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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996 Commission File No. 1-10437
TEXAS VANGUARD OIL COMPANY
(Exact name of registrant as specified in its charter)
Texas 74-2075344
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9811 Anderson Mill Rd., Suite 202
Austin, Texas 78750
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (512) 331-6781
Former name, address and fiscal year, if changed since last report:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X or No ___.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
Common Stock, $.05 par value 1,427,087 shares
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TEXAS VANGUARD OIL COMPANY
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<CAPTION>
INDEX
Page
Number
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Part I: Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets -
June 30, 1996 and December 31, 1995 3
Condensed Statements of Operations -
Three and six months ended June 30, 1996 and 1995 4
Condensed Statements of Cash Flows -
Six months ended June 30, 1996 and 1995 4
Notes to the Condensed Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information 7
Signatures 8
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In the opinion of the Registrant, all adjustments (consisting of normal
recurring accruals) necessary to a fair statement of the results of the
interim periods have been included.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS VANGUARD OIL COMPANY
Condensed Balance Sheets
(Unaudited)
Assets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<C> <C> <C>
Current assets:
Cash and temporary investments $ 482,118 383,321
Trade accounts receivable 30,587 26,352
--------- ---------
Total current assets 512,705 409,673
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 2,173,693 2,104,784
Office furniture and vehicles 93,530 93,530
--------- ---------
2,267,223 2,198,314
Less accumulated depreciation, depletion and
amortization (234,268) (200,956)
--------- ---------
Total property and equipment 2,032,955 1,997,358
--------- ---------
Other assets 18,516 21,319
Deferred tax asset --- 45,409
--------- ---------
TOTAL ASSETS $ 2,564,176 2,473,759
--------- ---------
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<C> <C> <C>
Current liabilities:
Trade accounts payable $ 14,451 47,096
Notes payable and current installments
of long-term debt 929,569 935,009
--------- ---------
Total current liabilities 944,020 982,105
--------- --------
Long-term debt, excluding current installments 195,997 252,247
--------- ---------
Total Liabilities 1,140,017 1,234,352
Stockholders' equity:
Common stock 71,354 71,354
Additional paid-in capital 1,901,468 1,901,468
Retained deficit (548,663) (733,415)
--------- ---------
Total stockholders' equity 1,424,159 1,239,407
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,564,176 2,473,759
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
<C> <C> <C> <C> <C>
Revenue:
Operating revenue $ 386,208 196,906 681,837 379,346
Other income 2,925 2,149 5,637 3,752
--------- --------- --------- ---------
Total revenue 389,133 199,055 687,474 383,098
--------- --------- --------- ---------
Costs and expenses:
Production cost 117,437 94,850 225,078 179,184
Exploration cost 32 191 343 553
Depreciation, depletion
and amortization 21,389 12,637 38,402 24,411
General and
administrative 73,133 48,662 129,540 92,256
Interest 28,281 18,103 57,436 36,102
Abandonment of leasehold 6,514 --- 6,514 ---
--------- --------- --------- ---------
Total costs and expenses 246,786 174,443 457,313 332,506
--------- --------- --------- ---------
Income before
federal income taxes 142,347 24,612 230,161 50,592
--------- --------- --------- ---------
Federal income taxes:
Current federal taxes --- --- --- ---
Deferred federal taxes 15,552 8,368 45,409 17,201
--------- -------- --------- ---------
Total federal income tax 15,552 8,368 45,409 17,201
--------- --------- --------- ---------
Net income $ 126,795 16,244 184,752 33,391
========= ========= ========= =========
Weighted average number of
shares outstanding 1,427,087 1,427,087 1,427,087 1,427,087
========= ========= ========= =========
Income per common share .09 .01 .13 .02
========= ========= ========= =========
</TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1995
<C> <C> <C>
Net cash flows from operating activities $ 235,911 (24,591)
Net cash flows from investing activities (75,423) (115,641)
Net cash flows from financing activities (61,690) 13,730
--------- ---------
Net change in cash and temporary investments 98,798 (126,502)
Cash and temporary investments at
beginning of period 383,321 403,794
--------- ---------
Cash and temporary investments at
end of period $ 482,119 277,292
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
June 30, 1996
Note 1: Oil and Gas Properties
Texas Vanguard Oil Company (the Company) follows the "successful efforts"
method of accounting for oil and gas exploration and production operations.
Accordingly, costs incurred in the acquisition and exploratory drilling of
oil and gas properties are initially capitalized and either subsequently
expensed if the properties are determined not to have proved reserves, or
reclassified as a proven property if proved reserves are discovered.
Costs of drilling development wells are capitalized. Geological, geophysical,
carrying and production costs are charged to expense as incurred.
Costs related to acquiring unproved lease and royalty acreage are periodically
assessed for possible impairment of value. If the assessment indicates impair-
ment, the costs are charged to expense.
Depreciation, depletion and amortization of proved oil and gas property costs,
including related equipment and facilities, is provided using the units-of-
production method.
Note 2: Income Taxes
Effective January 1, 1993, the company adopted Statement No. 109. Under
the asset and liability method of Statement No. 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates in effect
for the year in which those temporary differences are expected to be recovered
or settled. Under Statement No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
The federal income tax expense of $45,409 for the six month period ended June
30, 1996, is a deferred tax expense and does not result in cash outflows.
In addition, the Company has approximately $945,000 of unused net operating
loss carryforwards for federal income tax purposes at June 30, 1996.
Note 3: Statement of Cash Flows
Cash and cash equivalents as used in the Condensed Statements of Cash Flows
include cash in banks and certificates of deposit owned.
Note 4: Adoption of Accounting Standard
The Financial Accounting Standards Board issued statement of Financial
Accounting Standards No. 121, Accounting For The Impairment Of Long-Lived
Assets And For Long-Lived Assets To Be Disposed Of, in March 1995 for
implementation in fiscal years beginning after December 15, 1995. There was
no affect on the Company's financial statements upon adoption of Statement
121 in the second quarter of 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
The following information is provided in compliance with SEC guidelines to
explain financial information shown in the Condensed Financial Statements.
RESULTS OF OPERATIONS
Operating revenues increased by $189,302 (96%) and $302,491 (80%) for the
three-month and six-month periods ended June 30, 1996 from the comparable
prior-year periods primarily due to a combination of factors including
higher oil prices in 1996 as compared to 1995, an increase in the number
of properties owned and operated by the Company, as well as an increase in
the amount of gas produced and sold which is attributable to new equipment
installed by the Company to enhance production capabilities.
The $22,587 (24%) and $45,894 (26%) increase in production cost for the
three-month and six-month periods ended June 30, 1996 as compared
to 1995 is primarily attributable to an increase in the number of
properties owned and operated by the Company as well as the installation
of new equipment as described above which maximizes gas production
capabilities. Interest expense increased approximately $10,178 and $21,334
for the three-month and six-month periods ended June 30, 1996 from the
comparable 1995 periods primarily due to higher average outstanding
balances. General and adminstrative expenses increased $37,284 for the six
month period ended June 30, 1996 from the comparable prior year period
primarily as a result of an $18,000 increase in management fees paid in
1996 as compared to 1995 as well as a $13,400 increase in accounting costs.
LIQUIDITY AND CAPITAL RESOURCES
Since December 31, 1995, the deficit in working capital has decreased by
approximately $141,117 to a total of $431,315. In April 1995, the Company
entered into a new note payable maturing in April 1999, which allowed for
classification of $195,997 of the bank note payable in the long term
catagory. The primary cause of the remaining deficit is short term notes
payable of $929,569 which are financing long term assets. Cash flow from
operations remains positive at $235,911 for the six months ended June 30,
1996. Notes payable have decreased by $61,690 due to scheduled payments.
The worldwide crude oil prices continue to fluctuate in 1996. The depressed
state of oil and gas prices have had tremendously negative impacts on the
Company's profitability. The Company cannot predict how prices will vary
during the remainder of 1996 and what effect they will ultimately have on
the Company, but management believes that the Company will be able to gen-
erate sufficient cash from operations to service its bank debt and provide
for maintaining current production of its oil and gas properties.
PART II.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None.
b) Reports on Form 8-K: Report Form 8-K filed May 6, 1996.
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.
TEXAS VANGUARD OIL COMPANY
--------------------------
(Registrant)
Robert N. Watson, Jr., President
--------------------------------
Robert N. Watson, Jr., President
(Principal Financial and
(Accounting Officer)
Date: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 482,118
<SECURITIES> 0
<RECEIVABLES> 30,587
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 512,705
<PP&E> 2,267,223
<DEPRECIATION> 234,268
<TOTAL-ASSETS> 2,564,176
<CURRENT-LIABILITIES> 944,020
<BONDS> 0
<COMMON> 1,427,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,564,176
<SALES> 681,837
<TOTAL-REVENUES> 687,474
<CGS> 225,078
<TOTAL-COSTS> 225,078
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,436
<INCOME-PRETAX> 230,161
<INCOME-TAX> 45,409
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,752
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
<PAGE>
</TABLE>
