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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 December 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 84-0989164
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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 January 31, 2002:
15,408,593
Transitional Small Business Disclosure Format:
Yes __ No X
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Page 1 of 6
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 2001
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 2,237,000
Accounts receivable 54,000
Other receivables 14,000
Other 18,000
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Total current assets 2,323,000
Property and equipment, at cost
Proved oil and gas properties (successful efforts method) 1,080,000
Other 67,000
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1,147,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,080,000)
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Net property and equipment 67,000
Other assets 46,000
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$ 2,436,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 11,000
Accrued production costs 50,000
Other accrued expenses 31,000
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Total current liabilities 92,000
Stockholders' equity
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued -
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 15,434,593 shares 154,000
Additional paid-in capital 14,241,000
Accumulated deficit (11,689,000)
Treasury stock, at cost, 26,000 shares at December 31, 2001 (3,000)
Notes receivable from stockholders (359,000)
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2,344,000
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$ 2,436,000
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See accompanying notes to consolidated, condensed financial statements.
Page 2 of 6
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
December 31
2001 2000
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Revenue
Oil and gas sales $ 118,000 233,000
Interest income 22,000 37,000
Other income (expense) - (1,000)
Gain on sale of assets - 488,000
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140,000 757,000
Costs and expenses
Lease operating 91,000 66,000
Production taxes 14,000 27,000
General and administrative 104,000 98,000
Reclamation, restoration, and dismantlement 1,000 -
Depreciation, depletion, amortization, and valuation allowance 3,000 3,000
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213,000 194,000
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Net earnings (loss) $ (73,000) 563,000
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Earnings (loss) per share $ (.01) .04
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Weighted average shares outstanding 15,153,915 15,561,325
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See accompanying notes to consolidated, condensed financial statements.
Page 3 of 6
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flow
(Unaudited)
Three Months Ended
December 31
2001 2000
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Cash flows from operating activities
Net earnings (loss) $ (73,000) 563,000
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 3,000
Decrease (increase) in accounts receivable 25,000 (7,000)
Decrease in other receivables 1,000 (7,000)
Increase in other current assets (1,000) (2,000)
Decrease in other assets 4,000 -
Increase (decrease) in accounts payable 1,000 (4,000)
Increase (decrease) in accrued production costs 2,000 (25,000)
Decrease in accrued reclamation, restoration, and dismantlement (1,000) -
Decrease in other accrued expenses (5,000) (1,000)
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Net cash provided by (used in) operating activities (44,000) 32,000
Cash flows from investing activities
Proceeds from sale of assets - 488,000
Other additions to property and equipment - (5,000)
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Net cash provided by investing activities - 483,000
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Cash flows from financing activities
Acquisition of treasury stock (109,000) -
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Net cash used in financing activities (109,000) -
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Net increase (decrease) in cash and cash equivalents (153,000) 515,000
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Cash and cash equivalents at beginning of period 2,390,000 1,757,000
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Cash and cash equivalents at end of period $ 2,237,000 2,272,000
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Supplemental disclosure of non-cash transactions recorded in the
accompanying financial statements
Decrease in other accrued expenses resulting from issuance of
common stock to company's president in payment of accrued bonus $ 75,000 -
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See accompanying notes to consolidated, condensed financial statements.
Page 4 of 6
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, 2001, and the cash flows and results of operations for the three months then
ended. Such adjustments consisted only of normal recurring items. 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 2001 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
Cash balances declined in the quarter ended December 31, 2001 ("Q1FY02") from
$2,390,000 to $2,237,000 because the Company used $109,000 cash to acquire
1,087,500 shares of its Common Stock and because the Company recognized a net
loss of $73,000. Accounts receivable declined from $79,000 to $54,000 because of
reduced sales. Other accrued expenses declined from $111,000 to $31,000 because
the Company paid an accrued bonus to its president of $75,000 by issuing 936,868
shares of its Common Stock to him at the then fair market value of $0.08 per
share.
In a Form 8-K filed August 22, 2000, when oil and gas prices were significantly
above current levels, the Company announced that its wholly-owned subsidiary,
Altex Oil Corporation ("AOC"), was attempting to sell substantially all of its
interests in producing oil and gas properties for cash, provided that certain
target prices were realized. Given the current depressed levels of oil and gas
prices, it appears highly unlikely that this strategy will meet with success,
and 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
will be material, although this cannot be assured. After its bonds with the
state 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.
At January 31, 2002, world oil prices and domestic natural gas and natural gas
liquids prices were materially depressed relative to price levels prevailing in
the prior year. Also, at January 31, 2002, interest rates were materially
depressed relative to levels prevailing for the last several decades. At such
price and interest rate levels, all other things being equal, cash flow from
operations is likely to be negative. Furthermore, unless the Company's
production increases as the result of acquisitions of producing properties,
successful drilling activities, or successful recompletions, at current price
and interest rate levels, the Company is likely to experience negative cash flow
from operations in the foreseeable 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
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result from such acquisitions or activities, the proceeds from possible
additional asset sales, and the current low level of oil, natural gas, and
natural gas liquids prices and the current low level of interest rates, 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 January 31,
2002, the Company had no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Sales decreased 49% from $233,000 in the quarter ended December 31, 2000
("Q1FY01"), to $118,000 in Q1FY02: A 19% decline in oil sold was exacerbated by
a 46% decline in the average realized price per barrel, and a 49% increase in
gas sold was offset by a 60% decline in the average realized price per thousand
cubic feet. Interest income declined 41% from $37,000 in Q1FY01 to $22,000 in
Q1FY02 because of lower realized interest rates. In Q1FY01 the Company
recognized a gain on sale of assets of $488,000 from the sale of interests in
producing oil and gas properties. Lease operating expense increased 38% from
$66,000 in Q1FY01 to $91,000 in Q1FY02 because of increased repairs and
maintenance expense. Production taxes decreased 48% from $27,000 in Q1FY01 to
$14,000 in Q1FY02 because of reduced sales. Net earnings decreased from $563,000
in Q1FY01 to a net loss of $73,000 in Q1FY02 because of reduced sales, reduced
gain on sale of assets, and higher lease operating expense in Q1FY02 as compared
to Q1FY01.
LIQUIDITY
Operating Activities. Cash provided by operating activities decreased from
$32,000 in Q1FY01 to $44,000 cash used in operating activities in Q1FY02 because
net earnings exclusive of gain on sale of assets decreased from $75,000 in
Q1FY01 to a net loss of $73,000 in Q1FY02.
Investing Activities. The Company expended $5,000 for other additions to
property and equipment in Q1FY01 and received $488,000 in proceeds from the sale
of assets.
Financing Activities. During Q1FY02 the Company acquired 1,087,500 shares of its
Common Stock for $109,000.
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 January 31, 2002,
world oil prices and domestic natural gas and natural gas liquids prices were
materially depressed relative to price levels prevailing in the prior year.
Also, at January 31, 2002, interest rates were materially depressed relative to
levels prevailing for the last several decades. At such price and interest rate
levels, all other things being equal, the Company is likely to experience net
losses unless it dramatically increases production levels. With the exception of
unanticipated variations in production levels, unanticipated RR&D, unanticipated
environmental expense, and current low price and interest rate 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: February 5, 2002 By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
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