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Previous: IEA INCOME FUND VI, 8-K, EX-2.2, 2000-12-28 |
Next: ALTEX INDUSTRIES INC, 10KSB, EX-27, 2000-12-28 |
Average Production
Net Production Average Price Cost Per Equivalent
Barrel ("BOE")
Fiscal Year Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf)
2000 18,000 106,000 $ 27.22 $ 2.65 $ 8.43
1999 17,000 121,000 15.94 1.51 7.59
1998 23,000 205,000 13.65 1.73 6.23
=============== =============== =============== ============= ============= ============================
>
Drilling Activity: The
Company participated in the drilling of one development well in fiscal 1998
(“FY98”) and did not participate in the drilling of any wells during
fiscal 1999 (“FY99”) or fiscal 2000 (“FY00”)
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
THE Company's Common Stock is quoted on the OTC Bulletin Board under the symbol
“ALTX”. Inter-dealer prices provided by the OTC Bulletin Board, which do not
include retail mark-up, mark-down, or commission, and may not represent actual
transactions, are listed in the table below.
FY00 FY99
--------------------------- ---------------------------
Quarter High Bid Low Bid High Bid Low Bid
------------- ------------- ------------ ------------- ------------
1 $0.07 $0.05 $0.08 $0.04
2 0.42 0.05 0.07 0.04
3 0.18 0.06 0.07 0.05
4 0.12 0.07 0.09 0.05
At December 20, 2000, there
were approximately 5,000 holders of record of the Company’s Common Stock,
excluding entities whose stock is held by clearing agencies. The Company has not
paid a dividend during the last two fiscal years.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FINANCIAL CONDITION
Cash balances increased
principally because of net cash provided by operating activities. Accounts
receivable increased because sales in the fourth quarter of FY00 were higher
than sales in the fourth quarter of FY99. The Company is completing the
restoration of the area that had contained its East Tisdale Field in Johnson
County, Wyoming. The Company recognized $20,000 in RR&D expense related to
the field in 1998 and expended $16,000 and $3,000 on RR&D activities in the
field in FY99 and FY00, respectively. 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. During
FY00 the Company acquired 156,166 shares of its common stock for
Operating Activities. In FY00 cash provided by operations was $112,000, and in FY99 cash used in operations was $68,000. Cash provided by operations increased principally due to the increase in net earnings.
Investing Activities. In FY00 the Company expended $6,000 on other capital expenditures, and in FY99 the Company expended $2,000 on oil and gas property.
Financing Activities. In FY00 the Company expended $9,000 to acquire 156,166 shares of treasury stock, and in FY99 the Company expended $4,000 to acquire 53,000 shares of treasury stock.
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 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 December 20, 2000, nominal world oil prices and nominal domestic natural gas prices were unusually high, and both the Company and the futures markets expect price levels to decline. Unless prices remain at the current high levels, the Company is unlikely to experience material positive earnings unless it dramatically increases production levels. With the exception of unanticipated variations in production levels, unanticipated RR&D, unanticipated environmental expense, and current high oil price levels, 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 the net sales or revenues or income from continuing operations.
3(i) Articles of Incorporation - Incorporated herein by reference to Exhibit B to August 20, 1985 Proxy Statement 3(ii) Bylaws - Incorporated herein by reference to Exhibit C to August 20, 1985 Proxy Statement 10 Steven H. Cardin Employment Agreement - Incorporated herein by reference to Exhibit A to Form 10-K for fiscal year ended September 30, 1989 and by reference to the Exhibit to Form 10-QSB for the quarterly period ended March 31, 1997 21 List of subsidiaries - Incorporated herein by reference to Form 10-KSB for fiscal year ended September 30, 1997 27 Financial Data Schedule - Submitted only in electronic format herewith, pursuant to Item 601(c) of Regulation S-B
(b) Reports on Form 8-K . On August 22, 2000, the Company filed a report on Form 8-K reporting the intention of its subsidiary, Altex Oil Corporation (“AOC”), to sell substantially all of its interests in producing oil and gas properties. On November 29, 2000, the Company filed a report on Form 8-K reporting the sale of certain of AOC’s interests in producing oil gas properties.We have audited the accompanying consolidated balance sheet of Altex Industries, Inc. and subsidiary as of September 30, 2000, and the related consolidated statements of operations, stockholder’ equity, and cash flows for each of the the years in the two-year period ended September 30, 2000. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Altex Industries, Inc. and subsidiary as of September 30, 2000, and the results of their operations and their cash flows for each of the years in the two-year period ended September 30, 2000, in conformity with generally accepted accounting principles.
