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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 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 July 24, 2001:
15,559,225
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
June 30, 2001
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 2,379,000
Accounts receivable 105,000
Other receivables 15,000
Other 18,000
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Total current assets 2,517,000
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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 (1,080,000)
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Net property and equipment 81,000
Other assets 54,000
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$ 2,652,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,000
Accrued production costs 18,000
Accrued reclamation, restoration, and dismantlement 1,000
Other accrued expenses 124,000
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Total current liabilities 151,000
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Stockholders' equity
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued -
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 15,561,325 shares 156,000
Additional paid-in capital 14,271,000
Accumulated deficit (11,567,000)
Treasury stock, at cost, 2,100 shares at June 30, 2001 -
Notes receivable from stockholders (359,000)
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2,501,000
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$ 2,652,000
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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 Nine Months Ended
June 30 June 30
2001 2000 2001 2000
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Revenue
Oil and gas sales $ 243,000 193,000 652,000 567,000
Interest income 29,000 28,000 100,000 80,000
Other income (expense) (1,000) - (3,000) 3,000
Gain on sale of assets 33,000 - 521,000 -
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304,000 221,000 1,270,000 650,000
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Costs and expenses
Lease operating 67,000 66,000 206,000 197,000
Production taxes 29,000 21,000 76,000 63,000
General and administrative 165,000 82,000 360,000 261,000
Reclamation, restoration, and dismantlement - 1,000 - 16,000
Depreciation, depletion, amortization, and valuation 3,000 5,000 9,000 15,000
allowance ----------------------------- ---------------------------
264,000 175,000 651,000 552,000
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Net earnings $ 40,000 46,000 619,000 98,000
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Earnings per share $ * * $0.04 $0.01
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Weighted average shares outstanding 15,560,192 15,561,433 15,560,920 15,603,702
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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)
Nine Months Ended
June 30
2001 2000
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Cash flows from operating activities
Net earnings $ 619,000 98,000
Adjustments to reconcile net earnings to net cash
provided by operating activities
Gain on sale of assets (521,000) -
Depreciation, depletion, amortization, and valuation allowance 9,000 15,000
Increase in accounts receivable (4,000) (40,000)
Decrease (increase) in other receivables 1,000 (1,000)
Increase in other current assets (16,000) -
Increase in other assets (25,000)
Decrease in accounts payable (13,000) (9,000)
Increase (decrease) in accrued production costs (20,000) 3,000
Decrease in accrued reclamation, restoration, and dismantlement - (3,000)
Increase (decrease) in other accrued expenses 78,000 (3,000)
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Net cash provided by operating activities 108,000 60,000
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Cash flows from investing activities
Proceeds from sale of assets 521,000 -
Other additions to property and equipment (7,000) (5,000)
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Net cash provided by (used in) investing activities 514,000 (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 622,000 46,000
Cash and cash equivalents at beginning of period 1,757,000 1,660,000
Cash and cash equivalents at end of period $ 2,379,000 1,706,000
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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 June 30,
2001, and the cash flows and results of operations for the three and nine months
then ended. Such adjustments consisted only of normal recurring items. The
results of operations for the periods ended June 30 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. In the
quarter ended June 30, 2001 ("Q3FY01"), the Company received $33,000 cash
proceeds from the sale of interests in undeveloped zones held by production from
deeper zones in producing oil and gas properties in which the Company owns
interests. Cash balances increased during the nine months ended June 30, 2001,
principally because of proceeds from the sale of assets. Also as a result of the
sale of assets, the Company removed $1,046,000 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
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has any material exposure to environmental liability or to RR&D, net of salvage
value, although this cannot be assured.
At July 24, 2001, world oil prices and domestic natural gas and natural gas
liquids prices were 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, 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
July 24, 2001, the Company had no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Sales increased 26% from $193,000 in the quarter ended June 30, 2000, ("Q3FY00")
to $243,000 in Q3FY01 and increased 15% from $567,000 in the nine months ended
June 30, 2000, to $652,000 in the nine months ended June 30, 2001. Sales
increased from quarter to quarter because a 25% decline in oil sold was offset
by an 18% increase in the average realized price per barrel and because a 2%
increase in gas sold was accompanied by a 90% increase in average realized price
per thousand of cubic feet. Sales increased from nine months to nine months
because a 24% decline in oil sold was offset by an 8% increase in average
realized price per barrel and because a 17% decline in gas sold was offset by a
104% increase in average realized price per thousand cubic feet. Interest income
increased 25% from $80,000 in the nine months ended June 30, 2000, to $100,000
in the nine months ended June 30, 2001, because of higher cash balances.
Production taxes increased 38% from $21,000 in Q3FY00 to $29,000 in Q3FY01 and
21% from $63,000 in the nine months ended June 30, 2000, to $76,000 in the nine
months ended June 30, 2001, because of increased sales. General and
administrative expense ("G&A") increased 101% from $82,000 in Q3FY00 to $165,000
in Q3FY01 and 38% from $261,000 in the nine months ended June 30, 2000, to
$360,000 in the nine months ended June 30, 2001. Pursuant to his employment
agreement, the Company's president receives an annual bonus of no less than 10%
of earnings before income tax; accordingly, included in G&A in Q3FY01 and in
other accrued expense at June 30, 2001, is $69,000 of accrued bonus expense.
Excluding such expense, G&A increased 18% from $82,000 in Q3FY00 to $96,000 in
Q3FY01 and 12% from $261,000 in the nine months ended June 30, 2000, to $291,000
in the nine months ended June 30, 2001, because of increased salary and
insurance expense. During Q2FY00 the Company incurred $15,000 in expense
associated with the plugging and abandonment of three wells. Net earnings
decreased from $46,000 in Q3FY00 to $40,000 in Q3FY01 because of increased G&A,
and increased from $98,000 in the nine months ended June 30, 2000, to $619,000
in the nine months ended June 30, 2001, because of gain on sale of assets of
$521,000.
LIQUIDITY
Operating Activities. Cash provided by operating activities increased from
$60,000 in the nine months ended June 30, 2000, to $108,000 in the months ended
June 30, 2001, because of an increase in accounts receivable in the nine months
ended June 30, 2000.
Investing Activities. The Company expended $5,000 and $7,000 for other additions
to property and equipment in the nine months ended June 30, 2000 and 2001,
respectively. During the nine months ended June 30, 2001, the Company received
$521,000 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 July 24, 2001,
world oil prices and domestic natural gas and natural gas liquids prices were
high. 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
Page 6 of 7
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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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: July 27, 2001 By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
Page 7 of 7