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, 1998
--------------------- ---------------------------------
$.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 1998 and December 31, 1997 3
Condensed Statements of Earnings,
Three and nine months ended
September 30, 1998 and 1997 4
Condensed Statements of Cash Flows,
Nine months ended September 30, 1998 and 1997 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,
1998 1997
<S> <C> <C>
Current assets:
Cash and temporary investments $ 427,767 1,105,264
Trade accounts receivable 79,447 80,404
--------- ---------
Total current assets 507,214 1,185,668
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 3,181,302 2,760,621
Office furniture and vehicles 97,891 97,891
--------- ---------
3,279,193 2,858,512
Less accumulated depreciation,
depletion and amortization (433,346) (344,653)
----------- ----------
Total property and equipment 2,845,847 2,513,859
----------- ----------
Other assets 2,927 5,108
----------- ----------
TOTAL ASSETS $ 3,355,988 3,704,635
----------- ----------
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 21,612 113,194
Notes payable and current installments
of long-term debt 660,480 944,606
----------- ----------
Total current liabilities 682,092 1,057,800
----------- ----------
Deferred tax liabilities 215,020 122,000
Long-term debt, excluding
current installments 555,868 802,396
----------- ----------
Total liabilities 1,452,980 1,982,196
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained deficit (57,851) (238,420)
----------- ----------
Total stockholders' equity 1,903,008 1,722,439
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,355,988 3,704,635
----------- ----------
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE> 3
<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Earnings
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue:
Operating revenue $ 372,659 375,799 1,153,272 1,206,741
Other income 3,369 2,672 7,957 8,271
--------- ------- --------- ---------
Total revenue 376,028 378,471 1,161,229 1,215,012
--------- ------- --------- ---------
Costs and expenses:
Production cost 178,955 145,686 510,718 406,889
Exploration cost 729 1,226 729 1,418
Depreciation, depletion
and amortization 29,368 31,241 92,059 99,517
Interest 27,493 34,033 90,758 110,283
General and
administrative 57,009 61,910 193,377 193,772
Abandonment/Impairment
of leaseholds --- 50,000 --- 67,600
--------- --------- --------- ---------
Total costs and expenses 293,554 324,096 887,641 879,479
--------- --------- --------- ---------
Income before
federal income taxes 82,474 54,375 273,588 335,533
--------- --------- --------- ---------
Federal income taxes:
Deferred federal income
tax expense 28,041 --- 93,020 ---
--------- --------- --------- ---------
Net earnings $ 54,433 54,375 180,568 335,533
========= ========= ========= ==========
Weighted average number
of shares outstanding 1,417,087 1,417,087 1,417,087 1,417,087
========= ========= ========= =========
Basic and diluted
earnings per share .04 .04 .13 .24
========= ========= ========= =========
</TABLE>
<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine months ended
September 30,
1998 1997
<S> <C> <C>
Net cash flows from operating activities $ 275,021 397,023
Net cash flows from investing activities (421,864) (437,018)
Net cash flows from financing activities (530,654) (406,972)
----------- ---------
Net change in cash
and temporary investments (677,497) (446,967)
Cash and temporary investments at
beginning of period 1,105,264 985,238
---------- ---------
Cash and temporary investments at
end of period $ 427,767 538,271
========= ========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 4
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
September 30, 1998
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.
The federal income tax of $93,020 for the nine-month period ended September
30, 1998, is a deferred tax liability and does not result in cash outflows.
In addition, the Company has approximately $359,000 of unused net
operating loss carryforwards for federal income tax purposes at December
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> 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 decreased by $3,140 (1%) and $53,469 (4%) for the
three-month and nine-month periods ended September 30, 1998 from the
comparable prior-year periods primarily as a result of lower oil prices
in 1998 as compared to 1997. The $33,269 (23%) and $103,829 (26%) increase in
production cost for the three-month and nine-month periods ended September
30, 1998 as compared to 1997 is primarily attributable to an increase in the
number of properties owned and operated by the Company as well as the install-
ation of new equipment installed by the Company which maximizes gas production
capabilities.
General and administrative expenses for the nine-month period ended September
30, 1998 were comparable to the prior year period as the Company made every
effort to control the level of these type expenses. Interest expense decreased
approximately $6,540 (19%) and $19,525 (18%) for the three-month and nine-month
periods ended September 30, 1998 from the comparable 1997 periods primarily
due to lower average outstanding balances. Depreciation, depletion and
amortization decreased by $7,458 (7%) for the nine-month period ended
September 30, 1998 from the comparable prior-year period due to a lower
rate in 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the period ended September 30, 1998, the Company's liquidity remained
strong enough to meet its short-term cash needs. The sources of liquidity
and capitol resources are generated from cash on hand, cash provided by
operations and from credit available from financial institutions. Working
capital at September 30, 1998, has decreased to .74 to 1 from 1.12 to 1 at
December 30, 1997 due to repayment of outstanding long term debt. Cash flow
from operations remains positive at $275,021 for the nine months ended
September 30, 1998. Notes payable have decreased by $284,126 and long-term
debt decreased by $246,528 for the nine-month period ended September 30,
1998, by using cash on hand and cash generated from operations.
The worldwide crude oil prices continue to fluctuate in 1998. The Company
cannot predict how prices will vary during the remainder of 1998 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.
YEAR 2000 COMPLIANCE
The Company has considered the impact of Year 2000 issues on its computer
systems and applications and has determined that these systems and appli-
cations are Year 2000 compliant. As such, no Year 2000 conversion
expenditures were incurred in 1998 and the Company expects no Year 2000
conversion expenditures in the future.
<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, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 427,767
<SECURITIES> 0
<RECEIVABLES> 79,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 507,214
<PP&E> 3,279,193
<DEPRECIATION> 433,346
<TOTAL-ASSETS> 3,355,988
<CURRENT-LIABILITIES> 682,092
<BONDS> 0
<COMMON> 1,417,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,355,988
<SALES> 1,153,272
<TOTAL-REVENUES> 1,161,229
<CGS> 510,718
<TOTAL-COSTS> 510,718
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,758
<INCOME-PRETAX> 273,588
<INCOME-TAX> 93,020
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 180,568
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
<PAGE>
</TABLE>