Higgins, Meritt &Burdick, P.C. Denver, Colorado October 26, 2000
Current assets
Cash and cash equivalents $ 1,757,000
Accounts receivable 101,000
Other receivables 16,000
Other 2,000
===========
Total current assets 1,876,000
Property and equipment, at cost
Proved oil and gas properties (successful efforts method) (Notes 6 and 8) 2,139,000
Other 64,000
===========
2,203,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (2,120,000)
===========
Net property and equipment 83,000
Other assets 29,000
===========
$ 1,988,000
Liabilities and Stockholders' Equity
Current liabliities
Accounts payable $ 21,000
Accrued production costs 38,000
Accrued reclamation, restoration, and dismantlement 1,000
Other accrued expenses 46,000
===========
Total current liabilities 106,000
Stockholders' equity (Note 3)
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, 15,561,325 shares issued and outstanding 156,000
Additional paid-in capital 14,271,000
Accumulated deficit (12,186,000)
Notes receivable from stockholders (359,000)
============
1,882,000
============
Commitments and Contingencies (Notes 3, 5, and 6)
$ 1,988,000
See accompanying notes to consolidated financial statements.
2000 1999
===================================
Revenue
Oil and gas sales $ 771,000 454,000
Interest (Note 3) 109,000 96,000
Other income 3,000 4,000
===================================
883,000 554,000
===================================
Costs and expenses
Lease operating 301,000 230,000
Production taxes 85,000 52,000
General and administrative (Note 3) 362,000 355,000
Exploration 1,000 --
Reclamation, restoration, and dismantlement (Note 6) 16,000 1,000
Depreciation, depletion, and amortization 14,000 65,000
===================================
779,000 703,000
===================================
Net earnings (loss) $ 104,000 (149,000)
Earnings (loss) per share of common stock $0.01 ($0.01)
===================================
Weighted average shares outstanding 15,593,050 15,733,181
See accompanying notes to consolidated financial statements.
Common Stock Additional Accumulated Treasury Note receivable Total
paid-in deficit stock from stockholders'
capital shareholder equity
Shares Amount
===========================================================================================
Balances at September 30, 1998 15,770,491 $158,000 14,282,000 (12,141,000) -- (359,000) 1,940,000
Net loss -- -- -- (149,000) -- -- (149,000)
Acquisition of Treasury stock,
53,000 shares at $0.08 per share -- -- -- -- (4,000) -- (4,000)
Retirement of Treasury stock (53,000) (1,000) (3,000) -- 4,000 -- --
===========================================================================================
Balances at September 30, 1999 15,717,491 157,000 14,279,000 (12,290,000) -- (359,000) 1,787,000
Net earnings -- -- -- 104,000 -- -- 104,000
Acquisition of Treasury stock,
156,000 shares at $0.06 per share -- -- -- -- (9,000) -- (9,000)
Retirement of Treasury stock (156,166) (1,000) (8,000) -- 9,000 -- --
===========================================================================================
Balances at September 30, 2000 15,561,325 $156,000 14,271,000 (12,186,000) -- (359,000) 1,882,000
See accompanying notes to consolidated financial statements.
2000 1999
================================
Cash flows from operating activities
Net earnings (loss) $ 104,000 (149,000)
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion, and amortization 14,000 65,000
(Increase) decrease in accounts receivable (30,000) 20,000
(Increase) decrease in other receivables (3,000) 6,000
Decrease in other assets 4,000 1,000
Increase in accounts payable 5,000 2,000
Increase in accrued production costs 10,000 1,000
Decrease in accrued restoration, reclamation, and dismantlement (3,000) (16,000)
Increase in other accrued expenses 11,000 2,000
--------------------------------
Net cash provided by (used in) operating activities 112,000 (68,000)
--------------------------------
Cash flows from investing activities
Oil and gas property development expenditures -- (2,000)
Other capital expenditures (6,000) --
--------------------------------
Net cash used in investing activities (6,000) (2,000)
--------------------------------
Cash flows used in financing activities
Acquisition of treasury stock (9,000) (4,000)
--------------------------------
Net increase (decrease) in cash and cash equivalents 97,000 (74,000)
--------------------------------
Cash and cash equivalents at beginning of year 1,660,000 1,734,000
--------------------------------
Cash and cash equivalents at end of year $ 1,757,000 1,660,000
See accompanying notes to consolidated financial statements.
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Property and Equipment: The Company follows the successful efforts method of accounting for oil and gas operations, under which exploration costs, including geological and geophysical costs, annual delay rentals, and exploratory dry hole costs, are charged to expense as incurred. Costs to acquire unproved properties, to drill and equip exploratory wells that find proved reserves, and to drill and equip development wells are capitalized. Capitalized costs relating to proved oil and gas properties are depleted on the units-of-production method based on estimated quantities of proved reserves and estimated RR&D. Upon the sale or retirement of property and equipment, the cost thereof and the accumulated depreciation, depletion, or valuation allowance are removed from the accounts, and the resulting gain or loss is credited or charged to operations. Actual RR&D expense in excess of estimated RR&D expense is charged to operations.
Impairment of Long-Lived Assets: The Company assesses long-lived assets for impairment when circumstances indicate that the carrying value of such assets may not be recoverable. This review compares the asset’s carrying value with management’s best estimate of the asset’s expected future undiscounted cash flows without interest costs. If the expected future cash flows exceed the carrying value, no impairment is recognized. If the carrying value exceeds the expected future cash flows, an impairment equal to the excess of the carrying value over the estimated fair value of the asset is recognized. No such impairment may be restored in the future. The Company’s proved oil and gas properties are assessed for impairment on an individual field basis. The Company recognized impairments of $43,000 for the year ended September 30, 1999.
Cash Equivalents: For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Income Taxes: The Company follows the asset and liability method of accounting for deferred income taxes. The asset and liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between financial accounting and tax bases of assets and liabilities.
Earnings Per Share: Earnings per share of common stock is based upon the weighted average number of shares of common stock outstanding during the year.NOTE 2 - INCOME TAXES. At September 30, 2000, the Company had net operating loss, depletion, and investment tax credit carryforwards for income tax purposes of $2,323,000, $836,000, and $2,000, respectively. If not utilized, the net operating losses will expire during the period from 2001 through 2019, and the investment tax credit carryforwards will expire during the period 2001. The approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax assets at September 30, 2000, computed in accordance with SFAS No. 109, is as follows:
Deferred Tax Assets
Net operating loss carryforward $ 813,000
Depletion carryforward 293,000
Investment tax credit carryforward 2,000
Tax basis of assets written off for financial statement purposes 688,000
Depletion, depreciation, amortization, and valuation allowance for financial statement
purposes in excess of amounts for income tax purposes 5,000
--------------
Total Gross Deferred Tax Assets 1,801,000
Less valuation allowance (1,801,000)
--------------
Net Deferred Tax Asset $ --
==============
Income tax expense is different from amounts computed by applying the statutory Federal income tax rate for the following reasons:
2000 1999
===============================
Tax (benefit) expense at 34% of net earnings (loss) $ 35,000 (51,000)
Change in valuation allowance for net deferred tax assets (756,000) (712,000)
Expiration of tax carryforwards 747,000 745,000
Other (26,000) (18,000)
-------------------------------
Income tax expense $ -- --
===============================
NOTE 3 - RELATED PARTY TRANSACTIONS. Pursuant to an employment agreement with the Company, the Company’s president has purchased from the Company 2,383,615 shares of the Company’s common stock at a price of $.09375 per share and 1,376,249 shares at a price of $0.06 per share in exchange for a $306,000 note receivable. The Company’s two non-executive directors have each purchased 155,544 shares of the Company’s common stock from the Company at a price of $0.17 per share in exchange for notes receivable from each of $26,500. Each of the three notes is non-recourse, secured by the respective shares, due on September 30, 2002, and bears interest at the Applicable Federal Rate. The principal amount of the notes can be paid with shares of the Company’s common stock. The Company will reimburse the president and the directors for interest expense related to the notes, and will indemnify them against additional tax due as a result of such reimbursement and indemnification. The Company recognized $17,000 of both interest income and general and administrative expense related to the notes in 2000 and 1999. The president’s employment agreement also provides that he will receive an annual bonus equal to no less than 10% of the Company’s earnings before income tax. At September 30, 2000, the Company had accrued bonus expense of $12,000.
NOTE 4 - MAJOR CUSTOMERS. In 2000 and 1999 the Company had, respectively, three and two customers who individually accounted for 10% or more of the Company’s revenue and who, in aggregate, accounted for 88% and 80% of revenue in 2000 and 1999, respectively. In 2000 the three customers individually accounted for 58% , 17%, and 13% of revenue; and in 1999 the two customers individually accounted for 64% and 16% of revenue.
NOTE 5 - LEASES. The Company rents office space under a noncancellable operating lease that expires in April 2004. At September 30, 2000, required future payments under the lease are $21,000 for each of the years ending September 30, 2001 through September 30, 2003, and $12,000 for the year ended September 30, 2004. In 2000 and 1999 the Company incurred rent expense of $21,000.
NOTE 6 - RECLAMATION, RESTORATION, AND DISMANTLEMENT. The Company is completing the restoration of the area that had contained its East Tisdale Field in Johnson County, Wyoming. The Company recognized $20,000 in RR&D expense related to the field in 1998 and expended $3,000 and $16,000 on RR&D activities in the field in 2000 and 1999, respectively. 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.
NOTE 7 - SUBSEQUENT EVENT. On November 16, 2000, the Company received approximately $439,000 cash proceeds from the sale of substantially all of its interests in the Altamont-Bluebell Field in Utah, and approximately $62,000 cash proceeds from the sale of various other interests in producing oil and gas properties in Colorado, Oklahoma, and Wyoming. The assets sold represented approximately 9% of the Company’s proved, developed, producing reserves estimated as of September 30, 2000. The Company is attempting to sell substantially all of its interests in producing oil and gas properties for cash, provided that certain target prices are realized.
NOTE 8 - SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED). The Company’s operations are confined to the continental United States, and all of the Company’s reserves are proved developed. Prices and costs in the tables below have been estimated using prices and costs in effect at the end of the years indicated. Prices are estimated net of estimated quality and transportation adjustments. Income tax expense is not reflected in the tables below because of the anticipated utilization of net operating loss carryforwards and tax credits. The estimation of reserves is complex and subjective, and reserve estimates tend to fluctuate in light of new production data.
I. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
September 30, 2000
================
Proved properties $ 2,139,000
Accumulated depreciation, depletion, amortization, and valuation allowance (2,061,000)
----------------
Net capitalized cost $ 78,000
` ================
II. ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES
Oil in Barrels Gas in Mcfs
===========================================
Balance at September 30, 1998 100,000 1,283,000
Revisions of previous estimates 59,000 (612,000)
Production (17,000) (121,000)
-------------------------------------------
Balance at September 30, 1999 142,000 550,000
Revisions of previous estimates 30,000 356,000
Production (18,000) (106,000)
-------------------------------------------
Balance at September 30, 2000 154,000 800,000
===========================================
III. PRESENT VALUE OF ESTIMATED FUTURE NET REVENUE
At September 30
2000 1999
===========================================
Estimated future revenue $ 7,170,000 4,329,000
Estimated future expenditures (4,495,000) (2,708,000)
-------------------------------------------
Estimated future net revenue 2,675,000 1,621,000
10% annual discount of estimated future net revenue (1,003,000) (569,000)
-------------------------------------------
Present value of estimated future net revenue $ 1,672,000 1,052,000
===========================================
IV. SUMMARY OF CHANGES IN PRESENT VALUE OF ESTIMATED FUTURE NET REVENUE
Year ended September 30
2000 1999
===========================================
Present value of estimated future net revenue, beginning of year $ 1,052,000 655,000
Sales, net of production costs (385,000) (172,000)
Net change in prices and costs of future production 372,000 744,000
Revisions of quantity estimates 520,000 (194,000)
Accretion of discount 105,000 65,000
Change in production rates and other $ 8,000 (46,000
-------------------------------------------
Present value of estimated future net revenue, end of year $ 1,672,000 1,052,000
===========================================
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