CKX(CKX) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents CKX Lands, Inc.'s unaudited interim financial statements, including Balance Sheets, Statements of Operations, Equity, Cash Flows, and Notes, for periods ended June 30, 2025 BALANCE SHEETS AS OF JUNE 30, 2025 AND DECEMBER 31, 2024 (UNAUDITED) Key Balance Sheet Data: | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $7,468,514 | $3,421,576 | | Certificates of deposit | $2,166,088 | $5,908,491 | | Total current assets | $9,941,535 | $9,579,388 | | Total assets | $18,886,761 | $18,847,237 | | Total current liabilities | $174,706 | $264,183 | | Total stockholders' equity | $18,712,055 | $18,583,054 | STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024 (UNAUDITED) Statements of Operations Summary: | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenue | $135,936 | $1,027,434 | $484,119 | $1,169,283 | | Income from operations | $159,669 | $646,128 | $271,818 | $209,522 | | Net income | $161,042 | $565,278 | $276,615 | $163,949 | | Basic net income per share | $0.08 | $0.28 | $0.14 | $0.08 | | Diluted net income per share | $0.08 | $0.27 | $0.14 | $0.08 | - Total revenue decreased significantly for both the three-month (-86.8%) and six-month (-58.6%) periods ended June 30, 2025, compared to the prior year, primarily due to declines in surface and oil and gas revenues[12] - Net income for the six months ended June 30, 2025, increased by 68.7% to $276,615, while net income for the three months decreased by 71.5% to $161,042[12] STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024 (UNAUDITED) Stockholders' Equity Changes (Three Months Ended June 30, 2025): | Item | Amount | | :-------------------------- | :------------- | | Balances, March 31, 2025 | $18,698,627 | | Repurchases of common stock | $(147,614) | | Net income | $161,042 | | Balances, June 30, 2025 | $18,712,055 | Stockholders' Equity Changes (Six Months Ended June 30, 2025): | Item | Amount | | :-------------------------- | :------------- | | Balances, December 31, 2024 | $18,583,054 | | Repurchases of common stock | $(147,614) | | Net income | $276,615 | | Balances, June 30, 2025 | $18,712,055 | STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024 (UNAUDITED) Cash Flow Summary (Six Months Ended June 30): | Activity | 2025 | 2024 | | :----------------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $94,026 | $353,909 | | Net cash provided by investing activities | $4,100,526 | $175,067 | | Net cash used in financing activities | $(147,614) | $(208,854) | | Net change in cash and cash equivalents | $4,046,938 | $320,122 | | Cash and cash equivalents, end of period | $7,468,514 | $7,866,811 | - Net cash provided by operating activities decreased by 73.5% in 2025, while net cash provided by investing activities increased significantly due to higher maturities of certificates of deposit[18] NOTES TO FINANCIAL STATEMENTS AS OF JUNE 30, 2025 (UNAUDITED) Note 1: Significant Accounting Policies and Recent Accounting Pronouncements - No impairment charges were recorded for long-lived assets during the six months ended June 30, 2025 and 2024[24] - No further share-based awards were made under the 2021 Stock Incentive Plan during the six months ended June 30, 2025, and no unvested awards remain as of June 30, 2025[26] - No dividends were declared during the six months ended June 30, 2025 and 2024[29] - The company is evaluating the impact of recently issued FASB ASUs: 2023-09 (Income Taxes, effective after Dec 15, 2024), 2024-02 (Codification Improvements, effective after Dec 15, 2024), and 2024-03 (Expense Disaggregation, effective after Dec 15, 2026)[31][32][33] Note 2: Fair Value of Financial Instruments - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[34][35][36] Fair Value of Financial Assets (June 30, 2025): | Financial Assets | Level | Carrying Value | Fair Value | | :----------------------- | :---- | :------------- | :----------- | | Cash and cash equivalents | 2 | $7,468,514 | $7,468,514 | | Certificates of deposit | 2 | $2,166,088 | $2,166,088 | | Total | | $9,634,602 | $9,634,602 | Fair Value of Financial Assets (December 31, 2024): | Financial Assets | Level | Carrying Value | Fair Value | | :----------------------- | :---- | :------------- | :----------- | | Cash and cash equivalents | 2 | $3,421,576 | $3,421,576 | | Certificates of deposit | 2 | $5,908,491 | $5,829,337 | | Total | | $9,330,067 | $9,250,913 | Note 3: Property and Equipment Property and Equipment, Net: | Item | June 30, 2025 | December 31, 2024 | | :---------------------- | :-------------- | :---------------- | | Land | $6,591,852 | $6,760,765 | | Timber | $2,250,525 | $2,250,525 | | Equipment | $120,873 | $120,873 | | Accumulated depreciation | $(97,744) | $(96,058) | | Total | $8,865,506 | $9,036,105 | - The company recognized a gain on sale of land of $189,210 for the six months ended June 30, 2025, compared to $140,582 in the prior year[40] - Depreciation expense was $1,687 for the six months ended June 30, 2025, a decrease from $2,130 in the prior year[41] Note 4: Segment Reporting - The company operates in three principal segments: oil and gas, timber, and surface, with performance evaluated based on gross profit[43][44] Segment Revenues (Three Months Ended June 30): | Segment | 2025 | 2024 | | :-------- | :----- | :------- | | Oil and Gas | $57,488 | $161,148 | | Timber | $0 | $0 | | Surface | $78,448 | $866,286 | | Consolidated | $135,936 | $1,027,434 | Segment Revenues (Six Months Ended June 30): | Segment | 2025 | 2024 | | :-------- | :----- | :------- | | Oil and Gas | $325,996 | $243,648 | | Timber | $0 | $2,275 | | Surface | $158,123 | $923,360 | | Consolidated | $484,119 | $1,169,283 | Note 5: Income Taxes - The company believes all income tax filing positions are highly certain and does not require a reserve for uncertain tax positions[47] Note 6: Related Party Transactions - The company has a 25-year lease agreement with Stream Wetlands Services, LLC, a related party where the Company's President also serves as president. The lease includes contingent payments and a guaranteed minimum payment of $500,000 under specific conditions[48] - Matilda Stream Management Inc. (MSM), also led by the Company's President and CFO, provides administrative services to the Company for no compensation[49] Note 7: Concentrations Revenue from Five Largest Customers (Six Months Ended June 30): | Customer Rank | 2025 Revenue | 2024 Revenue | | :------------ | :----------- | :----------- | | 1 | $191,682 | $536,615 | | 2 | $30,000 | $240,578 | | 3 | $27,633 | $120,919 | | 4 | $26,950 | $31,212 | | 5 | $25,060 | $20,205 | Note 8: Share-Based Compensation - The 2021 Stock Incentive Plan granted 76,755 restricted stock units (RSUs) and 280,245 performance shares (PSUs) in 2022[51] - On July 15, 2024, 196,900 unvested performance shares were forfeited due to unachieved performance criteria[52] - On April 16, 2025, the final tranche of 36,551 RSUs was issued, with 10,454 shares withheld for taxes and reported as treasury stock[53] - The total fair value of awards was $3,374,002, with no unrecognized stock-based compensation expense as of June 30, 2025[54] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section analyzes CKX Lands, Inc.'s financial condition and results of operations for the three and six months ended June 30, 2025, covering business overview, recent developments, liquidity, capital resources, and accounting policies - The company's results for the six months ended June 30, 2025, were primarily driven by an increase in oil and gas revenue and a decrease in general and administrative expenses, offset by a decrease in surface revenues[76] Cautionary Statement - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[57] - The company undertakes no obligation to update or revise publicly any forward-looking statements[57] Overview - CKX Lands, Inc. derives income from mineral royalties, timber sales, and surface payments from its land holdings in southwest Louisiana[59] - The company is passive in oil and gas production, with income fluctuating based on production and commodity prices[59][60] - The Board of Directors is evaluating strategic alternatives to increase shareholder value, including acquisitions, dispositions, or a potential sale of the company, and is in advanced discussions with a potential counterparty[67][68][70] - The company expects to seek to partition its undivided interests in co-owned lands[71] Recent Developments - The company is developing ranchette-style subdivisions (over three acres each) in Calcasieu and Beauregard Parishes, with 24 of 39 lots sold as of June 30, 2025[73] - During the six months ended June 30, 2025, the company closed on the sale of one 25-acre lot and one 53-acre lot, resulting in a gain on sale of $189,210[75] Results of Operations Revenue – Three Months Ended June 30, 2025 Revenue (Three Months Ended June 30): | Revenue Type | 2025 | 2024 | Change | Percent Change | | :------------- | :----- | :------- | :------- | :------------- | | Oil and gas | $57,488 | $161,148 | $(103,660) | (64.3)% | | Timber sales | $0 | $0 | $0 | - | | Surface revenue | $78,448 | $866,286 | $(787,838) | (90.9)% | | Total revenue | $135,936 | $1,027,434 | $(891,498) | (86.8)% | - The decrease in oil and gas revenues was primarily due to a reduction in net oil and gas produced[79] - The decrease in surface revenue was due to lower right-of-way income, partially offset by higher surface lease income[81] Revenue – Six Months Ended June 30, 2025 Revenue (Six Months Ended June 30): | Revenue Type | 2025 | 2024 | Change | Percent Change | | :------------- | :----- | :------- | :------- | :------------- | | Oil and gas | $325,996 | $243,648 | $82,348 | 33.8% | | Timber sales | $0 | $2,275 | $(2,275) | (100.0)% | | Surface revenue | $158,123 | $923,360 | $(765,237) | (82.9)% | | Total revenues | $484,119 | $1,169,283 | $(685,164) | (58.6)% | - Oil and gas revenues increased due to an increase in net oil and gas produced, partially offset by a decrease in the average sales price[85] - Timber revenue decreased by 100% due to normal business variations in timber customers' harvesting[86] - Surface revenues decreased due to lower right-of-way income, partially offset by higher surface lease income[87] Costs and Expenses – Three and Six Months Ended June 30, 2025 - Oil and gas costs increased by $26 for the three months and $10,370 for the six months ended June 30, 2025[88] - Timber costs decreased by $3,866 for the three months and $4,076 for the six months ended June 30, 2025, primarily due to decreased timber management costs[89] - General and administrative expenses decreased by $352,323 for the three months and $704,683 for the six months ended June 30, 2025, primarily due to lower professional fees and share-based compensation expense[90] Gain on Sale of Land – Three and Six Months Ended June 30, 2025 - Gain on sale of land was $189,210 for both the three and six months ended June 30, 2025, compared to $140,582 in the prior year, resulting from the sale of two ranchette lots[91] Liquidity and Capital Resources - The company had current assets of $9,941,535 and current liabilities of $174,706 as of June 30, 2025, with no outstanding debt[92][93] - Management believes cash and cash equivalents are adequate for projected operations and possible land acquisitions[94] - Net cash provided by operating activities decreased to $94,026 for the six months ended June 30, 2025, from $353,909 in the prior year[96] - Net cash provided by investing activities significantly increased to $4,100,527 in 2025 from $175,067 in 2024, primarily due to higher maturities of certificates of deposit[97] - Net cash used in financing activities decreased to $147,614 in 2025 from $208,854 in 2024, due to fewer common stock repurchases[98] Significant Accounting Policies and Estimates - There were no changes in significant accounting policies and estimates during the six months ended June 30, 2025, from those reported in the Annual Report on Form 10-K for December 31, 2024[99] Recent Accounting Pronouncements - Refer to Note 1 for information regarding recently issued accounting pronouncements that may impact the financial statements[100] Off-Balance Sheet Arrangements - The company did not have any off-balance sheet arrangements, financings, or relationships with unconsolidated entities during the six months ended June 30, 2025[101] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This item is marked as "Not Applicable" in the report, indicating no material quantitative or qualitative disclosures about market risk are required for the period - Item 3 is designated as "Not Applicable" for this reporting period[102] ITEM 4. CONTROLS AND PROCEDURES Management, including the principal executive and financial officers, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective. There were no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2025[102] Changes in Internal Control Over Financial Reporting - There were no changes in the company's internal control over financial reporting during the three months ended June 30, 2025, that materially affected or are reasonably likely to materially affect these controls[103] PART II. OTHER INFORMATION ITEMS 1 – 4. NOT APPLICABLE Items 1 (Legal Proceedings), 1A (Risk Factors), 2 (Unregistered Sales of Equity Securities and Use of Proceeds), 3 (Defaults Upon Senior Securities), and 4 (Mine Safety Disclosures) are all marked as "Not Applicable" for this reporting period - Items 1, 1A, 2, 3, and 4 of Part II are designated as "Not Applicable"[105] ITEM 5. OTHER INFORMATION During the second fiscal quarter of 2025, no director or officer adopted or terminated any contract, instruction, or written plan for the purchase or sale of the Registrant's securities - No director or officer adopted or terminated a contract, instruction, or written plan for the purchase or sale of the Registrant's securities during the second fiscal quarter of 2025[105] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications under the Sarbanes-Oxley Act, and Inline XBRL taxonomy files - Exhibits include Restated Articles of Incorporation, Amendments, Amended and Restated By-Laws[106] - Certifications of the President and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed[106] - Inline XBRL Instance and Taxonomy Extension files are included[106] SIGNATURES Signature The report is duly signed on behalf of CKX Lands, Inc. by W. Gray Stream, President, on August 8, 2025 - The report was signed by W. Gray Stream, President (Principal executive officer) on August 8, 2025[109][110]