UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No.1
(Mark One)
x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2007
¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from to
Commission file number 1-31905
CKX LANDS, INC.
(Exact name of small business issuer as specified in its charter)
Louisiana | 72-0144530 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
751 Bayou Pines East, Suite C, Lake Charles, Louisiana 70601
(Address of principal executive offices)
337-310-0547
(Issuers telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 1,942,495
Transitional Small Business Disclosure Format (Check one): Yes ¨ No x
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-QSB/A for the quarter ended March 31, 2007 is being filed to
1. | Update the Commission File Number to 1-31905, |
2. | Amend Item 3 Controls and Procedures to address the requirements of Regulation S-B Item 308 (c), |
3. | Amend Item 6 Exhibits to incorporate by reference additional exhibits required by Regulation S-B Item 601 (a), and |
4. | Provide signed and dated Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002. The Certifications were not dated in the original filing. |
Form 10-QSB
For the Quarter Ended March 31, 2007
INDEX
Balance Sheet
March 31,2007 | ||||
ASSETS |
||||
Current Assets: |
||||
Cash and cash equivalents |
$ | 913,783 | ||
Certificate of deposit |
1,000,000 | |||
Accounts receivables |
392,540 | |||
Prepaid expense and other |
32,966 | |||
Total Current Assets |
2,339,289 | |||
Securities Available for Sale |
1,637,895 | |||
Property and Equipment: |
||||
Building and equipment less accumulated depreciation of $88,012 |
89,853 | |||
Timber less accumulated depletion of $446,834 |
400,514 | |||
Land |
4,004,963 | |||
Total Property and Equipment, net |
4,495,330 | |||
Total Assets |
$ | 8,472,514 | ||
Liabilities and Stockholders Equity |
||||
Current Liabilities: |
||||
Trade payables and accrued expenses |
$ | 50,934 | ||
Income taxes payable: |
||||
Current |
136,574 | |||
Deferred |
137,974 | |||
Total Current Liabilities |
325,482 | |||
Noncurrent Liabilities: |
||||
Deferred income tax payable |
166,833 | |||
Stockholders Equity: |
||||
Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued |
72,256 | |||
Retained earnings |
8,131,427 | |||
Accumulated other comprehensive income |
152,032 | |||
Less cost of treasury stock (157,505 shares) |
(375,516 | ) | ||
Total stockholders equity |
7,980,199 | |||
Total Liabilities and Stockholders Equity |
$ | 8,472,514 | ||
See accompanying notes
1
Statements of Income
Three Months Ended March 31, 2007 |
Three Months Ended March 31, 2006 | ||||||
Revenues: |
|||||||
Oil and gas |
$ | 603,314 | $ | 578,508 | |||
Agriculture |
67,166 | 57,139 | |||||
Timber |
33,634 | 19,819 | |||||
Total revenues |
704,114 | 655,466 | |||||
Costs and Expenses: |
|||||||
Oil and gas production |
53,905 | 30,736 | |||||
Agriculture |
5,640 | 1,410 | |||||
Timber |
649 | 13,586 | |||||
General and administrative |
125,224 | 116,019 | |||||
Depreciation and depletion |
7,606 | 2,984 | |||||
Total cost and expenses |
193,024 | 164,735 | |||||
Income from operations |
511,090 | 490,731 | |||||
Other Income / (Expense): |
|||||||
Interest income |
24,800 | 33,285 | |||||
Dividend income |
8,469 | 7,454 | |||||
Gain / (loss) on sale of securities available for sale |
(2,068 | ) | 7,285 | ||||
Net other income / (expense) |
31,201 | 48,024 | |||||
Income before income taxes |
542,291 | 538,755 | |||||
Federal and state income taxes: |
|||||||
Current |
169,443 | 167,510 | |||||
Deferred |
| | |||||
Total income taxes |
169,443 | 167,510 | |||||
Net Income |
$ | 372,848 | $ | 371,245 | |||
Per common stock (1,942,495 shares) |
$ | 0.19 | $ | 0.19 | |||
Dividends per share |
$ | 0.07 | $ | 0.17 | |||
See accompanying notes
2
Statements of Changes in Stockholders Equity
Three Months Ended March 31, 2007:
Comprehensive Income |
Retained Earnings |
Accumulated Other |
Capital Stock Issued |
Treasury Stock | |||||||||||||
December 31, 2006 Balance |
$ | 7,895,007 | $ | 132,193 | $ | 72,256 | $ | 375,516 | |||||||||
Comprehensive income: |
|||||||||||||||||
Net income |
$ | 372,848 | 372,848 | | | | |||||||||||
Other comprehensive income: |
|||||||||||||||||
Unrealized net holdings gains occurring during period net of taxes of $12,067 |
18,101 | ||||||||||||||||
Less: reclassification adjustment for net losses included in net income, net of taxes of $1,159 |
(1,738 | ) | |||||||||||||||
Other Comprehensive income, net of taxes |
19,839 | | 19,839 | | | ||||||||||||
Total comprehensive income |
$ | 392,687 | |||||||||||||||
Dividends |
(136,428 | ) | | | | ||||||||||||
March 31, 2007 Balance |
$ | 8,131,427 | $ | 152,032 | $ | 72,256 | $ | 375,516 | |||||||||
Three Months Ended March 31, 2006: | |||||||||||||||||
Comprehensive Income |
Retained Earnings |
Accumulated Other Comprehensive Income |
Capital Stock Issued |
Treasury Stock | |||||||||||||
December 31, 2005 Balance |
$ | 9,042,971 | $ | 31,503 | $ | 72,256 | $ | 375,516 | |||||||||
Comprehensive income: |
|||||||||||||||||
Net income |
$ | 371,245 | 371,245 | | | | |||||||||||
Other comprehensive income: |
|||||||||||||||||
Unrealized net holdings gains occurring during period net of taxes of $14,568 |
21,851 | | 21,851 | | | ||||||||||||
Total comprehensive income |
$ | 393,096 | |||||||||||||||
Dividends |
(323,039 | ) | |||||||||||||||
March 31, 2006 Balance |
$ | 9,091,177 | $ | 53,354 | $ | 72,256 | $ | 375,516 | |||||||||
See accompanying notes
3
Statements of Cash Flows
Three Months Ended March 31, 2007 |
Three Months Ended March 31, 2006 |
|||||||
Cash Flows From Operating Activities: |
||||||||
Net Income |
$ | 372,848 | $ | 371,245 | ||||
Noncash (Income) expenses included in net income: |
||||||||
Depreciation, depletion and amortization |
7,606 | 2,984 | ||||||
(Gain) / loss from securities sales |
2,068 | | ||||||
Change in operating assets and liabilities: |
||||||||
(Increase) decrease in current assets |
(11,889 | ) | 118,352 | |||||
Increase (decrease) in current liabilities |
156,554 | 99,096 | ||||||
Net cash provided by operating activities |
527,187 | 591,677 | ||||||
Cash Flows From Investing Activities: |
||||||||
Net sale of certificate of deposits |
511,713 | | ||||||
Available for sale securities: |
||||||||
Purchases |
(487,870 | ) | (4,888 | ) | ||||
Sales |
1,492,657 | 347,658 | ||||||
Net cash provided by (used in) investing activities |
1,516,500 | 342,770 | ||||||
Cash Flows From Financing Activities |
||||||||
Dividends paid net of refunds |
(2,214,897 | ) | (128,790 | ) | ||||
Net cash (used in) financing activities |
(2,214,897 | ) | (128,790 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
(171,210 | ) | 805,657 | |||||
Cash and cash equivalents: |
||||||||
Beginning |
1,084,993 | 920,489 | ||||||
Ending |
$ | 913,783 | $ | 1,726,146 | ||||
See accompanying notes
4
Notes to Financial Statements
March 31, 2007
(Unaudited)
Note 1. Basis of Presentation
In the opinion of management, the accompanying balance sheet and related interim statements of income, changes in stockholders equity, and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in accordance with generally accepted accounting principles of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-QSB should be read in conjunction with Managements Discussion and Analysis and financial statements and notes thereto included in the CKX Lands, Inc. 2006 Form 10-KSB.
Note 2. Nature of Business and Significant Accounting Policies
Nature of business:
The Companys business is the ownership and management of land. The primary activities consist of leasing its properties for minerals (oil and gas) and agriculture and raising timber.
Significant accounting polices:
Cash and equivalents:
For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less.
Pervasiveness of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Investment securities:
The Company complies with the provisions of Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. Under the provisions of this statement, management must make a determination at the time of acquisition whether certain investments in debt and equity securities are to be held as investments to maturity, held as available for sale, or held for trading. Management, under a policy adopted by the board of directors of the Company, made a determination that all debt and equity securities owned at that date and subject to the provisions of the statement would be classified as held available-for-sale.
Under the accounting policies provided for investments classified as held available-for-sale, all such debt securities and equity securities that have readily determinable fair value shall
5
be measured at fair value in the balance sheet. Unrealized holding gains and losses for available-for-sale securities shall be excluded from earnings and reported as a net amount (net of income taxes) as a separate component of retained earnings until realized. Realized gains and losses on available-for-sale securities are included in income. The cost of securities sold is based on the specific identification method. Interest on debt securities is recognized in income as earned, and dividends on marketable equity securities are recognized in income when declared.
Declines in the fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Property and equipment:
Property and equipment is stated at cost. Major additions are capitalized; maintenance and repairs are charged to income currently. Depreciation is computed on the straight-line and accelerated methods over the estimated useful lives of the assets.
Timber:
When timber land is purchased with standing timber, the cost is divided between land and timber based on timber cruises contracted by the Company. The costs of reforestation are capitalized. The timber asset is amortized when the timber is sold based on the percentage of the timber sold from a particular tract applied to the amount capitalized for timber for that tract.
Oil and gas:
Oil and gas income is booked when the Company is notified by the wells operators as to the Companys share of the sales proceeds together with the withheld severance taxes. The Company has no capitalized costs relating to oil and gas producing activities and no costs for property acquisition, exploration and development activities.
Note 3. Earnings per share:
Earnings per share is based on the weighted average number of common shares outstanding during the year.
Note 4. Income taxes:
Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
Note 5. Contingencies:
There are no material contingencies known to management. The Company does not participate in off balance sheet arrangements.
6
Item 2. | Managements Discussion and Analysis or Plan of Operations |
Results of Operations
Revenue
Revenue for the first three months of 2007 was $704,114, an increase of $48,648 or 7.4% over the first three months of 2006. Oil and gas income exceed 2006 by $63,068 and both barrels produced and MCF produced exceed 2006 volumes. However, as illustrated in the schedule below, average price per barrel and MCF were lower in 2007.
Three Months Ended March 31, 2007 |
Three Months Ended March 31, 2006 | |||||
Oil Income |
$ | 283,384 | $ | 173,194 | ||
Barrels produced |
4,765 | 2,857 | ||||
Average price per barrel |
$ | 59.47 | $ | 60.62 | ||
Gas income |
$ | 251,441 | $ | 298,563 | ||
MCF produced |
31,914 | 22,669 | ||||
Average price per MCF |
$ | 7.88 | $ | 13.17 |
The increase in both oil and gas production was due to new fields more than offsetting depletion in older fields. There were two new fields, Bon Air and South Lake Charles which accounted for all of the increase in both oil and gas production. Neither field had been brought in prior to March 31, 2006. The Companys share of Bon Air oil production in the first quarter of 2007 was 1,923 barrels. The Companys share of oil produced in the first quarter of 2007 from South Lake Charles was 250 barrels. The Companys share of gas produced in 2007 from Bon Air was 17,286 MCF and from South Lake Charles was 2,363 MCF.
Largest decline in production for oil was from the Vinton field which declined 368 barrels from 1,085 barrels to 717 barrels. The largest decrease in gas production were from Castor Creek which went from 11,699 MCF to 7,281 MCF and Bunchy Creek which went from 2,395 MCF to 513 MCF.
The Company will have an approximately 1.5% in new production from the Abdalla #1 in Southeast Unita field which tested at 125 barrels of oil and 2,500 MCF of gas. The Company has also signed a division order for the Glover #1 in Calcasieu Parish and will have a 0.23528% interest in the production. The Company will also have a small interest in the Irby #4 in Beauregard Parish which is currently being completed.
On April 30, 2007, Walker Louisiana Properties completed the sale of 100 acres on South Park Drive for $1,912,050. This is the first sale from a tract of land totaling approximately 1,300 acres which Walker Louisiana Properties owns on the South border of Lake Charles, LA. The Company owns a one-sixth interest in this land which has a basis of approximately $1,000 per acre.
Revenue from both Agriculture and Timber activities remained relatively the same as in previous years.
7
Operating Expenses
Operating expenses increased by $28,289 or 17.2% during the first quarter of 2007 over the same period in 2006. The largest increase was $23,169 for increased production severance taxes reported from oil and gas operators.
Financial Condition
Current assets plus securities available for sale totaled $3,977,184 at March 31, 2007, compared with $5,625,409 at December 31, 2006 and $5,096,936 at March 31, 2006. Total liabilities were $492,315 at March 31, 2007, compared to $2,404,405 at December 31, 2006 and $702,931 at March 31, 2006
Management believes existing cash and short-term investments together with funds generated from operations should be sufficient to meet operating requirements and provide funds for strategic acquisitions.
The Company declared the normal seven cents per common share during the quarter ended March 31, 2007. It is anticipated that the Company will be able to continue paying a seven cents per common share per quarter.
Issues and Uncertainties
This Quarterly Report contains statements that are forward-looking. 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 listed below, which, among others, should be considered in evaluating the Companys financial outlook.
Revenues from oil and gas provide most of the Companys income. All of these revenues come from wells operated by other companies from property belonging to CKX Lands, Inc. Consequently, these revenues fluctuate due to changes in oil and gas prices and changes in the operations of the other companies.
Item 3. | Controls and Procedures |
Under the supervision and with the participation of the Companys Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a -15(e) as of March 31, 2007. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
There has been no change in the Companys internal control over financial reporting during the quarter ending March 31, 2007 that has materially affected, or is reasonably likely to affect, the Companys internal control over financial reporting.
8
Item 4. | Submission of Matters to a Vote of Security Holders |
The Annual Meeting of Stockholders was held on April 26, 2007.
The following proposals were adopted by the margins indicated:
1. To elect a Board of Directors to hold office until their successors are elected and qualified. | ||||||
Number of Shares | ||||||
For | Withheld | |||||
Arthur Hollins, III | 1,511,985 | 2,326 | ||||
Brian R. Jones | 1,511,985 | 2,326 | ||||
Charles D. Viccellio | 1,511,985 | 2,326 | ||||
Henry E. Blake | 1,511,985 | 2,326 | ||||
Laura A. Leach | 1,511,651 | 2,660 | ||||
Frank O. Pruitt | 1,511,985 | 2,326 | ||||
B. James Reaves, III | 1,511,985 | 2,326 | ||||
Mary W. Savoy | 1,511,985 | 2,326 | ||||
William Gray Stream | 1,511,835 | 2,476 | ||||
Mary Leach Werner | 1,511,985 | 2,326 | ||||
2. To approve McElroy, Quirk and Burch APC as auditors for the 2007 fiscal year. | ||||||
For | 1,513,146 | |||||
Against | 0 | |||||
Abstained | 1,165 |
Item 6. | Exhibits |
3.1 | Restated/Articles of Incorporation of the Registrant are incorporated by reference to Exhibit (3)-1 to Form 10 filed April 29, 1981. | |
3.2 | Amendment to Articles of Incorporation of the Registrant is incorporated by reference to Exhibit (3.2) to Form 10-K for year ended December 31, 2003. | |
3.3 | By-Laws of the Registrant are incorporated by reference to Exhibit (3.3) to Form 10-K for year ended December 31, 2003. | |
31.1 | Certification of Arthur Hollins, III, President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith. | |
31.2 | Certification of Brian R. Jones, Treasurer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith. | |
32 |
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Items 1, 2, 3 and 5 are not applicable.
9
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.
CKX Lands, Inc. | ||||
Date: May 9, 2007 | /s/ Arthur Hollins, III | |||
Arthur Hollins, III | ||||
President and Chief Executive Officer | ||||
/s/ Brian R. Jones | ||||
Brian R. Jones | ||||
Treasurer and Chief Financial Officer |
10