Item 1. Financial Statements
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
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December 31,
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September 30,
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2020
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2020
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Assets
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Current assets
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|
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Cash and cash equivalents
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$2,107,000
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$2,141,000
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Accounts receivable
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2,000
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-
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Other
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17,000
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20,000
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Total current assets
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2,126,000
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2,161,000
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Property and equipment, at cost
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Proved oil and gas properties (successful efforts method)
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333,000
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333,000
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Less accumulated depreciation, depletion, and amortization
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(285,000)
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(283,000)
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Net property and equipment
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48,000
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50,000
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|
|
|
|
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Right-of-Use Asset
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112,000
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118,000
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|
|
|
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Total assets
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2,286,000
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2,329,000
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Liabilities and Stockholders’ Equity
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Current liabilities
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Accounts payable
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6,000
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9,000
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Operating lease liability
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22,000
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21,000
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Accrued expenses, related party
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1,073,000
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1,073,000
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Other accrued expenses
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4,000
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10,000
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Total current liabilities
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1,105,000
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1,113,000
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Long-term operating lease liability
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90,000
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97,000
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Total Liabilities
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1,195,000
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1,210,000
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Commitments and Contingencies
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-
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-
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Stockholders’ equity
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Preferred stock, $0.01 par value. Authorized 5,000,000 shares, none issued
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-
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-
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Common stock, $0.01 par value. Authorized 50,000,000 shares;
12,141,401 shares issued and outstanding
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122,000
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122,000
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Additional paid-in capital
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13,794,000
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13,794,000
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Accumulated deficit
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(12,825,000)
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(12,797,000)
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Total stockholders' equity
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1,091,000
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1,119,000
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Total liabilities and stockholders' equity
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$2,286,000
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$2,329,000
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See notes to unaudited condensed consolidated financial statements
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended
December 31,
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2020
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2019
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Revenue
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Oil and gas sales
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$8,000
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$16,000
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Total revenue
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8,000
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16,000
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Operating expense
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Production taxes
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-
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1,000
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General and administrative
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34,000
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32,000
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Depreciation, depletion, and amortization
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2,000
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2,000
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Total operating expense
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36,000
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35,000
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Other income
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Interest income
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-
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9,000
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Total other income
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-
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9,000
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Net loss
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$(28,000)
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$(10,000)
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Basic and diluted loss per share
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$(0.00)
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$(0.00)
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Basic and diluted weighted average shares outstanding
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12,141,401
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12,185,409
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See notes to unaudited condensed consolidated financial statements
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Three months ended
December 31,
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2020
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2019
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Cash flows used in operating activities
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Net loss
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$(28,000)
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$(10,000)
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Adjustments to reconcile net loss to net cash used in operating activities
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Depreciation, depletion, and amortization
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2,000
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2,000
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Increase in accounts receivable
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(2,000)
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(1,000)
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Decrease in other current assets
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3,000
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5,000
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Decrease in accounts payable
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(3,000)
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(9,000)
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Decrease in other accrued expenses
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(6,000)
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(3,000)
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Net cash used in operating activities
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(34,000)
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(16,000)
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Cash flows from investing activitites
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-
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-
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Cash flows from financing activities
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-
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-
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Net decrease in cash and cash equivalents
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(34,000)
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(16,000)
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Cash and cash equivalents at beginning of period
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2,141,000
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2,266,000
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Cash and cash equivalents at end of period
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$2,107,000
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$2,250,000
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See notes to unaudited condensed consolidated financial statements
ALTEX INDUSTRIES, INC.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
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For the three months ended December 31, 2020
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Preferred Stock
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Common Stock
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Additional
paid-in
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Accumulated
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Treasury
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Total
stockholders'
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Shares
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Amount
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Shares
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Amount
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capital
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deficit
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stock
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equity
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Balance at September 30, 2020
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12,141,401
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$122,000
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$13,794,000
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$(12,797,000)
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$-
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$1,119,000
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Net loss
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(28,000)
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(28,000)
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Balance at December 31, 2020
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12,141,401
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$122,000
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$13,794,000
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$(12,825,000)
|
$-
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$1,091,000
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See notes to unaudited condensed consolidated financial statements
ALTEX INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation. The accompanying Condensed Consolidated Balance Sheet as of September 30, 2020, which was derived from audited financial statements, and the unaudited, interim, condensed, consolidated, financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. 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, 2020, and the cash flows and results of operations for the three then ended. Such adjustments consisted only of normal recurring items. The results of operations for the three months 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 2020 Annual Report on Form 10-K, and it is suggested that these condensed, consolidated 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-Q 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 of oil and gas; 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 of Financial Condition and Results of Operation.
COVID-19
COVID-19 has had and is likely to continue to have a material impact on the Company, its operations, its financial condition, and its results of operations. The world-wide reduction in demand for oil resulting from changes in social behavior designed to reduce the likelihood of the transmission of the SARS-CoV-2 virus is likely to contribute to significant continuing price weakness for crude oil. The Company’s president and all of its directors are in the high-risk group for COVID-19. The illness or death of any of them could materially impact the Company’s ability to continue normal operations. The social distancing measures that have been implemented by the State of Colorado, where the Company’s president, the Company’s administrative assistant, the Company’s bookkeeper, the Company’s accountant, and two of the Company’s directors reside, have had an impact on the Company’s daily administrative operations and are likely to continue to do so. Continuing low oil prices are likely to reduce the Company’s revenue, increase its losses, and reduce its cash balances. Monetary policy responses by the Federal Reserve and risk-reducing investment activity in international capital markets as a result of the anticipated consequences of the COVID-19 pandemic have resulted in exceptionally low interest rates, thereby reducing the Company’s interest received on cash balances. There may be other material but unanticipated consequences of the COVID-19 pandemic.
Financial Condition
The Company used $34,000 cash in operating activities in the three months ended December 31, 2020, and used $16,000 cash in operating activities in the three months ended December 31, 2019. At December 31, 2020 and 2019, $1,073,000 of other accrued expenses is accrued but unpaid salary (and related accrued payroll tax liability) due to the Company’s president that the Company’s president has elected to defer. The Company’s president may require the Company to pay the unpaid salary and payroll tax liability at any time.
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 the effects of the COVID-19 pandemic, 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, the possibility of a change in the interest rates the Company realizes on cash balances, and changes in the price of oil and natural gas, the Company knows of no other trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company's liquidity increasing or decreasing in any material way.
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 5, 2021, the Company had no material commitments for capital expenditures.
The Company regularly assesses its exposure to environmental liability and asset retirement obligations (ARO). The Company does not believe that it currently has any material exposure to environmental liability or to ARO, although this cannot be assured.
Results of Operations
At current oil and gas prices, the current level of cash balances, and 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 the effects of COVID-19, unanticipated ARO, unanticipated environmental expense, and possible changes in interest rates and oil and gas prices, the Company is not aware of any other known trends or uncertainties that have had or that the Company reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.
Item 4. 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.