UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to.
Commission file number 1-9030
ALTEX INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant 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
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 265-9312
--------------
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: common stock, par
value $0.01 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ] Non-accelerated filer [ ]
Smaller Reporting Company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [X] No [ ]
Aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity as of March 31, 2009: $1,430,000
Number of shares outstanding of registrant's common stock as of December 17,
2009:13,885,734
1
"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-K 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; 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.
PART I
ITEM 1. BUSINESS.
Altex Industries, Inc. (or the "Registrant" or the "Company," each of which
terms, when used herein, refer to Altex Industries, Inc. and/or its subsidiary)
is a holding company with one full-time employee and one part-time employee that
was incorporated in Delaware in 1985. Through its operating subsidiary, AOC, the
Company currently owns interests, including working interests, in productive
onshore oil and gas properties, has bought and sold producing oil and gas
properties, and, to a lesser extent, has participated in the drilling of
exploratory and development wells, and in recompletions of existing wells.
All of AOC's interests are in properties operated by others. An interest owner
in a property not operated by that interest owner must rely on information
regarding the property provided by the operator, even though there can be no
assurance that such information is complete, accurate, or current. In addition,
an owner of a working interest in a property is potentially responsible for 100%
of all liabilities associated with that property, regardless of the size of the
working interest actually owned.
The operators of producing properties in which AOC has an interest sell produced
oil and gas to refiners, pipeline operators, and processing plants. If a
refinery, pipeline, or processing plant that purchases such production were
taken out of service, the operator could be forced to halt the production that
is purchased by such refinery, pipeline, or plant.
Although many entities produce oil and gas, competitive factors play a material
role in AOC's production operations only to the extent that such factors affect
demand for and prices of oil and gas and demand for, supply of, and prices of
oilfield services. The sale of oil and gas is regulated by Federal, state, and
local agencies, and AOC is also subject to Federal, state, and local laws and
regulations relating to the environment. These laws and regulations generally
provide for control of pollutants released into the environment and require
responsible parties to undertake remediation. AOC regularly assesses its
exposure to environmental liability and to reclamation, restoration, and
dismantlement expense ("RR&D"), which activities are covered by Federal, state,
and local regulation. AOC 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. (See Management's Discussion and Analysis below.)
ITEM 1A. RISK FACTORS.
Not applicable.
2
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
WELLS AND ACREAGE: At December 17, 2009, the Company did not own a working
interest in any undeveloped acreage, and, to the best knowledge of the Company,
none of the wells in which the Company owns an interest is a multiple
completion. However, certain wells in which the Company owns an interest do
produce from multiple zones. At December 17, 2009, the SHCSteven CardinFrom AII
- Audit - 2006 - Calculation of Gross and Net Acres - 061109.xls in Aud06Company
owned working interests in 2 gross (0.22 net) productive oil wells (which
produce associated natural SHCSteven CardinFrom AII - Audit - 2006 - Calculation
of Gross and Net Acres - 061109.xls in Aud06gas), no wells producing only
natural gas, and 203 gross (13 net) developed acres. All of the Company's
production is located in Utah and Wyoming. The Company has not reported to, or
filed with, any other Federal authority or agency any estimates of total, proved
net oil or gas reserves since the beginning of the last fiscal year. For
additional information, see Note 7 of Notes to Consolidated Financial Statements
below.
Production
Net Production Average Price Average Production
------------------------------- ------------------------ Cost Per
Fiscal Year Oil (Bbls) Gas (Mcf) Oil (Bbls) Gas (Mcf) Equivalent Barrel ("BOE")
----------- --------------- -------------- ------------- ---------- ---------------------------
2009 * 2,000 NA $ 3.47 $ 3.01
----------- --------------- -------------- ------------- ---------- --------------------------
2008 * 2,000 NA 6.33 21.01
----------- --------------- -------------- ------------- ---------- --------------------------
2007 * 3,000 NA 7.00 6.00
---------------------------------------------------------------------------------------------------
*Less than 1,000 barrels.
DRILLING ACTIVITY: The Company did not participate in the drilling of any wells
during the year ended September 30, 2007 ("FY07"), the year ended September 30,
2008 ("FY08"), or the year ended September 30, 2009 ("FY09").
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
The Company's common stock is quoted on the OTC Bulletin Board under the symbol
"ALTX". Inter-dealer prices provided by the OTC Bulletin Board, which do not
include retail mark-up, mark-down, or commission, and may not represent actual
transactions, are listed in the table below.
3
FY09 FY08
------------------- -------------------
Quarter High Bid Low Bid High Bid Low Bid
------- --------- -------- --------- --------
1 $ 0.18 $ 0.11 $ 0.23 $ 0.21
------- --------- -------- --------- --------
2 0.12 0.07 0.23 0.19
------- --------- -------- --------- --------
3 0.13 0.07 0.22 0.16
------- --------- -------- --------- --------
4 0.15 0.08 0.20 0.17
------- --------- -------- --------- --------
At December 17, 2009, there were approximately 4,000 holders of record of the
Company's common stock, excluding entities whose stock is held by clearing
agencies. The Company has not paid a dividend during the last two fiscal years.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7 . MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
Cash balances decreased $327,000 during FY09 because the Company used $316,000
cash in operating activities and acquired 68,167 shares of its common stock for
$11,000 in cash. At September 30, 2009, the Company reduced proved oil and gas
properties and related accumulated depreciation, depletion, amortization, and
valuation allowance by $23,000 to reflect final abandonment of wells in which
the Company had owned small over-riding royalty interests. Also at September 30,
2009, the Company removed $21,000 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 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 17, 2009, the Company had no
material commitments for capital expenditures.
During FY08 the Bureau of Land Management, the State of Wyoming, and the surface
owner of the area that had contained AOC's East Tisdale Field in Johnson County,
Wyoming (the "Field"), agreed that AOC had completed restoration and reclamation
of the area that had contained the Field. The Bureau of Land Management and the
State of Wyoming have released AOC's bonds, and the surface owner has released
AOC from any further liability in connection with the Field or the area that had
contained the Field. 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
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.
LIQUIDITY
OPERATING ACTIVITIES. In FY08 and FY09 net cash used in operating activities was
$225,000 and $316,000, respectively.
4
INVESTING ACTIVITIES. In FY08 and FY09 the Company expended $5,000 and nil on
information technology equipment, respectively.
FINANCING ACTIVITIES. In FY08 the Company expended $76,000 to acquire 333,623
shares of its common stock, and in FY09 the Company expended $11,000 to acquire
68,167 shares of its common stock.
RESULTS OF OPERATIONS
Oil and gas sales increased from $34,000 in FY08 to $48,000 in FY09 because of
increased production. Interest income decreased from $120,000 in FY08 to $81,000
in FY09 because of lower cash balances and lower interest rates. Lease operating
expense decreased from $13,000 in FY08 to $3,000 in FY09 because of lower repair
and maintenance expense. General and administrative expense increased from
$418,000 in FY08 to $437,000 in FY09 principally because of higher payroll and
contract labor expense. Revenue was $154,000 and $129,000 in FY08 and FY09,
respectively, and expenses were $457,000 and $446,000 in FY08 and FY09,
respectively, resulting in a net loss of $303,000 and $317,000 in FY08 and FY09,
respectively.
At the current levels of net oil and gas production, cash balances and 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements follow the signature page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A(T). 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 which could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
5
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE.
Mr. Steven H. Cardin, 59, an economist, formerly with The Conference Board and
the consulting firm, National Economics Research Associates, has been Chairman
and CEO of the Company for over five years, and a Director since 1984. Mr.
Jeffrey S. Chernow, 58 , a lawyer, formerly Director of Enforcement in the
Division of Securities, State of Maryland, Office of the Attorney General, has
been in private practice in Maryland for over five years, and a Director since
1989. Mr. Stephen F. Fante, 53, a CPA, was Chairman and CEO of IMS, which
provided computerized accounting systems to the oil and gas industry and was a
reseller of microcomputer products to the Fortune 1000, and was Chairman and CEO
of Seca Graphics, Inc., which provided design and mapping services and software
to the cable television and telecommunications industries. Mr. Fante has been a
private investor for the last five years and currently owns and operates CB
Paws, which retails high-end accessories for dogs and cats. Mr. Fante has been a
Director since 1989.
