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 June 30, 2007
[ ] 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)
(303) 265-9312
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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 (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 [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Number of shares outstanding of issuer's Common Stock as of August 1, 2007:
14,287,524
Transitional Small Business Disclosure Format. Yes [ ] No [X]
Page 1 of 8
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2007
(UNAUDITED)
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 4,901,000
Accounts receivable 5,000
Deferred income tax asset 52,000
Other 18,000
------------
Total current assets 4,976,000
------------
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 95,000
Other 69,000
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164,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (158,000)
------------
Net property and equipment 6,000
OTHER ASSETS 8,000
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$ 4,990,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 2,000
Other accrued expenses 293,000
------------
Total current liabilities 295,000
------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 14,346,724 shares 143,000
Additional paid-in capital 14,061,000
Accumulated deficit (9,494,000)
Treasury shares, at cost, 59,200 shares (15,000)
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4,695,000
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$ 4,990,000
============
See accompanying notes to consolidated, condensed financial statements.
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30 June 30
2007 2006 2007 2006
------------------------- -----------------------
Revenue
Oil and gas sales $ 6,000 3,000 16,000 333,000
Interest income 62,000 59,000 187,000 134,000
Other income 4,000 22,000 2,000 29,000
Gain on sale of assets - - - 2,530,000
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72,000 84,000 205,000 3,026,000
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Costs and expenses
Lease operating - 1,000 2,000 114,000
Production taxes 1,000 - 2,000 39,000
General and administrative 102,000 97,000 336,000 581,000
Depreciation, depletion, amortization, and valuation allowance - 1,000 2,000 5,000
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103,000 99,000 342,000 739,000
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Net earnings (loss) $ (31,000) (15,000) (137,000) 2,287,000
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Earnings (loss) per share $ (0.002) (0.001) (0.010) 0.154
========================= =======================
Weighted average shares outstanding 14,336,315 14,814,407 14,343,254 14,856,214
========================= =======================
See accompanying notes to consolidated, condensed financial statements.
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30 JUNE 30
2007 2006
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (137,000) $ 2,287,000
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities
Gain on sale of assets - (2,530,000)
Increase in deferred income tax asset (1,000) -
Depreciation, depletion, amortization, and valuation allowance 2,000 5,000
Decrease in accounts receivable - 144,000
(Increase) decrease in other current assets (3,000) 5,000
Decrease in other assets 2,000 3,000
Decrease in accounts payable (19,000) (9,000)
Decrease in income taxes payable (51,000) -
Decrease in accrued production costs (17,000) (31,000)
Increase in other accrued expenses 6,000 204,000
----------------------------
Net cash provided by operating activities (218,000) 78,000
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets, net of selling expenses - 2,568,000
Other additions to property and equipment (6,000) -
----------------------------
Net cash provided by (used in) investing activities (6,000) 2,568,000
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CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury shares (15,000) (32,000)
----------------------------
Net cash used in financing activities (15,000) (32,000)
----------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (239,000) 2,614,000
----------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,140,000 2,281,000
----------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,901,000 $ 4,895,000
============================
See accompanying notes to consolidated, condensed financial statements.
Page 4 of 8
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,
2007, and the cash flows and results of operations for the three and nine months
then ended. Such adjustments consisted only of normal recurring items. The
results of operations for the three and nine months 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
2006 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
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UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
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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;
movements in interest rates; the market price of oil and natural gas; the risks
associated with exploration and production in the Rocky Mountain region; the
Company's ability, or the ability of its operating subsidiary, Altex Oil
Corporation ("AOC"), 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 and
AOC'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
During the three months ended December 31, 2005 ("Q1FY06") AOC sold its
non-operated working interests in three producing oil and gas wells for
proceeds, net of selling expenses, of $206,000. During the remainder of fiscal
2006 ("FY06"), AOC sold substantially all of its remaining non-operated working
interests in producing oil and gas wells in Wyoming, all of its operated working
interests in producing oil and gas wells, all of its overriding royalty
interests in then producing oil and gas wells in Wyoming, and its interest in an
application for leases under the Combined Hydrocarbon Leasing Act of 1981 in the
Tar Sands Triangle Area of Utah for $2,387,000 cash, net of selling expenses.
The Company intends to invest the proceeds of the sales either in interests in
oil and gas properties or otherwise. There can be no assurance as to if and when
any such investment will be made. AOC retains small working and overriding
royalty interests in producing oil and gas wells in Utah and Wyoming.
Cash balances declined $239,000 from $5,140,000 at September 30, 2006, to
$4,901,000 at June 30, 2007, because, during the nine months ended June 30,
2007, the company used $218,000 cash in operating activities, expended $6,000
cash on information technology, and acquired 59,200 shares of its Common Stock
for $15,000. Current income taxes payable declined from $51,000 at September 30,
2006, to nil at June 30, 2007, because the Company paid $51,000 in income taxes
during the nine months ended June 30, 2007. Accrued production costs at
September 30, 2006, consisted principally of accrued production tax liabilities
related to oil and gas sales recognized during FY06. Included in other accrued
expenses of $287,000 at September 30, 2006, and $293,000 at June 30, 2007, is an
accrued bonus payable to the Company's president, pursuant to his employment
agreement (see below), of $248,000.
The Company is likely to experience negative cash flow from operations unless
and until the Company invests in interests in producing oil and gas wells or in
another venture that produces cash flow from operations. With the exception of
capital
Page 5 of 8
expenditures related to production acquisitions or drilling or recompletion
activities or an investment in another venture that produces cash flow from
operations, none of which are currently planned, the cash flows that could
result from such acquisitions, activities, or investments, and the possibility
of a decline from the current level of interest rates, 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, and interest income, the Company has no internal or
external sources of liquidity other than its working capital. At August 1, 2007,
the Company had no material commitments for capital expenditures.
AOC is completing the restoration of the area that had contained its East
Tisdale Field in Johnson County, Wyoming. AOC 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 AOC's 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 expense ("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.
RESULTS OF OPERATIONS
The sales of AOC's interests in producing oil and gas properties caused oil and
gas sales to decline from $318,000 in Q1FY06 to $7,000 in Q1FY07 and, therefore,
from $333,000 in the nine months ended June 30, 2006, to $16,000 in the nine
months ended June 30, 2007. The increase in cash balances resulting from the
sales of AOC's interests caused interest income to increase from $134,000 in the
nine months ended June 30, 2006, to $187,000 in the nine months ended June 30,
2007. In Q1FY06 the Company recognized a gain of $206,000 on the sale of AOC's
non-operated working interests in three producing oil and gas wells. In Q2FY06
the Company recognized a gain of $2,324,000 on the sale of AOC's remaining
non-operated working interests in producing oil and gas wells in Wyoming, all of
its operated working interests in producing oil and gas wells, and all of its
overriding royalty interests in then producing oil and gas wells in Wyoming.
The sales of AOC's interests in producing oil and gas properties caused lease
operating expense to decline from $113,000 in Q1FY06 to $1,000 in Q1FY07 and,
therefore, from $114,000 in the nine months ended June 30, 2006, to $2,000 in
the nine months ended June 30, 2007. The sales of AOC's interests in producing
oil and gas properties caused production taxes to decline from $38,000 in Q1FY06
to $1,000 in Q1FY07 and, therefore, from $39,000 in the nine months ended June
30, 2006, to $2,000 in the nine months ended June 30, 2007. Pursuant to his
employment agreement, the Company's president is to receive a bonus equal to no
less than 10% of earnings before tax. The Company recorded accrued bonus expense
of $28,000 during Q1FY06 and $228,000 during Q2FY06, and reduced accrued bonus
expense by $8,000 during Q3FY06. Excluding accrued bonus expense, general and
administrative expense was $333,000 in the nine months ended June 30, 2006, and
$336,000 in the nine months ended June 30, 2007.
Net loss increased from $15,000 in Q3FY06 to $31,000 in Q3FY07 because other
income, which consists of various miscellaneous items, decreased from $22,000 in
Q3FY06 to $4,000 in Q3FY07. Net earnings of $2,287,000 in the nine months ended
June 30, 2006, declined to a net loss of $137,000 in the nine months ended June
30, 2007.
The Company's revenue currently consists almost entirely of interest earned on
cash balances. At the current level of cash balances and at current interest
rates, the Company's revenue is unlikely to exceed its expenses. Unless and
until the Company invests a substantial portion of its cash balances in
interests in producing oil and gas wells or in one or more other ventures that
produce revenue and net income, the Company is likely to experience net losses.
With the exception of unanticipated RR&D, unanticipated environmental expense,
and possible changes in 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.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Net cash provided by operating activities in the nine
months ended June 30, 2006, included a decrease in accounts receivable of
$144,000, which resulted from the collection of oil and gas sales recognized in
Q1FY06. As oil and gas sales in Q1FY07 were substantially reduced due to asset
sales, there was no similar receivable to collect. Consequently,
Page 6 of 8
net cash provided by operating activities declined from $78,000 in the nine
months ended June 30, 2006, to net cash used in operating activities of $218,000
in the nine months ended June 30, 2007.
Investing Activities. In the nine months ended June 30, 2006, the Company
received proceeds from the sale of assets, net of selling expenses, of
$2,568,000, and, in the nine months ended June 30, 2007, the Company expended
$6,000 on information technology.
Financing Activities. The Company acquired 114,133 shares of its Common Stock
for $32,000 in the nine months ended June 30, 2006. The Company acquired 59,200
shares of its common Stock for $15,000 in the nine months ended June 30, 2007.
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.
As of the end of the period covered by the 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 that could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
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 Number Average Total Number of Shares (or Maximum Number (or
of Shares (or Price Paid Units) Purchased as Part of Approximate Dollar Value) of
Period Units) Per Share Publicly Announced Plans or Shares (or Units) that May Yet Be
Purchased (or Unit) Programs Purchased Under the Plans or
Programs
-------------------- -------------- ------------ ---------------------------- -----------------------------------
April 1, 2007
through
April 30, 2007 - - - -
-------------------- -------------- ------------ ---------------------------- -----------------------------------
May 1, 2007
through
May 31, 2007 - - - -
-------------------- -------------- ------------ ---------------------------- -----------------------------------
June 1, 2007
through
June 30, 2007 59,200 $ 0.25 - -
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The Company has no publicly announced plan or program for the purchase of
shares. In June 2007 the Company purchased 59,200 shares other than through a
publicly announced plan or program in open-market transactions.
Page 7 of 8
ITEM 6. EXHIBITS
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications
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 1, 2007 By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and Principal
Financial Officer
Page 8 of 8
EXHIBIT INDEX
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications