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, 2008
[ ] 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)
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, 2008:
13,973,901
Transitional Small Business Disclosure Format. Yes [ ] No [X]
Page 1 of 7
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2008
(UNAUDITED)
ASSETS
--------
CURRENT ASSETS
Cash and cash equivalents $ 4,372,000
Accounts receivable 4,000
Other 7,000
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Total current assets 4,383,000
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PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) 91,000
Other 38,000
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129,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (122,000)
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Net property and equipment 7,000
OTHER ASSETS 8,000
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$ 4,398,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Accounts payable $ 21,000
Other accrued expenses 31,000
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Total current liabilities 52,000
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STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, issued 14,287,524 shares 143,000
Additional paid-in capital 14,047,000
Accumulated deficit (9,772,000)
Treasury shares, at cost, 313,623 shares (72,000)
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4,346,000
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$ 4,398,000
============
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 Nine months Ended
June 30 June 30
2008 2007 2008 2007
------------------------- ------------------------
Revenue
Oil and gas sales $ 11,000 6,000 22,000 16,000
Interest income 20,000 62,000 100,000 187,000
Other income - 4,000 - 2,000
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31,000 72,000 122,000 205,000
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Costs and expenses
Lease operating 9,000 - 10,000 2,000
Production taxes 1,000 1,000 2,000 2,000
General and administrative 103,000 102,000 311,000 336,000
Reclamation, restoration, and dismantlement 7,000 - 14,000 -
Depreciation, depletion, amortization, and valuation allowance 1,000 - 3,000 2,000
------------------------- ------------------------
121,000 103,000 340,000 342,000
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Net loss $ (90,000) (31,000) (218,000) (137,000)
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Loss per share $ (0.006) (0.002) (0.015) (0.010)
========================= ========================
Weighted average shares outstanding 13,973,901 14,336,315 14,116,277 14,343,254
========================= ========================
See accompanying notes to consolidated, condensed financial statements.
Page 3 of 7
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30 JUNE 30
2008 2007
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (218,000) (137,000)
Adjustments to reconcile net loss to net cash
provided by operating activities
Increase in deferred income tax asset - (1,000)
Depreciation, depletion, amortization, and valuation allowance 3,000 2,000
(Increase) decrease in other current assets 58,000 (3,000)
Decrease in other assets - 2,000
Increase (decrease) in accounts payable 14,000 (19,000)
Decrease in income taxes payable - (51,000)
Increase (decrease) in other accrued expenses (5,000) (11,000)
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Net cash used in operating activities (148,000) (218,000)
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CASH FLOWS FROM INVESTING ACTIVITIES
Other additions to property and equipment (5,000) (6,000)
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Net cash used in investing activities (5,000) (6,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of treasury shares (72,000) (15,000)
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Net cash used in financing activities (72,000) (15,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (225,000) (239,000)
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,597,000 5,140,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,372,000 4,901,000
===========================
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 June 30,
2008, 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
2007 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
Cash balances declined $225,000 in the nine months ended June 30, 2008, because
the Company used $148,000 cash in operating activities, expended $5,000 cash on
information technology, and acquired 313,623 shares of its Common Stock for
$72,000. Other current assets declined from $65,000 at September 30, 2007, to
$7,000 at June 30, 2008, principally because the Company received an income tax
refund of $50,000 during the three months ended March 31, 2008 ("Q2FY08"). At
December 31, 2007, the Company reduced proved oil and gas properties and related
accumulated depreciation, depletion, amortization, and valuation allowance by
$4,000 to reflect final abandonment of wells in which the Company had owned
small over-riding royalty interests. Also at December 31, 2007, the Company
removed $36,000 from other property and equipment and related accumulated
depreciation, depletion, amortization, and valuation allowance to reflect the
abandonment of obsolete office equipment.
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 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, 2008,
the Company had no material commitments for capital expenditures.
Page 5 of 7
AOC has completed the restoration of the area that had contained its East
Tisdale Field in Johnson County, Wyoming, and its bonds with the State of
Wyoming and the Bureau of Land Management have been 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
Oil and gas sales increased from $6,000 in the three months ended June 30, 2007
("Q3FY07") , to $11,000 in the three months ended June 30, 2008 ("Q3FY08") , and
from $16,000 in the nine months ended June 30, 2007, to $22,000 in the nine
months ended June 20, 2008, principally because of higher prices. Interest
income decreased from $62,000 in Q3FY07, to $20,000 in Q3FY08 and from $187,000
in the nine months ended June 30, 2007, to $100,000 in the nine months ended
June 30, 2008, because of lower interest rates and lower cash balances. Lease
operating expense ("LOE") increased from nil in Q3FY07 to $9,000 in Q3FY08 and
from $2,000 in the nine months ended June 30, 2007, to $10,000 in the nine
months ended June 30, 2008, principally because of repairs and maintenance
expense to one well in which AOC has a small working interest. General and
administrative expense decreased from $336,000 in the nine months ended June 30,
2007, to $311,000 in the nine months ended June 30, 2008, principally because of
decreased consulting, insurance, and legal expense. The Company made two
payments of $7,000 to the surface owner of its East Tisdale Field to secure a
landowner release, one in the three months ended March 31, 2008, and one in
Q3FY08 and, therefore, recognized $7,000 in reclamation, restoration, and
dismantlement expense ("RR&D") in Q3FY08 and $14,000 in the six months ended
June 30, 2008.
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. Excluding changes in other current assets, accounts
payable, and income taxes payable, net cash used in operating activities
increased from $145,000 in the nine months ended June 30, 2007, to $220,000 in
the nine months ended June 30, 2008.
Investing Activities. In the nine months ended June 30, 2007, the Company
expended $6,000 on information technology, and in the nine months ended June 30,
2008, the Company expended $5,000 on information technology
Financing Activities. In the nine months ended June 30, 2007, the Company
acquired 59,200 shares of its Common Stock for $15,000, and in the nine months
ended June 30, 2008, the Company acquired 313,623 shares of its Common Stock for
$72,000.
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.
Page 6 of 7
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 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, 2008 By: /s/ STEVEN H. CARDIN
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Steven H. Cardin
Chief Executive Officer and Principal
Financial Officer
Page 7 of 7
EXHIBIT INDEX
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Section 1350 Certifications