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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 March 31, 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: None
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 March 31, 1996
Common Stock, $.05 par value 1,427,087 shares
<PAGE>
TEXAS VANGUARD OIL COMPANY
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Part I. Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets -
March 31, 1996 and December 31, 1995 3
Condensed Statements of Operations -
Three months ended March 31, 1996 and 1995 4
Condensed Statements of Cash Flows -
Three months ended March 31, 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
</TABLE>
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.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS VANGUARD OIL COMPANY
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
Assets
March 31, December 31,
1996 1995
<S> <C> <C>
Current assets:
Cash and temporary investments $ 371,613 383,321
Trade accounts receivable 25,177 26,352
--------- ----------
Total current assets 396,790 409,673
--------- ----------
Property and equipment, at cost:
Oil and gas properties - successful efforts
method of accounting 2,157,352 2,104,784
Office furniture and vehicles 93,530 93,530
--------- ---------
2,250,882 2,198,314
Less accumulated depreciation, depletion and
amortization (216,567) (200,956)
---------- ----------
Total property and equipment 2,034,315 1,997,358
--------- ----------
Other assets 19,918 21,319
--------- ----------
Deferred tax asset 15,552 45,409
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TOTAL ASSETS $ 2,466,575 2,473,759
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 12,820 47,096
Notes payable and current installments of
long-term debt 932,269 935,009
--------- ----------
Total current liabilities 945,089 982,105
--------- ----------
Long-term debt, excluding current installments 224,122 252,247
--------- ----------
Total liabilities 1,169,211 1,234,352
--------- ----------
Stockholders' equity:
Common stock 71,354 71,354
Additional paid-in capital 1,901,468 1,901,468
Retained deficit (675,458) (733,415)
--------- ----------
Total stockholders' equity 1,297,364 1,239,407
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,466,575 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
March 31,
1996 1995
<C> <S> <S>
Revenue:
Operating revenue $ 295,630 182,440
Other income 2,712 1,603
--------- ---------
Total revenue 298,342 184,043
--------- ---------
Costs and expenses:
Production cost 107,641 84,334
Exploration cost 311 362
Depreciation, depletion and amortization 17,013 11,774
General and administrative 56,407 43,593
Interest 29,155 18,000
--------- ---------
Total costs and expenses 210,527 158,063
--------- ---------
Income before
federal income taxes 87,815 25,980
--------- ---------
Federal income tax 29,857 8,833
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Net income $ 57,958 17,147
--------- ---------
Weighted average number of shares outstanding 1,427,087 1,427,087
--------- ---------
Income per common share $ .04 .01
--------- ---------
</TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1996 1995
<S> <C> <C>
Net cash flows from operating activities $ 71,726 (61,753)
Net cash flows from investing activities (52,569) (56,275)
Net cash flows from financing activities (30,865) (12,104)
--------- ---------
Net change in cash and temporary investments (11,708) (130,132)
Cash and temporary investments at
beginning of period 383,321 403,794
--------- ---------
Cash and temporary investments at
end of period $ 371,613 273,662
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
March 31, 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 $29,857 for the three months ended March 31,
1996, reduces the deferred tax asset on the balance sheet 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 March 31, 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 Accounts
Standards No. 121, Accounting For The Impairment of Long-Lived Assets For Long-
Lived Assets To Be Disposed Of in March 1995, for implementation in fiscal year
beginning after December 15, 1995. There was no affect on the Company's
financial statements upon adoption of Statement 121 in the first 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 $113,190 (62%) for the three-month period
ended March 31, 1995 from the comparable prior-year period due to a com-
bination 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 $23,307 (28%) increase in production cost for the three-month period
ended March 31, 1996 as compared to 1995 is primarily attributable to
the installation of new equipment as described above which maximizes gas
production capabilities. General and administrative expenses increased
$12,814 (29%) for the three-month period ended March 31, 1996 from the
comparable prior year period primarily as a result of an $8,000 increase in
management fees paid in 1996 as compared to 1995 as well as a $5,000 increase
in accounting costs. Interest expense increased approximately $11,155 for
the three-month period ended March 31, 1996 from the comparable prior-year
period due to higher average outstanding balances.
LIQUIDITY AND CAPITAL RESOURCES
Since December 31, 1995, the deficit in working capital has decreased by
approximately $24,133 to a total of $548,299. In April 1995, the Company
entered into a new bank note payable maturing in April 1999, which has
allowed for classification of $224,122 of the bank note payable in the long
term category. The primary cause of the remaining deficit is short term
notes payable of $932,269 which are financing long term assets. The
Company does not anticipate any problems with the continued renewal of its
bank debt. Cash flow from operations remains positive at $71,726 for the
three months ended March 31, 1996. Notes payable have decreased by $30,865
due to scheduled payments for the first quarter of 1996.
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>
PART II.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None.
b) Reports on Form 8-K: None.
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: May 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 371,613
<SECURITIES> 0
<RECEIVABLES> 25,177
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 396,790
<PP&E> 2,250,882
<DEPRECIATION> 216,567
<TOTAL-ASSETS> 2,466,575
<CURRENT-LIABILITIES> 945,269
<BONDS> 0
<COMMON> 1,427,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,466,575
<SALES> 295,630
<TOTAL-REVENUES> 298,342
<CGS> 107,641
<TOTAL-COSTS> 107,641
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,155
<INCOME-PRETAX> 87,815
<INCOME-TAX> 29,857
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,958
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
<PAGE>
</TABLE>
