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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 March 31, 2002
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.)
PO Box 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 9, 2002:
15,303,593
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, 2002
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 2,182,000
Accounts receivable 48,000
Other receivables 13,000
Other 17,000
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Total current assets 2,260,000
Property and equipment, at cost
Proved oil and gas properties (successful efforts method) 1,079,000
Other 67,000
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1,146,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,084,000)
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Net property and equipment 62,000
Other assets 43,000
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$ 2,365,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,000
Accrued production costs 63,000
Other accrued expenses 31,000
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Total current liabilities 99,000
Stockholders' equity
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued -
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 15,434,593 shares 154,000
Additional paid-in capital 14,241,000
Accumulated deficit (11,767,000)
Treasury stock, at cost, 26,000 shares at March 31, 2002 (3,000)
Notes receivable from stockholders (359,000)
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2,266,000
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$ 2,365,000
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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
2002 2001 2002 2001
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Revenue
Oil and gas sales $ 102,000 176,000 220,000 409,000
Interest income 18,000 34,000 40,000 71,000
Other income (expense) 6,000 (1,000) 6,000 (2,000)
Gain on sale of assets - - - 488,000
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126,000 209,000 266,000 966,000
Costs and expenses
Lease operating 79,000 73,000 170,000 139,000
Production taxes 13,000 20,000 27,000 47,000
General and administrative 104,000 97,000 208,000 195,000
Reclamation, restoration, and dismantlement 3,000 - 4,000 -
Depreciation, depletion, amortization, and valuation allowance 5,000 3,000 8,000 6,000
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204,000 193,000 417,000 387,000
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Net earnings (loss) $ (78,000) 16,000 (151,000) 579,000
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Earnings (loss) per share $ ($0.01) * ($0.01) $0.04
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Weighted average shares outstanding 15,408,593 15,561,242 5,252,542 15,561,284
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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
2002 2001
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Cash flows from operating activities
Net earnings (loss) $ (151,000) 579,000
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 8,000 6,000
Decrease in accounts receivable 31,000 14,000
Decrease (increase) in other receivables 2,000 (1,000)
Increase in other current assets - (4,000)
Decrease in other assets 7,000 -
Decrease in accounts payable (5,000) (8,000)
Increase (decrease) in accrued production costs 15,000 (22,000)
Decrease in accrued reclamation, restoration, and dismantlement (1,000) -
Increase (decrease) in other accrued expenses (5,000) 6,000
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Net cash provided by (used in) operating activities (99,000) 82,000
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Cash flows from investing activities
Proceeds from sale of assets - 488,000
Other additions to property and equipment - (7,000)
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Net cash provided by investing activities - 481,000
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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 (208,000) 563,000
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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 $ 2,182,000 2,320,000
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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 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, 2002, 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 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 decreased in the six months ended March 31, 2002 from $2,390,000
to $2,182,000 because the Company used $109,000 cash to acquire 1,087,500 shares
of its Common Stock and because the Company used $99,000 cash in operating
activities. Accounts receivable decreased from $79,000 to $48,000 because of
reduced sales. Other accrued expenses decreased from $111,000 to $31,000
principally 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, 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.
Although prices have risen during the last 60 days, the world oil prices and
domestic natural gas and natural gas liquids prices that prevailed during the
six months ended March 31, 2002, were materially depressed relative to price
levels prevailing in the prior year. Also, during the six months ended March 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.
Page 5 of 7
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 result from such acquisitions or activities;
the proceeds from possible additional asset sales; the fluctuating levels 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 May 1, 2002, the Company had no material commitments for capital
expenditures.
RESULTS OF OPERATIONS
Sales decreased 42% from $176,000 in the quarter ended March 31, 2001
("Q2FY01"), to $102,000 in the quarter ended March 31, 2002 ("Q2FY02"): A 27%
increase in oil sold was accompanied by a 1% increase in the average realized
price per barrel, and a 30% increase in gas sold was offset by a 73% decrease in
the average realized price per thousand cubic feet. Sales decreased 46% from
$409,000 in the six months ended March 31, 2001, to $220,000 in the six months
ended March 31, 2002: A 1% decrease in oil sold was accompanied by a 35%
decrease in the average realized price per barrel, and a 40% increase in gas
sold was offset by a 67% decrease in the average realized price per thousand
cubic feet. Interest income decreased 47% from $34,000 in Q2FY01 to $18,000 in
Q2FY02 and 44% from $71,000 in the six months ended March 31, 2001, to $40,000
in the six months ended March 31, 2002, because of lower realized interest
rates. In the quarter ended December 31, 2000, 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 8% from $73,000 in Q2FY01 to
$79,000 in Q2FY02 and 22% from $139,000 in the six months ended March 31, 2001,
to $170,000 in the six months ended March 31, 2002, because of increased repairs
and maintenance expense. Production taxes decreased 35% from $20,000 in Q2FY01
to $13,000 in Q2FY02 and 43% from $47,000 in the six months ended March 31,
2001, to $27,000 in the six months ended March 31, 2002, because of reduced
sales. Net earnings decreased from $16,000 in Q2FY01 to a net loss of $78,000 in
Q2FY02 principally because of lower sales and interest income, and from net
earnings of $579,000 in the six months ended March 31, 2001, to a net loss of
$151,000 in the six months ended March 31, 2002, principally because of lower
sales and interest income, and because of a significant reduction in gain on
sale of assets.
LIQUIDITY
Operating Activities. Net cash provided by operating activities decreased from
$82,000 in the six months ended March 31, 2001, to $99,000 net cash used in
operating activities in the six months ended March 31, 2002, because net
earnings exclusive of gain on sale of assets decreased from $91,000 in the six
months ended March 31, 2001, to a net loss of $151,000 in the six months ended
March 31, 2002.
Investing Activities. In the six months ended March 31, 2001, the Company
expended $7,000 for other additions to property and equipment and received
$488,000 in proceeds from the sale of assets.
Financing Activities. In the six months ended March 31, 2002, the Company
acquired 1,087,500 shares of its Common Stock for $109,000. On May 7, 2002, the
Company acquired 105,000 shares of its Common Stock in a negotiated transaction
for $11,865. On May 8, 2002, the Company retired all outstanding treasury
shares, and the Board of Directors authorized the purchase of no more than
250,000 shares of its Common Stock, from time to time, on the open market and
through negotiated transactions, prior to December 31, 2002.
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. Although prices have
risen during the last 60 days, the world oil prices and domestic natural gas and
natural gas liquids prices that prevailed during the six months ended March 31,
2002, were materially depressed relative to price levels prevailing in the prior
year. Also, during the six months ended March 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 increases production
levels. With the exception of unanticipated variations in production levels,
unanticipated RR&D, unanticipated environmental expense, price fluctuations, and
low 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.
Page 6 of 7
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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: May 9, 2002 By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
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