10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

R Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2012

o Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: None

VANGUARD ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

COLORADO	27-2888719
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1330 Post Oak Blvd., Suite 1600

Houston, Texas 77056

(Address of principal executive offices, including Zip Code)

(713) 627-2500

(Issuer’s telephone number, including area code)

____________________________________________

(Former name or former address if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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 þ No o

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 12,741,512 shares of common stock as of December 31, 2012.

CONTENTS

	Page Number
Consolidated Balance Sheets		3
Consolidated Statements of Operations		4
Consolidated Statements of Cash Flows		5
Notes to the Consolidated Financial Statements		6

2

VANGUARD ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,			September 30,
ASSETS	2012			2012
	(Unaudited)
Current assets
Cash and cash equivalents	$	1,285,858		$	3,090,422
Accounts receivable		1,017,747			615,631
Other assets		7,774			6,132
Total current assets		2,311,379			3,712,185
Property and equipment
Oil and gas, on the basis of full cost accounting
Proved properties		11,067,982			9,288,166
Unproved properties and properties under
development, not being amortized		658,656			1,427,294
Furniture and equipment		24,872			24,494
Less: accumulated depreciation, depletion and amortization		(1,478,292	)		(1,108,956	)
Total property and equipment		10,273,218			9,630,998
Debt issuance costs		769,571			857,412
Other assets		15,125			15,570
Total assets	$	13,369,293		$	14,216,165
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	17,774		$	414,873
Other liabilities		372,170			344,712
Current portion of notes payable, net of discount of $0 and $77,584		-			247,416
Current portion of conversion feature liabilities		-			564
Total current liabilities		389,944			1,007,565
Notes payable, net of discount of $590,433 and $635,748		7,664,067			7,618,752
Participation liability		1,521,274			1,573,605
Conversion feature liabilities		189,979			583,454
Warrant liabilities		19,848			68,746
Asset retirement obligations		105,780			96,410
Total liabilities		9,890,892			10,948,532
Commitments and contingencies		-			-
Stockholders' equity
Preferred stock, $0.00001 par value; 5,000,000 shares
authorized, none issued or outstanding		-			-
Common stock, $0.00001 par value; 50,000,000 shares authorized,
12,741,512 shares issued and outstanding		127			127
Additional paid-in capital		5,522,204			5,522,204
Accumulated deficit		(2,043,930	)		(2,254,698	)
Total stockholders' equity		3,478,401			3,267,633
Total liabilities and stockholders' equity	$	13,369,293		$	14,216,165

The accompanying notes are an integral part of these consolidated financial statements.

3

VANGUARD ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended
	December 31,
	2012			2011
	(Unaudited)			(Unaudited)
Revenues
Oil and gas sales	$	1,315,661		$	745,171
Costs and expenses
Lease operating expense		177,443			99,096
Production taxes		60,659			34,343
Depreciation, depletion and amortization		369,336			121,945
Asset retirement obligation accretion		4,474			1,143
General and administrative		407,650			300,871
Total costs and expenses		1,019,562			557,398
Income from operations		296,099			187,773
Other income (expense)
Interest income		526			532
Interest expense		(528,794	)		(245,544	)
Change in fair value of warrant and
conversion feature liabilities		442,937			74,619
Total other income (expense)		(85,331	)		(170,393	)
Income before income taxes		210,768			17,380
Provision for income taxes		-			-
Net income	$	210,768		$	17,380
Earnings per share
Basic	$	0.02		$	0.00
Diluted	$	0.02		$	0.00
Weighted average shares outstanding
Basic		12,741,512			9,410,502
Diluted		12,741,512			9,410,502

The accompanying notes are an integral part of these consolidated financial statements.

4

VANGUARD ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	December 31,
	2012			2011
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	210,768		$	17,380
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation, depletion and amortization		369,336			121,945
Amortization of debt issuance costs		87,841			52,816
Asset retirement obligation accretion		4,474			1,143
Amortization of debt discount		122,899			202,781
Accretion of participation liability		38,212			27,377
Stock-based compensation expense		-			15,000
Change in fair value of warrant and conversion
feature liabilities		(442,937	)		(74,619	)
Change in operating assets and liabilities:
Accounts receivable		(402,116	)		(102,789	)
Other assets		(1,197	)		(26,951	)
Accounts payable		(397,099	)		47,548
Other liabilities		(63,085	)		(73,213	)
Net cash from operating activities		(472,904	)		208,418
Cash flows from investing activities
Purchase of furniture and equipment		(378	)		-
Capital expenditures on oil and gas properties		(1,006,282	)		(824,964	)
Net cash from investing activities		(1,006,660	)		(824,964	)
Cash flows from financing activities
Equity offering costs		-			(199,849	)
Proceeds from issuance of common stock and warrants		-			4,224,000
Repayment of note payable		(325,000	)		-
Net cash from financing activities		(325,000	)		4,024,151
Net change in cash and cash equivalents		(1,804,564	)		3,407,605
Cash and cash equivalents
Beginning of period		3,090,422			453,243
End of period	$	1,285,858		$	3,860,848

The accompanying notes are an integral part of these consolidated financial statements.

5

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

These consolidated financial statements of Vanguard Energy Corporation (Vanguard or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. These financial statements should be read along with Vanguard’s audited financial statements as of September 30, 2012.

Certain reclassifications have been made to the prior period financial statement and footnote amounts in order to conform to the current period presentation.

On December 2, 2011, the Company sold 4,800,000 units in an initial public offering at a price of $1.00 per unit.  Each unit consisted of one share of the Company's common stock and one Class A warrant.  Each Class A warrant entitles its holder to purchase one share of the Company's common stock at an exercise price of $1.50.  The Class A warrants are exercisable at any time on or before November 29, 2016.  The underwriters for the offering were paid a commission of $432,000 (9% of the gross offering proceeds) and a non-accountable expense allowance of $144,000 (3% of the gross offering proceeds). The underwriters also received warrants to purchase up to 480,000 units.  Proceeds from the offering were approximately $3,498,859 million net of the underwriters’ discount and offering expenses. As of December 31, 2012, the Company has 12,741,512 shares issued and outstanding.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of December 31, 2012, Vanguard’s significant accounting policies are consistent with those discussed in the audited financial statements as of September 30, 2012.

Earnings Per Share – Basic earnings per share have been calculated based upon the weighted-average number of common shares outstanding.  The weighted-average number of common shares outstanding used in the computations of earnings per share was 12,741,512 for the three-month period ended December 31, 2012 and 9,410,502 for the three-month period ended December 31, 2011. The calculation of diluted weighted-average shares outstanding for the three-month periods ended December 31, 2012 and 2011 excludes 17,610,860 shares and 13,870,000 shares, respectively, issuable pursuant to outstanding warrants, stock options and debt conversion features because their effect is anti-dilutive.

Recently Issued Accounting Pronouncements – Various accounting standards updates have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries.  No new accounting pronouncements have been issued that are likely to have a material impact to the Company's consolidated financial statements.

NOTE 3 – OIL AND GAS ACQUISITIONS

By agreement dated March 15, 2011, the Company entered into a farmout agreement with an unrelated third party pertaining to a 100-acre lease in the Batson Dome Field. As of December 31, 2012, the Company had drilled four wells on the lease. Pursuant to the farmout agreement, as amended in January 2013, the Company has the option of drilling additional wells on the lease; provided however, that if it does not drill at least three wells in any twelve month period the right to drill any additional wells on the lease will terminate. The estimated cost of drilling and completing any well on this lease is approximately $600,000.

6

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

By agreement dated May 25, 2011, the Company entered into a farmout agreement with an unrelated third party pertaining to a 100-acre lease in the Batson Dome Field. Pursuant to the agreement, the Company had the obligation to commence drilling a well on the lease by June 14, 2012.  In June 2012, the Company paid $10,000 to extend the agreement, whereby it now has an obligation to commence drilling by June 14, 2013.  Subject to the commencement of drilling the first well by June 14, 2013, and completing the well if warranted, the Company has the option of drilling additional wells on the lease; provided however, that unless the Company commences drilling each well within 180 days of the date the latest well is completed or abandoned, the right to drill any additional wells on the lease will terminate. The estimated cost of drilling and completing any well on this lease is approximately $1,000,000.

By agreement dated January 6, 2012, the Company entered into a three-year farmout agreement with an unrelated third party pertaining to another 70-acre lease in the Batson Dome Field.  The estimated cost of drilling and completing any well on this lease is approximately $1,000,000.

By agreement dated May 1, 2012, the Company entered into a farmout agreement with an unrelated third party pertaining to another 45-acre lease in the Hull-Daisetta Field. Pursuant to the agreement, the Company had the obligation to commence drilling a well on the lease by January 31, 2013.  In January 2013, the agreement was amended, whereby the Company now has an obligation to commence drilling by January 31, 2014.  Subject to the commencement of drilling the first well by January 31, 2014, and completing the well if warranted, the Company has the option of drilling additional wells on the lease; provided however, that unless the Company commences drilling each well within 180 days of the date the latest well is completed or abandoned, the right to drill any additional wells on the lease will terminate. The estimated cost of drilling and completing any well on this lease is approximately $750,000.

Through certain acquisitions in 2010, the Company owns a ninety percent (90%) working interest in mineral leases for 230 acres in the Batson Dome Field. C.F.O., Inc. owns the remaining ten percent (10%) working interest and is the operator for the mineral leases pursuant to a joint operating agreement between the Company and C.F.O., Inc.  The Company has recorded a receivable from CFO, Inc. for  its 10% share of capital expenditures.  At December 31, 2012, this amount totaled $188,319.

NOTE 4 – LONG-TERM DEBT

2010 Convertible Promissory Notes – In December 2010, the Company completed the issuance of $3,400,000 in Convertible Promissory Notes, due and payable on October 31, 2012 and convertible, at the holder’s option, into common stock of the Company at $1.00 per share at any time after April 30, 2011.  The 2010 Convertible Promissory Notes bore interest at 8% per year, payable quarterly.  In addition, the note holders were issued 1,700,000 Series A warrants to purchase the Company’s common stock at $4.00 per share any time on or before October 31, 2014 and were additionally granted a twenty percent (20%) net profits interest payable quarterly from any net profits generated from wells drilled and completed with the proceeds of the notes. 

Direct costs of $400,051 were incurred in connection with the issuance of the 2010 Convertible Promissory Notes.  The Company also issued the placement agent Series B warrants for the purchase of up to 340,000 shares of common stock at a price of $1.20 per share at any time prior to October 31, 2014, 170,000 shares of common stock at a price of $4.00 per share at any time prior to October 31, 2014, and 453,322 shares of common stock at a price of $0.10 per share at any time prior to March 31, 2011.  As of December 31, 2012, 453,322 warrants have been exercised. The warrants also provide for adjustment to their exercise prices under certain circumstances.

7

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During 2012, $3,075,000 of the 2010 Convertible Promissory Notes outstanding were surrendered in exchange for new 2012 Convertible Promissory Notes as discussed below. The remaining notes, which had an outstanding principal balance of $325,000, were repaid in October 2012.

2012 Convertible Promissory Notes – During 2012, the Company issued $8,254,500 of Convertible Promissory Notes, due and payable on June 30, 2015 and convertible at the holder’s option, into common stock of the Company at $1.25 per share.  The Convertible Promissory Notes bear interest at 15% per year, payable quarterly. Of the total amount raised, $5,179,500 represented new cash investors and $3,075,000 represented investors from the 2010 convertible note offering who chose to roll their investment in that earlier offering into the Company's new offering. Net proceeds from this financing are being used to fund an accelerated developmental drilling program in the Company's oil fields located in Southeast Texas and to pay the 2010 Convertible Promissory Notes remaining outstanding on October 31, 2012.

Except in certain circumstances, the conversion price of the 2012 Convertible Promissory Notes will be lowered if the Company sells any additional shares of common stock or any securities convertible into common stock, at a price below the then applicable conversion price.  The conversion price will also be proportionately adjusted in the event of any stock split, or capital reorganization.  On or prior to December 31, 2013, the Company may repay the Notes, without penalty, upon twenty days written notice to the Note holders if, during any twenty trading days within a period of thirty consecutive trading days, the closing price of the Company’s common stock is $2.25 or greater and the Company’s common stock has an average daily trading volume of 100,000 shares or more during the twenty trading days. After December 31, 2013, the Company may prepay the Notes upon twenty days written notice to the Note holders.

Direct costs of $813,780 were incurred in connection with the issuance of the 2012 Convertible Promissory Notes.  The Company recognized a loss on debt extinguishment of $410,639 related to the investors who chose to roll their investment in the 2010 Convertible Promissory Notes into the new offering. The placement agents for this offering received a cash commission of $619,905 as well as 537,360 Series E warrants. Each Series E warrant entitles the holder to purchase one share of the Company’s common stock. The Series E warrants may be exercised at any time on or before June 30, 2017 at a price of $1.55 per share.

Total Indebtedness under Convertible Promissory Notes –The Company’s gross outstanding balance of the Convertible Promissory Notes was $8,254,000 as of December 31, 2012.  As of December 31, 2012, the unamortized discount on the Convertible Promissory Notes totaled $590,433.  Interest expense for the amortization of debt issuance cost and discount on the notes was $210,740 for the three-month period ended December 31, 2012.  The effective interest rate of the Convertible Promissory Notes (net of the participation liability discussed below) was 29.1% as of December 31, 2012.  Accrued interest included in Other Liabilities at December 31, 2012 and September 30, 2012 was $309,544 and $267,374, respectively.

Net Profits Interest Participation Liability –The note holder’s twenty percent (20%) net profits interest granted with the issuance of the Convertible Promissory Notes is owned by Vanguard Net Profits, LLC, a Texas limited liability company (the “Fund”). The Company has a 1% interest in the Fund and is the Fund’s manager on behalf of the notes holders who own the remaining interest.

8

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company has recognized a participation liability related to the net profits interest granted.  This participation liability is reflected in the liability section of the balance sheet at its estimated fair value of $1,521,274 as of December 31, 2012. The Company estimated the fair value of the participation liability utilizing a present value factor of 10 applied to proved developed reserves associated with the wells drilled and completed with the proceeds of the notes.  At any time, the Company may purchase the net profits interests held by the Fund for $3,400,000.

The Company incurred expense associated with the net profits interest granted during the three months ended December 31, 2012 of $38,212. This amount is reported as interest expense in the statement of operations. The Company made payments of $90,543 under this arrangement during the three-month period ended December 31, 2012.

NOTE 5 – INCOME TAXES

The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur. The Company recorded no income tax expense for the three-month period ended December 31, 2012 because the Company estimates it will record no income tax expense for the year ended September 30, 2013.  The Company recorded no income tax expense for the three-month period ended December 31, 2011.  The Company has a valuation allowance that fully offsets net deferred tax assets.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

The Company’s material future contractual obligations as of December 31, 2012 were as follows:

	Total		2013		2014		2015		Thereafter
Convertible notes	$	8,254,500		--		--	$	8,254,500		--
Office leases	$	35,600	$	35,600		--		--		--

The Company has no contractual capital commitments outstanding at December 31, 2012.  Capital expenditures during the first three months of fiscal year 2013 totaled $1.0 million. Management estimates the Company will spend approximately $6.0 million during the remainder of fiscal year 2013 for drilling and completing wells in the Batson Dome Field and for various other projects. Meeting this estimate for drilling and completing wells will require additional financing beyond the Company’s available cash on hand.

9

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of December 31, 2012 and September 30, 2012:

	Level		December 31, 2012		September 30, 2012
Participation liability		3	$	1,521,274	$	1,573,605
Conversion feature liabilities		3		189,979	$	584,018
Warrant liabilities		3		19,848	$	68,746
Total liabilities			$	1,731,101	$	2,226,369

Assets and liabilities that are not recognized or disclosed on a recurring basis include those measured at fair value in a business combination and the initial recognition of asset retirement obligations.

The conversion feature liability and warrant liabilities are marked to market at each balance sheet date. The fair value of the conversion feature liability at December 31, 2012 was computed using the Black-Scholes model with the following assumptions: (1) expected life of 2.5 years; (2) volatility of 26.8%; (3) risk free interest of 0.31%, and a dividend rate of zero. The fair value of the warrant liabilities at December 31, 2012 was also computed using the Black-Scholes pricing model with the following assumptions: (1) expected life between 1.8 and 3.2 years; (2) volatility between 27.2% and 28.0%; (3) risk free interest between 0.26% and 0.35%, and a dividend rate of zero.

10

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents a reconciliation of those liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Participation Liability			Conversion Feature Liabilities			Warrant Liabilities			Total
Balance at September 30, 2012	$	1,573,605		$	584,018		$	68,746		$	2,226,369
Purchases, issuances and settlements		(90,543	)		-			-			(90,543	)
(Gains) losses included in earnings		38,212			(394,039	)		(48,898	)		(404,725	)
Balance at December 31, 2012	$	1,521,274		$	189,979		$	19,848		$	1,731,101

NOTE 8 – SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended
	December 31,
	2012		2011
Interest paid	$	273,873	$	68,000
Interest capitalized (non-cash)		36,201		105,430
Noncash investing and financing activities:
Capital expenditures included in accounts payable		-		355,121
Asset retirement obligations incurred		4,896		-
Issuance of restricted shares		-		15,000

*  *  *  *  *

11

FORWARD LOOKING STATEMENTS

The information contained in this Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties, including among other things, statements regarding our capital needs, business strategy and expectations. Any statement which does not contain a historical fact may be deemed to be a forward-looking statement. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. In evaluating forward looking statements, you should consider various factors outlined in our latest Form 10-K, filed with the U.S. Securities Exchange Commission (“SEC”) on December 30, 2012, and, from time to time, in other reports we file with the SEC. These factors may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update these statements, or disclose any difference between our actual results and those reflected in these statements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION

The following discussion analyzes and summarizes the results of our operations and our financial condition for the three month periods ended December 31, 2012 and 2011. This discussion and analysis should be read in conjunction with our financial statements included with this report.

Results of Operations

We were incorporated in Colorado on June 21, 2010 and commenced operations on July 19, 2010. We are in the early stages of implementing our business plan.

In November and December 2010 we entered into two agreements to acquire oil and gas leases covering 220 acres in the Batson Dome Field in Hardin County, Texas.

In December 2010, we acquired two producing and three shut-in oil wells in the Batson Dome Field.  As of December 31, 2012, the two wells were producing approximately one barrel of oil per day, net to our 63% net revenue interest.  As of December 31, 2012, one shut-in well had been plugged and abandoned. We estimate the costs of reworking the two remaining shut-in wells will be $125,000 each.

As of December 31, 2012, we had drilled and completed twelve wells in the Batson Dome Field.  Our share of the costs of drilling and completing these wells was approximately $7,200,000.  Each of these wells has shown multiple potentially productive zones at depths ranging from 2,600 to 4,400 feet.   During the three months ended December 31, 2012, we produced 19,020 bbls of oil.

12

Material changes in our Statement of Operations for the three months ended December 31, 2012 as compared to the same period in the prior year are discussed below:

Item	Increase (I) or Decrease (D)	Reason
Oil and Gas Sales	I	Completion of new wells
Cost and Expenses	I	Operation of new wells and increased depletion of oil reserves as a result of increased production

Operating expenses requiring cash for the three months ended December 31, 2012 consisted primarily of:

●   lease operating expenses, and

●   general and administrative expenses;

Interest expense increased as the result of the sale of our convertible notes in June, July and September 2012.

The factors that will most significantly affect our future operating results will be:

●   the sale prices of crude oil;

●   the amount of production from oil wells in which we have an interest;

●   lease operating expenses;

●   the availability of drilling rigs, drill pipe and other supplies and equipment required to drill and complete oil wells, and;

●   corporate overhead costs.

Our revenues will also be significantly affected by our ability to maintain and increase oil production.

Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.

Liquidity and Capital Resources

In July 2010, we sold 4,900,000 shares of our common stock at a price of $0.001 per share to our officers and directors and third parties. In July, August, and September 2010, we sold 1,012,500 shares of our common stock to a group of private investors at a price of $0.40 per share.

13

In November and December 2010, we sold 34 units in a private offering at a price of $100,000 per unit. Each unit consisted of one promissory note in the principal amount of $100,000 and 50,000 Series A warrants. At any time after April 30, 2011, the notes could be converted into shares of our common stock, initially, at a conversion price of $1.00 per share. Each Series A warrant entitles the holder to purchase one share of our common stock at a price of $4.00 per share at any time on or before October 31, 2014. The notes bore interest at 8% per year. In June, July and September 2012 notes in the principal amount of $3,075,000 were surrendered in payment of the notes sold in 2012.  The remaining notes, which had an outstanding principal balance of $325,000, were repaid in October 2012.

In February and March 2011, we sold 1,500,000 units at a price of $1.00 per unit. Each unit consisted of one share of our common stock and one Series C warrant. Each Series C warrant allows the holder to purchase one share of our common stock at a price of $2.00 per share. In March 2011, we issued 453,322 shares of our common stock to a placement agent upon the exercise of warrants which had an exercise price of $0.10 per share.

In December 2011, we sold 4,800,000 units in an initial public offering at a price of $1.00 per unit. Net proceeds to us from this offering, after payment of the underwriting discounts and offering expenses, were approximately $3,498,900. Each unit consisted of one share of common stock and one Class A warrant. Each Class A warrant entitles its holder to purchase one share of common stock at an exercise price of $1.50. The Class A warrants are exercisable at any time on or before November 29, 2016.

In June, July and September 2012 we sold convertible secured promissory notes to a group of private investors.  The notes bear interest at 15% per year, are payable quarterly, mature on June 30, 2015, and are convertible into shares of our common stock at a conversion price of $1.25 per share, subject to adjustment.

Notes in the principal amount of $5,179,500 were sold for cash and notes in the principal amount of $3,075,000 were exchanged for notes that we sold in 2010. Net proceeds from this financing:

●   were used to pay the remaining balance ($325,000) of our 2010 notes, and

●   have been and are being used to fund a drilling program in our fields located in Southeast Texas.

Our sources and (uses) of funds for the three months ended December 31, 2012 and December 31, 2011 are shown below:

	Three Months Ended			Three Months Ended
	December 31, 2012			December 31, 2011
Cash (used in) provided by operations	$	(472,904	)	$	208,418
Purchase of furniture and equipment		(378	)		--
Drilling and completion costs		(1,006,282	)		(824,964	)
Equity offering costs		--			(199,849	)
Proceeds from issuance of common stock and warrants		--			4,224,000
Repayment of note payable		(325,000	)		--

14

As of December 31, 2012, our general and administrative expenses were approximately $130,000 per month, which amount includes salaries and other corporate overhead, but excludes lease operating and interest expenses.

By agreement dated March 15, 2011, we entered into a farmout agreement with an unrelated third party pertaining to a 100-acre lease in the Batson Dome Field.  As of December 31, 2012, we had drilled ­­­­­­four wells on the lease. Pursuant to the farmout agreement we have the option of drilling additional wells on the lease, subject to certain conditions. We estimate the cost of drilling and completing any well on this lease will be approximately $600,000.

By agreement dated May 25, 2011, we entered into a farmout agreement with Exxon/Mobil Corporation pertaining to another 100-acre lease adjacent to our existing leases in the Batson Dome Field. Pursuant to the agreement, we have the obligation to commence drilling a well on the lease by June 14, 2013. Subject to the commencement of drilling the first well by June 14, 2013, and completing the well if warranted, we have the option of drilling additional wells on the lease; provided however, that unless we commence drilling each well within 180 days of the date we complete or abandon the latest well drilled, our right to drill any additional wells on the lease will terminate. We estimate the cost of drilling and completing any well on this lease will be approximately $1,000,000.

By agreement dated January 6, 2012, we entered into a three-year farmout agreement with an unrelated third party pertaining to another 70-acre lease in the Batson Dome Field.  We estimate the cost of drilling and completing any well on this lease will be approximately $1,000,000.

By agreement dated May 1, 2012, we entered into a farmout agreement with an unrelated third party pertaining to a 45-acre lease in the Hull-Daisetta Field. Pursuant to the agreement, as amended in January 2013, we have the obligation to commence drilling a well on the lease by January 31, 2014.  Subject to the commencement of drilling the first well by January 31, 2014, and completing the well if warranted, we have the option of drilling additional wells on the lease; provided however, that unless we commence drilling each well within 180 days of the date the latest well is completed or abandoned, the right to drill any additional wells on the lease will terminate. We estimate the cost of drilling and completing any well on this lease will be approximately $750,000.

Capital expenditures during the first three months of fiscal year 2013 totaled $1.0 million. We estimate we will spend approximately $6.0 million during the remainder of fiscal year 2013 for drilling and completing wells and for various other projects. Meeting this estimate for drilling and completing wells will require additional financing beyond the Company’s available cash on hand.

15

Any cash generated by our operations, after payment of general, administrative and lease operating expenses, will be used to drill and, if warranted, complete oil wells, acquire oil and gas leases covering lands which we believe are favorable for the production of oil, and to fund working capital reserves. Our capital expenditure plans are subject to periodic revision based upon the availability of funds and expected return on investment.

We expect that our principal source of cash flow will be from the sale of crude oil reserves which are depleting assets. Cash flow from the sale of oil production depends upon the quantity of production and the price obtained for the production. An increase in prices will permit us to finance our operations to a greater extent with internally generated funds, may allow us to obtain equity financing more easily or on better terms, and lessens the difficulty of obtaining financing. However, price increases heighten the competition for oil prospects, increase the costs of exploration and development, and, because of potential price declines, increase the risks associated with the purchase of producing properties during times that prices are at higher levels.

A decline in oil prices (i) will reduce our cash flow which in turn will reduce the funds available for exploring for and replacing oil reserves, (ii) will increase the difficulty of obtaining equity and debt financing and worsen the terms on which such financing may be obtained, (iii) will reduce the number of oil prospects which have reasonable economic terms, (iv) may cause us to permit leases to expire based upon the value of potential oil reserves in relation to the costs of exploration, (v) may result in marginally productive oil wells being abandoned as non-commercial, and (vi) may increase the difficulty of obtaining financing. However, price declines reduce the competition for oil properties and correspondingly reduce the prices paid for leases and prospects.

We plan to generate profits by drilling productive oil wells. However, we plan to obtain the funds required to drill, and if warranted, complete new wells (including any wells pertaining to our farmout agreements) with any net cash generated by our operations, through the sale of our securities, from loans from third parties or from third parties willing to pay our share of the cost of drilling and completing the wells as partners/participants in the resulting wells. We do not have any commitments or arrangements from any person to provide us with any additional capital. We may not be successful in raising the capital needed to drill oil wells. Any wells which may be drilled by us may not produce oil.

Other than as disclosed above, we do not know of any:

●   Trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, any material increase or decrease in our liquidity; or

●   Significant changes in our expected sources and uses of cash.

16

Contractual Obligations

Our material future contractual obligations as of December 31, 2012 were as follows:

	Total		2013		2014		2015		Thereafter
2012 Convertible notes	$	8,254,500		--		--	$	8,254,000		--
Office lease	$	35,600	$	35,600		--		--		--

ITEM 4. CONTROLS AND PROCEDURES.

(a) We maintain a system of controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (“1934 Act”), is recorded, processed, summarized and reported within time periods specified in the SEC's rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is accumulated and communicated to our management, including our Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of December 31, 2012, our Principal Executive and Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Principal Executive and Financial Officer concluded that our disclosure controls and procedures were effective.

(b) Changes in Internal Controls. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

17

PART II

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Initial Public Offering

In December 2011 we sold 4,800,000 units in an initial public offering at a price of $1.00 per unit. Each unit consisted of one share of our common stock and one Class A warrant. Each Class A warrant entitles its holder to purchase one share of common stock at an exercise price of $1.50. The Class A warrants are exercisable at any time on or before November 29, 2016.

The units were registered by means of a Registration Statement on Form S-1, (Commission file no. 333-174194) which was declared effective by the Securities and Exchange Commission on November 14, 2011. Although the registration statement originally registered 6,000,000 units, the offering closed on December 2, 2011 with the sale of 4,800,000 units. Paulson Investment Company, Inc. and Neidiger, Tucker, Bruner, Inc. were the underwriters for the offering.

See our 10-Q report for the three months ended December 31, 2011 for information concerning the expenses associated with our December 2011 public offering.

As of December 31, 2012 we had used approximately $2,947,000 of the net proceeds of the offering for drilling and completing oil wells.

None of the offering proceeds were paid directly or indirectly to any of our directors or officers or their associates; to person owning 10% or more of any class of our equity securities; or to any of our affiliates.

ITEM 6. EXHIBITS

Exhibits

31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act.

18

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.

	VANGUARD ENERGY CORPORATION
Date: February 13, 2013	By:	/s/ Warren Dillard
		Warren Dillard,
		Chief Executive, Financial and Accounting Officer

19

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Warren Dillard, certify that;

1. I have reviewed this quarterly report on Form 10-Q of Vanguard Energy Corporation;

2. Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 13, 2013	By:	/s/ Warren Dillard
		Warren Dillard,
		Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Warren Dillard, certify that;

1. I have reviewed this quarterly report on Form 10-Q of Vanguard Energy Corporation;

2. Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 13, 2013	By:	/s/ Warren Dillard
		Warren Dillard,
		Principal Financial Officer

EX-32

EXHIBIT 32

In connection with the Quarterly Report of Vanguard Energy Corporation (the “Company”) on Form 10-Q for the period ending December 31, 2012 as filed with the Securities and Exchange Commission (the “Report”), Warren Dillard, the Principal Executive and Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects the financial condition and results of the Company.

Date: February 13, 2013	By:	/s/ Warren Dillard
		Warren Dillard,
		Principal Executive and Financial Officer

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4. LONG-TERM DEBT

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

4. LONG-TERM DEBT

2010 Convertible Promissory Notes – In December 2010, the Company completed the issuance of $3,400,000 in Convertible Promissory Notes, due and payable on October 31, 2012 and convertible, at the holder’s option, into common stock of the Company at $1.00 per share at any time after April 30, 2011.  The 2010 Convertible Promissory Notes bore interest at 8% per year, payable quarterly.  In addition, the note holders were issued 1,700,000 Series A warrants to purchase the Company’s common stock at $4.00 per share any time on or before October 31, 2014 and were additionally granted a twenty percent (20%) net profits interest payable quarterly from any net profits generated from wells drilled and completed with the proceeds of the notes. 

Direct costs of $400,051 were incurred in connection with the issuance of the 2010 Convertible Promissory Notes.  The Company also issued the placement agent Series B warrants for the purchase of up to 340,000 shares of common stock at a price of $1.20 per share at any time prior to October 31, 2014, 170,000 shares of common stock at a price of $4.00 per share at any time prior to October 31, 2014, and 453,322 shares of common stock at a price of $0.10 per share at any time prior to March 31, 2011.  As of December 31, 2012, 453,322 warrants have been exercised. The warrants also provide for adjustment to their exercise prices under certain circumstances.

During 2012, $3,075,000 of the 2010 Convertible Promissory Notes outstanding were surrendered in exchange for new 2012 Convertible Promissory Notes as discussed below. The remaining notes, which had an outstanding principal balance of $325,000, were repaid in October 2012.

2012 Convertible Promissory Notes – During 2012, the Company issued $8,254,500 of Convertible Promissory Notes, due and payable on June 30, 2015 and convertible at the holder’s option, into common stock of the Company at $1.25 per share.  The Convertible Promissory Notes bear interest at 15% per year, payable quarterly. Of the total amount raised, $5,179,500 represented new cash investors and $3,075,000 represented investors from the 2010 convertible note offering who chose to roll their investment in that earlier offering into the Company's new offering. Net proceeds from this financing are being used to fund an accelerated developmental drilling program in the Company's oil fields located in Southeast Texas and to pay the 2010 Convertible Promissory Notes remaining outstanding on October 31, 2012.

Except in certain circumstances, the conversion price of the 2012 Convertible Promissory Notes will be lowered if the Company sells any additional shares of common stock or any securities convertible into common stock, at a price below the then applicable conversion price.  The conversion price will also be proportionately adjusted in the event of any stock split, or capital reorganization.  On or prior to December 31, 2013, the Company may repay the Notes, without penalty, upon twenty days written notice to the Note holders if, during any twenty trading days within a period of thirty consecutive trading days, the closing price of the Company’s common stock is $2.25 or greater and the Company’s common stock has an average daily trading volume of 100,000 shares or more during the twenty trading days. After December 31, 2013, the Company may prepay the Notes upon twenty days written notice to the Note holders.

Direct costs of $813,780 were incurred in connection with the issuance of the 2012 Convertible Promissory Notes.  The Company recognized a loss on debt extinguishment of $410,639 related to the investors who chose to roll their investment in the 2010 Convertible Promissory Notes into the new offering. The placement agents for this offering received a cash commission of $619,905 as well as 537,360 Series E warrants. Each Series E warrant entitles the holder to purchase one share of the Company’s common stock. The Series E warrants may be exercised at any time on or before June 30, 2017 at a price of $1.55 per share.

Total Indebtedness under Convertible Promissory Notes – The Company’s gross outstanding balance of the Convertible Promissory Notes was $8,254,000 as of December 31, 2012.  As of December 31, 2012, the unamortized discount on the Convertible Promissory Notes totaled $590,433.  Interest expense for the amortization of debt issuance cost and discount on the notes was $210,740 for the three-month period ended December 31, 2012.  The effective interest rate of the Convertible Promissory Notes (net of the participation liability discussed below) was 29.1% as of December 31, 2012.  Accrued interest included in Other Liabilities at December 31, 2012 and September 30, 2012 was $309,544 and $267,374, respectively.

Net Profits Interest Participation Liability – The note holder’s twenty percent (20%) net profits interest granted with the issuance of the Convertible Promissory Notes is owned by Vanguard Net Profits, LLC, a Texas limited liability company (the “Fund”). The Company has a 1% interest in the Fund and is the Fund’s manager on behalf of the notes holders who own the remaining interest.

The Company has recognized a participation liability related to the net profits interest granted.  This participation liability is reflected in the liability section of the balance sheet at its estimated fair value of $1,521,274 as of December 31, 2012. The Company estimated the fair value of the participation liability utilizing a present value factor of 10 applied to proved developed reserves associated with the wells drilled and completed with the proceeds of the notes.  At any time, the Company may purchase the net profits interests held by the Fund for $3,400,000.

The Company incurred expense associated with the net profits interest granted during the three months ended December 31, 2012 of $38,212. This amount is reported as interest expense in the statement of operations. The Company made payments of $90,543 under this arrangement during the three-month period ended December 31, 2012.

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3. OIL AND GAS ACQUISITIONS

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

3. OIL AND GAS ACQUISITIONS

By agreement dated March 15, 2011, the Company entered into a farmout agreement with an unrelated third party pertaining to a 100-acre lease in the Batson Dome Field. As of December 31, 2012, the Company had drilled four wells on the lease. Pursuant to the farmout agreement, as amended in January 2013, the Company has the option of drilling additional wells on the lease; provided however, that if it does not drill at least three wells in any twelve month period the right to drill any additional wells on the lease will terminate. The estimated cost of drilling and completing any well on this lease is approximately $600,000.

By agreement dated May 25, 2011, the Company entered into a farmout agreement with an unrelated third party pertaining to a 100-acre lease in the Batson Dome Field. Pursuant to the agreement, the Company had the obligation to commence drilling a well on the lease by June 14, 2012.  In June 2012, the Company paid $10,000 to extend the agreement, whereby it now has an obligation to commence drilling by June 14, 2013.  Subject to the commencement of drilling the first well by June 14, 2013, and completing the well if warranted, the Company has the option of drilling additional wells on the lease; provided however, that unless the Company commences drilling each well within 180 days of the date the latest well is completed or abandoned, the right to drill any additional wells on the lease will terminate. The estimated cost of drilling and completing any well on this lease is approximately $1,000,000.

By agreement dated January 6, 2012, the Company entered into a three-year farmout agreement with an unrelated third party pertaining to another 70-acre lease in the Batson Dome Field.  The estimated cost of drilling and completing any well on this lease is approximately $1,000,000.

By agreement dated May 1, 2012, the Company entered into a farmout agreement with an unrelated third party pertaining to another 45-acre lease in the Hull-Daisetta Field. Pursuant to the agreement, the Company had the obligation to commence drilling a well on the lease by January 31, 2013.  In January 2013, the agreement was amended, whereby the Company now has an obligation to commence drilling by January 31, 2014.  Subject to the commencement of drilling the first well by January 31, 2014, and completing the well if warranted, the Company has the option of drilling additional wells on the lease; provided however, that unless the Company commences drilling each well within 180 days of the date the latest well is completed or abandoned, the right to drill any additional wells on the lease will terminate. The estimated cost of drilling and completing any well on this lease is approximately $750,000.

Through certain acquisitions in 2010, the Company owns a ninety percent (90%) working interest in mineral leases for 230 acres in the Batson Dome Field. C.F.O., Inc. owns the remaining ten percent (10%) working interest and is the operator for the mineral leases pursuant to a joint operating agreement between the Company and C.F.O., Inc.  The Company has recorded a receivable from CFO, Inc. for  its 10% share of capital expenditures.  At December 31, 2012, this amount totaled $188,319.

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Consolidated Balance Sheets (USD $)	Dec. 31, 2012	Sep. 30, 2012
Statement of Financial Position [Abstract]
Cash and cash equivalents	$ 1,285,858	$ 3,090,422
Accounts receivable	1,017,747	615,631
Other assets	7,774	6,132
Total current assets	2,311,379	3,712,185
Property and equipment - Oil and gas, on the basis of full cost accounting
Proved properties	11,067,982	9,288,166
Unproved properties and properties under development, not being amortized	658,656	1,427,294
Furniture and equipment	24,872	24,494
Less: accumulated depreciation, depletion and amortization	(1,478,292)	(1,108,956)
Total property and equipment	10,273,218	9,630,998
Debt issuance costs	769,571	857,412
Other assets	15,125	15,570
Total assets	13,369,293	14,216,165
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	17,774	414,873
Other liabilities	372,170	344,712
Current portion of notes payable, net of discount of $0 and $77,584	0	247,416
Current portion of conversion feature liability	0	564
Total current liabilities	389,944	1,007,565
Notes payable, net of discount of $590,433 and $635,748	7,664,067	7,618,752
Participation liability	1,521,274	1,573,605
Conversion feature liability	189,979	583,454
Warrant liabilities	19,848	68,746
Asset retirement obligations	105,780	96,410
Total liabilities	9,890,892	10,948,532
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, none issued or outstanding	0	0
Common stock, $0.00001 par value; 50,000,000 shares authorized, 12,741,512 shares issued and outstanding	127	127
Additional paid-in capital	5,522,204	5,522,204
Accumulated deficit	(2,043,930)	(2,254,698)
Total stockholders' equity	3,478,401	3,267,633
Total liabilities and stockholders' equity	$ 13,369,293	$ 14,216,165

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1. BASIS OF PRESENTATION

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

1. BASIS OF PRESENTATION

These consolidated financial statements of Vanguard Energy Corporation (Vanguard or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. These financial statements should be read along with Vanguard’s audited financial statements as of September 30, 2012.

Certain reclassifications have been made to the prior period financial statement and footnote amounts in order to conform to the current period presentation.

On December 2, 2011, the Company sold 4,800,000 units in an initial public offering at a price of $1.00 per unit.  Each unit consisted of one share of the Company's common stock and one Class A warrant.  Each Class A warrant entitles its holder to purchase one share of the Company's common stock at an exercise price of $1.50.  The Class A warrants are exercisable at any time on or before November 29, 2016.  The underwriters for the offering were paid a commission of $432,000 (9% of the gross offering proceeds) and a non-accountable expense allowance of $144,000 (3% of the gross offering proceeds). The underwriters also received warrants to purchase up to 480,000 units.  Proceeds from the offering were approximately $3,498,859 million net of the underwriters’ discount and offering expenses. As of December 31, 2012, the Company has 12,741,512 shares issued and outstanding.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary Of Significant Accounting Policies Details Narrative
Anti-dilutive shares	17,610,860	13,870,000

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4. LONG-TERM DEBT (Details Narrative) (USD $)	3 Months Ended
	Dec. 31, 2012	Sep. 30, 2012
Long-Term Debt Details Narrative
Warrants exercised	453,322
Convertible Notes Payable	$ 8,254,500
Unamortized Discount on notes	590,433	713,332
Interest expense of debt issuance costs and discount	210,740
Combined effective interest rate	29.10%
Accrued interest included in Other Liabilities	309,544	267,374
Participation Liability Fair Value	1,521,274	1,573,605
Net profits interest granted expenses	38,212
Payments under participation arrangement	$ 90,543

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of December 31, 2012, Vanguard’s significant accounting policies are consistent with those discussed in the audited financial statements as of September 30, 2012.

Earnings Per Share – Basic earnings per share have been calculated based upon the weighted-average number of common shares outstanding.  The weighted-average number of common shares outstanding used in the computations of earnings per share was 12,741,512 for the three-month period ended December 31, 2012 and 9,410,502 for the three-month period ended December 31, 2011. The calculation of diluted weighted-average shares outstanding for the three-month periods ended December 31, 2012 and 2011 excludes 17,610,860 shares and 13,870,000 shares, respectively, issuable pursuant to outstanding warrants, stock options and debt conversion features because their effect is anti-dilutive.

Recently Issued Accounting Pronouncements – Various accounting standards updates have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries.  No new accounting pronouncements have been issued that are likely to have a material impact to the Company's consolidated financial statements.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2012	Sep. 30, 2012
ASSETS
Discount on Note Payable	$ 590,433	$ 713,332
Stockholders' equity
Preferred stock, par value	$ 0.00001	$ 0.00001
Preferred stock, authorized shares	5,000,000	5,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, authorized shares	50,000,000	50,000,000
Common stock, issued shares	12,741,512	12,741,512
Common stock, outstanding shares	12,741,512	12,741,512

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8. SUPPLEMENTAL CASH FLOW INFORMATION (Tables)

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Supplemental Cash Flow Information

	Three Months Ended
	December 31,
	2012		2011
Interest paid	$	273,873	$	68,000
Interest capitalized (non-cash)		36,201		105,430
Noncash investing and financing activities:
Capital expenditures included in accounts payable		-		355,121
Asset retirement obligations incurred		4,896		-
Issuance of restricted shares		-		15,000

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Document and Entity Information	3 Months Ended
	Dec. 31, 2012
Document And Entity Information
Entity Registrant Name	Vanguard Energy Corp
Entity Central Index Key	0001497649
Document Type	10-Q
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	12,741,512
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

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6. Schedule of Contractual Obligations (Details) (USD $)	Dec. 31, 2012
Notes to Financial Statements
Convertible notes, 2013	$ 0
Convertible notes, 2014	0
Convertible notes, 2015	8,254,500
Convertible notes, thereafter	0
Total convertible notes due	8,254,500
Office leases, 2013	35,600
Office leases, 2014	0
Office leases, 2015	0
Office leases, thereafter	0
Total office leases payment due	$ 35,600

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Revenues
Oil and gas sales	$ 1,315,661	$ 745,171
Costs and expenses
Lease operating expense	177,443	99,096
Production taxes	60,659	34,343
Depreciation, depletion and amortization	369,336	121,945
Asset retirement obligation accretion	4,474	1,143
General and administrative	407,650	300,871
Total costs and expenses	1,019,562	557,398
Income from operations	296,099	187,773
Other income (expense)
Interest income	526	532
Interest expense	(528,794)	(245,544)
Change in fair value of warrant and conversion feature liabilities	442,937	74,619
Total other income (expense)	(85,331)	(170,393)
Income before income taxes	210,768	17,380
Provision for income taxes
Net income	$ 210,768	$ 17,380
Earnings per share - Basic	$ 0.02	$ 0
Earnings per share - Diluted	$ 0.02	$ 0
Weighted average shares outstanding - basic	12,741,512	9,410,502
Weighted average shares outstanding - diluted	12,741,512	9,410,502

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7. FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of December 31, 2012 and September 30, 2012:

	Level		December 31, 2012		September 30, 2012
Participation liability		3	$	1,521,274	$	1,573,605
Conversion feature liabilities		3		189,979	$	584,018
Warrant liabilities		3		19,848	$	68,746
Total liabilities			$	1,731,101	$	2,226,369

Assets and liabilities that are not recognized or disclosed on a recurring basis include those measured at fair value in a business combination and the initial recognition of asset retirement obligations.

The conversion feature liability and warrant liabilities are marked to market at each balance sheet date. The fair value of the conversion feature liability at December 31, 2012 was computed using the Black-Scholes model with the following assumptions: (1) expected life of 2.5 years; (2) volatility of 26.8%; (3) risk free interest of 0.31%, and a dividend rate of zero. The fair value of the warrant liabilities at December 31, 2012 was also computed using the Black-Scholes pricing model with the following assumptions: (1) expected life between 1.8 and 3.2 years; (2) volatility between 27.2% and 28.0%; (3) risk free interest between 0.26% and 0.35%, and a dividend rate of zero.

