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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 2001
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.
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(Exact Name of Small Business Issuer as Specified in Its Charter
Delaware
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(State or Other Jurisdiction of
Incorporation or Organization)
84-0989164
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(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)
Number of shares outstanding of issuer's Common Stock as of May 1, 2001:
15,561,225
Transitional Small Business Disclosure Format:
Yes___ No X
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Page 1 of 7
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
March 31, 2001
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 2,320,000
Accounts receivable 87,000
Other receivables 17,000
Other 6,000
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Total current assets 2,430,000
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Property and equipment, at cost
Proved oil and gas properties (successful efforts method) 1,094,000
Other 67,000
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1,161,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,077,000)
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Net property and equipment 84,000
Other assets 29,000
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$ 2,543,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 13,000
Accrued production costs 16,000
Accrued reclamation, restoration, and dismantlement 1,000
Other accrued expenses 52,000
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Total current liabilities 82,000
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Stockholders' equity
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 15,561,325 shares 156,000
Additional paid-in capital 14,271,000
Accumulated deficit (11,607,000)
Treasury stock, at cost, 100 shares at March 31, 2001 --
Notes receivable from stockholders (359,000)
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2,461,000
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$ 2,543,000
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See accompanying notes to consolidated, condensed financial statements.
Page 2 of 7
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
March 31 March 31
2001 2000 2001 2000
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Revenue
Oil and gas sales $ 176,000 196,000 409,000 374,000
Interest income 34,000 27,000 71,000 52,000
Other income (expense) (1,000) 1,000 (2,000) 3,000
Gain on sale of assets -- -- 488,000 --
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209,000 224,000 966,000 429,000
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Costs and expenses
Lease operating 73,000 58,000 139,000 131,000
Production taxes 20,000 21,000 47,000 42,000
General and administrative 97,000 89,000 195,000 179,000
Reclamation, restoration, and dismantlement -- 15,000 -- 15,000
Depreciation, depletion, amortization, and valuation 3,000 5,000 6,000 10,000
allowance
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193,000 188,000 387,000 377,000
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Net earnings $ 16,000 36,000 579,000 52,000
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Earnings per share $ * * $0.04 *
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*Less than $.01 per share
See accompanying notes to consolidated, condensed financial statements.
Page 3 of 7
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flow
(Unaudited)
Six Months Ended
March 31
2001 2000
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Cash flows from operating activities
Net earnings $ 579,000 52,000
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 6,000 10,000
Decrease (increase) in accounts receivable 14,000 (30,000)
Decrease (increase) in other receivables (1,000) 1,000
Increase in other current assets (4,000) --
Increase (decrease) in accounts payable (8,000) 2,000
Decrease in accrued production costs (22,000) --
Decrease in accrued reclamation, restoration, and dismantlement -- (3,000)
Decrease (increase) in other accrued expenses 6,000 (6,000)
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Net cash provided by operating activities 82,000 26,000
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Cash flows from investing activities
Proceeds from sale of assets 488,000 --
Other additions to property and equipment (7,000) (5,000)
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Net cash provided by (used in) investing activities 481,000 (5,000)
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Cash flows from financing activities
Acquisition of treasury stock -- (9,000)
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Net cash used in financing activities -- (9,000)
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Net increase in cash and cash equivalents 563,000 12,000
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Cash and cash equivalents at beginning of period 1,757,000 1,660,000
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Cash and cash equivalents at end of period $ 2,320,000 1,672,000
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See accompanying notes to consolidated, condensed financial statements.
Page 4 of 7
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 March
31, 2001, and the cash flows and results of operations for the three and six
months then ended. Such adjustments consisted only of normal recurring items.
The results of operations for the periods ended March 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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"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES
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 actual
results 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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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FINANCIAL CONDITION
In the quarter ended December 31, 2000 ("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 during the six months ended March 31, 2001, 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 Company does not believe that it currently
has any material exposure to environmental liability or to RR&D, net of salvage
value, although this cannot be assured.
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At May 1, 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 May
1, 2001, the Company had no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Sales decreased 10% from $196,000 in the quarter ended March 31, 2000
("Q2FY00"), to $176,000 in the quarter ended March 31, 2001 ("Q2FY01"), and
increased 9% from $374,000 in the six months ended March 31, 2000, to $409,000
in the six months ended March 31, 2001. Sales decreased from quarter to quarter
because a 34% decline in barrels of oil equivalent ("BOE") sold was partially
offset by a 35% increase in the average realized price per BOE. Sales increased
from six months to six months because a 24% decline in BOE sold was more than
offset by a 44% increase in average realized price per BOE. Interest income
increased 26% from $27,000 in Q2FY00 to $34,000 in Q2FY01 because of higher cash
balances. Interest income increased 37% from $52,000 in the six months ended
March 31, 2000, to $71,000 in the six months ended March 31, 2001, because of
higher cash balances and higher average effective interest rates. Lease
operating expense increased 26% from $58,000 in Q2FY00 to $73,000 in Q2FY01 and
6% from $131,000 in the six months ended March 31, 2000, to $139,000 in the six
months ended March 31, 2001, because of increased repairs and maintenance
expense. Production taxes decreased 5% from $21,000 in Q2FY00 to $20,000 in
Q2FY01 because of decreased sales and increased 12% from $42,000 in the six
months ended March 31, 2000, to $47,000 in the six months ended March 31, 2001,
because of increased sales. General and administrative expense increased 9% from
$89,000 in Q2FY00 to $97,000 in Q2FY01 and 9% from $179,000 in the six months
ended March 31, 2000, to $195,000 in the six months ended March 31, 2001,
principally because of increased salary and medical insurance expense. During
Q2FY00 the Company incurred $15,000 in expense associated with the plugging and
abandonment of three wells. Net earnings decreased from $36,000 in Q2FY00 to
$16,000 in Q2FY01 principally because of decreased sales and increased from
$52,000 in the six months ended March 31, 2000, to $579,000 in the six months
ended March 31, 2001, principally because of a gain on sale of assets of
$488,000.
LIQUIDITY
Operating Activities. Cash provided by operating activities increased from
$26,000 in the six months ended March 31, 2000, to $82,000 in the six months
ended March 31, 2001, because of increased net earnings exclusive of gain on
sale of assets and because of an increase in accounts receivable in the six
months ended March 31, 2000.
Investing Activities. The Company expended $5,000 and $7,000 for other additions
to property and equipment in the six months ended March 31, 2000 and 2001,
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 work overs,
or in the acquisition of interests in producing properties. At May 1, 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 that have had or that are reasonably expected to have a
material impact on net sales or revenues or income from continuing operations.
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Page 6 of 7
SIGNATURES
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.
ALTEX INDUSTRIES, INC.
Date: May 1, 2001 By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
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