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
-------------------------------------------------------
(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, 1997
--------------------- ---------------------------------
$.05 par value 1,417,087 shares
<PAGE> 1
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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 1997 and December 31, 1996 3
Condensed Statements of Operations,
Three and nine months ended
September 30, 1997 and 1996 4
Condensed Statements of Cash Flows,
Nine months ended September 30, 1997 and 1996 4
Notes to the Condensed Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
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> 2
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS VANGUARD OIL COMPANY
Condensed Balance Sheets
(Unaudited)
<CAPTION>
Assets
September 30, December 31,
1997 1996
<S> <C> <C>
Current assets:
Cash and temporary investments $ 538,271 985,238
Trade accounts receivable 65,696 36,610
--------- ---------
Total current assets 603,967 1,021,848
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 2,711,175 2,341,758
Office furniture and vehicles 97,891 97,891
--------- ---------
2,809,066 2,439,649
Less accumulated depreciation,
depletion and amortization (337,021) (241,709)
----------- ----------
Total property and equipment 2,472,045 2,197,940
----------- ----------
Other assets 11,510 15,714
----------- ----------
TOTAL ASSETS $ 3,087,522 3,235,502
----------- ----------
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 38,258 114,799
Notes payable and current installments
of long-term debt 359,412 1,074,329
----------- ----------
Total current liabilities 397,670 1,189,128
----------- ----------
Long-term debt, excluding
current installments 868,700 560,755
----------- ----------
Total liabilities 1,266,370 1,749,883
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained deficit (139,707) (475,240)
----------- ----------
Total stockholders' equity 1,821,152 1,485,619
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,087,522 3,235,502
----------- ----------
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE> 3
<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Operations
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue:
Operating revenue $ 375,799 337,239 1,206,741 1,019,076
Other income 2,672 2,712 8,271 8,350
--------- ------- --------- ---------
Total revenue 378,471 339,951 1,215,012 1,027,426
--------- ------- --------- ---------
Costs and expenses:
Production cost 145,686 117,772 406,889 342,850
Exploration cost 1,226 5 1,418 348
Depreciation, depletion
and amortization 31,241 19,859 99,517 58,261
Interest 34,033 26,520 110,283 83,957
General and
administrative 61,910 45,866 193,772 175,405
Abandonment/Impairment
of leaseholds 50,000 --- 67,600 6,514
--------- --------- --------- ---------
Total costs and expenses 324,096 210,022 879,479 667,335
--------- --------- --------- ---------
Income before
federal income taxes 54,375 129,929 335,533 360,091
--------- --------- --------- ---------
Federal income taxes:
Current federal
income taxes --- --- --- 122,431
Deferred federal income
tax (benefit) --- --- --- (77,022)
--------- --------- --------- ---------
Total federal
income taxes --- --- --- 45,409
--------- --------- --------- ---------
Net income $ 54,375 129,929 335,533 314,682
========= ========= ========= ==========
Weighted average number
of shares outstanding 1,417,087 1,427,087 1,417,087 1,427,087
========= ========= ========= =========
Income per common share .04 .09 .24 .22
========= ========= ========= =========
</TABLE>
<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine months ended
September 30,
1997 1996
<S> <C> <C>
Net cash flows from operating activities $ 397,023 402,431
Net cash flows from investing activities (437,018) (292,963)
Net cash flows from financing activities (406,972) (85,919)
----------- --------
Net change in cash
and temporary investments (446,967) 23,549
Cash and temporary investments at
beginning of period 985,238 383,321
---------- --------
Cash and temporary investments at
end of period $ 538,271 406,870
========= ========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 4
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
September 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 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 or 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 nine-months ended September
30, 1997, due to the utilization of net operating loss carryforwards.
In addition, the Company has approximately $267,625 of unused net
operating loss carryforwards for federal income tax purposes at September
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> 5
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 $38,560 (11%) and $187,665 (18%) for the
three-month and nine-month periods ended September 30, 1997 from the
comparable prior-year periods 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 $27,914 (24%) and $64,039 (19%) increase in production cost for the
three-month and nine-month periods ended September 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. General
and administrative expenses increased $16,044 (35%) and $18,367 (10%) for the
three-month and nine-month periods ended September 30, 1997 from the comparable
1996 periods. Interest expense increased approximately $7,513 and $26,326
for the three-month and nine-month periods ended September 30, 1997 from the
comparable 1996 periods primarily due to higher average outstanding balances.
Depreciation, depletion and amortization increased by $41,256 (71%) for
the nine-month period ended September 30, 1997 from the comparable prior-year
period due to increased production and shortened reservoir lives.
For the three-month and nine-month periods ended September 30, 1997, the
Company provided provisions of $50,000 and $67,600 respectively, for the
impairment of value of oil and gas properties due to less than expected
production history of specific wells and for wells that were plugged or
abandoned.
LIQUIDITY AND CAPITAL RESOURCES
In July 1997, the Company entered into a new bank note payable maturing
in July 2001, which has allowed for classification of $868,700 of the bank
note payable in the long term category. Cash flow from operations remains
positive at $397,023 for the nine months ended September 30, 1997. Notes
payable and long-term debt decreased by $406,972 for the nine-month period
ended September 30, 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> 6
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> 7
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, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 538,271
<SECURITIES> 0
<RECEIVABLES> 65,696
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 603,967
<PP&E> 2,809,066
<DEPRECIATION> 337,021
<TOTAL-ASSETS> 3,087,522
<CURRENT-LIABILITIES> 397,670
<BONDS> 0
<COMMON> 1,417,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,087,522
<SALES> 1,206,741
<TOTAL-REVENUES> 1,215,012
<CGS> 406,889
<TOTAL-COSTS> 406,889
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,517
<INCOME-PRETAX> 335,533
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335,533
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
<PAGE>
</TABLE>
