UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to .
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Commission file number 1-9030
ALTEX INDUSTRIES, INC.
(Name of small business issuer in its charter)
-------------------------------------- --------------------------------------
Delaware 84-0989164
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
POB 1057 Breckenridge, CO 80424-1057
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 265-9312
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common
stock, par value $0.01 per share
Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. [ ]
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No
[ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Issuer's revenue for its most recent fiscal year: $1,029,000
Aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity as of December 23, 2005: $1,539,750
Number of shares outstanding of issuer's Common Stock as of December 23,
2005: 14,877,117
Transitional Small Business Disclosure Format: Yes No X
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1
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements that are not historical facts contained in this Form 10-KSB are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ from projected results. Factors that could cause actual
results to differ materially include, among others: general economic conditions;
the market price of oil and natural gas; the risks associated with exploration
and production in the Rocky Mountain region; the Company's ability to find,
acquire, market, develop, and produce new properties; operating hazards
attendant to the oil and natural gas business; uncertainties in the estimation
of proved reserves and in the projection of future rates of production and
timing of development expenditures; the strength and financial resources of the
Company's competitors; the Company's ability to find and retain skilled
personnel; climatic conditions; availability and cost of material and equipment;
delays in anticipated start-up dates; environmental risks; the results of
financing efforts; and other uncertainties detailed elsewhere herein.
PART I
ITEM 1. DESCRIPTION OF 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 two full-time employees and one part-time employee
that was incorporated in Delaware in 1985. Through its operating subsidiary, the
Company currently owns interests, including working interests, in productive
onshore oil and gas properties, buys and sells producing oil and gas properties,
and, to a lesser extent, participates in the drilling of exploratory and
development wells, and in recompletions of existing wells.
The Company operates only one producing well and one field currently being
abandoned. All other interests are in properties operated by others. A working
interest owner in a property not operated by that interest owner must
substantially 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.
Through the operators of the properties in which it has an interest, the Company
sells produced oil and gas to refiners, pipeline operators, and processing
plants. If a refinery, pipeline, or processing plant that purchases the
Company's production were taken out of service, the Company could be forced to
halt production that is purchased by such refinery, pipeline, or plant.
Approximately 74% of the Company's oil and gas sales result from production from
one field for which there is only one available gas pipeline system (See Note 4
of Notes to Consolidated Financial Statements below.). If this pipeline system
were taken out of service, production of both oil and gas from that field would
be halted.
Although many entities produce oil and gas, competitive factors play a material
role in the Company'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 the Company 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. The
Company regularly assesses its exposure to environmental liability and to
reclamation, restoration, and dismantlement expense ("RR&D"), which activities
are covered by Federal, state, and local regulation. The Company does not
believe that it currently has any material exposure to environmental liability
or to RR&D, net of salvage value, although this cannot be assured. (See
Management's Discussion and Analysis below.)
During the quarter ending December 31, 2005 ("Q1FY06"), the Company sold its
non-operated working interests in three producing oil and gas wells for net
proceeds of $206,000. Also during Q1FY06 the Company agreed to sell
substantially all of its remaining non-operated working interests in producing
oil and gas wells for approximately $1.85 million in cash, net of selling
expenses; all of its operated working interests in producing oil and gas wells
for approximately $335,000 in cash, net of selling expenses; and all of its
overriding royalty interests in producing oil and gas wells in Wyoming for
approximately $180,000 in cash, net of selling expenses. These three
transactions are subject to recision and pricing adjustments under certain
conditions, and closing of the transactions cannot be assured. The Company
retains very small working and overriding royalty interests in the
Bluebell-Altamont Field in Utah, an overriding royalty interest in undrilled
locations in the Standard
2
Draw and Echo Springs Fields in Wyoming, and an interest in an application for
leases in the Tar Sands Triangle Area of Utah under the Combined Hydrocarbon
Leasing Act of 1981. The Company intends to reinvest the proceeds of the sales
either in interests in oil and gas properties or otherwise. There can be no
assurance as to if and when any such reinvestment would be made.
ITEM 2. DESCRIPTION OF PROPERTY.
WELLS AND ACREAGE: At December 23, 2005, the Company did not own a working
interest in any undeveloped acreage, and, to the best knowledge of the Company,
none of the wells in which the Company owns an interest is a multiple
completion. However, certain wells in which the Company owns an interest do
produce from multiple zones. At December 23, 2005, the Company owned working
interests in 41 gross (13.22 net) productive oil wells (certain of which produce
associated natural gas), no wells producing only natural gas, and 20,000 gross
(6,000 net) developed acres. Substantially all of the Company's production is
located in Utah and Wyoming. One well accounts for approximately 21% of the
Company's oil and gas sales and for approximately 40% of the Company's estimated
proved oil reserves. The Company has not reported to, or filed with, any other
Federal authority or agency any estimates of total, proved net oil or gas
reserves since the beginning of the last fiscal year. For additional
information, see Note 7 of Notes to Consolidated Financial Statements below.
Production
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Net Production Average Price
--------------------------------------------------- Average Production
Oil Gas Oil Gas Cost Per Equivalent
Fiscal Year (Bbls) (Mcf) (Bbls) (Mcf) Barrel ("BOE")
--------------------------------------------------------------------------
2005 11,000 83,000 $ 49.00 $ 5.22 $ 11.72
--------------------------------------------------------------------------
2004 11,000 89,000 37.00 4.44 11.04
--------------------------------------------------------------------------
2003 13,000 84,000 26.54 4.57 10.74
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DRILLING ACTIVITY: The Company did not participate in the drilling of any wells
during fiscal 2003 ("FY03"), fiscal 2004 ("FY04"), or fiscal 2005 ("FY05").
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common stock is quoted on the OTC Bulletin Board under the symbol
"ALTX". Inter-dealer prices provided by the OTC Bulletin Board, which do not
include retail mark-up, mark-down, or commission, and may not represent actual
transactions, are listed in the table below.
-------------------------------------------------
FY05 FY04
-------------------------------------------------
Quarter High Bid Low Bid High Bid Low Bid
-------------------------------------------------
1 $ 0.15 $ 0.08 $ 0.12 $ 0.06
-------------------------------------------------
2 0.23 0.10 0.14 0.09
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3 0.25 0.11 0.16 0.08
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4 0.43 0.14 0.10 0.09
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3
At December 23, 2005, there were approximately 4,400 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.
4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FINANCIAL CONDITION
During the quarter ending December 31, 2005 ("Q1FY06"), the Company sold its
non-operated working interests in three producing oil and gas wells for net
proceeds of $206,000. Also during Q1FY06 the Company agreed to sell
substantially all of its remaining non-operated working interests in producing
oil and gas wells for approximately $1.85 million in cash, net of selling
expenses; all of its operated working interests in producing oil and gas wells
for approximately $335,000 in cash, net of selling expenses; and all of its
overriding royalty interests in producing oil and gas wells in Wyoming for
approximately $180,000 in cash, net of selling expenses. These three
transactions are subject to recision and pricing adjustments under certain
conditions, and closing of the transactions cannot be assured. The Company
retains very small working and overriding royalty interests in the
Bluebell-Altamont Field in Utah, an overriding royalty interest in undrilled
locations in the Standard Draw and Echo Springs Fields in Wyoming, and an
interest in an application for leases in the Tar Sands Triangle Area of Utah
under the Combined Hydrocarbon Leasing Act of 1981. The Company intends to
reinvest the proceeds of the sales either in interests in oil and gas properties
or otherwise. There can be no assurance as to if and when any such reinvestment
would be made.
If the transactions referred to above close and recision rights are not
exercised, the Company is likely to experience negative cash flow from
operations unless and until the Company invests in interests in producing oil
and gas wells or in another venture that produces cash flow from operations. If
the transactions do not close, or if recision rights are exercised, the Company
is likely to experience positive cash flow from operations because of the high
levels of oil and gas prices. In that case, if prices declined materially and if
interest rates on cash balances also declined materially, then, unless the
Company materially increased production by acquiring producing properties or by
engaging in successful drilling activities or recompletions, the Company would
be likely to experience negative cash flows from operations. With the exception
of capital expenditures related to production acquisitions or drilling or
recompletion activities, none of which are currently planned, the cash flows
that could result from such acquisitions or activities, the current level of
prices and interest rates, declining production levels, and the transactions
referred to above, the Company knows of no trends, events, or uncertainties that
have or are reasonably likely to have a material impact on the Company's
short-term or long-term liquidity. 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, 2005, the Company had no material
commitments for capital expenditures.
The Company is completing the restoration of the area that had contained its
East Tisdale Field in Johnson County, Wyoming. The Company has removed all
equipment from the field and has recontoured and reseeded virtually all
disturbed areas in the field. Barring unforeseen events, the Company does not
believe that the expense associated with any remaining restoration activities
will be material, although this cannot be assured. After its bonds with the
state and the Bureau of Land Management are released, the Company does not
believe it will have any further liability in connection with the field,
although this cannot be assured. The Company regularly assesses its exposure to
both environmental liability and RR&D. The Company does not believe that it
currently has any material exposure to environmental liability or to RR&D, net
of salvage value, although this cannot be assured.
Cash balances increased $167,000 during FY05 because $183,000 cash provided by
operating activities was reduced by $5,000 cash for additions to other property
and equipment and $11,000 cash used to acquire 110,200 shares of treasury stock.
RESULTS OF OPERATIONS
Oil and gas sales increased 21% from $802,000 in FY04 to $972,000 in FY05
because oil sales increased 32% from $407,000 in FY04 to $539,000 in FY05, and
gas sales increased 10% from $395,000 in FY04 to $433,000 in FY05. Oil sales
increased because of a 32% increase in average price per barrel from $37.00 in
FY04 to $49.00 in FY05. Gas sales increased because a 7% decrease in thousands
of cubic feet ("MCFs") sold from 89,000 in FY04 to 83,000 in FY05 was offset by
an 18% increase in average price per MCF from $4.44 in FY04 to $5.22 in FY05.
Production taxes increased 15% from $103,000 in FY04 to $118,000 in FY05 because
of increased sales. General and administrative expense increased 9% from
$417,000 in FY04 to $453,000 in FY05 because of increased salary and bonus
expense. Net earnings increased from $38,000 in FY04 to $156,000 in FY05 because
of increased sales.
5
LIQUIDITY
OPERATING ACTIVITIES. In FY04 net cash provided by operating activities was
$36,000, and in FY05 net cash provided by operating activities was $183,000.
INVESTING ACTIVITIES. In FY04 the Company expended $7,000 on additions to other
property and equipment, and in FY05 the Company expended $5,000 on additions to
other property and equipment.
FINANCING ACTIVITIES. In FY04 the Company expended $12,000 to acquire 141,933
shares of treasury stock, and in FY05 the Company expended $11,000 to acquire
110,200 shares of treasury stock.
The Company's revenue and earnings are functions of the prices of oil, gas, and
natural gas liquids and of the level of production expense, all of which are
highly variable and largely beyond the Company's control. In addition, because
the quantity of oil and gas produced from existing wells declines over time, the
Company's sales and net income will decline unless rising prices offset
production declines or the Company increases its net production by investing in
the drilling of new wells, in successful workovers, or in the acquisition of
interests in producing oil or gas properties. At current price and interest rate
levels, the Company is likely to record a modest net gain.
If the transactions discussed above close, and if they are not rescinded, unless
and until the Company invests a substantial portion of its prospective cash
balances into interests in producing oil and gas wells or into one or more other
ventures that produce revenue and net income, the Company is likely to
experience net losses.
With the exception of unanticipated variations in production levels,
unanticipated RR&D, unanticipated environmental expense, possible changes in oil
and gas price levels and interest rates, the transactions discussed above, and
the possible consequences of those transactions, the Company is not aware of any
other trends, events, or uncertainties that have had or that are reasonably
expected to have a material impact on net sales or revenues or income from
continuing operations.
ITEM 7. FINANCIAL STATEMENTS.
The consolidated financial statements follow the signature page.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 8A. 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.
6
ITEM 8B. OTHER INFORMATION
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
Mr. Steven H. Cardin, 55, an economist, formerly with The Conference Board and
the consulting firm, National Economics Research Associates, has been Chairman
and CEO of the Company for over five years, and a Director since 1984. Mr.
Jeffrey S. Chernow, 54, a lawyer, formerly Director of Enforcement in the
Division of Securities, State of Maryland, Office of the Attorney General, has
been in private practice in Maryland for over five years, and a Director since
1989. Mr. Stephen F. Fante, 50, a CPA, formerly 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 formerly Chairman
and CEO of Seca Graphics, Inc., which provided design and mapping services and
software to the cable television and telecommunications industries, has been a
private investor for the last five years, and a Director since 1989.
The Board of Directors has a separately-designated standing Audit Committee
which is comprised of Mr. Fante and Mr. 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 used in Item 7(d)(3)(iv) of
Schedule 14A under the Exchange Act.
Messrs. Chernow's, Cardin's, and Fante's terms as Directors continue until their
successors are duly elected and qualified. The Company has adopted a code of
ethics that applies to its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions.
ITEM 10. EXECUTIVE COMPENSATION.
Each Director who is not also an officer of the Company receives $750 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. In 1998, the
Company's two non-executive Directors each purchased 155,544 shares of the
Company's Common Stock from the Company at a price of $0.17 per share in
exchange for notes receivable from each of $26,500. The notes are non-recourse,
secured by the respective shares, bear interest at the Applicable Federal Rate,
and due on September 30, 2006. The principal amount of the notes can be paid
with shares of the Company's Common Stock. The Company will reimburse the
Directors for interest expense related to the notes and will indemnify them
against additional tax due as a result of such reimbursement and
indemnification.
Mr. Cardin has an Employment Agreement with the Company that was effective
October 1, 2001, that has an initial term of five years, and that provides that
Mr. Cardin is to receive a base salary of $191,000 per annum, escalating at no
less than 5% per annum, and an annual bonus of no less than 10% of the Company's
earnings before tax. Pursuant to the agreement, Mr. Cardin purchased from the
Company 2,383,615 shares of the Company's Common Stock at a price of $.09375 per
share and 1,376,249 shares at a price of $0.06 per share in exchange for a note
receivable from him of $306,000. The note is non-recourse, is secured by the
shares, bears interest at the Applicable Federal Rate, and is due at the end of
the term of the Employment Agreement. The principal amount of the note can be
paid with shares of the Company's Common Stock. The Company will reimburse Mr.
Cardin for interest expense related to the note and will indemnify him against
additional tax due as a result of such reimbursement and indemnification.
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.
7
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.
The following table sets forth the dollar value of compensation earned by the
Company's CEO, its only executive officer, during the last three fiscal years.
Summary Compensation Table
-----------------------------------------------------------
Annual Compensation
-----------------------------------------------------------
Name and Principal Year Salary Bonus Other Annual
Position Compensation
-----------------------------------------------------------
Steven H. Cardin, CEO 2005 $222,000 17,000 9,000
-----------------------------------------------------------
Steven H. Cardin, CEO 2004 $211,000 4,000 9,000
-----------------------------------------------------------
Steven H. Cardin, CEO 2003 $201,000 10,000
-----------------------------------------------------------
Pursuant to his Employment Agreement (See above), Mr. Cardin paid $10,000 in
interest to the Company in FY03 and $9,000 in interest in FY04 and FY05. The
Company reimbursed him for those payments.
ITEM 11. 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, 2005, 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, 2005, 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 Percent
Beneficially Owned of Class
----------------------------------------------------------------------------------------------
Steven H. Cardin (Director and Executive Officer)
POB 1057 Breckenridge CO 80424-1057 7,233,866 48.62%
----------------------------------------------------------------------------------------------
Jeffrey S. Chernow (Director)
POB 1057 Breckenridge CO 80424-1057 155,544 1.05%
----------------------------------------------------------------------------------------------
Stephen F. Fante (Director)
----------------------------------------------------------------------------------------------
POB 1057 Breckenridge CO 80424-1057 155,544 1.05%
----------------------------------------------------------------------------------------------
All Directors and Executive Officers as a Group (3 Persons) 7,544,954 50.72%
----------------------------------------------------------------------------------------------
8
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective October 1, 2001, the Company entered into a five-year employment
agreement with its president which provides for a base salary of $191,000
annually, plus escalations of not less than 5% annually. The agreement contains
provisions providing for payments to the president in the event of his
disability or termination of his employment. The agreement also provides that
he will receive an annual bonus equal to no less than 10% of the Company's
earnings before income tax. Pursuant to the employment agreement, the Company's
president has purchased from the Company 2,383,615 shares of the Company's
common stock at a price of $.09375 per share and 1,376,249 shares at a price of
$0.06 per share in exchange for a $306,000 note receivable. The Company's two
non-executive directors have each purchased 155,544 shares of the Company's
common stock from the Company at a price of $0.17 per share in exchange for
notes receivable from each of $26,500. Each of the three notes is non-recourse,
secured by the respective shares, due on September 30, 2006, and bears interest
at the Applicable Federal Rate. The principal amount of the notes can be paid
with shares of the Company's common stock. The Company will reimburse the
president and the directors for interest expense related to the notes, and will
indemnify them against additional tax due as a result of such reimbursement and
indemnification. The Company recognized $11,000 of both interest income and
general and administrative expense related to the notes in 2004 and 2005.
ITEM 13. EXHIBITS
3(i) Articles of Incorporation - Incorporated herein by reference to
Exhibit B to August 20, 1985 Proxy Statement
3(ii) Bylaws - Incorporated herein by reference to Exhibit C to August 20,
1985 Proxy Statement
10.1 Summary of Employment Agreement between the Company and Steven H.
Cardin, effective October 1, 2001 - Incorporated herein by reference
to Form 10-KSB for fiscal year ended September 30, 2001
10.2 Assignment, Bill of Sale, and Conveyance, delivered October 25, 2005 -
Incorporated herein by reference to Form 8-K reporting Entry into a
Material Definitive Agreement filed on October 27, 2005
14 Code of Ethics - Incorporated herein by reference to Form 10-KSB for
fiscal year ended September 30, 2003
21 List of subsidiaries - Incorporated herein by reference to Form 10-KSB
for fiscal year ended September 30, 1997
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES. Fees billed for annual audits and for reviews of Forms 10-QSB and
Forms 8-K: Billed in FY05: $10,700. Billed in FY04: $10,900.
AUDIT-RELATED FEES. None.
TAX FEES. Fees billed for preparation of registrant's federal and state income
tax returns: Billed in FY05: None. Billed in FY04: $2,250. Fees billed for other
tax-related services: None.
ALL OTHER FEES. None.
The registrant does not engage an accountant to render audit or non-audit
services unless the engagement is explicitly pre-approved by the registrant's
Audit Committee. During FY05 and FY04 no Audit-Related or Other Fees were
billed, and all Tax Fees had been pre-approved by the Audit Committee.
9
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALTEX INDUSTRIES, INC.
/s/ STEVEN H. CARDIN
By: Steven H. Cardin, CEO
Date: December 27, 2005
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ STEVEN H. CARDIN
By: Steven H. Cardin, Director,
Principal Executive Officer,
Principal Financial Officer, and
Principal Accounting Officer
Date: December 27, 2005
/s/ STEPHEN F. FANTE
By: Stephen F. Fante, Director
Date: December 27, 2005
10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
ALTEX INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheet of Altex Industries,
Inc. and subsidiary as of September 30, 2005, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended September 30, 2005. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Altex Industries,
Inc. and subsidiary as of September 30, 2005, and the consolidated results of
its operations and its cash flows for each of the years in the two-year period
ended September 30, 2005, in conformity with U.S. generally accepted accounting
principles.
Denver, Colorado
December 27, 2005
/s/ Comiskey & Company
PROFESSIONAL CORPORATION
11
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2005
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 2,281,000
Accounts receivable 149,000
Other 19,000
Total current assets 2,449,000
PROPERTY AND EQUIPMENT, AT COST
Proved oil and gas properties (successful efforts method) (Notes 6 and 7) 1,076,000
Other 63,000
Less accumulated depreciation, depletion, amortization, and valuation allowance (1,091,000)
Net property and equipment 48,000
OTHER ASSETS 13,000
$ 2,510,000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 16,000
Accrued production costs 51,000
Other accrued expenses 79,000
Total current liabilities 146,000
COMMITMENTS AND CONTINGENCIES (Notes 3, 5, and 6)
STOCKHOLDERS' EQUITY (Note 3)
Preferred stock, $.01 par value. Authorized 5,000,000 shares, none issued --
Common stock, $.01 par value. Authorized 50,000,000 shares, 14,877,117 shares issued and 149,000
outstanding
Additional paid-in capital 14,191,000
Accumulated deficit (11,617,000)
Notes receivable from stockholders (359,000)
2,364,000
$ 2,510,000
See accompanying notes to consolidated financial statements.
12
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2005 AND 2004
2005 2004
REVENUE
Oil and gas sales $ 972,000 $ 802,000
Interest (Note 3) 55,000 42,000
Other income (expense) 2,000 9,000
1,029,000 853,000
COSTS AND EXPENSES
Lease operating 293,000 287,000
Production taxes 118,000 103,000
General and administrative (Note 3) 453,000 417,000
Depreciation, depletion, and amortization 9,000 8,000
873,000 815,000
NET EARNINGS $ 156,000 $ 38,000
EARNINGS PER SHARE OF COMMON STOCK $ 0.01 *
WEIGHTED AVERAGE SHARES OUTSTANDING 14,881,949 15,039,919
----------------------------------------
* Less than $0.01 per share
See accompanying notes to consolidated financial statements.
13
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2005 AND 2004
COMMON STOCK ADDITIONAL ACCUMULATED TREASURY NOTES TOTAL
PAID-IN DEFICIT STOCK RECEIVABLE STOCKHOLDERS'
CAPITAL FROM EQUITY
SHARES AMOUNT SHAREHOLDERS
--------------------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2003 15,129,250 $151,000 14,212,000 (11,811,000) (359,000) $ 2,193,000
Net earnings 38,000 38,000
Acquisition of treasury stock,
141,933 shares at $0.085 per share (12,000) (12,000)
Retirement of treasury stock (141,933) (1,000) (11,000) 12,000
--------------------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2004 14,987,317 150,000 14,201,000 (11,773,000) (359,000) 2,219,000
Net earnings 156,000 156,000
Acquisition of treasury stock,
110,200 shares at $0.096 per share (11,000) (11,000)
Retirement of treasury stock (110,200) (1,000) (10,000) 11,000
--------------------------------------------------------------------------------------------
BALANCES AT SEPTEMBER 30, 2005 14,877,117 $149,000 14,191,000 (11,617,000) (359,000) $ 2,364,000
See accompanying notes to consolidated financial statements.
14
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2005 AND 2004
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 156,000 $ 38,000
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation, depletion, and amortization 9,000 8,000
Increase in accounts receivable (9,000) (15,000)
(Increase) decrease in other current assets (9,000) 1,000
Decrease in other assets 4,000 3,000
Increase (decrease) in accounts payable 11,000 (2,000)
Increase (decrease) in accrued production costs 5,000 (5,000)
Increase in other accrued expenses 16,000 8,000
Net cash provided by operating activities 183,000 36,000
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to other property and equipment (5,000) (7,000)
CASH FLOWS USED IN FINANCING ACTIVITIES
Acquisition of treasury stock (11,000) (12,000)
------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 167,000 17,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,114,000 2,097,000
CASH AND CASH EQUIVALENTS AT END OF YEAR $2,281,000 $2,114,000
See accompanying notes to consolidated financial statements.
15
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
NATURE OF OPERATIONS: Altex Industries, Inc., through its wholly-owned
subsidiary, jointly referred to as "the Company," owns interests, including
working interests, in productive oil and gas properties located in Utah and
Wyoming. The Company's revenues are generated from sales of oil and gas
production, sales of oil and gas properties, and interest income from cash
deposits. The Company's operations are significantly affected by changes in oil
and gas prices and in interest rates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Altex Industries, Inc. and its wholly-owned subsidiary. All
intercompany balances and transactions have been eliminated in consolidation.
ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PROPERTY AND EQUIPMENT: The Company follows the successful efforts method of
accounting for oil and gas operations, under which exploration costs, including
geological and geophysical costs, annual delay rentals, and exploratory dry hole
costs, are charged to expense as incurred. Costs to acquire unproved properties,
to drill and equip exploratory wells that find proved reserves, and to drill and
equip development wells are capitalized. Capitalized costs relating to proved
oil and gas properties are depleted on the units-of-production method based on
estimated quantities of proved reserves and estimated RR&D (Note 6). Upon the
sale or retirement of property and equipment, the cost thereof and the
accumulated depreciation, depletion, and valuation allowance are removed from
the accounts, and the resulting gain or loss is credited or charged to
operations. Actual RR&D expense in excess of estimated RR&D expense is charged
to operations.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company assesses long-lived assets for
impairment when circumstances indicate that the carrying value of such assets
may not be recoverable. This review compares the asset's carrying value with
management's best estimate of the asset's expected future undiscounted cash
flows without interest costs. If the expected future cash flows exceed the
carrying value, no impairment is recognized. If the carrying value exceeds the
expected future cash flows, an impairment equal to the excess of the carrying
value over the estimated fair value of the asset is recognized. No such
impairment may be restored in the future. The Company's proved oil and gas
properties are assessed for impairment on an individual field basis.
CASH EQUIVALENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS: For purposes of the
statement of cash flows, the Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents. The
carrying amount reported on the balance sheet for cash and cash equivalents
approximates its fair value.
INCOME TAXES: The Company follows the asset and liability method of accounting
for deferred income taxes. The asset and liability method requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between financial accounting and tax bases
of assets and liabilities.
EARNINGS PER SHARE: Earnings per share of common stock is based upon the
weighted average number of shares of common stock outstanding during the year.
CONCENTRATIONS OF CREDIT RISK: The Company sells the majority of its oil and gas
production to two customers (Note 4). Receivables are not collateralized.
Although this concentration could affect the Company's overall exposure to
credit risk, management believes the risk is minimal. The Company maintains
significant amounts of cash and sometimes permits cash balances in national
banking institutions to exceed FDIC limits.
16
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
REVENUE RECOGNITION: Substantially all of the Company's revenue is from sales of
oil and gas production and from interest income. Revenue from oil and gas
production is recognized based on sales or delivery date. Interest income is
recognized when earned.
RECENT ACCOUNTING PRONOUNCEMENTS:
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
123(R), "Share-Based Payment," which addresses the accounting for employee stock
options. SFAS 123(R) revises the disclosure provisions of SFAS 123 and
supersedes APB 25. SFAS 123(R) requires that the cost of all employee stock
options, as well as other equity-based compensation arrangements, be reflected
in the financial statements based on the estimated fair value of the awards. In
March 2005, the Securities & Exchange Commission (the "SEC") issued Staff
Accounting Bulletin No. 107, "Share-Based Payment", which summarizes the views
of the SEC staff regarding the interaction between SFAS 123(R) and certain SEC
rules and regulations, and is intended to assist in the initial implementation.
SFAS 123(R) is effective for all public companies that file as of the beginning
of the first annual reporting period that begins after June 15, 2005. The
Company is currently evaluating the provisions of SFAS 123(R) and its effect on
its financial statements. The adoption of this standard is not expected to have
a material impact on the financial statements.
In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary Assets, an
amendment of APB 29, Accounting for Nonmonetary Transactions." This Statement's
amendments are based on the principle that exchanges of nonmonetary assets
should be measured based on the fair value of the assets exchanged. Further,
SFAS 153 eliminates the narrow exception for nonmonetary exchanges of similar
productive assets and replaces it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance. Provisions of this
statement are effective for fiscal periods beginning after June 15, 2005. The
adoption of this statement is not expected to have a material impact on the
financial statements.
In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"), which is an interpretation
of SFAS 143, "Accounting for Asset Retirement Obligations." FIN47 clarifies
terminology within SFAS 143 and requires an entity to recognize a liability for
the fair value of a conditional asset retirement obligation when incurred if the
liability's fair value can be reasonably estimated. FIN 47 is effective for
fiscal years ending after December 15, 2005. The Company does not expect the
adoption of this statement to have a material impact on the financial
statements.
In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error
Corrections." SFAS 154 replaces APB 20, "Accounting Changes" and SFAS 3,
"Reporting Accounting Changes in Interim Financial Statements" and establishes
retrospective application as the required method for reporting a change in
accounting principle. SFAS 154 provides guidance for determining whether
retrospective application of a change in accounting principle is impracticable
and for reporting a change when retrospective application is impracticable. The
reporting of a correction of an error by restating previously issued financial
statements is also addressed. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
The Company does not expect the adoption of this statement to have a material
impact on the financial statements.
NOTE 2 - INCOME TAXES. At September 30, 2005, the Company had net operating loss
and depletion carryforwards for income tax purposes of $168,000 and $1,147,000
respectively. If not utilized, the net operating losses will expire during the
period from 2006 through 2023. The approximate tax effect of each type of
temporary difference and carryforward that gives rise to a significant portion
of deferred tax assets at September 30, 2005, computed in accordance with SFAS
No. 109, is as follows:
DEFERRED TAX ASSETS
Net operating loss carryforward $ 59,000
Depletion carryforward 401,000
Tax basis of assets written off for financial statement purposes 694,000
------------
1,154,000
DEFERRED TAX LIABILITY
Depletion, depreciation, amortization, and valuation allowance for income tax purposes in
excess of amounts for financial statement purposes (11,000)
------------
TOTAL NET DEFERRED TAX ASSETS 1,143,000
Less valuation allowance (1,143,000)
------------
NET DEFERRED TAX ASSET $ -
------------
17
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
Based on the uncertainty of future realization, a valuation allowance equal to
the net deferred tax asset has been provided. Accordingly, no tax benefit has
been recorded.
Income tax expense is different from amounts computed by applying the statutory
Federal income tax rate for the following reasons:
2005 2004
--------------------
Tax expense at 35% of net earnings $ 55,000 $ 13,000
Change in valuation allowance for net deferred tax assets (11,000) 14,000
Expiration of tax carryforwards - -
Change in valuation allowance for net deferred tax assets due to an increase in depletion
carryforwards (44,000) (27,000)
Other - -
--------------------
Income tax expense $ - $ -
--------------------
NOTE 3 - RELATED PARTY TRANSACTIONS. Effective October 1, 2001, the Company
entered into a five-year employment agreement with its president which provides
for a base salary of $191,000 annually, plus escalations of not less than 5%
annually. The agreement contains provisions providing for payments to the
president in the event of his disability or termination of his employment. The
agreement also provides that he will receive an annual bonus equal to no less
than 10% of the Company's earnings before income tax. Pursuant to the employment
agreement, the Company's president has purchased from the Company 2,383,615
shares of the Company's common stock at a price of $.09375 per share and
1,376,249 shares at a price of $0.06 per share in exchange for a $306,000 note
receivable. The Company's two non-executive directors have each purchased
155,544 shares of the Company's common stock from the Company at a price of
$0.17 per share in exchange for notes receivable from each of $26,500. Each of
the three notes is non-recourse, secured by the respective shares, due on
September 30, 2006, and bears interest at the Applicable Federal Rate. The
principal amount of the notes can be paid with shares of the Company's common
stock. The Company will reimburse the president and the directors for interest
expense related to the notes, and will indemnify them against additional tax due
as a result of such reimbursement and indemnification. The Company recognized
$11,000 of both interest income and general and administrative expense related
to the notes in 2004 and 2005.
NOTE 4 - MAJOR CUSTOMERS. In 2005 and 2004 the Company had two customers who
individually accounted for 10% or more of the Company's oil and gas sales and
who, in aggregate, accounted for 95% of oil and gas sales. In 2005 the two
customers individually accounted for 74% and 21% of oil and gas sales, and in
2004 the two customers individually accounted for 78% and 17% of oil and gas
sales.
NOTE 5 - LEASES. The Company rented office space under a noncancellable
operating lease that expired in April 2004 and that the Company renewed for five
years ending April 30, 2009. At September 30, 2005, required future payments
under the lease are $21,000 for the years ending September 30, 2006, September
30, 2007, and September 30, 2008, and $12,000 for the year ending September 30,
2009. In 2005 and 2004 the Company incurred rent expense of $21,000.
NOTE 6 - RECLAMATION, RESTORATION, AND DISMANTLEMENT (RR&D). The Company is
completing the restoration of the area that had contained its East Tisdale Field
in Johnson County, Wyoming. The Company has removed all equipment from the field
and has recontoured and reseeded virtually all disturbed areas in the field.
Barring unforeseen events, the Company does not believe that the expense
associated with any remaining restoration activities will be material, although
this cannot be assured. After its bonds with the state and the Bureau of Land
Management are released, the Company does not believe it will have any further
liability in connection with the field, although this cannot be assured. The
Company accounts for its remaining RR&D costs in accordance with SFAS 143,
"Accounting for Asset Retirement Obligations". SFAS 143 addresses obligations
associated with the retirement of tangible, long lived assets and the associated
asset retirement costs. This
18
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
statement requires the Company to recognize a liability for the fair value of
its plugging and abandonment liability (excluding salvage value) with the
associated costs included as part of the Company's oil and gas properties
balance. For the years ended September 30, 2005 and 2004, the plugging and
abandonment liability was not material to the financial statements.
NOTE 7 - SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED). The Company's operations are confined to the continental United
States, and all of the Company's reserves are proved developed. Prices and costs
in the tables below have been estimated using prices and costs in effect at the
end of the years indicated. Prices are estimated net of estimated quality and
transportation adjustments. Income tax expense is not reflected in the tables
below because of the anticipated utilization of net operating loss carryforwards
and tax credits. The estimation of reserves is complex and subjective, and
reserve estimates tend to fluctuate in light of new production data.
I. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
SEPTEMBER 30, 2005
Proved properties $ 1,076,000
Accumulated depreciation, depletion, amortization, and valuation allowance (1,036,000)
Net capitalized cost $ 40,000
II. ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES
OIL IN BARRELS GAS IN MCFS
BALANCE AT SEPTEMBER 30, 2003 87,000 718,000
Revisions of previous estimates 24,000 120,000
Production (11,000) (89,000)
BALANCE AT SEPTEMBER 30, 2004 100,000 749,000
Revisions of previous estimates 34,000 151,000
Production (11,000) (83,000)
BALANCE AT SEPTEMBER 30, 2005 123,000 817,000
III. PRESENT VALUE OF ESTIMATED FUTURE NET REVENUE
AT SEPTEMBER 30
2005 2004
Estimated future revenue $14,236,000 $ 7,870,000
Estimated future expenditures (6,119,000) (4,990,000)
Estimated future net revenue 8,117,000 2,880,000
10% annual discount of estimated future net revenue (3,854,000) (905,000)
Present value of estimated future net revenue $ 4,263,000 $ 1,975,000
19
ALTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
IV. SUMMARY OF CHANGES IN PRESENT VALUE OF ESTIMATED FUTURE NET REVENUE
YEAR ENDED SEPTEMBER 30
2005 2004
Present value of estimated future net revenue, beginning of year $ 1,975,000 $ 1,143,000
Sales, net of production costs (561,000) (412,000)
Net change in prices and costs of future production 2,095,000 785,000
Revisions of quantity estimates 974,000 383,000
Accretion of discount 198,000 114,000
Change in production rates and other (418,000) (38,000)
Present value of estimated future net revenue, end of year $ 4,263,000 $ 1,975,000
NOTE 8 - SUBSEQUENT EVENTS. During the quarter ending December 31, 2005,
("Q1FY06") the Company sold its non-operated working interests in three
producing oil and gas wells for net proceeds of $206,000. Also during Q1FY06 the
Company agreed to sell substantially all of its remaining non-operated working
interests in producing oil and gas wells for approximately $1.85 million in
cash, net of selling expenses; all of its operated working interests in
producing oil and gas wells for approximately $335,000 in cash, net of selling
expenses; and all of its overriding royalty interests in producing oil and gas
wells in Wyoming for approximately $180,000 in cash, net of selling expenses.
The latter three transactions are subject to recision and pricing adjustments
under certain conditions, and closing of the transactions cannot be assured. The
Company retains very small working and overriding royalty interests in the
Bluebell-Altamont Field in Utah, an overriding royalty interest in undrilled
locations in the Standard Draw and Echo Springs Fields in Wyoming, and an
interest in an application for leases in the Tar Sands Triangle Area of Utah
under the Combined Hydrocarbon Leasing Act of 1981.
20
EXHIBIT INDEX
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications