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 June 30, 1999
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.)
POB 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 Stock as of August 4, 1999:
15,735,491
Transitional Small Business Disclosure Format:
Yes No X
Page 1 of 7
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,634,000
Accounts receivable 50,000
Other receivables 12,000
Other 2,000
Total current assets 1,698,000
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 2,139,000
Other 71,000
2,210,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (2,108,000)
Net property and equipment 102,000
OTHER ASSETS 34,000
$ 1,834,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,000
Accrued production costs 34,000
Accrued reclamation, restoration, and dismantlement 4,000
Other accrued expenses 34,000
Total current liabilities 78,000
---------------
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 15,770,491 shares 158,000
Additional paid-in capital 14,282,000
Treasury stock, at cost, 35,000 shares at June 30, 1999 (3,000)
Accumulated deficit (12,322,000)
Note receivable from stockholder (359,000)
1,756,000
$ 1,834,000
</TABLE>
See accompanying notes to consolidated, condensed financial statements.
Page 2 of 7
<PAGE>
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
REVENUE
Oil and gas sales $ 94,000 142,000 288,000 525,000
Interest income 23,000 28,000 72,000 82,000
Other income 1,000 (2,000) 4,000 5,000
118,000 168,000 364,000 612,000
COSTS AND EXPENSES
Lease operating 51,000 74,000 184,000 194,000
Production taxes 9,000 16,000 33,000 60,000
General and administrative 85,000 85,000 273,000 278,000
Reclamation, restoration, and dismantlement -- -- 1,000 --
Depreciation, depletion, amortization, and valuation allowance 5,000 7,000 54,000 22,000
150,000 182,000 545,000 554,000
NET EARNINGS (LOSS) $ (32,000) (14,000) (181,000) 58,000
EARNINGS (LOSS) PER SHARE $ * * (0.01) *
WEIGHTED AVERAGE SHARES OUTSTANDING 15,735,491 15,572,364 15,737,414 15,526,670
</TABLE>
*Less than $.01 per share
See accompanying notes to consolidated, condensed financial statements.
Page 3 of 7
<PAGE>
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
<TABLE>
<S> <C> <C>
NINE MONTHS ENDED
JUNE 30
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (181,000) 58,000
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion, amortization, and valuation allowance 54,000 22,000
Decrease in accounts receivable 41,000 22,000
Decrease (increase) in other receivables 7,000 (2,000)
Decrease in other current assets -- 2,000
Decrease in accounts payable (8,000) (16,000)
Increase (decrease) in accrued production costs 7,000 (13,000)
Decrease in accrued reclamation, restoration, and dismantlement (16,000) --
Increase in other accrued expenses 1,000 6,000
Net cash provided by (used in) operating activities (95,000) 79,000
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets -- 1,000
Expenditures for oil and gas property acquisitions -- (4,000)
Expenditures for oil and gas property development (2,000) (7,000)
Net cash used in investing activities (2,000) (10,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury stock (3,000) (11,000)
Net cash used in financing activities (3,000) (11,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (100,000) 58,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,734,000 1,675,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,634,000 1,733,000
</TABLE>
See accompanying notes to consolidated, condensed financial statements.
Page 4 of 7
<PAGE>
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,
1999, and the cash flows and results of operations for the three and nine months
then ended. Such adjustments consisted only of normal recurring items. Certain
reclassifications have been made to the financial statements for the three and
nine months ended June 30, 1998, to conform with the classifications used in the
financial statements for three and nine months ended June 30, 1999. 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 1998 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. Information included in this document includes
forward-looking statements that can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "believe,"
"estimate," or "continue," or the negative thereof or other variations thereon
or comparable terminology. The statements and disclaimers in this Quarterly
Report on Form 10-QSB constitute cautionary statements identifying important
factors, including risks and uncertainties, with respect to such forward-looking
statements that could cause actual results to differ materially from those
reflected in such forward-looking statements.
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FINANCIAL CONDITION
Cash and cash equivalents decreased from $1,734,000 to $1,634,000 during the
nine months ended June 30, 1999, principally because of net cash used in
operating activities. Accounts receivable decreased from $91,000 at September
30, 1998, to $50,000 at June 30, 1999, because of decreased sales. Other
receivables decreased from $19,000 at September 30, 1998, to $12,000 at June 30,
1999, because, during the three months ended March 31, 1999 ("Q2FY99"), the
Company collected refundable production taxes receivable.
The Company is completing the restoration of the area that had contained its
East Tisdale Field in Johnson County, Wyoming. During the three months ended
December 31, 1998 ("Q1FY99"), the Company expended $16,000 of $20,000 it has
accrued for reclamation, restoration, and dismantlement expense ("RR&D") related
to the Field. The Company has removed all equipment from, 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 of Wyoming 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 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.
Page 5 of 7
<PAGE>
Unless the Company's production of oil and gas increases as the result of future
acquisitions of producing oil and gas properties, successful drilling
activities, or successful recompletions, the Company is likely to continue to
experience negative cash flow from operations. 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 the Company's intention to acquire producing oil and gas properties,
and cash flows that may result from such acquisitions, 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 June 30, 1999,
the Company had no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Sales decreased from $142,000 for the three months ended June 30, 1998
("Q3FY98"), to $94,000 for the three months ended June 30, 1999 ("Q3FY99"),
because a 41% decrease in barrels of oil equivalent ("BOE") sold was only
partially offset by a 12% increase in average realized price per BOE. Sales
decreased from $525,000 for the nine months ended June 30, 1998, to $288,000 for
the nine months ended June 30, 1999, because a 23% decline in BOE sold was
exacerbated by a 29% decline in average realized price per BOE. Interest income
decreased from $28,000 for Q3FY98 to $23,000 for Q3FY99 and from $82,000 for the
nine months ended June 30, 1998, to $72,000 for the nine months ended June 30,
1999, because of lower cash balances and lower realized interest rates. Lease
operating expense decreased from $74,000 for Q3FY98 to $51,000 for Q3FY99 and
from $194,000 for the nine months ended June 30, 1998, to $184,000 for the nine
months ended June 30, 1999, because of decreased repair and maintenance expense.
Production taxes decreased from $16,000 for Q3FY98 to $9,000 for Q3FY99 and from
$60,000 for the nine months ended June 30, 1998, to $33,000 for the nine months
ended June 30, 1999, because of decreased sales. Included in depreciation,
depletion, amortization, and valuation allowance ("DDA&V") for the nine months
ended June 30, 1999, is $14,000 in depreciation and depletion expense and a
valuation allowance of $40,000. Net earnings decreased from a loss of $14,000
for Q3FY98 to a loss of $32,000 for Q2FY99 and from earnings of $58,000 for the
nine months ended June 30, 1998, to a loss of $181,000 for the nine months ended
June 30, 1999, because of reduced sales and the recognition of the valuation
allowance at December 31, 1998.
LIQUIDITY
Operating Activities. Cash provided by (used in) operating activities declined
from positive $79,000 for the nine months ended June 30, 1998, to negative
$95,000 for the nine months ended June 30, 1999, because of reduced earnings.
Investing Activities. During the nine months ended June 30, 1998, the Company
realized proceeds of $1,000 from the sale of assets and expended $4,000 for oil
and gas property acquisitions and $7,000 for oil and gas property development.
During the nine months ended June 30, 1999, the Company expended $2,000 for oil
and gas property development.
Financing Activities. The Company expended $11,000 and $3,000 to repurchase
141,000 and 35,000 of its shares during the nine months ended June 30, 1998 and
1999, respectively.
The Company's revenues 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 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 changes in the prices of oil, natural gas, and natural gas
liquids, unanticipated variations in production levels, unanticipated RR&D, and
unanticipated environmental expense, 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.
YEAR 2000 ISSUES
The so-called Year 2000 ("Y2K") Problem arose because many existing computer
programs use only the last two digits to refer to a year and, therefore, cannot
distinguish between a year that begins with "20" and one that begins with "19."
If not corrected, many computer applications could fail or create erroneous
results when references to the Year 2000 become necessary.
Page 6 of 7
<PAGE>
RISKS AND STATE OF READINESS
The Company has completed its assessment of its state of readiness, and the
Company believes it faces three kinds of risks as a result of the Year 2000
Problem: (1) Will hardware and software related to oil and gas production
facilities fail as a result of the Y2K Problem? (2) Will back-office hardware or
software fail as a result of the Y2K Problem? (3) Will unresolved Y2K Problems
of third parties on whom the Company is dependent cause material adverse
consequences to the Company?
Production Facilities. The Company operates only one producing well. The Company
does not believe that any equipment associated with that well is susceptible to
the Y2K Problem, but this cannot be assured. If critical production equipment is
not Y2K ready, production could cease or hydrocarbon contamination of the
production facility could occur.
Back-Office Facilities. The Company's back-office operations depend upon the
following hardware: three Intel-chip-based microcomputers and associated
peripheral devices, one AT&T Partner Plus telephone system, one Hewlett Packard
inkjet fax machine, and one Pitney Bowes postage meter. The Company has tested
the telephone system, fax machine, and postage meter and is confident that they
are Y2K ready. All three computers are Y2K ready. The Company does not believe
that any of its peripheral devices are subject to Y2K issues. All of the
Company's software is off-the-shelf software provided by world-class vendors.
The Company believes that all software critical to its back-office functions is
currently Y2K ready.
Third Parties. The Company is inquiring of relevant third parties regarding
their state of readiness. Virtually all of the Company's revenue consists of oil
and gas sales and interest income. All cash flow from oil and gas sales results
from remittances to the Company from operators or purchasers of oil and gas
production in which the Company has an interest. Should any operator or
purchaser of production in which the Company has an interest suffer system
failures due to Y2K problems, either in their production or back-office systems,
revenue flowing to the Company could be interrupted. Similarly, should any
financial institution in which the Company deposits its cash suffer system
failures due to Y2K problems, the Company's cash flow from interest income could
be interrupted, and the Company's access to its cash could be delayed. Because
the Company is not significant to any third party, the Company does not have
leverage in dealing with potential problems.
COSTS AND CONTINGENCY PLANS
The Company does not believe that costs associated with achieving Y2K readiness
will exceed $1,000, but this cannot be assured. The Company neither has nor
plans to adopt formal contingency plans for unanticipated Y2K problems.
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27. Financial Data Schedule - Submitted only in electronic format, pursuant
to Item 601(c) of Regulation S-B
(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: August 11, 1999 By: /s/ STEVEN H. CARDIN
- ----------------------- --------------------------
Steven H. Cardin
Chief Executive Officer and
Principal Financial Officer
Page 7 of 7
<PAGE>
Exhibit Index
27 Financial Data Schedule - Submitted only in electronic format, pursuant to
Item 601(c) of Regulation S-B
<TABLE> <S> <C>
<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 06/30/99, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,634,000
<SECURITIES> 0
<RECEIVABLES> 62,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,698,000
<PP&E> 2,210,000
<DEPRECIATION> 2,108,000
<TOTAL-ASSETS> 1,834,000
<CURRENT-LIABILITIES> 78,000
<BONDS> 0
0
0
<COMMON> 158,000
<OTHER-SE> 1,598,000
<TOTAL-LIABILITY-AND-EQUITY> 1,834,000
<SALES> 94,000
<TOTAL-REVENUES> 118,000
<CGS> 0
<TOTAL-COSTS> 150,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (32,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,000)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