The Board of Directors has a separately-designated standing Audit Committee
which is comprised of Messrs. Fante and Chernow. The Board of Directors has
determined that the Company has at least one Audit Committee Financial Expert
serving on its Audit Committee: Mr. Fante is an Audit Committee Financial
Expert, and he is independent, as that term is defined by NASDAQ.
Messrs. Chernow's, Cardin's, and Fante's terms as Directors continue until their
successors are duly elected and qualified. The Company has adopted a code of
ethics that applies to its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation earned by the Company's only
executive officer during the last two fiscal years.
SUMMARY COMPENSATION TABLE
Name and Principal Position Year Salary($) Total($)
--------------------------- ---- --------- --------
Steven H. Cardin, CEO 2009 269,378 269,378
--------------------------- ---- --------- --------
Steven H. Cardin, CEO 2008 256,551 256,551
--------------------------- ---- --------- --------
Effective October 1, 2006, the Company renewed its Employment Agreement with Mr.
Cardin. The Agreement has an initial term of five years and provides that Mr.
Cardin is to receive an annual base salary of $244,000, escalating at no less
than 5% per annum, and an annual bonus of no less than 10% of the Company's
earnings before tax, payable, at Mr. Cardin's election, in either cash or common
stock of the Company at then fair market value.
6
The Employment Agreement also provides that, in the event the Company terminates
Mr. Cardin's employment by reason of his permanent disability, the Company shall
(1) pay Mr. Cardin a total sum, payable in 24 equal monthly installments, equal
to 50% of the base salary to which he would have been entitled had he performed
his duties for the Company for a period of two years after his termination, less
the amount of any disability insurance benefits he receives under policies
maintained by the Company for his benefit, and (2) continue to provide Mr.
Cardin with all fringe benefits provided to him at the time of his permanent
disability for a period of two years following such permanent disability.
The Employment Agreement also provides that, in the event the Company terminates
Mr. Cardin's employment in breach of the agreement, or in the event that Mr.
Cardin terminates his employment because his circumstances of employment shall
have changed subsequent to a change in control, then the Company shall pay Mr.
Cardin a lump sum payment equal to the sum of (1) twice Mr. Cardin's base salary
during the 12-month period immediately preceding the termination of his
employment, (2) the greater of (a) twice any annual bonus paid to or accrued
with respect to Mr. Cardin by the Company during the fiscal year immediately
preceding the fiscal year in which his employment shall have been terminated or
(b) three times his base salary during the 12-month period immediately preceding
the termination of his employment, and (3) any other compensation owed to Mr.
Cardin at the time of his termination. The agreement also provides that the
Company will indemnify Mr. Cardin against any special tax that may be imposed on
him as a result of any such termination payment made by the Company pursuant to
the agreement.
Under the Employment Agreement, a change in control is deemed to occur (1) if
there is a change of one-third of the Board of Directors under certain
conditions, (2) if there is a sale of all or substantially all of the Company's
assets, (3) upon certain mergers or consolidations, (4) under certain
circumstances if another person (or persons) acquires 20% or more of the
outstanding voting shares of the Company, or (5) if any person except Mr. Cardin
shall own or control half of such outstanding voting shares.
DIRECTOR COMPENSATION
Fees Earned or
Name Paid in Cash($) Total($)
------------------ --------------- -----------
Jeffrey S. Chernow 12,000 12,000
------------------ --------------- -----------
Stephen F. Fante 12,000 12,000
------------------ --------------- -----------
Each Director who is not also an officer of the Company receives $1,000 per
month for service as a Director. No additional fees are paid for service on
Committees of the Board or for attendance at Board or Committee Meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information concerning each person who, as of
December 17, 2009, is known to the Company to be the beneficial owner of more
than five percent of the Company's common stock and information regarding common
stock of the Company beneficially owned, as of December 17, 2009, by all
Directors and executive officers and by all Directors and executive officers as
a group.
Shares of
Common Stock
Beneficially Percent
Name and Address of Beneficial Owner Owned of Class
---------------------------------------------------------- ------------- ---------
Steven H. Cardin (Director and Executive Officer)POB 1057
Breckenridge CO 80424-1057 7,233,866 52.10%
---------------------------------------------------------- ------------- ---------
All Directors and Executive Officers as a Group (1 Person) 7,233,866 52.10%
---------------------------------------------------------- ------------- ---------
7
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Messrs. Fante and Chernow are both independent under the NASDAQ independence
standards.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES. Billed for FY09: $9,375. Billed for FY08: $9,000.
AUDIT-RELATED FEES. None.
TAX FEES. None.
ALL OTHER FEES. None.
The Company does not engage an accountant to render audit or non-audit services
unless the engagement is explicitly pre-approved by the Company's Audit
Committee. During FY09 and FY08 no Audit-Related Fees, Tax Fees, or Other Fees
were billed by the Company's principal accountant.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
3(i) Articles of Incorporation - Incorporated herein by reference to Exhibit B
to August 20, 1985 Proxy Statement
3(ii) Bylaws - Incorporated herein by reference to Exhibit C to August 20, 1985
Proxy Statement
10 Summary of Employment Agreement between the Company and Steven H. Cardin -
Incorporated herein by reference to Form 10-K for fiscal year ended
September 30, 2006
14 Code of Ethics - Incorporated herein by reference to Form 10-K for fiscal
year ended September 30, 2003
21 List of subsidiaries - Incorporated herein by reference to Form 10-K for
fiscal year ended September 30, 1997
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALTEX INDUSTRIES, INC.
/s/ STEVEN H. CARDIN
-------------------------------------
By: Steven H. Cardin, CEO
Date: December 17, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ STEVEN H. CARDIN
-------------------------------------
By: Steven H. Cardin,
Director, Principal Executive
Officer, Principal Financial
Officer, and Principal
Accounting Officer
Date: December 17, 2009
/s/ STEPHEN F. FANTE
-------------------------------------
By: Stephen F. Fante, Director
Date: December 17, 2009
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
ALTEX INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheet of Altex Industries,
Inc. and subsidiary as of September 30, 2009, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended September 30, 2009. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Altex Industries,
Inc. and subsidiary as of September 30, 2009, and the consolidated results of
its operations, changes in stockholders' equity and cash flows for each of the
years in the two-year period ended September 30, 2009, in conformity with U.S.
generally accepted accounting principles.
Denver, Colorado
December 4, 2009
/s/ Comiskey & Company
PROFESSIONAL CORPORATION
10
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
------
SEPTEMBER 30
2009 2008
CURRENT ASSETS
Cash and cash equivalents $ 3,964,000 $ 4,291,000
Accounts receivable 9,000 6,000
Other 3,000 7,000
----------------------------
Total current assets 3,976,000 4,304,000
----------------------------
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) (Notes 6 and 7) 68,000 91,000
Other 17,000 38,000
----------------------------
85,000 129,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (82,000) (123,000)
----------------------------
Net property and equipment 3,000 6,000
OTHER ASSETS 5,000 7,000
----------------------------
$ 3,984,000 $ 4,317,000
----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 19,000 23,000
Other accrued expenses 36,000 37,000
----------------------------
Total current liabilities 55,000 60,000
----------------------------
COMMITMENTS AND CONTINGENCIES (Notes 3, 5, and 6)
STOCKHOLDERS' EQUITY (Note 3)
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued -- --
Common stock, $.01 par value. Authorized 50,000,000 shares, 13,885,734 shares
issued and outstanding 139,000 140,000
Additional paid-in capital 13,964,000 13,974,000
Accumulated deficit (10,174,000) (9,857,000)
----------------------------
3,929,000 4,257,000
----------------------------
$ 3,984,000 4,317,000
----------------------------
See accompanying notes to consolidated financial statements.
11
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30
2009 2008
--------------------------
REVENUE
Oil and gas sales $ 48,000 34,000
Interest (Note 3) 81,000 120,000
-------------------------
129,000 154,000
-------------------------
COSTS AND EXPENSES
Lease operating 3,000 13,000
Production taxes 3,000 3,000
General and administrative (Note 3) 437,000 418,000
Reclamation, restoration, and dismantlement - 19,000
Depreciation, depletion, and amortization 3,000 4,000
-------------------------
446,000 457,000
-------------------------
NET LOSS (317,000) (303,000)
-------------------------
LOSS PER SHARE OF COMMON STOCK $ (0.023) (0.022)
-------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 13,896,566 14,080,290
-------------------------
See accompanying notes to consolidated financial statements.
