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 December 31, 2003
[ ] 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, 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 (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 February 4, 2004:
15,046,017
Transitional Small Business Disclosure Format: Yes No X
-- ---
1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003
(UNAUDITED)
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 2,082,000
Accounts receivable 150,000
Other 8,000
-------------
Total current assets 2,240,000
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PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 1,076,000
Other 53,000
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1,129,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,076,000)
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Net property and equipment 53,000
OTHER ASSETS 20,000
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$ 2,313,000
=============
LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
CURRENT LIABILITIES
Accounts payable $ 9,000
Accrued production costs 58,000
Other accrued expenses 49,000
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Total current liabilities 116,000
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STOCKHOLDERS EQUITY
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 15,129,250 shares 151,000
Additional paid-in capital 14,212,000
Treasury shares, at cost, 83,233 shares (6,000)
Accumulated deficit (11,801,000)
Notes receivable from stockholders (359,000)
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2,197,000
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$ 2,313,000
=============
See accompanying notes to consolidated, condensed financial statements.
2
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31
2003 2002
-------------------------
REVENUE
Oil and gas sales $ 204,000 $ 102,000
Interest income 11,000 15,000
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215,000 117,000
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COSTS AND EXPENSES
Lease operating 75,000 70,000
Production taxes 25,000 12,000
General and administrative 103,000 107,000
Depreciation, depletion, amortization, and valuation allowance 2,000 4,000
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205,000 193,000
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NET EARNINGS (LOSS) $ 10,000 $ (76,000)
=========================
EARNINGS (LOSS) PER SHARE * $ (0.01)
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WEIGHTED AVERAGE SHARES OUTSTANDING 15,047,832 15,143,250
=========================
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*Less than $.01 per share
See accompanying notes to consolidated, condensed financial statements.
3
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31
2003 2002
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 10,000 $ (76,000)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Depreciation, depletion, amortization, and valuation allowance 2,000 4,000
(Increase) decrease in accounts receivable (25,000) 17,000
Decrease in other current assets 3,000 -
Decrease in other assets - 3,000
Increase in accounts payable 2,000 17,000
Increase (decrease) in accrued production costs 7,000 (5,000)
Decrease in other accrued expenses (6,000) (8,000)
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Net cash used in operating activities (7,000) (48,000)
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CASH FLOWS FROM INVESTING ACTIVITIES
Other additions to property and equipment (2,000) -
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Net cash used in investing activities (2,000) -
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CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury shares (6,000) -
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Net cash used in financing activities (6,000) -
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NET DECREASE IN CASH AND CASH EQUIVALENTS (15,000) (48,000)
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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 $ 2,082,000 $ 2,070,000
==========================
See accompanying notes to consolidated, condensed financial statements.
4
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, 2003, 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 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 three months ended December 31, 2003, from
$2,097,000 to $2,082,000 because the Company used $7,000 cash in operating
activities, expended $2,000 on other additions to property and equipment, and
expended $6,000 on the acquisition of treasury shares. Accounts receivable
increased from $125,000 to $150,000 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.
5
The Company is currently experiencing modest positive cash flow from operations
because 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 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 4,
2004, the Company had no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Sales increased 100% from $102,000 in the quarter ended December 31, 2002
(Q1FY03"), to $204,000 in the quarter ended December 31, 2003 (Q1FY04"), because
of higher prevailing oil and gas price levels. Production taxes increased 108%
from $12,000 in Q1FY03 to $25,000 in Q1FY04 because of increased sales.
LIQUIDITY
Operating Activities. Net cash used in operating activities decreased from
$48,000 in Q1FY03 to $7,000 in Q1FY04.
Investing Activities. During Q1FY04 the company invested $2,000 in new computer
equipment.
Financing Activities. During Q1FY04 the Company acquired 83,233 shares of its
Common Stock for $6,000.
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 modest net income. 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
managements 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.
6
PART II
OTHER INFORMATION
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: February 9, 2004
By: /s/ STEVEN H. CARDIN
Steven H. Cardin
Chief Executive Officer and Principal
Financial Officer
7
EXHIBIT INDEX
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications