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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, 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
February 1, 2002: 15,143,250
Transitional Small Business Disclosure Format:
Yes No X
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Page 1 of 8
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,070,000
Accounts receivable 50,000
Other receivables 5,000
Other 17,000
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Total current assets 2,142,000
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PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 1,076,000
Other 47,000
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1,123,000
Less accumulated depreciation, depletion, amortization, and (1,069,000)
valuation allowance
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Net property and equipment 54,000
OTHER ASSETS 29,000
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$ 2,225,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 21,000
Accrued production costs 33,000
Other accrued expenses 29,000
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Total current liabilities 83,000
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STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value. Authorized 5,000,000 shares, --
none issued
Common stock, $.01 par value. Authorized 50,000,000 shares, 151,000
issued 15,143,250 shares
Additional paid-in capital 14,213,000
Accumulated deficit (11,863,000)
Notes receivable from stockholders (359,000)
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2,142,000
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$ 2,225,000
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See accompanying notes to consolidated, condensed financial statements.
Page 2 of 8
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31
2003 2002
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REVENUE
Oil and gas sales $ 102,000 $ 118,000
Interest income 15,000 22,000
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117,000 140,000
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COSTS AND EXPENSES
Lease operating 70,000 91,000
Production taxes 12,000 14,000
General and administrative 107,000 104,000
Reclamation, restoration, and dismantlement -- 1,000
Depreciation, depletion, amortization, and 4,000 3,000
valuation allowance
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193,000 213,000
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NET LOSS $ (76,000) $ (73,000)
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LOSS PER SHARE $ 0.01 *
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WEIGHTED AVERAGE SHARES OUTSTANDING 15,143,250 15,332,494
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*Less than $.01 per share
See accompanying notes to consolidated, condensed financial statements.
Page 3 of 8
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
Three Months Ended
December 31
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (76,000) $ (73,000)
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion, amortization, and 4,000 3,000
valuation allowance
Decrease in accounts receivable 17,000 25,000
Decrease in other receivables -- 1,000
Increase in other current assets -- (1,000)
Decrease in other assets 3,000 4,000
Increase in accounts payable 17,000 1,000
Increase (decrease) in accrued production costs (5,000) 2,000
Decrease in accrued reclamation, restoration, -- (1,000)
and dismantlement
Decrease in other accrued expenses (8,000) (5,000)
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Net cash used in operating activities (48,000) (44,000)
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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 DECREASE IN CASH AND CASH EQUIVALENTS (48,000) (153,000)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,118,000 2,390,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,070,000 $ 2,237,000
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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 8
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, 2002, 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 2002 Annual Report
on Form 10-KSB, and it is suggested that these consolidated, condensed financial
statements be read in conjunction therewith.
"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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FINANCIAL CONDITION
Cash balances decreased in the three months ended December 31, 2002 from
$2,118,000 to $2,070,000 because the Company used $48,000 cash in operating
activities. Accounts receivable decreased from $67,000 to $50,000 because of
reduced sales.
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.
The Company regularly assesses its exposure to both environmental liability and
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.
At current oil and gas prices, production levels, and interest rates, the
Company is likely to experience negative cash flow from operations. 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 current level of
prices and interest rates, and declining production levels, 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
properties, asset sales, and interest income, the Company has no internal or
external sources of liquidity other than its working capital. At February 1,
2003, the Company had no material commitments for capital expenditures.
Page 5 of 8
RESULTS OF OPERATIONS
Sales decreased 14% from $118,000 in the quarter ended December 31, 2001
("Q1FY02"), to $102,000 in the quarter ended December 31, 2002 ("Q1FY03")
because increased average realized prices were more than offset by decreases in
volumes sold. Interest income decreased 32% from $22,000 in Q1FY02 to $15,000 in
Q1FY03 because of lower cash balances and lower realized interest rates. Lease
operating expense decreased 23% from $91,000 in Q1FY02 to $70,000 in Q1FY03
because of reduced repairs and maintenance expense.
LIQUIDITY
Operating Activities. Net cash used in operating activities increased from
$44,000 in Q1FY02 to $48,000 Q1FY03.
Investing Activities. None.
Financing Activities. During Q1FY02 the Company acquired 1,087,500 shares of
its Common Stock for $109,000.
The Company's revenue 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 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 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 oil or gas properties. At current price and interest rate
levels, the Company is likely to record significant net losses. With the
exception of unanticipated variations in production levels, unanticipated RR&D,
unanticipated environmental expense, and possible changes in oil and gas price
levels and interest rates, 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.
ITEM 3. CONTROLS AND PROCEDURES.
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Principal Executive
Officer and Principal Financial Officer as appropriate, to allow timely
decisions regarding required disclosure. Management necessarily applied its
judgment in assessing the costs and benefits of such controls and procedures
which, by their nature, can provide only reasonable assurance regarding
management's control objectives.
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Principal Executive Officer and Principal
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon the foregoing, the Company's Principal Executive Officer and
Principal Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiary) required to be
included in the Company's Exchange Act reports. There have been no significant
changes in the Company's internal controls or in other factors which could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
99. Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter.
Page 6 of 8
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.
Date: February 12, 2003 ALTEX INDUSTRIES, INC.
By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
Page 7 of 8
CERTIFICATIONS
I, Steven H. Cardin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Altex Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ STEVEN H. CARDIN February 12, 2003
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Steven H. Cardin Date
Principal Executive Officer and
Principal Financial Officer
Page 8 of 8
EXHIBIT INDEX
99 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002