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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 March 31, 2005
[_] 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
(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)
(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 May 6, 2005:
14,877,117
Transitional Small Business Disclosure Format: Yes No X
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1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2005
(UNAUDITED)
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 2,141,000
Accounts receivable 155,000
Other 4,000
-------------
Total current assets 2,300,000
-------------
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 1,076,000
Other 63,000
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1,139,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,086,000)
-------------
Net property and equipment 53,000
OTHER ASSETS 17,000
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$ 2,370,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 15,000
Accrued production costs 56,000
Other accrued expenses 53,000
-------------
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, $.01 par value. Authorized 50,000,000 shares, issued 14,987,317 shares 150,000
Additional paid-in capital 14,201,000
Treasury shares, at cost, 110,200 shares (11,000)
Accumulated deficit (11,735,000)
2
Notes receivable from stockholders (359,000)
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2,246,000
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$ 2,370,000
=============
See accompanying notes to consolidated, condensed financial statements.
3
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Six months Ended
March 31 March 31
2005 2004 2005 2004
------------------------ -----------------------
Revenue
Oil and gas sales $ 209,000 135,000 444,000 339,000
Interest income 13,000 10,000 25,000 21,000
Other income - 4,000 - 4,000
------------------------ -----------------------
222,000 149,000 469,000 364,000
------------------------ -----------------------
Costs and expenses
Lease operating 72,000 96,000 160,000 171,000
Production taxes 24,000 19,000 53,000 44,000
General and administrative 103,000 100,000 214,000 203,000
Depreciation, depletion, amortization, and valuation allowance 2,000 3,000 4,000 5,000
------------------------ -----------------------
201,000 218,000 431,000 423,000
------------------------ -----------------------
Net earnings (loss) $ 21,000 (69,000) 38,000 (59,000)
======================== =======================
Earnings (loss) per share $ 0.001 (0.005) 0.003 (0.004)
======================== =======================
Weighted average shares outstanding 14,877,114 15,046,017 14,886,807 15,060,138
======================== =======================
See accompanying notes to consolidated, condensed financial statements.
4
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
SIX MONTHS ENDED
MARCH 31
2005 2004
------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 38,000 $ (59,000)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Depreciation, depletion, amortization, and valuation allowance 4,000 5,000
(Increase) decrease in accounts receivable (15,000) 17,000
Decrease in other current assets 6,000 8,000
Increase (decrease) in accounts payable 10,000 (2,000)
Increase in accrued production costs 10,000 23,000
Decrease in other accrued expenses (10,000) (4,000)
------------------------
Net cash provided by (used in) operating activities 43,000 (12,000)
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CASH FLOWS FROM INVESTING ACTIVITIES
Other additions to property and equipment (5,000) (5,000)
------------------------
Net cash used in investing activities (5,000) (5,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury shares (11,000) (6,000)
------------------------
Net cash used in financing activities (11,000) (6,000)
------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,000 (23,000)
------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,114,000 2,097,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,141,000 $2,074,000
========================
See accompanying notes to consolidated, condensed financial statements.
5
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, 2005, and the cash flows and results of operations for the 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 2004 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 increased $27,000 in the six months ended March 31, 2004, from
$2,114,000 to $2,141,000 because $43,000 cash provided by operating activities
was offset by $5,000 cash expended on other additions to property and equipment
and $11,000 cash expended on the acquisition of treasury shares. Accounts
receivable increased $15,000 from $140,000 to $155,000 because of increased
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
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
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acquiring producing properties or by engaging in successful drilling activities
or recomple-tions, 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 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 May 6, 2005, the Company had no material commitments for capital
expenditures.
RESULTS OF OPERATIONS
Sales increased 55% from $135,000 in the quarter ended March 31, 2004
("Q2FY04"), to $209,000 in the quarter ended March 31, 2005 ("Q2FY05"), and
increased 31% from $339,000 in the six months ended March 31, 2004, to $444,000
in the six months ended March 31, 2005, because of higher realized prices. Lease
operating expense decreased 25% from $96,000 in Q2FY04 to $72,000 in Q2FY05 and
6% from $171,000 in the six months ended March 31, 2004, to $160,000 in the six
months ended March 31, 2005, because of decreased repairs and maintenance
expense. Production taxes increased 26% from $19,000 in Q2FY04 to $24,000 in
Q2FY05 and 20% from $44,000 in the six months ended March 31, 2004, to $53,000
in the six months ended March 31, 2005, because of increased sales. General and
administrative expense increased 3% from $100,000 in Q2FY04 to $103,000 in
Q2FY05 and 5% from $203,000 in the six months ended March 31, 2004, to $214,000
in the six months ended March 31, 2005, because of increased salary expense.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Net cash provided by (used in) operating activities
increased from $12,000 used in operating activities in the six months ended
March 31, 2004, to $43,000 provided by operating activities the six months ended
March 31, 2005.
Investing Activities. In each of the six month periods ended March 31, 2004, and
March 31, 2005, the Company invested $5,000 in information technology equipment.
Financing Activities. In the six months ended March 31, 2004, the Company
acquired 83,233 shares of its Com-mon Stock for $6,000, and in the six months
ended March 31, 2005, the Company acquired 110,200 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 work-overs, 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
7
and benefits of such controls and procedures which, by their nature, can provide
only reasonable assurance regarding management's control objectives.
As of the end of the period covered by the 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
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications
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 6, 2005 By: /s/ STEVEN H. CARDIN
Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
8
EXHIBIT INDEX
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications