ITEM 1. BUSINESS
General
Texas Vanguard Oil Company (the "Company" or "Registrant") was incorporated under the laws of the state of Texas on December 4, 1979. The business of the Company is to engage in the acquisition, exploration, development, and operation of onshore oil and gas properties in the United States, principally in Texas. The Company also engages in oil and natural gas exploration, development and production in New Mexico, Oklahoma, Nebraska and Wyoming. Generally, the Company acquires operated working interests in producing oil and natural gas properties which it further develops.
The executive offices of the Company are located at 9811 Anderson Mill Rd., Suite 202, Austin, Texas 78750 and its telephone number is (512) 331-6781.
Markets for Oil and Gas
The market for the Company's primary products, oil and gas, depends upon a number of factors, including the availability of other domestic production, crude oil imports, the proximity and size of oil and gas pipelines and general fluctuations in the supply and demand for oil and gas. At present, the Company sells all of its production to traditional industry purchasers, such as pipeline and crude oil companies, who have the facilities to transport the oil and gas from the well site. The Company has recorded revenues in excess of 10% of total revenue from DCP Midstream (21% in 2008 and 23% in 2007) and Plains Marketing (52% in 2008 and 49% in 2007). The Company does not believe that the loss of a major purchaser would have a materially adverse effect on the Company because oil production can be sold to other oil purchasers at a comparable price. Oil sales are made under a written contract generally not more than one year in length. The nature of the Company's business is not seasonal except to the extent that adverse weather conditions could affect oil and gas exploration and production activities. The Company currently has no intention of refining or marketing its own oil and gas. Since the Company engages independent contractors for the drilling of any wells, it does not plan to own any significant amount of drilling equipment. The Company does not contemplate any material product research and development, any material acquisition of plants or equipment, or any material changes in its number of employees in the near future.
Competition
The oil and gas industry is highly competitive in all aspects. The Company competes with major oil companies, numerous independent oil and gas producers, individual proprietors, and investment programs. Many of these competitors possess financial and personnel resources substantially in excess of those which are available to the Company and may, therefore, be able to pay greater amounts for desirable leases and to define, evaluate, bid for, and purchase a greater number of potential producing prospects than the Company's own resources permit. The Company's ability to generate resources will depend not only on its ability to develop existing properties, but also on its ability to identify and acquire proven and unproven acreage and prospects for future exploration.
Environmental Matters
The Company's operations are subject to numerous federal, state and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. Such matters have not had a material effect on operations of the Company to date, but the Company cannot predict whether such matters will have any material effect on its capital expenditures, earnings or competitive position in the future.
Regulation
The production and sale of crude oil and natural gas are currently subject to extensive regulation of both federal and state authorities. At the federal level there are price regulations and income tax laws. At the state level, there are severance taxes, proration of production, spacing of wells, prevention and clean-up of pollution and permits to drill and produce oil and gas. Although compliance with their laws and regulations has not had a materially adverse effect on the Company's operations, the Company cannot predict whether its future operations will be adversely affected thereby.
Employees
The Company's officers actively manage the Company's activities. There are no employment contracts with any officers. At December 31, 2008, the Company had two full-time salaried employees. From time to time the Company engages independent petroleum engineers, geologists and landmen on a fee basis. Both William Watson and Linda Watson are directors of other companies that have oil and gas interests. Due to this situation a conflict of interest may arise. However, there have been no such conflicts in the past five years.
ITEM 2.
ITEM 2. PROPERTIES
The Company owns no significant properties other than oil and gas properties. It leases approximately 2,000 square feet of space for its executive offices at 9811 Anderson Mill Rd., Suite 202, Austin, Texas 78750. The Company currently has a month-to-month lease with a company owned by the Chairman of the Company for these facilities. The rent for these facilities is $2,200 per month.
Well Activity
During 2008, the Company participated in the completion of one gas producer which had been started in 2007. The Company also participated in the drilling of two wells. One well was successfully completed as an oil producer and the other well was scheduled to be completed as an oil producer in early 2009.The Company also acquired interest in seven producing wells, six of which are oil wells and one is a gas well. In addition, the Company acquired additional interest in 17 wells which the Company operates. All of the Company's oil and gas working and royalty interests, reserves and activities are located onshore in the continental United States. The following table sets forth the drilling and acquisition activity of the Company, for the years ended December 31, 2006, 2007 and 2008.
Fiscal years Oil Gas Dry ended December 31, Gross Net Gross Net Gross Net
2006 39 2.54 7 0.42 1 0.1 2007 49 2.80 4 0.04 0 0 2008 17 1.30 9 0.46 0 0
(1) A gross well is a well in which the Company has an interest.
(2) A net well is made up of 100% of the working interest in a well. If the Company has a 12.5% working interest in a well, .125 is shown in the net well column.
(3) A dry well is a well found to be incapable of producing oil or gas in sufficient quantities to justify completion of the well.
(4) In 2006, the Company participated in the drilling of four new wells. Two were completed as oil wells, one as a gas well and one was plugged.
(5) In 2007, the Company participated in the drilling of two wells. One well was completed as an oil producer and one was waiting for a pipeline connection at yearend, then completed as a gas producer in early 2008.
The Company is not obligated to provide a fixed and determinable quantity of oil or gas in the future under existing contracts or agreements.
Significant Properties
Over the past two years, the Company has made investments in proven oil and gas properties that in the aggregate have been significant to the Company. None of the individual properties has cost more than 15% of the average balance in oil and gas properties at the time of purchase. These investments have been made in different fields and areas, primarily in south, central and west Texas. As of December 31, 2008, the Company does not have any single property that is significant enough to materially affect its operations.
As of December 31, 2008, the Company has pledged its interest in certain properties and well equipment against a line of credit. None of the individual properties are significant.
Productive Wells and Acreage
The following table sets forth by a county the Company's gross and net productive wells and developed acreage as of December 31, 2008. All counties are in Texas unless otherwise noted.
Producing Wells (a) Developed Oil Gas Acreage (a) County Gross Net Gross Net Gross Net
Andrews 1 .04 --- --- 80.00 3.00 Bastrop (b) 84 65.23 47 40.20 3,208.46 2,657.76 Bee 5 .31 12 1.20 685.70 60.92 Burleson 2 1.56 --- --- 320.00 210.91 Chaves (c) --- --- 1 .50 160.00 80.00 Crane (b) 12 11.00 1 .02 160.00 109.99 Crockett --- --- 2 2.00 160.00 160.00 Eastland (b) --- --- 4 .09 122.00 1.30 Eddy (c) 4 .88 1 .11 440.00 65.50 Fayette (b) 17 12.47 1 .63 3,136.39 1,541.29 Garza (b) 3 .05 --- --- 30.00 .47 Grimes 1 1.00 --- --- 652.85 652.85 Haskell (f) --- --- 1 .13 640.00 83.39 Hemphill --- --- 1 .13 700.00 87.50 Hidalgo --- --- 3 .34 457.86 23.39 Kent (b) 27 .67 --- --- 1,411.65 29.49 Kimball (d) 1 .05 --- --- 40.00 2.00 Lea (b)(c) 3 .25 1 .07 574.45 65.87 Lee (b) 112 92.60 5 4.55 2,953.40 2,190.09 Lipscomb 1 .03 --- --- 80.00 2.50 Martin 4 3.82 --- --- 320.19 305.74 Midland 3 .14 --- --- 240.00 11.33 Nolan (b) 1 .03 --- --- 40.00 1.25 Parker (b) --- --- 1 .01 136.91 .83 Schleicher 2 .50 --- --- 80.00 20.00 Ward (b) 1 .03 1 .13 720.00 19.20 Washington (b) 3 .21 --- --- 1,032.92 103.29 Weston (e) 3 .94 --- --- 120.00 37.42 Wilson 1 .95 --- --- 80.00 76.00 Woodward (f) 1 .01 --- --- 640.00 3.32 ------ ------- ----- ----- -------- -------- 292 192.77 82 50.11 19,422.78 8,606.60
(a) A gross well is a well in which the Company owns either a working interest or a royalty interest. A net well is the fractional interest owned by the Company. Gross acres are the total acres in a lease. Net acres are the gross acres multiplied by the Company's interest. (b) The Company owns overriding royalty interest in these counties. (c) Chaves, Eddy and Lea Counties are located in New Mexico. (d) Kimball County is located in Nebraska. (e) Weston County is located in Wyoming. (f) Haskell and Woodward Counties are located in Oklahoma.
Reserve Quantity Information
For information required by Statement of Financial Accounting Standards No. 69, "Disclosures About Oil and Gas Producing Activities," see the "Supplemental Oil and Gas Information" section included in Item 7. This section also includes estimates of proven oil and gas reserves.
OIL AND GAS STATISTICS
The following summarizes the net oil and gas production, average sales prices and production costs per unit for the years ended December 31, 2008, 2007 and 2006.
2008 2007 2006 Oil: Production volume (barrels) 56,467 61,293 60,763 Average sales price per barrel $103.66 $68.04 $64.77 Gas: Production volume (MCF) 345,512 359,969 385,798 Average sales price per MCF $ 9.36 $ 7.24 $ 6.94
Average production costs per equivalent barrel $ 38.12 $34.24 $28.07
The worldwide crude oil prices of 2008 continue to fluctuate in 2009. The Company cannot predict how prices will vary during 2009 and what effect they will ultimately have on the Company.
UNDEVELOPED ACREAGE
The following table sets forth by county the Company's gross and net undeveloped acreage as of December 31, 2008. All counties are in Texas unless otherwise noted.
County Gross Net
Andrews 384.00 192.00 Bastrop 2,306.18 1,827.94 Crane 593.64 563.61 Crosby 1,118.77 559.38 Eastland 199.30 2.37 Eddy (a) 480.00 65.00 Fayette 1,772.64 354.06 Garza 2,771.10 548.51 Kent 4,037.44 1,471.31 Kimble 549.60 54.96 Lea (a) 840.00 321.56 Lee 1,930.11 1,615.33 Midland 133.33 9.11 Weston (b) 840.00 379.75 Wilson 129.51 123.03 --------- -------- 18,085.62 8,087.92 ========= ========
Of the 8,087.92 net undeveloped acres under lease, 8,032.97 net acres are being held by production.
a) Eddy and Lea Counties are located in New Mexico b) Weston County is located in Wyoming.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company knows of no material litigation pending, threatening or contemplated, or unsatisfied judgments against it, or any other proceeding in which the Company is a party. The Company knows of no material legal actions pending or threatening or judgments entered against any officers on the board of directors of the Company in their capacity as such.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the quarter ended December 31, 2008.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's common stock is quoted on the OTC Bulletin Board with the symbol (TVOC.OB). The range of high and low sales price for each quarterly period during the past two years is as follows:
Sales Price High Low Fiscal 2008
First Quarter 12.00 10.73 Second Quarter 15.83 8.25 Third Quarter 13.98 8.00 Fourth Quarter 10.30 6.05
Fiscal 2007
First Quarter 8.75 7.00 Second Quarter 10.01 7.00 Third Quarter 15.00 8.10 Fourth Quarter 12.00 8.50
At December 31, 2008, the approximate number of holders of record of the Company's common stock was 424. The Company has not paid any dividends and has no plans to do so in the immediate future. The Company issued no equity securities in 2008. The Company has no equity compensation plans for its directors, officers or employees.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF FINANCIAL CONDITION
During the years ended December 31, 2008 cash increased by $2,709,422 while cash increased for the year ended December 31, 2007 by $1,225,131. The cash flow from operating activities in 2008 was approximately $3,831,542, an increase of $1,778,471 from 2007. The cash flow from operating activities in 2007 was approximately $2,043,061, an increase of $419,684 from 2006. The significant use of cash, other than for operating expenses, has been investments in oil and gas properties. Investments in oil and gas properties were $1,063,256 and $810,951 in 2008 and 2007, respectively. As of December 31, 2008, the Company had a cash balance of $7,142,159, and notes payable of $150,000 as compared to the December 31, 2007, cash balance of $4,432,737, and notes payable of $150,000.
During the last two years, the Companys investment in producing oil and gas properties was provided by cash flow from operating activities, sales of other oil and gas properties, and from borrowings on notes payable to banks. The Company sells selected properties when it is more economical to sell rather than produce them.
Working capital at December 31, 2008, increased to 9.84 to 1 from 6.27 to 1 at December 31, 2007. The Company continued its policy of making strategic investments in producing oil and gas properties in the same or similar fields to properties already operated by the Company, which are primarily financed with short-term notes payable and cash from operations.
LIQUIDITY AND CAPITAL RESOURCES
During the current fiscal year, the Companys liquidity has 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. Management believes the Company will be able to meet its current operating needs through internally generated cash from operations. Management believes that oil and gas property investing activities in 2009 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 2009 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. The Company cannot predict how oil and gas prices will fluctuate during 2009 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. The Company had no significant commitments for capital expenditures at December 31, 2008.
At the end of 2008, the Company was holding a substantial cash reserve. In the first half of 2008, commodity prices dramatically increased which affected the Company ability to purchase properties that met its parameters and criteria. However, if the low commodity prices at the end of 2008 continue, it may bring a number of operated properties to the market which would meet the Company requirements. The Company will continue to review the market for opportunities to purchase operated properties, non-operated interests and participate in drilling projects that meet its criteria.
As of December 31, 2008, the Company had a $5,000,000 line of credit secured by producing oil and gas properties and well equipment owned by the Company. The line credit matures on May 16, 2009. The Company also maintains a $1,000,000 line of credit secured by a certificate of deposit. The line of credit matures on April 27, 2009 (see note 2 of notes to financial statements for further explanation).
RESERVE ESTIMATES
At the end of 2008, the Companys oil reserves were 358,119 barrels of oil, down 40% from the prior year. The Companys gas reserves were 2,330,534 MCF of gas, down 31% from the prior year. These declines in reserves are primarily due to lower commodity prices, the natural decline of production and higher operating costs.
	Estimates of oil and gas reserves, by necessity, are projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production and the timing of development expenditures. Estimates of economically recoverable oil and gas reserves and of future net cash flows depend upon a number of variable factors and assumptions, such as future production, oil and gas prices, operating costs, severance taxes, development costs and workover costs, all of which may vary considerably from actual results. Any significant variance in the assumptions could materially affect the estimated quantity and value of the reserves. Moreover, there can be no assurance that our reserves will ultimately be produced or that any undeveloped reserves will be developed. For these reasons, estimates of the economically recoverable quantities of oil and gas and estimates of the future net cash flows expected therefrom may vary substantially. Actual production, revenue and expenditures with respect to our reserves will likely vary from estimates, and such variances may be material. The estimated discounted future net cash flows from proved reserves are generally based on prices and costs as of the date of the estimate, while actual future prices and costs may be materially higher or lower.
ANALYSIS OF RESULTS OF OPERATIONS
Oil and gas sales revenue increased in 2008 and 2007 by 32% and 3%, respectively. The Companys total revenue for the fiscal year ended December 31, 2008, was $9,744,676 as compared to $7,403,987 as of December 31, 2007.
In 2007, oil production volume increased by 1% at the same time as the average price per barrel increased by 5% to $68.04. Also, in 2007, the gas production volume decreased by 7% at the same time as the average price per MCF increased by 4% to $7.24. In 2008, oil production volume decreased by 8% at the same time as the average price per barrel increased by 52% to $103.66. Also, in 2008, the gas production volume decreased by 4% while the average price per MCF increased by 29% to $9.36. The fluctuation in oil and gas prices is solely attributable to changes in market prices.
Oil and gas production expenses increased in 2008 and 2007 by 5% and 18%, respectively. The increased production costs for 2008 is largely associated with an increase in overall field expenses while the increased production costs for 2007 is largely associated with an increase in workover activity as compared to the prior year, an increase in overall field expenses, and an increased participation in non-operated properties and the costs associated therewith.
The Company participated in the drilling of 2 wells in both 2008 and 2007, respectively, and the costs associated therewith were capitalized.
In 2008, interest expense decreased 19% over 2007 due to a reduction of interest rates on outstanding balances. In 2007, interest expense decreased by 79% in 2007 over 2006 due to lower average outstanding balances.
Depreciation, depletion and amortization varies from year to year 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. Depletion increased 47% in 2008 as compared to a 1% increase in depletion in 2007.
Total general and administrative expenses increased $77,995 in 2008 while total general and administrative expenses decreased $55,993 in 2007.
In 2008 and 2007, the Company provided an allowance of $105,318 and $141,576 respectively, for trade accounts receivable that were deemed uncollectible and thus classified as doubtful accounts.
In 2008 and 2007, the Company recognized approximately $250,763 and $201,745, respectively, for the impairment of value of oil and gas properties due to less than expected production performance of specific wells and for wells that were plugged and abandoned.
Inflation is not anticipated to have a significant impact on the Company's operations.
CONTRACTUAL OBLIGATIONS OF COMPANY
The Companys contractual obligations as of December 31, 2008 are as follows:
Contractual Obligations: 2009 Thereafter Total
Debt Obligations $ 150,000 --- $150,000 ======= ========= ========
FORWARD-LOOKING STATEMENTS
This annual report contains various forward-looking statements within the meaning of the Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in the Form 10-K that address activities, events or developments of the Company are forward-looking statements and represent managements expectations or beliefs concerning future events, and may be signified by the words expect, estimate, believe, anticipate, predict or other similar expressions. Forward-looking statements appear throughout this Form 10-K with respect to, among other things: estimates of future oil and gas production; estimates of future oil and gas prices; estimates of oil and gas reserves; future drilling and operations; future capital expenditures; future net cash flows; our future financial condition or results of operations; and our business strategy and other plans and objectives for future operations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and may not be realized. For these reasons, you should not place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise them.
ITEM 7A.
ITEM 7A. 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.
Oil and Natural Gas Prices
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 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors Texas Vanguard Oil Company:
We have audited the accompanying balance sheets of Texas Vanguard Oil Company (the Company) as of December 31, 2008 and 2007, and the related statements of earnings, stockholders' equity and cash flows for the years ended December 31, 2008 and 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Texas Vanguard Oil Company as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Padgett, Stratemann & Co. L.L.P. Certified Public Accountants Austin, Texas March 20, 2009
TEXAS VANGUARD OIL COMPANY
Balance Sheets
December 31, 2008 and 2007
ASSETS 2008 2007 Current assets: Cash (including certificates of deposit of $1,250,000, pledged, in 2008 and 2007, respectively) $ 7,142,159 $ 4,432,737 Trade accounts receivable, net of allowance for doubtful accounts of $105,318 and $141,576 in 2008 and 2007, respectively 122,301 128,326 Prepaid expense 8,550 --- Prepaid federal income tax 1,895 263,329 ---------- --------- Total current assets 7,274,905 4,824,392 ---------- --------- Oil and gas properties, partially pledged, successful efforts method of accounting: Proven properties 7,062,204 6,264,719 Unproven properties 149,812 151,412 Office furniture and equipment 223,753 230,353 --------- --------- 7,435,769 6,646,484 Less accumulated depreciation, depletion and amortization (3,450,714) (2,973,268) --------- --------- 3,985,055 3,673,216 --------- --------- Other assets 1,000 1,000 --------- --------- TOTAL ASSETS $ 11,260,960 $ 8,498,608 ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Trade accounts payable $ 417,954 $ 502,021 Taxes payable 56,062 42,575 Asset retirement obligation, current portion 115,294 74,544 Notes payable 150,000 150,000 --------- --------- Total current liabilities 739,310 769,140 --------- --------- Deferred federal income tax liability 199,694 329,329 Asset retirement obligation, less current portion 332,049 190,254 --------- --------- Total Liabilities 1,271,053 1,288,723 --------- --------- Commitments
Stockholders' equity: Common stock, par value $.05; authorized 12,500,000 shares; 1,416,587 issued and outstanding in 2008 and 2007, respectively 70,828 70,828 Additional paid-in capital 1,888,528 1,888,528 Retained earnings 8,030,551 5,250,529 --------- --------- Total stockholders' equity 9,989,907 7,209,885 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,260,960 $ 8,498,608 ========= =========
See accompanying notes to financial statements.
TEXAS VANGUARD OIL COMPANY Statements of Earnings
Years ended December 31, 2008 and 2007
2008 2007
Revenues: Oil and gas sales $ 9,135,376 $ 6,927,891 Well operation fees 122,420 126,892 Other, net 408,432 255,159 Interest income 78,448 94,045 --------- --------- Total revenues 9,744,676 7,403,987 --------- --------- Expenses: Production cost 4,347,275 4,152,951 Depreciation, depletion and amortization 559,518 380,559 Interest expense 7,863 9,671 General and administrative 587,439 509,444 Impairment in value of oil and gas property 250,763 201,745 Doubtful accounts expense --- 141,576 --------- --------- Total expenses 5,752,858 5,395,946 --------- --------- Earnings before income tax 3,991,818 2,008,041
Federal and State taxes: Provision for federal income tax 1,287,344 601,469 Deferred federal income tax (benefit) (129,635) --- Provision for state margin tax 54,087 52,876 -------- ---------
Net earnings $ 2,780,022 $ 1,353,696 ========= ========= Weighted average number of shares outstanding 1,416,587 1,416,587 ========= =========
Basic and diluted earnings per share $ 1.96 $ .96 ========= =========
See accompanying notes to financial statements.
TEXAS VANGUARD OIL COMPANY Statements of Stockholders' Equity
Years ended December 31, 2008 and 2007
Total Common Stock Additional Stock- Shares Amount Paid-In Retained holders Capital Earnings Equity
Balances at Dec. 31, 2006 1,416,587 $70,828 $1,888,528 $3,896,833 $5,856,189
Net earnings --- --- --- 1,353,696 1,353,696 --------- -------- --------- --------- ---------- Balances at Dec. 31, 2007 1,416,587 $70,828 $1,888,528 $5,250,529 $7,209,885
Net earnings --- --- --- 2,780,022 2,780,022 --------- -------- --------- --------- ---------- Balances at Dec. 31, 2008 1,416,587 $70,828 $1,888,528 $8,030,551 $9,989,907 ========= ========= ========== ========== ==========
See accompanying notes to financial statements.
TEXAS VANGUARD OIL COMPANY
Statements of Cash Flows
Years ended December 31, 2008 and 2007
2008 2007
Cash flows from operating activities: Net earnings $ 2,780,022 $ 1,353,696 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation, depletion and amortization 559,518 380,559 Impairment in value of oil and gas property 250,763 201,745 Doubtful accounts expense --- 141,576 Changes in assets and liabilities: (Increase) decrease in receivables 6,025 (59,929) Increase (decrease) in payables and accrued expenses 111,965 143,743 (Increase) decrease in prepaid taxes 261,434 (118,329) Increase (decrease) in deferred federal income tax (129,635) --- (Increase) decrease in prepaid expense (8,550) --- --------- --------- Net cash provided by operating activities 3,831,542 2,043,061 --------- --------- Cash flows from investing activities: Additions to oil and gas properties (1,063,256) (810,951) Purchases of equipment (58,864) --- --------- --------- Net cash used in investing activities (1,122,120) (810,951) --------- --------- Cash flows from financing activities: Repayments of notes payable --- (6,979) --------- --------- Net cash used in financing activities --- (6,979) --------- --------- Net increase in cash 2,709,422 1,225,131
Cash and cash equivalents at beginning of year 4,432,737 3,207,606 --------- --------- Cash and cash equivalents at end of year $ 7,142,159 $ 4,432,737 ========== ========== Supplemental disclosure of cash flow information: Interest paid $ 7,863 $ 9,671 ========== ==========
Cash paid for income taxes $ 1,068,485 $ 821,301 ========== ==========
See accompanying notes to financial statements.
TEXAS VANGUARD OIL COMPANY
Notes to Financial Statements
December 31, 2008 and 2007
(1) Significant Accounting Policies
Description of Business - Texas Vanguard Oil Company (the Company) engages in the acquisition, exploration, development, and operation of onshore oil and gas properties in the United States, principally in Texas. The Company owns interests in producing properties and undeveloped oil and gas leases in Texas, Wyoming and New Mexico. The Company sells all of its production to traditional industry purchasers who have the facilities to transport the oil and gas from the well site.
Oil and Gas Properties - 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.
Financial Accounting Standards Board (FASB), Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. It establishes guidelines for determining recoverability based on future net cash flows from the use of the asset and for the measurement of the impairment loss. Impairment loss under SFAS No. 144 is calculated as the difference between the carrying amount of the asset and its fair value. Any impairment loss is recorded in the current period in which the recognition criteria are first applied and met. Under the successful efforts method of accounting for oil and gas operations, the Company periodically assesses its proved properties for impairments by comparing the aggregate net book carrying amount of all proved properties with their aggregate future net cash flows. The statement requires that the impairment review be performed on the lowest level of asset groupings for which there are identifiable cash flows.
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.
Impairment is measured on discounted cash flows utilizing a discount rate appropriate for risks associated with the related properties or based on fair market values. Impairment and abandonment losses of $250,763 and $201,745 were recorded in 2008 and 2007, respectively.
Depreciation, depletion and amortization of proved oil and gas property costs, including related equipment and facilities, are provided using the units-of- production method on a property by property basis.
Office Furniture and Equipment - Office furniture and equipment is stated at cost. Depreciation is computed using the straight-line method, based on the following estimated useful lives:
Office furniture and equipment 7 years Automotive equipment 5 years
Accounts Receivable - The Company provides for uncollectible accounts using the allowance method of accounting for bad debts. Under this method of accounting, a provision for uncollectible accounts is charged to earnings. The allowance account is increased or decreased based on past collection history and managements evaluation of accounts receivable. All amounts considered uncollectible are charged against the allowance and recoveries are added to the allowance.
Federal 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.
Cash and Cash Equivalents - The Company considers cash and cash equivalents to consist of demand deposits and certificates of deposit.
Concentration of Credit Risk - The Company sells all of its production to traditional industry purchasers. Oil sales are made under a written contract, generally not more than one year in length. The Company has recorded revenues in excess of 10% of total revenue from two purchasers in 2008 and two purchasers in 2007 as follows: 2008 - 52%, 21% and 2007 - 49%, 23%. The Company does not believe the loss of these purchasers would have a materially adverse effect on its operations as it could sell its production to other gathering companies.
The Company maintains cash in depository institutions that are guaranteed by the Federal Deposit Insurance Corporation (FDIC). Effective October 14, 2008 the FDIC ruled that all non-interest bearing deposit accounts at an FDIC insured institution are fully insured for the entire amount in the deposit account. This unlimited insurance coverage is temporary and will remain in effect for participating institutions until December 31, 2009. In addition, interest bearing accounts are insured up to at least $250,000 per account. At December 31, 2008 cash in one interest bearing account exceeded the FDIC limits. At December 31, 2007 cash in banks exceeded the $100,000 FDIC limit. The Company has not experienced any losses on deposits.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates pertain to proved oil and gas reserve volumes and the future development costs. Actual results could differ from those estimates.
(2) Notes Payable and Long-term Debt
The Company had notes payable to banks as follows at December 31:
2008 2007
Line of credit with a bank in the amount of $5,000,000. Interest payable monthly at prime plus .5%, secured by oil and gas properties. The line of credit was scheduled to mature on February 15, 2009. Subsequent to December 31, 2008, the note was extended until May 16, 2009 with the same terms. $ --- $ ---
Line of credit with a bank in the amount of $1,000,000. Interest payable monthly at 4.50%, secured by $1,000,000 in certificates of deposit. The line of credit matures on April 27, 2009. 150,000 ---
Line of credit with a bank in the amount of $1,000,000. Interest payable monthly at 6.50%, secured by $1,000,000 in certificates of deposit. The line of credit matured on April 27, 2008. --- 150,000
--------- --------- Total debt 150,000 150,000 Less current installments (150,000) (150,000) --------- --------- Long-term debt, excluding current installments $ --- $ --- ========= =========
As of December 31, 2008 and 2007, respectively, the Company had no long term debt.
(3) Related Party Transactions
The Company and an entity owned by the Chairman of the Company have an agreement whereby the latter provides the Company general corporate management services. The affiliated company received $240,000 and $234,000 as compensation for performance of those services during the years ended December 31, 2008 and 2007, respectively. Effective January 1, 2009, the agreement was continued with terms of $20,500 per month through December 31, 2009.
The Company leases office space from a company owned by the Chairman of the Company under a month-to-month operating lease. Rent expense incurred under this lease was $25,800 and $25,200 for the years ended December 31, 2008 and 2007, respectively.
Certain officers and directors of the Company own small interests in a number of the properties that the Company has interests in as well as other similar properties in which the Company does not have an interest. For the years ended December 31, 2008 and 2007 these individuals received $110,638 and $60,187, respectively.
During the years ended December 31, 2008 and 2007, a Director of the Company received $69,000 and $67,200, respectively for engineering consultant work.
The Company purchases materials and services from two businesses in which the Chairman of the Company owns an interest. These purchases represent less than 10% of the Company's total oil field purchases.
(4) Federal Income Taxes
The federal income tax expense for 2008 and 2007 does not differ from the expected tax expense by applying the U.S. Federal corporate income tax rate of 34% to earnings before income taxes. The provision for income taxes for the year ended December 31, 2008 and 2007 consists of:
2008 2007
Current tax expense $1,287,344 $ 601,469 Deferred tax expense (benefit) (129,635) --- _________ _________ $1,157,709 $ 601,469 ========= =========
The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at December 31, 2008 and 2007 is presented below:
2008 2007
Deferred tax liability: Office furniture and equipment and oil and gas property, due to differences in depreciation and abandonment $ (199,694) $ (329,329) --------- ---------- Total deferred tax liability $ (199,694) $ (329,329) ========= ==========
The Company has no accumulated losses for Federal income tax purposes as of December 31, 2008 and 2007, which may be carried forward and used to reduce taxable income in future years.
We adopted the provisions of FASB Interpretation (FIN) 48, Accounting for Uncertainty in Income Taxes, an interpretation of Statement of Financial Accounting Standards (SFAS) 109 on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity financial statements and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. As a result of our implementation of FIN 48 at the time of adoption and December 31, 2008, the Company did not recognize a liability for uncertain tax positions. As a result, the only differences between our financial statements and our income tax returns relate to normal timing differences such as depreciation, depletion and amortization, which are recorded as deferred taxes on our consolidated balance sheets. We do not expect our unrecognized tax benefits to change significantly over the next 12 months. The tax years 2001 through 2008 remain open to examination by the taxing jurisdictions in which we file income tax returns.
(5) Fair Value of Financial Instruments
Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of notes payable approximates market value at December 31, 2008 and 2007.
(6) Asset Retirement Obligation
In June 2001, the FASB issued FAS 143,Accounting for Asset Retirement Obligations. FAS 143 requires that an asset retirement obligation (ARO) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred or becomes determinable (as defined by the standard), with an associated increase in the carrying amount of the related long-lived asset. The cost of the tangible asset, including the initially recognized asset retirement cost, is depreciated over the useful life of the asset. The ARO is recorded at fair value, and accretion expense will be recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash outflows discounted at the Companys credit-adjusted risk-free interest rate. The provisions of this statement apply to legal obligations associated with the retirement of long-lived assets that result from the acquisition, development, and operation of a long-lived asset.
					 2008 	 2007 Asset retirement obligation Beginning of year	 $ 264,798 $ 215,867 Liabilities incurred during the period 18,003 17,333 Settlements --- --- Accretion expense		 11,349 11,349 Revisions in estimated cash flow 153,193 20,249 ------- -------- 	Asset retirement obligation 	 End of year $ 447,343 $ 264,798 ======= =======
TEXAS VANGUARD OIL COMPANY
SUPPLEMENTAL OIL AND GAS INFORMATION
Years ended December 31, 2008 and 2007 (Unaudited)
Reserve Quantity Information (Unaudited)
The following reserve related information is based on estimates prepared by an independent third party petroleum engineer in 2008 and 2007. Reserve estimates are inherently imprecise and are continually subject to revisions based on production history, results of additional exploration and development, price of oil and gas and other factors. All of the Companys oil and gas reserves are located in the United States.
2008 2007 Oil Gas Oil Gas BBLS MCF BBLS MCF
Proved developed reserves: Beginning of year 595,907 3,386,477 605,039 3,633,393 Revisions of previous estimates (187,065) (781,243) 19,026 9,867 Extensions and Discoveries 938 37,596 1,339 8,549 Purchase of minerals in place 4,806 33,216 31,796 94,637 Sale of minerals --- --- --- --- Production (56,467) (345,512) (61,293) (359,969) --------- --------- -------- --------- End of year 358,119 2,330,534 595,907 3,386,477 ========= ========= ======== ========= Proved developed reserves: Beginning of year 595,907 3,386,477 605,039 3,633,393 End of year 358,119 2,330,534 595,907 3,386,477
Standardized Measure of Discounted Future Net Cash Flows (Unaudited)
The following is a standardized measure of discounted future net cash flows and changes therein relating to proved oil and gas reserves. Future net cash flows were computed using year-end prices and costs and relate to existing proved oil and gas reserves in which the enterprise has mineral interests. The Company cannot predict price fluctuations, which may occur in the future. Future income tax expenses were provided after estimated utilization of any available Federal income tax loss carryforwards.
December 31, 2008 2007
Future cash inflows $ 28,021,930 $ 81,740,550 Future production and development costs (17,164,290) (38,201,930) Future income tax expenses (1,977,217) (12,888,188) ------------ ------------ Future net cash flows 8,880,423 30,650,432
10% annual discount for estimated timing of cash flows (2,885,625) (12,485,618) ------------ ------------ Standardized measure of discounted future net cash flows $ 5,994,798 $ 18,164,814 ============ ============
TEXAS VANGUARD OIL COMPANY
SUPPLEMENTAL OIL AND GAS INFORMATION, CONTINUED (Unaudited)
The following are the principal sources of change in the standardized measure of discounted future net cash flows:
2008 2007 Changes: Sale of oil and gas produced, net of production costs $ 4,788,101 $ 2,774,940 Net changes in prices and production costs (2,455,554) 1,442,368 Purchase of minerals in place 13,866 180,217 Extensions and discoveries 9,337 9,399 Sales --- --- Revisions of previous quantity estimates (2,158,077) 107,560 Accretion of discount 1,816,481 1,304,718 Other (14,184,170) (701,565) ---------- ---------- Net changes (12,170,016) 5,117,637
Beginning balance - standardized measure of discounted future net cash flows 18,164,814 13,047,177 ---------- ---------- Ending balance - standardized measure of discounted future net cash flows $ 5,994,798 $18,164,814 ========== ==========
The Company has not filed with or included in reports to any Federal authority or agency other than the Securities and Exchange Commission any estimates of total proved net oil and gas reserves.
Capitalized Costs Relating to Oil and Gas Producing Activities
Years ended December 31, 2008 2007
Unproven oil and gas properties (including wells in progress) $ 149,812 $ 151,412
Proven oil and gas properties 7,062,204 6,264,719
Accumulated depletion and amortization (3,342,078) (2,832,789) ---------- ---------- Net capitalized costs $ 3,869,938 $ 3,583,342 ========== ==========
Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities
Years ended December 31, 2008 2007
Acquisition of properties - unproven $ --- $ --- Acquisition of properties - proven 1,063,256 810,951 Exploration costs --- --- Development costs --- ---
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Commission Rules 13a-15(e) and 15d-15(e), the Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of the end of the quarter covered by this Report. Based on the foregoing, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective at the reasonable assurance level.
There has been no change in the Companys internal control over financial reporting during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.
Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was effective as of December 31, 2008.
This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation requirements by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
Items 10, 11, 12 and 13 constituting Part III of Form 10-K have been omitted from this annual report pursuant to the provisions of Instruction G(3) to Form 10-K, as the Company will file a definitive proxy statement pursuant to Regulation 14A under the Securities Exchange Act of 1934 within 120 days after the close of its fiscal year.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit-Related Fees.
On November 6, 2007, the audit committee of Texas Vanguard Oil Company approved a mutual agreement with the Companys independent auditor, Sprouse & Anderson, L.L.P., to terminate Sprouse & Andersons engagement as the Companys independent auditor and to engage Padgett, Stratemann & Co., L.L.P. as the Companys new auditor. Sprouse & Anderson merged with the firm of Padgett, Stratemann & Co., L.L.P. and thus agreed to resign as the Companys auditor. At the same time, the Companys audit committee approved the engagement of Padgett, Stratemann & Co., L.L.P. as the new auditor and expects to maintain a continuity of auditing experience and personnel.
The aggregate fees billed to the Company by Padgett, Stratemann & Co. L.L.P. for the audit of Texas Vanguard Oil Company annual financial statements included in the Form 10-K and for the review of the financial statements included in its quarterly reports on Form 10-Q for the fiscal year ended December 31, 2008 totaled $35,500. The aggregate fees billed to the Company by Sprouse & Anderson, L.L.P. and Padgett, Stratemann & Co., L.L.P. for the audit of Texas Vanguard Oil Companys annual financial statements included in the Form 10-KSB and for the review of the financial statements included in its quarterly reports on Form 10-QSB for the fiscal year ended December 31, 2007 totaled $30,000.
Tax Fees.
Tax services for the fiscal years ended December 31, 2008 and 2007 were not provided by Sprouse & Anderson, L.L.P. or Padgett, Stratemann & Co. L.L.P.
All Other Fees.
For the fiscal year ended December 31, 2008 the fees billed to the Company by Padgett, Stratemann & Co., L.L.P. for other services totaled $1,750. The Company engaged Padgett, Stratemann & Co., L.L.P. to perform a review of the Companys SOX documentation. There were no fees for other services paid to Padgett, Stratemann & Co., L.L.P. for the fiscal year ended December 31, 2007.
It is the audit committees policy to pre-approve all services provided by Sprouse & Anderson, L.L.P. and Padgett, Stratemann & Co. L.L.P. All services provided by Padgett, Stratemann & Co., L.L.P. during the year ended December 31, 2008 were pre-approved by the audit committee. All services provided by Sprouse & Anderson, L.L.P. and Padgett, Stratemann & Co. L.L.P. during the year ended December 31, 2007 were pre-approved by the audit committee.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1). Financial Statements.
Independent Auditors' Report, Balance Sheets at December 31, 2008 and 2007 and the related Statements of Earnings, Stockholders' Equity, and Cash Flows for each of the years in the two-year period ended December 31, 2008, and notes to financial statements are included in Item 8.
(a)(2) Financial Statement Schedules
Not applicable.
(a)(3). Exhibits
Number Description of Document
3* Copies of Articles of Incorporation and Bylaws - Incorporated by reference to Exhibits 4a and 4b to Registration Statement No. 2-66693 filed by registrant on Form S-2.
3.1* Articles of Amendment to authorize capitalization of common stock, previously filed as exhibits to Form 8-K dated May 27, 1983.
3.2* Certificate of Amendment dated February 20, 1990 of Articles of Incorporation and Articles of Amendment dated February 16, 1990 to the Articles of Incorporation. Filed as Exhibit to 1989 Form 10-K.
10.1 Management agreement between Texas Vanguard Oil Company and Robert Watson Inc. dated January 1, 2008.
31.1 Rule 13a-14(a)/15d-14(a) Certification
32.1 18 U.S.C. Section 1350 Certification
* Incorporated by reference.
(b). Reports of Form 8-K.
None filed during the quarter ended December 31, 2008.
(c). Separate financial statements of subsidiaries.
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: William G. Watson William G. Watson, President March 27, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
William G. Watson Robert L. Patterson William G. Watson, President, Robert L. Patterson, Director Director, Chief Executive March 27, 2009 Officer and Chief Financial Officer March 27, 2009
Linda R. Watson Teresa N. Nuckols Linda R. Watson, Director Teresa N. Nuckols, Secretary and Chairman of the Board March 27, 2009 March 27, 2009
THIS PAGE IS NOT PART OF OUR ANNUAL REPORT ON FORM 10-K.
OFFICERS AND DIRECTORS CORPORATE INFORMATION
Linda R. Watson CORPORATE OFFICE Chairman of the Board 9811 Anderson Mill Road, Suite 202 and Director Austin, Texas 78750
William G. Watson INDEPENDENT ACCOUNTANTS President, Chief Executive Padgett, Stratemann & Co., L.L.P. Officer, Chief Financial Austin, Texas Officer, and Director TRANSFER AGENT Teresa Nuckols For stock certificate transfers, address Secretary change or lost certificates: Computershare Trust Company, Inc. Robert L. Patterson P.O. Box 43070 Director Providence, Rhode Island 02940
COMMON STOCK Quoted on OTC Bulletin Board Symbol: TVOC.OB
CORPORATE GOVERNANCE The Company has adopted a Code of Ethics for its executive officers, directors and employees which is available upon request, free of charge from: Investor Relations 9811 Anderson Mill Road, Suite 202 Austin, Texas 78750
2008 Annual Shareholders Meeting June 4, 2009, at 10:00 A.M. CST Holiday Inn Northwest 8901 Business Park Drive Austin, TX 78759