September 26, 2022

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ALTEX INDUSTRIES : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

Financial Condition

In FY20 operating activities used $121,000 cash, and the Company used $4,000
cash to acquire 44,008 shares of its common stock. In FY19 operating activities
provided $5,000 cash, and the Company used $13,000 cash to acquire 166,322
shares of its common stock. Consequently, cash balances decreased $125,000 in
FY20 and $8,000 in FY19.. At September 30, 2020 and 2019, accrued expenses,
related party, of $1,073,000 consists of $1,024,000 in salary payable to the
Company’s president, pursuant to his employment agreement, that the president
has elected to defer, as well as $49,000 in related accrued payroll tax. 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 sufficient 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 material change in the current level of interest rates or of
oil and gas prices, the Company knows of no trends or 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 December 28,
2020
, the Company had no material commitments for capital expenditures.


                             Results of Operations


Oil and gas sales decreased from $56,000 in FY19 to $31,000 in FY20 because
quantities sold and prices received declined in FY20. In FY19 the Company wrote
down the carrying value of it oil and gas properties by recognizing an
impairment provision of $24,000. Interest income decreased from $51,000 in FY19
to $17,000 in FY20 because of lower realized interest rates on cash balances.
Included in other income in FY19 was $63,000 in bonus payments for undeveloped
acreage leased to third parties.

At the current levels of net oil and gas production, cash balances, interest
rates, and oil and gas prices, 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 ARO, unanticipated
environmental expense, and possible changes in interest rates and oil and gas
prices, 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.

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