Attached files

file filename
EX-31.2 - EXHIBIT 31.2 - Yuma Energy, Inc.v239256_ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - Yuma Energy, Inc.v239256_ex32-1.htm
EX-32.2 - EXHIBIT 32.2 - Yuma Energy, Inc.v239256_ex32-2.htm
EX-31.1 - EXHIBIT 31.1 - Yuma Energy, Inc.v239256_ex31-1.htm
EXCEL - IDEA: XBRL DOCUMENT - Yuma Energy, Inc.Financial_Report.xls

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 10-Q

x           Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2011

¨           Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from         to

Commission File Number 001-32989

PYRAMID OIL COMPANY
(Exact Name of registrant as specified in its charter)

CALIFORNIA
 
94-0787340
(State of other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

2008 – 21st. Street. P.O. Box 832, Bakersfield, California
 
93302
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number:
(661) 325-1000

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 requirements for the past 90 days.    Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).   Yes  x  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer  ¨
Accelerated Filer  ¨
Non-accelerated filer  ¨
Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ¨  No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

(Class)
(Outstanding at November 11, 2011)
Common Stock Without Par Value
4,683,853

 
 

 

PYRAMID OIL COMPANY

 
FORM 10-Q
September 30, 2011

Table of Contents

   
Page
     
PART I
     
Item 1.
Financial Statements
 
     
 
Balance Sheets - September 30, 2011 (Unaudited) and December 31, 2010
3
     
 
Statement of Operations -
 
 
Three months ended September 30, 2011 and 2010 (Unaudited)
5
 
Nine months ended September 30, 2011 and 2010 (Unaudited)
6
     
 
Condensed - Statements of Cash Flows -
 
 
Nine months ended September 30, 2011 and 2010 (Unaudited)
7
     
 
Notes to Financial Statements (Unaudited)
9
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
17
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
22
     
Item 4.
Controls and Procedures
22
     
PART II
     
Item 1.
Legal Proceedings
23
     
Item 1A.
Risk Factors
23
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
23
     
Item 3.
Defaults Upon Senior Securities
23
     
Item 4.
Removed and Reserved
23
     
Item 5.
Other Information
23
     
Item 6.
Exhibits
23
 
 
2

 

PART I - FINANCIAL INFORMATION

 
Item 1.  Financial Statements

 
PYRAMID OIL COMPANY

BALANCE SHEETS

ASSETS

   
September 30
   
December 31
 
   
2011
   
2010
 
   
(Unaudited)
   
(Audited)
 
             
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 2,267,006     $ 1,535,532  
Short-term investments
    3,190,618       3,058,528  
Trade accounts receivable  (net of reserve for doubtful accounts of $4,000 in 2011 and 2010)
    532,333       508,457  
Joint interest billing receivable
    10,776        
Income taxes receivable
    9,498        
Crude oil inventory
    96,697       86,361  
Prepaid expenses and other assets
    92,661       230,876  
Deferred Income taxes
    262,500       245,100  
                 
TOTAL CURRENT ASSETS
    6,462,089       5,664,854  
                 
PROPERTY AND EQUIPMENT, at cost:
               
                 
Oil and gas properties and equipment (successful efforts method)
    19,110,614       18,101,529  
Capitalized asset retirement costs
    401,242       389,463  
Drilling and operating equipment
    1,956,371       1,946,805  
Land, buildings and improvements
    1,073,918       1,066,571  
Automotive, office and other property and equipment
    1,180,042       1,182,613  
      23,722,187       22,686,981  
Less - accumulated depletion,  depreciation, amortization and valuation allowances
    (19,928,176 )     (18,687,908 )
                 
TOTAL PROPERTY AND EQUIPMENT
    3,794,011       3,999,073  
                 
OTHER ASSETS
               
Deferred income taxes
    842,600       708,500  
Deposits
    250,000       250,000  
Other assets
    17,380       7,380  
                 
TOTAL OTHER ASSETS
    1,109,980       965,880  
                 
TOTAL ASSETS
  $ 11,366,080     $ 10,629,807  

The accompanying notes are an integral part of these balance sheets.

 
3

 

PYRAMID OIL COMPANY

BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY

   
September 30
   
December 31
 
   
2011
   
2010
 
   
(Unaudited)
   
(Audited)
 
CURRENT LIABILITIES:
           
Accounts payable
  $ 48,651     $ 73,374  
Accrued professional fees
    123,045       122,506  
Accrued taxes, other than income taxes
    32,143       63,361  
Accrued payroll and related costs
    77,416       60,365  
Accrued royalties payable
    203,983       193,052  
Accrued insurance
          86,888  
Accrued income taxes
          12,800  
Current maturities of long-term debt
    32,015       13,473  
                 
TOTAL CURRENT LIABILITIES
    517,253       625,819  
                 
Long-term debt, net of current maturities
    38,541       26,946  
                 
LIABILITY FOR ASSET RETIREMENT OBLIGATIONS
    1,273,765       1,235,193  
                 
TOTAL LIABILITES
    1,829,559       1,887,958  
                 
COMMITMENTS AND CONTINGENCIES (Note 4)
               
                 
SHAREHOLDERS' EQUITY:
               
                 
Preferred stock, no par value
Authorized - 10,000,000 shares
Issued and outstanding - none
           
                 
Common stock, no par value (Note 6, 7 and 9)
Authorized - 50,000,000 shares
Issued and outstanding - 4,683,853 shares
    1,682,971       1,639,228  
Retained earnings
    7,853,550       7,102,621  
TOTAL SHAREHOLDERS’ EQUITY
    9,536,521       8,741,849  
                 
TOTAL LIABILITES AND SHAREHOLDERS’ EQUITY
  $ 11,366,080     $ 10,629,807  

The accompanying notes are an integral part of these balance sheets.

 
4

 

PYRAMID OIL COMPANY
 
STATEMENTS OF OPERATIONS
(UNAUDITED)

   
Three months ended,
 
   
September 30,
 
   
2011
   
2010
 
REVENUES:
           
Oil and gas sales
  $ 1,412,342     $ 1,099,464  
Gain on sale of fixed assets
    500       320,556  
      1,412,842       1,420,020  
                 
COSTS AND EXPENSES:
               
Operating expenses
    421,405       386,897  
General and administrative
    222,583       195,838  
Stock based compensation
          113,500  
Taxes, other than income and payroll taxes
    37,399       39,654  
Provision for depletion, depreciation, and amortization
    184,208       151,855  
Valuation allowances
    673,000        
Accretion expense
    5,229       6,664  
Other costs and expenses
    31,280       26,403  
      1,575,104       920,811  
                 
OPERATING INCOME (LOSS)
    (162,262 )     499,209  
                 
OTHER INCOME (EXPENSE):
               
Interest income
    12,193       13,521  
Other income
          3,600  
Interest expense
    (568 )     ( 30 )
      11,625       17,091  
INCOME (LOSS) BEFORE
               
INCOME TAX PROVISION (BENEFIT)
    (150,637 )     516,300  
Income tax provision (benefit)
               
Current
    52,700       47,200  
Deferred
    (207,600 )     75,300  
      (154,900 )     122,500  
                 
NET INCOME
  $ 4,263     $ 393,800  
                 
BASIC INCOME PER COMMON SHARE
  $ 0.00     $ 0.08  
                 
DILUTED INCOME PER COMMON SHARE
  $ 0.00     $ 0.08  
                 
Weighted average number of
               
common shares outstanding
    4,683,853       4,677,728  
                 
Diluted average number of
               
common shares outstanding
    4,685,177       4,720,014  

The accompanying notes are an integral part of these statements.

 
5

 

PYRAMID OIL COMPANY
 
STATEMENTS OF OPERATIONS
(UNAUDITED)

   
Nine months ended,
 
   
September 30,
 
   
2011
   
2010
 
REVENUES:
           
Oil and gas sales
  $ 4,287,669     $ 3,329,594  
Gain on sales of fixed assets
    1,512       320,556  
      4,289,181       3,650,150  
COSTS AND EXPENSES:
               
Operating expenses
    1,282,950       1,165,209  
General and administrative
    666,375       653,793  
Stock based compensation
    43,743       113,500  
Taxes, other than income and payroll taxes
    101,358       97,313  
Provision for depletion, depreciation, and amortization
    595,631       498,115  
Valuation allowances
    727,384       867,468  
Accretion expense
    26,793       18,775  
Other costs and expenses
    118,964       90,946  
      3,563,198       3,505,119  
                 
OPERATING INCOME
    725,983       145,031  
                 
OTHER INCOME (EXPENSE):
               
Interest income
    38,704       29,904  
Other income
    500       9,997  
Interest expense
    (2,459 )     (333 )
      36,745       39,568  
INCOME BEFORE
               
INCOME TAX PROVISION (BENEFIT)
    762,728       184,599  
Income tax provision (benefit)
               
Current
    163,300       92,100  
Deferred
    (151,500 )     (180,100 )
      11,800       ( 88,000 )
                 
NET INCOME
  $ 750,928     $ 272,599  
                 
BASIC INCOME PER COMMON SHARE
  $ 0.16     $ 0.06  
                 
DILUTED INCOME PER COMMON SHARE
  $ 0.16     $ 0.06  
                 
Weighted average number of
               
common shares outstanding
   
4,682,492
      4,677,728  
                 
Diluted average number of
               
common shares outstanding
   
4,688,465
      4,719,276  

The accompanying notes are an integral part of these statements.

 
6

 

PYRAMID OIL COMPANY

STATEMENTS OF CASH FLOWS
(UNAUDITED)

   
Nine months ended,
September 30,
 
   
2011
   
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 750,928     $ 272,599  
                 
Adjustments to reconcile net income to net cash provided by operating activities:
               
                 
Provision for depletion, depreciation, and amortization
    595,631       498,115  
Valuation allowances
    727,384       867,468  
Gain on sale of fixed assets
    (1,512 )     (320,556 )
Stock based compensation
    43,743       113,500  
Accretion expense
    26,793       18,775  
Loss on disposal of fixed assets
          803  
Deferred income taxes
    (151,900 )     (180,100 )
Asset retirement obligations
    11,779        
                 
Changes in operating assets and liabilities:
               
(Increase) decrease in trade accounts receivable
    (44,150 )     89,284  
(Increase) in crude oil inventories
    (10,336 )     (1,101 )
Decrease in prepaid expenses and other assets
    139,016       61,605  
(Increase) in other assets
    (10,000 )      
(Decrease) in accounts payable and accrued liabilities
    (127,108 )     ( 2,786 )
                 
Net cash provided by operating activities
    1,950,268       1,417,606  

The accompanying notes are an integral part of these statements.

 
7

 
 
PYRAMID OIL COMPANY
 
STATEMENTS OF CASH FLOWS
(UNAUDITED)

   
Nine months ended,
 
   
September 30,
 
   
2011
   
2010
 
CASH FLOWS FROM INVESTING ACTIVITIES:
           
             
Capital expenditures
  $ (1,137,941 )   $ (1,714,181 )
Redemptions of short-term investments
          680,000  
Payments to acquire short-term investments
    (100,000 )     (550,000 )
(Increase) decrease in short-term investments
    (32,090 )     103,615  
Proceeds from sale of property and equipment
    21,500       320,556  
                 
Net cash used in investing activities
    (1,248,531 )     (1,160,010 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
                 
Loans to employees
    (1,300 )     (2,900 )
Proceeds from issuance of long-term debt
    55,979        
Principal payments from loans to employees
    900       3,800  
Principal payments on long-term debt
    (25,842 )     (19,735 )
                 
Net cash provided by (used in) financing activities
    29,737       (18,835 )
                 
Net increase in cash and cash equivalents
    731,474       238,761  
                 
Cash and cash equivalents at beginning of year
    1,535,532       1,438,825  
                 
Cash and cash equivalents at end of period
  $ 2,267,006     $ 1,677,586  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
                 
Cash paid during the nine months for interest
  $ 2,459     $ 303  
                 
Cash paid during the nine months for income taxes
  $ 185,598     $ 1,100  

The accompanying notes are an integral part of these statements.

 
8

 

PYRAMID OIL COMPANY
NOTES TO FINANCIAL STATEMENTS
September 30, 2011
(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, 2010 Form 10-K which is incorporated herein by reference.  The financial data presented herein should be read in conjunction with the Company's December 31, 2010 financial statements and notes thereto, contained in the Company's Form 10-K.

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, 2011 and the results of its operations and its cash flows for the three and nine month periods ended September 30, 2011 and 2010.  The results of operations for any interim period are not necessarily indicative of the results to be expected for a full year.

Income Taxes - When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

The Company files income tax returns in the U.S. federal jurisdiction, California, Texas and New York states.  With few exceptions, the Company is no longer subject to U.S. federal tax examination for the years before 2007.  State jurisdictions that remain subject to examination range from 2006 to 2010.  The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

The Company policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.  As of the date of adoption of FASB ASC 740, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the quarter.

Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.

Earnings (Loss) per Share - Basic earnings (loss) per common share is computed by dividing the net income (loss) applicable to common stock by the weighted average number of shares of common stock outstanding during the period.

 
9

 

Valuation Allowances - The Company has recorded valuation allowances for certain of its oil and gas properties when the undiscounted future net cash flows are less than the net capitalized costs for the property.  On March 21, 2011, the Company participated in the drilling of a joint venture well in Menard County, Texas.  Log analysis of this well indicated that the well would not be commercially viable, and was plugged and abandoned.  The Company owns a 30% interest in the joint venture.  The Company recorded a valuation allowance of $54,384 against the costs incurred during the first six months of 2011 for the drilling of this well.
 
In addition, the Company determined that the assets related to its joint venture in the Pike 1-H well may have been impaired because the results of drilling operations there had not fulfilled expectations and has not responded favorably to efforts by the Company to stimulate production from this well..  During the third quarter of 2011, the Company determined that well assets of $897,000 were impaired and wrote them down by $673,000 to their estimated fair value.  The estimated fair value was based upon estimated future cash flows to be generated by the wells estimated production discounted at a market rate of interest.
 
Joint Interest Billing Receivable - The Company entered into a joint venture agreement on February 23, 2011 with Victory Oil Company for the drilling of a well on the Company’s Pike lease.  The Pike 1-H well was drilled during the first quarter of 2011.  The well was completed and placed into production during April 2011.  The Company’s share of the total costs for drilling and completing this well are 68% and Victory Oil’s share of costs are 32%.  As of September 30, 2011, the Company’s share of costs for drilling this well were approximately $897,000 and Victory Oil’s share of the costs were approximately $422,000.  At September 30, 2011, the Company has a joint interest billing receivable of approximately $9,500 from Victory Oil for its share of the costs for operating this well.

2.  Recent Accounting Pronouncements
 
ASU 2010-28 – In December 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-28, “ When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU 2010-28”). ASU 2010-28 provides amendments to ASC No. 350 “ Intangibles- Goodwill and Other” , modifying Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with the existing guidance and examples in paragraph 350-20-35-30, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010 and early adoption is not permitted. The adoption of ASU 2010-28 did not have a material impact on the Company’s financial condition, results of operations and cash flows, or disclosures thereto.
 
ASU 2010-29 – In December 2010, the FASB issued ASU No. 2010-29, “ Disclosure of Supplementary Pro Forma Information for Business Combinations” (“ASU 2010-29”). ASU 2010-29 provides amendments to ASC No. 805 “Business Combinations” , which specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this update also expand the supplemental pro forma disclosure under ASC No. 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. The adoption of ASU 2010-29 did not have a material impact on the Company’s financial condition, results of operations and cash flows, or disclosures thereto.

 
10

 

ASU 2011-04 - In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (ASU 2011-04) which amends ASC Topic 820, Fair Value Measurement.  The updated guidance in ASC Topic 820 changes the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.   The updated guidance in ASC Topic 820 is effective during interim and annual period beginning after December 15, 2011.  Early adoption is not permitted.  We are currently evaluating the impact of ASU 2011-04 on our results of operations, financial condition and disclosure requirements.  We will apply the provisions of these accounting standards after the effective date.

ASU 2011-05 - In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income” (ASU 2011-05) which amends ASC Topic 220, Comprehensive Income.  The updated guidance in ASC Topic 220 gives an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.   The updated guidance in ASC Topic 220 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.   The adoption of this guidance will not have any impact on our results of operations or financial condition.
 
In September 2011, the FASB issued ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350) — Testing Goodwill for Impairment”. This amendment allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and early adoption is permitted. The Company does not expect this amendment to have an impact on its financial position, results of operations or cash flows.

3.  Dividends

No cash dividends were paid during the nine months ended September 30, 2011 and 2010.

4.  Commitments and Contingencies

In February 2002, the Company entered into an employment agreement with John H. Alexander pursuant to which Mr. Alexander agreed to serve as the Company's Vice President. On June 3, 2004, Mr. Alexander was appointed as the Company's President and Chief Executive Officer.  The employment agreement is for an initial term of six years, which term automatically renews annually if written notice is not tendered.  The agreement was automatically renewed on June 3, 2011.

Pursuant to the employment agreement, the Company may terminate Mr. Alexander's employment with or without cause at any time before its term expires upon providing written notice.  In the event the Company terminates Mr. Alexander's employment without cause, Mr. Alexander would be entitled to receive a severance amount equal to his annual base salary and benefits for the balance of the term of his employment agreement.  In the event of termination by reason of Mr. Alexander's death or permanent disability, his legal representative will be entitled to receive his annual salary and benefits for the remaining term of his employment agreement.  In the event of, or termination following, a change in control of the Company, as defined in the agreement, Mr. Alexander would be entitled to receive his annual salary and benefits for the remainder of the term of his agreement.  In the event that Mr. Alexander is terminated the Company would incur approximately $600,000 in costs.

The Company has been notified by the United States Environmental Protection Agency (EPA) of a final settlement offer to settle its potential liability as a generator of waste containing hazardous substances that was disposed of at a waste disposal site in Santa Barbara County.  The Company has responded to the EPA by indicating that the waste contained petroleum products that fall within the exception to the definition of hazardous substances for petroleum-related substances of the pertinent EPA regulations.  Management has concluded that under both Federal and State regulations no reasonable basis exists for any valid claim against the Company.  As such, the likelihood of any settlement is deemed remote.  There has been not further communication form the EPA on this matter since September 25, 2009.

 
11

 

5.  Income Tax Provision

The Company recognized an income tax provision of $11,800 for the nine months ended September 30, 2011 compared to a net income tax benefit of $88,000 for the same period in 2010.

Income tax provision for the nine months ended September 30, 2011 was calculated as follows:

   
Federal
   
State
   
Total
 
                   
Current tax provision
  $ 140,000     $ 23,300     $ 163,300  
Deferred tax provision
    (117,800 )     (33,700 )     (151,500 )
                         
    $ 22,200     $ (10,400 )   $ 11,800  

Income tax provision (benefit) for the nine months September 30, 2010 was calculated as follows:

   
Federal
   
State
   
Total
 
                   
Current tax provision
  $ 78,000     $ 14,100     $ 92,100  
Deferred tax (benefit)
    (140,100 )     (40,000 )     (180,100 )
                         
    $ (62,100 )   $ (25,900 )   $ (88,000 )

Income tax provision for the three months ended September 30, 2011 was calculated as follows:

   
Federal
   
State
   
Total
 
                   
Current tax provision
  $ 45,200     $ 7,500     $ 52,700  
Deferred tax provision
    (161,600 )     (46,000 )     (207,600 )
                         
    $ (116,400 )   $ (38,500 )   $ (154,900 )

Income tax provision (benefit) for the three months ended September 30, 2010 was calculated as follows:

   
Federal
   
State
   
Total
 
                   
Current tax provision
  $ 40,150     $ 7,050     $ 47,200  
Deferred tax (benefit)
    58,800       16,500       75,300  
                         
    $ 98,950     $ 23,550     $ 122,500  

Deferred income taxes are recognized using the asset and liability method by applying income tax rates to cumulative temporary differences based on when and how they are expected to affect the tax returns.  Deferred tax assets and liabilities are adjusted for income tax rate changes.  Deferred income tax assets have been offset by a valuation allowance of $1,710,000 as of September 30, 2011.  Management reviews deferred income taxes regularly throughout the year, and accordingly makes any necessary adjustments to properly reflect the valuation allowance based upon current financial trends and projected results.

 
12

 

6.  Severance Award Agreements

On September 15, 2010, the Company and John Alexander entered into a Severance Award Agreement pursuant to which the Company awarded Mr. Alexander a supplemental payment in connection with his future severance of employment with the Company and recorded an increase to stockholders' equity of $113,500 (25,000 shares at $4.54 per share).  Pursuant to the Severance Award Agreement and following the termination of Mr. Alexander's employment, he will be entitled to receive (at the Company's option) 25,000 shares of the Company's common stock or the then-fair market value of the shares.  As of September 30, 2010, the Company intends to deliver the Company's common shares for the Severance Award; therefore, in accordance with FASB ASC Topic 718, Compensation-Stock Compensation, management has classified the share-based compensation as stockholders' equity at September 30, 2010.

7.  Incentive and Retention Plan

On January 9, 2007, the Company's Board of Directors adopted an Incentive and Retention Plan pursuant to which the Company's officers and other employees selected by the Company's Compensation Committee are entitled to receive payments if they are employed by the Company as of the date of a 'Corporate Transaction,' as defined in the Incentive and Retention Plan.  A 'Corporate Transaction' includes certain mergers involving the Company, sales of Company assets, and other changes in the control of the Company, as specified in the Incentive and Retention Plan.  In general, the amount that is payable to each plan participant will equal the number of plan units that have been granted to him or her, multiplied by the increase in the value of the Company between January 9, 2007 and the date of a Corporate Transaction.  There has been no Corporate Transaction since the adoption of the Incentive and Retention Plan.

8.  Related-party Transaction

Effective January 1, 1990, John H. Alexander, an officer and director of the Company participated with a group of investors that acquired the mineral and fee interest on one of the Company's oil and gas leases (Santa Fe Energy lease) in the Carneros Creek field after the Company declined to participate.  The thirty-three percent interest owned by Mr. Alexander represents a minority interest in the investor group.  Royalties on oil and gas production from this property paid to the investor group approximated $176,000 during the nine months ended September 30, 2011 and $154,000 during the nine months ended September 30, 2010.

 
13

 

9.  Stock Based Compensation

The Company issued warrants and options to purchase common shares of the Company as compensation for consulting and Board of Directors services.  The value of warrants and options issued for compensation are accounted for as a non-cash expense to the Company at the fair value of the warrants and options issued.  The Company values the warrants and options at fair value as calculated by using the Black-Scholes option-pricing model.  As of September 30, 2011 the Company has $0 in unamortized stock based compensation related to outstanding options and warrants.

The following table summarizes the warrant and option activity for the nine months ended September 30, 2011:

   
Number of
       
(Unaudited)
 
 
Warrants and
Options
   
Weighted-Average
Exercise Price
 
             
Outstanding, December 31, 2010
    25,000     $ 3.20  
Granted
    10,000       5.40  
Exercised
    (10,000 )     3.20  
Cancelled
           
Outstanding, September 30, 2011
    25,000     $ 4.08  

On March 1, 2011, a consultant exercised 10,000 warrants under “cash-less” exercise provisions of the warrant agreement.

The following summarizes the warrants issued, outstanding and exercisable as of September 30, 2011:

Grant Date
 
November, 2008
 
Strike Price
  $ 3.20  
Expiration Date
 
November, 2011
 
Warrants Remaining
    15,000  
Proceeds if Exercised
  $ 48,000  

The following summarizes the options issued, outstanding and exercisable as of September 30, 2011:

Grant Date
 
June 2, 2011
 
Strike Price
  $ 5.40  
Expiration Date
 
June 1, 2016
 
Options Remaining
    10,000  
Proceeds if Exercised
  $ 54,000  

10.  Fair Value

Effective January 1, 2009, the Company adopted FASB ASC 820 (formerly SFAS No. 157) for our nonfinancial assets and nonfinancial liabilities measured on a non-recurring basis.  The Company adopted the provisions of FASB ASC 820 for measuring the fair value of our financial assets and liabilities during 2008.  As defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company utilizes market data or assumptions that we believe market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.  FASB ASC 820 establishes a three-tiered fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1 - Observable inputs such as quoted prices in active markets;

 
14

 

Level 2 - Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.  Included in this category is the Company's determination of the value of its asset retirement obligation liability.  The obligation has increased $38,572 during the nine months ended September 30, 2011 as a result of normal accretion expense and the drilling of a new well.

The carrying amount of our cash and equivalents, short term investments, accounts receivable, accounts payable and accrued expenses reported in the condensed consolidated balance sheets approximates fair value because of the short maturity of those instruments.
 
Fair Value on a Nonrecurring Basis
 
Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP (for example, when there is evidence of impairment). The amounts below represent only balances measured at fair value during the period presented and still held as of the reporting date.  These balances appear as a component of the “Oil and Gas Properties and Equipment” and “Accumulated Depletion, Depreciation, Amortization and Valuation Allowances” captions on the balance sheet.
 
   
At and for the period ended September 30, 2011:
 
   
 
Total
   
 
Level 1
   
 
Level 2
   
 
Level 3
   
Total
Valuation
 
Oil and gas properties and equipment
  $ 897,000     $ --     $ --     $ 224,000     $ (673,000 )
 
Oil and gas properties and equipment held and used with a carrying amount of $897,000 were written down to their fair value of $224,000, resulting in a valuation charge of $673,000, which was included in earnings for the period.  The fair value of these long-lived assets held and used was calculated based upon discounted cash flow projections.  These projections incorporate management's assumptions about future cash flows based upon past experience and future expectations.  The expected cash flows are then discounted using a discount rate that the Company believes is commensurate with the risks involved. 
 
11.  Registration Statement on Form S-3

The Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on December 22, 2009, that became effective on January 14, 2010.  The registration statement is designed to provide the Company the flexibility to offer and sell from time to time up to $20 million of the Company's common stock.  The Company may offer and sell such securities through one or more methods of distribution, subject to market conditions and the Company's capital needs.  The terms of any offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of the offering.  The Company has not filed any supplemental prospectus with the SEC or sold any common stock under this registration statement.

 
15

 
 
12.  Asset Retirement Obligations

The Company recognizes a liability at discounted fair value for the future retirement of tangible long-lived assets and associated assets retirement cost associated with the petroleum and natural gas properties. The fair value of the liability is capitalized as part of the cost of the related asset and amortized to expense over its useful life. The liability accretes until the date of expected settlement of the retirement obligations. The related accretion expense is recognized in the statement of operations. The provision will be revised for the effect of any changes to timing related to cash flow or undiscounted abandonment costs. Actual expenditures incurred for the purpose of site reclamation are charged to the asset retirement obligations to the extent that the liability exists on the balance sheet. Differences between the actual costs incurred and the fair value of the liability recorded are recognized in income in the period the actual costs are incurred.

There are no legally restricted assets for the settlement of asset retirement obligations.  A reconciliation of the Company's asset retirement obligations from the periods presented, are as follows:

Balance at December 31, 2010
  $ 1,235,193  
Incurred during the period
     
Additions for new wells
    11,779  
Accretion expense
    26,793  
Balance at September 30, 2011
  $ 1,273,765  

13.  Subsequent Events

The Company evaluated subsequent events after the balance sheet date of September 30, 2011 through the date these unaudited financial statements were issued.

 
16

 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING INFORMATION
 
Looking forward into the balance of fiscal 2011, crude oil prices have increased by $13.45 per barrel.
 
In an effort to increase oil production volumes, Pyramid is pursuing a range of drilling opportunities on its core properties in Kern County, California. The Company expects to drill a new well in its productive Cameras Creek field in early 2012. Pyramid was previously evaluating re-drill opportunities on two existing wells in its Mountain View area. However, in light of very tight contract rig availability, management has determined it will initially focus on new wells, and will reassess re-entry opportunities when contract rigs become more accessible.
 
During the third quarter, the Company continued efforts to mitigate the technical challenges on the Pike 1-H, a horizontal well drilled during the first quarter of 2011 with joint-venture partner Victory Oil Company. After encouraging test results, the well has failed to produce the oil volumes expected and has not responded favorably to a range of stimulation efforts. The Company therefore recorded a valuation allowance of $673,000 against the costs of drilling the Pike 1-H, which is currently producing approximately 5 barrels of oil per day. Pyramid and Victory have maintained a strong working relationship and may consider additional joint-venture opportunities in the future.
 
Pyramid has maintained a strong balance sheet and working capital position, and management continues to seek and evaluate opportunities within the energy sector to enhance the value of the Company.  Pyramid's growth during the balance of 2011 will be highly dependent on the level of success the Company has in its operations and capital investments, including the outcome of wells that have not yet been drilled.  The Company's future capital investment program may be modified due to exploration and development successes or failures, market conditions and other variables.  The production and sales of oil and gas involves many complex processes that are subject to numerous uncertainties, including reservoir risk, mechanical failures, human error and market conditions.

The Company has positioned itself, over the past several years, to withstand various types of economic uncertainties, with a program of consolidating operations on certain producing properties and concentrating on properties that provide the major revenue sources.  The drilling of a new well and several limited work-overs of certain wells have allowed the Company to maintain its crude oil reserves for the last three years.  The Company expects to maintain its reserve base in 2011 by drilling new wells and routine maintenance of its existing wells.

The Company may be subject to future costs necessary for compliance with the new implementation of air and water environmental quality requirements of the various state and federal governmental agencies.  The requirements and costs are unknown at this time, but management believes that costs could be significant in some cases.  As the scope of the requirements become more clearly defined, management may be better equipped to determine the true costs to the Company.

The Company continues to absorb the costs for various state and local fees and permits under new environmental programs, the sum of which were not material during 2011.  The Company retains outside consultants to assist the Company in maintaining compliance with these regulations.  The Company is actively pursuing an ongoing policy of upgrading and restoring older properties to comply with current and proposed environmental regulations.  The costs of upgrading and restoring older properties to comply with environmental regulations have not been determined.  Management believes that these costs will not have a material adverse effect upon its financial position or results of operations.

 
17

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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.

ANALYSIS OF SIGNIFICANT CHANGES IN RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 2011
COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 2010

REVENUES

The increase in oil and gas sales of $312,878 is due primarily to higher average sales prices for the third quarter of 2011.  The average sales price of the Company's oil and gas for the third quarter of 2011 increased by approximately $31.80 per equivalent barrel when compared to the same period of 2010.  The Company's net revenue share of crude oil production/sales decreased by approximately 1,600 barrels for the third quarter of 2011.

On July 28, 2010, the Company entered into a Purchase and Sale Agreement for the sale of a portion of its Texas joint venture leaseholds.  Pursuant to the agreement, the Company agreed to sell to the buyers 5% of the working interest of the Company's Texas joint venture, subject to certain prior agreements and encumbrances.  The purchase price for the assigned interest is $320,566.  After the sale, the Company continues to own a 7.5% working interest in the assets.  The Company recognized a gain on the sale of the Texas leasehold interests in the amount of $320,566.  The leasehold interests had been previously fully amortized.

OPERATING EXPENSES

Operating expenses increased by $34,508 for the third quarter of 2011.  The cost to produce an equivalent barrel of crude oil during the third quarter of 2011 was approximately $31.35 per barrel, an increase of approximately $5.57 per barrel when compared with production costs for the third quarter of 2010.  The increase in lease operating expenses is caused by many factors.  These include higher costs for labor, pump repairs, equipment fuel and equipment rental.  This was offset by lower costs for parts and supplies.

Labor costs increased by $19,133 due primarily to additional overtime hours worked during the third quarter of 2011 when compared with the same period of 2010.  Down-hole pump repairs increased by $11,894 due to higher maintenance activities for the third quarter of 2011.  Equipment fuel costs increased by $11,283 due primarily to an increase in average fuel costs for the gasoline and diesel used by the Company’s vehicles and production equipment. Equipment rental costs increased by $9,958 due primarily to higher costs on the Pike lease.  The Company leased the surface pumping unit and a crude oil storage tank for the new 1-H well that was drilled in the first quarter of 2011.  Parts and supplies were lower by $19,170 due to lower maintenance activities for the third quarter of 2011.

 
18

 

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased by $26,745 for the third quarter of 2011 when compared with the same period for 2010.  Accounting services increased by $25,943 due primarily to higher fees for audit services, tax consulting and tax preparation.  Legal services increased by $16,944 due primarily to the filing of a Registration Statement on Form S-8 that was filed in the third quarter of 2011.  This was offset by lower fees for consulting services.  Consulting services decreased by $16,320 due to lower fees for consulting geologists.  In 2010, the Company retained a geologist to review its oil and gas properties for future well locations.  That project was completed in 2010.

STOCK BASED COMPENSATION

On September 15, 2010, the Company and John Alexander entered into a Severance Award Agreement pursuant to which the Company awarded Mr. Alexander a supplemental payment in connection with his future severance of employment with the Company and recorded stock based compensation of $113,500 (25,000 shares at $4.54 per share).

PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION

The provision for depletion, depreciation and amortization increased by $32,353 for the third quarter of 2011, when compared with the same period for 2010.  The increase is due primarily to an increase in depletion of the Company’s oil and gas properties.  The increase in depletion is due primarily to an increase in the depletion rate per barrel on the Santa Fe and the Anderson oil producing properties for 2011.  The depletion rate for these properties increased for 2011 due to a decrease in oil and gas reserves at December 31, 2010.
 
VALUATION ALLOWANCES

During the third quarter of 2011, the Company recorded a valuation allowance of $673,000 against the cost of drilling the Pike 1-H well.  The Pike 1-H well was drilled in the first quarter of 2011 and has not responded favorably to efforts by the Company to stimulate production from this well.  The well is currently producing approximately 5 barrels per day.  The Company’s share of the production from this well is approximately 3.4 barrels per day.

During the second quarter of 2010, the Company commenced drilling of a horizontal well on one of its Mountain View properties in Kern County, California.  The well was drilled to its objective but did not encounter adequate hydrocarbons to warrant completion of the well.  During the second quarter of 2010, the Company recorded a valuation allowance of $842,327 for the costs that had been incurred for the drilling of this well.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2010

REVENUES

The increase in oil and gas sales of $958,075 is due primarily to higher average sales prices for the nine months ended September 30, 2011.  The average sales price of the Company's oil and gas for the nine months ended September 30, 2011 increased by approximately $29.50 per equivalent barrel when compared to the same period of 2010.  The Company's net revenue share of crude oil production/sales decreased by approximately 3,500 barrels for the nine months ended September 30, 2011.

 
19

 

On July 28, 2010, the Company entered into a Purchase and Sale Agreement for the sale of a portion of its Texas joint venture leaseholds.  Pursuant to the agreement, the Company agreed to sell to the buyers 5% of the working interest of the Company's Texas joint venture, subject to certain prior agreements and encumbrances.  The purchase price for the assigned interest is $320,566.  After the sale, the Company continues to own a 7.5% working interest in the assets.  The Company recognized a gain on the sale of the Texas leasehold interests in the amount of $320,566.  The leasehold interests had been previously fully amortized.

OPERATING EXPENSES

Operating expenses increased by $117,741 for the nine months ended September 30, 2011.  The cost to produce an equivalent barrel of crude oil during the nine months ended September 30, 2011 was approximately $31.04 per barrel, an increase of approximately $5.06 per barrel when compared with production costs for the same period of 2010.  The increase in lease operating expenses is caused by many factors.  These include higher costs for labor, equipment fuel, contract operations, chemicals, equipment repair and maintenance, equipment rental, utilities and outside services.  These were offset by lower costs for parts and supplies and waste water disposal.

Labor costs increased by $44,904 due primarily to an increase in overtime hours worked during the nine months ended September 30, 2011 when compared with the same period of 2010.  Equipment fuel costs increased by $24,910 due primarily to an increase in average fuel costs for gasoline and diesel used by the Company’s vehicles and production equipment.  Contract operations increased by $21,190 due primarily to higher operating costs on the Wyoming joint venture operations due to workovers on certain wells.  Chemical costs increased by $19,446 due to higher volumes of chemical usage on a number of the Company’s oil and gas properties.  Equipment repair and maintenance costs increased by $17,227 due primarily to higher levels of maintenance on the Company’s production equipment, pickups and trucks.

Equipment rental costs increased by $17,220 due primarily to higher costs on the Pike lease.  The Company leased the surface pumping unit and a crude oil storage tank for the new 1-H well that was drilled in the first quarter of 2011.  Utilities increased by $12,388 due primarily to higher costs for electricity to power wells and other oilfield related facilities.  Utilities increased due primarily to higher electric rates charged by the utility company that provides the electrical power.  Utilities also increased on the Pike lease due to the new pumping unit on the Pike 1-H well.  Outside services increased by $10,634 due primarily to charges for the Miller and Pike leases.  The Company engaged a third-party contractor to clear the surface area of the Miller fee property.

Parts and supplies decreased by $37,475 due to lower maintenance activities for the first nine months ended September 30, 2011.  Waste water disposal costs decreased by $17,814 for the nine months ended due to lower costs on the Delaney Tunnell lease.

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased by $12,582 for the nine months ended September 30, 2011 when compared with the same period for 2010.  Accounting services increased by $40,453 due to  fees paid ($19,575) to a third-party individual to assist with the training and implementation of a new oil and gas accounting software that was effective January 1, 2011.  Audit fees were higher by $12,931 and tax consulting and tax preparation services were higher by $9,044.  Directors and officer’s liability insurance increased by $25,313, directors and officers liability insurance was not effective until October 1, 2010.  Legal fees increased by $12,309 due primarily to the filing of a Registration Statement on Form S-8 that was filed in the third quarter of 2011.  These were offset by lower costs for consulting services and other office expenses.  Consulting services declined by $54,115 due to lower fees for consulting geologists.  In 2010, the Company retained a geologist to review its oil and gas properties for future well locations.  That project was completed in 2010.

 
20

 

STOCK BASED COMPENSATION

Effective June 2, 2011, the Company’s board of directors approved the issuance of options to purchase 5,000 shares of the Company’s common stock to the Company’s two outside directors.  These options vest immediately and must be exercised within ninety days after the director leaves office.  The Company recorded $43,743 in stock based compensation during the third quarter of 2011, based on a valuation performed using a Black-Scholes option-pricing model.

PROVISION FOR DEPLETION, DEPRECIATION AND AMORTIZATION

The provision for depletion, depreciation and amortization increased by $97,516 for the nine months ended September 30, 2011, when compared with the same period for 2010.  The increase is due primarily to an increase in depletion of the Companys oil and gas properties.  The increase in depletion of approximately $102,000 is due primarily to an increase in the depletion rate per barrel on the Santa Fe and the Anderson oil producing properties for 2011.  The depletion rate for these properties increased for 2011 due to a decrease in oil and gas reserves at December 31, 2010.  This was offset by a decline in the amortization of Texas leaseholds.  The amortization of Texas leaseholds decreased by approximately $12,000 during 2011, when compared with the same period for 2010.

VALUATION ALLOWANCES

During the third quarter of 2011, the Company recorded a valuation allowance of $673,000 against the costs of drilling the Pike 1-H well.  The Pike 1-H well was drilled in the first quarter of 2011 and has not responded favorably to efforts by the Company to stimulate production from this well.  The well is currently producing approximately 5 barrels per day.  The Company’s share of the production from this well is approximately 3.4 barrels per day.

On March 21, 2011, the Company participated in the drilling of a joint venture well in Menard County, Texas.  Log analysis of this well indicated that the well would not be commercially viable, and was plugged and abandoned.  The Company owns a 30% interest in the joint venture.  The Company recorded a valuation allowance of $54,384 against the costs incurred during the six months ended June 30, 2011 for the drilling of this well.

During the second quarter of 2010, the Company commenced drilling of a horizontal well on one of its Mountain View properties in Kern County, California.  The well was drilled to its objective but did not encounter adequate hydrocarbons to warrant completion of the well.  For the six months ended June 30, 2010, the Company recorded a valuation allowance of $867,468 against the costs that had been incurred for the drilling of this well.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased by $731,474 for the nine months ended September 30, 2011.  During the nine months ended September 30, 2011, operating activities provided cash of $1,950,268.  Cash was also provided by proceeds from the issuance of long-term debt of $55,979 and proceeds from the sale of property and equipment of $21,500.  Cash was used for capital spending of $1,137,941, acquisition of short-term investments of $100,000 and principal payments on long-term debt of $32,090.  See the Statements of Cash Flows for additional detailed information.  The Company had available a line of credit of $500,000 and short-term investments of $3,190,618 at September 30, 2011 that provided additional liquidity during the first nine months of 2011.

 
21

 

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 nine months ended September 30, 2011 increased by approximately $29.50 per equivalent barrel when compared with the same period of 2010.  The Company cannot predict the future course of crude oil prices.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Not Applicable

Item 4.  Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 
22

 

PART II - OTHER INFORMATION

Item 1.  -  Legal Proceedings

None

Item 1A. -  Risk Factors

See the risk factors that are included in the Company's Annual Report on Form 10K for the fiscal year ended December 31, 2010.

Item 2.  - Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  -  Defaults Upon Senior Securities

None

Item 4.  -  [Removed and Reserved]

None

Item 5.  -  Other Information

None

Item 6.  -  Exhibits

31.1 - Certification of the Registrant's Principal Executive Officer  under Exchange Act Rules 13a-14(a) and 15-d-14(a), as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 - Certification of the Registrant's Principal Financial Officer under Exchange Act Rules 13a-14(a) and 15-d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 - Certification of the Registrant's Principal Executive Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 - Certification of the Registrant's Principal Financial Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 - The following information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language):  (1) Balance Sheets as of September 30, 2011 and December 31, 2010;  (2) Income Statements for the three and nine months ended September 30, 2011 and 2010;  (3) Condensed Statements of Cash Flows for the nine months ended September 30, 2011 and 2010;  and (4) Notes to Financial Statements. *
  
*
Pursuant to Rule 406T of Regulation S-T, the information in Exhibit 101 (a) is “furnished” and is not deemed to be “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, (b) is deemed not to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and (c) is not otherwise subject to liability under those sections.

 
23

 

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 11, 2011
JOHN H. ALEXANDER
 
John H. Alexander
 
President
   
Dated:  November 11, 2011
LEE G. CHRISTIANSON
 
Lee G. Christianson
 
Chief Financial Officer
 
 
24