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UNITED STATES
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, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from to .
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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)
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 (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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Number of shares outstanding of issuer's Common Stock as of August 6, 2004:
15,006,017
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, 2004
(UNAUDITED)
ASSETS
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CURRENT ASSETS
Cash and cash equivalents $ 2,087,000
Accounts receivable 123,000
Other 2,000
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Total current assets 2,212,000
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PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 1,076,000
Other 58,000
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1,134,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,080,000)
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Net property and equipment 54,000
OTHER ASSETS 20,000
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$ 2,286,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Accounts payable $ 8,000
Accrued production costs 63,000
Other accrued expenses 53,000
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Total current liabilities 124,000
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STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 15,129,250 shares 151,000
Additional paid-in capital 14,212,000
Treasury shares, at cost, 123,233 shares (11,000)
Accumulated deficit (11,831,000)
Notes receivable from stockholders (359,000)
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2,162,000
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$ 2,286,000
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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
2004 2003 2004 2003
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REVENUE
Oil and gas sales $ 222,000 231,000 561,000 504,000
Interest income 10,000 11,000 31,000 37,000
Other income 3,000 10,000 7,000 9,000
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235,000 252,000 599,000 550,000
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COSTS AND EXPENSES
Lease operating 70,000 87,000 241,000 227,000
Production taxes 28,000 29,000 72,000 62,000
General and administrative 97,000 96,000 300,000 315,000
Depreciation, depletion, amortization,
and valuation allowance 1,000 3,000 6,000 11,000
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196,000 215,000 619,000 615,000
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NET INCOME (LOSS) $ 39,000 37,000 (20,000) (65,000)
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NET INCOME (LOSS) PER SHARE $ 0.003 0.002 (0.001) (0.004)
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WEIGHTED AVERAGE SHARES OUTSTANDING 15,034,149 15,132,942 15,051,506 15,139,789
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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
2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (20,000) (65,000)
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion, amortization, and valuation allowance 6,000 11,000
(Increase) decrease in accounts receivable 2,000 (29,000)
Decrease in other receivables 1,000 4,000
Decrease in other current assets 8,000 3,000
Decrease in other assets - 8,000
Increase (decrease) in accounts payable 1,000 (2,000)
Increase in accrued production costs 12,000 11,000
Increase (decrease) in other accrued expenses (2,000) 31,000
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Net cash provided by (used in) operating activities 8,000 (28,000)
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (7,000) (3,000)
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Net cash used in investing activities (7,000) (3,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury stock (11,000) (1,000)
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Net cash used in financing activities (11,000) (1,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (10,000) (32,000)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,097,000 2,118,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,087,000 2,086,000
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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,
2004, and the cash flows and results of operations for the 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 2003 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 nine months ended June 30, 2004, from $2,097,000
to $2,087,000 because the Company expended $7,000 cash for additions to property
and equipment and $11,000 cash for the acquisition of treasury shares.
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
reclamation, restoration, and dismantlement ("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.
The Company is currently experiencing modest cash flow from operations in spite
of the extraordinarily high levels of oil and gas prices, which levels are
unlikely to persist into the long term. Should prices decline materially, and
should interest rates on cash balances remain at current levels, then, unless
the Company materially increases production by acquiring producing properties or
by engaging in successful drilling activities or recompletions, the Company is
likely to experience negative cash flows 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
Page 5 of 7
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
August 6, 2004, the Company had no material commitments for capital
expenditures.
RESULTS OF OPERATIONS
Sales decreased 4% from $231,000 in the quarter ended June 30, 2003 ("Q3FY03"),
to $222,000 in the quarter ended June 30, 2004 ("Q3FY04"), and increased 11%
from $504,000 in the nine months ended June 30, 2003, to $561,000 in the nine
months ended June 30, 2004. Interest income decreased 16% from $37,000 in the
nine months ended June 30, 2003, to $31,000 in the nine months ended June 30
,2004, because of lower realized yields on cash balances. Lease operating
expense decreased 20% from $87,000 in Q3FY03 to $70,000 in Q3FY04 because of
reduced repair and maintenance expense and increased 6% from $227,000 in the
nine months ended June 30, 2003, to $241,000 in the nine months ended June 30,
2004, because of increased repair and maintenance expense. Production taxes
increased 16% from $62,000 in the nine months ended June 30, 2003, to $72,000 in
the nine months ended June 30, 2004, because of increased sales. General and
administrative expense decreased 5% from $315,000 in the nine months ended June
30, 2003, to $300,000 in the nine months ended June 30, 2004, because of reduced
salary expense.
LIQUIDITY
Operating Activities. Net cash provided by or used in operating activities
increased from $28,000 used in operating activities in the nine months ended
June 30, 2003, to $8,000 provided by operating activities in the nine months
ended June 30, 2004.
Investing Activities. During the nine months ended June 30, 2003, the Company
invested $3,000 in new information technology equipment, and during the nine
months ended June 30, 2004, the Company invested $7,000 in new information
technology equipment.
Financing Activities. During the nine months ended June 30, 2003, the Company
acquired 14,000 shares of its Common Stock for $1,000, and during the nine
months ended June 30, 2004, the Company acquired 123,233 shares of its Common
Stock for $11,000.
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 a modest net gain. 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
Page 6 of 7
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 2. CHANGES IN SECURITIES
Purchases of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
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(a) (b) (d)
Total Average (c) Maximum Number (or
Number of Price Total Number of Shares (or Approximate Dollar Value) of
Shares (or Paid per Units) Purchased as Part of Shares (or Units) that May Yet
Units) Share (or Publicly Announced Plans Be Purchased Under the Plans
Period Purchased Unit) or Programs or Programs
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April 1, 2004
through
April 30, 2004 - - - -
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May 1, 2004
through
May 31, 2004 - - - -
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June 1, 2004
through
June 30, 2004 40,000 $ 0.10 - -
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The Company has no publicly announced plan or program for the purchase of
shares. In June 2004 the Company purchased 40,000 shares other than through a
publicly announced plan or program in open-market transactions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter.
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: August 6, 2004 By: /s/ STEVEN H. CARDIN
Steven H. Cardin
Chief Executive Officer
and Principal Financial
Officer
Page 7 of 7
EXHIBIT INDEX
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications