---------------------------------------------------------------------
---------------------------------------------------------------------
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, 1998 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, 1998
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, 1998 and December 31, 1997 3
Condensed Statements of Earnings -
Three months ended March 31, 1998 and 1997 4
Condensed Statements of Cash Flows -
Three months ended March 31, 1998 and 1997 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,
1998 1997
<S> <C> <C>
Current assets:
Cash and temporary investments $ 485,741 1,105,264
Trade accounts receivable 56,072 80,404
--------- ----------
Total current assets 541,813 1,185,668
--------- ----------
Property and equipment, at cost:
Oil and gas properties - successful efforts
method of accounting 2,853,294 2,760,621
Office furniture and vehicles 97,891 97,891
--------- ---------
2,951,185 2,858,512
Less accumulated depreciation, depletion and
amortization (374,919) (344,653)
---------- ----------
Total property and equipment 2,576,266 2,513,859
--------- ----------
Other assets 4,381 5,108
--------- ----------
TOTAL ASSETS $ 3,122,460 3,704,635
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 22,272 113,194
Notes payable and current installments of
long-term debt 432,090 944,606
--------- ----------
Total current liabilities 454,362 1,057,800
--------- ----------
Deferred tax liability 159,726 122,000
Long-term debt, excluding current installments 712,700 802,396
--------- ----------
Total liabilities 1,326,788 1,982,196
--------- ----------
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained deficit (165,187) (238,420)
--------- ----------
Total stockholders' equity 1,795,672 1,722,439
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,122,460 3,704,635
========= ==========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
<C> <S> <S>
Revenue:
Operating revenue $ 402,427 446,106
Other income 2,614 2,712
--------- ---------
Total revenue 405,041 448,818
--------- ---------
Costs and expenses:
Production cost 163,109 139,704
Exploration cost 392 38
Depreciation, depletion and amortization 32,177 36,481
General and administrative 63,592 62,239
Abandonment of leaseholds --- 100
Interest 34,813 40,392
--------- ---------
Total costs and expenses 294,083 278,954
--------- ---------
Earnings before
federal income taxes 110,958 169,864
Federal income taxes:
Deferred federal income tax expense 37,726 ---
--------- ---------
Net earnings $ 73,232 169,864
--------- ---------
Weighted average number of shares outstanding 1,417,087 1,417,087
--------- ---------
Basic and diluted earnings per share $ .05 .12
--------- ---------
</TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
<S> <C> <C>
Net cash flows from operating activities $ 76,544 116,757
Net cash flows from investing activities (93,855) (200,913)
Net cash flows from financing activities (602,212) (256,991)
--------- ---------
Net change in cash and temporary investments (619,523) (341,147)
Cash and temporary investments at
beginning of period 1,105,264 985,238
---------- ---------
Cash and temporary investments at
end of period $ 485,741 644,091
---------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
March 31, 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 of a change in
tax rates is recognized in income in the period that includes enactment date.
The federal income tax expense of $37,726 for the three month period ended
March 31, 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>
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 $43,679 (10%) for the three-month period
ended March 31, 1998 from the comparable prior-year period primarily as a
result of lower oil prices in 1998 as compared to 1997. The $23,405 (17%)
increase in production cost for the three-month period ended March 31, 1998
as compared to 1997 is primarily attributable to the installation of new
equipment installed by the Company which maximizes gas production capabilities.
General and administrative expenses for the three-month period ended March 31,
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 $5,579 (14%) for the three-month period ended March 31, 1998
from the comparable prior-year period due to lower average outstanding balances
Depreciation, depletion, and amortization decreased by $4,304 (12%) for the
three-month period ended March 31, 1998, from the comparable prior-year period.
LIQUIDITY AND CAPITAL RESOURCES
During the period ended March 31, 1998, the Company's liquidity remained strong
enough to meet its short-term cash needs. The sources of liquidity and capital
resources are generated from cash on hand, cash provided by operations and from
credit available from financial institutions. Working capital at March 31, 1998
has increased to 1.19 to 1 from 1.12 to 1 at December 31, 1997. Cash flow from
operations remains positive at $76,544 for the three months ended March 31,
1998. Notes payable decreased by $512,516 and long-term debt decreased by
$89,696 for the first quarter of 1998.
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.
<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 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 485,741
<SECURITIES> 0
<RECEIVABLES> 56,072
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 541,813
<PP&E> 2,951,185
<DEPRECIATION> 374,919
<TOTAL-ASSETS> 3,122,460
<CURRENT-LIABILITIES> 454,362
<BONDS> 0
<COMMON> 1,417,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,122,460
<SALES> 402,427
<TOTAL-REVENUES> 405,041
<CGS> 163,109
<TOTAL-COSTS> 163,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,813
<INCOME-PRETAX> 110,958
<INCOME-TAX> 37,726
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,232
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
<PAGE>
</TABLE>
