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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, 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
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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 8, 2005:
14,877,117
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, 2005
(UNAUDITED)
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 2,184,000
Accounts receivable 147,000
Other 3,000
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Total current assets 2,334,000
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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 (1,089,000)
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Net property and equipment 50,000
OTHER ASSETS 17,000
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$ 2,401,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Accounts payable $ 9,000
Accrued production costs 49,000
Other accrued expenses 57,000
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Total current liabilities 115,000
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STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 14,987,317 shares 150,000
Additional paid-in capital 14,201,000
Treasury shares, at cost, 110,200 shares (11,000)
Accumulated deficit (11,695,000)
Notes receivable from stockholders (359,000)
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2,286,000
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$ 2,401,000
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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
2005 2004 2005 2004
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Revenue
Oil and gas sales $ 238,000 222,000 682,000 561,000
Interest income 14,000 10,000 39,000 31,000
Other income - 3,000 - 7,000
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252,000 235,000 721,000 599,000
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Costs and expenses
Lease operating 61,000 70,000 221,000 241,000
Production taxes 30,000 28,000 83,000 72,000
General and administrative 118,000 97,000 332,000 300,000
Depreciation, depletion, amortization, and valuation allowance 3,000 1,000 7,000 6,000
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212,000 196,000 643,000 619,000
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Net earnings (loss) $ 40,000 39,000 78,000 (20,000)
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Earnings (loss) per share $ 0.003 0.003 0.005 (0.001)
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Weighted average shares outstanding 14,877,117 15,034,149 14,883,577 15,051,506
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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
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 78,000 $ (20,000)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Depreciation, depletion, amortization, and valuation allowance 7,000 6,000
(Increase) decrease in accounts receivable (7,000) 2,000
Decrease in other current assets 7,000 9,000
Increase in accounts payable 4,000 1,000
Increase in accrued production costs 3,000 12,000
Decrease in other accrued expenses (6,000) (2,000)
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Net cash provided by operating activities 86,000 8,000
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CASH FLOWS FROM INVESTING ACTIVITIES
Other additions to property and equipment (5,000) (7,000)
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Net cash used in investing activities (5,000) (7,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury shares (11,000) (11,000)
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Net cash used in financing activities (11,000) (11,000)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 70,000 (10,000)
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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 $ 2,184,000 $ 2,087,000
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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,
2005, 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 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 $70,000 in the nine months ended June 30, 2005, from
$2,114,000 to $2,184,000 because $86,000 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.
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
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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 August 8, 2005, the
Company had no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Sales increased 7% from $222,000 in the quarter ended June 30, 2004 ("Q3FY04"),
to $238,000 in the quarter ended June 30, 2005 ("Q3FY05"), and increased 22%
from $561,000 in the nine months ended June 30, 2004, to $682,000 in the nine
months ended June 30, 2005, because of higher realized prices. Lease operating
expense decreased 13% from $70,000 in Q3FY04 to $61,000 in Q3FY05 and 8% from
$241,000 in the nine months ended June 30, 2004, to $221,000 in the nine months
ended June 30, 2005, because of decreased repairs and maintenance expense.
Production taxes increased 7% from $28,000 in Q3FY04 to $30,000 in Q3FY05 and
15% from $72,000 in the nine months ended June 30, 2004, to $83,000 in the nine
months ended June 30, 2005, because of increased sales. General and
administrative expense increased 22% from $97,000 in Q3FY04 to $118,000 in
Q3FY05 and 11% from $300,000 in the nine months ended June 30, 2004, to $332,000
in the nine months ended June 30, 2005, because of increased salary expense and
because the Company has expended $16,000, principally on legal and engineering
fees, in connection with the possible sale of its interests in three producing
oil and gas wells.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Net cash provided by operating activities increased from
$8,000 provided by operating activities in the nine months ended June 30, 2004,
to $86,000 provided by operating activities in the nine months ended June 30,
2005, principally because a net loss of $20,000 for the nine months ended June
30, 2004, was replaced by a net gain of $78,000 for the nine months ended June
30, 2005.
Investing Activities. In the nine month periods ended June 30, 2004, and June
30, 2005, the Company invested $7,000 and $5,000, respectively, in information
technology equipment.
Financing Activities. The Company acquired 123,233 shares of its Common Stock
for $11,000 in the nine months ended June 30, 2004, and 110,200 shares of its
Common Stock for $11,000 in the nine months ended June 30, 2005.
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
Page 6 of 7
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.
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: August 8, 2005 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