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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, 1997 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, 1997
Common Stock, $.05 par value 1,417,087 shares
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TEXAS VANGUARD OIL COMPANY
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<CAPTION>
INDEX
Page
Number
<C> <C>
Part I: Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Statements of Operations -
Three and six months ended June 30, 1997 and 1996 4
Condensed Statements of Cash Flows -
Six months ended June 30, 1997 and 1996 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
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<CAPTION>
June 30, December 31,
1997 1996
<C> <C> <C>
Current assets:
Cash and temporary investments $ 623,681 985,238
Trade accounts receivable 61,653 36,610
--------- ---------
Total current assets 685,334 1,021,848
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 2,613,089 2,341,758
Office furniture and vehicles 97,891 97,891
--------- ---------
2,710,980 2,439,649
Less accumulated depreciation, depletion and
amortization (307,182) (241,709)
--------- ---------
Total property and equipment 2,403,798 2,197,940
--------- ---------
Other assets 12,911 15,714
--------- ---------
TOTAL ASSETS $ 3,102,043 3,235,502
--------- ---------
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<C> <C> <C>
Current liabilities:
Trade accounts payable $ 34,135 114,799
Notes payable and current installments
of long-term debt 866,431 1,074,329
--------- ---------
Total current liabilities 900,566 1,189,128
--------- --------
Long-term debt, excluding current installments 434,700 560,755
--------- ---------
Total Liabilities 1,335,266 1,749,883
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained deficit (194,082) (475,240)
--------- ---------
Total stockholders' equity 1,766,777 1,485,619
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,102,043 3,235,502
--------- ---------
</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,
1997 1996 1997 1996
<C> <C> <C> <C> <C>
Revenue:
Operating revenue $ 384,835 386,208 830,941 681,837
Other income 2,887 2,925 5,599 5,637
--------- --------- --------- ---------
Total revenue 387,722 389,133 836,540 687,474
--------- --------- --------- ---------
Costs and expenses:
Production cost 121,500 117,437 261,204 225,078
Exploration cost 154 32 192 343
Depreciation, depletion
and amortization 31,795 21,389 68,276 38,402
General and
administrative 69,620 73,133 131,859 129,540
Interest 35,858 28,281 76,250 57,436
Abandonment of leasehold 17,500 6,514 17,600 6,514
--------- --------- --------- ---------
Total costs and expenses 276,427 246,786 555,381 457,313
--------- --------- --------- ---------
Income before
federal income taxes 111,295 142,347 281,159 230,161
--------- --------- --------- ---------
Federal income taxes:
Current federal taxes --- --- --- ---
Deferred federal taxes --- 15,552 --- 45,409
--------- -------- --------- ---------
Total federal income tax --- 15,552 --- 45,409
--------- --------- --------- ---------
Net income $ 111,295 126,795 281,159 184,752
========= ========= ========= =========
Weighted average number of
shares outstanding 1,417,087 1,427,087 1,417,087 1,427,087
========= ========= ========= =========
Income per common share .08 .09 .20 .13
========= ========= ========= =========
</TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996
<C> <C> <C>
Net cash flows from operating activities $ 261,327 235,911
Net cash flows from investing activities (288,931) (75,423)
Net cash flows from financing activities (333,953) (61,690)
--------- ---------
Net change in cash and temporary investments (361,557) 98,798
Cash and temporary investments at
beginning of period 985,238 383,321
--------- ---------
Cash and temporary investments at
end of period $ 623,681 482,119
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</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
June 30, 1997
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
The Company uses the "asset and liability method" of income tax accounting
which bases the amount of current and future taxes payable on the events
recognized in the financial statements and on tax laws existing at the balance
sheet date. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes enactment date.
There is no federal income tax expense for the six month period ended June 30,
1997, due to the utilization of net operating loss carryforwards.
In addition, the Company has approximately $322,000 of unused net operating
loss carryforwards for federal income tax purposes at June 30, 1997.
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.
<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 decreased by $1,373 (.3%) for the three-month period
ended June 30, 1997 from the comparable prior year period and increased
$149,104 (22%) for the six-month period ended June 30, 1997 from the
comparable prior-year period primarily due to a combination of factors
including higher oil prices in 1997 as compared to 1996, 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 $4,063 (3%) and $36,126 (16%) increase in production cost for the
three-month and six-month periods ended June 30, 1997 as compared
to 1996 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 $7,577 and $18,814
for the three-month and six-month periods ended June 30, 1997 from the
comparable 1996 periods primarily due to higher average outstanding
balances. Depreciation, depletion and amortization increased by $29,874
(78%) for the six-month period ended June 30, 1997 for the comparable
prior-year period due to increased production and shortened reservoir lives.
LIQUIDITY AND CAPITAL RESOURCES
Since December 31, 1996, the deficit in working capital has increased by
approximately $47,952 to a total of $215,232. The primary cause of the
deficit is short term notes payable of $866,431 which are financing long
term assets. Cash flow from operations remains positive at $261,327 for
the six months ended June 30, 1997. Notes payable have decreased by
$207,898 and long-term debt decreased by $126,055 for the second quarter
of 1997.
The worldwide crude oil prices continue to fluctuate in 1997. The Company
cannot predict how prices will vary during the remainder of 1997 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.
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: August 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 623,681
<SECURITIES> 0
<RECEIVABLES> 61,653
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 685,334
<PP&E> 2,710,980
<DEPRECIATION> 307,182
<TOTAL-ASSETS> 3,102,043
<CURRENT-LIABILITIES> 900,566
<BONDS> 0
<COMMON> 1,417,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,102,043
<SALES> 830,941
<TOTAL-REVENUES> 836,540
<CGS> 261,204
<TOTAL-COSTS> 261,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,250
<INCOME-PRETAX> 281,159
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281,159
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<PAGE>
</TABLE>
