SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-10437
TEXAS VANGUARD OIL COMPANY
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(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
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (512) 331-6781
Not Applicable
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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 .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at September 30, 1996
--------------------- ---------------------------------
$.05 par value 1,427,087 shares
<PAGE> 2
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TEXAS VANGUARD OIL COMPANY
QUARTERLY REPORT FORM 10-Q
INDEX
<CAPTION>
Page No.
<S> <C> <C>
Part I. Financial Information
Condensed Balance Sheets,
September 1996 and December 31, 1995 4
Condensed Statements of Operations,
Three and nine months ended
September 30, 1996 and 1995 5
Condensed Statements of Cash Flows,
Nine months ended September 30, 1996 and 1995 5
Notes to the Condensed Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II. Other Information 8
Signatures 9
<FN>
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.
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<PAGE> 3
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS VANGUARD OIL COMPANY
Condensed Balance Sheets
(Unaudited)
<CAPTION>
Assets
September 30, December 31,
1996 1995
<S> <C> <C>
Current assets:
Cash and temporary investments $ 406,870 383,321
Trade accounts receivable 38,783 26,352
--------- ---------
Total current assets 445,653 409,673
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 2,366,906 2,104,784
Office furniture and vehicles 117,857 93,530
--------- ---------
2,484,763 2,198,314
Less accumulated depreciation,
depletion and amortization (252,725) (200,956)
----------- ----------
Total property and equipment 2,232,038 1,997,358
----------- ----------
Other assets 17,115 21,319
----------- ----------
Deferred tax asset --- 45,409
----------- ----------
TOTAL ASSETS $ 2,694,806 2,473,759
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 39,380 47,096
Notes payable and current installments
of long-term debt 504,215 935,009
----------- ----------
Total current liabilities 543,595 982,105
----------- ----------
Long-term debt, excluding
current installments 597,122 252,247
----------- ----------
Total liabilities 1,140,717 1,234,352
Stockholders' equity:
Common stock 71,354 71,354
Additional paid-in capital 1,901,468 1,901,468
Retained deficit (418,733) (733,415)
----------- ----------
Total stockholders' equity 1,554,089 1,239,407
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,694,806 2,473,759
----------- ----------
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Operations
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Operating revenue $ 337,239 234,133 1,019,076 613,479
Other income 2,712 2,712 8,350 6,464
--------- ------- --------- -------
Total revenue 339,951 236,845 1,027,426 619,943
--------- ------- --------- -------
Costs and expenses:
Production cost 117,772 114,304 342,850 293,488
Exploration cost 5 384 348 936
Depreciation, depletion
and amortization 19,859 14,754 58,261 39,165
Interest 26,520 21,676 83,957 57,778
General and
administrative 45,866 56,939 175,405 149,196
Abandonment/Impairment
of leaseholds --- --- 6,514 ---
--------- --------- --------- ---------
Total costs and expenses 210,022 208,057 667,335 540,563
--------- --------- --------- ---------
Income before
federal income taxes 129,929 28,788 360,091 79,380
--------- --------- --------- ---------
Federal income taxes:
Current federal
income taxes 44,176 --- 122,431 ---
Deferred federal income
tax (benefit) (44,176) 9,788 (77,022) 26,989
--------- --------- --------- ---------
Total federal
income taxes --- 9,788 45,409 26,989
--------- --------- --------- ---------
Net income $ 129,929 19,000 314,682 52,391
========= ========= ========= ==========
Weighted average number
of shares outstanding 1,427,087 1,427,087 1,427,087 1,427,087
========= ========= ========= =========
Income per common share .09 .01 .22 .04
========= ========= ========= =========
</TABLE>
<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine months ended
September 30,
1996 1995
<S> <C> <C>
Net cash flows from operating activities $ 402,431 40,771
Net cash flows from investing activities (292,963) (427,284)
Net cash flows from financing activities (85,919) 274,953
----------- --------
Net change in cash
and temporary investments 23,549 (111,560)
Cash and temporary investments at
beginning of period 383,321 403,794
---------- --------
Cash and temporary investments at
end of period $ 406,870 292,234
========= ========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 5
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
September 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 impairment, 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 nine-months ended
September 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 September
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 third quarter of 1996.
<PAGE> 6
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 $103,106 (44%) and $405,597 (66%) for the
three-month and nine-month periods ended September 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 $3,468 (3%) and $49,362 (17%) increase in production cost for the
three-month and nine-month periods ended September 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 $4,844 and $26,179 for the three-month and
nine-month periods ended September 30, 1996 from the comparable 1995 periods
primarily due to higher average outstanding balances. General and
administrative expenses increased $26,209 for the nine-month period ended
September 30, 1996 from the comparable prior year period primarily as a result
of an $21,000 increase in management fees paid in 1996 as compared to 1995.
LIQUIDITY AND CAPITAL RESOURCES
Since December 31, 1995, the deficit in working capital has decreased by
approximately $474,490 to a total of $97,942. In July 1996, the Company
entered into a new note payable maturing in July 2000, which has allowed
for classification of $543,595 of the bank note payable in the long term
category. Cash flow from operations remains positive at $402,431 for the
nine months ended September 30, 1996. Notes payable have decreased by
$85,919 due to scheduled payments.
The worldwide crude oil prices continue to fluctuate in 1996. 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 generate sufficient cash from operations
to service its bank debt and provide for maintaining current production of
its oil and gas properties.
<PAGE> 7
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
FORM 10-Q
PART II OF TWO PARTS
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None.
b) Reports on Form 8-K: None.
<PAGE> 8
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: November 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 406,870
<SECURITIES> 0
<RECEIVABLES> 38,783
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 445,653
<PP&E> 2,484,763
<DEPRECIATION> 252,725
<TOTAL-ASSETS> 2,694,806
<CURRENT-LIABILITIES> 543,595
<BONDS> 0
<COMMON> 1,427,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,694,806
<SALES> 1,019,076
<TOTAL-REVENUES> 1,027,426
<CGS> 342,850
<TOTAL-COSTS> 342,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,957
<INCOME-PRETAX> 360,091
<INCOME-TAX> 45,409
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 314,682
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<PAGE>
</TABLE>
