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
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(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, 1999
--------------------- ---------------------------------
$.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 1999 and December 31, 1998 3
Condensed Statements of Earnings,
Three and nine months ended
September 30, 1999 and 1998 4
Condensed Statements of Cash Flows,
Nine months ended September 30, 1999 and 1998 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,
1999 1998
<S> <C> <C>
Current assets:
Cash and temporary investments $ 525,702 1,099,802
Trade accounts receivable 114,671 87,860
--------- ---------
Total current assets 640,373 1,187,662
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 4,141,269 3,494,307
Office furniture and vehicles 182,434 97,891
--------- ---------
4,323,703 3,592,198
Less accumulated depreciation,
depletion and amortization (597,924) (449,293)
----------- ----------
Total property and equipment 3,725,779 3,142,905
----------- ----------
Other assets 1,300 2,200
----------- ----------
TOTAL ASSETS $ 4,367,452 4,332,767
----------- ----------
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 34,374 72,766
Notes payable and current installments
of long-term debt 810,665 1,718,615
----------- ----------
Total current liabilities 845,039 1,791,381
----------- ----------
Deferred tax liabilities 252,664 167,000
Long-term debt, excluding
current installments 1,211,678 482,606
----------- ----------
Total liabilities 2,309,381 2,440,987
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained earnings (deficit) 97,212 (69,079)
----------- ----------
Total stockholders' equity 2,058,071 1,891,780
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,367,452 4,332,767
----------- ----------
<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,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenue:
Operating revenue $ 653,909 372,659 1,506,840 1,153,272
Other income 2,445 3,369 7,580 7,957
--------- ------- --------- ---------
Total revenue 656,354 376,028 1,514,420 1,161,229
--------- ------- --------- ---------
Costs and expenses:
Production cost 363,618 178,955 744,006 510,718
Exploration cost 691 729 1,345 729
Depreciation, depletion
and amortization 72,206 29,368 169,670 92,059
Interest 45,792 27,493 134,484 90,758
General and
administrative 61,349 57,009 194,400 193,377
Abandonment/Impairment
of leaseholds 18,560 --- 18,560 ---
--------- --------- --------- ---------
Total costs and expenses 562,216 293,554 1,262,465 887,641
--------- --------- --------- ---------
Income before
federal income taxes 94,138 82,474 251,955 273,588
--------- --------- --------- ---------
Federal income taxes:
Deferred federal income
tax expense 32,007 28,041 85,664 93,020
--------- --------- --------- ---------
Net earnings $ 62,131 54,433 166,291 180,568
========= ========= ========= ==========
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 .12 .13
========= ========= ========= =========
</TABLE>
<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine months ended
September 30,
1999 1998
<S> <C> <C>
Net cash flows from operating activities $ 336,284 275,021
Net cash flows from investing activities (731,506) (421,864)
Net cash flows from financing activities (178,878) (530,654)
----------- ---------
Net change in cash
and temporary investments (574,100) (677,497)
Cash and temporary investments at
beginning of period 1,099,802 1,105,264
---------- ---------
Cash and temporary investments at
end of period $ 525,702 427,767
========= ========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 4
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
September 30, 1999
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 $85,664 for the nine-month period ended September
30, 1999, is a deferred tax liability and does not result in cash outflows.
In addition, the Company has approximately $360,000 of unused net
operating loss carryforwards for federal income tax purposes at December
31, 1998.
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 $281,250 (75%) and $353,568 (31%) for the
three-month and nine-month periods ended September 30, 1999 from the
comparable prior-year periods primarily as a result of higher oil prices
in 1999 as compared to 1998 as well as an increase in the number of properties
owned and operated by the Company. The $184,663 (103%) and $233,288 (46%)
increase in production cost for the three-month and nine-month periods ended
September 30, 1999 as compared to 1998 is primarily attributable to an
increase in the number of properties owned and operated by the Company and
the higher lease operating costs associated with operating more producing
wells in addition to the installation of new equipment installed by the
Company which maximizes gas production capabilities.
General and administrative expenses for the nine-month period ended September
30, 1999 were comparable to the prior year period as the Company made every
effort to control the level of these type expenses. Interest expense increased
approximately $18,299 (67%) and $43,726 (48%) for the three-month and nine-
month periods ended September 30, 1999 from the comparable 1998 periods
primarily due to higher average outstanding balances and higher average
interest rates. Depreciation, depletion and amortization increased by
$77,611 (84%) for the nine-month period ended September 30, 1999 from
the prior-year period. Depreciation, depletion and amortization varies from
year to year because of changes in reserve estimates, changes in quantities
of oil and gas produced, as well as the acquisition, discovery or sale of
producing properties.
LIQUIDITY AND CAPITAL RESOURCES
During the period ended September 30, 1999, 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, 1999, has increased to .76 to 1 from .66 to 1 at
December 30, 1998. Cash flow from operations remains positive at $336,284
for the nine months ended September 30, 1999. Notes payable have decreased
by $907,950 while long-term debt increased by $729,072 for the nine-month
period ended September 30, 1999. In July 1999, the Company entered into a
new note payable maturing in August 2003, which has allowed for the reclass-
ification of the bank note payable in the long term category.
The worldwide crude oil prices continue to fluctuate in 1999. The Company
cannot predict how prices will vary during the remainder of 1999 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.
Inflation is not anticipated to have a significant impact on the Company's
operations.
<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 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 525,702
<SECURITIES> 0
<RECEIVABLES> 114,671
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 640,373
<PP&E> 4,323,703
<DEPRECIATION> 597,924
<TOTAL-ASSETS> 4,367,452
<CURRENT-LIABILITIES> 845,039
<BONDS> 0
<COMMON> 1,417,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,367,452
<SALES> 1,506,840
<TOTAL-REVENUES> 1,514,420
<CGS> 744,006
<TOTAL-COSTS> 744,006
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134,484
<INCOME-PRETAX> 251,955
<INCOME-TAX> 85,664
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,291
<EPS-BASIC> .12
<EPS-DILUTED> .12
<PAGE>
</TABLE>