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 March 31, 1996
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.
(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)
(970) 453-6641
(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, and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of issuer's common equity as of April 10, 1996:
13,991,989
Transitional Small Business Disclosure Format:
Yes No X
Page 1 of 6
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1996
(Unaudited)
Assets
<TABLE>
<S> <C>
Current Assets
Cash and cash equivalents $ 1,118,000
Accounts receivable 128,000
Other receivables 22,000
Other 14,000
Total current assets 1,282,000
Property and equipment, at cost
Proved oil and gas properties (successful efforts method) 2,387,000
Other 68,000
2,455,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (2,128,000)
Net property and equipment 327,000
$ 1,609,000
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 19,000
Accrued production costs 44,000
Accrued reclamation, restoration, and dismantlement expense 18,000
Other accrued expenses 23,000
Total current liabilities 104,000
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 14,285,989 shares 143,000
Additional paid-in capital 14,188,000
Accumulated deficit (12,587,000)
Treasury stock, at cost, 294,000 shares at March 31, 1996 (16,000)
Note receivable from stockholder (223,000)
1,505,000
$ 1,609,000
</TABLE>
See accompanying notes to consolidated, condensed financial statements.
Page 2 of 6
<PAGE>
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
March 31 March 31
1996 1995 1996 1995
Revenue
Oil and gas sales $ 231,000 187,000 419,000 384,000
Interest income 18,000 19,000 35,000 34,000
Gain on sale of assets -- -- -- 1,000
Other income 6,000 1,000 14,000 3,000
255,000 207,000 468,000 422,000
Costs and expenses
Lease operating 81,000 83,000 165,000 163,000
Production taxes 23,000 19,000 40,000 43,000
General and administrative 76,000 84,000 157,000 170,000
Exploration -- 5,000 8,000 10,000
Depreciation, depletion, and amortization 18,000 25,000 35,000 47,000
198,000 216,000 405,000 433,000
Net earnings (loss) $ 57,000 (9,000) 63,000 (11,000)
Earnings (loss) per share $ * * * *
Weighted average shares outstanding 14,011,989 14,621,989 14,118,869 14,721,712
</TABLE>
*Less than $.01 per share
See accompanying notes to consolidated, condensed financial statements.
Page 3 of 6
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ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<S> <C> <C>
Six Months Ended
March 31
1996 1995
Cash flows from operating activities
Net earnings (loss) $ 63,000 (11,000)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Gain on sale of assets -- (1,000)
Depreciation, depletion, and amortization 35,000 47,000
Decrease in accounts receivable 10,000 32,000
Decrease in other receivables 7,000 32,000
Decrease in other current assets 1,000 --
Decrease in accounts payable (21,000) (27,000)
Decrease in accrued production costs (11,000) (22,000)
Decrease in accrued reclamation, restoration, and dismantlement (27,000) (14,000)
Decrease in other accrued expenses (20,000) --
Net cash provided by operating activities 37,000 36,000
Cash flows from investing activities
Expenditures for oil and gas property development, net of proceeds (2,000) 3,000
Other additions to property and equipment (1,000) (4,000)
Net cash used in investing activities (3,000) (1,000)
Cash flows from financing activities
Acquisition of treasury stock (19,000) (23,000)
Net cash used in financing activities (19,000) (23,000)
Net increase in cash and cash equivalents 15,000 12,000
Cash and cash equivalents at beginning of period 1,103,000 1,012,000
Cash and cash equivalents at end of period $ 1,118,000 1,024,000
</TABLE>
See accompanying notes to consolidated, condensed financial statements.
Page 4 of 6
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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, con densed financial statements contain
all adjustments necessary to present fairly the financial position of the
Company as of March 31, 1996, its cash flows for the six months ended March 31,
1996 and 1995, and its results of opera tions for the three and six months ended
March 31, 1996 and 1995. Such adjustments consisted only of normal re curring
items. Certain reclassifications have been made to the financial statements for
the three and six months ended March 31, 1995, to conform with the
classifications used in the financial statements for the three and six months
ended March 31, 1996. The results of operations for the periods ended March 31
are not necessarily indica tive 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 1995 Annual Report on Form 10-KSB, and it is suggested that these
consoli dated, condensed financial statements be read in conjunction therewith.
Item 2. Management's Discussion and Analysis or Plan of Operation.
During the six months ended March 31, 1996, other receivables decreased
because the Company received $8,000 in refundable production taxes and also
received $6,000 related to an advance for an unsuccessful recompletion. Accounts
payable decreased because the Company has been paying invoices more promptly.
Accrued production costs decreased because lease operating expenses have
declined. Accrued reclamation, restoration, and dismantle ment expense decreased
because during Q1FY96 the Company expended $28,000 to plug the remaining
unplugged wells in the field discussed below. Other accrued expenses decreased
because the Company received invoices for its previously accrued audit and tax
preparation expense, and because the Company paid its president an accrued
$9,000 bonus. Also included in expenditures for oil and gas property development
during the six months ended March 31, 1995, is a refund of $3,000.
