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, 1996
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 84-0989164
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
PO Box 1057 Breckenridge CO 80424-1057
(Address of Principal Executive Offices)
(970) 453-6641
(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.
Yes X No
Number of shares outstanding of issuer's common equity as of July 9, 1996:
13,966,989
Transitional Small Business Disclosure Format:
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,206,000
Accounts receivable 112,000
Other receivables 19,000
Other 14,000
Total current assets 1,351,000
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 2,388,000
Other 69,000
2,457,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (2,145,000)
Net property and equipment 312,000
$ 1,663,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 12,000
Accrued production costs 38,000
Accrued reclamation, restoration, and dismantlement expense 18,000
Other accrued expenses 40,000
Total current liabilities 108,000
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 14,285,989 shares 143,000
Additional paid-in capital 14,188,000
Accumulated deficit (12,536,000)
Treasury stock, at cost, 366,000 shares at June 30, 1996 (17,000)
Note receivable from stockholder (223,000)
1,555,000
$ 1,663,000
See accompanying notes to consolidated, condensed financial statements.
Page 2 of 6
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30 June 30
1996 1995 1996 1995
REVENUE
Oil and gas sales $ 240,000 221,000 659,000 605,000
Interest income 18,000 16,000 53,000 50,000
Gain on sale of assets -- 2,000 -- 3,000
Other income (5,000) (8,000) 9,000 (5,000)
253,000 231,000 721,000 653,000
COSTS AND EXPENSES
Lease operating 72,000 91,000 237,000 254,000
Production taxes 25,000 26,000 65,000 69,000
General and administrative 88,000 95,000 245,000 265,000
Exploration -- -- -- 10,000
Reclamation, restoration, and dismantlement -- -- 8,000 --
Depreciation, depletion, and amortization 17,000 22,000 52,000 69,000
202,000 234,000 607,000 667,000
NET EARNINGS (LOSS) $ 51,000 (3,000) 114,000 (14,000)
EARNINGS (LOSS) PER SHARE $ * * 0.01 *
WEIGHTED AVERAGE SHARES OUTSTANDING 13,983,473 14,516,769 14,073,901 14,653,398
*Less than $.01 per share
See accompanying notes to consolidated, condensed financial statements.
Page 3 of 6
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
NINE MONTHS ENDED
JUNE 30
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 114,000 (14,000)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Gain on sale of assets -- (3,000)
Depreciation, depletion, and amortization 52,000 69,000
Decrease in accounts receivable 26,000 23,000
Decrease in other receivables 10,000 28,000
(Increase) decrease in other current assets 1,000 (13,000)
Decrease in accounts payable (28,000) (23,000)
Decrease in accrued production costs (17,000) (25,000)
Decrease in accrued reclamation, restoration, and dismantlement (27,000) (14,000)
(Increase) decrease in other accrued expenses (3,000) 14,000
Net cash provided by operating activities 128,000 42,000
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets -- 3,000
Expenditures for oil and gas property development, net of proceeds (3,000) 3,000
Other additions to property and equipment (2,000) (8,000)
Net cash used in investing activities (5,000) (2,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury stock (20,000) (35,000)
Net cash used in financing activities (20,000) (35,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 103,000 5,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,103,000 1,012,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,206,000 1,017,000
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 fi nancial statements contain all adjustments
necessary to present fairly the financial position of the Company as of June 30,
1996, its cash flows for the nine months ended June 30, 1996 and 1995, and its
results of operations for the three and nine months ended June 30, 1996 and
1995. Such adjustments consisted only of normal recurring items. Certain
reclassifica tions have been made to the financial statements for the three and
nine months ended June 30, 1995, to conform with the classifications used in the
financial statements for the three and six months ended June 30, 1996. 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 1995
Annual Report on Form 10-KSB, and it is suggested that these consolidated,
condensed financial statements be read in conjunction therewith.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Cash and cash equivalents increased from September 30, 1995, to June 30, 1996,
principally because of net cash provided by operating activities. Other
receivables decreased because the Company received $8,000 in refundable
production taxes and also received $6,000 related to an advance for an
unsuccessful recompletion. Accounts payable decreased because the Company has
been paying invoices more promptly. Accrued production costs decreased because
lease operating expenses have declined. Accrued reclamation, restoration, and
dismantlement expense decreased because during the three months ended December
31, 1995, the Company expended $28,000 to plug the remaining unplugged wells in
the field discussed below.
During the nine months ended June 30, 1996, the Company retired approximately
6,400,000 shares of its Common Stock, which had the effect of reducing Common
Stock, par value, by $64,000 and additional paid in capital by $594,000. During
the nine months ended June 30, 1996, the Company acquired 366,000 shares of its
Common Stock at a total cost of $20,000.
The Company owns a property which contains oil-contaminated soil. At this time,
the Company cannot reasonably predict what reclamation activities may be
required to restore the property, or their costs. However, based on the
Company's preliminary assessment of the contamination and feasible reclamation
alternatives, the Company originally estimated that such reclamation and
restoration costs, including the costs of plugging the wells on the property,
could range from $60,000 to $160,000, of which the Company has accrued $60,000.
As of June 30, 1996, the Company had plugged all of the wells on the property
for a total cost of approximately $42,000, which was applied against the
accrual. The Company expects to begin selling equipment from the property and to
commence reclamation and restoration activities during the Summer of 1996.
Net cash provided by operating activities increased during the nine months ended
June 30, 1996, as compared to the nine months ended June 30, 1995, principally
because of the increase in net earnings. Also included in expenditures for oil
and gas property development during the nine months ended June 30, 1995, is a
refund of $3,000.
Currently, Iraq and the United Nations are negotiating an agreement under which
Iraq may be permitted to export limited quantities of oil. The Company
anticipates that oil and gas prices will decline precipitously from current
levels if Iraq returns to the world oil market. At such prices, unless the
Company's production of oil and gas increases as the result of acquisitions of
producing oil and gas properties, successful drilling activities, or successful
recompletions, the Company is likely to experience negative cash flow from
operations. Although the Company continually evaluates possible acquisitions of
producing oil and gas properties, the market for such properties has become
highly competitive, with properties trading at prices well above those implied
by the Company's acquisition criteria. Therefore, the Company has not
consummated a significant acquisition of interests in producing oil and gas
properties since fiscal 1990.
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With the exception of the Company's intention to acquire producing oil and gas
properties, cash flows that may result from such acquisitions, and possible
additional reclamation, restoration, and dismantlement expense, 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 oil and gas proper ties, asset sales,
or interest income, the Company has no internal or external sources of liquidity
other than its working capital. At July 9, 1996, the Company had no material
commitments for capital expenditures.
Sales increased during the three and nine months ended June 30, 1996, as
compared to the three and nine months ended June 30, 1996, because of higher
effective prices per barrel of oil equivalent. Interest income increased for the
three and nine months because of higher effective interest rates and higher cash
balances. Other income consists of a multitude of miscellaneous items, including
adjustments to sales, production taxes, and lease operating expense in prior
periods reported currently by operators of properties in which the Company has
an interest. For the three and nine months ended June 30, 1995, material items
included an $8,000 adjustment to lease operating expense related to a prior year
and an $8,000 purchase price adjustment related to an acquisition of interests
in producing properties consummated in a prior year.
Lease operating expense decreased during the three and nine months ended
June 30, 1996, because of reduced repairs and maintenance expense. General and
administrative expense decreased during the three and nine months principally
because the Company incurred $7,000 in rent and lease termination expense during
the three months ended June 30, 1995, and $15,000 in such expense during the
nine months ended June 30, 1995, relating to the lease of the Company's former
office space, which lease was terminated in 1995. During the nine months ended
June 30, 1995, the Company recognized $10,000 in exploration expense related to
an unsuccessful attempted recompletion. During the three months ended December
31, 1995, the Company recognized $8,000 in reclamation, restoration, and
dismantlement expense related to the plugging and abandonment of one well in a
field in Wyoming. Depreciation, depletion, and amortization expense decreased
during the three and nine months ended June 30, 1996, because the Company's
basis in its depreciable and depletable assets declined. Net earnings increased
during the three and nine months because revenue increased and expense
decreased.
The Company's sales and net income 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 largely beyond the Company's control. In addition, because
the quantity of oil and gas produced from existing wells declines over time, the
Company's sales and net income will decrease 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 oil or gas properties. With the exception of
unanticipated variations in production levels, possible additional reclamation,
restoration, and dismantlement expense, and price declines resulting from Iraq's
return to the world oil markets, 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 sales or revenue or income from continuing operations.
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 11, 1996 By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
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