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Previous: CORCOM INC, PRER14A, 1998-05-08 |
Next: UST CORP /MA/, S-4/A, 1998-05-08 |
May 8 1998
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, 1998.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Sincerely,
/s/ Edward B. Grimball
---------------------------------
Edward B. Grimball
Executive Vice President &
Chief Financial Officer
(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, 1998
[ ] 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, 1998
-------------------------------
Transitional Small Business Disclosure Former (check one); Yes No X
--- ---
An exhibit index is located at page 12 of this report.
----
<PAGE>
AVOCA, INCORPORATED
-------------------
I N D E X
---------
Page No.
--------
Part I. Financial Information (Unaudited)
---------------------
Condensed Balance Sheet - March 31, 1998 4
Condensed Statements of Operations
Three Months Ended March 31, 1998
and 1997 5
Condensed Statements of Cash Flows
Three Months Ended March 31, 1998
and 1997 6
Notes to Condensed Financial Statements 7
Management's Discussion and Analysis or
Plan of Operation 8-9
Part II. Other Information
-----------------
Submission of Matters to a Vote of
Security Holders 10
Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
AVOCA, INCORPORATED
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Avoca, Incorporated
Condensed Balance Sheet (Unaudited)
March 31, 1998
Assets
Current assets:
<S> <C>
Cash and cash equivalents $ 20,748
Short-term investments 1,179,874
Accounts receivable 21,299
Accrued interest receivable 34,819
Prepaid expenses 9,541
Recoverable income taxes 118
------------
Total current assets 1,266,399
Property and equipment, less accumulated depreciation and depletion 72,131
Other assets:
Long-term investments 971,305
Avoca Drainage Bonds, $415,000, in default -- at nominal amount 1
------------
$ 2,309,836
============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 23,032
Deferred income taxes 13,268
Shareholders' equity:
Common stock, no par value -- authorized, issued and outstanding
830,500 shares 94,483
Retained earnings 2,179,053
------------
Total shareholders' equity 2,273,536
------------
$ 2,309,836
============
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Avoca, Incorporated
Condensed Statements of Operations (Unaudited)
Three months ended
March 31
1998 1997
Revenue: ---------- ---------
<S> <C> <C>
Royalties $ 32,588 $ 111,718
Less severance taxes 1,302 1,951
---------- ---------
31,286 109,767
Interest income 32,658 28,724
---------- ---------
63,944 138,491
Expenses:
Legal and accounting services 10,841 3,411
Consultant fees 21,000 19,000
Geological and engineering fees 4,419 2,586
Insurance 5,637 5,772
Miscellaneous expenses 48,490 22,783
---------- ---------
90,387 53,552
---------- ---------
Income (loss) before income taxes (26,443) 84,939
Income tax benefit (expense) - (22,827)
Net income (loss) $ (26,443) $ 62,112
========== =========
Net income (loss) per share $ ( .03) $ .07
========== =========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Avoca, Incorporated
Condensed Statements of Cash Flows (Unaudited)
Three months ended
March 31
1998 1997
---------- ---------
Operating activities
<S> <C> <C>
Net income (loss) $ ( 26,443) $ 62,112
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation expense 684 684
Deferred taxes ( 127) ( 127)
Changes in operating assets and liabilities:
Operating assets 8,663 ( 32,944)
Operating liabilities 4,999 4,284
---------- ---------
Net cash provided by (used in) operating activities ( 12,224) 34,009
Investing activities
Maturity of investments 697,044 722,531
Purchase of investments (541,567) (382,561)
---------- ---------
Net cash provided by investing activities 155,477 339,970
Financing activities
Dividends paid (622,875) (373,725)
---------- ---------
Net cash used in financing activities (622,875) (373,725)
---------- ---------
Increase (decrease) in cash and cash equivalents (479,622) 254
Cash and cash equivalents at beginning of period 500,370 65,127
---------- ---------
Cash and cash equivalents at end of period $ 20,748 $ 65,381
========== =========
</TABLE>
See accompanying notes.
<PAGE>
Avoca, Incorporated
Notes to Condensed Financial Statements (Unaudited)
Three months ended March 31, 1998
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, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. 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, 1997.
The Company considers its United States Government securities held with
a maturity of three months or less when purchased to be cash equivalents.
2. Earnings Per Share
The Company adopted FAS No. 128, Earnings Per Share, in the quarter ended
December 31, 1997. The adoption had no impact on previously reported quarterly
earnings per share amounts. Due to the Company's simple capital structure, basic
and diluted earnings per share are the same.
<PAGE>
Item 2 - Management's Discussion and
Analysis or Plan of Operation
The unaudited statements of operations show that net income
for the first quarter of 1998, as compared with the first quarter of 1997,
decreased from $66,112 to a loss of $26,443. The principal reason for the loss
was a substantial decrease in royalty income net of severance taxes.
As compared with the comparable period of 1997, royalty income
net of severance taxes for the first quarter of 1998 decreased $78,481 primarily
because of the absence of royalty income from the Intercoastal Shipyard No. 1
well. The well, which ceased production in April 1997, contributed $47,523 of
royalty income during the first quarter of 1997.
The decrease in net royalty income is also attributable to
significantly lower gas prices received by Delta Operating Company (formerly
alliance Operating Corporation) and a slight decrease in gas production from the
well during the first quarter of 1998. First quarter gas production from the
Avoca No. 1 well was approximately 10% lower than production for the comparable
period of 1997, and the average sales price of gas decreased from $3.55 per Mcf
for the three months ended March 31, 1997 to $2.43 for the three months ended
March 31, 1998.
Interest income on U.S. Government and U.S. Government agency
securities increased $3,934 or 14% because of higher interest rates and an
increase in funds available for investment.
As compared with the first quarter of 1997, expenses increased
$36,835 or approximately 69%. Most of the $25,707 increase in miscellaneous
expense is attributable to an increase in special remedial surface maintenance
on the northern part of Avoca Island. The $7,430 increase in legal and
accounting services resulted from the timing of legal services rendered for the
first quarters of 1998 and 1997 and the increased need for legal services
primarily related to mineral matters. Consultant fees increased $2,000 because
of a larger bonus paid to the Company's manager
<PAGE>
in recognition of commendable results achieved in 1997. Geological and
engineering fees increased $1,833 because of increased potential mineral
activity related to these services during the first quarter of 1998.
The change in income tax expense for the three months ended
March 31, 1998 resulted from a decrease in taxable income for the first quarter
of 1998 as compared to the first quarter of 1997.
The Company's continued liquidity is evidenced by the fact
that approximately 94% of its assets, as measured by book value, are cash and
U.S. Government and U.S. Government agency securities.
In addition to interest income, the Company customarily
derives essentially all of its other income from the granting of oil, gas and
mineral 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>
Part II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on March
17, 1998. 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
------- ------- ------- ---------------
664,264 -0- 19,951 -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 666,551 17,664 -0-
Edward B. Grimball 666,551 17,664 -0-
Peter V. Guarisco 666,561 17,654 -0-
Guy C. Lyman, Jr. 655,488 28,727 -0-
M. Cleland Powell, III 666,551 17,664 -0-
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B:
Exhibit 27 - Financial Data Schedule.
(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.
<PAGE>
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
May 5, 1998 /s/ Edward B. Grimball
- -------------------------------- -----------------------------------------
Edward B. Grimball
President and Principal Financial Officer
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
27 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 20,748
<SECURITIES> 1,179,874
<RECEIVABLES> 21,299
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,266,399
<PP&E> 72,131
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,309,836
<CURRENT-LIABILITIES> 23,032
<BONDS> 0
<COMMON> 94,483
0
0
<OTHER-SE> 2,179,053
<TOTAL-LIABILITY-AND-EQUITY> 2,309,836
<SALES> 32,588
<TOTAL-REVENUES> 63,944
<CGS> 0
<TOTAL-COSTS> 1,302
<OTHER-EXPENSES> 90,387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (26,443)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,443)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,443)
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
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