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EXCEL - IDEA: XBRL DOCUMENT - TEXAS VANGUARD OIL COFinancial_Report.xls
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EX-31.1 - EX-31.1 - TEXAS VANGUARD OIL COex31-1.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q
 


(Mark One)
x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2014

or

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

       Commission File No. 000-24778

TEXAS VANGUARD OIL COMPANY
(Exact name of registrant as specified in its charter)
 
Texas 74-2075344
(State or other jurisdiction of 
incorporation or organization)
(IRS Employer
Identification No.)
 
9811 Anderson Mill Rd., Suite 202
Austin, Texas 78750
(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (512) 331-6781

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x    No o.

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 o.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
o Large accelerated filer  o Accelerated filer
o Non-accelerated filer  x Smaller reporting company
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o    No x
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Outstanding at March 31, 2014
1,416,587 shares
 
TEXAS VANGUARD OIL COMPANY
 
TABLE OF CONTENTS
 

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.


PART I.  FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
TEXAS VANGUARD OIL COMPANY
 
Condensed Balance Sheets
 
Assets
 
 
 
March 31, 2014
   
December 31,2013
 
 
 
(Unaudited)
   
(Audited)
 
Current assets:
           
Cash and cash equivalents (including certificates of deposit of $1,250,000 pledged, in 2014 and 2013)
  $ 19,142,126     $ 12,212,690  
Trade accounts receivable
    155,678       193,395  
Prepaid expense
    79,793       100,813  
Note receivable
    -0-       8,000,000  
                 
Total current assets
    19,377,597       20,506,898  
                 
Property and equipment, at cost:
               
Oil and gas properties - successful efforts method of accounting
    4,034,252       3,926,210  
Office furniture and vehicles
    156,871       156,871  
 
               
      4,191,123       4,083,081  
Less accumulated depreciation, depletion and amortization
    (1,845,767 )     (1,792,771 )
 
               
Total property and equipment, net
    2,345,356       2,290,310  
                 
Other assets
    1,000       1,000  
 
               
TOTAL ASSETS
  $ 21,723,953     $ 22,798,208  
                 
Liabilities and Stockholders' Equity
 
Current liabilities:
               
Trade accounts payable
  $ 252,360     $ 477,528  
Taxes payable
    1,762,235       770,943  
Deferred federal income tax liability
    -0-       1,757,882  
Asset retirement obligation, current portion
    6,678       6,678  
Notes payable
    150,000       150,000  
                 
Total current liabilities
    2,171,273       3,163,031  
                 
Asset retirement obligation, less current portion
    95,104       93,089  
                 
Total liabilities
    2,266,377       3,256,120  
 
               
Stockholders' equity:
               
Common stock, par value $.05; authorized 12,500,000 shares; 1,416,587 issued and outstanding in 2014 and 2013, respectively
    70,828       70,828  
Additional paid-in capital
    1,888,528       1,888,528  
Retained earnings
    17,498,220       17,582,732  
                 
Total stockholders' equity
    19,457,576       19,542,088  
 
               
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 21,723,953     $ 22,798,208  
 
See accompanying notes to condensed financial statements.
 
 
Page 3 of 10

 
TEXAS VANGUARD OIL COMPANY
 
Condensed Statements of Earnings
(Unaudited)
 
   
Three months ended
March 31,
 
   
2014
   
2013
 
Revenue:
           
Operating revenue
  $ 220,261     $ 1,469,167  
Other income
    4,185       13,119  
                 
Total revenue
    224,446       1,482,286  
                 
Costs and expenses:
               
Production cost
    72,003       798,489  
Depreciation, depletion and amortization
    52,996       102,359  
General and administrative
    211,194       161,757  
Abandonment and Impairment in value of oil and gas property
    15,656       -0-  
Interest
    647       870  
Doubtful account receivable expense
    -0-       18,684  
                 
Total costs and expenses
    352,496       1,082,159  
                 
Earnings (loss) before taxes
    (128,050 )     400,127  
Federal and state taxes:
               
Provision for federal income tax (benefit)
    (43,537 )     133,145  
Provision for state margin tax
    -0-       8,523  
                 
Net earnings (loss)
  $ (84,513 )   $ 258,459  
                 
Weighted average number of shares outstanding
    1,416,587       1,416,587  
                 
                 
Basic earnings (loss) per share
  $ (.06 )   $ .18  
Diluted earnings (loss) per share
  $ (.06 )   $ .18  
 
See accompanying notes to condensed financial statements.
 
 
Page 4 of 10

 
TEXAS VANGUARD OIL COMPANY
 
Condensed Statements of Cash Flows
(Unaudited)
 
   
Three months ended March 31,
 
 
 
2014
   
2013
 
Net cash provided by (used in) operating activities
  $ (962,522 )   $ 337,583  
                 
Cash flows used in investing activities:
               
Additions to oil and gas properties
    (108,042 )     (4,607 )
Proceeds from collection of note receivable
    8,000,000       -0-  
                 
Net cash provided by (used in) investing activities
    7,891,958       (4,607 )
                 
Net cash used in financing activities
    ---       ---  
                 
Net change in cash and cash equivalents
    6,929,436       332,976  
                 
Cash and cash equivalents at beginning of period
    12,212,690       9,036,449  
                 
Cash and cash equivalents at end of period
  $ 19,142,126     $ 9,369,425  
 
See accompanying notes to condensed financial statements.
 
 
Page 5 of 10

 
TEXAS VANGUARD OIL COMPANY
 
Notes to Condensed Financial Statements
(Unaudited)

March 31, 2014
 
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.
 
The Company performs a periodic review for impairment of proved properties. The Company determines if impairment has occurred through either adverse changes or as a result of its periodic review for impairment. Upon abandonment of properties, the reserves are deemed fully depleted and any unamortized costs are recorded in the statement of income under impairment expense. Upon the sale of oil and gas reserves in place, costs less accumulated amortization of such property are removed from the accounts and resulting gain or loss on sale is reflected in operations. 
 
Impairment of unproved properties is assessed periodically and any impairment in value is currently charged to expense. Loss is recognized to the extent that such impairment is indicated. When an entire interest in an unproved property is sold, gain or loss is recognized, taking into consideration any recorded impairment.
 
Depreciation, depletion and amortization of proved oil and gas property costs, including related equipment and facilities, are 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.

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 deposits owned.

Note 4:   Recently Issued Accounting Standards

The Company has reviewed the updates issued by the Financial Accounting Standards Board (FASB) during the three-month period ended March 31, 2014, and determined that the updates are either not applicable to the Company or will not have a material impact upon the Company.
 
 
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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 $1,248,906 (85%) for the three-month period ended March 31, 2014 from the comparable prior-year period and production costs decreased $726,486 (91%) for the three-month period ended March 31, 2014 from the prior-year period.  The decrease in operating revenues and production costs for the three-month period ended March 31, 2014 as compared to the prior year period are primarily due to the sale of the Company’s operated properties effective October 1, 2013. The operated properties which were sold comprised a large portion of the Company’s assets.  After the sale, the Company has continued to own non-operated oil and gas properties and intends to continue to own and manage the non-operated oil and gas properties for the foreseeable future.

General and administrative expenses for the three-month period ended March 31, 2013 increased $49,437 (31%) as compared to the prior year period. Interest expense decreased $223 for the three-month period ended March 31, 2014 from the comparable prior-year period.  Depreciation, depletion and amortization decreased by $49,363 (48%) for the three-month period ended March 31, 2014 from the comparable prior-year period.  Depreciation, depletion and amortization varies from period to period because of changes in reserve estimates, changes in quantities of oil and gas produced, changes in price of oil and gas sold,  as well as the acquisition, discovery, or sale of producing properties.

LIQUIDITY AND CAPITAL RESOURCES

During the period ended March 31, 2014, 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, 2014 increased to 8.92 to 1 from 6.48 to 1 at December 31, 2013. Management believes that oil and gas property investing activities in 2014 can be financed through cash on hand, cash from operating activities, and bank borrowings. The Company anticipates continued invest­ments in proven oil and gas properties in 2014 when they can be purchased at prices that will provide a short payback period. If bank credit is not available, the Company may not be able to continue its policy of continued investment in strategic oil and gas properties. Cash flow used in operations was $962,522 for the three months ended March 31, 2014.  The Company used $108,042 to invest in oil and gas properties in the first three months of 2014 as compared to $4,607 in the first three months of 2013.

The worldwide crude oil prices continue to fluctuate in 2014. The Company cannot predict how prices will vary during the remainder of 2014 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.

As of March 31, 2014, the Company was holding a substantial cash reserve. The Company will explore how to use its cash reserves including possibly purchasing additional oil and gas properties, issuing a cash dividend to shareholders or making a self-tender for Company shares to enable public shareholders to realize a cash return on their investment. The Company continued to participate in low-risk projects. As commodity prices and prospect quality fluctuate, the Company will continue to adjust to best meet our criteria.
 
 
Page 7 of 10


Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company does not engage in hedging activities and does not use commodity futures nor forward contracts in its cash management functions.

Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas.  These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors that are beyond our control.  We cannot predict future oil and natural gas prices with any degree of certainty. Sustained declines in oil and natural gas prices may adversely affect our financial condition and results of operations, and may also reduce the amount of net oil and natural gas reserves that we can produce economically.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as of March 31, 2014 (the "Evaluation Date"). Based upon this evaluation, our principal financial and accounting officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission ("SEC") reports is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms relating to the Company, including, our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared.

In addition, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date.
 
 
Page 8 of 10


PART II.  OTHER INFORMATION
 
Item 6. Exhibits
 
Exhibits:
31.1
 
32.1
 
101.INS
XBRL Instance Document
 
101.SCH
XBRL Taxonomy Extension Schema
 
101.CAL
Taxonomy Extension Calculation Linkbase
 
101.DEF
Taxonomy Extension Definition Linkbase
 
101.LAB
Taxonomy Extension Label Linkbase
 
101.PRE
Taxonomy Extension Presentation Linkbase


 
 
Page 9 of 10


 
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)

 
 /s/ William G. Watson, President
_____________________________________
William G. Watson, President
(Chief Executive Officer and Chief Financial Officer)


Date: May 6, 2014


 
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