U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
of 1934
For the quarterly period ended December 31, 2000
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ---- to ----
Commission file number 1-9030
ALTEX INDUSTRIES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
84-0989164
(I.R.S. Employer
Identification No.)
POB 1057 Breckenridge CO 80424-1057
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(Address of Principal Executive Offices)
(303) 265-9312
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(Issuer's Telephone Number, Including Area Code)
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, and (2) has been subject to such filing requirements for the past 90 days.
Number of shares outstanding of issuer's Common Stock as of February 7, 2001:
15,561,325
Transitional Small Business Disclosure Format:
Yes No X
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Page 1 of 8
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 2000
(Unaudited)
ASSETS Current Assets Cash and cash equivalents $ 2,272,000 Accounts receivable 108,000 Other receivables 23,000 Other 4,000 Total current assets 2,407,000 Property and equipment, at cost Proved oil and gas properties (successful efforts method) 1,094,000 Other 67,000 1,161,000 Less accumulated depreciation, depletion, amortization, and valuation allowance (1,076,000) Net property and equipment 85,000 Other assets 29,000 $ 2,521,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 17,000 Accrued production costs 13,000 Accrued reclamation, restoration, and dismantlement 1,000 Other accrued expenses 45,000 Total current liabilities 76,000 ------------ Stockholders' equity Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued -- Common stock, $.01 par value. Authorized 50,000,000 shares, issued 15,561,325 shares 156,000 Additional paid-in capital 14,271,000 Accumulated deficit (11,623,000) Note receivable from stockholder (359,000) 2,445,000 $ 2,521,000
Page 2 of 8
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
Three Months Ended December 31 2000 1999 Revenue Oil and gas sales $ 233,000 178,000 Interest income 37,000 25,000 Other income (expense) (1,000) 2,000 Gain on sale of assets 488,000 - 757,000 205,000 Costs and expenses Lease operating 66,000 73,000 Production taxes 27,000 21,000 General and administrative 98,000 90,000 Depreciation, depletion, amortization, and valuation 3,000 5,000 allowance 194,000 189,000 Net earnings $ 563,000 16,000 Earnings per share $ .04 * Weighted average shares outstanding 15,561,325 15,687,263*Less than $.01 per share
Page 3 of 8
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flow
(Unaudited)
Three Months Ended December 31 2000 1999 Cash flows from operating activities Net earnings $ 563,000 16,000 Adjustments to reconcile net earnings to net cash provided by operating activities Gain on sale of assets (488,000) - Depreciation, depletion, amortization, and valuation allowance 3,000 5,000 Increase in accounts receivable (7,000) (8,000) Increase in other receivables (7,000) (1,000) Increase in other current assets (2,000) - Increase (decrease) in accounts payable (4,000) 12,000 Increase (decrease) in accrued production costs (25,000) 4,000 Decrease in accrued reclamation, restoration, and dismantlement - (3,000) Decrease in other accrued expenses (1,000) (9,000) Net cash provided by operating activities 32,000 16,000 Cash flows from investing activities Proceeds from sale of assets 488,000 - Other additions to property and equipment (5,000) (3,000) Net cash provided by (used in) investing activities 483,000 (3,000) Cash flows from financing activities Acquisition of treasury stock - (9,000) Net cash used in financing activities - (9,000) Net increase in cash and cash equivalents 515,000 4,000 Cash and cash equivalents at beginning of period 1,757,000 1,660,000 Cash and cash equivalents at end of period $ 2,272,000 1,664,000
Page 4 of 8
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated, Condensed Financial Statements
(Unaudited)
Note 1 - Financial Statements. In the opinion of management, the accompanying unaudited, consolidated, condensed financial statements contain all adjustments necessary to present fairly the financial position of the Company as of December 31, 2000, and the cash flows and results of operations for the three months then ended (“Q1FY01”). Such adjustments consisted only of normal recurring items. Certain reclassifications have been made to the financial statements for the three months ended December 31, 1999 (“Q1FY00”), to conform with the classifications used in the financial statements for Q1FY01. The results of operations for the periods ended December 31 are not necessarily indicative of the results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The accounting policies followed by the Company are set forth in Note 1 to the Company’s consolidated financial statements contained in the Company’s 2000 Annual Report on Form 10-KSB, and it is suggested that these consolidated, condensed financial statements be read in conjunction therewith.
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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements that are not historical facts contained in this Form 10-QSB are forward-looking statements that involve risks and uncertainties that could cause actual results to differ from projected results. Factors that could cause a result to differ materially include, among others: general economic conditions; the market prices of oil and natural gas; the risks associated with exploration and production in the Rocky Mountain region; the Company’s ability to find, acquire, and develop new properties and its ability to produce and market its oil and gas reserves; operating hazards attendant to the oil and natural gas business; uncertainties in the estimation of proved reserves and in the projection of future rates of production and timing of development expenditures; the strength and financial resources of the Company’s competitors; the Company’s ability to find and retain skilled personnel; climatic conditions; availability and cost of material and equipment; delays in anticipated start-up dates; environmental risks; the results of financing efforts; and other uncertainties detailed elsewhere herein and in the Company’s filings with the Securities and Exchange Commission.
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FINANCIAL CONDITION
In Q1FY01 the Company received $488,000 cash proceeds, net of expenses, from the sale of interests in producing oil and gas properties. The assets sold represented approximately 9% of the Company’s proved, developed, producing reserves estimated as of September 30, 2000. Cash balances increased in Q1FY01 principally because of proceeds from the sale of assets. Also as a result of the sale of assets, the Company removed $1,045,000 from proved oil and gas properties and from accumulated depreciation, depletion, amortization, and valuation allowance. The Company’s wholly-owned subsidiary, Altex Oil Corporation (“AOC”), is attempting to sell substantially all of its interests in producing oil and gas properties for cash, provided that certain target prices are realized. There can be no assurance that any additional interests will actually be sold. Any sale will be subject to applicable legal and regulatory requirements. AOC does not currently intend to sell its non-producing interests in the Tar Sands Triangle Area of Utah.
The Company is completing the restoration of the area that had contained its East Tisdale Field in Johnson County, Wyoming. The Company has removed all equipment from the field and has recontoured and reseeded virtually all disturbed areas in the Field. Barring unforeseen events, the Company does not believe that the expense associated with any remaining restoration activities in the Field will be material, although this cannot be assured. After its bonds with the State of Wyoming and the Bureau of Land Management are released, the Company does not believe it will have any further liability in connection with the Field, although this cannot be assured. The Company regularly assesses its exposure to both environmental liability and reclamation, restoration, and dismantlement expense (“RR&D”). The
At February 7, 2001, world oil prices and domestic natural gas and natural gas liquids prices were unusually high. At such price levels, all other things being equal, cash flow from operations is likely to be higher than it would have been at lower price levels. However, unless the Company’s production increases as the result of acquisitions of producing properties, successful drilling activities, or successful recompletions, the Company is likely to experience negative cash flow from operations in the future. With the exception of capital expenditures related to production acquisitions or drilling or recompletion activities, none of which are currently planned, the cash flows that could result from such acquisitions or activities, the proceeds from possible additional asset sales, and the current high level of oil and natural gas and natural gas liquids prices, the Company knows of no trends, events, or uncertainties that have or are reasonably likely to have a material impact on the Company’s short-term or long-term liquidity. Except for cash generated by the operation of the Company’s producing properties, asset sales, or interest income, the Company has no internal or external sources of liquidity other than its working capital. At February 7, 2001, the Company had no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Oil sales increased 28% from $106,000 in Q1FY00 to $136,000 in Q1FY01, and gas sales increased 35% from $72,000 in Q1FY00 to $97,000 in Q1FY01. Oil sales increased because a 1% decrease in oil sold was offset by a 30% increase in realized oil prices. Gas sales increased because a 27% decrease in gas sold was offset by a 84% increase in realized gas prices. Net earnings increased from $16,000 in Q1FY00 to $563,000 in Q1FY01 because of increased sales and because of a gain on sale of assets of $488,000.
LIQUIDITY
Operating Activities. Cash provided by operating activities increased from $16,000 in Q1FY00 to $32,000 in Q1FY01 because of increased net earnings exclusive of gain on sale of assets.
Investing Activities. The Company expended $3,000 and $5,000 for other additions to property and equipment in Q1FY00 and Q1FY01, respectively. In Q1FY01 the Company received $488,000 in proceeds from the sale of assets.
Financing Activities. The Company expended $9,000 to acquire 156,000 shares of treasury stock in Q1FY00.
The Company’s revenues and earnings are functions of the prices of oil, gas, and natural gas liquids and of the level of production expense, all of which are highly variable and beyond the Company’s control. In addition, because the quantity of oil, gas, and natural gas liquids produced from existing wells declines over time, the Company’s sales and net income will decline unless rising prices offset production declines or the Company increases its net production by investing in the drilling of new wells, in successful workovers, or in the acquisition of interests in producing properties. At February 7, 2001, world oil prices and domestic natural gas and natural gas liquids prices were unusually high, and both the Company and the futures markets expect price levels to decline. Unless prices remain at the current high levels, the Company is unlikely to experience material positive earnings unless it dramatically increases production levels. With the exception of unanticipated variations in production levels, unanticipated RR&D, unanticipated environmental expense, and current high price levels, the Company is not aware of any other trends, events, or uncertainties thav had or that are reasonably expected to have a material impact on net sales or revenues or income from continuing operations.
(a) Exhibits 27. Financial Data Schedule - Submitted only in electronic format, pursuant to Item 601(c) of Regulation S-B. (b) Reports on Form 8-K. On November 29, 2000, the Company filed a Form 8-K reporting the disposition of assets.
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By: /s/ STEVEN H. CARDIN
Steven H. Cardin
Chief Executive Officer and Principal Financial Officer