##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D. C.
    20549
 Form 10-K
  ANNUAL REPORT
 PURSUANT TO SECTIONS 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
  þ

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

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission File number 0-14183
  ENERGY, INC.
 (Exact name of registrant as
    specified in its charter)
  Montana(State or other jurisdiction
    of
    incorporation or organization)

27-0573782(I.R.S. Employer
    Identification No.)   1 First Avenue South, Great Falls, Montana 59401
 (Address of principal executive
    offices) (Zip Code)
  Registrants telephone number, including area code
    (406) 791-7500
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon, par value $.15 per share

NYSE Amex Equities   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller reporting
    company þ (Do not check if a smaller
    reporting company)
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.
  Form 10-K, Form 10-K




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##### 





TABLE OF
    CONTENTS
   
 PagePart I


1Item 1.


Business


1Item 1A.


Risk Factors


16Item 2.


Properties


25Item 3.


Legal Proceedings


25Item 4.


[RESERVED]


26Part II


26Item 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


26Item 6.


Selected Financial Data


30Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


31Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


54Item 8.


Financial Statements and Supplementary Data


54Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


55Item 9A(T.)


Controls and Procedures


55Item 9B.


Other Information


55Part III


56Item 10.


Directors, Executive Officers and Corporate
    Governance


56Item 11.


Executive Compensation


56Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


56Item 13.


Certain Relationships and Related Transactions
    and Director Independence


56Item 14.


Principal Accountant Fees and Services


56Part IV


57Item 15.


Exhibits and Financial Statement Schedules


57Signatures


65EX-21EX-23.1EX-31EX-32   i




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Forward-Looking
    Statements
  This
    Form 10-K
    contains forward-looking statements within the meaning of the
    federal securities laws. Statements that are not historical
    facts, including statements about our beliefs and expectations,
    are forward-looking statements. Forward-looking statements
    include statements preceded by, followed by or that include the
    words may, could, would,
    should, believe, expect,
    anticipate, plan, estimate,
    target, project, intend, or
    similar expressions. These statements include, among others,
    statements regarding our current expectations, estimates and
    projections about future events and financial trends affecting
    the financial condition and operations of our business.
    Forward-looking statements are only predictions and not
    guarantees of performance and speak only as of the date they are
    made. We undertake no obligation to update any forward-looking
    statement in light of new information or future events.
  Although we believe that the expectations, estimates and
    projections reflected in the forward-looking statements are
    based on reasonable assumptions when they are made, we can give
    no assurance that these expectations, estimates and projections
    can be achieved. We believe the forward-looking statements in
    this
    Form 10-K
    are reasonable; however, you should not place undue reliance on
    any forward-looking statement, as they are based on current
    expectations. Future events and actual results may differ
    materially from those discussed in the forward-looking
    statements. Factors that could cause actual results to differ
    materially from our expectations include, but are not limited
    to:
  
    fluctuating energy commodity prices,
    the possibility that regulators may not permit us to pass
    through all of our increased costs to our customers,
    the impact of the Federal Energy Regulatory Commission (FERC)
    and state public service commission statutes, regulations, and
    actions, including allowed rates of return, and the resolution
    of other regulatory matters,
    the impact of weather conditions and alternative energy sources
    on our sales volumes,
    future utilization of pipeline capacity, which can depend on
    energy prices, competition from alternative fuels, the general
    level of natural gas and propane demand, decisions by customers
    not to renew expiring natural gas contracts and weather
    conditions,
    changes in federal or state laws and regulations to which we are
    subject, including tax, environmental, and employment laws and
    regulations,
    the ability to meet financial covenants imposed by lenders,
    the effect of changes in accounting policies, if any,
    the ability to manage our growth,
    the ability to control costs,
    the ability of each business unit to successfully implement key
    systems, such as service delivery systems,
    our ability to develop expanded markets and product offerings
    and our ability to maintain existing markets,
    our ability to maintain effective internal controls in
    accordance with Section 404 of the Sarbanes-Oxley Act of
    2002, and
    our ability to obtain governmental and regulatory approval of
    various expansion or other projects, including acquisitions. ii




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PART I  Item 1.
    Business.  Change in
    Fiscal Year
  Form 10-K Form 10-K
  Overview
    Natural Gas Operations
    
    Annually, we distribute approximately 29 billion cubic feet
    of natural gas to approximately 62,000 customers through
    regulated utilities operating in and around Great Falls and West
    Yellowstone, Montana, Cody, Wyoming, Bangor, Maine, Elkin, North
    Carolina and various cities in Ohio and Western Pennsylvania.
    The approximate population of the service territories is
    5.3 million. The operation in Elkin, North Carolina
    was added October 1, 2007. The operation in Bangor, Maine
    was added December 1, 2007. Our Ohio and Pennsylvania
    operations were added January 5, 2010Marketing and Production
    Operations (EWR)
    
    Annually, we market approximately 2.4 billion cubic feet of
    natural gas to commercial and industrial customers in Montana
    and Wyoming and manage midstream supply and production assets
    for transportation customers and utilities through our
    subsidiary, Energy West Resources, Inc. (EWR). EWR owns an
    average 48% gross working interest (an average 41% net revenue
    interest) in 160 natural gas producing wells and gas gathering
    assets. Energy West Propane, Inc. dba Missouri River Propane
    (MRP), our small Montana wholesale distribution company that
    sells propane to our affiliated utility, had been reported in
    our propane operations. It is now being reported in marketing
    and production operations.Pipeline Operations (EWD)
    
    We own the Shoshone interstate and the Glacier gathering natural
    gas pipelines located in Montana and Wyoming through our
    subsidiary Energy West Development, Inc. (EWD). Certain natural
    gas producing wells owned by our pipeline operations are being
    managed and reported under our marketing and production
    operations.Propane Operations 
    (Discontinued Operations)
    
    Our Arizona assets were sold during fiscal year 2007, and the
    results of operations for the propane assets related to this
    sale have been reclassified as income from discontinued
    operations. Prior to discontinuance, we distributed
    approximately 5.4 million gallons annually, of propane to
    approximately 8,000 customers through utilities operating
    underground vapor systems in and around Payson, Pine, and
    Strawberry, Arizona and retail distribution of bulk propane to
    approximately 2,300 customers in the same Arizona communities.
    The 1




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associated assets and liabilities are shown on the consolidated
    balance sheet as Assets held for sale and
    Liabilities held for sale. MRP, our small Montana
    wholesale distribution company that sells propane to our
    affiliated utility, had been reported in propane operations. It
    is now being reported in our marketing and production operations.Corporate and Other
    
    This segment was not reported prior to fiscal 2008. Corporate
    and other was established to encompass the results of corporate
    acquisitions and other equity transactions. Reported in
    Corporate and other for the years ended December 31, 2008
    and December 31, 2009 are costs associated with business
    development and acquisitions, and dividend income and recognized
    gains from the sale of marketable securities.  See Note 14 to our Consolidated Financial Statements for
    financial information for each of our segments.
  Recent
    Acquisitions and Future Acquisition Strategy
      2007
    Expansion into North Carolina and Maine
      2009
    Acquisition of Additional Operations in Montana
   2




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2010
    Expansion into Ohio and Western Pennsylvania
    Future
    Acquisition Strategy
            
    cost-effective expansion of our existing customer base by
    prudently managing capital expenditures and ensuring that new
    customers provide sufficient margins for an appropriate return
    on the additional resources and investment required to serve
    these customers, 3




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
    appropriate regulatory treatment of increases in the cost of
    natural gas,
    continuous improvement of our operational efficiencies, and
    maintenance and improvement of our positive reputation with our
    regulators and customers.  New
    Holding Company Structure
      Recent
    Industry Trends
    Natural
    Gas Operations
      Natural
    Gas  Montana
     4




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Gas RevenueYears Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008


2007(In thousands)Residential

$
19,734


$
23,595


$
9,704


$
7,801


$
21,692


$
19,492Commercial


12,462



14,924



5,896



4,895



13,923



12,894Transportation


2,383



2,340



1,011



1,008



2,337



2,058Total

$
34,579


$
40,859


$
16,611


$
13,704


$
37,952


$
34,444         Gas VolumesYears Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2009


2009


2008


2007


2008


2007(In MMcf)Residential


2,368



2,262



891



841



2,212



2,097Commercial


1,370



1,338



478



476



1,336



1,267Transportation


1,770



1,645



742



749



1,652



1,526Total Gas Sales


5,508



5,245



2,111



2,066



5,200



4,890        5




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##### Table of Contents



Natural
    Gas  Wyoming
        Gas RevenueYears Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2008


2007


2008


2007


2008


2007(In thousands)Residential

$
4,626


$
5,213


$
2,227


$
1,996


$
4,982


$
4,657Commercial


3,896



4,733



2,239



1,944



4,438



2,990Industrial


840



2,060



914



862



2,008



4,348Total

$
9,362


$
12,006


$
5,380


$
4,802


$
11,428


$
11,995       Gas VolumesYears Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008


2007(In MMcf)Residential


584



578



230



219



567



526Commercial


634



628



286



271



613



593Transportation


189



326



138



146



334



472Total Gas Sales


1,407



1,532



654



636



1,514



1,591    6




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Natural
    Gas  North Carolina
        Gas RevenueYears Ended


Six Months Ended


Year EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008(In thousands)Residential

$
289


$
313


$
145


$
90


$
258Commercial


3,331



3,284



1,764



651



2,171Transportation


3,016



3,632



1,870



869



2,631Total

$
6,636


$
7,229


$
3,779


$
1,610


$
5,060       Gas VolumesYear Ended


6 Months Ended


Year EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008(In MMcf)Residential


25



20



8



6



18Commercial


378



220



107



49



162Transportation


1,705



1,867



840



506



1,533Total Gas Sales


2,108



2,107



955



561



1,713  7




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Natural
    Gas  Maine
        Gas RevenueYear Ended


Six Months Ended


Year EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008(In thousands)Residential

$
560


$
364


$
187


$
55


$
232Commercial


5,032



4,141



1,636



713



3,218Transportation


1,446



1,312



672



138



778Bucksport


1,151



1,150



575



96



671Total

$
8,189


$
6,967


$
3,070


$
1,002


$
4,899    8




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Gas VolumesYear Ended


Six Months Ended


Year EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008(In MMcf)Residential


50



26



13



3



16Commercial


526



308



134



47



221Transportation


1,035



851



400



81



532Bucksport


14,127



13,784



6,811



1,158



8,131Total Gas Sales


15,738



14,969



7,358



1,289



8,900     start-up start-up
      Natural Gas  Ohio and Western
    Pennsylvania
     9




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Gas RevenueYear EndedDecember 31,2009


2008(In thousands)Residential

$
16,645


$
20,968Commercial


10,685



13,987Transportation


966



779Total

$
28,296


$
35,734     Gas VolumesYear EndedDecember 31,2009


2008(In MMcf)Residential


1,674



1,523Commercial


1,390



1,030Transportation


1,399



1,159Total Gas Sales


4,463



3,712       Marketing
    and Production Operations
   10




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Pipeline
    Operations
    Propane
    Operations  (Discontinued Operations)
    Form 10-K.
  Corporate
    and Other
   11




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20-year
        Competition
  and/or
 12




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Gas
    Supply Marketers and Gas Supply Contracts
      Governmental
    Regulation
  State
    Regulation
      Franchise
    Agreements
   13




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right-of-ways.
  Federal
    Regulations
          Seasonality
    Environmental
    Matters
  Environmental
    Laws and Regulations
   14




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Environmental
    Issues
           15




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Employees
    Item 1A.
    Risk
    Factors.    Risks
    Related to Our Business
  We are
    subject to comprehensive regulation by federal, state and local
    regulatory agencies that impact the rates we are able to charge,
    our costs and profitability.
    Our
    gas purchase practices are subject to an annual review by state
    regulatory agencies which could impact our earnings and cash
    flow.
    Operational
    issues beyond our control could have an adverse effect on our
    business.
     16




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Storing
    and transporting natural gas involves inherent risks that could
    cause us to incur significant financial losses.
    Our
    earnings and cash flow are sensitive to decreases in customer
    consumption resulting from warmer than normal temperatures and
    customer conservation.
      The
    increased cost of purchasing natural gas during periods in which
    natural gas prices are rising significantly could adversely
    impact our earnings and cash flow.
  dollar-for-dollar
  The
    loss of a major commercial or industrial gas customer to which
    we provide natural gas may negatively impact our
    profitability.
    Volatility
    in the price of natural gas could result in customers switching
    to alternative energy sources which could reduce our revenues,
    earnings and cash flow.
   17




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The
    gas industry is intensely competitive and competition has
    increased in recent years as a result of changes in the price
    negotiation process within the supply and distribution chain of
    the gas industry, both of which could negatively impact
    earnings.
    Earnings
    and cash flow may be adversely affected by downturns in the
    economy.
    Changes
    in the regulatory environment and events in the energy markets
    that are beyond our control may reduce our earnings and limit
    our access to capital markets.
    We
    acquired interests in our natural gas wells by quitclaim deed
    and cannot guarantee that we hold clear title to our interests
    or that our interests will not be challenged in the
    future.
     18




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Failure
    to maintain effective internal controls in accordance with
    Section 404 of the Sarbanes-Oxley Act could have a material
    adverse effect on our business and stock price.
  Form 10-K
    Our
    actual results of operations could differ from estimates used to
    prepare our financial statements.
    We are
    subject to numerous environmental laws and regulations that may
    increase our cost of operations, impact our business plans and
    expose us to environmental liabilities.
    clean-up clean-up
   19




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We
    have a net deferred tax asset of 14.0 million and we cannot
    guarantee that we will be able to generate sufficient future
    taxable income to realize a significant portion of this net
    deferred tax asset, which could lead to a writedown (or even a
    loss) of the net deferred tax asset and adversely affect our
    operating results and financial position.
          Changes
    in the market price and transportation costs of natural gas
    could result in financial losses that would negatively impact
    our results of operations.
   20




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Risks
    Related to Our Acquisition Strategy
  We
    face a variety of risks associated with acquiring and
    integrating new business operations.
    
    identify suitable acquisition candidates or opportunities,
    acquire assets or business operations on commercially acceptable
    terms,
    effectively integrate the operations of any acquired assets or
    businesses with our existing operations,
    manage effectively the combined operations of the acquired
    businesses,
    achieve our operating and growth strategies with respect to the
    acquired assets or businesses,
    reduce our overall selling, general, and administrative expenses
    associated with the acquired assets or businesses, or
    comply with the internal control requirements of
    Section 404 as a result of an acquisition.    To the
    extent we are successful in making an acquisition, we may be
    exposed to a number of risks.
    Subsequent
    to the consummation of an acquisition, we may be required to
    take write-downs or write-offs, restructuring and impairment
    charges or other charges that could have a significant negative
    impact on our financial condition, results of operations and our
    stock price.
    Risks
    Related to Our Common Stock
  Our
    ability to pay dividends on our common stock is
    limited.
   21




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The
    possible issuance of future series of preferred stock could
    adversely affect the holders of our common stock.
    Organization,
    Structure and Management Risks
  Our
    credit facilities contain restrictive covenants that may reduce
    our flexibility, and adversely affect our business, earnings,
    cash flow, liquidity and financial condition.
    
    requiring us to dedicate a substantial portion of our cash flow
    from operations to the payment of principal and interest on our
    indebtedness, thereby reducing the availability of cash flow for
    working capital, capital expenditures and other business
    activities,
    requiring us to meet certain financial tests, which may affect
    our flexibility in planning for, or reacting to, changes in our
    business and the industries in which we operate,
    limiting our ability to sell assets, make investments or acquire
    assets of, or merge or consolidate with, other companies,
    limiting our ability to repurchase or redeem our stock or enter
    into transactions with our shareholders or affiliates, and
    limiting our ability to grant liens, incur additional
    indebtedness or contingent obligations or obtain additional
    financing for working capital, capital expenditures,
    acquisitions and general corporate and other activities.    Our
    primary assets are our operating subsidiaries, and our
    subsidiaries credit facilities include financial covenants
    that limit our ability to obtain revenue from those
    subsidiaries, which may limit our ability to pay dividends to
    shareholders.
   22




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##### Table of Contents




    We may cause our Montana, Wyoming, North Carolina and Maine
    operating subsidiaries to pay a dividend only if the dividend,
    when combined with dividends over the previous five years, would
    not exceed 75% of their net income over those years,
    We may cause Orwell and Lightning Pipeline to distribute no more
    than 60% of Orwells net income to us during any fiscal
    year, and
    We may cause NEO, Great Plains and GPL to distribute dividends
    to us only if their consolidated net worth, after payment of the
    dividend, is no less than $1,815,000 as positively increased by
    100% of net income as of the end of each fiscal quarter and year.    Form 10-K.
  In
    acquiring the Ohio Companies, we incurred $20.9 million in
    additional debt, $8.2 million of which will mature in the
    last quarter of 2010. Our short term debt and high degree of
    leverage limit our flexibility in managing our business, and our
    inability to satisfy debts and comply with other financial
    covenants in the short or long term could materially and
    adversely affect our business, earnings, cash flow, liquidity
    and financial condition.
      
    we may be required to dedicate a substantial portion of our cash
    flow from operations to required payments on debt, thereby
    reducing the availability of cash flow for working capital,
    capital expenditures and other general corporate
    activities, and
    covenants relating to our debt may limit our ability to obtain
    additional financing for working capital, capital expenditures
    and other general corporate activities.     23




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Our
    performance depends substantially on the performance of our
    executive officers and other key personnel and the ability of
    our new management team to fully implement our business
    strategy.
      We
    have entered a limited liability operating agreement with third
    parties to develop and operate oil, gas and mineral leasehold
    estates, which exposes us to the risk associated with oil, gas
    and mineral exploration as well as the risks inherent in relying
    upon third parties in business ventures and we may enter into
    similar agreements in the future.
      We
    have entered into certain transactions with persons who are our
    directors and may enter into additional transactions in the
    future.
   24




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Item 2.
    Properties.  Montana
    and Wyoming
  day-to-day
          North
    Carolina
    Maine
    Ohio and
    Western Pennsylvania
    Item 3.
    Legal
    Proceedings.   25




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Shelby Gas
    Association v. Energy West Resources, Inc., No. DV-08-008,
    Item 4.
    [RESERVED]  PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity
    Securities.  Our
    Common Stock
  3-for-2
    Year Ended 12/31/09

High

LowFirst Quarter

$
8.39


$
6.61Second Quarter

$
8.65


$
7.24Third Quarter

$
8.55


$
7.74Fourth Quarter

$
10.61


$
8.12   Six Months Ended 12/31/08

High

LowFirst Quarter

$
10.70


$
7.27Second Quarter

$
8.48


$
5.92   Year Ended 6/30/08

High

LowThird Quarter

$
9.49


$
8.14Fourth Quarter

$
9.80


$
8.19Third Quarter

$
9.68


$
7.59Fourth Quarter

$
11.21


$
7.40   26




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Year Ended 6/30/07

High

LowFirst Quarter

$
7.96


$
6.01Second Quarter

$
8.00


$
7.19Third Quarter

$
10.00


$
7.40Fourth Quarter

$
10.81


$
9.01   Holders
    of Record
    Dividend
    Policy
    December 28, 2007

$
0.036January 28, 2008

$
0.036February 28, 2008

$
0.036March 28, 2008

$
0.036April 30, 2008

$
0.036May 30, 2008

$
0.036June 30, 2008

$
0.040July 31, 2008

$
0.040August 29, 2008

$
0.040September 30, 2008

$
0.040October 30, 2008

$
0.040December 1, 2008

$
0.040December 30, 2008

$
0.040January 30, 2009

$
0.040February 27, 2009

$
0.040March 31, 2009

$
0.040April 30, 2009

$
0.045May 29, 2009

$
0.045July 2, 2009

$
0.045July 31, 2009

$
0.045September 4, 2009

$
0.045September 30, 2009

$
0.045October 30, 2009

$
0.045November 30, 2009

$
0.045December 31, 2009

$
0.045   Restrictions
    on Payment of Dividends
   27




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Recent
    Sales of Unregistered Securities
   28




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Performance
    Graph
    Comparison
    of 5 Year Cumulative Total Return
    Assumes Initial Investment of $100
    December 2009
  
 29




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Item 6.
    Selected
    Financial Data.  Form 10-K.
  Year Ended


Six Months EndedDecember 31,


December 31,2009


2008


2008


2007(Unaudited)





(Unaudited)(In thousands, except per share)Operating resultsOperating revenue

$
71,454


$
87,278


$
38,757


$
28,313Operating expensesGas and electric purchases


46,699



63,506



27,230



19,895General and administrative


10,562



11,777



5,717



4,602Maintenance


667



645



320



326Depreciation and amortization


2,213



1,999



1,023



889Taxes other than income


2,250



2,501



1,285



864Total operating expenses


62,391



80,428



35,575



26,576Operating income


9,063



6,850



3,182



1,737Other income (expense)


(976
)


(295
)


(420
)


191Total interest charges


1,241



1,224



677



530Income (loss) before taxes


6,846



5,331



2,085



1,398Income tax expense (benefit)


27



1,985



926



274Discontinued operations (net of tax)














Net Income (Loss) before extraordinary item


6,819



3,346



1,159



1,124Extraordinary Gain














6,819Net Income

$
6,819


$
3,346


$
1,159


$
7,943Basic earnings (loss) per common share

$
1.58


$
0.77


$
0.27


$
1.85Diluted earnings (loss) per common share

$
1.58


$
0.77


$
0.27


$
1.85Dividends per common share

$
0.53


$
0.46


$
0.28


$
0.25Weighted average common shares Outstanding  diluted


4,313,098



4,338,240



4,331,726



4,304,559At year end:Current assets

$
25,641


$
31,484


$
31,484Total assets

$
78,626


$
75,819


$
75,818Current liabilities

$
27,428


$
30,114


$
30,114Total long-term debt

$
13,000


$
13,000


$
13,000Total stockholders equity

$
35,688


$
30,082


$
30,082Total capitalization

$
48,688


$
43,082


$
43,082   30




---



##### Table of Contents



Fiscal Years Ended June 30,2008


2007


2006(In thousands, except per share)Operating resultsOperating revenue

$
76,833


$
59,373


$
74,696Operating expensesGas and electric purchases


56,170



43,806



60,398General and administrative


10,662



6,198



6,389Maintenance


650



567



505Depreciation and amortization


1,865



1,692



1,672Taxes other than income(1)


2,080



1,697



1,453Total operating expenses


71,427



53,960



70,417Operating income (loss)


5,406



5,413



4,279Other
    income-net


316



241



391Total interest charges(2)


1,077



2,124



1,649Income before taxes


4,645



3,530



3,021Income tax expense


1,333



1,273



1,109Discontinued operations (net of tax)






3,955



405Net Income (Loss) before extraordinary item


3,312



6,212



2,317Extraordinary Gain


6,819Net Income

$
10,131


$
6,212


$
2,317Basic earnings (loss) per common share

$
2.35


$
1.40


$
0.53Diluted earnings (loss) per common share

$
2.35


$
1.39


$
0.52Dividends per common share(3)

$
0.47


$
0.34


$
0.11Weighted average common shares Outstanding  diluted


4,316,244



4,484,073



4,422,069At year end:Current assets

$
16,340


$
18,830


$
23,669Total assets

$
58,377


$
51,582


$
56,629Current liabilities

$
11,962


$
8,756


$
10,796Total long-term debt

$
13,000


$
13,000


$
17,605Total stockholders equity

$
30,649


$
22,296


$
19,165Total capitalization

$
43,649


$
35,296


$
36,770     (1)
    
    Taxes other than income include $250,000 in fiscal 2007 for
    additional personal property taxes assessed by the Montana
    Department of Revenue. The 2008 increase results from personal
    property taxes on our acquired companies in Maine and North
    Carolina(2)
    
    Total interest charges include expenses in fiscal 2007
    associated with refinancing our long-term debt. We expensed
    $991,000 of debt issue costs related to the refinanced debt.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Form 10-K. Forward-Looking
    Statements.
 31




---



##### Table of Contents



Executive
    Overview
      Critical
    Accounting Policies and Estimates
    Regulatory
    Accounting
  ASC 980 Regulated
    Operations cost-of-service
     32




---



##### Table of Contents



Accumulated
    Provisions for Doubtful Accounts
    Unbilled
    Revenues and Gas Costs
      Fair
    Value of Financial Instruments
   33




---



##### Table of Contents



Recoverable/Refundable
    Costs of Gas and Propane Purchases
    Deferred
    Tax Asset and Income Tax Accruals
    trued-up
           34




---



##### Table of Contents



Goodwill
    Results
    of Consolidated Operations
     35




---



##### Table of Contents



Years Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008


2007(Unaudited)





(Unaudited)Consolidated OperationsOperating revenues

$
71,454


$
87,278


$
38,758


$
28,313


$
76,833


$
59,373Gas Purchased


46,699



63,506



27,231



19,895



56,171



43,807Gross Margin


24,755



23,772



11,527



8,418



20,662



15,566Operating expenses


15,692



16,922



8,345



6,681



15,258



10,154Operating income


9,063



6,850



3,182



1,737



5,404



5,412Other income (expense)


(976
)


(295
)


(420
)


190



316



242Income before interest and taxes


8,087



6,555



2,762



1,927



5,720



5,654Interest (expense)


(1,241
)


(1,224
)


(677
)


(529
)


(1,076
)


(2,124
)Income before income taxes


6,846



5,331



2,085



1,398



4,644



3,530Income tax (expense)


(27
)


(1,985
)


(926
)


(274
)


(1,333
)


(1,273
)Income from continuing operations


6,819



3,346



1,159



1,124



3,311



2,257Discontinued operations:Gain from disposal of operations






















5,479Income from discontinued operation






















976Income tax (expense)






















(2,500
)Income from discontinued operations






















3,955Income before extraordinary item


6,819



3,346



1,159



1,124



3,311



6,212Extraordinary gain














6,819



6,819



Net income

$
6,819


$
3,346


$
1,159


$
7,943


$
10,130


$
6,212   Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
  Net Income
  Revenues
 36




---



##### Table of Contents



Gross Margin
  Expenses Other Than Cost of Sales
  Other Income (Expense)
  Interest Expense
  Income Tax Expense
  Discontinued
    Operations
    Six
    Months Ended December 31, 2008 Compared to Six Months Ended
    December 31, 2007
  Net Income
   37




---



##### Table of Contents



Revenues
  Gross Margin
  Expenses Other Than Cost of Sales
  Other Income (Loss)
  Interest Expense
  Income Tax Expense
  Extraordinary
    Gain
    Discontinued
    Operations
   38




---



##### Table of Contents



Fiscal
    Year Ended June 30, 2008 Compared to Fiscal Year Ended
    June 30, 2007
  Net Income
    Revenues
  Gross Margin
  Expenses Other Than Cost of Sales
  Other Income
  Interest Expense
  Income Tax Expense
 39




---



##### Table of Contents



Extraordinary
    Gain
    Discontinued
    Operations
    Income from discontinued operations before income
    tax
  Gain from Disposal of Operations
  Income Tax Expense from discontinued
    operations
  Operating
    Results of our Natural Gas Operations
  Year EndedDecember 31,2009


2008(In thousands)Natural Gas OperationsOperating revenues

$
58,766


$
67,061Gas Purchased


37,052



46,825Gross Margin


21,714



20,236Operating expenses


14,663



15,585Operating income


7,051



4,651Other income


254



216Income before interest and taxes


7,305



4,867Interest (expense)


(1,135
)


(1,057
)Income before income taxes


6,170



3,810Income tax (expense)


(2,281
)


(1,491
)Net income

$
3,889


$
2,319   Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
  Natural Gas Revenues and Gross Margins
   40




---



##### Table of Contents



Natural Gas Operating Expenses
  Natural Gas Other Income
  Natural Gas Interest Expense
  Natural Gas Income Tax Benefit (Expense)
      Years Ended June 30, 2008Six Months Ended








Total LessDecember 31,





2007


New2008


2007


Total


Acquisitions


Acquisitions


2007(In thousands)





(In thousands)Natural Gas OperationsOperating revenues

$
28,840


$
21,118


$
59,339


$
9,960


$
49,379


$
46,439Gas Purchased


19,460



13,972



41,337



5,159



36,178



33,542Gross Margin


9,380



7,146



18,002



4,801



13,201



12,897Operating expenses


7,879



6,247



13,954



3,681



10,273



9,307Operating income


1,501



899



4,048



1,120



2,928



3,590Other income (expense)


160



190



245



(7
)


252



229Income before interest and taxes


1,661



1,089



4,293



1,113



3,180



3,819Interest (expense)


(584
)


(462
)


(933
)


(30
)


(903
)


(1,897
)Income before income taxes


1,077



627



3,360



1,083



2,277



1,922Income tax (expense)


(519
)


(120
)


(1,091
)


(417
)


(674
)


(653
)Net income

$
558


$
507


$
2,269


$
666


$
1,603


$
1,269  41




---



##### Table of Contents



Six
    Months Ended December 31, 2008 Compared to Six Months Ended
    December 31, 2007
  Natural Gas Revenues and Gross Margins
      Natural Gas Operating Expenses
  Natural Gas Other Income
  Natural Gas Interest Expense
  Natural Gas Income Tax Benefit (Expense)
  Fiscal
    Year Ended June 30, 2008 Compared to Fiscal Year Ended
    June 30, 2007
  Natural Gas Revenues and Gross Margins
     42




---



##### Table of Contents



Natural Gas Operating Expenses
  Natural Gas Other Income
  Natural Gas Interest Expense
    Operating
    Results of our Marketing and Production Operations
    (EWR)
  Years Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008


2007(Unaudited)





(Unaudited)


(In thousands)(In thousands)


(In thousands)Energy West ResourcesOperating revenues

$
12,239


$
19,808


$
9,692


$
7,008


$
17,124


$
12,545Gas Purchased


9,648



16,681



7,770



5,923



14,833



10,264Gross Margin


2,591



3,127



1,922



1,085



2,291



2,281Operating expenses


844



679



369



321



631



559Operating income


1,747



2,448



1,553



764



1,660



1,722Other income (expense)


(687
)


(37
)


(37
)


0



1



2Income before interest and taxes


1,060



2,411



1,516



764



1,661



1,724Interest (expense)


(89
)


(149
)


(83
)


(59
)


(125
)


(185
)Income before income taxes


971



2,262



1,433



705



1,536



1,539Income tax (expense)


(413
)


(758
)


(551
)


(135
)


(344
)


(593
)Net income

$
558


$
1,504


$
882


$
570


$
1,192


$
946   Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
    Marketing and Production Revenues and Gross
    Margins
   43




---



##### Table of Contents



Marketing and Production Operating Expenses
  Marketing and Production Other Income
    (expense)
  Marketing and Production Interest Expense
  Marketing and Production Income Tax Expense
  Six
    Months Ended December 31, 2008 Compared to Six Months Ended
    December 31, 2007
    Marketing and Production Revenues and Gross
    Margins
    Marketing and Production Operating Expenses
  Marketing and Production Interest Expense
  Marketing and Production Income Tax Expense
 44




---



##### Table of Contents



Fiscal
    Year Ended June 30, 2008 Compared to Fiscal Year Ended
    June 30, 2007
    Marketing and Production Revenues and Gross
    Margins
    Marketing and Production Operating Expenses
  Marketing and Production Other Income
  Marketing and Production Interest Expense
  Marketing and Production Income Tax Expense
  Operating
    Results of our Pipeline Operations
  Years Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008


2007(Unaudited)





(Unaudited)


(In thousands)(In thousands)


(In thousands)Pipeline OperationsOperating revenues

$
450


$
409


$
226


$
187


$
370


$
388Gas Purchased






















Gross Margin


450



409



226



187



370



388Operating expenses


177



217



97



113



233



289Operating income


273



192



129



74



137



99Other income






















11Income before interest and taxes


273



192



129



74



137



110Interest (expense)


(17
)


(18
)


(9
)


(9
)


(17
)


(42
)Income before income taxes


256



174



120



65



120



68Income tax (expense)


(99
)


(67
)


(46
)


(19
)


(40
)


(26
)Net income

$
157


$
107


$
74


$
46


$
80


$
42  45




---



##### Table of Contents



Results
    of our Discontinued Operations
    Fiscal
    Year Ended June 30, 2007
    Results
    of our Corporate and Other Operations
  Years Ended


Six Months Ended


Year EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007


2008(Unaudited)





(Unaudited)


(In thousands)(In thousands)


(In thousands)Corporate and OtherOperating revenues

$



$



$



$



$
Gas Purchased


















Gross Margin


















Operating expenses


8



441











441Operating income


(8
)


(441
)










(441
)Other income (expense)


(543
)


(474
)


(544
)






70Income before interest and taxes


(551
)


(915
)


(544
)






(371
)Interest expense


















Income before income taxes


(551
)


(915
)


(544
)






(371
)Income tax benefit (expense)


2,766



331



189







142Income before extraordinary item


2,215



(584
)


(355
)






(229
)Extraordinary gain














6,819



6,819Net income

$
2,215


$
(584
)

$
(355
)

$
6,819


$
6,590     Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
   46




---



##### Table of Contents



Six
    Months Ended December 31, 2008 Compared to Six Months Ended
    December 31, 2007
      Fiscal
    Year Ended June 30, 2008
    Consolidated
    Cash Flow Analysis
  Sources
    and Uses of Cash
           47




---



##### Table of Contents



Year Ended December 31,


Six Months Ended December 31,


Years Ended June 30,2009


2008


2008


2007


2008


2007Cash provided by (used in) operating activities

$
16,301,000


$
1,644,000


$
(8,102,000
)

$
(4,105,000
)

$
5,437,000


$
(905,000
)Cash (used in) provided by investing activities


(9,185,000
)


(11,149,000
)


(7,673,000
)


(6,526,000
)


(9,798,000
)


15,453,000Cash (used in) provided by financing activities


(5,429,000
)


8,665,000



16,044,000



5,526,000



(1,853,000
)


(9,178,000
)Increase (decrease) in cash

$
1,687,000


$
(840,000
)

$
269,000


$
(5,105,000
)

$
(6,214,000
)

$
5,370,000                48




---



##### Table of Contents



Liquidity
    and Capital Resources
    Bank of
    America Term Loans and Credit Facility
    Long-term Debt  $13.0 million
    6.16% Senior Unsecured Notes
  Line of Credit
    First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterTwelve Months Ended December 31, 2009Minimum borrowing

$
5,595,000


$



$
3,600,000


$
9,950,000Maximum borrowing

$
18,095,000


$
5,045,000


$
10,250,000


$
15,250,000Average borrowing

$
11,987,000


$
2,002,000


$
7,654,000


$
12,351,000  49




---



##### Table of Contents



First


SecondQuarter


QuarterSix Months Ended December 31, 2008Minimum borrowing

$



$
11,285,000Maximum borrowing

$
11,685,000


$
18,695,000Average borrowing

$
5,286,000


$
14,733,000Six Months Ended December 31, 2007Minimum borrowing

$



$
3,775,000Maximum borrowing

$



$
7,525,000Average borrowing

$



$
4,558,000     First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterYear Ended June 30, 2008Minimum borrowing

$



$
3,275,000


$



$
Maximum borrowing

$



$
7,525,000


$
6,525,000


$
Average borrowing

$



$
4,558,000


$
2,256,000


$
Year Ended June 30, 2007Minimum borrowing

$



$
2,900,000


$



$
Maximum borrowing

$
2,900,000


$
6,200,000


$
3,502,000


$
6,700,000Average borrowing

$
282,000


$
4,384,000


$
392,000


$
485,000   60-month debt-to-capital
    60-month debt-to-capital
  Citizens
    Bank Credit Facility
   50




---



##### Table of Contents



Long-term Debt  $10.3 million
    5.00% Senior Secured Notes  30-day
  Line of Credit  30-day
      Huntington
    Credit Facility
    Long-term Debt 30-day
  Line of Credit 30-day
    Combined
    Term Loans and Credit Facilities
   51




---



##### Table of Contents



Capital
    Expenditures
    EstimatedYear Ended


Six Months Ended


Actual


Future CashDecember 31,


December 31,


Fiscal


Requirements2009


2008


2008


2007


2008


2010(In thousands)


(In thousands)Natural Gas Operations

$
8,649


$
6,894


$
4,465


$
1,151


$
3,578


$
6,061Energy West Resources


191



122



69



197



250



Pipeline Operations






4







37



41



Corporate and Other


14



















Total capital expenditures

$
8,854


$
7,020


$
4,534


$
1,385


$
3,869


$
6,061     Off-Balance-Sheet
    Arrangements
    New
    Accounting Pronouncements
  Recently
    Adopted
  Fair Value Measurements
  Business Combinations
 52




---



##### Table of Contents



Noncontrolling Interests
  Derivative Instruments and Hedging Activities
  Interim Fair Value Disclosures 
  Other-Than-Temporary
    Impairments other-than-temporary other-than-temporary other-than-temporary
  Accounting Standards Codification
    (Codification)
  Earnings Per Share 
  Subsequent Events
 53




---



##### Table of Contents



Recently
    Issued
  Consolidation of Variable Interest Entities
  Fair Value Measurement Disclosures Fair Value Measurements and Disclosures
    (Topic 820)  Improving Disclosures about Fair Value
    Measurements (ASU
    No. 2010-06) No. 2010-06
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk    Commodity
    Price Risk
    Credit
    Risk
    Item 8.
    Financial
    Statements and Supplementary Data.  page F-1 Form 10-K.
 54




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    Item 9A(T).
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f).
      Changes
    in Internal Control over Financial Reporting
    Attestation
    Report of Independent Registered Public Accounting
    Firm
  Form 10-K Form 10-K.
  Item 9B.
    Other
    Information.   55




---



##### Table of Contents



Name

For


WithheldIan Abrams


3,879,234



176,933Gene Argo


3,858,393



197,734Greg Osborne


3,718,382



337,784Rick Osborne


3,745,164



311,002Jim Smail


3,854,950



201,217Tom Smith


3,789,483



266,683Jim Sprague


3,784,853



271,314Mike Victor


3,844,298



211,869     Votes For

Votes Against

Abstain2,517,037

264,888

40,366  PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.   56




---



##### 



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.  (a)
    Financial Statements:   
 PageReport of Independent Registered Public
    Accounting Firm  Hein & Associates LLP

F-2Consolidated Balance Sheets

F-3Consolidated Statements of Income

F-4Consolidated Statements of Stockholders
    Equity and Comprehensive Income

F-5Consolidated Statements of Cash Flows

F-6Notes to Consolidated Financial Statements

F-8Schedule II  Valuation and
    Qualifying Accounts

64    Exhibit Index.
  2
.1

Agreement and Plan of Merger, dated June 29, 2009, by and among
    Energy West, Incorporated, Various Acquisition Subsidiaries,
    Lightning Pipeline Co., Inc., Great Plains Natural Gas Company,
    Brainard Gas Corp., Richard M. Osborne, Trustee, Rebecca Howell,
    Stephen G. Rigo, Marty Whelan and Thomas J. Smith, incorporated
    by reference to Exhibit 10.2 to Energy, Inc.s current
    report on Form 8-K dated June 26, 2009 as filed with the
    Securities and Exchange Commission2
.2

Agreement and Plan of Merger, dated June 29, 2009, by and among
    Energy West, Incorporated, an Acquisition Subsidiary, Great
    Plains Land Development Company, LTD. and Richard M. Osborne,
    Trustee, incorporated by reference to Exhibit 10.3 to Energy,
    Inc.s current report on Form 8-K as filed July 2, 2009
    with the Securities and Exchange Commission2
.3

Agreement and Plan of Merger by and among Energy Inc., Energy
    West, Incorporated and Energy West Merger Sub, Inc., dated
    August 3, 2009, incorporated by reference to Exhibit 2.1 to
    Energy, Inc.s current report on Form 8-K as filed August
    4, 2009 with the Securities and Exchange Commission2
.4

Assignment and Assumption Agreement, dated December 30, 2009, by
    and between Energy West, Incorporated and Energy, Inc., filed as
    Exhibit 2.3 to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference2
.5

Assignment and Assumption Agreement, dated December 30, 2009, by
    and between Energy West, Incorporated and Energy, Inc., filed as
    Exhibit 2.4 to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference2
.6

First Amendment to Agreement and Plan of Merger, dated as of
    January 5, 2010, by and among Richard M. Osborne, Trustee,
    Rebecca Howell, Stephen G. Rigo, Marty Whelan and Thomas J.
    Smith, Lightning Pipeline Co., Inc., Great Plains Natural Gas
    Company, and Brainard Gas Corp., Lightning Pipeline Acquisition
    Inc., Great Plains Acquisition Inc. and Brainard Acquisition
    Inc. and Energy, Inc., filed as Exhibit 2.5 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference2
.7

First Amendment to Agreement and Plan of Merger, dated as of
    January 5, 2010, by and among Richard M. Osborne, Trustee,
    Great Plains Land Development Company, LTD. and GPL Acquisition
    LLC and Energy, Inc., filed as Exhibit 2.6 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference3
.1(a)

Restated Articles of Incorporation. Filed as Exhibit 3.1 to
    Amendment No. 1 to the Registrants Annual Report on Form
    10-K/A for the year ended June 30, 1996 and incorporated herein
    by reference3
.1(b)

Articles of Amendment to the Articles of Incorporation dated
    January 28, 2008. Filed as Exhibit 3.1 to the Registrants
    Current Report on Form 8-K dated February 1, 2008 and
    incorporated herein by reference3
.1(c)

Articles of Amendment to the Articles of Incorporation dated
    December 5, 2007. Filed as Exhibit 3.1(e) to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended December 31, 2007 and incorporated herein by reference3
.1(d)

Articles of Amendment to the Articles of Incorporation dated May
    29, 2007. Filed as Exhibit 3.1 to the Registrants Current
    Report on Form 8-K, filed on June 4, 2007, and incorporated
    herein by reference 57




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##### Table of Contents



3
.2

Amended and Restated Bylaws. Filed as Exhibit 3.2 to the
    Registrants Current Report on Form 8-K on March 5, 2004
    and incorporated herein by reference3
.2(a)

Amendment No. 3 to Amended and Restated Bylaws dated August 12,
    2008. Filed as Exhibit 3.1 to the Registrants Current
    Report on Form 8-K dated August 12, 2008 and incorporated herein
    by reference3
.2(b)

Amendment No. 2 to Amended and Restated Bylaws dated April 10,
    2008. Filed as Exhibit 3.1 to the Registrants Current
    Report on Form 8-K dated April 10, 2008 and incorporated herein
    by reference3
.2(c)

Amendment No. 1 to Amended and Restated Bylaws dated November
    14, 2007. Filed as Exhibit 3.1 to the Registrants Current
    Report on Form 8-K dated November 14, 2007 and incorporated
    herein by reference10
.1

Satisfaction and Discharge of Indenture dated June 22, 2007,
    between the Registrant and HSBC Bank USA, National Association,
    as Successor Trustee for the Series 1997 Notes. Filed as Exhibit
    10.1 to the Registrants Current Report on Form 8-K, filed
    July 5, 2007, and incorporated herein by reference10
.2

Satisfaction and Discharge of Indenture dated June 22, 2007,
    between the Registrant and US Bank National Association, as
    Successor Trustee for the Series 1993 Notes. Filed as Exhibit
    10.2 to the Registrants Current Report on Form 8-K, filed
    July 5, 2007, and incorporated herein by reference10
.3

Discharge of Obligor under Indenture dated June 22, 2007,
    between the Registrant and HSBC Bank USA, National Association,
    as Successor Trustee for the Series 1992-B Bonds. Filed as
    Exhibit 10.3 to the Registrants Current Report on Form
    8-K, filed July 5, 2007, and incorporated herein by reference10
.4

Note Purchase Agreement dated June 29, 2007, between the
    Registrant and various Purchasers relating to 6.16% Senior
    Unsecured Notes due June 29, 2017. Filed as Exhibit 10.4 to the
    Registrants Current Report on Form 8-K, filed July 5,
    2007, and incorporated herein by reference10
.5

Credit Agreement dated as of June 29, 2007, by and among the
    Registrant and various financial institutions and LaSalle Bank
    National Association. Filed as Exhibit 10.5 to the
    Registrants Current Report on Form 8-K, filed July 5,
    2007, and incorporated herein by reference10
.6

Amendment dated October 22, 2007 to the Credit Agreement among
    the Registrant, various financial institutions and LaSalle Bank
    National Association, as agent. Filed as Exhibit 10.1 to the
    Registrants Current Report on Form 8-K dated October 22,
    2007 and incorporated herein by reference10
.7

Energy, Inc. 2002 Stock Option Plan. Filed as Appendix A to the
    Registrants Proxy Statement on Schedule 14A, filed on
    October 30, 2002, and incorporated herein by reference10
.8

First Amendment to Energy West Incorporated 2002 Stock Option
    Plan, filed as Exhibit 10.8 to the Registrants Transition
    Report on 10-K/T for the transition period ended December 31,
    2008 and incorporated herein by reference10
.9

Employee Stock Ownership Plan Trust Agreement. Filed as Exhibit
    10.2 to Registration Statement on Form S-1 (File No. 33-1672)
    and incorporated herein by reference10
.10

Management Incentive Plan. Filed as Exhibit 10.12 to the
    Registrants Annual Report on Form 10-K/A for the year
    ended June 30, 1996, filed on July 8, 1997, and incorporated
    herein by reference10
.11

Energy West Senior Management Incentive Plan. Filed as Exhibit
    10.19 to the Registrants Annual Report on Form 10-K for
    the year ended June 30, 2002, filed on September 30, 2002, and
    incorporated herein by reference10
.12

Energy West Incorporated Deferred Compensation Plan for
    Directors. Filed as Exhibit 10.20 to the Registrants
    Annual Report on Form 10-K for the year ended June 30, 2002,
    filed on September 30, 2002, and incorporated herein by reference10
.13

Amended and Restated Energy West Incorporated Deferred
    Compensation Plan for Directors, filed as Exhibit 10.13 to the
    Registrants Transition Report on 10-K/T for the transition
    period ended December 31, 2008 and incorporated herein by
    reference10
.14

Amended and Restated Operating Agreement of Kykuit Resources,
    LLC, dated October 24, 2007. Filed as Exhibit 10.6 to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2007 and incorporated herein by reference10
.15

First Amendment to Amended and Restated Operating Agreement of
    Kykuit Resources, LLC, dated December 17, 2007. Filed as Exhibit
    10.2 to the Registrants Quarterly Report on Form 10-Q for
    the quarter ended December 31, 2007 and incorporated herein by
    reference 58




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##### Table of Contents



10
.16

Stock Purchase Agreement dated January 30, 2007 between the
    Registrant and Sempra Energy. Filed as Exhibit 10.1 to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2007 and incorporated herein by reference10
.17

Amendment No. 1 to Stock Purchase Agreement dated April 11, 2007
    between the Registrant and Sempra Energy. Filed as Exhibit 10.2
    to the Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2007 and incorporated herein by
    reference10
.18

Amendment No. 2 to Stock Purchase Agreement dated August 7, 2007
    between the Registrant and Sempra Energy. Filed as Exhibit 10.3
    to the Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2007 and incorporated herein by
    reference10
.19

Amendment No. 3 to Stock Purchase Agreement, dated November 28,
    2007, by and between the Registrant and Sempra Energy. Filed as
    Exhibit 10.1 to the Registrants Quarterly Report on Form
    10-Q for the quarter ended December 31, 2007 and incorporated
    herein by reference10
.20

Stock Purchase Agreement dated January 30, 2007 between the
    Registrant and Sempra Energy. Filed as Exhibit 10.4 to the
    Registrants Quarterly Report on Form 10-Q for the quarter
    ended September 30, 2007 and incorporated herein by reference10
.21

Amendment Number 1 to Stock Purchase Agreement dated August 2,
    2007 between the Registrant and Sempra Energy. Filed as Exhibit
    10.5 to the Registrants Quarterly Report on Form 10-Q for
    the quarter ended September 30, 2007 and incorporated herein by
    reference10
.22

Stock Purchase Agreement dated December 18, 2007 between the
    Registrant, Dan F. Whetstone, Pamela R. Lowry, Paula A. Poole,
    William J. Junkermier and Roger W. Junkermier. Filed as Exhibit
    10.1 to the Registrants Current Report on Form 8-K dated
    December 17, 2007 and incorporated herein by reference10
.23

First Amendment to Stock Purchase Agreement dated as of November
    11, 2008, between Dan F. Whetstone, Pamela R. Lowry, Paula A.
    Poole, William J. Junkermier, Roger W. Junkermiern and Energy,
    Inc.. Filed as Exhibit 10.1 to the Registrants Current
    Report on Form 8-K dated November 11, 2008 and incorporated
    herein by reference10
.24

Non-Competition and Non-Disclosure Agreement dated December 18,
    2007 between the Registrant and Daniel F. Whetstone. Filed as
    Exhibit 10.2 to the Registrants Current Report on Form 8-K
    dated December 17, 2007 and incorporated herein by reference10
.25

Lease Agreement dated February 25, 2008 between OsAir, Inc. and
    Energy West, Incorporated. Filed as Exhibit 10.1 to the
    Registrants Current Report on Form 8-K dated February 25,
    2008 and incorporated herein by reference10
.26

Gas Sales Agreement dated as of July 1, 2008 between John D. Oil
    & Gas Marketing Co., LLC, Northeast Ohio Natural Gas Corp.,
    Orwell Natural Gas Company and Brainard Gas Corp. Filed as
    Exhibit 10.25 to the Registrants Annual Report on 10-K for
    the year ended June 30, 2008 and incorporated herein by reference10
.27

Natural Gas Transportation Service Agreement dated as of July 1,
    2008 between Orwell-Trumbull Pipeline Co., LLC, Orwell Natural
    Gas Company and Brainard Gas Corp. Filed as Exhibit 10.26 to the
    Registrants Annual Report on 10-K for the year ended June
    30, 2008 and incorporated herein by reference10
.28

Transportation Service Agreement dated as of July 1, 2008
    between Cobra Pipeline Co., Ltd., Northeast Ohio Natural Gas
    Company, Orwell Natural Gas Company and Brainard Gas Corp. Filed
    as Exhibit 10.27 to the Registrants Annual Report on 10-K
    for the year ended June 30, 2008 and incorporated herein by
    reference10
.29

First Amendment dated July 1, 2008 to the Orwell-Trumbull
    Pipeline Co., LLC Operations Agreement between Orwell Natural
    Gas Company and Orwell-Trumbull Pipeline Co., LLC. Filed as
    Exhibit 10.28 to the Registrants Annual Report on 10-K for
    the year ended June 30, 2008 and incorporated herein by reference10
.30

Orwell-Trumbull Pipeline Co., LLC Operations Agreement dated
    January 1, 2008 between Orwell Natural Gas Company and
    Orwell-Trumbull Pipeline Co., LLC. Filed as Exhibit 10.29 to the
    Registrants Annual Report on 10-K for the year ended June
    30, 2008 and incorporated herein by reference10
.31

Triple Net Lease Agreement dated as of July 1, 2008 between
    Station Street Partners, LLC and Orwell Natural Gas Company.
    Filed as Exhibit 10.30 to the Registrants Annual Report on
    10-K for the year ended June 30, 2008 and incorporated herein by
    reference 59




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10
.32

Triple Net Lease Agreement dated as of July 1, 2008 between
    OsAir, Inc. and Orwell Natural Gas Company. Filed as Exhibit
    10.31 to the Registrants Annual Report on 10-K for the
    year ended June 30, 2008 and incorporated herein by reference10
.33

Triple Net Lease Agreement dated as of July 1, 2008 between
    Richard M. Osborne, Trustee and Orwell Natural Gas Company.
    Filed as Exhibit 10.32 to the Registrants Annual Report on
    10-K for the year ended June 30, 2008 and incorporated herein by
    reference10
.34

Triple Net Lease Agreement dated as of July 1, 2008 between
    OsAir, Inc. and Northeast Ohio Natural Gas Company. Filed as
    Exhibit 10.33 to the Registrants Annual Report on 10-K for
    the year ended June 30, 2008 and incorporated herein by reference10
.35

Stock purchase agreement dated September 12, 2008, between
    Energy, Inc., and Richard M. Osborne, trustee, Rebecca Howell,
    Stephen G. Rigo, Marty Whelan, and Thomas J. Smith, filed as
    exhibit 10.1 to the registrants current report on Form 8-K
    dated September 17, 2008, and incorporated herein by reference10
.36

Termination of Stock Purchase Agreement, dated June 26, 2009, by
    and among Richard M. Osborne, Trustee, Rebecca Howell, Stephen
    G. Rigo, Marty Whelan and Thomas J. Smith and Energy West,
    Incorporated, filed as Exhibit 10.1 to the Registrants
    Current Report on 10-K for dated June 26, 2009 and incorporated
    herein by reference10
.37

Employment Agreement dated August 25, 2006 between Energy, Inc.
    and Kevin J. Degenstein, filed as Exhibit 10.1 to the
    Registrants Current Report on Form 8-K dated September 18,
    2006 and incorporated herein by reference10
.38

First Amendment to Employment Agreement dated as of December 31,
    2008, between Energy, Inc. and Kevin J. Degenstein, filed as
    Exhibit 10.39 to the Registrants Transition Report on
    10-K/T for the transition period ended December 31, 2008 and
    incorporated herein by reference10
.39

Employment Agreement dated April 13, 2007 between Energy, Inc.
    and David C. Shipley, filed as Exhibit 10.40 to the
    Registrants Transition Report on 10-K/T for the transition
    period ended December 31, 2008 and incorporated herein by
    reference10
.40

Asset Management Agreement, dated January 3, 2010, by and
    between Orwell Natural Gas Company and John D. Oil and Gas
    Marketing Company, LLC, filed as Exhibit 10.1 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.41

Asset Management Agreement, dated January 3, 2010, by and
    between Northeast Ohio Natural Gas and John D. Oil and Gas
    Marketing Company, LLC, filed as Exhibit 10.2 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.42

Appointment of Natural Gas Agent, dated January 3, 2010, by and
    between Northeast Ohio Natural Gas Company, Orwell Natural Gas
    Company, Brainard Gas Corporation and John D. Oil and Gas
    Marketing Company, LLC, filed as Exhibit 10.3 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.43

Demand Promissory Note, dated December 1, 2008, to Richard M.
    Osborne, Trustee from Lightning Pipeline Company, Inc.,
    incorporated by reference to Exhibit 10.8 to Energy, Inc.s
    current report on Form 8-K as filed July 2, 2009 with the
    Securities and Exchange Commission10
.44

Amended and Restated Promissory Note, dated January 3, 2010, to
    Richard M. Osborne, Trustee from Lightning Pipeline Company,
    Inc., filed as Exhibit 10.5(a) to the Registrants Current
    Report on Form 8-K dated January 5, 2010 and incorporated herein
    by reference10
.45

Demand Cognovit Note, dated August 6, 2008, to Richard M.
    Osborne from Brainard Gas Corp., filed as Exhibit 10.5(b) to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.46

Gas Sales Agreement dated as of July 1, 2008 between John D. Oil
    & Gas Marketing Co., LLC, Northeast Ohio Natural Gas Corp.,
    Orwell Natural Gas Company and Brainard Gas Corp., incorporated
    by reference to Exhibit 10.25 to the Registrants Annual
    Report on 10-K for the year ended June 30, 2008 as filed
    September 30, 2008 with the Securities and Exchange Commission10
.47

Electronic Metering Service and Operation Agreement, as of April
    15, 2009, by and between Orwell Trumbull Pipeline, LTD. and
    Orwell Natural Gas Co., incorporated by reference to Exhibit
    10.4 to Energy, Inc.s current report on Form 8-K as filed
    July 2, 2009 with the Securities and Exchange Commission 60




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10
.48

Electronic Metering Service and Operation Agreement, as of April
    15, 2009, by and between COBRA Pipeline Company, LTD. and
    Brainard Gas Corporation, incorporated by reference to Exhibit
    10.5 to Energy, Inc.s current report on Form 8-K as filed
    July 2, 2009 with the Securities and Exchange Commission10
.49

Electronic Metering Service and Operation Agreement, as of April
    15, 2009, by and between COBRA Pipeline Company, LTD. and
    Northeast Ohio Natural Gas Corporation, Incorporated by
    reference to Exhibit 10.6 to Energy, Inc.s current report
    on Form 8-K as filed July 2, 2009 with the Securities and
    Exchange Commission10
.50

Electronic Metering Service and Operation Agreement, as of April
    15, 2009, by and between COBRA Pipeline Company, LTD. and Orwell
    Natural Gas Co., Incorporated by reference to Exhibit 10.7 to
    Energy, Inc.s current report on Form 8-K as filed July 2,
    2009 with the Securities and Exchange Commission10
.51

Credit Agreement, dated July 3, 2008, by and between Northeast
    Ohio Natural Gas Corp., as borrower and Citizens Bank, as
    lender, filed as Exhibit 10.20 to the Registrants Current
    Report on Form 8-K dated January 5, 2010 and incorporated herein
    by reference10
.52

Revolving Note, dated July 3, 2008, by Northeast Ohio Natural
    Gas Corp., as maker, to Citizens Bank, as holder, filed as
    Exhibit 10.21 to the Registrants Current Report on Form
    8-K dated January 5, 2010 and incorporated herein by reference10
.53

Term Note, dated July 3, 2008, by Northeast Ohio Natural Gas
    Corp., as maker, to Citizens Bank, as holder, filed as Exhibit
    10.22 to the Registrants Current Report on Form 8-K dated
    January 5, 2010 and incorporated herein by reference10
.54

Security Agreement, dated July 3, 2008, by Northeast Ohio
    Natural Gas Corp. in favor of Citizens Bank, filed as Exhibit
    10.23 to the Registrants Current Report on Form 8-K dated
    January 5, 2010 and incorporated herein by reference10
.55

Guaranty, dated July 3, 2008, by Great Plains Natural Gas
    Company in favor of Citizens Bank with respect to Northeast Ohio
    Natural Gas Corp. as borrower, filed as Exhibit 10.24(a) to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.56

Guaranty, dated July 3, 2008, by Richard M. Osborne,
    individually, in favor of Citizens Bank with respect to
    Northeast Ohio Natural Gas Corp. as borrower, filed as Exhibit
    10.24(b) to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference10
.57

Guaranty, dated July 3, 2008, by Richard M. Osborne, Trustee UTA
    January 13, 1995, in favor of Citizens Bank with respect to
    Northeast Ohio Natural Gas Corp. as borrower, filed as Exhibit
    10.24(c) to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference10
.58

Credit Agreement, dated July 3, 2008, by and between Great
    Plains Natural Gas Company, as borrower, and Citizens Bank, as
    lender, filed as Exhibit 10.25 to the Registrants Current
    Report on Form 8-K dated January 5, 2010 and incorporated herein
    by reference10
.59

Term Note, dated July 3, 2008, by Great Plains Natural Gas
    Company, as maker, to Citizens Bank, as holder, filed as Exhibit
    10.26 to the Registrants Current Report on Form 8-K dated
    January 5, 2010 and incorporated herein by reference10
.60

Security Agreement, dated July 3, 2008, by Great Plains Natural
    Gas Company in favor of Citizens Bank, filed as Exhibit 10.27 to
    the Registrants Current Report on Form 8-K dated January
    5, 2010 and incorporated herein by reference10
.61

Guaranty, dated July 3, 2008, by Richard M. Osborne,
    individually, in favor of Citizens Bank with respect to Great
    Plains Natural Gas Company as borrower, filed as Exhibit
    10.28(a) to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference10
.62

Guaranty, dated July 3, 2008, by Richard M. Osborne, Trustee UTA
    January 13, 1995, in favor of Citizens Bank with respect to
    Great Plains Natural Gas Company as borrower, filed as Exhibit
    10.28(b) to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference10
.63

Credit Agreement, dated July 3, 2008, by and between Great
    Plains Land Development Co., LTD., as borrower and Citizens
    Bank, N.A., as lender, filed as Exhibit 10.29 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference 61




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##### Table of Contents



10
.64

Term Note, dated July 3, 2008, by Great Plains Land Development
    Co., LTD., as maker, to Citizens Bank, N.A. as holder, filed as
    Exhibit 10.30 to the Registrants Current Report on Form
    8-K dated January 5, 2010 and incorporated herein by reference10
.65

Security Agreement, dated July 3, 2008, by Great Plains Land
    Development Co., LTD. in favor of Citizens Bank, filed as
    Exhibit 10.31 to the Registrants Current Report on Form
    8-K dated January 5, 2010 and incorporated herein by reference10
.66

Guaranty, dated July 3, 2008, by Great Plains Natural Gas
    Company in favor of Citizens Bank with respect to Great Plains
    Land Development Co., LTD. as borrower, filed as Exhibit
    10.32(a) to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference10
.67

Guaranty, dated July 3, 2008, by Richard M. Osborne,
    individually, in favor of Citizens Bank with respect to Great
    Plains Land Development Co., LTD. as borrower, filed as Exhibit
    10.32(b) to the Registrants Current Report on Form 8-K
    dated January 5, 2010 and incorporated herein by reference10
.68

Guaranty, dated July 3, 2008, by Richard M. Osborne, Trustee UTA
    January 13, 1995, in favor of Citizens Bank with respect to
    Great Plains Land Development Co., LTD. as borrower, filed as
    Exhibit 10.32(c) to the Registrants Current Report on Form
    8-K dated January 5, 2010 and incorporated herein by reference10
.69

Loan Modification Agreement, effective as of December 1, 2009,
    by and among Northeast Ohio Natural Gas Corp., as borrower, and
    Richard M. Osborne, individually, Richard M. Osborne, Trustee
    UTA January 13, 1995, and Great Plains Natural Gas Company, each
    as guarantors, and Citizens Bank, filed as Exhibit 10.33 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.70

Loan Modification Agreement, effective as of December 1, 2009,
    by and among Great Plains Natural Gas Company, as borrower, and
    Richard M. Osborne, individually, and Richard M. Osborne,
    Trustee UTA January 13, 1995, each as guarantors, and Citizens
    Bank, filed as Exhibit 10.34 to the Registrants Current
    Report on Form 8-K dated January 5, 2010 and incorporated herein
    by reference10
.71

Loan Modification Agreement, effective as of December 1, 2009,
    by and among Great Plains Land Development Co., LTD., as
    borrower, and Richard M. Osborne, individually, Richard M.
    Osborne, Trustee UTA January 13, 1995, and Great Plains Natural
    Gas Company, each as guarantors, and Citizens Bank, filed as
    Exhibit 10.35 to the Registrants Current Report on Form
    8-K dated January 5, 2010 and incorporated herein by reference10
.72

Guaranty, dated January 5, 2010, by Energy, Inc. in favor of
    Citizens Bank with respect to Northeast Ohio Natural Gas Corp.
    as borrower, filed as Exhibit 10.36 to the Registrants
    Current Report on Form 8-K dated January 5, 2010 and
    incorporated herein by reference10
.73

Guaranty, dated January 5, 2010, by Energy, Inc. in favor of
    Citizens Bank with respect to Great Plains Natural Gas Company
    as borrower, filed as Exhibit 10.37 to the Registrants
    Current Report on Form 8-K dated January 5, 2010 and
    incorporated herein by reference10
.74

Guaranty, dated January 5, 2010, by Energy, Inc. in favor of
    Citizens Bank with respect to Great Plains Land Development Co.,
    LTD. as borrower, filed as Exhibit 10.38 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.75

Amended and Restated Loan Agreement, dated December 31, 2009, by
    and among Orwell Natural Gas Company, as borrower, and ONG
    Marketing, Inc., Lightning Pipeline Company, Inc., Lightning
    Pipeline Company II, Inc., and Richard M. Osborne, individually,
    as guarantors, and The Huntington National Bank, N.A., as
    lender, filed as Exhibit 10.39 to the Registrants Current
    Report on Form 8-K dated January 5, 2010 and incorporated herein
    by reference10
.76

Amended and Restated Security Agreement, dated December 31,
    2009, by Orwell Natural Gas Company in favor of The Huntington
    National Bank, N.A, filed as Exhibit 10.40 to the
    Registrants Current Report on Form 8-K dated January 5,
    2010 and incorporated herein by reference10
.77

Note Modification Agreement (Line of Credit Note), dated
    December 31, 2009, by and between Orwell Natural Gas Company as
    borrower and The Huntington National Bank, N.A., as lender,
    filed as Exhibit 10.41 to the Registrants Current
    Report on Form 8-K dated January 5, 2010 and incorporated herein
    by reference10
.78

Note Modification Agreement (Term Note), dated December 31,
    2009, by and between Orwell Natural Gas Company as borrower and
    The Huntington National Bank, N.A., as lender, filed as Exhibit
    10.42 to the Registrants Current Report on Form 8-K dated
    January 5, 2010 and incorporated herein by reference 62




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##### Table of Contents



10
.79

Amended and Restated Continuing Agreement of Guaranty and
    Suretyship, dated December 31, 2009, by ONG Marketing, Inc.,
    Lightning Pipeline Company, Inc., Lightning Pipeline Company II,
    Inc., Richard M. Osborne, individually, as guarantors, in
    favor of The Huntington National Bank, N.A., filed as Exhibit
    10.43 to the Registrants Current Report on Form 8-K dated
    January 5, 2010 and incorporated herein by reference10
.80

Continuing Agreement of Guaranty and Suretyship, dated January
    12, 2010, by Energy, Inc. in favor of The Huntington National
    Bank, N.A., filed as Exhibit 10.44 to the Registrants
    Current Report on
    Form 8-K
    dated January 5, 2010 and incorporated herein by reference14


Code of Business Conduct, filed as Exhibit 14 to the
    Registrants Annual Report on 10-K for the year ended June
    30, 2006 and incorporated herein by reference21*


Company Subsidiaries23
.1*

Consent of Hein & Associates LLP31*


Certifications pursuant to SEC Release No. 33-8238, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200232*


Certifications pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002     
    
    Management agreement or compensatory plan or arrangement*
    
    Filed herewith 63




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##### Table of Contents



(c)
    Financial Statement Schedules: Schedule II
    Valuation and Qualifying Accounts
    Energy, Inc.
    December 31, 2009 Balance at


Charged to


Write-Offs


BalanceBeginning


Costs &


Net of


at End ofDescription

of Period


Expenses


Recoveries


PeriodAllowance for bad debtsYear Ended June 30, 2007

$
121,453


$
210,956


$
(268,355
)

$
64,054Year Ended June 30, 2008

$
64,054


$
174,531


$
(102,186
)

$
136,399Six Months Ended December 31, 2008

$
136,399


$
58,085


$
13,458


$
207,942Year Ended December 31, 2009

$
207,942


$
139,512


$
(114,122
)

$
233,332    64




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##### Table of Contents



SIGNATURES      Richard
    M. Osborne
        Form 10-K,
    /s/  Richard
    M. OsborneRichard
    M. Osborne

Chief Executive Officer
    (Principal Executive Officer)

March 31, 2010/s/  Thomas
    J. SmithThomas
    J. Smith

Chief Financial Officer
    (Principal Financial Officer and
    Principal Accounting Officer)

March 31, 2010/s/  W.E.
    ArgoW.E.
    Argo

Director

March 31, 2010/s/  Ian
    AbramsIan
    Abrams

Director

March 31, 2010/s/  James
    E. SpragueJames
    E. Sprague

Director

March 31, 2010/s/  James
    R. SmailJames
    R. Smail

Director

March 31, 2010/s/  Michael
    T. VictorMichael
    T. Victor

Director

March 31, 2010/s/  Gregory
    J. OsborneGregory
    J. Osborne

Director

March 31, 2010  65




---



##### 



CONSOLIDATED
    FINANCIAL STATEMENTS
    OF
    ENERGY, INC. AND SUBSIDIARIES
  TABLE OF
    CONTENTS
  
  PageReport of Independent Registered Public
    Accounting Firm  Hein & Associates LLP


F-2Consolidated Balance Sheets as of
    December 31, 2009 and 2008


F-3Consolidated Statements of Income for the Year
    Ended December 31, 2009, the Six Months ended 2008, and the
    Years Ended June 30, 2008 and 2007


F-4Consolidated Statements of Changes in
    Stockholders Equity and Comprehensive Income for the Year
    Ended December 31, 2009, the Six Months Ended
    December 31, 2008, and the Years Ended June 30, 2008
    and 2007


F-5Consolidated Statements of Cash Flows for the
    Year Ended December 31, 2009, the Six Months ended
    December 31, 2008, and the Years Ended June 30, 2008
    and 2007


F-6Notes to Consolidated Financial Statements


F-8   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              /s/  HEIN &
    ASSOCIATES LLP
    F-2




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  December 31,2009


2008(Audited)ASSETSCurrent Assets:Cash and cash equivalents

$
2,752,168


$
1,065,529Marketable securities


4,411,171



3,376,875Accounts receivable less $233,332 and $207,942, respectively,
    allowance for bad debt


7,579,974



7,430,694Unbilled gas


2,869,826



4,839,138Natural gas and propane inventories


5,251,942



9,891,802Materials and supplies


1,018,673



1,175,596Prepayment and other


552,641



422,514Income tax receivable






1,014,806Recoverable cost of gas purchases


641,755



2,041,280Deferred tax asset


562,936



225,953Total current assets


25,641,086



31,484,187Property, Plant and Equipment, Net


41,203,668



34,904,442Deferred Charges


2,094,468



2,558,156Deferred Tax Assets  Long term


7,550,970



5,693,310Other Investments


784,363



1,081,423Goodwill


1,056,771



Other Assets


294,356



97,447TOTAL ASSETS

$
78,625,682


$
75,818,965LIABILITIES AND CAPITALIZATIONCurrent Liabilities:Bank overdraft

$
663,777


$
773,199Accounts payable


5,530,645



5,783,927Line of credit


14,651,265



17,551,276Accrued income taxes


534,710



35,236Overrecovered gas purchases


1,452,580



1,022,853Accrued and other current liabilities


4,594,883



4,947,448Total current liabilities


27,427,860



30,113,939Other Obligations:Deferred investment tax credits


218,503



239,565Other long-term liabilities


2,291,511



2,383,323Total other obligations


2,510,014



2,622,888Long-Term Debt


13,000,000



13,000,000Commitments and Contingencies (notes 16)Stockholders Equity:Preferred stock; $.15 par value, 1,500,000 shares
    authorized, no shares outstanding






Common stock; $.15 par value, 5,000,000 shares
    authorized, 4,361,869, and 4,296,603 shares outstanding at
    December 31, 2009 and 2008, respectively


654,280



652,503Treasury Stock






(8,012
)Capital in excess of par value


6,514,851



5,926,028Capital in excess of par value  noncontrolling
    interest


100,989



Accumulated other comprehensive income


146,701



(319,147
)Retained earnings


28,270,987



23,830,766Total stockholders equity


35,687,808



30,082,138TOTAL CAPITALIZATION


48,687,808



43,082,138TOTAL LIABILITIES AND CAPITALIZATION

$
78,625,682


$
75,818,965    F-3




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF INCOME  Year


Six MonthsEnded


Ended


Year EndedDecember 31,


June 30,2009


2008


2008


2007(Audited)


(Audited)REVENUES:Natural gas operations

$
58,765,618


$
28,840,123


$
59,338,996


$
46,439,506Gas and electric  wholesale


12,238,906



9,691,560



17,124,081



12,545,359Pipeline operations


449,757



226,157



370,171



388,175Total revenues


71,454,281



38,757,840



76,833,248



59,373,040COST OF SALES:Gas purchased


37,051,852



19,459,908



41,337,397



33,541,993Gas and electric  wholesale


9,647,693



7,770,347



14,833,353



10,264,633Total cost of sales


46,699,545



27,230,255



56,170,750



43,806,626GROSS MARGIN


24,754,736



11,527,585



20,662,498



15,566,414Distribution, general, and administrative


10,562,069



5,717,406



10,661,878



6,197,529Maintenance


666,477



319,798



650,553



566,683Depreciation and amortization


2,212,553



1,023,381



1,865,294



1,692,486Taxes other than income


2,250,298



1,284,557



2,080,144



1,696,936Total expenses


15,691,397



8,345,142



15,257,869



10,153,634OPERATING INCOME


9,063,339



3,182,443



5,404,629



5,412,780OTHER INCOME (EXPENSE)


(976,334
)


(420,349
)


315,779



241,519INTEREST (EXPENSE)


(1,241,226
)


(677,056
)


(1,076,345
)


(2,124,155
)INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE


6,845,779



2,085,038



4,644,063



3,530,144INCOME TAX (EXPENSE)


(27,242
)


(926,457
)


(1,332,688
)


(1,272,664
)INCOME FROM CONTINUING OPERATIONS


6,818,537



1,158,581



3,311,375



2,257,480DISCONTINUED OPERATIONS:Gain from disposal of operations














5,479,166Income from discontinued operations














975,484Income tax (expense)














(2,499,875
)INCOME FROM DISCONTINUED OPERATIONS














3,954,775INCOME BEFORE EXTRAORDINARY ITEM


6,818,537



1,158,581



3,311,375



6,212,255EXTRAORDINARY GAIN










6,819,182



NET INCOME

$
6,818,537


$
1,158,581


$
10,130,557


$
6,212,255BASIC INCOME PER COMMON SHARE:Income from continuing operations

$
1.58


$
0.27


$
0.77


$
0.51Income from discontinued operations














0.89Income from extraordinary gain










1.58



$
1.58


$
0.27


$
2.35


$
1.40DILUTED INCOME PER COMMON SHARE:Income from continuing operations

$
1.58


$
0.27


$
0.77


$
0.51Income from discontinued operations














0.88Income from extraordinary gain










1.58



$
1.58


$
0.27


$
2.35


$
1.39WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic


4,309,852



4,330,200



4,314,748



4,437,807Diluted


4,313,098



4,331,726



4,316,244



4,484,073    F-4




---



##### Table of Contents





ENERGY,
    INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    AND COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2009,
    THE SIX MONTHS ENDED DECEMBER 31, 2008,
    AND THE YEARS ENDED JUNE 30, 2008 and 2007 Capital in


Other


Cut BankCommon


Common


Treasury


Treasury


Excess of


Comprehensive


Noncontrolling


RetainedShares


Stock


Shares


Stock


Par Value


Income (Loss)


Interest


Earnings


TotalBALANCE AT JULY 1, 2006


4,401,266


$
660,191






$



$
7,414,273


$



$



$
11,090,649


$
19,165,113Stock Compensation


13,163



1,974











83,111















85,085Repurchase of Stock  stock buyback program


(219,522
)


(32,928
)










(2,162,133
)














(2,195,061
)Costs associated with stock buyback


















(81,280
)














(81,280
)Stock option liability


















115,603















115,603Exercise of stock options @ $4.31 to $7.00


93,750



14,062











498,152















512,214Net income






























6,212,255



6,212,255Dividends paid @ $0.34






























(1,518,219
)


(1,518,219
)BALANCE AT JUNE 30, 2007


4,288,657


$
643,299






$



$
5,867,726


$



$



$
15,784,685


$
22,295,710Stock compensation


3,750



563











248,528















249,091Repurchase of Stock  stock buyback program


(16,780
)


(2,517
)










(156,821
)














(159,338
)Costs associated with stock buyback


















(2,313
)














(2,313
)Exercise of stock options @ $4.31 to $10.00


109,500



16,424











611,491















627,915Intrinsic value of stock exercised  tax effect


















80,933















80,933Return of stock at market price in exchange for stock options


(37,500
)


(5,625
)










(368,874
)














(374,499
)Rounding adjustments for stock split issuance


142



21











(21
)














Net income






























10,130,557



10,130,557Dividends paid @ $0.47






























(2,199,277
)


(2,199,277
)BALANCE AT JUNE 30, 2008


4,347,769


$
652,165






$



$
6,280,649


$



$



$
23,715,965


$
30,648,779Comprehensive Income:Net income






























1,158,581



1,158,581Net unrealized losses on
    available-for-sale
    securities






















(319,147
)










(319,147
)Total comprehensive income


































839,434Stock compensation


2,250



338











35,655















35,993Repurchase of Stock  stock buyback program


(53,416
)






53,416



(8,012
)


(398,027
)














(406,039
)Intrinsic value of stock exercised  tax effect


















7,751















7,751Dividends paid @ $0.47






























(1,043,780
)


(1,043,780
)BALANCE AT DECEMBER 31, 2008


4,296,603


$
652,503



53,416


$
(8,012
)

$
5,926,028


$
(319,147
)

$



$
23,830,766


$
30,082,138Comprehensive Income:Net income






























6,818,537



6,818,537Net unrealized gains on
    available-for-sale
    securities






















465,848











465,848Total comprehensive income


































7,284,385Stock compensation


8,366



1,255











98,345















99,600Reissue treasury stock


53,416







(53,416
)


8,012



(8,012
)














Cut Bank Acquisition


3,484



522











498,490







100,989







600,001Dividends paid @ $0.53






























(2,378,316
)


(2,378,316
)BALANCE AT DECEMBER 31, 2009


4,361,869


$
654,280






$



$
6,514,851


$
146,701


$
100,989


$
28,270,987


$
35,687,808    F-5




---



##### Table of Contents





ENERGY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Six MonthsYear Ended


EndedDecember 31,


December 31,


Year Ended June 30,2009


2008


2008


2007(Audited)


(Audited)


(Audited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
6,818,537


$
1,158,581


$
10,130,557


$
6,212,255Adjustments to reconcile net income toNet cash provided by (used in) operating activities:Depreciation and amortization, including deferred charges and
    financing costs


2,583,322



1,204,233



2,037,070



3,011,727Stock-based compensation


99,600



35,993



249,090



Derivative assets






145,428



(87,581
)


80,018Derivative liabilities






(146,206
)


88,188



15,354Deferred gain






(82,062
)






(325,582
)Gain on sale of assets














(5,479,166
)Gain on sale of securities


(96,888
)










Investment tax credit


(21,062
)


(10,531
)


(21,062
)


(21,062
)Deferred income taxes


(2,545,742
)


491,286



(176,719
)


(1,573,249
)Impairment of other investments


620,789











Extraordinary gain










(6,819,182
)


Changes in assets and liabilities:Accounts receivable


1,938,979



(5,908,400
)


(779,559
)


509,893Natural gas and propane inventories


4,641,344



(4,386,465
)


(31,027
)


(615,710
)Accounts payable


(238,499
)


(1,520,915
)


1,925,899



971,466Recoverable/refundable cost of gas purchases


1,750,042



(485,900
)


(260,137
)


(228,388
)Prepayments and other


(123,454
)


(228,933
)


(25,069
)


118,800Equity in income of Kykuit


65,982



36,841







Net assets held for sale














(1,219,927
)Other assets


314,051



18,378



(309,466
)


(275,609
)Accrued and other liabilities


493,998



1,576,528



(483,719
)


(2,086,253
)Net cash provided by (used in) operating activities


16,300,999



(8,102,144
)


5,437,283



(905,433
)CASH FLOWS FROM INVESTING ACTIVITIES:Construction expenditures


(8,854,010
)


(4,534,180
)


(3,869,832
)


(2,406,910
)Construction expenditures  discontinued operations














(365,845
)Purchase of marketable securities


(1,392,275
)


(2,985,898
)


(1,301,524
)


Sale of marketable securities


1,211,740







390,746



Purchase of fixed assets  Acquisition of Bangor and
    Frontier










(5,357,850
)


Cash acquired in acquisition


48,020







960,464



Proceeds from sale of assets














17,899,266Other investments


(386,888
)


(242,606
)


(875,658
)


Customer advances received for construction


(70,851
)


90,093



129,641



327,376Increase from contributions in aid of construction


259,090







125,678



Net cash (used in) provided by investing activities


(9,185,174
)


(7,672,591
)


(9,798,335
)


15,453,887CASH FLOWS FROM FINANCING ACTIVITIES:Repayments of long-term debt














(18,663,213
)Repayments of other short-term borrowings


(54,967
)


(1,309
)






Proceeds from lines of credit


19,550,000



22,100,000



14,075,495



11,012,000Repayments of lines of credit


(22,645,000
)


(4,605,000
)


(14,075,495
)


(11,012,000
)Proceeds from long-term debt














13,000,000Repurchase of common stock






(406,038
)


(161,651
)


(2,276,192
)Debt issuance cost














(317,539
)Sale of common stock


(17
)






334,350



597,151Dividends paid


(2,279,202
)


(1,043,691
)


(2,025,365
)


(1,518,219
)Net cash (used in) provided by financing activities


(5,429,186
)


16,043,962



(1,852,666
)


(9,178,012
)NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


1,686,639



269,227



(6,213,718
)


5,370,442CASH AND CASH EQUIVALENTS:Beginning of year


1,065,529



796,302



7,010,020



1,639,578End of year

$
2,752,168


$
1,065,529


$
796,302


$
7,010,020    F-6




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Six MonthsYear Ended


EndedDecember 31,


December 31,


Year Ended June 30,2009


2008


2008


2007(Audited)


(Audited)


(Audited)


(Audited)SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for interest

$
1,107,269


$
624,549


$
922,359


$
1,410,114Cash paid during the period for income taxes


1,053,830



444,000



1,929,499



5,474,500SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
    ACTIVITIES:Shares issued to satisfy deferred board compensation














84,046Shares issued to purchase Cut Bank Gas


499,013











Acquisition of Kykuit investment










242,606



Construction expenditures included in accounts payable


44,928



338,000







Capitalized interest


14,231



11,322



11,512



21,414Repurchase of stock  noncash










374,499



Accrued dividends


273,114



174,001



173,911



  F-7




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 For the year ended December 31, 2009, the six months
    ended December 31, 2008,
 and the years ended June 30, 2008 and 2007
  1.
    Summary
    of Business and Significant Accounting Policies  Nature of Business
      Basis of Presentation
  FASB Accounting Standards Codification
  Reclassifications
  Principles of Consolidation
  Segments
 F-8




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Use of Estimates in Preparing Financial
    Statements
  Natural Gas Inventories
  Accumulated Provisions for Doubtful Accounts
  Recoverable/Refundable Costs of Gas and Propane
    Purchases
  Property, Plant, and Equipment
  Contributions in Aid and Advances Received for
    Construction
  Natural Gas Reserves units-of-production
 F-9




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Impairment of Long-Lived Assets
  Stock-Based Compensation
      Twelve Months EndedTwelve Months Ended


Six Months Ended


June 30,December 31, 2009


December 31, 2008


2008


2007Expected dividend rate


5.24
%


5.81
%


4.47
%


4.00
%Risk free interest rate


3.39
%


1.87
%


3.61
%


5.10
%Weighted average expected lives, in years


8.33



3.50



2.50



2.26Price volatility


42.23
%


73.24
%


31.16
%


30.00
%Total intrinsic value of options exercised

$



$



$
419,890


$
218,609Total cash received from options exercised

$



$



$
293,930


$
512,175   Comprehensive Income available-for-sale
  Twelve Months EndedTwelve Months Ended


Six Months Ended


June 30December 31 2009


December 31 2008


2008


2007Net income

$
6,818,537


$
1,158,581


$
10,130,557


$
6,212,255Other comprehensive income Change in unrealized gain/loss on
    available-for-sale
    securities, net of ($291,025) and $199,454 of income tax


465,848



(319,147
)






Comprehensive income

$
7,284,385


$
839,434


$
10,130,557


$
6,212,255  F-10




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue Recognition
  Derivatives
  Debt Issuance and Reacquisition Costs
  Cash and Cash Equivalents
  Earnings Per Share 3-for-2
  Credit Risk
  Effects of Regulation
  Income Taxes
 F-11




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Financial Instruments
  Asset Retirement Obligations (ARO)
      Balance  July 1, 2006

$
650,717Accretion


37,654Balance  July 1, 2007

$
688,371Accretion


37,860Balance  June 30, 2008

$
726,231Accretion


19,968Balance  December 31, 2008

$
746,199Accretion


41,034Balance  December 31, 2009

$
787,233   Goodwill
 F-12




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Equity Method Investments
        New
    Accounting Pronouncements
  Recently
    Adopted
  Fair Value Measurements
  Business Combinations
  Noncontrolling Interests
 F-13




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Derivative Instruments and Hedging Activities
  Interim Fair Value Disclosures
  Other-Than-Temporary
    Impairments other-than-temporary other-than-temporary other-than-temporary
  Accounting Standards Codification
    (Codification)
  Earnings Per Share 
  Subsequent Events
  Recently
    Issued
  Consolidation of Variable Interest Entities
  Fair Value Measurement Disclosures Fair Value Measurements and Disclosures
    (Topic 820)  Improving Disclosures about Fair Value
    Measurements (ASU
    No. 2010-06)
 F-14




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 2010-06
  2.
    Discontinued
    Operations      and/or
   F-15




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended June 302007(In thousands)Operations  (Discontinued operations)Operating revenues

$
10,266Propane purchased


6,906Gross Margin


3,360Operating expenses


2,104Operating income


1,256Other (income)


(51
)Income before interest and taxes


1,307Interest expense


333Income before income taxes


974Income tax (expense)


(378
)Income from discontinued operations


596Gain from disposal of operations


5,479Income tax (expense)


(2,120
)Net Income

$
3,955     3.
    Acquisitions
    and Extraordinary Gain      24-year
 F-16




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            4.
    Natural
    Gas Wells  units-of-production
     F-17




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        5.
    Marketable
    Securities  held-to-maturity held-to-maturity available-for-sale Available-for-sale
  available-for-sale
  December 31, 2009Investment


Unrealized


Estimatedat Cost


Gains


Fair ValueCommon Stock

$
4,172,899


$
238,272


$
4,411,171   December 31, 2008Investment


Unrealized


Estimatedat Cost


Losses


Fair ValueCommon Stock

$
3,895,476


$
(518,601
)

$
3,376,875   available-for-sale available-for-sale
  6.
    Fair
    Value Measurements    Valuation
    Hierarchy
   F-18




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2009Level I


Level 2


Level 3


TOTALAvailable-for-sale
    securities


4,411,171











4,411,171   December 31, 2008Level I


Level 2


Level 3


TOTALAvailable-for-sale
    securities


3,376,875











3,376,8753,376,875











3,376,875   7.
    Property,
    Plant and Equipment    December 31,2009


2008Gas transmission and distribution facilities

$
56,346,112


$
49,359,031Land


164,903



155,252Buildings and leasehold improvements


2,967,108



2,945,258Transportation equipment


1,985,805



1,622,798Computer equipment


3,165,260



3,164,821Other equipment


3,984,996



2,209,783Construction
    work-in-progress


2,639,507



2,494,646Producing natural gas properties


3,911,404



5,009,23275,165,095



66,960,821Accumulated depreciation, depletion, and amortization


(33,961,427
)


(32,056,379
)Total

$
41,203,668


$
34,904,442     8.
    Deferred
    Charges    December 31,2009


2008Regulatory asset for property tax

$
1,247,993


$
1,554,244Regulatory asset for income taxes


452,646



452,646Regulatory assets for deferred environmental remediation costs


22,042



114,960Rate case costs


15,448



18,538Unamortized debt issue costs


356,339



417,768Total

$
2,094,468


$
2,558,156    F-19




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    9.
    Accrued
    and Other Current Liabilities    December 31,2009


2008Property tax settlement  current portion

$
242,120


$
235,772Payable to employee benefit plans


81,045



57,617Accrued vacation


55,416



464,153Customer deposits


521,535



501,248Accrued interest


31,900



4,897Accrued taxes other than income


640,801



457,084Deferred payments from levelized billing


2,176,671



2,075,860Other regulatory liabilities


59,996



Other


785,399



1,150,817Total

$
4,594,883


$
4,947,448   10.
    Other
    Long-Term Liabilities    December 31,2009


2008Asset retirement obligation

$
787,233


$
746,199Customer advances for construction


800,250



824,955Regulatory liability for income taxes


83,161



83,161Regulatory liability for gas costs


131,443



Long-term notes payable


3,416



Property tax settlement


486,008



729,008Total

$
2,291,511


$
2,383,323   11.
    Credit
    Facilities and Long-Term Debt    Bank of America Line of Credit
    $13,000,000 6.16% Senior Unsecured Notes
 F-20




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Series 1997 Notes Payable
  Series 1993 Notes Payable
  Series 1992B Industrial Development Revenue
    Obligations
  Term Loan
  Debt Covenants 60-month debt-to-capital
  12.
    Employee
    Benefit Plans     F-21




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      13.
    Income
    Taxes    December 31,2009


2008Current


Long-Term


Current


Long-TermDeferred tax asset:Allowances for doubtful accounts

$
84,150


$



$
79,323


$
Unamortized investment tax credit














(17,502
)Contributions in aid of construction






635,484







334,460Property, plant, and equipment






8,652,601







8,858,733Other nondeductible accruals


38,071



37,153



203,893



26,265Recoverable purchase gas costs


487,653











Derivatives










31,561



Deferred incentive and pension accrual














4,147Unrealized (loss) gain on securities held for sale


(91,571
)






199,454



Net operating loss (NOL) carryforwards






3,243,317







3,660,736Other


291,452



995,952



10,383



972,409Total


809,755



13,564,507



524,614



13,839,248Deferred tax liabilities:Recoverable purchase gas costs


246,819







418,575



Property tax liability






450,594







403,341Covenant not to compete






113,545







36,010Other






272,928



(119,914
)


236,701Total


246,819



837,067



298,661



676,052Net deferred tax asset (liabilities)


562,936



12,727,440



225,953



13,163,196Less valuation allowance






(5,176,470
)






(7,469,886
)Net deferred tax asset (liabilities)

$
562,936


$
7,550,970


$
225,953


$
5,693,310  F-22




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended


Six Months Ended


Years Ended,December 31,


December 31,


June 30,2009


2008


2008


2007Current income taxes:Federal

$
2,218,263


$
(120,435
)

$
1,058,405


$
957,135State


392,196



(39,303
)


52,121



164,240Total current income taxes


2,610,459



(159,738
)


1,110,526



1,121,375Deferred income taxes:Federal


(2,100,967
)


944,144



241,244



137,881State


(461,188
)


152,582



1,980



34,470Total deferred income taxes


(2,562,155
)


1,096,726



243,224



172,351Total income taxes before credits


48,304



936,988



1,353,750



1,293,726Investment tax credit, net


(21,062
)


(10,531
)


(21,062
)


(21,062
)Total income tax expense

$
27,242


$
926,457


$
1,332,688


$
1,272,664     Year Ended


Six Months Ended


Years EndedDecember 31,


December 31,


June 30,2009


2008


2008


2007Tax expense at statutory rate of 34%

$
2,327,565


$
708,913


$
1,578,981


$
1,200,249State income tax, net of federal tax benefit


314,906



92,993



179,835



154,620Amortization of deferred investment tax credits


(21,062
)


(10,531
)


(21,062
)


(21,062
)Decrease in valuation allowance


(2,781,334
)










Other


187,167



135,082



(405,066
)


(61,143
)Total

$
27,242


$
926,457


$
1,332,688


$
1,272,664     14.
    Segments
    of Operations   F-23




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Twelve Months Ended

Natural Gas





Pipeline


Corporate andDecember 31, 2009

Operations


EWR


Operations


Other


Eliminations


ConsolidatedOperating revenue:Natural gas operations

$
59,301,564


$



$



$



$
(535,946
)

$
58,765,618Marketing and wholesale






19,656,795











(7,417,889
)


12,238,906Pipeline operations










449,757











449,757Total operating revenue


59,301,564



19,656,795



449,757







(7,953,835
)


71,454,281Gas purchased


37,587,798















(535,946
)


37,051,852Gas and electric  wholesale






17,065,582











(7,417,889
)


9,647,693Distribution, general, and administrative


9,942,220



526,305



85,573



7,971







10,562,069Maintenance


654,281



641



11,555











666,477Depreciation and amortization


1,865,941



290,872



55,740











2,212,553Taxes other than income


2,200,487



26,112



23,699











2,250,298Operating expenses


52,250,727



17,909,512



176,567



7,971



(7,953,835
)


62,390,942Operating income


7,050,837



1,747,283



273,190



(7,971
)






9,063,339Other income (expense)


254,326



(686,771
)






(543,889
)






(976,334
)Interest (expense)


(1,134,858
)


(89,151
)


(16,841
)


(376
)






(1,241,226
)Income (loss) from continuing operations before income taxes


6,170,305



971,361



256,349



(552,236
)






6,845,779Income taxes (expense)


(2,281,053
)


(413,017
)


(100,115
)


2,766,943







(27,242
)Net income

$
3,889,252


$
558,344


$
156,234


$
2,214,707


$



$
6,818,537Capital expenditures and natural gas properties

$
8,648,035


$
191,608


$



$
14,367


$



$
8,854,010Total assets

$
62,452,569


$
6,589,065


$
725,538


$
36,401,142


$
(27,542,632
)

$
78,625,682Equity Method investments

$



$
784,363


$



$



$



$
784,363Goodwill

$
1,056,771


















$
1,056,771   F-24




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Six Months Ended

Natural Gas





Pipeline


Corporate andDecember 31, 2008

Operations


EWR


Operations


Other


Eliminations


ConsolidatedOperating revenue:Natural gas operations

$
29,158,035


$



$



$



$
(317,912
)

$
28,840,123Marketing and wholesale






14,623,793











(4,932,233
)


9,691,560Pipeline operations










226,157











226,157Total operating revenue


29,158,035



14,623,793



226,157







(5,250,145
)


38,757,840Gas purchased


19,777,820















(317,912
)


19,459,908Gas and electric  wholesale






12,702,580











(4,932,233
)


7,770,347Distribution, general, and administrative


5,460,205



205,087



52,114











5,717,406Maintenance


317,112



40



2,646











319,798Depreciation and amortization


841,405



152,767



29,209











1,023,381Taxes other than income


1,260,475



11,155



12,927











1,284,557Operating expenses


27,657,017



13,071,629



96,896







(5,250,145
)


35,575,397Operating income


1,501,018



1,552,164



129,261











3,182,443Other income


160,326



(36,516
)


94



(544,253
)






(420,349
)Interest (expense)


(584,484
)


(83,300
)


(9,272
)










(677,056
)Income from continuing operations before income taxes


1,076,860



1,432,348



120,083



(544,253
)






2,085,038Income taxes (expense)


(518,933
)


(550,701
)


(45,943
)


189,120







(926,457
)Net income

$
557,927


$
881,647


$
74,140


$
(355,133
)

$



$
1,158,581Capital expenditures and natural gas properties

$
4,465,480


$
68,700


$



$



$



$
4,534,180Total assets

$
59,748,521


$
7,819,863


$
717,977


$
28,468,131


$
(20,935,527
)

$
75,818,965Equity Method investments

$



$
1,081,423


$



$



$



$
1,081,423   F-25




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Natural Gas





Pipeline


Corporate andYear Ended June 30, 2008

Operations


EWR


Operations


Other


Eliminations


ConsolidatedOperating revenue:Natural gas operations

$
60,093,090


$



$



$



$
(754,094
)

$
59,338,996Marketing and wholesale






29,395,960











(12,271,879
)


17,124,081Pipeline operations










370,171











370,171Total operating revenue


60,093,090



29,395,960



370,171







(13,025,973
)


76,833,248Gas purchased


42,091,491















(754,094
)


41,337,397Gas and electric  wholesale






27,105,232











(12,271,879
)


14,833,353Distribution, general, and administrative


9,710,294



370,374



140,087



441,123







10,661,878Maintenance


641,211



1,094



8,248











650,553Depreciation and amortization


1,566,359



242,551



56,384











1,865,294Taxes other than income


2,035,403



16,704



28,037











2,080,144Operating expenses


56,044,758



27,735,955



232,756



441,123



(13,025,973
)


71,428,619Operating income


4,048,332



1,660,005



137,415



(441,123
)






5,404,629Other income


245,487



578



17



69,697







315,779Interest (expense)


(933,655
)


(124,827
)


(17,863
)










(1,076,345
)Income from continuing operations before income taxes


3,360,164



1,535,756



119,569



(371,426
)






4,644,063Income taxes (expense)


(1,091,105
)


(343,646
)


(40,007
)


142,070







(1,332,688
)Net income before extraordinary item


2,269,059



1,192,110



79,562



(229,356
)






3,311,375Extraordinary gain














6,819,182







6,819,182Net income

$
2,269,059


$
1,192,110


$
79,562


$
6,589,826


$



$
10,130,557Capital expenditures and natural gas properties

$
3,578,307


$
250,091


$
41,434


$



$



$
3,869,832Total assets

$
49,414,217


$
7,486,996


$
988,318


$
25,713,911


$
(25,226,352
)

$
58,377,090Equity Method Investments

$



$
1,118,264


$



$



$



$
1,118,264   F-26




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Natural Gas





Pipeline


DiscontinuedYear Ended June 30, 2007

Operations


EWR


Operations


Operations


Eliminations


ConsolidatedOperating revenue:Natural gas operations

$
47,074,560


$



$



$



$
(635,054
)

$
46,439,506Marketing and wholesale






22,466,030











(9,920,671
)


12,545,359Pipeline operations










388,175











388,175Total operating revenue


47,074,560



22,466,030



388,175







(10,555,725
)


59,373,040Gas purchased


34,177,047















(635,054
)


33,541,993Gas and electric  wholesale






20,185,304











(9,920,671
)


10,264,633Distribution, general, and administrative


5,676,195



315,279



206,055











6,197,529Maintenance


563,912



297



2,474











566,683Depreciation and amortization


1,414,003



222,110



56,373











1,692,486Taxes other than income


1,652,661



20,529



23,746











1,696,936Operating expenses


43,483,818



20,743,519



288,648







(10,555,725
)


53,960,260Operating income


3,590,742



1,722,511



99,527











5,412,780Other income


228,515



1,592



11,412











241,519Interest (expense)


(1,896,650
)


(185,365
)


(42,140
)










(2,124,155
)Income from continuing operations before income taxes


1,922,607



1,538,738



68,799











3,530,144Income taxes (expense)


(653,130
)


(593,078
)


(26,456
)










(1,272,664
)Income from continuing operations


1,269,477



945,660



42,343











2,257,480Discontinued operations:Gain from disposal of operations














5,479,166







5,479,166Income from discontinued operations














975,484







975,484Income tax (expense)














(2,499,875
)






(2,499,875
)Income from discontinued operations














3,954,775







3,954,775Net income

$
1,269,477


$
945,660


$
42,343


$
3,954,775


$



$
6,212,255Capital expenditures and natural gas properties

$
2,024,443


$
361,379


$
21,088


$



$



$
2,406,910Total assets

$
38,260,280


$
5,882,390


$
1,003,145


$



$
6,436,001


$
51,581,816Equity Method Investments

$



$



$



$



$



$
   15.
    Stockholders
    Equity  3-for-2
 F-27




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Purchases
    of Equity Securities by Our Company
  Maximum Number ofTotal Number of


Shares That May YetShares Purchased as


be Purchased UnderTotal Shares


Average Price Paid


Part of Publicly


the StockPeriod

Purchased


per share


Announced Plans


Repurchase PlanMay 30, 2007  June 30, 2007


219,522


$
10.00



219,522July 1, 2007  June 30, 2008


16,780


$
9.50



16,780July 1, 2008  December 31, 2008


53,416


$
7.60



53,416289,718







289,718



158,782       2002 Stock Option Plan
    Stock Option Disclosures
    F-28




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Weighted


AggregateNumber of


Average


IntrinsicShares


Exercise Price


ValueOutstanding July 1, 2006


218,250


$
5.56Granted


45,000


$
7.03Exercised


(93,750
)

$
5.47Expired


(4,500
)

$
Outstanding June 30, 2007


165,000


$
5.98Granted


30,000


$
6.59Exercised


(109,500
)

$
3.82Expired


(66,000
)

$
Outstanding June 30, 2008


19,500


$
9.10Granted


10,000


$
7.10Exercised





$
Expired





$
Outstanding December 31, 2008


29,500


$
9.10Granted


15,000


$
8.71Exercised





$
Expired





$
Outstanding December 31, 2009


44,500


$
8.52


$
79,190Exerciseable December 31, 2009


23,750


$
9.14


$
27,550       WeightedAverageWeighted


Remaining





WeightedAverage


Contractual





AverageExercise


Number


Exercise


Life


Number


ExerciseGrant Date

Price


Outstanding


Price


(Years)


Exercisable


Price1/6/2006

$
6.35



4,500


$
6.35



1.01






$
6.3512/1/2007

$
9.93



15,000


$
9.93



0.08



15,000


$
9.9312/1/2008

$
7.10



10,000


$
7.10



8.92



5,000


$
7.106/3/2009

$
8.44



5,000


$
8.44



4.42



1,250


$
8.4412/1/2009

$
8.85



10,000


$
8.85



9.92



2,500


$
8.8544,500











23,750    F-29




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Termination of Preferred Stock Rights Agreement by Amendment
    of Final Expiration Date  Expiration of the Preferred
    Stock Purchase Rights
    16.
    Commitments
    and Contingencies  Commitments
    Year ending December 31:2010


500,8742011


500,8742012


500,8742013


500,8742014


500,874Thereafter


1,592,474Total

$
4,096,844     Environmental Contingency
     F-30




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Derivative Contingencies mark-to-market
  Litigation
  Shelby Gas
    Association v. Energy West Resources, Inc.,
      1997-2002.
 F-31




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Operating Leases
  Year ended:December 31, 2010


229,083December 31, 2011


144,675December 31, 2012


89,926December 31, 2013


85,947December 31, 2014


85,151Thereafter


122,681$
757,463     17.
    Financial
    Instruments and Risk Management  Management of Risks Related to Derivatives
    mark-to-market Mark-to-market mark-to-market
     F-32




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   18.
    Subsequent
    Event    Acquisition of Ohio Gas Utilities by Mergers Form 8-K
  Merger Agreements Form 8-K Form 8-K
  Merger Consideration  Issuance of Shares
    (unaudited) 
       F-33




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    TotalOhio





LightningCompanies


Great Plains


Pipeline


BrainardCurrent assets

$
11,628,876


$
7,391,188


$
4,093,241


$
144,447Property and equipment


29,530,636



18,290,612



10,818,923



421,101Deferred Tax Assets


199,700







162,499



37,201Other Noncurrent assets


152,585



1,000



140,002



11,583Customer Relationships


685,000



640,000



45,000



Goodwill


12,717,024



8,894,601



3,765,673



56,750Total assets acquired


54,913,821



35,217,401



19,025,338



671,082Current liabilities


13,687,443



7,497,196



5,786,196



404,051Asset Retirement Obligation


487,447







477,939



9,508Deferred Tax Liability


2,869,592



1,405,340



1,393,119



71,133Total liabilities assumed


17,044,482



8,902,536



7,657,254



484,692Net assets acquired (unaudited):

$
37,869,339


$
26,314,865


$
11,368,084


$
186,390         Year Ended December 31,2009


2008(In thousands)Revenues

$
102,708


$
125,643Operating income


11,918



9,289Net income


8,403



4,587Earnings per share  basic

$
1.400


$
0.760Earnings per share  diluted

$
1.400


$
0.760  F-34




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##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Citizens
    Bank Credit Facility (Unaudited)
    Long-term Debt  $10.3 million 5.00% Senior
    Secured Notes 
  Line of Credit 
      Huntington
    Credit Facility (unaudited)
    Long-term Debt 
 F-35




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Line of Credit 
    Combined
    Term Loans and Credit Facilities (unaudited)
      19.
    Quarterly
    Information (Unaudited)    For the Quarters EndedMarch 31,


June 30,


September 30,


December 31,Year Ended December 31,2009

2009


2009


2009


2009Revenues

$
31,334


$
12,238


$
8,326


$
19,556Gross margin

$
7,774


$
5,248


$
4,190


$
7,543Operating income

$
3,564


$
1,523


$
245


$
3,731Income (loss) before extraordinary items

$
1,963


$
686


$
(172
)

$
4,342Net income (loss)

$
1,963


$
686


$
(172
)

$
4,342Basic earnings (loss) before extraordinary items per common share

$
0.46


$
0.16


$
(0.04
)

$
1.00Basic earnings (loss) per common share  extraordinary
    gain

$
0.00


$
0.00


$
0.00


$
0.00Basic earnings (loss) per common share  net income

$
0.46


$
0.16


$
(0.04
)

$
1.00Diluted earnings (loss) per share

$
0.46


$
0.16


$
(0.04
)

$
1.00Diluted earnings (loss) per share  extraordinary gain

$
0.00


$
0.00


$
0.00


$
0.00Diluted earnings (loss) per share  net income

$
0.46


$
0.16


$
(0.04
)

$
1.00   F-36




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##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  For the Quarters EndedSeptember 30,


December 31,Six Months Ended December 31, 2008

2008


2008Revenues

$
13,987


$
24,771Gross margin

$
4,544


$
6,984Operating income

$
711


$
2,471Income (loss) before extraordinary items

$
386


$
773Extraordinary gain

$
0


$
0Net income (loss)

$
386


$
773Basic earnings (loss) before extraordinary items per common share

$
0.09


$
0.18Basic earnings (loss) per common share  extraordinary
    gain

$
0.00


$
0.00Basic earnings (loss) per common share  net income

$
0.09


$
0.18Diluted earnings (loss) per share

$
0.09


$
0.18Diluted earnings (loss) per share  extraordinary gain

$
0.00


$
0.00Diluted earnings (loss) per share  net income

$
0.09


$
0.18   For the Quarters EndedSeptember 30,


December 31,


March 31,


June 30,Year Ended June 30, 2008

2007


2007


2008


2008Revenues

$
6,951


$
20,171


$
30,878


$
18,833Gross margin

$
2,675


$
5,742


$
7,639


$
4,606Operating income

$
117


$
1,620


$
3,553


$
114Income (loss) before extraordinary items

$
75


$
1,049


$
2,307


$
(120
)Extraordinary gain

$
0


$
6,819


$
0


$
0Net income (loss)

$
75


$
7,868


$
2,307


$
(120
)Basic earnings (loss) before extraordinary items per common share

$
0.02


$
0.24


$
0.53


$
(0.03
)Basic earnings (loss) per common share  extraordinary
    gain

$
0.00


$
1.59


$
0.00


$
0.00Basic earnings (loss) per common share  net income

$
0.02


$
1.83


$
0.53


$
(0.03
)Diluted earnings (loss) per share

$
0.02


$
0.24


$
0.53


$
(0.03
)Diluted earnings (loss) per share  extraordinary gain

$
0.00


$
1.58


$
0.00


$
0.00Diluted earnings (loss) per share  net income

$
0.02


$
1.83


$
0.53


$
(0.03
)     F-37




---



##### Table of Contents



ENERGY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  For the Quarters EndedSeptember 30,


December 31,


March 31,


June 30,Year Ended June 30, 2007

2006


2006


2007


2007Revenues

$
8,456


$
18,041


$
21,516


$
11,360Gross margin

$
3,200


$
5,566


$
6,935


$
3,225Operating income

$
326


$
2,121


$
2,358


$
606Income (loss) before extraordinary items

$
4


$
1,113


$
1,293


$
(152
)Extraordinary gain

$
(199
)

$
157


$
636


$
3,360Net (loss) income

$
(195
)

$
1,270


$
1,929


$
3,208Basic earnings (loss) per common share  continuing
    operations

$
0.00


$
0.25


$
0.29


$
(0.03
)Basic (loss) earnings per common share  discontinued
    operations

$
(0.05
)

$
0.04


$
0.14


$
0.76Basic earnings (loss) per common share  net income

$
(0.05
)

$
0.29


$
0.43


$
0.73Diluted earnings (loss) per share  continuing
    operations

$
0.00


$
0.25


$
0.28


$
(0.03
)Diluted (loss) earnings per share  discontinued
    operations

$
(0.04
)

$
0.04


$
0.14


$
0.75Diluted (loss) earnings per share  net income

$
(0.04
)

$
0.29


$
0.42


$
0.72    F-38