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 December 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.
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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)
(970) 453-6641
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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, 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 Stock as of January 8, 1996:
13,762,489
Transitional Small Business Disclosure Format:
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996
(UNAUDITED)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,279,000
Accounts receivable 136,000
Other receivables 21,000
Other 2,000
Total current assets 1,438,000
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 2,375,000
Other 69,000
2,444,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (2,147,000)
Net property and equipment 297,000
$ 1,735,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 71,000
Accrued production costs 35,000
Other accrued expenses 30,000
Total current liabilities 136,000
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 13,840,989 shares 138,000
Additional paid-in capital 14,169,000
Accumulated deficit (12,482,000)
Treasury stock, at cost, 38,500 shares at December 31, 1996 (3,000)
Note receivable from stockholder (223,000)
1,599,000
$ 1,735,000
</TABLE>
See accompanying notes to consolidated, condensed financial statements.
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ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED
DECEMBER 31
1996 1995
REVENUE
Oil and gas sales $ 261,000 188,000
Interest 20,000 17,000
Other (5,000) 8,000
276,000 213,000
COSTS AND EXPENSES
Lease operating 78,000 84,000
Production taxes 31,000 17,000
General and administrative 78,000 81,000
Reclamation, restoration, and dismantlement 10,000 8,000
Depreciation, depletion, and amortization 13,000 17,000
210,000 207,000
NET EARNINGS $ 66,000 6,000
EARNINGS PER SHARE $ * *
WEIGHTED AVERAGE SHARES OUTSTANDING 13,826,728 14,224,587
*Less than $.01 per share
</TABLE>
See accompanying notes to consolidated, condensed financial statements.
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ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
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THREE MONTHS ENDED
DECEMBER 31
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 66,000 6,000
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion, and amortization 13,000 17,000
Decrease in accounts receivable 5,000 7,000
Decrease in other receivables 2,000 11,000
Decrease in other current assets -- 1,000
Increase (decrease) in accounts payable 33,000 (9,000)
Increase (decrease) in accrued production costs (7,000) 1,000
Decrease in accrued reclamation, restoration, and dismantlement (70,000) (28,000)
Decrease in other accrued expenses (12,000) (24,000)
Net cash provided by (used in) operating activities 30,000 (18,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for oil and gas property development (2,000) --
Other additions to property and equipment -- (1,000)
Net cash used in investing activities (2,000) (1,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury stock (3,000) (17,000)
Net cash used in financing activities (3,000) (17,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,000 (36,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,254,000 1,103,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,279,000 1,067,000
</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, condensed financial statements contain all adjustments
necessary to present fairly the financial position of the Company as of December
31, 1996, and its cash flows and results of operations for the three months then
ended. Such adjustments consisted only of normal recurring items. Certain
reclassifications have been made to the financial statements for the three
months ended December 31, 1995, to conform with the classifications used in the
financial statements for the three months ended December 31, 1996. 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 1996 Annual Report
on Form 10-KSB, and it is suggest ed 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 contained in this Form 10-QSB that are not historical facts 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 price of oil and natural gas, the risks associated with exploration
and production in the Rocky Mountain region, the Company's ability to find,
acquire, market, develop, and produce new properties, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Cash and cash equivalents increased from September 30, 1996, to December 31,
1996, principally because of net cash provided by operating activities. Accounts
payable increased because the Company received invoices that remained unpaid at
December 31, 1996, for work done in connection with the reclamation of the
Company's East Tisdale Field, discussed below. Accrued production costs
decreased because lease operating expense declined. Accrued reclamation,
restoration, and dismantlement expense decreased because, during the three
months ended December 31, 1996, the Company was invoiced for all estimated
expenses accrued at September 30, 1996, in connection with the reclamation of
the Company's East Tisdale Field, discussed below. Net cash provided by
operating activities increased during the three months ended December 31, 1996,
as compared to the three months ended December 31, 1995, because of increased
net earnings.
The Company is in the process of reclaiming its East Tisdale Field, which
contained oil-contaminated soil. All wells have been plugged and abandoned, all
oil-contaminated soil has been excavated and road-spread, and all pits have been
backfilled. The Company does not believe that substantial work remains to
complete reclamation and restoration, but the Bureau of Land Management, the
Wyoming Oil and Gas Conservation Commission, the Wyoming Department of
Environmental Quality, and private landowners will probably inspect the field in
Summer 1997 and may, at that time, ask the Company to perform additional
remediation. At this time, the Company cannot reasonably predict what additional
remediation measures, if any, the Company will be required to perform to
complete reclamation and restoration.
In Summer 1996 a representative of the US Fish and Wildlife Service advised the
Company by telephone that a number of dead birds had been found in oil saturated
pits in the East Tisdale Field and that, therefore, the Company was under
investigation for possible violations of the Migratory Bird Treaty Act, which
imposes criminal penalties on a strict liability basis of up to $10,000 per bird
on any person, including a corporation, who, by any means or manner, kills any
migratory bird. To date the Company has not received any formal notice of such
investigation, and the Company cannot reasonably estimate what penalty, if any,
may be assessed against it for any violation of the Act. No other individual,
group, or regulatory authority has indicated any intention to bring a claim or
complaint in connection with the East Tisdale Field.
The Company regularly assesses its exposure to both environmental liability and
reclamation, restoration, and dismantlement expense. With the exception of
liability under the Migratory Bird Treaty Act discussed above, the Company does
not believe that it currently has any material exposure to environmental
liability, although this cannot be assured. Nor does it believe that
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reclamation, restoration, and dismantlement, net of salvage value, associated
with the abandonment of any property other than the East Tisdale Field will be
material, although this cannot be assured.
Currently, oil and gas prices are at six-year highs. Neither management nor the
oil and gas futures markets currently believe that current price levels are
sustainable. At substantially lower 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 at some point
in the future. Although the Company continually evaluates possible acquisitions
of producing oil and gas properties, the market for such properties has become
highly competitive, with properties trading at prices well above those implied
by the Company's acquisition criteria.
With the exception of the Company's intention to acquire producing oil and gas
properties, cash flows that may result from such acquisitions, and penalties
that may be assessed under the Migratory Bird Treaty Act, 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, or interest income, the Company has no internal or
external sources of liquidity other than its working capital. At January 8,
1997, the Company had no material commitments for capital expenditures.
Sales increased during the three months ended December 31, 1996, as compared to
the three months ended December 31, 1995, because of higher effective prices per
barrel of oil equivalent. Other income consists of a multitude of miscellaneous
items, including adjustments to sales, production taxes, and lease operating
expense in prior periods reported currently by operators of properties in which
the Company has an interest. For the three months ended December 31, 1996, such
items included a negative adjustment of $5,000 to estimated refundable
production taxes, and, for the three months ended December 31, 1995, such items
included positive adjustments of $11,000 to previously recognized production
taxes.
Lease operating expense decreased during the three months ended December 31,
1996, because of reduced repairs and maintenance expense. Production taxes
increased because of increased sales. Depreciation, depletion, and amortization
expense decreased because the Company's basis in its depreciable and depletable
assets declined. Net earnings increased because oil and gas sales increased.
Production of oil and gas from the Company's interests in wells in Utah and
Wyoming account for substantially all of the Company's oil and gas sales.
Certain parties are building a pipeline that will bring substantial quantities
of Canadian crude oil into Wyoming. The pipeline is scheduled to be operational
on April 1, 1997, and crude oil purchasers have indicated to the Company that
they intend to stop paying premiums to posted prices and to begin charging for
transportation once the pipeline is operational. The Company believes that the
pipeline will materially increase the supply of crude oil in Wyoming, which may
have a material adverse effect on Utah and Wyoming crude oil prices, and, thus,
on the level of oil and gas sales and net income the Company would otherwise
have experienced.
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 work overs, 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, unanticipated environmental expense, and
price declines resulting from a general decline from current high levels or
price declines resulting from a material increase in the supply of crude oil in
Wyoming, 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 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 under signed, thereunto duly
authorized.
ALTEX INDUSTRIES, INC.
Date: January 14, 1997 By: /s/ STEVEN H. CARDIN
Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
OF ALTEX INDUSTRIES, INC. FOR THE QUARTER ENDED 12/31/96, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,279,000
<SECURITIES> 0
<RECEIVABLES> 157,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,438,000
<PP&E> 2,444,000
<DEPRECIATION> 2,147,000
<TOTAL-ASSETS> 1,735,000
<CURRENT-LIABILITIES> 136,000
<BONDS> 0
0
0
<COMMON> 138,000
<OTHER-SE> 1,461,000
<TOTAL-LIABILITY-AND-EQUITY> 1,735,000
<SALES> 261,000
<TOTAL-REVENUES> 276,000
<CGS> 0
<TOTAL-COSTS> 210,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 66,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 66,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
