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 ($) | Total ($) | Year | | Salary ($) | | | Total ($) | |
Steven H. Cardin, CEO | 2014 | 212,000 | 212,000 | 2017 | | | 3,000 | | | | 3,000 | |
Steven H. Cardin, CEO | 2013 | 206,000 | 206,000 | 2016 | | | 225,000 | | | | 225,000 | |
Effective October 1, 2011,2016, 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 $200,000, escalating at no less than 3% per annum,equal to the maximum annual contribution to a Health Flexible Spending Arrangement ("FSA") and an annual bonus of no less than 20% 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. The Company will match any contribution that Mr. Cardin makes to the Company's FSA.
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
Name | | Fees Earned or 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
Matters.
The following table sets forth information concerning each person who, as of November 28, 2013,December 15, 2017, 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 November 28, 2013,December 15, 2017, by all Directors and executive officers and by all Directors and executive officers as a group.
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Class | | Shares of Common Stock Beneficially Owned | | | Percent of Class | |
Steven H. Cardin (Director and Executive Officer) PO Box 1057 Breckenridge CO 80424 | 7,233,866 | 55.75% | | | 7,233,866 | | | | 57.53 | % |
All Directors and Executive Officers as a Group (1 Person) | 7,233,866 | 55.75% | | | 7,233,866 | | | | 57.53 | % |
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 ServicesServices.
Audit Fees. Billed for FY14: $6,500.FY17: $9,700. Billed for FY13: $6,900.FY16: $6,650.
Audit-Related Fees. None.
Tax Fees. None.
All Other Fees. None.
The Company does not engage an accountant to render audit or non-auditnon‑audit services unless the engagement is explicitly pre-approved by the Company’sCompany's Audit Committee. During FY14FY17 and FY13FY16 no Audit-Related Fees, Tax Fees, or Other Fees were billed by the Company’sCompany's principal accountant.
PART IV
Item 15. Exhibits, Financial Statement Schedules
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 |
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 |
101.xml* | XBRL Instance Document |
101.xsd* | XBRL Taxonomy Extension Schema Document |
101.cal* | XBRL Taxonomy Extension Calculation Linkbase Document |
101.def* | XBRL Taxonomy Extension Definition Linkbase Document |
101.lab* | XBRL Taxonomy Extension Label Linkbase Document |
101.pre* | XBRL Taxonomy Extension Presentation Linkbase Document |
___________________________ |
* Furnished. Not Filed. Not incorporated by reference. Not subject to liability. |
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
| ALTEX INDUSTRIES, INC. |
| |
| /s/ STEVEN H. CARDIN |
| By: Steven H. Cardin, CEO |
| |
| Date: November 28, 2014 |
By: Steven H. Cardin, CEO
Date: December 15, 2017
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: November 28, 2014 |
| |
| /s/ STEPHEN F. FANTE |
| By: Stephen F. Fante, Director |
| |
| Date: November 28, 2014 |
/s/ STEVEN H. CARDIN
By: Steven H. Cardin, Director, Principal Executive Officer, Princi-pal Financial Officer, and Principal Accounting Officer
Date: December 15, 2017
/s/ STEPHEN F. FANTE
By: Stephen F. Fante, Director
Date: December 15, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Altex Industries, Inc.
Breckenridge, Colorado
We have audited the accompanying consolidated balance sheet of Altex Industries, Inc. and its subsidiaries (collectively, “the Company”"the Company") as of September 30, 2014 and 20132017 and the related consolidated statementstatements of operations, stockholders’stockholders' equity and cash flows for each of the yearsyear then ended. These financial statements are the responsibility of the company’scompany's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.audit.
We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance 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 audit 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’sCompany'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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Altex Industries, Inc. and its subsidiaries as of September 30, 2017 and the results of their operations and their cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Thayer O'Neal Company, LLC
Thayer O'Neal Company, LLC
Houston, Texas
December 15, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Altex Industries, Inc.
Breckenridge, Colorado
We have audited the accompanying consolidated balance sheet of Altex Industries, Inc. and its subsidiaries (collectively, "the Company") as of September 30, 2016 and the related consolidated statement of operations, stockholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance 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 audit 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, 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 financial position of Altex Industries, Inc. and its subsidiaries as of September 30, 2014 and 20132016 and the results of their operations and their cash flows for the periodsperiod then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
November 28, 2014December 23, 2016
ALTEX INDUSTRIES, INC. | |
Consolidated Balance Sheets | |
| | | | | | |
| | September 30 | |
| | 2017 | | | 2016 | |
Assets | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | 2,349,000 | | | $ | 2,472,000 | |
Accounts receivable | | | - | | | | 3,000 | |
Other | | | 17,000 | | | | 16,000 | |
Total current assets | | | 2,366,000 | | | | 2,491,000 | |
| | | | | | | | |
Property and equipment, at cost | | | | | | | | |
Proved oil and gas properties (successful efforts method) (Notes 6 and 7) | | | 333,000 | | | | 334,000 | |
Other | | | 3,000 | | | | 17,000 | |
Total property and equipment, at cost | | | 336,000 | | | | 351,000 | |
Less accumulated depreciation, depletion, and amortization | | | (227,000 | ) | | | (224,000 | ) |
Net property and equipment | | | 109,000 | | | | 127,000 | |
| | | | | | | | |
Total assets | | $ | 2,475,000 | | | $ | 2,618,000 | |
| | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 4,000 | | | $ | 7,000 | |
Other accrued expenses | | | 1,080,000 | | | | 1,080,000 | |
Total current liabilities | | | 1,084,000 | | | | 1,087,000 | |
| | | | | | | | |
Commitments and Contingencies (Notes 3, 5 and 6) | | | - | | | | - | |
| | | | | | | | |
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 and outstanding, 12,597,631 and 12,734,452, respectively | | | 126,000 | | | | 127,000 | |
Additional paid-in capital | | | 13,827,000 | | | | 13,837,000 | |
Accumulated deficit | | | (12,562,000 | ) | | | (12,433,000 | ) |
Total stockholders' equity | | | 1,391,000 | | | | 1,531,000 | |
| | | | | | | | |
Total stockholders' equity and liabilities | | $ | 2,475,000 | | | $ | 2,618,000 | |
| | | | | | | | |
See accompanying notes to consolidated financial statements. | |
ALTEX INDUSTRIES, INC. | |
Consolidated Statements of Operations | |
Years ended September 30 | |
| | | | | | |
| | 2017 | | | 2016 | |
Revenue | | | | | | |
Oil and gas sales | | $ | 61,000 | | | $ | 28,000 | |
| | | 61,000 | | | | 28,000 | |
| | | | | | | | |
Costs and expenses | | | | | | | | |
Production taxes | | | 5,000 | | | | 2,000 | |
General and administrative | | | 188,000 | | | | 390,000 | |
Depreciation, depletion, and amortization | | | 18,000 | | | | 22,000 | |
| | | 211,000 | | | | 414,000 | |
| | | | | | | | |
Other income | | | | | | | | |
Interest income | | | 18,000 | | | | 17,000 | |
Other income | | | 3,000 | | | | - | |
| | | | | | | | |
Net loss | | $ | (129,000 | ) | | $ | (369,000 | ) |
| | | | | | | | |
Basic and diluted loss per share | | $ | (0.01 | ) | | $ | (0.03 | ) |
| | | | | | | | |
Basic and diluted weighted average shares outstanding | | | 12,658,843 | | | | 12,739,991 | |
| | | | | | | | |
See accompanying notes to consolidated financial statements. | |
ALTEX INDUSTRIES, INC. | |
Consolidated Statements of Cash Flows | |
Years ended September 30 | |
| | 2017 | | | 2016 | |
Cash flows used in operating activities | | | | | | |
Net loss | | $ | (129,000 | ) | | $ | (369,000 | ) |
Adjustments to reconcile net loss to net cash used in operating activities | |
Depreciation, depletion, and amortization | | | 18,000 | | | | 22,000 | |
Decrease in accounts receivable | | | 3,000 | | | | 4,000 | |
(Increase) decrease in other assets | | | (1,000 | ) | | | 1,000 | |
Decrease in accounts payable | | | (3,000 | ) | | | (11,000 | ) |
Increase in other accrued expenses | | | - | | | | 236,000 | |
Net cash used in operating activities | | | (112,000 | ) | | | (117,000 | ) |
| | | | | | | | |
Cash flows from investing activities | | | - | | | | - | |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Acquisition of treasury stock | | | (11,000 | ) | | | (16,000 | ) |
Net cash from financing activities | | | (11,000 | ) | | | (16,000 | ) |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | (123,000 | ) | | | (133,000 | ) |
Cash and cash equivalents at beginning of year | | | 2,472,000 | | | | 2,605,000 | |
Cash and cash equivalents at end of year | | $ | 2,349,000 | | | $ | 2,472,000 | |
| | | | | | | | |
Noncash Investing and Financing Activities | | | | | | | | |
Retirement of treasury stock | | $ | 11,000 | | | $ | 16,000 | |
| | | | | | | | |
See accompanying notes to consolidated financial statements. | |
ALTEX INDUSTRIES, INC. | |
Consolidated Statements of Stockholders' Equity | |
| | | | | | | | | | | | | | | | | | |
| | Common Stock | | | Additional paid-in capital | | | Accumulated deficit | | | Treasury stock | | | Total stockholders' equity | |
| | Shares | | | Amount | | | | | | | | | |
Balance at September 30, 2015 | | | 12,923,232 | | | | 129,000 | | | | 13,851,000 | | | | (12,064,000 | ) | | | - | | | | 1,916,000 | |
Net loss | | | | | | | | | | | | | | | (369,000 | ) | | | | | | | (369,000 | ) |
Acquisition of treasury stock, 188,780 shares at $0.08 per share | | | | | | | | (16,000 | ) | | | (16,000 | ) |
Retirement of treasury stock | | | (188,780 | ) | | | (2,000 | ) | | | (14,000 | ) | | | | | | | 16,000 | | | | - | |
Balance at September 30, 2016 | | | 12,734,452 | | | | 127,000 | | | | 13,837,000 | | | | (12,433,000 | ) | | | - | | | | 1,531,000 | |
Net loss | | | | | | | | | | | | | | | (129,000 | ) | | | | | | | (129,000 | ) |
Acquisition of treasury stock, 136,821 shares at $0.08 per share | | | | | | | | (11,000 | ) | | | (11,000 | ) |
Retirement of treasury stock | | | (136,821 | ) | | | (1,000 | ) | | | (10,000 | ) | | | | | | | 11,000 | | | | - | |
Balance at September 30, 2017 | | | 12,597,631 | | | $ | 126,000 | | | $ | 13,827,000 | | | $ | (12,562,000 | ) | | $ | - | | | $ | 1,391,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. | |
ALTEX INDUSTRIES, INC. |
Consolidated Balance Sheet |
| | | | | | |
| | September 30 | |
| | 2014 | | | 2013 | |
Assets | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | 2,699,000 | | | $ | 2,785,000 | |
Accounts receivable | | | 9,000 | | | | 13,000 | |
Other | | | 16,000 | | | | 15,000 | |
Total current assets | | | 2,724,000 | | | | 2,813,000 | |
| | | | | | | | |
Property and equipment, at cost | | | | | | | | |
Proved oil and gas properties (successful efforts method) (Notes 6 and 7) | | | 347,000 | | | | 347,000 | |
Other | | | 17,000 | | | | 17,000 | |
Total property and equipment, at cost | | | 364,000 | | | | 364,000 | |
Less accumulated depreciation, depletion, and amortization | | | (195,000 | ) | | | (176,000 | ) |
Net property and equipment | | | 169,000 | | | | 188,000 | |
| | | | | | | | |
Other assets | | | 2,000 | | | | 2,000 | |
| | | | | | | | |
Total assets | | $ | 2,895,000 | | | $ | 3,003,000 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 7,000 | | | $ | 2,000 | |
Other accrued expenses | | | 620,000 | | | | 399,000 | |
Total current liabilities | | | 627,000 | | | | 401,000 | |
| | | | | | | | |
Commitments and Contingencies (Notes 3, 5 and 6) | | | - | | | | - | |
| | | | | | | | |
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 and outstanding, 12,975,321 and 13,229,888, respectively | | | 130,000 | | | | 132,000 | |
Additional paid-in capital | | | 13,854,000 | | | | 13,881,000 | |
Accumulated deficit | | | (11,716,000 | ) | | | (11,411,000 | ) |
Total stockholders' equity | | | 2,268,000 | | | | 2,602,000 | |
| | | | | | | | |
Total stockholders' equity and liabilities | | $ | 2,895,000 | | | $ | 3,003,000 | |
| | | | | | | | |
See accompanying notes to consolidated financial statements. |
ALTEX INDUSTRIES, INC. |
Consolidated Statement of Operations |
Years ended September 30 |
| | | | | | |
| | 2014 | | | 2013 | |
Revenue | | | | | | |
Oil and gas sales | | $ | 93,000 | | | | 97,000 | |
Other | | | 7,000 | | | | 4,000 | |
| | | 100,000 | | | | 101,000 | |
| | | | | | | | |
Costs and expenses | | | | | | | | |
Lease operating | | | 3,000 | | | | 6,000 | |
Production taxes | | | 9,000 | | | | 9,000 | |
General and administrative | | | 391,000 | | | | 359,000 | |
Depreciation, depletion, and amortization | | | 19,000 | | | | 21,000 | |
| | | 422,000 | | | | 395,000 | |
| | | | | | | | |
Other income (expenses) | | | | | | | | |
Interest income | | | 17,000 | | | | 18,000 | |
| | | | | | | | |
Net loss | | $ | (305,000 | ) | | | (276,000 | ) |
| | | | | | | | |
Basic and diluted loss per share | | $ | (0.02 | ) | | | (0.02 | ) |
| | | | | | | | |
Basic and diluted weighted average shares outstanding | | | 13,221,519 | | | | 13,287,382 | |
| | | | | | | | |
See accompanying notes to consolidated financial statements. |
ALTEX INDUSTRIES, INC. |
Consolidated Statement of Stockholders' Equity |
Years ended September 30 |
| | | | | | | | | | | | | | | | | | |
| | Common Stock | | | Additional paid-in capital | | | Accumulated deficit | | | Treasury stock | | | Total stockholders' equity | |
| | Shares | | | Amount | | | | | | | | | | | | | |
Balance at September 30, 2012 | | | 13,288,343 | | | $ | 133,000 | | | | 13,887,000 | | | | (11,135,000 | ) | | | | | $ | 2,885,000 | |
Net loss | | | | | | | | | | | | | | | (276,000 | ) | | | | | | (276,000 | ) |
Acquisition of treasury stock, 58,455 shares at $0.11 per share | | | | | | | | | | | | | | | | (7,000 | ) | | | (7,000 | ) |
Retirement of treasury stock | | | (58,455 | ) | | | (1,000 | ) | | | (6,000 | ) | | | | | | | 7,000 | | | | - | |
Balance at September 30, 2013 | | | 13,229,888 | | | | 132,000 | | | | 13,881,000 | | | | (11,411,000 | ) | | | - | | | | 2,602,000 | |
Net loss | | | | | | | | | | | | | | | (305,000 | ) | | | | | | | (305,000 | ) |
Acquisition of treasury stock, 254,567 shares at $0.12 per share | | | | | | | | | | | | | | | | (29,000 | ) | | | (29,000 | ) |
Retirement of treasury stock | | | (254,567 | ) | | | (2,000 | ) | | | (27,000 | ) | | | | | | | 29,000 | | | | - | |
Balance at September 30, 2014 | | | 12,975,321 | | | $ | 130,000 | | | | 13,854,000 | | | | (11,716,000 | ) | | | - | | | $ | 2,268,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. |
ALTEX INDUSTRIES, INC. |
Consolidated Statement of Cash Flows |
Years ended September 30 |
| | 2014 | | | 2013 | |
Cash flows used in operating activities | | | | | | |
Net loss | | $ | (305,000 | ) | | | (276,000 | ) |
Adjustments to reconcile net loss to net cash used in operating activities | | | | | |
Depreciation, depletion, and amortization | | | 19,000 | | | | 21,000 | |
Decrease in accounts receivable | | | 4,000 | | | | - | |
Increase in other current assets | | | (1,000 | ) | | | 1,000 | |
Increase (decrease) in accounts payable | | | 5,000 | | | | (10,000 | ) |
Increase in other accrued expenses | | | 221,000 | | | | 204,000 | |
Net cash used in operating activities | | | (57,000 | ) | | | (60,000 | ) |
| | | | | | | | |
Cash flows from investing activities | | | - | | | | - | |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Acquisition of treasury stock | | | (29,000 | ) | | | (7,000 | ) |
Net cash from financing activities | | | (29,000 | ) | | | (7,000 | ) |
| | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (86,000 | ) | | | (67,000 | ) |
Cash and cash equivalents at beginning of year | | | 2,785,000 | | | | 2,852,000 | |
Cash and cash equivalents at end of year | | $ | 2,699,000 | | | | 2,785,000 | |
| | | | | | | | |
See accompanying notes to consolidated financial statements. |
ALTEX INDUSTRIES, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
September 30, 20142017 and 20132016
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"the Company,”" owns interests, including working interests, in productive oil and gas properties located in Utah and Wyoming. The Company’sCompany's revenues are generated from interest income from cash deposits and from sales of oil and gas production. The Company’sCompany's operations are significantly affected by changes in interest rates and oil and gas prices.
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-productionunits‑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’sasset's carrying value with management’smanagement's best estimate of the asset’sasset'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’sCompany'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, 2014.
2017.
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’sCompany'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.
Interest income: Interest income is generated from cash deposit and is recognized when earned.
Recent Accounting Pronouncements:
There are no recent accounting pronouncements that have a material impact on the consolidated financial statements.
Note 2 - Income Taxes. At September 30, 2014,2017, the Company had a depletion carryforward of $860,000 and a net operating loss carryforward ("NOL") of $1,852,000,$2,259,000, which will expire in the years 20272029 through 2034.2037. 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, 2014,2017, computed in accordance with the Income Tax Topic (Topic 740) of the Codification, is as follows:
Deferred Tax Assets | | 2014 | | | 2013 | | | 2017 | | | 2016 | |
Depletion carryforward | | $ | 302,000 | | | $ | 301,000 | | | $ | 301,000 | | | | 301,000 | |
Net operating loss carryforward | | | 648,000 | | | | 615,000 | | | | 790,000 | | | | 740,000 | |
Accrued shareholder salary | | | 205,000 | | | | 132,000 | | | | 359,000 | | | | 359,000 | |
Other | | | | - | | | | 5,000 | |
Total Net Deferred Tax Assets | | | 1,155,000 | | | | 1,048,000 | | | | 1,450,000 | | | | 1,405,000 | |
Less valuation allowance | | | (1,155,000 | ) | | | (1,048,000 | ) | | | (1,450,000 | ) | | | (1,405,000 | ) |
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:
| | 2014 | | | 2013 | | | 2017 | | | 2016 | |
Tax benefit at 35% of net earnings | | $ | (106,000 | ) | | | (97,000 | ) | | $ | (45,000 | ) | | | (129,000 | ) |
State income tax, net of Federal benefit | | | - | | | | - | | | | - | | | | - | |
Change in valuation allowance for net deferred tax assets | | | 106,000 | | | | 97,000 | | | | 45,000 | | | | 129,000 | |
Income tax expense | | $ | - | | | | - | | | $ | - | | | | - | |
As of September 30, 2014,2017, the Company has no unrecognized tax benefit as a result of uncertain tax positions. As of September 30, 2014,2017, the Company’sCompany's tax years that remain subject to examination are 20112014 - 20142017 (Federal jurisdiction) and 20102013 - 20142017 (state jurisdictions).
Note 3 - Related Party Transactions. Effective October 1, 2012,2016, the Company entered into a five-yearrenewed its employment agreement with its president whichpresident. The agreement has an initial term of five years and provides for aan annual base salary equal to the maximum annual contribution to a Health Flexible Spending Arrangement ("FSA") and an annual bonus of $200,000 annually, plus escalations of notno less than 3% annually.20% of the Company's earnings before tax, payable, at the president's election, in either cash or common stock of the Company at then fair market value. The Company will match any contribution that the president makes to the Company's FSA. 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 20% 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. At September 30, 2014,2017, other accrued expense includes $586,000$1,024,000 in salary payable to the Company’sCompany's president that the president has elected to defer.
In 2014 and 2013, the Company expended $29,000 and $7,000 to acquire 254,567 and 58,455 shares of common stock, respectively.
Note 4 - Major Customers. In 20142017 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 78%91% of oil and gas sales. In 20142017 the two customers individually accounted for 63%58% and 15%33% of oil and gas sales. In 20132016 the Company had threetwo customers who individually accounted for 10% or more of the Company's oil and gas sales and who, in aggregate, accounted for 85%87% of oil and gas sales. In 20132016 the threetwo customers individually accounted for 49%, 19% and 17%38% of oil and gas sales.
Note 5 - Leases. The Company rents office space under a cancellable operating lease that expires AprilJune 30, 2022.2025. The Company may cancel upon 30 daysdays' written notice and the payment of a termination fee of $3,000. In 2014 and 2013 the$4,000. The Company incurred rent expense of $13,000.$24,000 in 2017 and 2016.
Note 6 - Reclamation, Restoration, and Dismantlement (RR&D). The Company accounts for its 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, 20142017 and 2013,2016, 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. Oil prices used are the average of the NYMEX settlement price for the spot month on the first day of each month of 2014, adjusted for the Company’s2017, corrected to received price using a price differential. Income tax expense is not reflected in the tables below because of the anticipated utilization of net operating loss carryforwards and depletion carryforwards. The estimation of reserves is complex and subjective, and reserve estimates tend to fluctuate in light of new production data.
I. Capitalized Costs Relating to Oil and Gas Producing Activities
| | September 30, 2014 | | | September 30, 2017 | |
Proved properties | | $ | 347,000 | | | $ | 333,000 | |
Accumulated depreciation, depletion, amortization and valuation allowance | | | (178,000 | ) | | | (224,000 | ) |
Net capitalized cost | | $ | 169,000 | | | $ | 109,000 | |
II. Estimated Quantities of Proved Oil and Gas Reserves
| | Oil in Barrels | | | Gas in MCFs | |
Balance at September 30, 2012 | | | 5,200 | | | | - | |
Revisions of previous estimates | | | 3,200 | | | | 1,000 | |
Production | | | (800 | ) | | | (1,000 | ) |
Balance at September 30, 2013 | | | 7,600 | | | | - | |
Revisions of previous estimates | | | (100 | ) | | | 2,000 | |
Production | | | (800 | ) | | | (2,000 | ) |
Balance at September 30, 2014 | | | 6,700 | | | | - | |
| | Oil in Barrels | |
Balance at September 30, 2015 | | | 4,200 | |
Revisions of previous estimates | | | (300 | ) |
Production | | | (700 | ) |
Balance at September 30, 2016 | | | 3,200 | |
Revisions of previous estimates | | | 1,100 | |
Production | | | (600 | ) |
Balance at September 30, 2017 | | | 3,700 | |
III. Present Value of Estimated Future Net Revenue
| | At September 30 | | | At September 30 | |
| | 2014 | | | 2013 | | | 2017 | | | 2016 | |
Estimated future revenue | | $ | 503,000 | | | $ | 521,000 | | | $ | 130,000 | | | $ | 85,000 | |
Estimated future expenditures | | | (54,000 | ) | | | (56,000 | ) | | | (15,000 | ) | | | (10,000 | ) |
Estimated future net revenue | | | 449,000 | | | | 465,000 | | | | 115,000 | | | | 75,000 | |
10% annual discount of estimated future net revenue | | | (193,000 | ) | | | (203,000 | ) | | | (44,000 | ) | | | (26,000 | ) |
Present value of estimated future net revenue | | $ | 256,000 | | | $ | 262,000 | | | $ | 71,000 | | | $ | 49,000 | |
IV. Summary of Changes in Present Value of Estimated Future Net Revenue