SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2003
Commission File No. 0-18774
SPINDLETOP OIL & GAS CO.
(Exact name of registrant as specified in its charter)
Texas 75-2063001
(State or other jurisdiction IRS Employer or ID #)
of incorporation or organization)
331 Melrose, Suite 102, Richardson, T 75080
(Address of principal executive offices) (Zip Code)
(972) 644-2581
(Company's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $0.01 per share
(Title of Class)
Indicate by check mark whether the Company (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES ___X___ NO _______
As of March 31, 2003, 7,607,471 shares of the Company's common stock were
issued and outstanding, and the aggregate market value of the voting stock
held by non-affiliates of the company as of that date is not determinable
since no significant public trading market has been established for the
Company's common stock.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 2003
Index to Consolidated Financial Statements and Schedules
Page
Part I - Financial Information:
Item 1. - Financial Statements
Consolidated Balance Sheets
March 31, 2003 (Unaudited) and December 31, 2002 . . . . . . . . . 3-4
Consolidated Statements of Income or Loss (Unaudited)
Three Months Ended March 31, 2003 and 2002 . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2003 and 2002 . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 7
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 8
Part II - Other Information:
Part I - Financial Information
Item 1. - Financial Statements
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of
--------------------------
March 31 December 31
2003 2002
(Unaudited)
----------- -----------
ASSETS
Current Assets
Cash $ 2,265,000 $ 2,046,000
Accounts receivable 451,000 274,000
Prepaid income tax 17,000 109,000
----------- -----------
Total Current Assets 2,733,000 2,429,000
----------- -----------
Property and Equipment, at cost
Oil and gas properties (full cost method) 3,909,000 3,936,000
Rental equipment 399,000 399,000
Gas gathering systems 145,000 145,000
Other property and equipment 85,000 85,000
----------- -----------
4,538,000 4,565,000
Accumulated depreciation and amortization (3,293,000) (3,230,000)
----------- -----------
Total Property and Equipment, net 1,245,000 1,335,000
----------- -----------
Total Assets $ 3,978,000 $ 3,764,000
=========== ===========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
As of
--------------------------
March 31 December 31
2003 2002
(Unaudited)
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 369,000 $ 414,000
Notes payable, related party 39,000 42,000
Tax savings benefit payable 97,000 97,000
----------- -----------
Total current liabilities 505,000 553,000
----------- -----------
Deferred income tax payable 179,000 179,000
----------- -----------
Shareholders' Equity
Common stock, $.01 par value; 100,000,000
Shares authorized; 7,607,471 shares
issued and outstanding at March 31, 2003
and 7,582,471 shares issued and outstanding
at December 31, 2002. 103,334 shares of
Treasury Stock at March 31, 2003 and
December 31, 2002. 76,000 76,000
Additional paid-in capital 776,000 776,000
Treasury Stock (18,000) (18,000)
Retained earnings 2,460,000 2,198,000
----------- -----------
Total Shareholders' Equity 3,294,000 3,032,000
----------- -----------
Total Liabilities and Shareholders' Equity $ 3,978,000 $ 3,764,000
=========== ===========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended
--------------------------
March 31 March 31
2003 2002
----------- -----------
Revenues
Oil and gas revenue $ 718,000 $ 428,000
Revenue from lease operations 16,000 9,000
Gas gathering, compression and
Equipment rental 42,000 46,000
Interest income 30,000 16,000
Other 3,000 3,000
----------- -----------
Total revenue 809,000 502,000
----------- -----------
Expenses
Lease operations 269,000 157,000
Pipeline and rental operations 9,000 5,000
Depreciation and amortization 63,000 35,000
General and administrative 112,000 101,000
Interest expense 2,000 3,000
----------- -----------
Total Expenses 455,000 301,000
----------- -----------
Income (Loss) Before Income Tax 354,000 201,000
----------- -----------
Current tax provision 92,000 50,000
Deferred tax provision - -
----------- -----------
92,000 50,000
----------- -----------
Net Income (Loss) $ 262,000 $ 151,000
=========== ===========
Earnings (Loss) per Share of Common Stock
Basic $ 0.03 $ 0.02
=========== ===========
Diluted $ 0.03 $ 0.02
=========== ===========
Weighted Average Shares Outstanding 7,603,582 7,525,804
=========== ===========
Diluted Shares Outstanding 7,673,304 7,525,804
=========== ===========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
--------------------------
March 31 March 31
2003 2002
----------- -----------
Cash Flows from Operating Activities
Net Income (Loss) $ 262,000 $ 151,000
Reconciliation of net income (loss)
to net cash provided by (used for)
Operating Activities
Depreciation and amortization 63,000 35,000
Amortization of note discount (2,000) (3,000)
Changes in accounts receivable (177,000) (117,000)
Changed in prepaid income taxes 92,000 -
Changes in accounts payable (45,000) 118,000
Changes in current taxes payable - 50,000
----------- -----------
Net cash provided by (used for) operating
Activities 193,000 234,000
----------- -----------
Cash flows from Investing Activities
Capitalized acquisition, exploration
and development costs 27,000 (169,000)
----------- -----------
Net cash provided by (used for) Investing
Activities 27,000 (169,000)
----------- -----------
Cash Flows from Financing Activities
Reduction of notes payable to
related party (1,000) (204,000)
----------- -----------
Net cash provided by (used for) Financing
Activities (1,000) (204,000)
----------- -----------
Increase (decrease) in cash 219,000 (139,000)
Cash at beginning of period 2,046,000 2,323,000
----------- -----------
Cash at end of period $ 2,265,000 $ 2,184,000
=========== ===========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND ORGANIZATION
The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the Company's annual Form 10-K filing. Accordingly,
the reader of this Form 10-Q may wish to refer to the Company's Form 10-K for
the year ended December 31, 2002 for further information.
The consolidated financial statements presented herein include the accounts
of Spindletop Oil & Gas Co., a Texas corporation and its wholly owned
subsidiaries, Prairie Pipeline Co., a Texas corporation and Spindletop
Drilling Company, a Texas Corporation. All significant inter-company
transactions and accounts have been eliminated.
In the opinion of management, the accompanying unaudited interim financial
statements contain all material adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial condition,
the results of operations and changes in cash flows of the Company and its
consolidated subsidiaries for the interim periods presented.
2. ISSUANCE OF COMMON STOCK AND STOCK OPTIONS
Effective October 7, 2002, the board of directors of the Company authorized
the issuance of 25,000 shares of restricted common stock at a value of $0.30
per share, along with payment of cash, and an option to purchase an
additional 75,000 shares of restricted common stock of the Company in
consideration for the purchase of certain oil and gas leases in North Texas.
The options granted under the stock option agreement expire in July, 2004.
The above options, along with options to acquire another 70,000 shares of
common stock of the Company, which expire in July 2003, were accounted for in
2002, using FASB Statement 123, Accounting for Stock-Based Compensation,
which had the effect of charging the oil and gas properties account with
$26,850, which will be amortized using the full cost method of accounting.
As of March 31, 2003, none of the options to purchase 145,000 shares of the
Company's common stock have been exercised, and none of the options have had
a dilutive effect on earnings per share.
3. EARNINGS PER SHARE
Earnings per share ("EPS") are calculated in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS 128), which
was adopted in 1997 for all years presented. Basic EPS is computed by
dividing income available to common shareholders by the weighted average
number of common shares outstanding during the period. All calculations have
been adjusted for the effects of the stock split discussed in Note 2. The
adoption of SFAS 128 had no effect on previously reported EPS. Diluted EPS
is computed based on the weighted number of shares outstanding, plus the
additional common shares that would have been issued had the options
outstanding been exercised.
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
2003 Compared to 2002
Oil and gas revenue increased for the three months ended March 31, 2003 as
compared to the same period in 2002 due primarily to higher average prices.
Gas prices spiked upward in the 1st Quarter of 2003, going from an average
price of $4.05 per mcf in January 2003 to a high of $7.47 per mcf in March
2003. The average price received in the first three months of 2003 was $5.51
per mcf as compared to an average price for the first quarter of 2002 of $1.91
per mcf. Oil prices also were higher in 2003 than in the previous year.
Average prices per barrel were $32.77 in 2003 compared to $19.91 in 2002.
In addition to price increases for natural gas and crude oil, oil production
for the first quarter of 2003 significantly increased versus 2002 levels due
to the acquisition of several operated oil properties during the 3rd and 4th
quarters of 2002. These properties were on-line and being produced during
the first three months of 2003.
