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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, 2004
[ ] 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)
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 7, 2005:
14,877,117
Transitional Small Business Disclosure Format: Yes No X
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Page 1 of 7
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2004
(Unaudited)
ASSETS
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CURRENT ASSETS
Cash and cash equivalents $ 2,104,000
Accounts receivable 147,000
Other 3,000
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Total current assets 2,254,000
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PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 1,076,000
Other 63,000
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1,139,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,084,000)
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Net property and equipment 55,000
Other assets 17,000
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$ 2,326,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Accounts payable $ 16,000
Accrued production costs 53,000
Other accrued expenses 32,000
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Total current liabilities 101,000
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Stockholders' equity
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 14,987,317 shares 150,000
Additional paid-in capital 14,201,000
Treasury shares, at cost, 110,200 shares (11,000)
Accumulated deficit (11,756,000)
Notes receivable from stockholders (359,000)
2,225,000
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$ 2,326,000
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See accompanying notes to consolidated, condensed financial statements.
Page 2 of 7
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31
2004 2003
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REVENUE
Oil and gas sales $ 235,000 $ 204,000
Interest income 12,000 11,000
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247,000 215,000
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COSTS AND EXPENSES
Lease operating 88,000 75,000
Production taxes 29,000 25,000
General and administrative 111,000 103,000
Depreciation, depletion, amortization, and valuation allowance 2,000 2,000
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230,000 205,000
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NET EARNINGS $ 17,000 $ 10,000
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EARNINGS PER SHARE * *
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WEIGHTED AVERAGE SHARES OUTSTANDING 14,896,287 15,047,832
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*Less than $.01 per share
See accompanying notes to consolidated, condensed financial statements.
Page 3 of 7
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
Three months ended
December 31
2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 17,000 10,000
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation, depletion, amortization, and valuation allowance 2,000 2,000
Increase in accounts receivable (7,000) (25,000)
Decrease in other receivables 7,000 -
Decrease in other current assets - 3,000
Increase in accounts payable 11,000 2,000
Increase in accrued production costs 7,000 7,000
Decrease in other accrued expenses (31,000) (6,000)
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Net cash provided by (used in) operating activities 6,000 (7,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (5,000) (2,000)
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Net cash used in investing activities (5,000) (2,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury stock (11,000) (6,000)
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Net cash used in financing activities (11,000) (6,000)
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,000) (15,000)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,114,000 2,097,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,104,000 2,082,000
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See accompanying notes to consolidated, condensed financial statements.
Page 4 of 7
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, 2004, 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 2004 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
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.
The Company is currently experiencing modest cash flow from operations in spite
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 flows 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
Page 5 of 7
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 7, 2005, the Company had no material
commitments for capital expenditures.
RESULTS OF OPERATIONS
Sales increased 15% from $204,000 in the quarter ended December 31, 2003
("Q1FY04"), to $235,000 in the quarter ended December 31, 2004 ("Q1FY05"),
because of sharply higher world energy prices. Lease operating expense increased
17% from $75,000 in Q1FY04 to $88,000 in Q1FY05 because of increased repair and
maintenance expense. Production taxes increased 16% from $25,000 in Q1FY04 to
$29,000 in Q1FY05 because of increased sales. General and administrative expense
increased 8% from $103,000 in Q1FY04 to $111,000 in Q1FY05 because of increased
salary expense.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Net cash provided by or used in operating activities
increased from $7,000 used in operating activities in Q1FY04 to $6,000 provided
by operating activities in Q1FY05.
Investing Activities. In Q1FY04 and Q1FY05 the Company invested $2,000 and
$5,000, respectively, in new information technology equipment.
Financing Activities. In Q1FY04 the Company acquired 83,233 shares of its Common
Stock for $6,000, and in Q1FY05 the Company acquired 110,200 shares of its
Common Stock for $11,000.
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 a modest net gain. 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
management's 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.
Page 6 of 7
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Purchases of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
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(a) (b) (c) (d)
Total Average Total Number of Shares Maximum Number (or
Number of rice Paid (or Units) Purchased as Approximate Dollar Value) of
Period Shares (or Per Part of Publicly Shares (or Units) that May Yet
Units) Share (or Announced Plans or Be Purchased Under the Plans
Purchased Unit) Programs or Programs
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October 1, 2004
through 110,200 $ 0.096 - -
October 31, 2004
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November 1, 2004
through - - - -
November 30, 2004
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December 1, 2004
through - - - -
December 31, 2004
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The Company has no publicly announced plan or program for the purchase of
shares. In October 2004 the Company purchased 110,200 shares other than through
a publicly announced plan or program in open-market transactions.
ITEM 6. EXHIBITS
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications
Page 7 of 7
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 7, 2005 By: /s/ STEVEN H. CARDIN
Steven H. Cardin
Chief Executive Officer and Principal
Financial Officer
Page 8 of 7
EXHIBIT INDEX
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications