UNITED        STATES SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

**FORM        10-Q**

 

QUARTERLY        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES AND EXCHANGE ACT OF 1934

 

 

| For the quarterly period ended March 31, 2008 | Commission File No. 001-31852 |
|-----------------------------------------------|-------------------------------|

 

 

**Tri-Valley Corporation**

(Exact        name of registrant as specified in its charter)

 

 

| **Delaware**

                                             | **84-0617433**                       |
|-----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of

incorporation or organization) | (I.R.S. Employer Identification No.) |

 

 

**4550        California Avenue, Suite 600, Bakersfield, California 93309**

(Address        of principal executive offices)

 

**(661)        864-0500**

(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 period that the Registrant was required to file such reports), and (2)        has been subject to such filing requirements for the past 90 days.

YesxNoo

 

Indicate        by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or        a non-accelerated filer. (as defined in Rule 12b-2 of the Exchange Act). (Check        one):

 

| Large accelerated filer

                          | o | Accelerated filer         | x |
|---------------------------------------------------------|---|---------------------------|---|
| Non-accelerated filer                                   | o | Smaller reporting company | o |

 

Indicate        by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the        Exchange Act).

YesoNox

 

 

The number        of shares of Registrant's common stock outstanding at April 30, 2008, was        26,404,109.

 

 

 

 

**TRI-VALLEY CORPORATION**

 

 

**INDEX**

 

|       |                                                                              | Page   |   |
|------------|-----------------------------------------------------------------------------------|--------|--------|
|       |                                                                              |   |   |
| PART I -   | FINANCIAL INFORMATION                                                             | 3      |   |
|       |                                                                              |   |   |
| Item 1.    | Consolidated Financial Statements                                                 | 3      |   |
|       |                                                                              |   |   |
| Item 2.    | Management's Discussion and Analysis of Financial                                 |   |   |
|       | Condition and Results of Operations                                               | 14     |   |
|       |                                                                              |   |   |
| Item 3.    | Quantitative and Qualitative Disclosures about Market                        Risk | 19     |   |
|       |                                                                              |   |   |
| Item 4.    | Controls and Procedures                                                           | 19     |   |
|       |                                                                              |   |   |
| PART II -  | OTHER INFORMATION                                                                 | 19     |   |
|       |                                                                              |   |   |
| Item 1A.   | Risk Factors                                                                      | 19     |   |
|       |                                                                              |   |   |
| Item 2.    | Unregistered Sales of Equity Securities                                           | 19     |   |
|       |                                                                              |   |   |
| Item 6.    | Exhibits                                                                          | 20     |   |
|       |                                                                              |   |   |
| SIGNATURES |                                                                              | 21     |   |
|       |                                                                              |   |   |

**PART        I**

 

**FINANCIAL INFORMATION**

 

Item 1.        Unaudited Consolidated Financial Statements

 

**TRI-VALLEY CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

 

**ASSETS**

 

|                                     | March 31,    |   | December 31, |
|------------------------------------------|--------------|--------|--------------|
|                                     | 2008         |   | 2007         |
|                                     | (Unaudited)  |   | (Audited)    |
|                                     |         |   |         |
| Current assets                           |         |   |         |
| Cash                                     | $ 1,624,107  |   | $ 3,955,610  |
| Cash restricted to OPUS I use            | 6,288,198    |   | 3,712,083    |
| Accounts receivable, trade               | 623,664      |   | 313,521      |
| Prepaid expenses                         | 12,029       |   | 12,029       |
|                                     |         |   |         |
| Total current assets                     | 8,547,998    |   | 7,993,243    |
|                                     |         |   |         |
| Property and equipment, net              |         |   |         |
| Proved properties                        | 2,146,790    |   | 2,143,907    |
| Unproved properties                      | 3,794,756    |   | 2,414,843    |
| Rigs                                     | 6,386,297    |   | 6,731,758    |
| Other property and equipment             | 5,048,696    |   | 4,942,145    |
|                                     |         |   |         |
| Total property and equipment, net        | 17,376,539   |   | 16,232,653   |
|                                     |         |   |         |
| Other assets                             |         |   |         |
| Deposits                                 | 159,833      |   | 338,772      |
| Invest in marketable securities (Note 4) | 411,000      |   | 440,000      |
| Investments in partnerships              | 17,400       |   | 17,400       |
| Goodwill                                 | 212,414      |   | 212,414      |
| Other                                    | 20,413       |   | 20,413       |
|                                     |         |   |         |
| Total other assets                       | 821,060      |   | 1,028,999    |
|                                     |         |   |         |
| **Total assets**                         | $ 26,745,597 |   | $ 25,254,895 |

 

 

 

 

 

 

The        accompanying notes are an integral part of these consolidated financial        statements.

**LIABILITIES AND STOCKHOLDERS' EQUITY**

 

|                                                                                     | March 31,            |   | December 31,                                   |
|------------------------------------------------------------------------------------------|----------------------|--------|------------------------------------------------|
|                                                                                     | 2008                 |   | 2007                                           |
|                                                                                     | (Unaudited)          |   | (Audited)                                      |
| Current liabilities                                                                      |                 |   |                                           |
| Notes payable                                                                            | $ 409,468            |   | $ 402,003                                      |
| Accounts payable and accrued expenses                                                    | 8,280,569            |   | 5,699,153                                      |
| Deferred revenue                                                                         | 645,532              |   | 242,163                                        |
| Amounts payable to joint venture participants                                            | 236,724              |   | 281,419                                        |
| Advances from joint venture participants, net                                            | 1,217,569            |   | 3,671,927                                      |
|                                                                                     |                 |   |                                           |
| Total current liabilities                                                                | 10,789,862           |   | 10,296,665                                     |
|                                                                                     |                 |   |                                           |
| Non-Current Liabilities                                                                  |                 |   |                                           |
| Asset retirement obligation                                                              | 254,395              |   | 240,394                                        |
| Long-term portion of notes payable                                                       | 2,278,501            |   | 2,355,707                                      |
|                                                                                     |                 |   |                                           |
| Total non-current liabilities                                                            | 2,532,896            |   | 2,596,101                                      |
|                                                                                     |                 |   |                                           |
| Total liabilities                                                                        | 13,322,758           |   | 12,892,766                                     |
|                                                                                     |                 |   |                                           |
| Minority interest                                                                        | (53,025)             |   | 249,945                                        |
|                                                                                     |                 |   |                                           |
| Stockholders’ equity                                                               |                 |   |                                           |
| Common stock, $.001 par value; 100,000,000 shares                                        |                 |   |                                           |
| authorized; 25,991,189 and 25,077,184 issued and                                         |                 |   |                                           |
| outstanding at March 31, 2008, and December 31,                                          |                 |   |                                           |
| 2007, respectively                                                                       | 25,991               |   | 25,077                                         |
| Less: common stock in treasury, at cost,                                                 |                 |   |                                           |
| 100,025 shares                                                                           | (13,370)             |   | (13,370)                                       |
| Capital in excess of par value                                                           | 40,382,400           |   | 37,090,714                                     |
| Additional paid in capital – warrants                                              | 782,729              |   | 782,729                                        |
| Additional paid in capital - stock options                                               | 2,008,605            |   | 1,800,642                                      |
| Accumulated deficit                                                                      | (29,694,436)         |   | (27,586,553)                                   |
| Accumulated other comprehensive income (Note 4)

                                   |  

(16,055)     |   |  

12,945

                          |
|                                                                                     |                 |   |                                           |
| Total stockholders' equity                                                               | 13,475,864           |   | 12,112,184                                     |
|                                                                                     |                 |   |                                           |
| **Total liabilities, minority interest and stockholder's                        equity** |  

$ 26,745,597 |   |  

$ 25,254,895                           |

 

The        accompanying notes are an integral part of these consolidated financial        statements.

**TRI-VALLEY CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

(Unaudited)

|                                                                      | For the Three Months |   |
|---------------------------------------------------------------------------|----------------------|--------|
|                                                                      | Ended March 31       |   |
|                                                                      | 2008                 |   | 2007 |
| Revenues                                                                  |                 |   |   |
| Sale of oil and gas                                                       | $ 382,424            |   | $ 164,186 |
| Gain on sale of asset (see Note 8)                                        | 581,250              |   | - |
| Rig income                                                                | 555,306              |   | 1,250,503 |
| Other income                                                              | 152,816              |   | 101,611 |
| Interest income                                                           | 7,050                |   | 94,067 |
|                                                                      |                 |   |   |
| Total Revenues                                                            | 1,678,847            |   | 1,610,367 |
|                                                                      |                 |   |   |
| Costs and expenses                                                        |                 |   |   |
| Oil and gas lease expense                                                 | 57,563               |   | 88,395 |
| Mining exploration expenses                                               | 3,900                |   | 63,456 |
| Drilling and development                                                  | -                    |   | 232,496 |
| Rig operations                                                            | 415,322              |   | 444,558 |
| Depletion, depreciation and amortization                                  | 357,184              |   | 253,123 |
| Interest                                                                  | 67,776               |   | 76,896 |
| Impairment loss                                                           | -                    |   | 246,862 |
| General and administrative                                                | 2,888,755            |   | 2,460,610 |
|                                                                      |                 |   |   |
| Total costs and expenses                                                  | 3,790,500            |   | 3,866,396 |
|                                                                      |                 |   |   |
| Loss from operations, before income taxes

                          | (2,111,653)          |   | (2,256,029) |
| Tax provision                                                             | -                    |   | - |
|                                                                      |                 |   |   |
| Loss before minority interest                                             | (2,111,653)          |   | (2,256,029) |
|                                                                      |                 |   |   |
| Minority interest                                                         | (3,770)              |   | 145,990 |
|                                                                      |                 |   |   |
| Net Loss

                         

Basic net loss per share:       | (2,107,883)          |   | (2,402,019) |
| Loss from operations                                                      | $ (.08)              |   | $ (.09) |
| Basic loss per common share                                               | $ (.08)              |   | $ (.09) |
|                                                                      |                 |   |   |
| Weighted average number of shares outstanding                             | 25,166,302           |   | 24,537,251 |
|                                                                      |                 |   |   |
| Potentially dilutive shares outstanding                                   | 28,504,357           |   | 27,608,334 |
|                                                                           |                      |        |  |  |

 

No        dilution is reported since net income is a loss per SFAS 128

 

The        accompanying notes are an integral part of these consolidated financial        statements.

**TRI-VALLEY CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

(Unaudited)

 

|                                                                                                                     | For the Three Months |   |
|--------------------------------------------------------------------------------------------------------------------------|----------------------|--------|
|                                                                                                                     | Ended March 31,      |   |
|                                                                                                                     | 2008                 |   | 2007 |
| Cash Flows from Operating Activities                                                                                     |                 |   |   |
| Net loss                                                                                                                 | $ (2,107,883)        |   | $ (2,402,019) |
|                                                                                                                     |                 |   |   |
| Adjustments to reconcile net income to net cash used from                        operating activities:                   |                 |   |   |
| Depreciation, depletion and amortization                                                                                 | 357,184              |   | 253,123 |
| Impairment, dry hole and other disposals of                        property                                              | -                    |   | 252,862 |
| Minority interest

Stock options                                                                                         | (3,770)

207,963     |   | 145,990

138,149 |
| (Gain) Loss on sale of property                                                                                          | 581,250              |   | - |
| Warrants                                                                                                                 | -                    |   | 458,846 |
| Changes in operating capital:                                                                                            |                 |   |   |
| (Increase) decrease in prepaids                                                                                          | -                    |   | (219,665) |
| (Increase) decrease in deposits and other assets                                                                         | 178,939              |   | - |
| (Increase) decrease in accounts receivable                                                                               | (310,143)            |   | (430,785) |
| Increase (decrease) in accounts payable, deferred revenue                        and accrued expenses                    |  

2,984,786    |   |  

550,590 |
| Advances from Great Valley Drilling, LLC-increase                        (decrease)                                      | -                    |   | - |
| Increase (decrease) accounts payable to joint                        venture                                             |                 |   |   |
| participants and related parties                                                                                         | (44,695)             |   | (165,631) |
| Increase (decrease) in advances from joint venture                        participants                                   |  

(2,454,358)  |   |  

1,468,144 |
|                                                                                                                     |                 |   |   |
| Net cash provided by (used) by operating                        activities                                               | (610,727)            |   | 49,604 |
|                                                                                                                     |                 |   |   |
| Cash Flows from Investing Activities:                                                                                    |                 |   |   |
|                                                                                                                     |                 |   |   |
| Proceeds from sale of property                                                                                           | 1,687,500            |   | - |
| Buy back of minority interest in GVPS                                                                                    | (299,200)            |   | - |
| Capital expenditures                                                                                                     | (3,755,819)          |   | (1,086,894) |
|                                                                                                                     |                 |   |   |
| Net Cash Provided (Used) by Investing Activities                                                                         | (2,367,519)          |   | (1,086,894) |
|                                                                                                                     |                 |   |   |
| Cash Flows from Financing Activities                                                                                     |                 |   |   |
| Proceeds from long-term debt                                                                                             | -                    |   | - |
| Principal payments on long-term debt                                                                                     | (69,742)             |   | (45,329) |
| Net proceeds from additional paid in capital – stock                        options                                | 293,514              |   | 138,149 |
| Net proceeds from additional paid in capital –                        warrants                                     | -                    |   | 458,846 |
| Net proceeds from minority interest holders – Great                        Valley Drilling/Great Valley Production |  

-            |   |  

(395,120) |
| Net proceeds from issuance of common stock                                                                               | 2,999,086            |   | 4,958,689 |
|                                                                                                                     |                 |   |   |
|                                                                                                                     |                 |   |   |
| Net Cash Provided (Used) by Financing Activities                                                                         | $ 3,222,858          |   | $ 5,115,235 |
|                                                                                                                          |                      |        |  |  |

 

 

The        accompanying notes are an integral part of these consolidated financial        statements.

**TRI-VALLEY CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

(Unaudited)

 

|   | For the Three Months |
|--------|----------------------|
|   | Ended March 31       |
|   | 2008                 |   | 2007 |   |

 

 

|                                             |                 |   |         |   |
|--------------------------------------------------|----------------------|--------|--------------|--------|
| Net Increase in Cash and Cash Equivalents        | 244,612              |   | 4,077,945    |   |
| Cash and Cash Equivalents at Beginning of Period | 7,667,693            |   | 15,598,215   |   |
|                                             |                 |   |         |   |
| Cash and Cash Equivalents at End of Period       | $ 7,912,305          |   | $ 19,676,160 |   |
|                                             |                 |   |         |
|                                             |                 |
|                                             | For the Three Months |
|                                             | Ended March 31,      |
|                                             | 2008                 |   | 2007         |   |
| Supplemental Information:                        |                 |   |         |   |
| Cash paid for interest                           | $ 67,667             |   | $ 76,896     |   |
| Cash paid for taxes                              | $ -                  |   | $ -          |   |
|                                             |                 |   |         |   |
|                                                  |                      |        |              |        |  |  |  |  |  |

 

 

 

The        accompanying notes are an integral part of these consolidated financial        statements.

 

 

 

 

 

 

**TRI-VALLEY CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED**

**March        31, 2008 and 2007**

(Unaudited)

 

**NOTE 1 -        DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION**

 

**Description of Business**

 

Tri-Valley Corporation (“TVC” or the Company), a Delaware        corporation formed in 1971, is in the business of exploring, acquiring and developing        petroleum and metal and mineral properties and interests therein.

 

The        Company identifies reportable segments by product. The Company includes revenues from both        external customers and revenues from transactions with other operating segments in its        measure of segment profit or loss. The Company also includes interest revenue and expense,        DD&A, and other operating expenses in its measure of segment profit or loss. The        results of these four segments are presented in Note 7 to the Consolidated Financial        Statements.

 

| The Company’s four industry segments are: |
|-------------------------------------------------|
|                                            |   |
| -                                               | *Oil and gas operations*include                        our share of revenues from oil and gas wells on which Tri-Valley Oil and                        Gas Company serves as operator, royalty income and production revenue from                        other partnerships in which we have operating or non-operating interests.                        It also includes revenues for consulting services for oil and gas related                        activities and revenue from refurbishing and rebuilding equipment for                        outside parties. |
|                                            |   |
| -                                               | *Rig operations*began in 2006,                        when the Company acquired drilling rigs and began operating them through                        subsidiaries Great Valley Production Services, LLC, and Great Valley                        Drilling Company, LLC. Rig operations include income from rental of oil                        field equipment. |
|                                            |   |
| -                                               | *Minerals*include the                        Company’s mining and mineral prospects and operations, and expenses                        associated with those operations. |
|                                            |   |
| -                                               | *Drilling and development*includes revenues received from oil and gas drilling and                        development operations performed for joint venture partners, including the                        Opus-I drilling partnership. |
|                                            |   |

 

The        Company has five subsidiaries:

 

|   | **•** | Tri-Valley Oil & Gas Company (“TVOG”)                        operates the oil & gas activities. TVOG derives the majority of its                        revenue from oil and gas drilling and turnkey development. TVOG primarily                        generates its own exploration prospects from its internal database, and                        also screens prospects from other geologists and companies. TVOG generates                        these geological “plays” within a certain geographic area of                        mutual interest. The prospect is then presented to potential co-ventures.                        The company deals with both accredited individual investors and energy                        industry companies. TVOG serves as the operator of these co-ventures. TVOG                        operates both the oil and gas production segment and the drilling and                        development segment of our business lines. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **•** | Select Resources Corporation (“Select”) was                        created in late 2004 to manage, grow and operate the minerals segment of                        our business lines. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **•** | Great Valley Production Services, LLC, (“GVPS”)                        was formed in 2006 to operate oil production services, well work over and                        drilling rigs, primarily for TVOG. Tri-Valley currently owns 97% of GVPS,                        and the remainder is owned by outside investors. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Great Valley Drilling Company, LLC (“GVDC”) was                        formed in 2006 to operate oil drilling rigs, primarily in Nevada where                        Tri-Valley has 17,000 acres of prospective oil leases. However, because rig                        availability is scarce in Nevada, GVDC has an opportunity to do contract                        drilling for third parties in both petroleum and geothermal projects. For                        the time being GVDC, whose operation began in the first quarter of 2007,                        expects its primary activity will be contract drilling for third parties.                        GVDC is 100% owned by TVC. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | **•** | Tri-Valley Power Corporation is inactive at the present                        time. |
|--------|------------|--------------------------------------------------------------------------------------|

 

Basis of        Presentation

 

The        financial information included herein is unaudited; however, such information reflects all        adjustments (consisting solely of normal recurring adjustments), which are, in the opinion        of management, necessary for a fair statement of results for the interim periods. The        results of operations for the three-month period ended March 31, 2008, are not necessarily        indicative of the results to be expected for the full year.

 

The        accompanying consolidated financial statements do not include footnotes and certain        financial presentations normally required under generally accepted accounting principles in        the United States of America; and, therefore, should be read in conjunction with our Annual        Report on Form 10-K, filed with the Securities and Exchange Commission on March 14, 2008,        for the year ended December 31, 2007.

 

Principles of Consolidation

 

The        consolidated financial statements include the accounts of the Company, its wholly owned        subsidiaries, TVOG, Select, GVDC, Tri-Valley Power Corporation, since their inception.        GVPS, where the Company has retained a 97% ownership interest, is also included in the        consolidation. Other partnerships in which the Company has an operating or nonoperating        interest in which the Company is not the primary beneficiary and owns less than 51%, are        proportionately combined. This includes Opus I, Martins-Severin, Martins-Severin Deep, and        Tri-Valley Exploration 1971-1 partnerships. All material intra and intercompany accounts        and transactions have been eliminated in combination and consolidation.

 

**NOTE 2 -        PER SHARE COMPUTATIONS**

 

Per        share computations are based upon the weighted-average number of common shares outstanding        during each year. Common stock equivalents are not included in the computations since their        effect would be anti-dilutive.

 

**NOTE 3        – SUMMARY OF RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS**

 

Accounting for Uncertainty in Income Taxes

In July        2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation        No. 48,*“Accounting for Uncertainty in Income        Taxes*– An interpretation of FASB Statement No. 109”        (“FIN 48”). This Interpretation provides a comprehensive model for the        financial statement recognition, measurement, presentation and disclosure of uncertain tax        positions taken or expected to be taken in income tax returns. We adopted this        Interpretation in the first quarter of 2007 with no effect to the Company and the adoption        has not had a material impact on our financial position or results of        operations.

 

Fair        Value Measurements

 

In        September 2006, the FASB issued SFAS No. 157,*“Fair Value        Measurements.”*This Statement replaces multiple existing        definitions of fair value with a single definition, establishes a consistent framework for        measuring fair value and expands financial statement disclosures regarding fair value        measurements. This Statement applies only to fair value measurements that already are        required or permitted by other accounting standards and does not require any new fair value        measurements. SFAS No. 157 is effective for fiscal years beginning subsequent to

 

**NOTE        3 - Recently Issued Accounting Pronouncements (Continued)**

November        15, 2007. We adopted this Statement in the first quarter of 2008, and we do not expect the        adoption to have a material impact on our financial position or results of        operations.

 

The        Fair Value Option for Financial Assets and Financial Liabilities

 

In        February 2007, the FASB issued SFAS No. 159, “*The Fair Value        Option for Financial Assets and Financial Liabilities*,”        which permits an entity to measure certain financial assets and financial liabilities at        fair value. The objective of SFAS No. 159 is to improve financial reporting by allowing        entities to mitigate volatility in reported earnings caused by the measurement of related        assets and liabilities using different attributes, without having to apply complex hedge        accounting provisions. Under SFAS No. 159, entities that elect the fair value option (by        instrument) will report unrealized gains and losses in earnings at each subsequent        reporting date. The fair value option election is irrevocable, unless a new election date        occurs. SFAS No. 159 establishes presentation and disclosure requirements to help financial        statement users understand the effect of the entity’s election on its earnings, but        does not eliminate disclosure requirements of other accounting standards. Assets and        liabilities that are measured at fair value must be displayed on the face of the balance        sheet. The Company adopted this statement effective beginning January 1, 2008, and we do        not expect the adoption to have a material impact on our financial position or results of        operations.

 

**NOTE        4 – INVESTMENT**

 

In the        second quarter of 2007, the Company received 150,000 stock options for Duluth Metals common        stock for providing executive and geological services for Duluth Metals. The stock options        are exercisable at $0.30 Canadian. During the fourth quarter of 2007, the options were        exercised and converted into stock at a cost of $47,055. The market value of the stock on        March 31, 2008, was $2.68 Canadian. The Company follows the provisions of Statement of        Financial Accounting Standards No. 115 (SFAS 115),        “*Accounting for Certain Investments in Debt and Equity        Securities*.” SFAS 115 requires companies to classify their        investments as trading, available-for-sale or held-to-maturity. The Company’s        securities consist of stock which has been classified as available-for-sale. These are        recorded in the financial statements at fair market value and any unrealized gains (losses)        will be reported as a component of shareholder equity. At March 31, 2008, the cost basis        net of write-downs, unrealized gains, unrealized losses and fair market value of the        Company's holdings are as follows:

 

|                 | March 31, 2008 |
|----------------------|----------------|
|                 |           |
| Net cost of equities | $ 427,055      |
| Unrealized Losses    | (16,055)       |
| Fair Market Value    | $ 411,000      |
|                 |           |

 

SFAS 115        requires that for each individual security classified as available-for-sale, a company        shall determine whether a decline in fair value below the cost basis is other than        temporary. If the decline in fair value is judged as such, the cost basis of the individual        security shall be written down to fair value as a new cost basis and the amount of the        write-down shall be reflected in other comprehensive income of the equity section. At March        31, 2008, the company's marketable securities had a fair market value of $411,000. The        unrealized loss of $29,000 for the first quarter of 2008 is reported as other comprehensive        income bringing the net unrealized loss inception to date to $16,055.

 

This        investment was translated into U.S. Dollars in accordance with SFAS        No. 52,*“Foreign Currency        Translation*.” The investment was translated at the rate of        exchange on the balance sheet date.

 

**NOTE 5 -        CHANGES IN SECURITIES**

 

Common Stock

 

During        the first quarter of 2008, the Company issued 914,005 shares of common stock. An employee        exercised employee stock options issued in previous years to purchase 5,000 shares of        common stock totaling $2,500. An employee exercised stock options in a cashless exercise        for 1,382 shares of common stock. A former director exercised his stock options in a        cashless exercise and was issued 185,677 shares of common stock. The Company’s        directors each received 2,000 shares for services for a total of 14,000 shares. The        remaining 707,946 shares were issued in private placements at prices of $5.00 to $7.40 per        share, for a total consideration of $ 3,652,000. Total stock issuance cost for the first        quarter was $395,400.

 

**NOTE 6        – STOCK BASED COMPENSATION EXPENSE**

 

Stock        Based Compensation

 

Compensation expense charged against income for stock based awards in the        first quarter of 2008 and 2007 was $207,963 and $231,949, pre-tax, respectively, and is        included in general and administrative expense in the Consolidated Statement of        Operations.

 

For        further information regarding stock based compensation, please refer to Note 5 of the Notes        to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year        ended December 31, 2007.

 

**NOTE        7 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS**

         

The        Company reports operating segments according to SFAS No. 131,*“Disclosure about Segments of an Enterprise and Related        Information.”*

 

The        Company identifies four principal industry segments by products and services, which are        described in*Note 1 – Description of Business and Basis of        Presentation – Description of Business*. The Company        includes revenues from both external customers and revenues from transactions with other        operating segments in its measure of segment profit or loss.

 

The        following table sets forth our revenues by segment for the first quarter 2008 and the first        quarter 2007:

         

         

|                                  |   | Three Months

Ended March 31,

2008 |   | Three Months Ended March 31, 2007 |
|---------------------------------------|--------|-------------------------------------|--------|-----------------------------------|
|                                  |   |                                |   |                              |
| **Sales and Other Revenues**          |   |                                |   |                              |
| Oil & Gas                         |   | $ 1,022,587                         |   | $ 292,447                         |
| Rigs                                  |   | 655,919                             |   | 1,313,099                         |
| Minerals                              |   | 341                                 |   | 4,821                             |
|                                  |   |                                |   |                              |
| Consolidated Sales and Other Revenues |   | $ 1,678,847                         |   | $ 1,610,367                       |

 

**NOTE        7- FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS (continued)**

 

The        following table sets forth our costs and expensesby        segment:

 

|                            |   | Three Months

Ended March 31,

2008 |   | Three Months Ended March 31, 2007 |
|---------------------------------|--------|-------------------------------------|--------|-----------------------------------|
|                            |   |                                |   |                              |
| **Total costs and expenses**    |   |                                |   |                              |
| Oil & Gas                   |   | $ 2,845,162                         |   | $ 2,289,490                       |
| Drilling & Development      |   | -                                   |   | 232,496                           |
| Rigs                            |   | 807,981                             |   | 1,009,690                         |
| Minerals                        |   | 137,357                             |   | 334,720                           |
|                            |   |                                |   |                              |
| Consolidated costs and expenses |   | $ 3,790,500                         |   | $ 3,866,396                       |

 

 

The        following table summarizes our total income (loss) by segment:

 

|                           |   | Three Months

Ended March 31,

2008 |   | Three Months Ended March 31, 2007 |
|--------------------------------|--------|-------------------------------------|--------|-----------------------------------|
|                           |   |                                |   |                              |
| **Net Income (Loss)**          |   |                                |   |                              |
| Oil & Gas                  |   | $ (1,822,575)                       |   | $ (1,997,043)                     |
| Drilling & Development     |   | -                                   |   | (232,496)                         |
| Rigs                           |   | (152,062)                           |   | 303,409                           |
| Minerals                       |   | (137,016)                           |   | (329,899)                         |
|                           |   |                                |   |                              |
| Consolidated Net Income (Loss) |   | $ (2,111,653)                       |   | $ (2,256,029)                     |

 

 

The        following table summarizes our total assets:

 

|                      |   | March 31, 2008 |   | December 31, 2007 |
|---------------------------|--------|----------------|--------|-------------------|
| **Total Assets**          |   |           |   |              |
| Oil & Gas             |   | $ 19,983,568   |   | $ 18,190,809      |
| Rigs                      |   | 4,516,214      |   | 4,702,623         |
| Minerals                  |   | 2,245,815      |   | 2,361,464         |
|                      |   |           |   |              |
| Consolidated Total Assets |   | $ 26,745,597   |   | $ 25,254,896      |
|                      |   |           |   |              |

 

**NOTE        8 – RELATED PARTY TRANSACTIONS**

 

During        the first quarter TVOG rebuilt two steam generators and sold a 75% interest to the Opus I        partnership at a fair market value of $1,687,500. These steam generators are being operated        by Tri-Valley Corporation on Opus I/TVOG properties. The gain recognized on the sale was        $581,250.

 

**NOTE        9 – SUBSEQUENT EVENTS**

 

On May        8, 2008 the gross daily production of oil and gas from the Company’s 39 active wells        reached 1,015 barrels of oil equivalent two months earlier than projected by our Operation        Catapult. The Company still has seven wells in the process of being steamed, reworked or        re-entered, some or all of which may be producible during the second quarter.

 

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

 

**Notice        Regarding Forward-Looking Statements**

 

This        report contains forward-looking statements. The words, "anticipate," "believe," "expect,"        "plan," "intend," "estimate," "project," "could," "may," "foresee," and similar expressions        are intended to identify forward-looking statements. These statements include information        regarding expected development of Tri-Valley's business, lending activities, relationship        with customers, and development in the oil and gas industry. Should one or more of these        risks or uncertainties occur, or should underlying assumptions prove incorrect, actual        results may vary materially and adversely from those anticipated, believed, estimated or        otherwise indicated.

 

**Results of Operations**

 

For the        quarter ended March 31, 2008, revenue was $1.7 million, compared to $1.6 million in the        first quarter of 2007, an increase of $0.1 million. We had an operating loss of about $2.1        million in the first quarter of 2008, compared to a loss of $2.3 million in the first        quarter of 2007.

 

Revenues

 

The        Company identifies reportable segments by products and services. The Company includes        revenues from both external customers and revenues from transactions with other operating        segments in its measure of segment profit or loss. The Company also allocates interest        revenue and expense, DD&A, and other operating expenses in its measure of segment        profit or loss. The following table sets forth our revenues by segment for the first fiscal        quarter of 2008 and 2007, in thousands.

 

|           | Three MonthsEnded March31, 2008 | Three MonthsEnded March31, 2007 |   |
|----------------|---------------------------------|---------------------------------|--------|
|           | $                               | %                               | $      | % |
| Oil and gas    | 1,023                           | 75                              | 292    | 18% |
| Rig operations | 656                             | 25                              | 1,313  | 82% |
| Minerals       | -                               | -                | 5      | -    |
|           |                            |                            |   |   |
| Total revenues | $1,679                          | 100%                            | $1,610 | 100% |
|                |                                 |                                 |        |  |  |

 

*Oil        and Gas*

 

Oil and        gas revenues in the first quarter of 2008 included approximately $382,000 from the sale of        oil and gas, compared to $164,000 in the first quarter of 2007. The increase resulted from        increased production and an increase in the price of oil. Other oil and gas revenues in        2008 consisted of $581,000 from the gain on sale of two steam generators compared to        nothing in 2007 and other income of $152,000 and interest income of $7,000.

The oil        and gas activities during the first quarter of 2008 represented a significant ramp-up of        operations and involved the drilling of six wells for the TVOG Opus I Drilling Program LP,        progressive cyclic steaming, further surface infrastructure improvements, remedial work and        additional perforated zones on existing wells, testing and initial production initiation on        a new gas well, production enhancement work via a conversion of a key gas well to plunger        lift technology, and continued progression of the existing asset exploitation programs. An        initial phase of “Operation Catapult” inaugurated a large increase in        operational activity, which is geared to accelerate production and operating cash flow        during this calendar year. Full-field development economics have been evaluated for        Pleasant Valley, Moffat Ranch, and our Belridge assets and indicate robust economic        yardsticks and shareholder return potential. The 2008 revenue plan has been developed        commensurate with current activity and fully supports our accelerated forecast, and actual        field results are exceeding plan both in production volume and schedule.

**Pleasant Valley Field, Ventura County, CA**:        Subsequent to the late 2007 initial drilling and steaming of the first horizontal well in        the field on the Hunsucker Lease, PV-1, and the deep Sespe test well, PV-2, five additional        horizontal wells were drilled and completed and a sixth well spudded in support of the        planned eight well Pleasant Valley Phase I drilling campaign with highly successful        drilling and reservoir evaluation results. Recent drill bit exploitation has further        confirmed our economic forecast. As such, first quarter drilling activity should result in        over 1000 bopd productive capacity by mid-year. Capacity is defined by enough well bores        that could potentially yield 1000 bopd after steaming although there is no guarantee at        this time that such a rate would be realized. Cyclic steaming continued via our 16        mmbtu/hour and 12.5 mmbtu/hour refurbished steam generators with initial steam injection on        PV-4 and a second steam cycle on PV-1 with very favorable production and steam injection        results. As expected, the second steam cycle on PV-1 resulted in increased production rates        and unassisted flow duration. In support of the full development of the Hunsucker Lease,        numerous surface facility and infrastructure enhancements occurred to support our paradigm        shift from testing/evaluation to long term full field development. To minimize lifting        costs and enhance shareholder returns into the future, a more cost-effective diluent source        has been contracted. Moreover, work has been on-going in support of a dedicated natural gas        fuel line to the field to further reduce initial higher lifting costs of using propane.        After the December 2007 milestone of first production and sales from this field, oil sales        continued in the first quarter. As of this time all of the above wells are on confidential        status with the California Division of Oil, Gas and Geothermal Resources as to public        disclosure of production rates and volumes.

**Moffat Ranch, Madera County, CA:**Subsequent to        the late 2007 drilling and completion of our first new drill well, 48X-7, a deeper gas zone        was perforated and flow tested unsuccessfully. Next, perforations were added in an uphole        gas zone and the well was tested to assess key gas zonal parameters and deliverability.        After highly successful testing results, facilities were installed and commissioned and        initial gas sales commenced in mid-March, 2008. Even though it is significantly choked        back, this well has produced pipeline quality gas at or near 1 million cubic feet per day        excepting a short time interval when remedial cementing work was performed to shutoff water        flowing from a lower zone through an annular cement channel. The well was quickly returned        to previous production levels via state-of-the-art coiled tubing cement squeeze technology.        Wellwork to restore two idle, existing wells to production service were also initiated.        Well testing and production response fully supports robust economic returns from our Moffat        Ranch development.

**Rio        Vista, Hanson Lease, Solano County, CA:**Following the late 2007        successful well bore cleanout and installation of an inner liner to mitigate sand        production on our top Rio Vista gas producer, Hanson #2, the well was successfully        converted from gas lift to plunger lift technology. The work resulted in more than doubling        2007 average production rates from the Hanson lease. This successful wellwork and        technology also provided additional fuel gas, which improved compression efficiency and in        turn enhanced production rates on Hanson #3. Other Rio Vista area proved developed        producing gas production continued at customary levels. This long term, sustained        production from our Rio Vista gas fields should continue to be highly profitable especially        due to the recent higher gas prices.

**Edison Field, Shields & Arms Lease, Kern County,        CA**: Wellwork was performed on existing producers and the single        injection well which has resulted in a more than two-fold increase in daily production from        this lease during the first quarter. Plans to enhance production from our other Edison        Field leases will follow.

**Belridge Field, Kern County, CA:**The waterflood        pilot project continued in the first quarter with all injection diverted to a single        injector, No. 92i, to accelerate waterflood response. A radioactive tracer was also        injected in this well and offset producers were sampled routinely. A second Diatomite zone        cyclic steaming cycle was performed on the D-352 well with our third refurbished steam        generator and the well has been recently placed on a third steam cycle to accelerate        reservoir heating to mobilize oil saturation. Pending favorable response, another Diatomite        well will be cyclic steamed. While evaluating these two key Diatomite wells, uphole        Etchegoin perforations were identified and added in the D-188 well with initial production        rate in excess of 45bopd with zero water. This served to double Belridge field production        levels. Due to this favorable response, other offset wells in the field will have Etchegoin        perforations added in the near term in an attempt to further boost production levels.        Continued, daily surveillance of the waterflood pilot is ongoing to evaluate waterflood        expansion potential.

*Rig        Operations*

 

Revenues        from rig operations totaled $0.7 million in the first quarter of 2008, including $0.6        million from drilling and completion operations and approximately $0.1 million from other        income, which was a reduction from $1.3 million revenue from rig operations in the first        quarter of 2007. GVPS had no revenues during the first quarter of 2008 as they had their        equipment in for API certification. This involves rigorous examination and testing by a        licensed party to certify the equipment meets certain standards.

 

We        established GVPS because of an acute shortage of contractor supplied production services in        California. GVPS enabled TVOG to begin well workovers and drilling new wells at least a        year sooner than rig availability as forecast by the production services contractor        community. However, during the time GVPS has had its equipment in for API certification so        it could also be used to service third parties as well as TVOG, contractor service has        improved markedly. This has led GVPS to consider alliances with various production service        firms to scale up rig availability for an increasing number of TVOG active and idle wells.        GVPS expects to begin to return its drilling rigs to field service in the second quarter        either on TVOG wells or for other operators.

 

GVDC        drilled one geothermal well in Nevada for another operator during the first quarter and has        a contract to drill a petroleum well in the second quarter also in Nevada. More than 120        petroleum and geothermal wells have been staked or permitted for future drilling in Nevada.        We believe that GVDC’s experience in Nevada provides a profitable opportunity for it        in 2008 and beyond.

 

*Minerals Activities*

 

Revenues        from minerals activities in the third quarter of 2008 were nothing compared to $5,000 in        2007. 

 

Mineral        programs for the first quarter (while including the continued work from the previous        quarter, i.e. generally assessing and compiling geologic information collected in previous        work programs associated with the Calder, Richardson, and Shorty Creek properties in        Alaska), consisted largely of pursuing candidates and consultants.  Select considered        several consultants and is now in contract negotiations with one consultant to assist in 1)        the development of the Admiral Calder mine in general, and 2) a business assessment for its        products.  Select continues to pursue returning the Admiral Calder mine to a        profitable undertaking, has added uranium as a new commodity of interest, and has reduced        efforts directed towards acquiring new base metals and industrial minerals        properties.

 

Precious        Metals

 

Select        continues to solicit mining interests for the larger scale exploration on both the        Richardson and Shorty Creek properties, as well as identifying a field site manager for        both properties.   Select has, and continues to, interview candidates for these        positions.

 

Base        Metals

 

Base        Metals operations continue to be on hold at this time.

 

Uranium

 

Select        Resources has begun soliciting and reviewing uranium opportunities in a very targeted and        selective manner.  Select is adhering rigorously to strict high-end criteria for these        properties.

 

Industrial Minerals

 

During        the winter months of the first quarter, Select continued low-cost monitoring and security        at the Admiral Calder calcium carbonate mine in Alaska.  Select is further evaluating        the site’s potential to produce new product types that can competitively participate        in new (first-time) market categories.  Select continues to pursue calcium carbonate        mining and processing companies as potential partners to fund larger scale development and        operations on the Admiral Calder mine, or acquire the property altogether.  Putting        the mine into a profitable status remains a Select priority.  In parallel with the        above, Select is reviewing candidates for a long-term position to head up the development        of this property.

 

Select        continues to maintain a number of industrial mineral projects in six western states in a        hold status, pending further review.  Commodities in these projects include barite,        sand & gravel, aggregate, limestone, dolomite, calcium carbonate, cinder, and other        industrial mineral commodities.

 

Costs        and Expenses

 

The        following table sets forth our operating income (loss) by segment in the first quarter of        2008 and 2007, in thousands.

 

 

|                            |   | Three Months

Ended March 31,

2008 |   | Three Months Ended March 31, 2007 |
|---------------------------------|--------|-------------------------------------|--------|-----------------------------------|
|                            |   |                                |   |                              |
|                            |   |                                |   |                              |
| **Total costs and expenses**    |   |                                |   |                              |
| Oil & Gas                   |   | $ 2,845                             |   | $ 2,289                           |
| Rigs                            |   | 808                                 |   | 1,010                             |
| Minerals                        |   | 137                                 |   | 335                               |
| Drilling and Development        |   | -                                   |   | 232                               |
|                            |   |                                |   |                              |
| Consolidated costs and expenses |   | $ 3,790                             |   | $ 3,866                           |

 

Costs        and expenses were approximately $3.8 million in the first quarter of 2008 compared with        $3.9 million the first quarter of 2007, a decrease of approximately 5% over the same        period. The oil and gas expense increased from $2.5 million in the first quarter of 2007 to        $2.8 million in the same period of 2008, as we incurred new expenses to operate the wells        we acquired. Rig operations expense decreased from $1.0 million in the first quarter of        2007 to $0.8 million in the first quarter of 2008, due to a decreased activity level of our        rig operations. We spent $137,000 on mining exploration in the first quarter of 2008, which        was approximately $200,000 dollars less than the same period in 2007. The 2008 expenses        were lower mainly because of a decreased activity in our minerals operations.

 

In the        first quarter of 2008 we did not recognize any impairment loss. In the first quarter of        2007, we recognized impairment losses of $247,000, primarily on the write-off of our ONYX        Ranch prospect.

 

General and        administrative costs increased from $2.5 million in the first quarter in 2007 to $2.9        million in the first quarter of 2008, due primarily to the increased activity level in our        oil and gas segment.

 

Capital        Resources and Liquidity

 

In 2002        through the first quarter of 2008, our drilling activities have been largely funded by        selling interests in our OPUS I drilling partnership. We do not borrow in order to fund        drilling activities. Our continued drilling activity relies on our ability to raise money        for projects through drilling partnerships or other joint ventures.

 

Current        assets were about $8.5 million at March 31, 2008, up from $8.0 million at year end 2007.        Cash on hand was increased from $7.7 million at year end 2007 compared to $7.9 million at        March 31, 2007. The increase in cash was due to private placements of stock and investment        by Opus I partners.

 

Current        liabilities increased to about $10.8 million at March 31, 2008, compared to $10.3 million        at year end 2007, due primarily to an increase of $2.6 million in accounts payable which        was caused by our recent increase in drilling activity and a decrease of about $2.5 million        in advances from joint venture participants and an increase of $0.4 million in deferred        revenue caused mainly by the sale of a steam generator that will not be completed until the        second quarter.

 

Operating Activities

 

We had a        negative cash flow of $611,000 for the three months ended March 31, 2008 compared to a        positive cash flow of $50,000 for the same period in 2007, the cash flow in the current        period is due mainly to our loss from operations being offset by our increase in accounts        payable and deferred revenue and a decrease in advances from joint venture participants.        Our loss from operations was approximately $2.1 million for the three months ended March        31, 2008 compared to a $2.4 million loss for the same period in 2007.

 

The        largest component of cash flow in the first quarter of 2008 was an increase in accounts        payable and deferred revenue. Accounts payable increased by about $2.4 million and deferred        revenue increase by about $0.4 million. Accounts payable increase due the recent increase        in drilling activity and deferred revenue increase due to revenue for a steam generator        that will not be completed until the second quarter.

 

Investing Activities

 

Cash        used in investing activities was $2.4 million for the first quarter of 2008 compared to        $1.1 million for the first three months of 2007. $3.8 million was used towards capital        expenditures, primarily the drilling of wells. We also received $1.7 million for the sale        of two steam generators. We used $0.3 million to buy back membership units in        GVPS.

 

Financing Activities

 

Net cash        provided by financing activities was $3.2 million for the first quarter. We received $3.0        million from sales of restricted shares of common stock in privately negotiated        transactions including the exercise of stock options by employees. We used $70,000 to pay        down principal on long-term debt. We have not planned any private placement of equity        securities for the remainder of 2007, but we may continue to receive funds from privately        negotiated transactions. We do not have a targeted or budgeted amount of equity financing        activities.

 

Liquidity

 

The        recoverability of our oil and gas reserves depends on future events, including obtaining        adequate financing for our exploration and development program, successfully completing our        planned drilling program, and achieving a level of operating revenues that is sufficient to        support our cost structure. At various times in our history, it has been necessary for us        to raise additional capital through private placements of equity financing. When such a        need has arisen, we have met it successfully. It is management’s belief that we will        continue to be able to meet our needs for additional capital as such needs arise in the        future. We may need additional capital to pay for our share of costs relating to the        drilling prospects and development of those that are successful, and to acquire additional        oil and gas leases, drilling equipment and other assets. The total amount of our capital        needs will be determined in part by the number of prospects generated within our        exploration program and by the working interest that we retain in those        prospects.

 

During        the remainder of 2008, we expect to expend approximately $20 million on drilling        activities. Funds for the majority of these activities will be provided by sales of        partnership interests in the Opus-I drilling partnership, which will still be raising funds        for development purposes. Tri-Valley’s portion is expected to be approximately $5        million. We are evaluating and finalizing results of recently drilled Pleasant Valley and        Moffat Ranch in order to design the optimum development plan for the property. We expect to        drill additional wells there in 2008. Our ability to complete our planned drilling        activities in 2008 depends on some factors beyond our control, such as availability of        equipment and personnel. Our actual capital commitments for fiscal year 2008 are less than        $4 million, but to expend $20 million we will require additional capital from the OPUS        partnership or other outside parties.

 

In 2008,        we expect expenditures of approximately $ 0.7 million on mining activities, including        mining lease and exploration expenses.

 

Should        we choose to make an acquisition of producing oil and gas properties, such an acquisition        would likely require that some portion of the purchase price be paid in cash, and thus        would create the need for additional capital. Additional capital could be obtained from a        combination of funding sources. The potential funding sources include:

 

|   | **•** | Cash flow from operating activities, |
|--------|------------|--------------------------------------|

|   | **•** | Borrowings from financial institutions (which we typically                        avoid), |
|--------|------------|-------------------------------------------------------------------------------------------|

|   | **•** | Debt offerings, which could increase our leverage and add to                        our need for cash to service such debt (which we typically                        avoid), |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Additional offerings of our equity securities, which would                        cause dilution of our common stock, |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------|

|   | **•** | Sales of portions of our working interest in the prospects                        within our exploration program, which would reduce future revenues from its                        exploration program, |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Sale to an industry partner of a participation in our                        exploration program, |
|--------|------------|---------------------------------------------------------------------------------------------------|

|   | **•** | Sale of all or a portion of our producing oil and gas                        properties, which would reduce future revenues. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------|

 

Our        ability to raise additional capital will depend on the results of our operations and the        status of various capital and industry markets at the time such additional capital is        sought. Accordingly, there can be no assurances that capital will be available to us from        any source or that, if available, it will be on terms acceptable to us. The Company has no        off balance sheet arrangements.

 

New        Accounting Pronouncements

 

See Note        3 to our unaudited consolidated financial statements.

 

| **Item 3.** | **Quantitative and Qualitative Disclosures about Market                        Risk** |
|-------------|---------------------------------------------------------------------------------------|

 

Tri-Valley Corporation does not engage in hedging activities and does not        use commodity futures or forward contracts in its cash management functions.

 

| **Item 4.** | **Controls and Procedures** |
|-------------|-----------------------------|

 

As of        March 31, 2008, an evaluation was performed under the supervision and with the        participation of our management, including our Chief Executive Officer and Chief Financial        Officer, of the effectiveness of the design and operation of our disclosure controls and        procedures. These controls and procedures are based on the definition of disclosure        controls and procedures in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the        Securities Exchange Act of 1934.

 

Based on        that evaluation as of March 31, 2008, our management, including the CEO and CFO concluded        that our disclosure controls and procedures were effective to ensure that the information        required to be disclosed by us 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 SEC rules and forms.

 

Management, including our CEO and CFO, do not expect that our disclosure        controls and procedures or internal control over financial reporting will prevent all        errors and fraud. In designing and evaluating our control system, management recognized        that any control system, no matter how well designed and operated, can provide only        reasonable, not absolute, assurance of achieving the desired control objectives. Further,        the design of a control system must reflect the fact that there are resource constraints,        and management necessarily was required to apply its judgment in evaluating the        cost-benefit relationship of possible controls and procedures. Because of the inherent        limitations in all control systems, no evaluation of controls can provide absolute        assurance that all control issues and instances of fraud, if any that may affect our        operations have been detected. These inherent limitations include the realities that        judgments in decision-making can be faulty, and that breakdowns can occur because of simple        error or mistake.

 

During        the first quarter of 2008, there were no changes in the Company's internal control over        financial reporting that have materially affected, or are reasonably likely to materially        affect, the Company’s internal control over financial reporting.

 

**PART II        - OTHER INFORMATION**

 

**Item        1A.****Risk Factors**

 

There have        been no material changes from the risk factors previously disclosed in our Annual Report on        Form 10-K for the fiscal year ended December 31, 2007.

 

| **Item 2.** | **Unregistered Sales of Equity Securities** |
|-------------|---------------------------------------------|

 

During        the first quarter of 2008, the Company issued 707,946 shares of restricted common stock to        private investors at prices of $5.00 to $7.40 per share for a total consideration of        $3,652,000. The Company also issued 14,000 shares of restricted common stock to directors        for services.

 

All of        these transactions were conducted in reliance on the exemption from registration        requirements of the Securities Act of 1933 contained in Section 4(2) of that        Act.

 

| **Item 6.** | **Exhibits** |
|-------------|--------------|

 

| Item | Description |
|------|-------------|

 

| 31.1 | Rule 13a-14(a)/15d-14(a) Certification |
|------|----------------------------------------|

| 31.2 | Rule 13a-14(a)/15d-14(a) Certification |
|------|----------------------------------------|

| 32.1 | 18 U.S.C. Section 1350 Certification |
|------|--------------------------------------|

| 32.2 | 18 U.S.C. Section 1350 Certification |
|------|--------------------------------------|

 

**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.

 

**TRI-VALLEY CORPORATION**

 

| May 12, 2008 | */s/F. Lynn Blystone* |
|--------------|-----------------------|

F. Lynn Blystone

Chairman, President and CEO

 

| May 12, 2008 | */s/ Arthur M. Evans* |
|--------------|-----------------------|

Arthur M. Evans

Chief Financial Officer