EDGAR 10-K Filing

Company CIK: 775057
Filing Year: 2022
Filename: 775057_10-K_2022_0001096906-22-003043.json

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ITEM 1. BUSINESS
Item 1.Business.
Altex Industries, Inc. (or the "Registrant" or the "Company," each of which terms, when used herein, refer to Altex Industries, Inc. and/or its subsidiary) is a holding company with one full-time employee that was incorporated in Delaware in 1985. Through its operating subsidiary, AOC, the Company currently owns interests in onshore oil and gas properties, has bought and sold producing oil and gas properties, and, to a lesser extent, has participated in the drilling of exploratory and development wells, and in recompletions of existing wells.
All of AOC’s interests are in properties operated by others. An interest owner in a property not operated by that interest owner must rely on information regarding the property provided by the operator, even though there can be no assurance that such information is complete, accurate, or current. In addition, an owner of a working interest in a property is potentially responsible for 100% of all liabilities associated with that property, regardless of the size of the working interest actually owned.
The operators of producing properties in which AOC has an interest sell produced oil and gas to refiners, pipeline operators, and processing plants. If a refinery, pipeline, or processing plant that purchases such production were taken out of service, the operator could be forced to halt the production that is purchased by such refinery, pipeline, or plant.
Although many entities produce oil and gas, competitive factors play a material role in AOC's production operations only to the extent that such factors affect demand for and prices of oil and gas and demand for, supply of, and prices of oilfield services. The sale of oil and gas is regulated by Federal, state, and local agencies, and AOC is also subject to Federal, state, and local laws and regulations relating to the environment. These laws and regulations generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation. AOC regularly assesses its exposure to environmental liability and asset retirement obligations (ARO), which activities are covered by Federal, state, and local regulation. AOC does not believe that it currently has any material exposure to environmental liability or ARO, as it does not own any working interests.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Not applicable.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
Not applicable.

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ITEM 2. PROPERTIES
Item 2.Properties.
The Company’s estimated reserves at September 30, 2022, are 1,300 barrels of proved, developed oil reserves associated with the Company’s 4.4% override in the Glo Field in Campbell County, Wyoming. The reserve estimate is prepared by the Company’s registered profession petroleum engineer; management supplies the engineer with ownership and revenue data and reviews the reserve estimate for reasonableness. All the Company’s interests in oil and gas properties are non-working interests. The Company did not participate in the drilling of any wells during the year ended September 30, 2021 (FY21) or the year ended September 30, 2022 (FY22). At December 23, 2022, the Company was not engaged in any oil and gas operations. The Company owns very small mineral interests in Utah. All the Company’s production is located in Utah and Wyoming.
Production
Net Production
Average Price
Average Production
Cost Per Equivalent
Barrel
Fiscal Year
Oil
(Bbls)
Gas
(Mcf)
Oil
(Bbls)
Gas
(Mcf)
$83.00
$5.65
$0.00
$51.88
$4.15
$0.00
$50.00
$2.50
$0.00

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ITEM 3. LEGAL PROCEEDINGS
Item 3.Legal Proceedings.
None.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4.Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Company's common stock is traded on OTC Pink under the symbol ALTX. At December 23, 2022, there were approximately 3,400 holders of record of the Company's common stock, excluding entities whose stock is held by clearing agencies. The Company has not paid a dividend during the last two fiscal years. The Company has no publicly announced plan or program for the purchase of shares and the Company has no compensation plans (including individual compensation arrangements) under which equity securities of the registrant are authorized for issuance. On October 26, 2022, the Company acquired 493,975 shares of its common stock for $44,556.55, and on November 9, 2022, the Company retired the 493,975 shares.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved.
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Financial Condition
In FY22 operating activities used $129,000 cash, and the Company sold certain oil, gas, and mineral interests in Utah for $450,000 cash. In FY21 operating activities used $85,000 cash, and the Company used $19,000 cash to acquire 130,000 shares of its common stock. Consequently, cash balances increased $321,000 in FY22 and decreased $104,000 in FY21. On October 26, 2022, the Company acquired 493,975 shares of its common stock for $44,556.55, and on November 9, 2022, the Company retired the 493,975 shares. At September 30, 2022 and 2021, accrued expenses, related party, of $1,073,000 consists of $1,024,000 in salary payable to the Company’s president, pursuant to his employment agreement, that the president has elected to defer, as well as $49,000 in related accrued payroll tax. The Company’s president may require the Company to pay the unpaid salary and payroll tax liability at any time.
The Company is likely to experience negative cash flow from operations unless the Company invests in interests in producing oil and gas wells or in another venture that produces sufficient cash flow from operations. With the exception of capital expenditures related to production acquisitions or drilling or recompletion activities or an investment in another venture that produces cash flow from operations, none of which are currently planned, the cash flows that could result from such acquisitions, activities, or investments, and the possibility of a material change in the current level of interest rates or of oil and gas prices, the Company knows of no trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company's liquidity increasing or decreasing in any material way. Except for cash generated by the operation of the Company's producing oil and gas properties, asset sales, and interest income, the Company has no internal or external sources of liquidity other than its working capital. At December 23, 2022, the Company had no material commitments for capital expenditures.
Results of Operations
In FY22 the Company realized a net gain of $450,000 from the sale of certain oil, gas, and mineral interests in Utah. Interest income increased from nil in FY21 to $14,000 in FY22 because of higher realized interest rates on cash balances. In FY22, other income consisted of $4,000 of out-of-period oil and gas sales received in 2022. In FY21, other income consisted of $56,000 of out-of-period oil and gas sales that, unbeknownst to the Company, an operator had held in suspense and that was received in 2021, and $1,000 of other out-of-period oil and gas sales received in 2021.
At the current levels of net oil and gas production, cash balances, interest rates, and oil and gas prices, the Company’s revenue is unlikely to exceed its expenses. Unless the Company invests a substantial portion of its cash balances in interests in producing oil and gas wells or in one or more other ventures that produce revenue and net income, the Company is likely to experience net losses. With the exception of unanticipated ARO, unanticipated environmental expense, and possible changes in interest rates and oil and gas prices, the Company is not aware of any other trends, events, or uncertainties that have had or that are reasonably expected to have a material impact on net sales or revenues or income from continuing operations.
Climate Change
The company does not believe that climate change or regulations adopted to mitigate the consequences of climate change will have a material impact on the Company’s financial condition or results of operations.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8.Financial Statements and Supplementary Data.
The consolidated financial statements follow the signature page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management’s control objectives.
As of the end of the period covered by the report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be included in the Company’s Exchange Act reports. There have been no significant changes in the Company’s internal controls or in other factors which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