12
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30
ADDITIONAL TOTAL
PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
COMMONSTOCK CAPITAL DEFICIT STOCK EQUITY
SHARES AMOUNT
-----------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2007 14,287,524 $143,000 14,047,000 (9,554,000) 4,636,000
Net loss (303,000) (303,000)
Acquisition of treasury stock, 333,623
shares at $0.228 per share (76,000) (76,000)
Retirement of treasury stock (333,623) (3,000) (73,000) 76,000
-----------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2008 13,953,901 $140,000 13,974,000 (9,857,000) $ 4,257,000
-----------------------------------------------------------------------------
Net loss (317,000) (317,000)
Acquisition of treasury stock,68,167
shares at $0.164 per share (11,000) (11,000)
Retirement of treasury stock (68,167) (1,000) (10,000) 11,000
-----------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2009 13,885,734 $139,000 13,964,000 (10,174,000) $ 3,929,000
-----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
13
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30
2009 2008
-----------------------
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss $ (317,000) (303,000)
Adjustments to reconcile net loss to net cash provided used in operating activities
Depreciation, depletion, and amortization 3,000 4,000
Increase in accounts receivable (3,000) (2,000)
Decrease in other current assets 4,000 58,000
Decrease in other assets 2,000 1,000
Increase (decrease) in accounts payable (4,000) 16,000
Increase (decrease) in accrued production costs (1,000) 1,000
-----------------------
Net cash used in operating activities (316,000) (225,000)
-----------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to other property and equipment - (5,000)
-----------------------
- (5,000)
-----------------------
CASH FLOWS USED IN FINANCING ACTIVITIES
Acquisition of treasury stock (11,000) (76,000)
-----------------------
(11,000) (76,000)
-----------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (327,000) (306,000)
-----------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,291,000 4,597,000
-----------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $3,964,000 4,291,000
-----------------------
See accompanying notes to consolidated financial statements.
14
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 AND 2008
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
NATURE OF OPERATIONS: Altex Industries, Inc., through its wholly-owned
subsidiary, jointly referred to as "the Company," owns interests, including
working interests, in productive oil and gas properties located in Utah and
Wyoming. The Company's revenues are generated primarily from interest income
from cash deposits and, to a lesser degree, from sales of oil and gas production
and sales of oil and gas properties. The Company's operations are significantly
affected by changes in interest rates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Altex Industries, Inc. and its wholly-owned subsidiary. All
intercompany balances and transactions have been eliminated in consolidation.
ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PROPERTY AND EQUIPMENT: The Company follows the successful efforts method of
accounting for oil and gas operations, under which exploration costs, including
geological and geophysical costs, annual delay rentals, and exploratory dry hole
costs, are charged to expense as incurred. Costs to acquire unproved properties,
to drill and to equip exploratory wells that find proved reserves, and to drill
and to equip development wells are capitalized. Capitalized costs relating to
proved oil and gas properties are depleted on the units-of-product-ion method
based on estimated quantities of proved reserves and estimated RR&D (Note 6).
Upon the sale or retirement of property and equipment, the cost thereof and the
accumulated depreciation, depletion, and valuation allowance are removed from
the accounts, and the resulting gain or loss is credited or charged to
operations. Actual RR&D expense in excess of estimated RR&D expense is charged
to operations.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company assesses long-lived assets for
impairment when circumstances indicate that the carrying value of such assets
may not be recoverable. This review compares the asset's carrying value with
management's best estimate of the asset's expected future undiscounted cash
flows without interest costs. If the expected future cash flows exceed the
carrying value, no impairment is recognized. If the carrying value exceeds the
expected future cash flows, an impairment equal to the excess of the carrying
value over the estimated fair value of the asset is recognized. No such
impairment may be restored in the future. The Company's proved oil and gas
properties are assessed for impairment on an individual field basis.
CASH EQUIVALENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS: For purposes of the
statement of cash flows, the Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents. The
carrying amount reported on the balance sheet for cash and cash equivalents
approximates its fair value.
