UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934    

For the fiscal year ended September 30, 20222023

☐  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

Registrant's telephone number, including area code: (303) 265-9312

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the 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 every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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 [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐  No [X]

Aggregate market value of the common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $535,000.$625,000.

Number of shares outstanding of registrant's common stock as of December 23, 2022: 11,517,426.15, 2023: 11,348,021.

“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: 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 that was incorporated in Delaware in 1985. Through its operating subsidiary, AOC, the Company currently owns interests in 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 asset retirement obligations (ARO), 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 ARO, as it does not own any working interests.

Item 1A. Risk Factors.

Not applicable.

Item 1B. Unresolved Staff Comments.

Not applicable.

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Item 2.Properties. 

The Company’s estimated reserves at September 30, 2022,2023, are 1,3001,600 barrels of proved, developed oil reserves associated with the Company’s 4.4% override in the Glo Field in Campbell County, Wyoming. The reserve estimate is prepared by the Company’s registered profession petroleum engineer; management supplies the engineer with ownership and revenue data and reviews the reserve estimate for reasonableness. All the Company’s interests in oil and gas properties are non-working interests. The Company did not participate in the drilling of any wells during the year ended September 30, 2021 (FY21)2022 (FY22) or the year ended September 30, 2022 (FY22)2023 (FY23). At December 23, 2022,15, 2023, the Company was not engaged in any oil and gas operations. The Company owns very small mineral interests in Utah. All the Company’s production is located in Utah and Wyoming.

Production

Item 3.Legal Proceedings. 

None.

Item 4.Mine Safety Disclosures. 

Not applicable.

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 traded on OTC Pink under the symbol ALTX. At December 23, 2022,15, 2023, there were approximately 3,400 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. The Company has no publicly announced plan or program for the purchase of shares, and the Company has no compensation plans (including individual compensation arrangements) under which equity securities of the registrant are authorized for issuance. On October 26, 2022, the Company acquired 493,975 shares

Issuer Purchases of its common stock for $44,556.55, and on November 9, 2022, the Company retired the 493,975 shares.Equity Securities

Item 6. Reserved.

Not applicable.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Financial Condition

In FY23 operating activities used $58,000 cash, and the Company used $68,000 cash to acquire 663,380 shares of its common stock. In FY22 operating activities used $129,000 cash, and the Company sold certain oil, gas, and mineral interests in Utah for $450,000 cash. In FY21 operating activities used $85,000 cash, and the Company used $19,000 cash to acquire 130,000 shares of its common stock. Consequently, cash balances decreased $126,000 in FY23 and increased $321,000 in FY22 and decreased $104,000 in FY21.FY22. On October 26, 2022, the Company acquired 493,975 shares of its common stock for $44,556.55, and on November 9, 2022, the Company retired the 493,975 shares. On September 27, 2023, the Company acquired 169,405 shares of its common stock for $22,954.38, and on September 29, 2023, the Company retired the 169,405 shares. At September 30, 2023, accrued expenses, related party, of $1,140,000 consists of $1,087,000 in salary and bonus payable to the Company’s president, pursuant to his employment agreement, that the president has elected to defer, as well as $53,000 in related accrued payroll tax. At September 30, 2022, and 2021, 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 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 23, 2022,15, 2023, the Company had no material commitments for capital expenditures.

Results of Operations

General and administrative expense increased from $179,000 in FY22 to $263,000 in FY23 because of increased insurance expense and because during FY23 the Company recognized bonus expense and related payroll tax liability of $68,000 pursuant to the president’s employment agreement. In FY22 the Company realized a net gain of $450,000 from the sale of certain oil, gas, and mineral interests in Utah. Interest income increased from nil in FY21 to $14,000 in FY22 to $101,000 in FY23 because of higher realized interest rates on cash balances. In FY23, other income consisted of $9,000 of out-of-period oil and gas sales received in 2023. In FY22, other income consisted of $4,000 of out-of-period oil and gas sales received in 2022. In FY21, other income consisted of $56,000 of out-of-period oil and gas sales that, unbeknownst to the Company, an operator had held in suspense and that was received in 2021, and $1,000 of other out-of-period oil and gas sales received in 2021.

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 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 expectedlikely to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.

Critical Accounting Estimates

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the Company. The Company does not believe that the Company utilizes any accounting estimates that have had or are reasonably likely to have a material impact on financial condition or results of operations.

Climate Change

The company does not believe that climate change or regulations adopted to mitigate the consequences of climate change will have a material impact on the Company’s financial condition or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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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. 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.

Item 9b. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10.Directors, Executive Officers, and Corporate Governance. 

Steven Cardin, 72,73, 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,since 1985, and a Director since 1984. Jeffrey Chernow, 71,72, 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. Stephen Fante, 67,68, 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. 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

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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

Effective October 1, 2021, the Company renewed its Employment Agreement with Mr. Cardin. The Agreement has an initial term of five years and provides an annual base salary 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. Mr. Cardin has deferred payment of the bonus earned in 2023, but he may cause the Company to pay the bonus in cash or common stock at any time.

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.

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Director Compensation

EachIn 2022 and 2023 each Director who is not also an officer of the Company received $1,000 per month for service as a Director. Effective November 1, 2024, each Director who is not also an officer of the Company receives $1,000$1,400 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 23, 2022,15, 2023, 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 23, 2022,15, 2023, by all Directors and executive officers and by all Directors and executive officers as a group.

Except for Mr. Cardin’s right to receive a bonus as common stock, the Company has no compensation plan under which equity securities of the company are authorized for issuance.

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 FY22: $11,500.FY23: $17,975. Billed for FY21: $11,000.FY22: $16,500.

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 pre-approved by the Company’s Audit Committee.

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PART IV

Item 15.Exhibits and Financial Statement Schedules 

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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.

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.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Altex Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Altex Industries, Inc. (the Company) as of September 30, 20222023 and 2021,2022, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively (collectively referred to as the "financial "financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 20222023 and 2021,2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United (United States) (PCAOB) and are required to be independent with respect to the Companyin accordance with the U.S. U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB .

We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,audit, we are required to obtain an understanding of internal control over financial reporting, 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.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our auditsaudit also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provideaudit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As discussed in Note 1 to the consolidated financial statements, the Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue from oil and gas production is recognized based on

the sales date as reported to the Company by the operators of oil and gas production facilities in which the Company has a royalty interest.

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Auditing management’s evaluation of the royalty revenue from its agreements with customers involves significant judgment based on the estimates of the revenue recorded and their subsequent true-up once payment is received.

To evaluate the appropriateness and accuracy of the revenue recorded by management, we evaluated management’s assessment of the revenue recorded based on the Company’s royalty interest.

/s/ M&K CPAS, PLLC

M&K CPAS, PLLC

PCAOB ID: 2738

We have served as the Company’s auditor since 2020

Houston, TX

December 23, 202215, 2023

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ALTEX INDUSTRIES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

September 30, 20222023 and 20212022

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 non-working interests in productive oil and gas properties located in Utah and Wyoming. The Company’s revenues are generated from interest income from cash deposits and from sales of oil and gas production. The Company’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-production method based on estimated quantities of proved reserves and estimated ARO. 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.

Impairment of long-lived assets: The Company assesses long-lived assets for impairment when the carrying value of such assets may not be recoverable. This review compares the asset’s carrying value with management’s estimate of its undiscounted cash flows. If the estimated cash flows exceed the carrying value, no impairment is recognized. If the carrying value exceeds the estimated cash flows, an impairment equal to the excess of the carrying value over the estimated cash flows 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.

Asset retirement obligations: If the Company acquires a working interest in an oil and gas property that is placed in service, it records a liability for its ARO. Subsequently, the ARO liability is accreted to its then-present value. Inherent in the estimation of ARO are numerous assumptions and judgments including ultimate settlement amounts, inflation rates, discount rates, timing of settlement, and changes in regulations. To the extent changes in these assumptions impact the estimate of the ARO, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.

Earnings (loss) per share: Basic earnings (loss) per share has been calculated based on the weighted average number of common shares outstanding. Under this method, the incremental number of shares used in computing diluted earnings per share (EPS) is the difference between the number of shares assumed issued and purchased using assumed proceeds. Diluted EPS amounts would include the effect of outstanding stock options, warrants, and other convertible securities if including such potential shares of common stock is dilutive. Basic and diluted earnings per share are the same in the periods presented as there are no such outstanding instruments at September 30, 2022,2023, or September 30, 2021.2022.

Fair value measurements: “Fair value“ is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of fair value estimation, based on the observability of inputs: Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Level 2. Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3. Valuations based on inputs that are unobservable and significant to the overall fair value measurement. As of September 30, 20222023 and 2021,2022, the Company believes the amounts reported for the carrying value of cash, other current assets, accounts payable, accrued expenses (related parties), and other accrued expenses, as reflected in the consolidated balance sheets, approximate fair value, due to the short maturity of these instruments.

Cash Equivalents: The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

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, 2022.2023.

Concentrations of credit risk: The Company maintains significant amounts of cash and sometimes permits cash balances to exceed insured limits.

Revenue recognition: The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Substantially all the Company’s revenue is from sales of oil and gas production, interest income, and, occasionally, bonus payments for mineral leases. Revenue from oil and gas production is recognized based on sales date as reported to the Company by the operators of oil and gas production facilities in which the company has an interest. Interest income is recognized when earned. The Company accounts for mineral lease bonus payments in accordance with the guidance set forth in ASC 932, Extractive Activities – Oil and Gas, and it classifies such income as other income. The Company recognizes revenue from mineral lease bonus payments when it has received both an executed agreement and the bonus payment, and the Company has no obligation to refund any portion of the payment. The Company classifies mineral lease bonus payments as other income because the leasing of mineral interests is not a principal business activity of the Company, and material amounts of mineral lease bonus payments do not occur with any regularity.

Other Income: Other income is any income the Company receives that is neither oil and gas sales attributable to the current period nor interest income. Other income includes out-of-period sales revenue and various items of miscellaneous income as well as lease bonus payments.

Recent Accounting Pronouncements:

In February 2016 the FASB issued ASU 2016-2, Leases (Topic 842), which requires lessees to recognize a lease liability and right-of-use asset for all leases, including operating leases, with a term greater than 12 months. The provisions of ASU 2016-2 also modify the definition of a lease and outline the requirements for recognition, measurement,

presentation, and disclosure of leasing arrangements. ASU 2016-2 is effective for annual periods beginning after December 15, 2018. The Company adopted the provisions of ASU 2016-2 effective October 1, 2019.

In December 2019 the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740). The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this Update effective October 1, 2021.

Note 2 - Income Taxes. At September 30, 2022,2023, the Company had a depletion carryforward of $860,000 and a net operating loss carryforward of $2,247,000,$2,318,000, of which $1,949,000 will expire in the years 2028 through 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, 2022,2023, computed in accordance with the Income Tax Topic (Topic 740) of the Codification, is as follows:

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:

As of September 30, 2022,2023, the Company has no unrecognized tax benefit as a result of uncertain tax positions. As of September 30, 2022,2023, the Company’s tax years that remain subject to examination are 20192020 - 20222023 (Federal jurisdiction) and 20182019 - 20222023 (state jurisdictions).

Note 3 - Related Party Transactions. Effective October 1, 2021, the Company renewed its employment agreement with its president. The agreement has an initial term of five years and provides an annual base salary 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 the president’s election, in either cash or common stock of the Company at then fair market value. The Company matches 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. At September 30, 2022,2023, accrued expense, related party, includes $1,024,000$1,087,000 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$53,000 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.

Note 4 - Major Customers. In 2023 the Company had one customer who accounted for 83% of the Company's oil and gas sales. In 2022 the Company had four customers who individually accounted for 10% or more of the Company's oil and gas sales and who, in aggregate, accounted for 93% of oil and gas sales. In 2022 the four customers individually accounted for 48%, 17%, 17%, and 11% of oil and gas sales. In 2021 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 93% of oil and gas sales. In 2021 the three customers individually accounted for 63%, 17% and 13% of oil and gas sales.

Note 5 - Leases. The Company rents office space under an operating lease that terminates on June 30, 2025. The Company may cancel the lease upon 30 days’ notice and the payment of a $4,000 termination fee. If the landlord sells the premises to an unrelated third party, the new landlord may reduce the term to one year from the date of purchase. The Company incurred lease cost of $30,000 in 2023 and $28,000 in 2022 and $27,000 in 2021.2022. The landlord may increase annual rent no more than CPI. On October 1, 2019, the Company adopted Financial Accounting Standards Board (FASB) ASC 842, “Leases.” The Company adopted ASC 842 using the optional modified retrospective transition method. Under this transition method, the Company did not recast the prior period financial statements. The adoption of ASC 842 resulted in the recognition of a right-of-use asset and a corresponding lease liability of $118,000 at September 30, 2020.

Note 6 - Oil and Natural Gas Properties. Oil and natural gas properties consist of the following:

As the Company does not own working interests, it is not liable for the cost of well abandonment or surface restoration, so no ARO liability was recorded at September 30, 20222023 and 2021.2022. In the year ended September 30, 2022, the Company realized a net gain of $450,000 from the sale of certain oil, gas, and mineral interests in Utah. As the Company had no basis in these assets, $450,000 was recorded as gain on sale of assets in the year ended September 30, 2022.

Note 7 - Equity and treasury stock transactions. In the year ended September 30, 2021,2023, the Company purchased 130,000663,380 shares of its common stock for an average price of $0.15$0.10 per share and retired the shares.

Note 8 – Other Income. In the year ended September 30, 2023, other income consisted of $9,000 of out-of-period oil and gas sales received in 2023. In the year ended September 30, 2022, other income consisted of $4,000 of out-of-period oil and gas sales received in 2022. In the year ended September 30, 2021, other income consisted of $56,000 of out-of-period oil and gas sales that, unbeknownst to the Company, an operator had held in suspense and that was received in 2021, and $1,000 of other out-of-period oil and gas sales received in 2021.

Note 9 – Subsequent events. On October 26, 2022, the Company acquired 493,975 shares of its common stock for $44,556.55. On November 9, 2022, the Company retired the 493,975 shares. The Company has evaluated all transactions from September 30, 2022,2023, through the financial statement issuance date and noted no other subsequent event warranting disclosure.

Note 10 - Supplemental Financial Data - Oil and Gas Producing Activities (Unaudited). The Company's operations are confined to the continental United States, and all the Company's reserves are proved, developed.

I. Capitalized Costs. Capitalized costs include the cost of properties, excluding any asset retirement obligations.