The following table presents a reconciliation of those liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Participation Liability			Conversion Feature Liabilities			Warrant Liabilities			Total
Balance at September 30, 2012	$	1,573,605		$	584,018		$	68,746		$	2,226,369
Purchases, issuances and settlements		(90,543	)		-			-			(90,543	)
(Gains) losses included in earnings		38,212			(394,039	)		(48,898	)		(404,725	)
Balance at December 31, 2012	$	1,521,274		$	189,979		$	19,848		$	1,731,101

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6. COMMITMENTS AND CONTINGENCIES

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

6. COMMITMENTS AND CONTINGENCIES

The Company’s material future contractual obligations as of December 31, 2012 were as follows:

	Total		2013		2014		2015		Thereafter
Convertible notes	$	8,254,500		--		--	$	8,254,500		--
Office leases	$	35,600	$	35,600		--		--		--

The Company has no contractual capital commitments outstanding at December 31, 2012.  Capital expenditures during the first three months of fiscal year 2013 totaled $1.0 million. Management estimates the Company will spend approximately $6.0 million during the remainder of fiscal year 2013 for drilling and completing wells in the Batson Dome Field and for various other projects. Meeting this estimate for drilling and completing wells will require additional financing beyond the Company’s available cash on hand.

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3. OIL AND GAS ACQUISITIONS (Details Narrative) (USD $)	Dec. 31, 2012
Oil And Gas Acquisitions Details Narrative
Receivable from CFO, Inc. 10% share of capital expenditures	$ 188,319

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7. Financial Liabilities at Fair Value (Details) (USD $)	Dec. 31, 2012	Sep. 30, 2012
Notes to Financial Statements
Participation liability (Level 3)	$ 1,521,274	$ 1,573,605
Conversion feature liability (Level 3)	189,979	584,018
Warrant liabilities (Level 3)	19,848	68,746
Total liabilities (Level 3)	$ 1,731,101	$ 2,226,369

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6. COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Schedule of Contractual Obligations

	Total		2013		2014		2015		Thereafter
Convertible notes	$	8,254,500		--		--	$	8,254,500		--
Office leases	$	35,600	$	35,600		--		--		--

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8. SUPPLEMENTAL CASH FLOW INFORMATION

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

8. SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended
	December 31,
	2012		2011
Interest paid	$	273,873	$	68,000
Interest capitalized (non-cash)		36,201		105,430
Noncash investing and financing activities:
Capital expenditures included in accounts payable		-		355,121
Asset retirement obligations incurred		4,896		-
Issuance of restricted shares		-		15,000

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Earnings Per Share

Earnings Per Share – Basic earnings per share have been calculated based upon the weighted-average number of common shares outstanding.  The weighted-average number of common shares outstanding used in the computations of earnings per share was 12,741,512 for the three-month period ended December 31, 2012 and 9,410,502 for the three-month period ended December 31, 2011. The calculation of diluted weighted-average shares outstanding for the three-month periods ended December 31, 2012 and 2011 excludes 17,610,860 shares and 13,870,000 shares, respectively, issuable pursuant to outstanding warrants, stock options and debt conversion features because their effect is anti-dilutive.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements – Various accounting standards updates have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries.  No new accounting pronouncements have been issued that are likely to have a material impact to the Company's consolidated financial statements.

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7. FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Financial Liabilities

	Level		December 31, 2012		September 30, 2012
Participation liability		3	$	1,521,274	$	1,573,605
Conversion feature liabilities		3		189,979	$	584,018
Warrant liabilities		3		19,848	$	68,746
Total liabilities			$	1,731,101	$	2,226,369

Liabilities Using Signigicant Unobservable Inputs

	Participation Liability			Conversion Feature Liabilities			Warrant Liabilities			Total
Balance at September 30, 2012	$	1,573,605		$	584,018		$	68,746		$	2,226,369
Purchases, issuances and settlements		(90,543	)		-			-			(90,543	)
(Gains) losses included in earnings		38,212			(394,039	)		(48,898	)		(404,725	)
Balance at December 31, 2012	$	1,521,274		$	189,979		$	19,848		$	1,731,101

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8. SUPPLEMENTAL CASH FLOW INFORMATION (Details) (USD $)	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Supplemental cash flow information:
Interest paid	$ 273,873	$ 68,000
Interest capitalized (non-cash)	36,201	105,430
Noncash investing and financing activities:
Capital expenditures included in accounts payable	0	355,121
Asset retirement obligations incurred	4,896	0
Issuance of restricted shares	$ 0	$ 15,000

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ 210,768	$ 17,380
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation, depletion and amortization	369,336	121,945
Amortization of debt issuance costs	87,841	52,816
Asset retirement obligation accretion	4,474	1,143
Amortization of debt discount	122,899	202,781
Accretion of participation liability	38,212	27,377
Stock-based compensation expense	0	15,000
Change in fair value of warrant and conversion feature liabilities	(442,937)	(74,619)
Change in operating assets and liabilities:
Accounts receivable	(402,116)	(102,789)
Other assets	(1,197)	(26,951)
Accounts payable	(397,099)	47,548
Other liabilities	(63,085)	(73,213)
Net cash from operating activities	(472,904)	208,418
Cash flows from investing activities
Purchase of furniture and equipment	(378)	0
Capital expenditures on oil and gas properties	(1,006,282)	(824,964)
Net cash from investing activities	(1,006,660)	(824,964)
Cash flows from financing activities
Equity offering costs	0	(199,849)
Proceeds from issuance of common stock and warrants	0	4,224,000
Repayment of note payable	(325,000)	0
Net cash from financing activities	(325,000)	4,024,151
Net change in cash and cash equivalents	(1,804,564)	3,407,605
Cash and cash equivalents Beginning of period	3,090,422	453,243
Cash and cash equivalents End of period	$ 1,285,858	$ 3,860,848

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5. INCOME TAXES

3 Months Ended

Dec. 31, 2012

Notes to Financial Statements

5. INCOME TAXES

The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur. The Company recorded no income tax expense for the three-month period ended December 31, 2012 because the Company estimates it will record no income tax expense for the year ended September 30, 2013.  The Company recorded no income tax expense for the three-month period ended December 31, 2011.  The Company has a valuation allowance that fully offsets net deferred tax assets.

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7. Liabilities Using Significant Unobservable Inputs (Details) (USD $)	3 Months Ended
	Dec. 31, 2012
Balance at September 30,2012	$ 2,226,369
Purchases, issuances and settlements	(90,543)
(Gains) losses included in earnings	(404,725)
Balance at December 31, 2012	1,731,101
Participation Liability
Balance at September 30,2012	1,573,605
Purchases, issuances and settlements	(90,543)
(Gains) losses included in earnings	38,212
Balance at December 31, 2012	1,521,274
Conversion Feature Liabilities
Balance at September 30,2012	584,018
Purchases, issuances and settlements	0
(Gains) losses included in earnings	(394,039)
Balance at December 31, 2012	189,979
Warrant Liabilities
Balance at September 30,2012	68,746
Purchases, issuances and settlements	0
(Gains) losses included in earnings	(48,898)
Balance at December 31, 2012	$ 19,848