Barnwell Industries(BRN) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The company presents unaudited financial statements reflecting a net loss and the sale of its contract drilling segment Condensed Consolidated Balance Sheets Total assets and equity decreased significantly due to lower cash and the reclassification of discontinued operations Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,432 | $4,285 | | Total current assets | $4,795 | $8,883 | | Total property and equipment, net | $14,023 | $16,566 | | Total Assets | $24,377 | $30,669 | | Liabilities & Equity | | | | Total current liabilities | $4,852 | $7,812 | | Total Liabilities | $14,222 | $17,607 | | Total Equity | $10,155 | $13,062 | - Assets and liabilities related to the contract drilling segment, sold on March 14, 2025, are classified as discontinued operations[9][28] Condensed Consolidated Statements of Operations The company's net loss widened due to lower revenues and higher G&A expenses, resulting in a loss of $0.31 per share Statement of Operations Highlights (in thousands, except per share data) | Metric | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total Revenues | $7,503 | $9,840 | | General and administrative | $3,325 | $2,576 | | Impairment of assets | $665 | $1,677 | | Net loss from continuing operations | $(3,138) | $(1,432) | | Net earnings (loss) from discontinued operations | $12 | $(780) | | Net loss attributable to Barnwell | $(3,124) | $(2,436) | | Net loss per share (basic & diluted) | $(0.31) | $(0.24) | Condensed Consolidated Statements of Cash Flows Operating cash flow turned negative, reversing from the prior year, driven by lower earnings and working capital changes Cash Flow Highlights - Continuing Operations (in thousands) | Cash Flow Activity | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(854) | $3,000 | | Net cash used in investing activities | $(2,272) | $(1,185) | | Net cash used in financing activities | $(15) | $(223) | | Net (decrease) increase in cash | $(3,073) | $855 | Notes to Condensed Consolidated Financial Statements Key disclosures include the sale of a subsidiary, a going concern warning, asset impairments, and a poison pill adoption - On March 14, 2025, the company sold its subsidiary, Water Resources International, Inc, for $1.05 million; its results are now classified as discontinued operations[28][33] - Management has identified substantial doubt about the company's ability to continue as a going concern due to costs from a shareholder proxy contest and reduced oil prices[31][102] - The company recorded a non-cash ceiling test impairment of $665,000 on its U.S. oil and gas properties, with a further impairment likely next quarter[60][61] - On January 26, 2025, the Board adopted a limited-duration shareholder rights plan ("poison pill") to deter hostile takeovers[88][89] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the going concern warning, a wider net loss, and negative operating cash flow Current Outlook The company's outlook is dominated by a going concern warning due to a proxy contest and volatile oil prices - There is substantial doubt about the company's ability to continue as a going concern due to costs from a shareholder proxy contest and funding uncertainty[102][159] - Potential funding sources being investigated include debt financing or asset sales, but no timing or amounts are secured[103][161] - Following the sale of Water Resources, the company's continuing operations consist of its oil and natural gas segment and its land investment segment[108][109] Results of Operations The net loss from continuing operations increased significantly, driven by higher G&A costs and lower revenues Net Loss from Continuing Operations (in thousands) | Period | Net Loss Attributable to Barnwell | | :--- | :--- | | Three months ended Mar 31, 2025 | $(1,538) | | Three months ended Mar 31, 2024 | $(1,306) | | Six months ended Mar 31, 2025 | $(3,136) | | Six months ended Mar 31, 2024 | $(1,656) | - G&A expenses increased by $749,000 for the six-month period, primarily due to $941,000 in fees related to a shareholder proxy contest[134] - Equity in income of affiliates decreased by $1,071,000 to nil, as no lots were sold by the Kukio Resort Land Development Partnerships[141] Oil & Gas Production Volumes (Six Months Ended March 31) | Product | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Natural Gas (Mcf) | 551,000 | 713,000 | (23%) | | Oil (Bbls) | 91,000 | 108,000 | (16%) | | NGLs (Bbls) | 29,000 | 34,000 | (15%) | Liquidity and Capital Resources The company reports a working capital deficit and negative operating cash flow, reinforcing the going concern doubt - At March 31, 2025, the company had a working capital deficit of $57,000[152] Cash Flow from Continuing Operations (Six Months Ended March 31, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating Activities | $(854) | $3,000 | | Investing Activities | $(2,272) | $(1,185) | - Estimated oil and natural gas capital expenditures for fiscal 2025 are projected to be between $500,000 and $1,000,000[163] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the end of the reporting period - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[166] - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2025[167] PART II. OTHER INFORMATION Risk Factors The company identifies new risks from a shareholder proxy contest and reiterates its going concern warning - A new risk factor is the ongoing proxy contest by the Sherwood Group, which has caused substantial legal fees and is expected to negatively impact operations[171][173] - A second new risk factor is the substantial doubt about the company's ability to continue as a going concern, driven by proxy contest costs and volatile commodity prices[174][176] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025[177] Exhibits This section lists filed exhibits, including the subsidiary sale agreement and Sarbanes-Oxley certifications - Exhibit 10.1 is the Stock Purchase Agreement for the sale of the company's contract drilling subsidiary[178] - Exhibits 31.1 and 31.2 contain the required Sarbanes-Oxley Act Section 302 certifications from the CEO and CFO[178]