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
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (512) 331-6781
Not Applicable
-------------------------------------------------------------------
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, 2000
--------------------- ---------------------------------
$.05 par value 1,417,087 shares
<PAGE> 1
<TABLE>
TEXAS VANGUARD OIL COMPANY
QUARTERLY REPORT FORM 10-Q
INDEX
<CAPTION>
Page No.
<S> <C> <C>
Part I. Financial Information
Condensed Balance Sheets,
September 30, 2000 and December 31, 1999 3
Condensed Statements of Earnings,
Three and nine months ended
September 30, 2000 and 1999 4
Condensed Statements of Cash Flows,
Nine months ended September 30, 2000 and 1999 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.
</TABLE>
<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,
2000 1999
<S> <C> <C>
Current assets:
Cash and temporary investments $ 1,025,421 1,805,685
Trade accounts receivable 101,604 155,708
--------- ---------
Total current assets 1,127,025 1,961,393
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 3,755,610 4,036,807
Office furniture and vehicles 182,434 182,434
--------- ---------
3,938,044 4,219,241
Less accumulated depreciation,
depletion and amortization (1,074,264) (697,388)
----------- ----------
Total property and equipment 2,863,780 3,521,853
----------- ----------
Other assets 1,000 1,000
----------- ----------
TOTAL ASSETS $ 3,991,805 5,484,246
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 51,512 229,920
Notes payable and current installments
of long-term debt 471,804 1,648,316
Related party notes payable 71,000 ---
Deferred revenue --- 83,114
----------- ----------
Total current liabilities 594,316 1,961,350
----------- ----------
Deferred tax liabilities 358,635 253,199
Long-term debt, excluding
current installments 775,075 1,210,588
----------- ----------
Total liabilities 1,728,026 3,425,137
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained earnings 302,920 98,250
----------- ----------
Total stockholders' equity 2,263,779 2,059,109
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,991,805 5,484,246
----------- ----------
<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,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenue:
Operating revenue $ 1,336,010 653,909 3,217,562 1,506,840
Other income 4,257 2,445 10,272 7,580
--------- ------- --------- ---------
Total revenue 1,340,267 656,354 3,227,834 1,514,420
--------- ------- --------- ---------
Costs and expenses:
Production cost 721,433 363,618 1,696,042 744,006
Exploration cost 24 691 895 1,345
Depreciation, depletion
and amortization 158,593 72,206 377,824 169,670
General and
administrative 74,834 61,349 239,903 194,400
Abandonment/Impairment
of leaseholds 320,000 18,560 476,649 18,560
Interest 39,204 45,792 126,415 134,484
--------- --------- --------- ---------
Total costs and expenses 1,314,088 562,216 2,917,728 1,262,465
--------- --------- --------- ---------
Income before
federal income taxes 26,179 94,138 310,106 251,955
--------- --------- --------- ---------
Federal income taxes:
Federal income
tax expense 8,901 32,007 105,436 85,664
--------- --------- --------- ---------
Net earnings $ 17,278 62,131 204,670 166,291
========= ========= ========= ==========
Weighted average number
of shares outstanding 1,417,087 1,417,087 1,417,087 1,417,087
========= ========= ========= =========
Basic and diluted
earnings per share .01 .04 .14 .12
========= ========= ========= =========
</TABLE>
<TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine months ended
September 30,
2000 1999
<S> <C> <C>
Net cash provided by operating activities $ 951,465 336,284
Net cash used in investing activities (190,703) (731,506)
Net cash used in financing activities (1,541,026) (178,878)
----------- ---------
Net change in cash
and temporary investments (780,264) (574,100)
Cash and temporary investments at
beginning of period 1,805,685 1,099,802
---------- ---------
Cash and temporary investments at
end of period $ 1,025,421 525,702
========= ========
<FN>
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE> 4
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
September 30, 2000
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 $105,436 for the nine-month period ended September
30, 2000, is a deferred tax liability and does not result in cash outflows.
In addition, the Company has approximately $144,000 of unused net
operating loss carryforwards for federal income tax purposes at December
31, 1999.
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 $682,101 (104%) and $1,710,722 (114%) for the
three-month and nine-month periods ended September 30, 2000 from the
comparable prior-year periods primarily as a result of higher oil prices
in 2000 as compared to 1999 as well as an increase in the number of properties
owned and operated by the Company. The $357,815 (98%) and $952,036 (128%)
increase in production cost for the three-month and nine-month periods ended
September 30, 2000 as compared to 1999 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 three-month and nine-month period
ended September 30, 2000 increased $13,485 (22%) and $45,503 (23%) as compared
to the prior year periods. Interest expense increased approximately $6,588
(14%) and $8,069 (6%) for the three-month and nine-month periods ended
September 30, 2000 from the comparable 1999 periods primarily due to lower
average outstanding balances and higher average interest rates. Depreciation,
depletion and amortization increased by $208,154 (123%) for the nine-month
period ended September 30, 2000 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. For the three-month
and nine-month periods ended September 30, 2000, the Company provided a
provision of $320,000 and $476,649 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 and abandoned.
LIQUIDITY AND CAPITAL RESOURCES
During the period ended September 30, 2000, 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, 2000, has increased to 1.90 to 1 from 1.00 to 1 at
December 30, 1999. Cash flow from operations remains positive at $951,465
for the nine months ended September 30, 2000. Notes payable and long-term
debt decreased by $1,541,025 for the nine-month period ended September 30,
2000, by using cash on hand and cash generated from operations.
The worldwide crude oil prices continue to fluctuate in 2000. The Company
cannot predict how prices will vary during the remainder of 2000 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 15, 2000