During the six months ended March 31, 1996, the Company retired
approximately 6,400,000 shares of its Common Stock, which had the effect of
reducing Common Stock, par value, by $64,000 and additional paid in capital by
$594,000. During the six months ended March 31, 1996, the Company acquired
341,000 shares of its Common Stock at a total cost of $19,000.
The Company owns a property which contains oil-contaminated soil. At this
time, the Company cannot reasonably predict what reclamation activities may be
required to restore the property, or their costs. However, based on the
Company's preliminary assessment of the contamination and feasible reclamation
alternatives, the Company origi nally estimated that such reclamation and
restoration costs, including the costs of plugging the wells on the prop erty,
could range from $60,000 to $160,000, of which the Company has accrued $60,000.
As of March 31, 1996, the Company had plugged all of the wells on the property
for a total cost of approximately $42,000, which was applied against the
accrual. The Company expects to begin selling equipment from the property and to
commence reclamation and restoration activities during the Summer of 1996.
Currently, Iraq and the United Nations are negotiating an agreement under
which Iraq may be permitted to export limited quantities of oil. The Company
anticipates that oil and gas prices will decline precipitously from current
levels if Iraq returns to the world oil market. At such prices, unless the
Company's production of oil and gas increases as the result of acquisitions of
producing oil and gas properties, successful drilling activities, or successful
recompletions, the Company is likely to experience negative cash flow from
operations in fiscal 1996. Although the Company continually evaluates possible
acquisitions of producing oil and gas properties, the market for such pro
perties has become highly competitive, with properties trading at prices well
above those implied by the Company's acquisition criteria. Therefore, the
Company has not consummated a significant acquisition of interests in producing
oil and gas properties since fiscal 1990.
Page 5 of 6
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With the exception of the Company's intention to acquire producing oil and
gas properties, cash flows that may re sult from such acquisitions, and possible
additional reclamation, restoration, and dismantlement expense, the Com pany
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 produc ing oil and
gas properties, asset sales, or interest income, the Company has no internal or
external sources of liqui dity other than its working capital. At April 10,
1996, the Company had no material commitments for capital expenditures.
Sales increased from Q2FY95 to Q2FY96 because both production and prices of
both oil and gas increased. Sales increased during the six months ended March
31, 1996, as compared to the six months ended March 31, 1995, because the
decline in sales during Q1FY96 was more than offset by the increase during
Q2FY96. Other income increased from Q2FY95 to Q2FY96 because during Q2FY96 the
Company recognized income of $4,000 related to a lease operating expense accrual
for which it is no longer liable, and other income increased for the six months
ended March 31, 1996, as compared to the six months ended March 31, 1995,
because during Q1FY96 the com pany recognized income of $9,000 related to
estimated production tax liability for which it is no longer liable.
General and administrative expense declined from Q2FY95 to Q2FY96 and from
the six months ended March 31, 1995, to the six months ended March 31, 1996,
principally because of reduced rent expense resulting from the termination of
the lease on the Companys Denver office space during FY95. During each of
Q1FY95 and Q2FY95 the Company recognized $5,000 in exploration expense related
to an unsuccessful attempted recompletion. During Q1FY96 the Company recognized
$8,000 in reclamation, restoration, and dismantlement expense related to the
plugging and abandonment of one well in a field in Wyoming. Depreciation,
depletion, and amortization expense declined from Q2FY95 to Q2FY96 and from the
six months ended March 31, 1995, to the six months ended March 31, 1996, because
the Companys basis in its property and equipment declined. Net income increased
from Q2FY95 to Q2FY96 and from the six months ended March 31, 1995, to the six
months ended March 31, 1996, because, for both the three and six month periods,
revenue increased and expenses declined.
The Company's sales and net income 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 decrease 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. With the exception of
unanticipated variations in production levels, possible additional reclamation,
restoration, and dismantlement expense, and price declines resulting from Iraqs
return to the world oil markets, the Company is not aware of any other trends,
events, or uncertainties that have had or that are reasonably expect ed to have
a material impact on sales or revenue or income from continuing operations.
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: April 17, 1996 By: /s/ STEVEN H. CARDIN
Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
Page 6 of 6
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,118,000
<SECURITIES> 0
<RECEIVABLES> 150,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,282,000
<PP&E> 2,455,000
<DEPRECIATION> (2,128,000)
<TOTAL-ASSETS> 1,609,000
<CURRENT-LIABILITIES> 104,000
<BONDS> 0
0
0
<COMMON> 143,000
<OTHER-SE> 1,362,000
<TOTAL-LIABILITY-AND-EQUITY> 1,609,000
<SALES> 231,000
<TOTAL-REVENUES> 255,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 198,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 57,000
<INCOME-TAX> 57,000
<INCOME-CONTINUING> 57,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
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