Table of Contents
| | Page | Part I. Financial Information | | | | | Item 1. | Financial Statements
| | | | | a. | Balance Sheets as of March 31, 2018 and December 31, 2017 (Unaudited)
| | PART I. | FINANCIAL INFORMATION | | | | | ITEM 1. | FINANCIAL STATEMENTS BALANCE SHEETS AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017 (UNAUDITED) STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (UNAUDITED) STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (UNAUDITED) NOTES TO FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED) | 1 | b. | Statements of Income for the quarters ended March 31, 2018 and 2017 (Unaudited)
| 2 | | c.ITEM 2. | Statements of Changes in Stockholders’ Equity for the quarters ended March 31, 2018 and 2017 (Unaudited)MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| 7 | | 3 | | d.ITEM 3. | Statements of Cash Flows for the quarters ended March 31, 2018 and 2017 (Unaudited)QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| 12 | | 4 | | e.ITEM 4. | Notes to Financial Statements as of March 31, 2018 (Unaudited)CONTROLS AND PROCEDURES
| 12 | | 5-7 | | PART II. | OTHER INFORMATION | | | | | ITEM 1 | LEGAL PROCEEDINGS | 12 | | | | Item 2.ITEM 1A. | RISK FACTORS | 12 | Management’s Discussion and Analysis of Financial Condition and Results of Operations
| 8-10 | | ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 12 | Item 4. | Controls and Procedures
| 10 | | ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 12 | Part II.Other Information | | | | | Item 6. | Exhibits
| 11 | | ITEM 4. | MINE SAFETY DISCLOSURES | 12 | | Signature
| | | ITEM 5. | OTHER INFORMATION | 12 | | | | ITEM 6. | EXHIBITS | 13 | | | | SIGNATURES | 13 |
PartPART I – Financial Information- FINANCIAL INFORMATION
Item 1.
| FINANCIAL STATEMENTS
|
CKX Lands, Inc.
Balance Sheets
March 31, 2018 and December 31, 2017
(Unaudited)ITEM 1. FINANCIAL STATEMENTS
| | 2018 | | | 2017 | | Assets | | | | | | | | | Current Assets | | | | | | | | | Cash | | $ | 1,585,950 | | | $ | 1,618,583 | | Cash-restricted | | | 993,160 | | | | 33,821 | | Certificates of deposit | | | 2,392,890 | | | | 2,662,890 | | Accounts receivable | | | 64,022 | | | | 113,067 | | Prepaid expense and other assets | | | 140,964 | | | | 50,354 | | Total current assets | | | 5,176,986 | | | | 4,478,715 | | Non-current Assets | | | | | | | | | Certificate of deposit | | | 1,205,000 | | | | 950,000 | | Property and equipment: | | | | | | | | | Land | | | 7,051,412 | | | | 7,147,100 | | Timber | | | 2,138,051 | | | | 2,119,180 | | Building and equipment less accumulated depreciation of $74,623 and $74,565, respectively | | | 33,979 | | | | 28,742 | | Total property and equipment, net | | | 9,223,442 | | | | 9,295,022 | | Total assets | | $ | 15,605,428 | | | $ | 14,723,737 | | Liabilities and Stockholders’ Equity | | | | | | | | | Current Liabilities | | | | | | | | | Trade payables and accrued expenses | | $ | 210,954 | | | $ | 207,166 | | Dividends payable | | | 233,099 | | | | -- | | Income tax payable | | | 53,888 | | | | 13,346 | | Total current liabilities | | | 497,941 | | | | 220,512 | | Non-current Liabilities | | | | | | | | | Deferred income tax payable | | | 187,664 | | | | 187,664 | | Total liabilities | | | 685,605 | | | | 408,176 | | Stockholders’ Equity | | | | | | | | | Common stock, no par value: 3,000,000 shares authorized; 1,942,495 and 1,942,495 shares issued, respectively | | | 59,335 | | | | 59,335 | | Retained earnings | | | 14,860,488 | | | | 14,256,226 | | Total stockholders’ equity | | | 14,919,823 | | | | 14,315,561 | | Total liabilities and stockholders’ equity | | $ | 15,605,428 | | | $ | 14,723,737 | |
CKX LANDS, INC. BALANCE SHEETS | | September 30, 2018 | | | December 31, 2017 | | | | (Unaudited) | | | | | | ASSETS | | | | | | | | | Current assets: | | | | | | | | | Cash | | $ | 1,992,461 | | | $ | 1,618,583 | | Restricted cash | | | - | | | | 33,821 | | Certificates of deposit | | | 2,150,000 | | | | 2,662,890 | | Accounts receivable | | | 120,446 | | | | 113,067 | | Prepaid expense and other assets | | | 96,098 | | | | 50,354 | | Total current assets | | | 4,359,005 | | | | 4,478,715 | | Long-term certificate of deposit | | | 1,945,000 | | | | 950,000 | | Property and equipment, net | | | 9,218,338 | | | | 9,295,022 | | Total assets | | $ | 15,522,343 | | | $ | 14,723,737 | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | Trade payables and accrued expenses | | $ | 177,753 | | | $ | 207,166 | | Income tax payable | | | - | | | | 13,346 | | Total current liabilities | | | 177,753 | | | | 220,512 | | Deferred income tax payable | | | 187,664 | | | | 187,664 | | Total liabilities | | | 365,417 | | | | 408,176 | | | | | | | | | | | Stockholders' equity: | | | | | | | | | Common stock, 3,000,000 authorized, no par value, 1,942,495 issued and outstanding as of September 30, 2018 and December 31, 2017 | | | 59,335 | | | | 59,335 | | Retained earnings | | | 15,097,591 | | | | 14,256,226 | | Total stockholders' equity | | | 15,156,926 | | | | 14,315,561 | | Total liabilities and stockholders' equity | | $ | 15,522,343 | | | $ | 14,723,737 | |
The accompanying notes are an integral part of these unaudited financial statements. CKX Lands, Inc.LANDS, INC. Statements of IncomeSTATEMENTS OF OPERATIONS
Quarters Ended March 31, 2018 and 2017
(Unaudited) | | 2018 | | | 2017 | | Revenues | | | | | | | | | Oil and gas | | $ | 124,577 | | | $ | 181,669 | | Timber | | | 178,449 | | | | -- | | Surface | | | 34,513 | | | | 17,102 | | Surface – related party | | | 9,156 | | | | -- | | Total revenues | | | 346,695 | | | | 198,771 | | Costs, Expenses and (Gains) | | | | | | | | | Oil and gas | | | 16,656 | | | | 17,565 | | Timber | | | 20,594 | | | | 2,940 | | Surface | | | 6,990 | | | | 16,858 | | General and administrative | | | 132,561 | | | | 134,857 | | Depreciation | | | 233 | | | | 234 | | Gain on sale of land | | | (878,320 | ) | | | (2,891 | ) | Total cost, expenses and (gains) | | | (701,286 | ) | | | 169,563 | | Income from operations | | | 1,047,981 | | | | 29,208 | | Other Income | | | | | | | | | Interest income | | | 12,922 | | | | 10,212 | | Net other income | | | 12,922 | | | | 10,212 | | Income before income taxes | | | 1,060,903 | | | | 39,420 | | Federal and State Income Taxes | | | | | | | | | Current | | | 223,542 | | | | (5,200 | ) | Total income taxes | | | 223,542 | | | | (5,200 | ) | Net Income | | $ | 837,361 | | | $ | 44,620 | | | | | | | | | | | Per Common Stock, basic and diluted | | | | | | | | | Net Income | | $ | 0.43 | | | $ | 0.02 | | Dividends | | $ | 0.12 | | | $ | 0.10 | | | | | | | | | | | Weighted Average Common Shares Outstanding, basic and diluted | | | 1,942,495 | | | | 1,942,495 | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | | | | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | | | | | | Oil and gas | | $ | 178,640 | | | $ | 132,348 | | | $ | 464,895 | | | $ | 465,710 | | Timber sales | | | 56,929 | | | | - | | | | 411,936 | | | | 8,966 | | Surface revenue | | | 22,127 | | | | 64,975 | | | | 109,133 | | | | 318,423 | | Surface revenue - related party | | | - | | | | - | | | | 12,459 | | | | - | | Total revenue | | | 257,696 | | | | 197,323 | | | | 998,423 | | | | 793,099 | | Costs, expenses and (gains): | | | | | | | | | | | | | | | | | Oil and gas costs | | | 18,435 | | | | 13,668 | | | | 48,378 | | | | 46,717 | | Timber costs | | | 15,212 | | | | 2,776 | | | | 50,591 | | | | 8,883 | | Surface costs | | | 10,717 | | | | 12,429 | | | | 25,220 | | | | 37,277 | | General and administrative expense | | | 136,366 | | | | 116,234 | | | | 402,674 | | | | 366,467 | | Depreciation expense | | | 1,050 | | | | 234 | | | | 1,517 | | | | 701 | | Gain on sale of land and equipment | | | - | | | | (28,561 | ) | | | (881,654 | ) | | | (31,452 | ) | Total costs, expenses and (gains) | | | 181,780 | | | | 116,780 | | | | (353,274 | ) | | | 428,593 | | Income from operations | | | 75,916 | | | | 80,543 | | | | 1,351,697 | | | | 364,506 | | | | | | | | | | | | | | | | | | | Other income - interest income | | | 26,301 | | | | 11,465 | | | | 52,176 | | | | 32,040 | | Income before income taxes | | | 102,217 | | | | 92,008 | | | | 1,403,873 | | | | 396,546 | | Federal and state income tax expense: | | | | | | | | | | | | | | | | | Current | | | 16,817 | | | | 29,617 | | | | 329,409 | | | | 76,055 | | Deferred | | | - | | | | 11,093 | | | | - | | | | 11,093 | | Total income taxes | | | 16,817 | | | | 40,710 | | | | 329,409 | | | | 87,148 | | Net income | | $ | 85,400 | | | $ | 51,298 | | | $ | 1,074,464 | | | $ | 309,398 | | | | | | | | | | | | | | | | | | | Per common stock, basic and diluted | | | | | | | | | | | | | | | | | Net income | | $ | 0.04 | | | $ | 0.03 | | | $ | 0.55 | | | $ | 0.16 | | Dividends | | $ | 0.00 | | | $ | 0.00 | | | $ | 0.12 | | | $ | 0.10 | | | | | | | | | | | | | | | | | | | Weighted average shares outstanding, basic and diluted | | | 1,942,495 | | | | 1,942,495 | | | | 1,942,495 | | | | 1,942,495 | |
The accompanying notes are an integral part of these unaudited financial statements. CKX Lands, Inc.LANDS, INC. Statements of Changes in Stockholders’ Equity
Quarters Ended March 31, 2018 and 2017STATEMENTS OF CASH FLOWS
(Unaudited) | | Total | | | Retained Earnings | | | Capital Stock Issued | | Quarter Ending March 31, 2018 | | | | | | | | | | | | | December 31, 2017 Balance | | $ | 14,315,561 | | | $ | 14,256,226 | | | $ | 59,335 | | Net income | | | 837,361 | | | | 837,361 | | | | -- | | Dividends declared | | | (233,099 | ) | | | (233,099 | ) | | | -- | | March 31, 2018 Balance | | $ | 14,919,823 | | | $ | 14,860,488 | | | $ | 59,335 | | | | | | | | | | | | | | | Quarter Ending March 31, 2017 | | | | | | | | | | | | | December 31, 2016 Balance | | $ | 13,986,948 | | | $ | 13,927,613 | | | $ | 59,335 | | Net income | | | 44,620 | | | | 44,620 | | | | -- | | Dividends declared | | | (194,250 | ) | | | (194,250 | ) | | | -- | | March 31, 2017 Balance | | $ | 13,837,318 | | | $ | 13,777,983 | | | $ | 59,335 | |
The accompanying notes are an integral part of these unaudited financial statements.
CKX Lands, Inc.
Statements of Cash Flows
Quarters Ended March 31, 2018 and 2017
(Unaudited)
| | 2018 | | | 2017 | | Cash Flows Used In Operating Activities: | | | | | | | | | Net Income | | $ | 837,361 | | | $ | 44,620 | | Less non-cash and non-operating (income) expenses included in net income: | | | | | | | | | Depreciation, depletion and amortization | | | 8,735 | | | | 234 | | Gain on sale of land | | | (878,320 | ) | | | (2,891 | ) | Change in operating assets and liabilities: | | | | | | | | | Increase in current assets | | | (55,817 | ) | | | (129,832 | ) | Increase in current liabilities | | | 44,330 | | | | 35,122 | | Net cash used in operating activities | | | (43,711 | ) | | | (52,747 | ) | Cash Flows Provided From (Used In) Investing Activities: | | | | | | | | | Certificates of deposit: | | | | | | | | | Purchases | | | (965,000 | ) | | | (720,000 | ) | Maturity proceeds | | | 980,000 | | | | 720,000 | | Land, equipment, and other assets: | | | | | | | | | Purchases | | | (10,370 | ) | | | -- | | Sales proceeds | | | 993,160 | | | | 3,390 | | Timber: | | | | | | | | | Purchases | | | (27,373 | ) | | | (11,040 | ) | Net cash provided from (used in) investing activities | | | 970,417 | | | | (7,650 | ) | Net increase (decrease) in cash and cash-restricted | | | 926,706 | | | | (60,397 | ) | Cash and cash-restricted: | | | | | | | | | Beginning | | | 1,652,404 | | | | 1,081,188 | | Ending | | $ | 2,579,110 | | | $ | 1,020,791 | | | | | | | | | | | Supplemental disclosures of cash flow information: | | | | | | | | | Cash payments for: | | | | | | | | | Interest | | $ | -- | | | $ | -- | | Income taxes | | $ | 183,000 | | | $ | 11,000 | |
| | Nine Months Ended September 30, | | | | 2018 | | | 2017 | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | Net income | | $ | 1,074,464 | | | $ | 309,398 | | Less non-cash expenses included in net income: | | | | | | | | | Depreciation, depletion and amortization expense | | | 15,413 | | | | 701 | | Deferred income tax expense | | | - | | | | 11,093 | | Gain on sale of land | | | (881,654 | ) | | | (31,452 | ) | Changes in operating assets and liabilities: | | | | | | | | | Increase in current assets | | | (67,375 | ) | | | (116,782 | ) | Increase in current liabilities | | | (42,759 | ) | | | 103,887 | | Net cash provided by operating activities | | | 98,089 | | | | 276,845 | | | | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | Purchases of certificates of deposit | | | (3,145,000 | ) | | | (2,412,890 | ) | Proceeds from maturity of certificates of deposit | | | 2,662,890 | | | | 2,410,000 | | Purchases of fixed assets | | | (39,317 | ) | | | (93,901 | ) | Proceeds from the sale of fixed assets | | | 996,494 | | | | 35,474 | | Net cash provided by (used in) investing activities | | | 475,067 | | | | (61,317 | ) | | | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | Dividends paid | | | (233,099 | ) | | | (194,250 | ) | Net cash used in financing activities | | | (233,099 | ) | | | (194,250 | ) | | | | | | | | | | NET INCREASE IN CASH AND RESTRICTED CASH | | | 340,057 | | | | 21,278 | | Cash and restricted cash, beginning of the period | | | 1,652,404 | | | | 1,081,188 | | Cash and restricted cash, end of the period | | $ | 1,992,461 | | | $ | 1,102,466 | | | | | | | | | | | SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | | | | Cash paid for interest | | $ | - | | | $ | - | | Cash paid for income taxes | | $ | 355,387 | | | $ | 99,240 | |
The accompanying notes are an integral part of these unaudited financial statements. CKX Lands, Inc.LANDS, INC. Notes to Financial StatementsNOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)
Note 1.1:Basis of Presentation and Recent Accounting Pronouncements Basis of Presentation The accompanying unaudited interim financial statements of CKX Lands, Inc. (“Company”)the Company have been prepared in accordance with accounting principles generally accepted in the United States generally accepted accounting principles for interim financial information. They do not include allof America, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnotes required by United States generally accepted accounting principles for complete financial statements. Except as described herein, there hasfootnote disclosures have been no material change in the information disclosed in the notesomitted pursuant to the financial statements included in our financial statements as ofsuch rules and for the year ended December 31, 2017. regulations. In the opinion of management, all adjustments (consisting ofthe accompanying financial statements include normal recurring accruals) consideredadjustments that are necessary for a fair presentation have beenof the results for the interim periods presented. These financial statements should be read in conjunction with our audited financial statements and notes thereto for the fiscal year ended December 31, 2017 included in our Annual Report on Form 10-K. The results of operations for the accompanyingthree and nine months ended September 30, 2018 are not necessarily indicative of results to be expected for the full fiscal year or any other periods. The preparation of the consolidated financial statements. Certainstatements in conformity with U.S. generally accepted accounting principles requires management to make a number of estimates and judgments that affect the reported amounts have been reclassified to conform to the current period’s presentation, including oilof assets, liabilities, expenses, and gas, timber, and surface,related disclosures. Actual results may differ from general and administrative costs and expenses on the statements of income.these estimates. Recent Accounting Pronouncements In May 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606)606), which supersedes the most current revenue recognition guidance, including industry-specific guidance. Subsequently, the FASB has issued updates which provide additional implementation guidance. The new guidance requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. WeThe Company adopted this guidance in the first quarter of 2018 applying the modified retrospective approach. We haveThe Company has completed ourits review of all revenue sources in scope for the new standard, and stumpage agreements are within this scope. In accordance with the new standard, the basis for determining revenue and expenses allocable to stumpage agreements (timber revenue) was not modified. There was no net cumulative effect adjustment for this change as of January 1, 2018. Interim results are not necessarily indicativeIn November 2016, the FASB issued ASU 2016-18, Statement of results forCash Flows (Topic 230), which provides guidance requiring companies to report net cash provided or used by operating, investing and financing activities and the net effect of those flows on the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents during the period. The statement of cash flows shall report that information in a full year. These financial statementsmanner that reconciles beginning and accompanying notes should be readending totals of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The companies shall also disclose information about the nature of the restrictions on restricted cash and restricted cash equivalents. The Company adopted this guidance in conjunctionthe first quarter of 2018. In accordance with the Company’s Form 10-Knew standard, no modification to our presentation for restricted cash was made.
Note 2:Restricted Cash During the first quarter of 2018, the Company closed on the sale of four parcels of land all of which were structured as a “deferred exchange using a qualified intermediary” pursuant to Paragraph 1031 of the Internal Revenue Code (1031 Exchange) for income tax purposes. The net proceeds from these transactions were $993,160, of which $873,355 remained in restricted cash. In August 2018, the funds were received and therefore restricted cash was $0 at September 30, 2018. Subsequent to the sale, identified properties for the year ended December 31, 2017 purposes of the 1031 Exchange were deemed not acceptable after preliminary due diligence. The 1031 Exchange was not completed. The following table provides a reconciliation of cash and Form 10-Q forrestricted cash reported within the quarterly period ended March 31, 2018.balance sheet that sum to the total of the same such amounts shown in the statement of cash flows. | | September 30, | | | December 31, | | | | 2018 | | | 2017 | | | | | | | | | | | Cash | | $ | 1,992,461 | | | $ | 1,618,583 | | Restricted cash | | | - | | | | 33,821 | | Total | | $ | 1,992,461 | | | $ | 1,652,404 | |
Note 2. Income Taxes3: Certificates of Deposit In accordance with generally accepted accounting principles,The Company has certificates of deposit for investment purposes. Certificates of deposit have maturities greater than three months when purchased, in amounts not greater than $250,000. All certificates of deposit are held until maturity and recorded at cost which approximates fair value. Certificates of deposit mature through August of 2020. Certificates of deposit were $2,150,000 and $2,662,890 as of September 30, 2018 and December 31, 2017, respectively. Purchases of certificates of deposit were $3,145,000 and $2,412,890 for the nine months ended September 30, 2018 and 2017, respectively. Proceeds from the maturity of certificates of deposit were $2,662,890 and $2,410,000 for the nine months ended September 30, 2018 and 2017, respectively.
Note 4: Property and Equipment Property and equipment consisted of the following: | | September 30, | | | December 31, | | | | 2018 | | | 2017 | | | | | | | | | | | Land | | $ | 7,051,412 | | | $ | 7,147,100 | | Timber | | | 2,213,777 | | | | 2,119,180 | | Building and equipment | | | 108,602 | | | | 103,307 | | | | | 9,373,791 | | | | 9,369,587 | | Accumulated depreciation | | | (155,453 | ) | | | (74,565 | ) | Total | | $ | 9,218,338 | | | $ | 9,295,022 | |
Depreciation, depletion and amortization expense was $15,413 and $701 for the nine months ended September 30, 2018 and 2017 respectively. Note 5: Dividends On March 22, 2018, the Company has analyzed its filing positions in federal and state income tax returns that remain subjectdeclared a dividend of $0.12 cents per common share payable to examination, generally 3 years after filing. The Company believes that all filing positions are highly certain and that all income tax filing positions and deductions would be sustained upon a taxing jurisdiction’s audit. Therefore, no reserve for uncertain tax positions is required. No interest or penalties have been levied against the Company and none are anticipated.shareholders of record as of April 5, 2018. Total dividends of $233,099 were paid on April 12, 2018. CKX Lands, Inc.
Notes to Financial Statements
March 31,Note 20168:
(Unaudited)
Note 3. Company OperationsSegment Reporting
The Company’s operations are classified into three principal operating segments that are all located in the United States: oil and gas, timber and surface. The Company’s reportable business segments are strategic business units that offer income from different products. They are managed separately due to the unique aspects of each area. Following is a summary of segmented operations
The tables below present financial information for the quarter ended March 31, 2018 and 2017, respectively:Company’s three operating business segments: | | 2018 | | | 2017 | | Revenues | | | | | | | | | Oil and Gas | | $ | 124,577 | | | $ | 181,669 | | Timber | | | 178,449 | | | | -- | | Surface | | | 43,669 | | | | 17,102 | | Total | | | 346,695 | | | | 198,771 | | Cost and Expenses | | | | | | | | | Oil and Gas | | | 16,656 | | | | 17,565 | | Timber | | | 20,594 | | | | 2,940 | | Surface | | | 6,990 | | | | 16,858 | | Total | | | 44,240 | | | | 37,363 | | Income from Operations | | | | | | | | | Oil and Gas | | | 107,921 | | | | 164,104 | | Timber | | | 157,855 | | | | (2,940 | ) | Surface | | | 36,679 | | | | 244 | | Total | | | 302,455 | | | | 161,408 | | Other Income (Expense) before Income Taxes | | | 758,448 | | | | (121,988 | ) | Income before Income Taxes | | | 1,060,903 | | | | 39,420 | | | | | | | | | | | Identifiable Assets, net of accumulated depreciation and depletion | | | | | | | | | Oil and Gas | | | -- | | | | -- | | Timber | | | 2,138,051 | | | | 2,083,408 | | Surface | | | -- | | | | -- | | General Corporate Assets | | | 13,467,377 | | | | 12,414,659 | | Total | | | 15,605,428 | | | | 14,498,067 | | | | | | | | | | | Capital Expenditures | | | | | | | | | Oil and Gas | | | -- | | | | -- | | Timber | | | 27,373 | | | | 11,040 | | Surface | | | -- | | | | -- | | General Corporate Assets | | | 10,370 | | | | -- | | Total | | | 37,743 | | | | 11,040 | | | | | | | | | | | Depreciation and Depletion | | | | | | | | | Oil and Gas | | | -- | | | | -- | | Timber | | | 8,502 | | | | -- | | Surface | | | -- | | | | -- | | General Corporate Assets | | | 233 | | | | 234 | | Total | | $ | 8,735 | | | $ | 234 | |
| | Three Months Ended | | | Nine Months Ended | | | | September 30, | | | September 30, | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | Revenues: | | | | | | | | | | | | | | | | | Oil and gas | | $ | 178,640 | | | $ | 132,348 | | | $ | 464,895 | | | $ | 465,710 | | Timber sales | | | 56,929 | | | | - | | | | 411,936 | | | | 8,966 | | Surface revenue | | | 22,127 | | | | 64,975 | | | | 121,592 | | | | 318,423 | | Total segment revenues | | | 257,695 | | | | 197,323 | | | | 998,423 | | | | 793,099 | | | | | | | | | | | | | | | | | | | Cost and expenses: | | | | | | | | | | | | | | | | | Oil and gas costs | | | 18,435 | | | | 13,668 | | | | 48,378 | | | | 46,717 | | Timber costs | | | 15,212 | | | | 2,776 | | | | 50,591 | | | | 8,883 | | Surface costs | | | 10,717 | | | | 12,429 | | | | 25,220 | | | | 37,277 | | Total segment costs and expenses | | | 44,363 | | | | 28,873 | | | | 124,188 | | | | 92,877 | | | | | | | | | | | | | | | | | | | Income from operations: | | | | | | | | | | | | | | | | | Oil and gas | | | 160,205 | | | | 118,680 | | | | 416,517 | | | | 418,993 | | Timber | | | 41,717 | | | | (2,776 | ) | | | 361,345 | | | | 83 | | Surface | | | 11,410 | | | | 52,546 | | | | 96,372 | | | | 281,146 | | Total segment income from operations | | | 213,332 | | | | 168,450 | | | | 874,234 | | | | 700,222 | | Other income (expenses) before income taxes | | | (111,115 | ) | | | (76,443 | ) | | | 529,639 | | | | (303,676 | ) | Income before income taxes | | $ | 102,217 | | | $ | 92,008 | | | $ | 1,403,873 | | | $ | 396,546 | |
| | Three Months Ended | | | Nine Months Ended | | | | September 30, | | | September 30, | | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | Identifiable Assets, net of accumulated depreciation | | | | | | | | | | | | | | | | | Oil and gas | | $ | - | | | $ | - | | | $ | - | | | $ | - | | Timber | | | 2,134,230 | | | | 2,111,302 | | | | 2,134,230 | | | | 2,111,302 | | Surface | | | - | | | | - | | | | - | | | | - | | General corporate assets | | | 13,388,113 | | | | 12,537,150 | | | | 13,388,113 | | | | 12,537,150 | | Total | | | 15,522,343 | | | | 14,648,452 | | | | 15,522,343 | | | | 14,648,452 | | | | | | | | | | | | | | | | | | | Capital expenditures: | | | | | | | | | | | | | | | | | Oil and gas | | | - | | | | - | | | | - | | | | - | | Timber | | | - | | | | 27,894 | | | | 29,763 | | | | 38,934 | | Surface | | | - | | | | - | | | | - | | | | - | | General corporate assets | | | - | | | | 88,788 | | | | 9,554 | | | | 88,788 | | Total segment costs and expenses | | | - | | | | 116,682 | | | | 39,317 | | | | 127,722 | | | | | | | | | | | | | | | | | | | Depreciation and depletion | | | | | | | | | | | | | | | | | Oil and gas | | | - | | | | - | | | | 13,896 | | | | - | | Timber | | | - | | | | - | | | | - | | | | - | | Surface | | | - | | | | - | | | | - | | | | - | | General corporate assets | | | 1,050 | | | | 233 | | | | 1,517 | | | | 701 | | Total | | $ | 1,050 | | | $ | 233 | | | $ | 15,413 | | | $ | 701 | |
There are no intersegment sales reported in the accompanying income statements. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Company’s Form 10-K10-K for the year ended December 31, 2017. The Company evaluates performance based on income or loss from operations before income taxes excluding any nonrecurring gains and losses on securities held available-for-sale. Income before income tax represents net revenues less costs and expenses less other income and expenses of a general corporate nature. Identifiable assets by segment are those assets used solely in the Company's operations within that segment. CKX Lands, Inc.
Notes to Financial Statements
March 31, 2018
(Unaudited)
Note 3. Company Operations (continued)
Revenue from customers representing 5% or more of total revenue for the quarter ended March 31, 2018 and 2017, respectively are:
Count | | | 2018 | | | 2017 | | 1 | | | $ | 138,519 | | | $ | 41,884 | | 2 | | | | 39,899 | | | | 34,137 | | 3 | | | | 34,723 | | | | 23,215 | | 4 | | | | 24,193 | | | | 13,039 | | 5 | | | | 19,764 | | | | 13,028 | | 6 | | | | -- | | | | 12,795 | |
During the first quarter of 2018, the company closed on the sale of four parcels of land all of which were structured as a “deferred exchange using a qualified intermediary” pursuant to Paragraph 1031 of the Internal Revenue Code (1031 Exchange) for income tax purposes. The net proceeds from these transactions of $993,160 are included the Cash-Restricted amount at March 31, 2018. Subsequent to March 31, 2018, identified properties for the purposes of the 1031 Exchange were deemed not acceptable after preliminary due diligence. The 1031 Exchange will not be completed. The related tax expense on the gain from these sales has been accrued at March 31, 2018.
The following table provides a reconciliation of cash and cash-restricted reported within the balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.
| | March 31, 2018 | | Cash | | $ | 1,585.950 | | Cash-restricted | | | 993,160 | | Cash and cash-restricted | | $ | 2.579,110 | |
Note 5.
| Dividend Declaration
|
On March 22, 2018, the Company declared a dividend of twelve ($0.12) cents per common share payable to shareholders of record date as of April 5, 2018 and payment date of April 12, 2018.
Note 6.
Note 7: Income Taxes | Related Party Transactions
|
On April 17, 2017, the Company entered into an option to lease agreement (“OTL”)In accordance with Stream Wetlands Services, LLC (“Stream”). Under the terms of the OTL, Stream paid the Company $38,333 during the quarter ended March 31, 2018 for an extension of an exclusive right to evaluate and market certain lands owned by the Company to their client for beneficial use purposes to compensate for wetlands impact through February 28, 2019. Stream may extend the OTL for up to two (2) successive periods of twelve (12) months. If Stream is chosen to perform their client’s project,generally accepted accounting principles, the Company has agreedanalyzed its filing positions in federal and state income tax returns that remain subject to put forth its best efforts to negotiateexamination, generally those filed in the last three years. The Company believes that all filing positions are highly certain and enter intothat all income tax filing positions and deductions would be sustained upon a mutually acceptable lease form. Due totaxing jurisdiction’s audit. Therefore, no reserve for uncertain tax positions is required. No interest or penalties have been levied against the uncertainty of the contract awardCompany and project scope, wenone are unable to estimate the potential financial benefit, if any, to the Company. William Gray Stream, a prior Company Director, is the president of Stream Wetlands Services, LLC.anticipated.
Note 8: Related Party Transactions The Company and Stream Wetlands Services, LLC (“Stream Wetlands”) are party to an option to lease agreement dated April 17, 2017 (the “OTL”). The OTL provides Stream Wetlands an option, exercisable through February 28, 2019, to lease certain lands from the Company, subject to the negotiation and execution of a mutually acceptable lease form. Stream Wetlands paid the Registrant $38,333 upon execution of the OTL, and an additional $38,333 during the quarter ended March 31, 2018. Stream Wetlands may extend the term of the OTL for up to two (2) successive periods of twelve (12) months by paying $38,333 for each twelve-month period. Mr. Stream, a director of the Company, is the president of Stream Wetlands. The Company’s President is a partner in Stockwell, Sievert, Viccellio, Clements, LLP (“Stockwell”). Beginning in August 2018, the Company began renting office space for administrative services from Stockwell. The Company pays Stockwell $750 per month as rent for office space and associated services, $2,000 per month to reimburse the firm for an administrative assistant and reimburses Stockwell for miscellaneous office supplies. For the three and nine months ended September 30, 2018, the Company recorded $6,571 in such expense. Note 9: Concentrations Revenue from customers representing 5% or more of total revenue for the nine months ended September 30, 2018 and 2017, respectively were: Count | | | 2018 | | | 2017 | | 1 | | | | 254,018 | | | | 179,292 | | 2 | | | | 117,589 | | | | 100,322 | | 3 | | | | 93,563 | | | | 88,284 | | 4 | | | | 72,557 | | | | 56,008 | | 5 | | | | 44,316 | | | | 45,443 | | 6 | | | | - | | | | 40,655 | |
Item
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2017 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed on March 23, 2018. Cautionary Statement This Management’s Discussion and Analysis includes a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like “believe,” “expect,” “plan,” “estimate,” “anticipate,” “intend,” “project,” “will,” “predicts,” “seeks,” “may,” “would,” “could,” “potential,” “continue,” “ongoing,” “should” and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Form 10-Q. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from our predictions, including those described in our Annual Report on Form 10-K and in our other public filings. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise. Overview CKX Lands, Inc. began operations in 1930 under the name Calcasieu Real Estate & Oil Co., Inc. It was originally organized as a spin-off by a bank operating in southwest Louisiana. The purpose of the spin-off was to form an entity to hold non-producing mineral interests which regulatory authorities required the bank to dispose of. Over the years, as some of the mineral interests began producing, the Company used part of the proceeds to acquire land. In 1990, the Company made its largest acquisition when it was one of four purchasers that bought a fifty percent undivided interest in approximately 35,575 acres in southwest Louisiana. Today the Company’s income is derived from mineral royalties, timber sales and surface payments from its lands. CKX receives income from royalty interests and mineral leases related to oil and gas production, timber sales, and surface rents. Although CKX is active in the management of its land and planting and harvesting its timber, CKX is passive in the production of income from oil and gas activities in that CKX does not explore for oil and gas,or operate wells. These oil and gas activities are performed by unrelated third parties. The Company’s oil and gas income fluctuates as new oil and gas production is discovered on Company land and then ultimately depletes or becomes commercially uneconomical to produce. The volatility in the daily commodity pricing of a barrel of oil or an MCF of gas will also cause fluctuations in the Company’s oil and gas income. CKX has small royalty interests in 31 different producing oil and gas fields. The size of each royalty interest is determined by the Company’s net ownership in the acreage unit for the well. CKX’s royalty interests range from 0.0045% for the smallest to 7.62% for the largest. As the Company does not own or operate the wells, it does not have access to any reserve information. Timber income is derived from timber on Company lands. The timber income will fluctuate depending on our ability to secure stumpage agreements in the regional markets, timber stand age, and/or stumpage commodity prices. Timber is a renewable resource that the Company actively manages. Surface income is earned from various recurring and non-recurring sources. Recurring surface income is earned from lease arrangements for farming, recreational and commercial uses. Non-recurring surface income can include such activities as pipeline right of ways, and temporary worksite rentals. In managing its lands, the Company relies on and has established relationships with real estate, forestry, environmental and agriculture consultants as well as attorneys with legal expertise in general corporate matters, real estate, and minerals. The Company actively searches for additional real estate for purchase in Louisiana with a focus on southwest Louisiana. When evaluating unimproved real estate for purchase, the Company will consider numerous characteristics including but not limited to timber fitness, agriculture fitness, future development opportunities and/or mineral potential. When evaluating improved real estate for purchase, the Company will consider characteristics including but not limited to geographic location, quality of existing revenue streams, and/or quality of the improvements. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Results of Operations Revenue – Three Months Ended September 30, 2018 ComparisonComponents of Revenuesrevenues for the three months ended March 31,September 30, 2018 andas compared to the three months ended September 30, 2017, are as follows:
| | 2018 | | | 2017 | | | $ Change | | | % Change | | | Three Months Ended | | | | | | | | | | Oil and Gas | | | 124,577 | | | | 181,669 | | | | (59,092 | ) | | | (32.53 | )% | | | | | September 30, | | | | | | | | | | | | | 2018 | | | 2017 | | | Change from Prior Year | | | Percent Change from Prior Year | | Revenues: | | | | | | | | | | | | | | | | | | Oil and gas | | | $ | 178,640 | | | $ | 132,348 | | | $ | 46,292 | | | | 35.0 | % | Timber | | | 178,449 | | | | -- | | | | 178,449 | | | | 100.00 | % | | | 56,929 | | | | - | | | | 56,929 | | | | 0.0 | % | Surface | | | 43,669 | | | | 17,102 | | | | 26,567 | | | | 155.34 | % | | | 22,127 | | | | 64,975 | | | | (42,848 | ) | | | (65.9 | )% | Total | | | 346,695 | | | | 198,771 | | | | 145,924 | | | | 74.42 | % | | Total revenues | | | $ | 257,696 | | | $ | 197,323 | | | $ | 60,373 | | | | 30.6 | % |
Oil and Gas
CKX leases its property to oil and gas operators and collects income through its land ownership in the form of oil and gas royalties and lease rentals and geophysical revenues. A breakdown of oil and gas revenues for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 are as follows: | | | Three Months Ended | | | | | | | | | | | | | September 30, | | | | | | | | | | | | 2018 | | | 2017 | | | $ Change | | | % Change | | | 2018 | | | 2017 | | | Change from Prior Year | | | Percent Change from Prior Year | | Oil | | | 97,662 | | | | 130,205 | | | | (32,542 | ) | | | (24.99 | )% | | $ | 142,664 | | | $ | 89,761 | | | $ | 52,903 | | | | 58.9 | % | Gas | | | 23,375 | | | | 46,464 | | | | (23,090 | ) | | | (49.69 | )% | | | 24,971 | | | | 35,242 | | | | (10,271 | ) | | | (29.1 | )% | Lease and Geophysical | | | 3,540 | | | | 5,000 | | | | (1.460 | ) | | | (29.20 | )% | | Total | | | 124,577 | | | | 181,669 | | | | 57,092 | | | | (31.43 | )% | | Lease and geophysical | | | | 11,005 | | | | 7,345 | | | | 3,660 | | | | 49.8 | % | Total revenues | | | $ | 178,640 | | | $ | 132,348 | | | $ | 46,292 | | | | 35.0 | % |
CKX received oil and/or gas revenues from 8280 and 8979 wells during the three-month periodthree months ended March 31,September 30, 2018 and 2017, respectively. The following schedule summarizes barrels and MCF produced and average price per barrel and per MCF.MCF for the three months ended September 30, 2018:
| | Three Months Ended | | | | September 30, | | | | 2018 | | | 2017 | | Net oil produced (Bbl)(2) | | | 1,448 | | | | 1,869 | | Average oil sales price (per Bbl)(1,2) | | $ | 75.25 | | | $ | 46.65 | | Net gas produced (MCF) | | | 5,165 | | | | 10,079 | | Average gas sales price (per MCF)(1) | | $ | 4.26 | | | $ | 3.50 | |
| | 2018 | | | 2017 | | Net oil produced (Bbl)(2) | | | 1,409 | | | | 2,274 | | Average oil sales price (per Bbl)(1,2) | | $ | 60.92 | | | $ | 50.33 | | Net gas produced (MCF) | | | 6,724 | | | | 13,404 | | Average gas sales price (per MCF)(1) | | $ | 3.48 | | | $ | 3.47 | |
Notes to above schedule:
(1) Before deduction of production costs and severance taxes.
(2) Excludes plant products.
(1) Before deduction of production costs and severance taxes | | (2) Excludes plant products | |
Oil andrevenues increased for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, by $52,903. Gas revenues decreased for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, by $57,092 from 2017 revenues.$10,271. As indicated from the schedule above the net decrease waschanges were due to increases in the average price per barrel and the average price per MCF and decreases in barrels of oil produced ,and MCF of gas produced, and the average price per MCF.produced. Item 2.
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
|
Lease and geophysical revenues were $3,540 in 2017 and $5,000 in 2016 amounts.increased for the three months ended September 30, 2018, as compared to the three months ended September 30, 2018, by $3,660. These revenues are dependent on oil and gas producers’ activities, are not predictable and can vary significantly from year to year.
Management believes oil and gas activity is driven by the current and forecasted commodity prices, demand for oil and gas, and upstream and downstream industry activity. Based on available public information, management believes that oil and gas activity which includes oil and gas production as well as lease rentals will be comparable to 2017 annual reported amounts.Timber
DuringTimber revenue was $56,929 for the first quarter of 2018, the Company received $178,449 in timber revenues. In 2017, the Company receivedthree months ended September 30, 2018. There was no timber revenues. We believerevenue for the three months ended September 30, 2017. The increase in revenues is due to our continued marketing of our timber and securing stumpage agreements over the last couple oftwo years and dryer weather. We believe the market will continue to be challenging during 2018.
Surface Surface revenue increased fromrevenues decreased for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, by $42,848. This is primarily due to increasing leasing fees for our hunting and agriculture properties as well as increased lease activity related southwest Louisiana economic growth. During 2018, we received no revenue related to pipeline right of way agreements.agreements that were received in 2017 and not in 2018. As previously noted by management, pipeline, utility and other right of ways are not unusual to the Company; however, these types of revenue are not predictable and can vary significantly from year to year.
Revenue – Nine Months Ended September 30, 2018 Components of revenues for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017, are as follows: | | Nine Months Ended | | | | | | | | | | | | September 30, | | | | | | | | | | | | 2018 | | | 2017 | | | Change from Prior Year | | | Percent Change from Prior Year | | Revenues: | | | | | | | | | | | | | | | | | Oil and gas | | $ | 464,895 | | | $ | 465,710 | | | $ | (815 | ) | | | (0.2 | )% | Timber sales | | | 411,936 | | | | 8,966 | | | | 402,970 | | | | 4494.4 | % | Surface revenue | | | 121,592 | | | | 318,423 | | | | (196,831 | ) | | | (61.8 | )% | Total revenues | | $ | 998,423 | | | $ | 793,099 | | | $ | 205,324 | | | | 25.9 | % |
Oil and Gas
CKX leases its property to oil and gas operators and collects income through its land ownership in the form of oil and gas royalties and lease rentals and geophysical revenues. A breakdown of oil and gas revenues for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 are as follows: | | Nine Months Ended | | | | | | | | | | | | September 30, | | | | | | | | | | | | 2018 | | | 2017 | | | Change from Prior Year | | | Percent Change from Prior Year | | Oil | | $ | 380,163 | | | $ | 331,774 | | | $ | 48,389 | | | | 14.6 | % | Gas | | | 76,223 | | | | 112,935 | | | | (36,712 | ) | | | (32.5 | )% | Lease and geophysical | | | 8,509 | | | | 21,001 | | | | (12,492 | ) | | | (59.5 | )% | Total revenues | | $ | 464,895 | | | $ | 465,710 | | | $ | (815 | ) | | | (0.2 | )% |
CKX received oil and/or gas revenues from 79 and 93 wells during the nine months ended September 30, 2018 and 2017, respectively. The following schedule summarizes barrels and MCF produced and average price per barrel and per MCF: | | Nine Months Ended | | | | September 30, | | | | 2018 | | | 2017 | | Net oil produced (Bbl)(2) | | | 4,678 | | | | 6,037 | | Average oil sales price (per Bbl)(1,2) | | $ | 67.29 | | | $ | 49.20 | | Net gas produced (MCF) | | | 20,334 | | | | 33,056 | | Average gas sales price (per MCF)(1) | | $ | 3.60 | | | $ | 3.42 | |
(1) Before deduction of production costs and severance taxes | | | | | | (2) Excludes plant products | | | | | | | | |
Oil revenues increased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, by $48,389. Gas revenues decreased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, by $36,712. As indicated from the schedule above the changes were due to increases in the average price per barrel and the average price per MCF and decreases in barrels of oil produced and MCF of gas produced. Lease and geophysical revenues decreased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2018, by $12,492. These revenues are dependent on oil and gas producers’ activities, are not predictable and can vary significantly from year to year. Timber Timber revenues increased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, by $402,970. The increase in revenues is due to our continued marketing of our timber and securing stumpage agreements over the last two years and dryer weather. Surface Surface revenues decreased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, by $196,831. This is primarily due to revenue related to pipeline right of way agreements that were received in 2017 and not in 2018. As previously noted by management, pipeline, utility and other right of ways are not unusual to the Company however, these types of revenue are not predictable and can vary significantly from year to year. Costs and Expenses – Three and Nine Months Ended September 30, 2018 Oil and gas costs increased for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 by $4,767. Oil and gas costs increased for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017, by $1,661. These changes were due to an increase in production taxes on oil and gas revenue. Production taxes consist of federal, state, and local taxes. Timber costs increased for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, by $17,954 in$12,436. Timber costs increased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, by $41,708. This is primarily due to the increased timberstimber revenue occurring induring the first quarter ofthree and nine months ended September 30, 2018. Surface costs decreased for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, by $9,868 in$1,712. Surface costs decreased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, by $12,057. This is primarily due to lower repair and maintenance cost and no legal contract review.review as the Company did not enter into any new contracts in 2018. General and administrative expenses decreaseincreased for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, by $2,296$20,132. General and administrative expenses increased for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, by $36,207. This is primarily due to increased officer salariesbonuses for land disposition administration paid in the first quarter of 2018 and increased accounting and professional services fees, offset by decreases in legal fees related to SEC reporting and director fees. Financial ConditionLiquidity and Capital Resources
Sources of Liquidity
Current assets totaled $5,176,986$4,359,005 and current liabilities equaled $497,941$177,753 at March 31,September 30, 2018. The Company has an unsecured revolving line of credit with Hancock Whitney Bank. The line of credit permits the Company to draw a maximum aggregate amount of $1,000,000. The line of credit matures on June 25, 2019, and borrowings under the line of credit bear interest at a rate of 4.25%. As of September 30, 2018, there was no outstanding balance under the line of credit. In the opinion of management, cash and cash equivalents, and certificates of deposit are adequate for projected operations and possible land acquisitions. The Company declared and paid twelve centsa $0.12 per common share dividend during the quarter ended March 31, 2018. During the first quarter of each future calendar year, the Company anticipates determining ifwhether a dividend will be declared. In determining whether a dividend will be declared, the board of directors will take into account the Company’s prior fiscal year’s cash flows from operations and current economic conditions among other information deemed relevant. Issues and Uncertainties
This quarterly report contains forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of issues and uncertainties such as those discussed below, which, among others, should be considered in evaluating the Company’s financial outlook.
Item 2.
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
|
Analysis of Cash Flows
Net cash provided by operating activities decreased by $178,756 to $98,089 for the nine months ended September 30, 2018, compared to $276,845 for the nine months ended September 30, 2017. The Company’s business and operations are subjectdecrease in cash provided by operating activities was attributable primarily to certain risks and uncertainties, including:the gain on the sale of land. Reliance upon OilNet cash provided by (used in) investing activities was $475,067 and Gas Discoveries
The Company’s most significant risk is its reliance upon others to perform exploration($61,317) for the nine months ended September 30, 2018, and development for oil2017, respectively. For the nine months ended September 30, 2018, this included purchases of certificates of deposit of $3,145,000 and gas on its land. Future income is dependent on others finding new production onpurchases of fixed assets of $39,317, offset by proceeds from maturity of certificates of deposit of $2,662,890 and from the Company’s land to replace present production as it is depleted. Oilsales of fixed assets of $996,494. For the nine months ended September 30, 2017, this includes purchases of certificates of deposits of $2,412,890, purchases of fixed assets of $93,901, offset by proceeds from maturity of certificates of deposits of $2,410,000 and gas prices as well as new technology will affect the possibility of new discoveries.
Commodity Prices
Most of the Company’s operating income comesproceeds from the sale of commodities produced from its lands: oil and gas, and timber. Fluctuations in these commodity prices will directly impact net income.fixed assets of $35,474.
Natural DisastersNet cash used in financing activities was $233,099 and $194,250 for the nine months ended September 30, 2018, and 2017, respectively. For the nine months ended September 30, 2018, and 2017 this included dividends paid.
The Company has approximately 10,612 net acres of timberland (pineSignificant Accounting Polices and hardwood) in various stages of growth or age classes. A typical pine timber stand will be harvested after 30 to 35 years of growth with some thinning occurring during this time. A hardwood stand will be harvested after 45 to 50 years of growth. A natural disaster can have a material adverse effect on timber growth, reducing its value. Natural disasters could include a hurricane, tornado, high winds, heavy rains and flooding, and/or fire cause by lightning.Estimates
Item 3.
There were no changes in our significant accounting policies and estimates during the nine months ended September 30, 2018 from those set forth in “Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2017. | Not applicable.
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Recent Accounting Pronouncements See Note 1, Basis of Presentation and Recent Accounting Pronouncements, to our condensed consolidated financial statements included in this report for information regarding recently issued accounting pronouncements that may impact our financial statements. Off-Balance Sheet Arrangements During the nine months ended September 30, 2018, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements. ITEM 3. NOT APPLICABLE Item 4.
| CONTROLS AND PROCEDURES
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ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the period covered by this report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, performed under the supervision and with the participation of the Company’s management, including the President, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by the report.September 30, 2018. Changes in Internal Control Over Financial Reporting There were no significant changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter covered by this report.three months ended September 30, 2018. PART II - OTHER INFORMATION ITEM 1 – 5. NOT APPLICABLE Part II. Other Information
Item 1 – 5.
| Not Applicable
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| 3.1
| Restated/Articles of Incorporation of the Registrant are incorporated by reference to Exhibit (3)-1 to Form 10 filed April 29, 1981.
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| 3.1 | Restated/Articles of Incorporation of the Registrant are incorporated by reference to Exhibit (3)-1 to Form 10 filed April 29, 1981. |
| 101.SCH** | XBRL Taxonomy Extension Schema |
| 101.CAL** | XBRL Taxonomy Extension Calculation |
| 101.DEF** | XBRL Taxonomy Extension Definition |
| 101.LAB** | XBRL Taxonomy Extension Labels |
| 101.PRE** | XBRL Taxonomy Extension Presentation |
| **XBRL | information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.Furnished herewith
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All exhibits not designated as filed herewith (*) or furnished herewith (*************************************) are incorporated herein by reference to a prior filing under File Number 001-31905 or 000-09669 as indicated. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 9, 2018 | CKX Lands, Inc.
| | | | | Date: May 3, 2018
| /s/ Brian R. JonesLee Boyer | | | Brian R. JonesLee Boyer
| | President | President
| (principal executive and Treasurerfinancial officer) | |
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