CKX 10-Q Quarter ended Sept. 30, 2015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2015

Commission File Number 1-31905

CKX Lands, Inc.

(Exact name of registrant as specified in its charter)

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 and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted 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 and post such files).

Yes ☒ No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 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

CKX Lands, Inc.

Form 10-Q

For the Quarter ended September 30, 2015

Table of Contents

CKX Lands, Inc.

September 30, 2015 and December 31, 2014

The accompanying notes are an integral part of these financial statements.

CKX Lands, Inc.

Quarter an d Nine Months Ended September 30, 2015 and 2014

(Unaudited)

The accompanying notes are an integral part of these financial statements.

CKX Lands, Inc.

Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2015 and 2014

(Unaudited)

The accompanying notes are an integral part of these financial statements.

CKX Lands, Inc.

Stat ements of Cash Flows

Nine Months Ended September 30, 2015 and 2014

(Unaudited)

The accompanying notes are an integral part of these financial statements.

CKX Lands, Inc.

Notes to Financial Statements

September 30, 2015

(Unaudited)

Results of Operations

Revenue

Comparison of Revenues for the nine months ended September 30, 2015 and 2014 follows:

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 follows:

CKX received oil and/or gas revenues from 114 and 113 wells during the nine months ended September 30, 2015 and 2014, respectively.

The following schedule summarizes barrels and MCF produced and average price per barrel and per MCF.

Oil and Gas revenues declined by $540,331 from 2014 revenues. As indicated in the schedule above the decline was due to an increased production not offsetting the declines in average sales prices for both oil and gas.

Lease and geophysical revenues decreased $77,070 from 2014 amounts. 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 and geophysical will continue to be depressed when compared to 2014 reported amounts.

During the first quarter of 2015, the Company marketed timber for sale and has found the demand for timber to be depressed. The Company has and will continue to market its timber for sale during 2015 but acceptable offer prices will determine if a sale is made in 2015.

Surface revenue decreased due to several large right of way agreements being executed in 2014. As previously noted by management, pipeline, utility and other right of ways are not unusual to the Company; however agreements of the magnitude seen in 2014 are unusual. Surface revenues are not predictable and can vary significantly from year to year.

Costs and Expenses

Oil and gas costs, primarily severance taxes, decreased by $18,533 in 2015. With the reduction in oil and gas revenues, the decrease was expected.

General and administrative expenses decreased by $16,508. Compensation expense and director fees decreased by $18,625 and $8,200, respectively, in 2015. Both compensation and director fees decreased due to the Company holding the board meetings for the annual meeting and the first quarter meeting on the same day. Compensation expense was further reduced due to lower incentive compensation paid in 2015. These decreases were offset by increases in professional fees ($4,031), property management fees ($3,310) and public company fees ($3,750). The increase in legal fees related to increased land acquisition activities, property management fees related to an increase in timber management activities and public company fees related to an increase in the annual NYSE fee.

Depreciation and depletion decreased by $46,966 in 2015. With the reduction in timber revenues, the decrease was expected.

Other costs and expenses incurred for the nine months ended September 30, 2015 were materially consistent with 2014 reported amounts.

Financial Condition

Current assets totaled $6,776,598 and total liabilities equaled $688,551 at September 30, 2015. Management believes available cash and certificates of deposit together with funds generated from operations should be sufficient to meet operating requirements and provide funds for strategic acquisitions. Additional sources of liquidity include an available bank line of credit of $5,000,000.

Due to the deterioration of current earnings the Company did not declare a quarterly dividend during the quarter ended September 30, 2015. In assessing the amount of or if a quarterly dividend will be declared, the Board of Directors will review recent earnings, current liquidity, and other relevant information.

From time to time, the Company may elect to pay an extra dividend. In determining if an extra dividend will be declared, the Board of Directors will take into consideration the Company’s current liquidity and capital resources and the availability of suitable timberland with mineral potential.

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.

Revenues from oil and gas provide a significant portion of the Company’s net income and cash flows. These revenues come from wells operated by other companies which CKX Lands, Inc. owns a royalty interest. Consequently, these revenues fluctuate due to changes in oil and gas prices and changes in the operations of these other companies.

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. 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.

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.

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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.

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