---------------------------------------------------------------------
---------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 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: 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, 1997
Common Stock, $.05 par value 1,417,087 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, 1997 and December 31, 1996 3
Condensed Statements of Operations -
Three months ended March 31, 1997 and 1996 4
Condensed Statements of Cash Flows -
Three months ended March 31, 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
</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,
1997 1996
<S> <C> <C>
Current assets:
Cash and temporary investments $ 644,091 985,238
Trade accounts receivable 43,810 36,610
--------- ----------
Total current assets 687,901 1,021,848
--------- ----------
Property and equipment, at cost:
Oil and gas properties - successful efforts
method of accounting 2,542,570 2,341,758
Office furniture and vehicles 97,891 97,891
--------- ---------
2,640,461 2,439,649
Less accumulated depreciation, depletion and
amortization (276,788) (241,709)
---------- ----------
Total property and equipment 2,363,673 2,197,940
--------- ----------
Other assets 14,313 15,714
--------- ----------
TOTAL ASSETS $ 3,065,887 3,235,502
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 32,312 114,799
Notes payable and current installments of
long-term debt 889,393 1,074,329
--------- ----------
Total current liabilities 921,705 1,189,128
--------- ----------
Long-term debt, excluding current installments 488,700 560,755
--------- ----------
Total liabilities 1,410,405 1,749,883
--------- ----------
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained deficit (305,377) (475,240)
--------- ----------
Total stockholders' equity 1,655,482 1,485,619
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,065,887 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
March 31,
1997 1996
<C> <S> <S>
Revenue:
Operating revenue $ 446,106 295,630
Other income 2,712 2,712
--------- ---------
Total revenue 448,818 298,342
--------- ---------
Costs and expenses:
Production cost 139,704 107,641
Exploration cost 38 311
Depreciation, depletion and amortization 36,481 17,013
General and administrative 62,239 56,407
Abandonment of leaseholds 100 ---
Interest 40,392 29,155
--------- ---------
Total costs and expenses 278,954 210,527
--------- ---------
Income before
federal income taxes 169,864 87,815
Federal income taxes:
Current federal income tax --- ---
Deferred federal income tax --- 29,857
--------- ---------
Total deferred federal income tax --- 29,857
--------- ---------
Net income $ 169,864 57,958
--------- ---------
Weighted average number of shares outstanding 1,417,087 1,427,087
--------- ---------
Income per common share $ .12 .04
--------- ---------
</TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
<S> <C> <C>
Net cash flows from operating activities $ 116,757 71,726
Net cash flows from investing activities (200,913) (52,569)
Net cash flows from financing activities (256,991) (30,865)
--------- ---------
Net change in cash and temporary investments (341,147) (11,708)
Cash and temporary investments at
beginning of period 985,238 383,321
--------- ---------
Cash and temporary investments at
end of period $ 644,091 371,613
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
March 31, 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
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
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 three months ended March 31,
1997, due to the utilization of net operating loss carryforwards.
In addition, the Company has approximately $433,000 of unused net operating
loss carryforwards for federal income tax purposes at March 31, 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 increased by $150,476 (51%) for the three-month period
ended March 31, 1997 from the comparable prior-year period due to a com-
bination 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 $32,063 (30%) increase in production cost for the three-month period
ended March 31, 1997 as compared to 1996 is primarily attributable to
the installation of new equipment as described above which maximizes gas
production capabilities. General and administrative expenses increased
$5,832 (10%) for the three-month period ended March 31, 1997 from the
comparable prior year period primarily as a result of an $2,500 increase in
management fees paid in 1997 as compared to 1996 as well as a $2,500 increase
in accounting costs. Interest expense increased approximately $11,237 for
the three-month period ended March 31, 1997 from the comparable prior-year
period due to higher average outstanding balances. Depreciation, depletion,
and amortization increased by $19,468 (114%) for the three-month period
ended March 31, 1997, from the comparable prior-year period due to increased
production and shortened reservoir lives.
LIQUIDITY AND CAPITAL RESOURCES
Since December 31, 1997, the deficit in working capital has increased by
approximately $66,524 to a total of $233,804. The primary cause of the deficit
is short term notes payable of $889,393 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 $116,757 for
the three months ended March 31, 1997. Notes payable decreased by $184,936 and
long-term debt decreased by $72,055 for the first 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.
<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, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 644,091
<SECURITIES> 0
<RECEIVABLES> 43,810
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 687,901
<PP&E> 2,640,461
<DEPRECIATION> 276,788
<TOTAL-ASSETS> 3,065,887
<CURRENT-LIABILITIES> 921,705
<BONDS> 0
<COMMON> 1,417,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,065,887
<SALES> 446,106
<TOTAL-REVENUES> 448,818
<CGS> 139,704
<TOTAL-COSTS> 139,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,392
<INCOME-PRETAX> 169,864
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,864
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
<PAGE>
</TABLE>