Lease operations in the first quarter of 2003 are higher than in 2002, due to
an increase in work-over projects. Work over projects that were postponed in
2002 due to decreased revenue from low product prices were put back on the
schedule as prices and cash flow increased during the first quarter. In
addition, the Company's total well count increased due to the acquisitions of
additional oil and gas properties during the 2nd half of 2002.
The depletion calculation for the first quarter of 2003 is higher than that
calculated in 2002. The Company has re-evaluated and increased its proved
oil and gas reserve quantities, but at the same time increased the
capitalized costs that are being amortized. In addition, production is up
for the first quarter of 2003 due to the added properties.
General and administrative costs for the first quarter of 2003 were up
slightly due to the increased administrative activity involved with
evaluation of potential property purchases, and the resulting administrative
and accounting work necessary to process new acquisitions and the related
accounting.
Financial Condition and Liquidity
The Company's operating capital needs, as well as its capital spending
program are generally funded from cash flow generated by operations. Because
future cash flow is subject to a number of variables, such as the level of
production and the sales price of oil and natural gas, the Company can
provide no assurance that its operations will provide cash sufficient to
maintain current levels of capital spending. Accordingly, the Company may be
required to seek additional financing from third parties in order to fund its
exploration and development programs.
Item 4. - Controls and Procedures
Based on their most recent evaluation, which was completed within 90 days of
the filing of this Form 10-Q, our Acting Principal Executive Officer and
Acting Chief Financial Officer, believe our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are
effective. There were not any significant changes in internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation, and there has not been any corrective action
with regard to significant deficiencies and material weaknesses.
Part II - Other Information
Item 6. - Exhibits and Reports on Form 8-K
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Annual Report of Spindletop Oil & Gas Co. ("the
Company") on Form 10-Q for the period ending March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof ("the Report"), We,
Chris G. Mazzini, President and Acting Principal Executive Officer and Robert
E. Corbin, Controller and Acting Principal Financial Officer of the Company,
hereby certify that to our knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
Date: May 15, 2003 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President, Acting Principal
Executive Officer
Date: May 15, 2003 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller, Acting Principal
Financial Officer
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.
SPINDLETOP OIL & GAS CO.
(Registrant)
Date: May 15, 2003 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President, Acting Principal
Executive Officer
Date: May 15, 2003 By: /s/ Michelle H. Mazzini
Michelle H. Mazzini
Secretary
Date: May 15, 2003 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller, Acting Principal
Financial Office
CERTIFICATION
I, Chris Mazzini, Acting Principal Executive Officer of Spindletop Oil and
Gas Co. ("the Company"), certify that:
1) I have reviewed this quarterly report on Form 10-Q of the Company;
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4) I am responsible for establishing and maintaining internal controls and
procedures and have:
a) designed such internal controls to insure that material information
relating to the company and its consolidated subsidiaries is made known
to me by others within those entities, particularly for the periods
presented in this annual report;
b) evaluated the effectiveness of the Company's internal controls as of a
date within 90 days prior to the filing date of this annual report; and
c) presented in this annual report my conclusions about the effectiveness
of the disclosure controls and procedures based on a date within 90
days prior to the filing date of this annual report;
5) I have disclosed to the Company's auditors and Audit Committee of the
Board of directors (or persons fulfilling the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize, and report financial data and have identified for
the Company's auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
controls; and
CERTIFICATION (continued)
6) I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Chris G. Mazzini
Chris G. Mazzini
Acting Principal Executive Officer
May 15, 2003
CERTIFICATION
I, Robert E. Corbin, Acting Principal Financial Officer of Spindletop Oil and
Gas Co. ("the Company"), certify that:
1) I have reviewed this quarterly report on Form 10-Q of the Company;
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4) I am responsible for establishing and maintaining internal controls and
procedures and have:
a) designed such internal controls to insure that material information
relating to the company and its consolidated subsidiaries is made known
to me by others within those entities, particularly for the periods
presented in this annual report;
b) evaluated the effectiveness of the Company's internal controls as of a
date within 90 days prior to the filing date of this annual report; and
c) presented in this annual report my conclusions about the effectiveness
of the disclosure controls and procedures based on a date within 90
days prior to the filing date of this annual report;
5) I have disclosed to the Company's auditors and Audit Committee of the
Board of directors (or persons fulfilling the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize, and report financial data and have identified for
the Company's auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
controls; and
CERTIFICATION (continued)
6) I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Robert E. Corbin
Robert E. Corbin
Acting Principal Financial Officer
May 15, 2003