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ITEM 9B. OTHER INFORMATION
Item 9b. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10.Directors, Executive Officers, and Corporate Governance.
Steven Cardin, 72, an economist, formerly with The Conference Board and the consulting firm, National Economics Research Associates, has been Chairman and CEO of the Company for over five years, and a Director since 1984. Jeffrey Chernow, 71, a lawyer, formerly Director of Enforcement in the Division of Securities, State of Maryland, Office of the Attorney General, has been in private practice in Maryland for over five years, and a Director since 1989. Stephen Fante, 67, a CPA, was Chairman and CEO of IMS, which provided computerized accounting systems to the oil and gas industry and was a reseller of microcomputer products to the Fortune 1000, and was Chairman and CEO of Seca Graphics, Inc., which provided design and mapping services and software to the cable television and telecommunications industries. Mr. Fante has been a private investor for the last five years. Mr. Fante has been a Director since 1989.
The Board of Directors has a separately-designated standing Audit Committee which is comprised of Messrs. Fante and Chernow. The Board of Directors has determined that the Company has at least one Audit Committee Financial
Expert serving on its Audit Committee: Mr. Fante is an Audit Committee Financial Expert, and he is independent, as that term is defined by NASDAQ.
Messrs. Chernow's, Cardin's, and Fante's terms as Directors continue until their successors are duly elected and qualified. The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11.Executive Compensation.
The following table sets forth the compensation earned by the Company's only executive officer during the last two fiscal years.
Summary Compensation Table
Name and Principal Position
Year
Salary ($)
Total ($)
Steven Cardin, CEO
3,000
3,000
Steven Cardin, CEO
3,000
3,000
Effective October 1, 2021, the Company renewed its Employment Agreement with Mr. Cardin. The Agreement has an initial term of five years and provides an annual base salary equal to the maximum annual contribution to a Health Flexible Spending Arrangement (FSA) and an annual bonus of no less than 20% of the Company's earnings before tax, payable, at Mr. Cardin's election, in either cash or common stock of the Company at then fair market value. The Company will match any contribution that Mr. Cardin makes to the Company’s FSA.
The Employment Agreement also provides that, in the event the Company terminates Mr. Cardin's employment by reason of his permanent disability, the Company shall (1) pay Mr. Cardin a total sum, payable in 24 equal monthly installments, equal to 50% of the base salary to which he would have been entitled had he performed his duties for the Company for a period of two years after his termination, less the amount of any disability insurance benefits he receives under policies maintained by the Company for his benefit, and (2) continue to provide Mr. Cardin with all fringe benefits provided to him at the time of his permanent disability for a period of two years following such permanent disability.
The Employment Agreement also provides that, in the event the Company terminates Mr. Cardin's employment in breach of the agreement, or in the event that Mr. Cardin terminates his employment because his circumstances of employment shall have changed subsequent to a change in control, then the Company shall pay Mr. Cardin a lump sum payment equal to the sum of (1) twice Mr. Cardin's base salary during the 12-month period immediately preceding the termination of his employment, (2) the greater of (a) twice any annual bonus paid to or accrued with respect to Mr. Cardin by the Company during the fiscal year immediately preceding the fiscal year in which his employment shall have been terminated or (b) three times his base salary during the 12-month period immediately preceding the termination of his employment, and (3) any other compensation owed to Mr. Cardin at the time of his termination. The agreement also provides that the Company will indemnify Mr. Cardin against any special tax that may be imposed on him as a result of any such termination payment made by the Company pursuant to the agreement.
Under the Employment Agreement, a change in control is deemed to occur (1) if there is a change of one-third of the Board of Directors under certain conditions, (2) if there is a sale of all or substantially all of the Company's assets, (3) upon certain mergers or consolidations, (4) under certain circumstances if another person (or persons) acquires 20% or more of the outstanding voting shares of the Company, or (5) if any person except Mr. Cardin shall own or control half of such outstanding voting shares.
Director Compensation
Name
Fees Earned or Paid in Cash
($)
Total
($)
Jeffrey Chernow
12,000
12,000
Stephen Fante
12,000
12,000
Each Director who is not also an officer of the Company receives $1,000 per month for service as a Director. No additional fees are paid for service on Committees of the Board or for attendance at Board or Committee Meetings.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information concerning each person who, as of December 23, 2022, is known to the Company to be the beneficial owner of more than five percent of the Company's common stock and information regarding common stock of the Company beneficially owned, as of December 23, 2022, by all Directors and executive officers and by all Directors and executive officers as a group.
Name and Address of Beneficial Owner
Shares of Common Stock
Beneficially Owned
Percent
of Class
Steven Cardin (Director and Executive Officer)
700 Colorado Blvd #273 Denver CO 80206-4084
7,233,866
62.8%
All Directors and Executive Officers as a Group (1 Person)
7,233,866
62.8%

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Messrs. Fante and Chernow are both independent under the NASDAQ independence standards.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Audit Fees. Billed for FY22: $11,500. Billed for FY21: $11,000.
Audit-Related Fees. None.
Tax Fees. None.
All Other Fees. None.
The Company does not engage an accountant to render audit or non-audit services unless the engagement is pre-approved by the Company’s Audit Committee.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15.Exhibits and Financial Statement Schedules
3(i)
Articles of Incorporation - Incorporated herein by reference to Exhibit B to August 20, 1985 Proxy Statement
3(ii)
Bylaws - Incorporated herein by reference to Exhibit C to August 20, 1985 Proxy Statement
Employment Agreement between the Company and Steven Cardin - Incorporated herein by reference to Form 10-K for the fiscal year ended September 30, 2021
Code of Ethics - Incorporated herein by reference to Form 10-K for fiscal year ended September 30, 2003
List of subsidiaries - Incorporated herein by reference to Form 10-K for fiscal year ended September 30, 1997
31.
Rule 13a-14(a)/15d-14(a) Certifications
32.*
Section 1350 Certifications
101.xml
XBRL Instance Document
101.xsd
XBRL Taxonomy Extension Schema Document
101.cal
XBRL Taxonomy Extension Calculation Linkbase Document
101.def
XBRL Taxonomy Extension Definition Linkbase Document
101.lab
XBRL Taxonomy Extension Label Linkbase Document
101.pre
XBRL Taxonomy Extension Presentation Linkbase Document
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* Furnished. Not Filed. Not incorporated by reference. Not subject to liability.