May 13, 1996
Securities and Exchange Commission
450 Fifth St., N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Via Edgar Electronic Filing System
In Re: File Number 0-9219
Gentlemen:
Pursuant to regulations of the Securities and Exchange
Commission, submitted herewith for filing on behalf of Avoca, Incorporated
(the "Company") is the Company's Report on Form 10-QSB for the period ended
March 31, 1996.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Sincerely,
/s/ Edward B. Grimball
--------------------------
Edward B. Grimball
President
(504) 586-7570
EBG/drm
<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-------------------------------------------------
[ ] 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 0-9219
---------------------------------------------------------
AVOCA, INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Louisiana 72-0590868
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 61260, New Orleans, Louisiana 70161
--------------------------------------------
(Address of principal executive offices)
(504) 552-4720
--------------------------------------------
(Issuer's telephone number)
--------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 830,500 shares on May 1, 1996
--------------------------------
Transitional Small Business Disclosure Former (check one); Yes No X
---- -----
An exhibit index is located at page 10-11 of this report.
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Page 1 of 12 Pages
<PAGE>
AVOCA, INCORPORATED
-------------------
I N D E X
---------
Page No.
--------
Part I. Financial Information (Unaudited)
---------------------
Condensed Balance Sheet - March 31, 1996 4
Condensed Statements of Income
Three Months Ended March 31, 1996
and 1995 5
Condensed Statements of Cash Flows
Three Months Ended March 31, 1996
and 1995 6
Notes to Condensed Financial Statements 7
Management's Discussion and Analysis or
Plan of Operation 8-9
Part II. Other Information
-----------------
Legal Proceedings 10
Submission of Matters to a Vote of
Security Holders 10
Exhibits and Reports on Form 8-K 10-11
Signature 11
Page 2 of 12 Pages
<PAGE>
AVOCA, INCORPORATED
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Page 3 of 12 Pages
<PAGE>
Avoca, Incorporated
Condensed Balance Sheet (Unaudited)
March 31, 1996
Assets
Current assets:
Cash $ 72,157
Short-term investments 1,990,760
Accounts receivable 22,883
Accrued interest receivable 25,640
Prepaid expenses 12,118
----------
Total current assets 2,123,558
Property and equipment, less
accumulated depreciation and depletion 77,601
Other assets:
Avoca Drainage Bonds, $415,000,
in default -- at nominal amount 1
-----------
$ 2,201,160
===========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 18,786
Income taxes payable 2,235
----------
Total current liabilities 21,021
----------
Deferred income taxes 14,282
Shareholders' equity:
Common stock, no par value -- authorized,
issued and outstanding 830,500 shares 94,483
Retained earnings 2,071,374
-----------
Total shareholders' equity 2,165,857
-----------
$ 2,201,160
===========
See accompanying notes
Page 4 of 12 Pages
<PAGE>
Avoca, Incorporated
Condensed Statements of Income (Unaudited)
Three months ended
March 31
1996 1995
--------- ----------
Revenue:
Royalties $ 35,196 $ 33,282
Less severance taxes 1,264 2,076
--------- ----------
33,932 31,206
Lease bonuses and delay rentals 37,875 -
Interest income 28,310 28,018
--------- ----------
100,117 59,224
Expenses:
Legal and accounting services 9,564 7,975
Consultant fees 14,000 13,750
Geological and engineering fees 2,762 1,762
Insurance 5,983 5,986
Miscellaneous expenses 20,464 27,907
--------- ----------
52,773 57,380
--------- ----------
Income before income taxes 47,344 1,844
Income taxes (benefit) 2,117 ( 6,894)
-------- ---------
Net income $ 45,227 $ 8,738
======== =========
Net income per share $ .05 $ .01
======== =========
See accompanying notes.
Page 5 of 12 Pages
<PAGE>
Avoca, Incorporated
Condensed Statements of Cash Flows (Unaudited)
Three months ended
March 31
1996 1995
----------- ----------
Operating activities
Net income $ 45,227 $ 8,738
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation expense 684 621
Deferred taxes ( 127) ( 7,010)
Loss on disposition of asset - 7,153
Changes in operating assets and liabilities:
Operating assets ( 12,489) (32,190)
Operating liabilities ( 41,311) ( 3,519)
----------- ----------
Net cash used in operating activities ( 8,016) ( 26,207)
Investing activities
Proceeds from the sale of short-term investments - 172,785
Proceeds from sale of asset - 15,750
Purchase of property, plant & equipment - (31,200)
----------- ----------
Net cash provided by investing activities - 157,335
Financing activities
Dividends paid (124,575) (124,575)
----------- ----------
Net cash used in financing activities (124,575) (124,575)
Increase (decrease) in cash and cash equivalents (132,591) 6,553
Cash and cash equivalents at beginning of period 204,748 15,025
----------- ----------
Cash and cash equivalents at end of period $ 72,157 $ 21,578
=========== ==========
See accompanying notes.
Page 6 of 12 Pages
<PAGE>
Avoca, Incorporated
Notes to Condensed Financial Statements (Unaudited)
Three months ended March 31, 1996
1. Basis of Accounting
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not included all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31,
1996 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual shareholders'
report incorporated by reference in the Form 10-KSB for the year ended December
31, 1995.
The Company considers its United States Goverment securities held with a
maturity of three months or less when purchased to be cash equivalents.
Page 7 of 12 Pages
<PAGE>
Item 2 - Management's Discussion and
Analysis or Plan of Operation
The unaudited condensed statements of income show that net
income for the first quarter of 1996, as compared with the first quarter of
1995, increased from $8,738 to $45,227.
Royalty income net of severance taxes for the first quarter of
1996 increased $2,726 or approximately 9% as compared with the first quarter of
1995. The increase is attributable to significantly higher prices received from
Delta Operating Company (formerly Alliance Operating Corporation) for gas
production from the Avoca No. 1 well during the first quarter of 1996. Gas
production from the well in 1996 was approximately 26% lower than production for
the first quarter of 1995.
Lease bonuses and delay rentals increased by $37,875, of which
$32,250 was received from I. P. Petroleum Co., Inc. as a quarterly delay rental
payment under its 860 acre mineral lease. The lease, which originally provided
for delay rentals of $129,000 payable annually, was amended in 1995 to provide
for payment of the delay rental amount on a quarterly basis. The Company has
been advised by I. P. Petroleum that it will not make the quarterly delay rental
payment due during the second quarter of 1996. Nonpayment will result in
cancellation of the lease. The Company received a $5,625 bonus on its new
mineral lease to Capital Energy, Inc. The lease covers 45.029 acres formerly
held by the B Sand Unit B producing unit in the Ramos Field under a lease to
Cabot Carbon Corporation dated January 19, 1960.
Expenses for legal and accounting services, consultant fees,
insurance and geological and engineering fees, which in the aggregate increased
by $2,836, were offset by a decrease of $7,443 in miscellaneous expenses,
resulting in a net decrease of $4,607 or 8% in overall expenses for the quarter.
Miscellaneous expenses for the corresponding period of 1995
Page 8 of 12 Pages
<PAGE>
included a loss of $7,153 recorded on the sale of a mobile home formerly
occupied by the Company's caretaker.
The change in income tax expense for the three months ended
March 31, 1996 resulted from an increase in taxable income for the first quarter
of 1996 as compared to the first quarter of 1995.
The Company's continued liquidity is evidenced by the fact
that approximately 94% of its assets, as measured by book value, are cash, U. S.
Government and U. S. Government agency securities. In addition to interest
income, the Company derives essentially all of its other income from the
granting of oil and gas leases, the collection of bonuses, delay rentals and
royalties thereunder and the leasing of hunting rights. The Company's business
is passive and all capital requirements for exploration, development and
production of the Company's mineral resources are funded by its Lessees.
Page 9 of 12 Pages
<PAGE>
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
Information regarding the Company's litigation with Gibson
Roofers, Inc., arising from roofing work performed by Gibson on an historic home
owned by the Company, is included in the Company's 10-KSB Report for the fiscal
year ended December 31, 1995.
Item 4 - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on March
19, 1996. Management's proposal to fix at five the number of directors to be
elected for the ensuing year was approved by the following vote:
For Against Abstain Broker Nonvotes
--- ------- ------- ---------------
659,198 -0- 686 -0-
Messrs. Fox, Grimball, Guarisco, Lyman and Powell were elected
directors for the ensuing year by the following vote:
<TABLE>
<CAPTION>
Withhold
For Vote Broker Nonvotes
--- ---- ---------------
<S> <C> <C> <C>
Richard W. Fox 659,674 200 -0-
Edward B. Grimball 659,699 200 -0-
Peter V. Guarisco 659,699 200 -0-
Guy C. Lyman, Jr. 659,674 200 -0-
M. Cleland Powell, II 659,674 200 -0-
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B:
None.
Page 10 of 12 Pages
<PAGE>
(b) Reports on Form 8-K
Reports on Form 8-K: No reports have been filed during the
quarter for which this report is filed.
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.
AVOCA, INCORPORATED
-------------------
Registrant
/s/ Edward B. Grimball
- -------------------------------- -----------------------------------------
Edward B. Grimball
President and Principal Financial Officer
Page 11 of 12 Pages
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 72,157
<SECURITIES> 1,990,760
<RECEIVABLES> 22,883
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,123,558
<PP&E> 77,601
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,201,160
<CURRENT-LIABILITIES> 21,021
<BONDS> 0
0
0
<COMMON> 94,483
<OTHER-SE> 2,071,374
<TOTAL-LIABILITY-AND-EQUITY> 2,201,160
<SALES> 33,932
<TOTAL-REVENUES> 100,117
<CGS> 0
<TOTAL-COSTS> 1,264
<OTHER-EXPENSES> 52,773
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 47,344
<INCOME-TAX> 2,117
<INCOME-CONTINUING> 45,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,227
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
