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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2022
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Commission File Number 1-31905
CKX Lands, Inc.
(Exact name of registrant as specified in its charter)
Louisiana
|
|
72-0144530
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
|
|
|
2417 Shell Beach Drive
|
|
|
Lake Charles, LA
|
|
70601
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
|
|
|
(337) 493-2399
|
|
|
(Registrant’s telephone number)
|
|
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock with no par value
|
CKX
|
NYSE American
|
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒
No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
|
|
|
|
Non-accelerated filer
|
☒
|
Smaller reporting company
|
☒
|
|
|
|
|
|
|
Emerging growth company
|
☐
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable
date: 1,942,495 shares of common stock are issued and
outstanding as of May 6, 2022.
TABLE OF CONTENTS
|
Page
|
|
|
PART I.
|
FINANCIAL INFORMATION
|
|
|
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEETS AS OF MARCH 31, 2022 (UNAUDITED) AND
DECEMBER 31, 2021
|
|
|
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2022
AND 2021 (UNAUDITED)
|
|
|
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE
MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
|
|
|
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH
31, 2022 AND 2021 (UNAUDITED)
|
|
|
NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2022 (UNAUDITED)
|
1
|
|
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
5
|
|
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
8
|
|
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
8
|
|
|
|
PART II.
|
OTHER INFORMATION
|
|
|
|
|
ITEM 1
|
LEGAL PROCEEDINGS
|
9
|
|
|
|
ITEM 1A.
|
RISK FACTORS
|
9
|
|
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
9
|
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
9
|
|
|
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
9
|
|
|
|
ITEM 5.
|
OTHER INFORMATION
|
9
|
|
|
|
ITEM 6.
|
EXHIBITS
|
9
|
|
|
|
SIGNATURES
|
10
|
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CKX LANDS, INC.
BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
7,357,204 |
|
|
$ |
7,409,873 |
|
Equity investment in mutual funds
|
|
|
502,365 |
|
|
|
502,832 |
|
Accounts receivable
|
|
|
48,178 |
|
|
|
50,739 |
|
Prepaid expense and other assets
|
|
|
94,054 |
|
|
|
35,405 |
|
Total current assets
|
|
|
8,001,801 |
|
|
|
7,998,849 |
|
Property and equipment, net
|
|
|
9,060,098 |
|
|
|
9,056,238 |
|
Total assets
|
|
$ |
17,061,899 |
|
|
$ |
17,055,087 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade payables and accrued expenses
|
|
$ |
115,126 |
|
|
$ |
111,123 |
|
Unearned revenue
|
|
|
148,182 |
|
|
|
150,113 |
|
Total current liabilities
|
|
|
263,308 |
|
|
|
261,236 |
|
Deferred income tax payable
|
|
|
187,664 |
|
|
|
187,664 |
|
Total liabilities
|
|
|
450,972 |
|
|
|
448,900 |
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Common stock, 3,000,000 shares
authorized, no par value, 1,942,495
shares issued and outstanding as of March 31, 2022 and December 31,
2021
|
|
|
59,335 |
|
|
|
59,335 |
|
Retained earnings
|
|
|
16,551,592 |
|
|
|
16,546,852 |
|
Total stockholders' equity
|
|
|
16,610,927 |
|
|
|
16,606,187 |
|
Total liabilities and stockholders' equity
|
|
$ |
17,061,899 |
|
|
$ |
17,055,087 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
CKX LANDS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Oil and gas
|
|
$ |
82,429 |
|
|
$ |
50,145 |
|
Timber sales
|
|
|
21,743 |
|
|
|
53,527 |
|
Surface revenue
|
|
|
68,163 |
|
|
|
41,621 |
|
Surface revenue - related party
|
|
|
9,583 |
|
|
|
9,583 |
|
Total revenue
|
|
|
181,918 |
|
|
|
154,876 |
|
Costs, expenses and (gains):
|
|
|
|
|
|
|
|
|
Oil and gas costs
|
|
|
5,736 |
|
|
|
8,221 |
|
Timber costs
|
|
|
234 |
|
|
|
958 |
|
Surface costs
|
|
|
5,129 |
|
|
|
- |
|
General and administrative expense
|
|
|
172,349 |
|
|
|
103,083 |
|
Depreciation expense
|
|
|
507 |
|
|
|
507 |
|
Gain on sale of land
|
|
|
- |
|
|
|
(406,220 |
) |
Total costs, expenses and (gains)
|
|
|
183,955 |
|
|
|
(293,451 |
) |
Income (loss) from operations
|
|
|
(2,037 |
) |
|
|
448,327 |
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,607 |
|
|
|
4,666 |
|
Miscellaneous income
|
|
|
3,023 |
|
|
|
- |
|
Income before income taxes
|
|
|
3,593 |
|
|
|
452,993 |
|
Federal and state income tax expense:
|
|
|
|
|
|
|
|
|
Current
|
|
|
(1,147 |
) |
|
|
26,186 |
|
Total income taxes
|
|
|
(1,147 |
) |
|
|
26,186 |
|
Net income
|
|
$ |
4,740 |
|
|
$ |
426,807 |
|
|
|
|
|
|
|
|
|
|
Earnings per share, basic and diluted
|
|
$ |
0.00 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
1,942,495 |
|
|
|
1,942,495 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
CKX LANDS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Unaudited)
|
|
Common Stock
|
|
|
Retained
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Equity
|
|
Balances, December 31, 2021
|
|
|
1,942,495 |
|
|
$ |
59,335 |
|
|
$ |
16,546,852 |
|
|
$ |
16,606,187 |
|
Net income
|
|
|
- |
|
|
|
- |
|
|
|
4,740 |
|
|
|
4,740 |
|
Balances, March 31, 2022
|
|
|
1,942,495 |
|
|
$ |
59,335 |
|
|
$ |
16,551,592 |
|
|
$ |
16,610,927 |
|
|
|
Common Stock
|
|
|
Retained
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Equity
|
|
Balances, December 31, 2020
|
|
|
1,942,495 |
|
|
$ |
59,335 |
|
|
$ |
15,727,503 |
|
|
$ |
15,786,838 |
|
Net income
|
|
|
- |
|
|
|
- |
|
|
|
426,807 |
|
|
|
426,807 |
|
Balances, March 31, 2021
|
|
|
1,942,495 |
|
|
$ |
59,335 |
|
|
$ |
16,154,310 |
|
|
$ |
16,213,645 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
CKX LANDS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
4,740 |
|
|
$ |
426,807 |
|
Adjustments to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
507 |
|
|
|
507 |
|
Depletion expense
|
|
|
138 |
|
|
|
77 |
|
Gain on sale of land
|
|
|
- |
|
|
|
(406,220 |
) |
Unrealized loss on equity investment in mutual funds
|
|
|
504 |
|
|
|
- |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in current assets
|
|
|
(56,088 |
) |
|
|
(125,141 |
) |
Increase (decrease) in current liabilities
|
|
|
2,072 |
|
|
|
(47,005 |
) |
Net cash used in operating activities
|
|
|
(48,127 |
) |
|
|
(150,975 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases of mutual funds
|
|
|
(37 |
) |
|
|
(124 |
) |
Costs of reforesting timber
|
|
|
(4,505 |
) |
|
|
(14,114 |
) |
Proceeds from the sale of fixed assets
|
|
|
- |
|
|
|
537,360 |
|
Net cash (used on) provided by investing activities
|
|
|
(4,542 |
) |
|
|
523,122 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(52,669 |
) |
|
|
372,147 |
|
Cash and cash equivalents, beginning of the period
|
|
|
7,409,873 |
|
|
|
6,463,255 |
|
Cash and cash equivalents, end of the period
|
|
$ |
7,357,204 |
|
|
$ |
6,835,402 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
Cash paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an integral part of these unaudited
financial statements.
CKX LANDS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
The “Company,” “we,” “us,” and “our,” refer to CKX Lands, Inc.
Note 1:
Significant Accounting Policies and Recent Accounting
Pronouncements
Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim financial statements of the
Company have been prepared in accordance with accounting principles
generally accepted in the United States of America, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures have been omitted
pursuant to such rules and regulations. In the opinion of
management, the accompanying financial statements include normal
recurring adjustments that are necessary for a fair presentation of
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, 2021 included in our Annual
Report on Form 10-K. The results of
operations for the three months
ended March 31, 2022 are not necessarily indicative of results to be
expected for the full fiscal year or any other periods.
The preparation of the financial statements in conformity with U.S.
generally accepted accounting principles requires management to
make a number of estimates and judgments that affect the reported
amounts of assets, liabilities, expenses, and related disclosures.
Actual results may differ from
these estimates.
Risks and Uncertainties
On March 11, 2020, the WHO declared
COVID-19 a pandemic. While the
Company did not incur significant
disruptions to its operations during 2021 and in 2022 to date from COVID-19, it is unable at this time to predict the
impact that COVID-19 or new
variants of the novel coronavirus will have on its business,
financial position and operating results in future periods due to
numerous uncertainties and is closely monitoring the impact of the
pandemic on all aspects of its business.
Concentration of Credit Risk
The Company maintains its cash balances in seven financial institutions. At times, cash
balances may exceed the Federal
Deposit Insurance Corporation’s insured limit of $250,000. The Company has not experienced any losses in such accounts
and management believes the Company is not exposed to any significant credit risk on
its cash balances.
Impairment of Long-lived Assets
Long-lived assets, such as land, timber and property, buildings,
and equipment, are reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset
may not be recoverable. If events or
circumstances arise that require a long-lived asset to be tested
for potential impairment, the Company first compares undiscounted cash flows
expected to be generated by the asset to its carrying value. If the
carrying amount of the long-lived asset is not recoverable on an undiscounted cash flow
basis, an impairment charge is recognized to the extent that the
carrying value exceeds the fair value. Fair value may be determined through various valuation
techniques including quoted market prices, third-party independent appraisals and
discounted cash flow models. During the year ended December 31, 2021, the Company performed
a step zero impairment
analysis on furniture and fixtures and land improvements and
determined there were no qualitative factors that would
indicate impairment. No
impairment charges were recorded during the three months ended March 31, 2022 and 2021.
Basic and Diluted Earnings per share
Net earnings per share is provided in accordance with FASB ASC
260-10, "Earnings per Share". Basic earnings per
share is computed by dividing earnings available to common
stockholders by the weighted average number of common shares
outstanding during the period. Diluted income per share gives
effect to all dilutive potential common shares outstanding during
the period. Dilutive income per share excludes all potential common
shares if their effect is anti-dilutive. As of March 31, 2022, and 2021 there were no dilutive shares
outstanding.
Dividends
The Company does not currently pay
dividends on a regular basis. In determining whether to
declare a dividend, the Board of Directors takes into account the
Company’s prior fiscal year’s cash flows from operations and the
current economic conditions, among other information deemed
relevant. Dividends paid per common stock are based on the weighted
average number of common stock shares outstanding during the
period. No dividends were declared during the three months ended March 31, 2022 and 2021.
Pursuant to a dividend reversion clause in the Company’s Articles
of Incorporation, dividends not
claimed within one year after the
dividend becomes payable will expire and revert in full ownership
to the Company and the Company’s obligation to pay such dividend
will cease. Any dividend reversions are recorded in equity upon
receipt.
Recent Accounting Pronouncements
There are various updates recently issued to the accounting
literature and these are not
expected to have a material impact on the Company’s financial
position, results of operations or cash flows.
Note 2:
Fair Value of Financial Instruments
ASC 820 Fair Value Measurements and
Disclosures (“ASC 820”), defines
fair value, establishes a framework for measuring fair value and
enhances disclosures about fair value measurements. It defines fair
value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.
ASC 820 also establishes a fair
value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when
measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Observable inputs such as
quoted prices (unadjusted) in active markets for identical assets
or liabilities.
Level 2: Inputs other than quoted
prices that are observable for the asset or liability, either
directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities that are not active; and model-driven valuations whose
inputs are observable or whose significant value drivers are
observable. Valuations may be
obtained from, or corroborated by, third-party pricing services.
Level 3: Unobservable inputs to
measure fair value of assets and liabilities for which there is
little, if any market activity at the measurement date, using
reasonable inputs and assumptions based upon the best information
at the time, to the extent that inputs are available without undue
cost and effort.
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it was
practical to estimate that value:
Class
|
Methods and/or
Assumptions
|
|
|
Cash and cash equivalents:
|
Carrying value approximates fair value due to its readily
convertible characteristic.
|
|
|
Equity Investment in mutual funds:
|
Carrying value adjusted to and presented at fair market
value.
|
The estimated fair values of the Company's financial instruments
are as follows:
|
|
|
|
|
|
March 31, 2022
|
|
|
December 31, 2021
|
|
Financial Assets:
|
|
Level
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1 |
|
|
$ |
7,357,204 |
|
|
$ |
7,357,204 |
|
|
$ |
7,409,873 |
|
|
$ |
7,409,873 |
|
Equity investment in mutual funds
|
|
|
1 |
|
|
|
504,643 |
|
|
|
502,365 |
|
|
|
504,606 |
|
|
|
502,832 |
|
Total
|
|
|
|
|
|
$ |
7,861,847 |
|
|
$ |
7,859,569 |
|
|
$ |
7,914,479 |
|
|
$ |
7,912,705 |
|
2
Note 3:
Property and Equipment
Property and equipment consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$ |
6,815,147 |
|
|
$ |
6,815,147 |
|
Timber
|
|
|
2,219,352 |
|
|
|
2,214,985 |
|
Equipment
|
|
|
108,602 |
|
|
|
108,602 |
|
|
|
|
9,143,101 |
|
|
|
9,138,734 |
|
Accumulated depreciation
|
|
|
(83,003 |
) |
|
|
(82,496 |
) |
Total
|
|
$ |
9,060,098 |
|
|
$ |
9,056,238 |
|
During the three months ended
March 31, 2022 and 2021, the Company had a gain on sale of land
of $0 and $406,220, respectively.
Depreciation expense was $507 for the three months ended March 31, 2022 and 2021.
Depletion expense was $138 and $77 for the three months ended March 31, 2022 and 2021, respectively.
Note 4:
Segment 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.
The tables below present financial information for the Company’s
three operating business
segments:
|
|
Three Months Ended
March 31,
|
|
|
Year Ended
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Identifiable Assets, net of accumulated depreciation
|
|
|
|
|
|
|
|
|
Timber
|
|
$ |
2,219,352 |
|
|
$ |
2,214,985 |
|
General corporate assets
|
|
|
14,842,547 |
|
|
|
14,840,102 |
|
Total
|
|
|
17,061,899 |
|
|
|
17,055,087 |
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Timber
|
|
$ |
4,505 |
|
|
$ |
18,606 |
|
Surface
|
|
|
- |
|
|
|
4,063 |
|
General corporate assets
|
|
|
- |
|
|
|
- |
|
Total segment costs and expenses
|
|
$ |
4,505 |
|
|
$ |
22,669 |
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion
|
|
|
|
|
|
|
|
|
Oil and gas
|
|
$ |
- |
|
|
$ |
- |
|
Timber
|
|
|
138 |
|
|
|
563 |
|
General corporate assets
|
|
|
507 |
|
|
|
2,027 |
|
Total
|
|
$ |
645 |
|
|
$ |
2,590 |
|
3
|
|
Three Months Ended March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Oil and gas
|
|
$ |
82,429 |
|
|
$ |
50,145 |
|
Timber sales
|
|
|
21,743 |
|
|
|
53,527 |
|
Surface revenue
|
|
|
77,746 |
|
|
|
51,204 |
|
Total segment revenues
|
|
|
181,918 |
|
|
|
154,876 |
|
|
|
|
|
|
|
|
|
|
Cost and expenses:
|
|
|
|
|
|
|
|
|
Oil and gas costs
|
|
$ |
5,736 |
|
|
$ |
8,221 |
|
Timber costs
|
|
|
234 |
|
|
|
958 |
|
Surface costs
|
|
|
5,129 |
|
|
|
- |
|
Total segment costs and expenses
|
|
|
11,099 |
|
|
|
9,179 |
|
|
|
|
|
|
|
|
|
|
Net income from operations:
|
|
|
|
|
|
|
|
|
Oil and gas
|
|
$ |
76,693 |
|
|
$ |
41,924 |
|
Timber
|
|
|
21,509 |
|
|
|
52,569 |
|
Surface
|
|
|
72,617 |
|
|
|
51,204 |
|
Total segment net income from operations
|
|
|
170,819 |
|
|
|
145,697 |
|
Unallocated other income (expense) before income taxes
|
|
|
(167,226 |
) |
|
|
307,296 |
|
Income before income taxes
|
|
$ |
3,593 |
|
|
$ |
452,993 |
|
There are no intersegment sales reported in the accompanying
statements of operations. 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-K for the year ended December 31, 2021. The Company evaluates
performance based on income or loss from operations before income
taxes excluding any nonrecurring gains and losses. 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.
Note 5:
Income Taxes
In accordance with generally accepted accounting principles, the
Company has analyzed its filing positions in federal and state
income tax returns for the tax returns that remain subject to
examination. Generally, returns are subject to examination for
three 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.
Note 6:
Related Party Transactions
The Company and Stream Wetlands Services, LLC (“Stream Wetlands”)
were parties to an option to lease agreement dated April 17, 2017 (the “OTL”). The OTL provided
Stream Wetlands an option to lease certain lands from the Company,
subject to the negotiation and execution of a mutually acceptable
lease form. On February 28, 2022,
the Company exercised the OTL and entered into a lease in exchange
for a payment by Stream Wetlands of $38,333. William Gray Stream,
the President and Treasurer and a director of the Company, is the
president of Stream Wetlands.
The Company’s President and Treasurer is also the President of
Matilda Stream Management, Inc. Matilda Stream Management provides
administrative and accounting services to the Company for
no compensation.
Surface revenue-related party was $9,583 for each of the three months ended March 31, 2022 and 2021. All of this amount was attributable to
the OTL with Stream Wetlands described above.
Note 7:
Concentrations
Revenue from the Company's five
largest customers for the three
months ended March 31, 2022 and
2021, respectively were:
|
|
|
Three Months Ended March 31,
|
|
Count
|
|
|
2022
|
|
|
2021
|
|
1 |
|
|
$ |
21,743 |
|
|
$ |
54,300 |
|
2 |
|
|
|
19,307 |
|
|
|
13,990 |
|
3 |
|
|
|
18,855 |
|
|
|
11,359 |
|
4 |
|
|
|
18,650 |
|
|
|
10,563 |
|
5 |
|
|
|
14,936 |
|
|
|
9,583 |
|
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 financial statements and related notes included in this
Quarterly Report on Form 10-Q and the audited financial statements
and notes thereto as of and for the year ended December 31, 2021
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, 2021, filed on March 28, 2022.
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 risks described in our Annual Report on Form 10-K,
this Form 10-Q 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., a Louisiana corporation, 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 charge off. 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 who 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, land 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 production in that CKX does not explore for
oil and gas or operate wells. These oil and gas activities are
performed by unrelated third parties.
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. 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 a thousand cubic feet, or
“MCF,” of gas will also cause fluctuations in the Company’s oil and
gas income. These commodity prices are affected by numerous factors
and uncertainties external to CKX’s business and over which it has
no control, including the global supply and demand for oil and gas,
the effect of the COVID-19 pandemic and government responses to the
pandemic on supply and demand, geopolitical conditions and domestic
and global economic conditions, among other factors.
CKX has small royalty interests in 20 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. Eventually, the
oil and gas reserves under the Company’s current land holdings will
be depleted.
Timber income is derived from sales of timber on Company lands. The
Company’s 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 and on
timberland and agricultural land. 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.
The Company’s Board of Directors regularly evaluates a range of
strategic alternatives that could increase shareholder value, and
the Board and management conduct due diligence activities in
connection with such alternatives. These include opportunities for
growth though the acquisitions of land or other assets, business
combinations, dispositions of assets and reinvestment of the
proceeds, and other alternatives. We cannot assure you that the
Board’s evaluations or the Company’s due diligence activities will
result in any transaction or other course of action.
Recent Developments
In the first quarter of 2019, the Company began developing several
ranchette-style subdivisions on certain of its lands in Calcasieu
and Beauregard Parishes using existing road rights of way.
The Company has identified demand in those areas for
ranchette-style lots, which consist of more than three acres each,
and the Board of Directors and management believe this project will
allow the Company to realize a return on its investment in the
applicable lands after payment of expenses. The Company has
completed and recorded plats for three subdivisions. The
three subdivisions are located on approximately 415 acres in
Calcasieu Parish and approximately 160 acres in Beauregard Parish,
and contain an aggregate of 39 lots. As of March 31, 2022,
the Company has closed on the sale of 21 of the 39 lots. As of the
date of this report no sales were pending, and the Company is
actively marketing the remaining lots
The Company is working to identify additional undeveloped acres
owned by the Company in Southwest Louisiana that would likewise be
suitable for residential subdivisions.
Results of Operations
Summary of Results
The Company’s results of operations for the three months ended
March 31, 2022 were driven primarily by an increase in oil and gas
and surface revenues partially offset by a decrease in timber
revenues and an increase in general and administrative expenses.
The increase in general and administrative expenses is primarily
due to an increase in audit fees, legal fees and commissions
partially offset by a decrease in property taxes and transfer agent
fees.
Revenue – Three Months Ended March 31,
2022
Total revenues for the three months ended March 31, 2022 were
$181,918, an increase of approximately 17.5% when compared with the
same period in 2021. Total revenue consists of oil and gas, timber,
and surface revenues. Components of revenues for the three months
ended March 31, 2022 as compared to 2021, are as follows:
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
2021
|
|
|
Change from
Prior Year
|
|
|
Percent Change
from Prior Year
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas
|
|
$ |
82,429 |
|
|
$ |
50,145 |
|
|
$ |
32,284 |
|
|
|
64.4 |
% |
Timber sales
|
|
|
21,743 |
|
|
|
53,527 |
|
|
|
(31,784 |
) |
|
|
(59.4 |
)% |
Surface revenue
|
|
|
77,746 |
|
|
|
51,204 |
|
|
|
26,542 |
|
|
|
51.8 |
% |
Total revenues
|
|
$ |
181,918 |
|
|
$ |
154,876 |
|
|
$ |
27,042 |
|
|
|
17.5 |
% |
Oil and Gas
Oil and gas revenues were 45% and 32% of total revenues for the
three months ended March 31, 2022 and 2021, respectively. A
breakdown of oil and gas revenues for the three months ended March
31, 2022 as compared to the three months ended March 31, 2021 is as
follows:
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
2021
|
|
|
Change from
Prior Year
|
|
|
Percent Change
from Prior Year
|
|
Oil
|
|
$ |
66,935 |
|
|
$ |
36,479 |
|
|
$ |
30,456 |
|
|
|
83.5 |
% |
Gas
|
|
|
13,782 |
|
|
|
12,921 |
|
|
|
861 |
|
|
|
6.7 |
% |
Lease and geophysical
|
|
|
1,712 |
|
|
|
745 |
|
|
|
967 |
|
|
|
129.8 |
% |
Total revenues
|
|
$ |
82,429 |
|
|
$ |
50,145 |
|
|
$ |
32,284 |
|
|
|
64.4 |
% |
CKX received oil and/or gas revenues from 62 and 64 wells during
the three months ended March 31, 2022 and 2021, respectively.
The following schedule summarizes barrels and MCF produced and
average price per barrel and per MCF for the three months ended
March 31, 2022 and 2021:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Net oil produced (Bbl)(2)
|
|
|
847 |
|
|
|
753 |
|
Average oil sales price (per Bbl)(1,2)
|
|
$ |
79.00 |
|
|
$ |
48.43 |
|
Net gas produced (MCF)
|
|
|
2,801 |
|
|
|
4,456 |
|
Average gas sales price (per MCF)(1)
|
|
$ |
4.92 |
|
|
$ |
2.90 |
|
(1) Before deduction of production costs and severance taxes
|
(2) Excludes plant products
|
Oil revenues increased for the three months ended March 31, 2022,
as compared to the three months ended March 31, 2021, by $30,456.
Gas revenues increased for the three months ended March 31, 2022,
as compared to the same period in 2021, by $861. As indicated from
the schedule above, the increase in oil revenues was due to an
increase in the net oil produced and an increase in the average oil
sales price per barrel. The increase in gas revenues was due to an
increase in average gas sales price per MCF partially offset by a
decrease net gas produced.
Lease and geophysical revenues increased for the three months ended
March 31, 2022, as compared to the three months ended March 31,
2021, by $967. These revenues are dependent on oil and gas
producers’ activities, are not predictable and can vary
significantly from year to year.
Timber
Timber revenue was $21,743 and $53,527 for the three months ended
March 31, 2022 and 2021, respectively. The decrease in timber
revenues was due to normal business variations in timber customers’
harvesting.
Surface
Surface revenues increased for the three months ended March 31,
2022, as compared to the three months ended March 31, 2021, by
$26,542. This increase is due a one-time oil and gas delay rental
from an operator to postpose commencement of drilling operations
during the primary term of the lease.
Costs and Expenses – Three months Ended March
31, 2022
Oil and gas costs decreased for the three months ended March 31,
2022 as compared to the three months ended March 31, 2021 by
$2,485. This variance is due to the normal variations in year to
year costs.
Timber costs decreased for the three months ended March 31, 2022,
as compared to the three months ended March 31, 2021, by $724.
Timber costs are related to timber revenue.
General and administrative expenses increased for the three months
ended March 31, 2022, as compared to the three months ended March
31, 2021, by $69,266. This is primarily due to an increase in audit
fees, legal fees and commissions partially offset by a decrease in
property taxes and transfer agent fees.
Gain on Sale of Land – Three months Ended March
31, 2022
Gain on sale of land was $0 and $406,220 for the three months ended
March 31, 2022 and 2021, respectively.
Liquidity and Capital Resources
Sources of Liquidity
Current assets totaled $8,001,801 and current liabilities equaled
$263,308 at March 31, 2022.
As of March 31, 2022 and December 31, 2021, the Company had no
outstanding debt.
In the opinion of management, cash and cash equivalents are
adequate for projected operations and possible land
acquisitions.
The Company’s Board of Directors regularly evaluates a range of
strategic alternatives that could increase shareholder value, and
the Board and management conduct due diligence activities in
connection with such alternatives. These include opportunities for
growth though the acquisitions of land or other assets or business
combinations, dispositions of assets and reinvestment of the
proceeds, and other alternatives. The cost and terms of any
financing to be raised in conjunction with any growth opportunity,
including the Company’s ability to raise debt or equity capital on
terms and at costs satisfactory to the Company, and the effect of
such opportunities on the Company’s balance sheet, are critical
considerations in any such evaluation.
Analysis of Cash Flows
Net cash used in operating activities was $48,127 and $150,975 for
the three months ended March 31, 2022 and March 31, 2021,
respectively. The change was attributable primarily to a decrease
in net income attributable to a decrease in gain on sale of land
and increase in prepaid assets.
Net cash (used in) provided by investing activities was
($4,542) and $523,122 for the three months ended March 31,
2022 and 2021, respectively. For the three months ended
March 31, 2022, this primarily resulted from purchases of mutual
funds of $37 and costs of reforesting timber of $4,505. For the
three months ended March 31, 2021, this primarily resulted from
proceeds from the sale of fixed assets of $537,360, offset by
purchases of mutual funds of $124 and costs of reforesting timber
of $14,114.
Significant Accounting Polices and Estimates
There were no changes in our significant accounting policies and
estimates during the three months ended March 31, 2022 from those
set forth in “Significant Accounting Policies and Estimates” in our
Annual Report on Form 10-K for the year ended December 31,
2021.
Recent Accounting Pronouncements
See Note 1, Basis of Presentation and Recent Accounting
Pronouncements, to our condensed 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 three months ended March 31, 2022, we do not have any
off-balance sheet arrangements, financings, or other relationships
with unconsolidated entities or other persons, also known as
“special purpose entities” (SPEs).
ITEM 3. NOT APPLICABLE
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) and Rule 15d-15(b) under the Exchange
Act, the Company’s principal executive and financial officer
carried out an evaluation of the effectiveness of the Company’s
disclosure controls and procedures (as defined under Rule 13a-15(e)
or Rule 15d-15(e) under the Exchange Act) as of the end of the
period covered by this Report. Disclosure controls and procedures
mean controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed by the issuer
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 an
issuer in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the issuer’s management,
including its principal executive and financial officer, or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. Based on its evaluation,
management concluded that as of March 31, 2022, the Company’s
disclosure controls and procedures were effective.
Changes in Internal Control Over Financial
Reporting
There were no changes in the Company’s internal control over
financial reporting during the fiscal quarter ended March 31, 2022
that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEMS 1 – 5. NOT APPLICABLE
ITEM 6. EXHIBITS
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3.1
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Restated Articles of Incorporation of
the Registrant (incorporated by reference to Exhibit 3.1 to Form
10-K (File No. 001-31905) for the year ended December 31, 2018
filed on March 21, 2019).
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3.2
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Amendment to Articles of
Incorporation of the Registrant (incorporated by reference to
Exhibit 3.2 to Form 10-K (File No. 001-31905) for the year ended
December 31, 2003 filed on March 19, 2004).
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|
|
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3.3
|
Articles of Amendment to the Restated
Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.3 to Form 10-K (File No. 001-31905) for the
year ended December 31, 2018 filed on March 21,
2019).
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3.4
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Amended and Restated By-Laws of the
Registrant (incorporated by reference to Exhibit
3.1 to Form 8-K (File No. 001-31905) filed on August 9,
2019).
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|
|
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10.1+ |
Second Amendment to Employment
Agreement effective as of March 24, 2022 (incorporated by reference
to Exhibit 10.1 to Form 8-K (File No. 001-31905) filed on March 29,
2022). |
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31*
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Certification of W. Gray Stream,
President and Treasurer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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32**
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Certification of W. Gray Stream,
President and Treasurer, pursuant to 18 U.S.C. Section 1350 and
Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS
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Inline XBRL Instance
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101.SCH
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Inline XBRL Taxonomy Extension Schema
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101.CAL
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Inline XBRL Taxonomy Extension Calculation
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101.DEF
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Inline XBRL Taxonomy Extension Definition
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101.LAB
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Inline XBRL Taxonomy Extension Labels
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101.PRE
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Inline XBRL Taxonomy Extension Presentation
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104
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Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101).
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*
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Filed herewith
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**
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Furnished herewith
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+ |
Management contract or
compensatory plan or arrangement |
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: May 6, 2022
CKX LANDS, INC.
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By:
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/s/ W. Gray Stream
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W. Gray Stream
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President and Treasurer
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(Principal executive and financial officer)
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