factors,? contained in
Tri-Valley′s Quarterly Reports on Form 10-Q for the quarters ended March
31 and June 30, 2011, respectively. Except as required by law,
Tri-Valley undertakes no obligation to update or revise publicly any of
the forward-looking statements after the date of this press release to
conform such statements to actual results or to reflect events or
circumstances occurring after the date of this press release.
EVC Group, Inc.
Doug Sherk, 415-568-9349 (Investors)
dsherk@evcgroup.com
Jenifer
Kirtland, 415-568-9349 (Investors)
jkirtland@evcgroup.com
Chris
Gale, 646-201-5431 (Media)
cgale@evcgroup.com