INCOME TAXES: The Company follows the asset and liability method of accounting
for deferred income taxes. The asset and liability method requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between financial accounting and tax bases
of assets and liabilities. The Company reports uncertainty in income taxes
according to GAAP. There was no increase in liabilities for unrecognized tax
benefits during the current year. The Company recognizes accrued interest
related to unrecognized tax benefits in interest expense and penalties in
general and administrative expense. There was neither interest nor penalty at
September 30, 2009.
15
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 AND 2008
EARNINGS PER SHARE: Earnings per share of common stock is based upon the
weighted average number of shares of common stock outstanding during the year.
CONCENTRATIONS OF CREDIT RISK: The Company maintains significant amounts of cash
and sometimes permits cash balances in national banking institutions to exceed
FDIC limits.
REVENUE RECOGNITION: Substantially all of the Company's revenue is from interest
income and sales of oil and gas production. Interest income is recognized when
earned. Revenue from oil and gas production is recognized based on sales or
delivery date.
RECENT ACCOUNTING PRONOUNCEMENTS:
Effective July 1, 2009, the Company adopted the FASB Accounting Standards
Codification ("ASC") 105-10, "Generally Accepted Accounting Principles." ASC
105-10 establishes the FASB Accounting Standards Codification ("Codification")
as the source of authoritative accounting principles recognized by the FASB to
be applied by nongovernmental entities in the preparation of financial
statements in conformity with GAAP for SEC registrants. All guidance contained
in the Codification carries an equal level of authority. The Codification
supersedes all existing non-SEC accounting and reporting standards. The FASB
will now issue new standards in the form of Accounting Standards Updates
("ASUs"). The FASB will not consider ASUs as authoritative in their own right.
ASUs will serve only to update the Codification, provide background information
about the guidance and provide the bases for conclusion on the changes in the
Codification. References made to FASB guidance have been updated for the
Codification throughout this document.
Effective June 30, 2009, the Company adopted guidance issued by the FASB and
included in ASC 855-10 "Subsequent Events," which establishes general standards
of accounting for and disclosures of events that occur after the balance sheet
date but before the financial statements are issued or are available to be
issued. It requires the disclosure of the date through which an entity has
evaluated subsequent events (see Note 8).
In February 2007 the FASB issued guidance now included in ASC 825-10 "Financial
Instruments," which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates.
The Company has not currently elected the fair value option for non-financial
instruments and is currently evaluating the impact of this guidance on its
consolidated financial statements.
NOTE 2 - INCOME TAXES. At September 30, 2009, the Company had a depletion
carryforward of $860,000 and a net operating loss carryforward ("NOL") of
$894,000. $274,000, $303,000, and $317,000 of this NOL expire in the years 2027,
2028, and 2029, respectively. The approximate tax effect of each type of
temporary difference and carryforward that gives rise to a significant portion
of deferred tax assets at September 30, 2009, computed in accordance with the
Income Tax topic (Topic 740) of the Codification, is as follows:
DEFERRED TAX ASSETS
Depletion carryforward $ 301,000
Net operating loss carryforward 313,000
----------
TOTAL NET DEFERRED TAX ASSETS 614,000
Less valuation allowance (614,000)
----------
NET DEFERRED TAX ASSET $ -
----------
A valuation allowance has been provided because of the uncertainty of future
realization. Income tax expense is different from amounts computed by applying
the statutory Federal income tax rate for the following reasons:
16
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 AND 2008
2009 2008
---------------------
Tax benefit at 35% of net earnings $(111,000) (106,000)
State income tax, net of Federal benefit - -
Change in valuation allowance for net deferred tax assets 111,000 107,000
Other - (1,000)
---------------------
Income tax expense $ - -
---------------------
As of September 30, 2009, the Company has no unrecognized tax benefit as a
result of uncertain tax positions. As of September 30, 2009, the Company's tax
years that remain subject to examination are 2006 - 2009 (Federal jurisdiction)
and 2005 - 2009 (state jurisdictions).
NOTE 3 - RELATED PARTY TRANSACTIONS. Effective October 1, 2006, the Company
entered into a five-year employment agreement with its president which provides
for a base salary of $244,000 annually, plus escalations of not less than 5%
annually. The agreement contains provisions providing for payments to the
president in the event of his disability or termination of his employment. The
agreement also provides that he will receive an annual bonus equal to no less
than 10% of the Company's earnings before income tax, payable, at his election,
in cash or common stock of the Company at then fair market value.
NOTE 4 - MAJOR CUSTOMERS. In 2009 the Company had two customers who individually
accounted for 10% or more of the Company's oil and gas sales and who, in
aggregate, accounted for 89% of oil and gas sales. In 2009 the two customers
individually accounted for 74% and 15% of oil and gas sales. In 2008 the Company
had three customers who individually accounted for 10% or more of the Company's
oil and gas sales and who, in aggregate, accounted for 82% of oil and gas sales.
In 2008 the three customers individually accounted for 36%, 23%, and 23% of oil
and gas sales.
NOTE 5 - LEASES. The Company rents office space under a noncancellable operating
lease that expires April 30, 2010. Required future payments under the lease are
$5,000. In 2009 the Company incurred rent expense of $25,000, and in 2007 the
Company incurred rent expense of $21,000.
NOTE 6 - RECLAMATION, RESTORATION, AND DISMANTLEMENT (RR&D). During the year
ending September 30, 2008, the Bureau of Land Management, the State of Wyoming,
and the surface owner of the area that had contained AOC's East Tisdale Field in
Johnson County, Wyoming, agreed that AOC had completed restoration and
reclamation of the area that had contained the Field. The Bureau of Land
Management and the State of Wyoming have released AOC's bonds, and the surface
owner has released AOC from any further liability in connection with the Field
or the area that had contained the Field. AOC does not believe it will have any
further liability in connection with the Field, although this cannot be assured.
The Company accounts for its remaining RR&D costs in accordance with ASC Topic
410 "Asset Retirement and Environmental Obligations." ASC 410 addresses
obligations associated with the retirement of tangible, long lived assets and
the associated asset retirement costs. This statement requires the Company to
recognize a liability for the fair value of its plugging and abandonment
liability (excluding salvage value) with the associated costs included as part
of the Company's oil and gas properties balance. For the years ended September
30, 2009 and 2008, the plugging and abandonment liability was not material to
the financial statements.
NOTE 7 - SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED). The Company's operations are confined to the continental United
States, and all of the Company's reserves are proved developed. Prices and costs
in the tables below have been estimated using prices and costs in effect at the
end of the years indicated. Prices are estimated net of estimated quality and
transportation adjustments. Income tax expense is not reflected in the tables
below because of the anticipated utilization of net operating loss
carryfor-wards and depletion carryforwards. The estimation of reserves is
complex and subjective, and reserve estimates tend to fluctuate in light of new
production data.
17
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 AND 2008
I. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
September 30, 2009
-------------------
Proved properties $ 68,000
Accumulated depreciation, depletion, amortization, and valuation allowance (68,000)
--------------------
Net capitalized cost $ -
--------------------
II. ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES
Oil in Barrels Gas in Mcfs
---------------------------
Balance at September 30, 2007 - -
Balance at September 30, 2008 - -
Balance at September 30, 2009 - -
III. PRESENT VALUE OF ESTIMATED FUTURE NET REVENUE
At September 30
2009 2008
------------------------------
Estimated future revenue $ - -
------------------------------
Estimated future expenditures - -
Estimated future net revenue - -
10% annual discount of estimated future net revenue - -
------------------------------
Present value of estimated future net revenue $ - -
------------------------------
IV. SUMMARY OF CHANGES IN PRESENT VALUE OF ESTIMATED FUTURE NET REVENUE
Year ended September 30
2009 2008
------------------------------
Present value of estimated future net revenue, beginning of year $ - -
Sales, net of production costs - -
Sales of minerals in place - -
Net change in prices and costs of future production - -
Revisions of quantity estimates - -
Accretion of discount - -
Change in production rates and other - -
------------------------------
Present value of estimated future net revenue, end of year $ - -
------------------------------
18
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009 AND 2008
NOTE 8 - SUBSEQUENT EVENTS. Effective October 1, 2009, the Company purchased a
4.4% override in the Glo Field in Campbell County, Wyoming for $275,000. The
Company has evaluated subsequent events from the September 30, 2009, balance
sheet date through the date these financial statements were filed with the
Securities and Exchange Commission. No events (other than as disclosed above)
occurred subsequent to the balance sheet date that would require recognition or
disclosure in the financial statements.
19
EXHIBIT INDEX
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications