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EX-23.1 - EXHIBIT 23.1 - CKX LANDS, INC.ex23-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

  

  

  

  

Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2014

  

  

  

  

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

 

 

Commission File Number 1-31905

CKX Lands, Inc.

(Exact name of registrant as specified in its Charter)

  

  

  

Louisiana
(State or other jurisdiction of
incorporation or organization)

  

72-0144530
(I.R.S. Employer Identification Number)

  

  

  

1508 Hodges Street

Lake Charles, LA
(Address of principal executive offices)

  

70601
(Zip Code)

 

Registrant’s telephone number, including area code: (337) 493-2399

 

Securities registered pursuant to Section 12(b) of the Act:

  

  

  

Common Stock with no par value

  

NYSE MKT

Title of each class

  

Name of each exchange on which registered

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes ☐     No ☑

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes ☐     No ☑

 

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 Website, 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 such shorter period that the registrant was required to submit and post such files). Yes ☑     No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

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.

 

Large accelerated filer  ☐

Accelerated filer  ☐  

Non-accelerated filer 

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

YES ☐     NO ☑

 

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2014 based on the closing price on that date of $16.71 was $23,383,640.

 

The number of shares of the registrant’s Common Stock outstanding as of March 20, 2015, was 1,942,495.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the Registrant’s definitive Proxy Statement prepared in connection with the 2015 Annual Meeting of Stockholders are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K.

 

 
 

 

 

PART I

 

Item 1.

BUSINESS

 

General Description

 

CKX Lands, Inc. is a Louisiana corporation organized in 1930 as Calcasieu Real Estate & Oil Co., Inc., to receive non-producing mineral royalties spun off by a southwest Louisiana bank. Over the years, as some of the royalties yielded oil and gas income, the Company used the proceeds to purchase land. On May 17, 2005, the Company changed its name from Calcasieu Real Estate & Oil Co., Inc. to CKX Lands, Inc. The primary reason for the change was to help clarify that the Company is not directly involved in oil and gas exploration or operations. As used herein, the “Company” or “CKX” refers to CKX Lands, Inc.

 

The Company’s shares are listed on the NYSE MKT (previously known as NYSE AMEX), under the symbol CKX. As of March 20, 2015, there were 1,942,495 shares outstanding. The Company had a common equity public float of less than $75 million as of the last business day of the second fiscal quarter. Consequently, the Company is a small reporting company under the Securities Exchange Commission regulations.

 

As a reporting company, CKX is subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) and accordingly files its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room. As an electronic filer, CKX’s public filings are maintained on the SEC’s Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

 

The Company will provide to stockholders without charge upon their written request a copy of the registrant's annual report on Form 10-K, including the financial statements and the financial statement schedules, required to be filed with the Securities and Exchange Commission for the registrant's most recent fiscal year.  Requests should be sent to Brian Jones, President, CKX Lands, Inc., 1508 Hodges Street, Lake Charles, LA 70601.

 

The Company owns land, timber, and mineral interests and collects income through its ownership in the form of oil and gas royalties, timber sales, and surface leases for farming, right of way and other uses. The Company is not involved in the exploration or production of oil and gas nor does it actively farm its lands.

 

CKX owns a 100% interest in 6,243 acres, 16.667% undivided interest in 35,575 acres, 40% undivided interest in 1,579 acres and 50% undivided interest in 443 acres resulting in an ownership of approximately 13,025 net acres.

 

CKX does not perform or cause to have performed oil and gas producing activities inasmuch as: (1) we do not search for crude oil or natural gas in their natural states; (2) we do not acquire property for the purpose of exploration or the removing of oil and gas; and (3) we are not involved in construction, drilling and/or production activities necessary to retrieve oil and gas.

 

Oil and gas royalties are paid by the operators who own the wells. Timber income is paid by the highest bidder of the timber. There are several mills in the immediate area that compete for timber. Surface income is received for farming, right of way or other surface land uses. The prices paid for oil, gas and timber depend on national and international market conditions. Prices paid for surface leases depend on regional and local market conditions. Oil and gas revenues were 56.66% of the Company’s total revenues in 2014 and 85.50% in 2013.

 

The source of all raw materials for the Company is the land itself. All oil and gas income will eventually deplete, but we have no access to this depletion information. Timber income and agriculture income are renewable resources.

 

 
1

 

 

The Company does not spend any money on Research and Development.

 

The Company does not need government approval of its principal products or services except that the State of Louisiana must approve the size & location of all oil and gas producing units.

 

Employees

 

The Company has three employees, all of whom are part-time. There are two officers, and one clerical person. The Company is subject to no union contracts nor does the Company have any hospitalization, pension, profit sharing, option or deferred compensation programs.

 

Customers

 

The Company’s customers are those who have mineral leases on Company lands, purchase timber in competitive bids or execute surface leases for farm or other purposes. During 2014, the Company received approximately 74.42% of its total revenues from the following customers:

 

Customer

Revenue Type

 

% of Total Revenue

 

Midstates Petroleum Company

Oil & Gas

    25.96 %

Georgia Pacific

Timber

    23.84 %

Swift Energy Operating LLC

Oil & Gas

    6.62 %

Enterprise Pipeline

Surface

    6.61 %

Riceland Petroleum Company

Oil & Gas

    6.11 %

Entergy Corporation

Surface

    5.29 %

 

Loss of cash receipts from any of these customers or revenue streams would have a material adverse effect on the Company.

 

Environmental and Other Governmental Regulations

 

The operators of the wells are responsible for complying with environmental and other governmental regulations. However, should an operator abandon a well located on Company land without following prescribed procedures, the land owners could possibly be held responsible. The Company does not believe this would have a material effect on its financial condition.

 

Item 2.

PROPERTIES

 

The Company owns a total of 13,025 net acres in the Louisiana Parishes of Allen, Beauregard, Calcasieu, Cameron, Jefferson Davis, LaFourche, Sabine, St. Landry and Vermilion. Most of the acreage is in Southwest Louisiana. As presented in the table below, some of the Company lands are owned in indivision.

 

           

Net
Acres (acres)

 
    100.000 %

Ownership of 6,243 acres

    6,243  
    40.000 %

Ownership of 1,579 acres

    632  
    50.000 %

Ownership of 443 acres

    221  
    16.667 %

Ownership of 35,575 acres

    5,929  

 

Of the total 13,025 net acres owned by CKX, timberland comprises 9,637 acres, 2,251 acres are agricultural land, 943 acres are marsh land and 194 acres are future subdivision land. 

 

 
2

 

 

The table below shows, for the years ended December 31, 2014 and December 31, 2013, the Company’s net gas produced in thousands of cubic feet (MCF), net oil produced in barrels (Bbl), and average sales prices relating to oil and gas attributable to the royalty interests of the Company as reported by the various producers.

 

   

Year Ended 12/31/14

   

Year Ended 12/31/13

 

Net gas produced (MCF)

    46,457       42,117  

Average gas sales price (per MCF)(1)

  $ 5.05     $ 4.42  
                 

Net oil produced (Bbl)(2)

    10,593       13,273  

Average oil sales price (per Bbl)(1,2)

  $ 98.03     $ 104.62  

 

Notes to above schedule:

 

(1) Before deduction of severance taxes and other charges.

(2) Excludes plant products.

 

Item 3.

LEGAL PROCEEDINGS

 

The Company was not involved in any legal proceedings as of December 31, 2014.

 

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

There were no matters submitted to a vote of security holders during the three months ended December 31, 2014.

 

PART II

 

Item 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

The Company’s Common Stock is traded on the NYSE MKT (previously known as NYSE AMEX) under the trading symbol CKX since its listing on December 8, 2003. Prior to the listing there was no established public trading market for the Common Stock, and there had been only limited and sporadic trading in the Common Stock, principally among its shareholders. On March 20, 2015, there were approximately 480 stockholders of record. There were no sales of unregistered securities of the Company and no purchases or sales of CKX equity securities during 2014 by the Company. The closing price for the Common Stock was $14.42 on March 19, 2015. The following table sets forth the high and low sales prices for the Common Stock by quarter during 2014 and 2013.

 

     

First

Quarter

   

Second

Quarter

   

Third

Quarter

   

Fourth

Quarter

 
                                   

Common stock price per share 2014

high     16.20       16.80       17.05       16.30  

 

Low     14.26       14.58       15.42       15.40  

Common stock price per share 2013

high     15.99       15.50       15.43       16.13  

 

low     11.58       13.05       13.75       14.13  

 

 
3

 

 

The Company has paid cash dividends since 1990. The Company is currently paying a quarterly dividend of 7¢ per share and intends to maintain paying quarterly dividends. 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 that has mineral potential. The Company did not pay an extra dividend to shareholders in 2014 or 2013. A summary of cash dividends declared is set forth in the table below.

 

   

First Quarter

   

Second Quarter

   

Third Quarter

   

Fourth Quarter

   

Year Total

 
                                         

Cash Dividend per Share

                                       

2014

  $ 0.07       0.07       0.07       0.07       0.28  

2013

  $ 0.07       0.07       0.07       0.07       0.28  

 

Pursuant to a dividend reversion clause in the Company’s Articles of Incorporation, dividends not claimed within one year after a dividend becomes payable will expire and revert in full ownership to the Company and the Company’s obligation to pay such dividend will cease. During 2014 and 2013, the Company received $11,413 and $0, respectively, in dividend reversions.

 

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

CKX Lands, Inc. 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 minerals 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 most of the Company’s income is derived from mineral royalties and timber sales from the Company lands. CKX receives income from royalty interest and mineral leases related to oil and gas production, timber 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.

 

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.

 

CKX has small royalty interests in 37 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 0.0034% 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 under the Company’s current land holdings will be depleted. The Company is constantly looking for additional land to be purchased in southwest Louisiana. Preferably, the Company searches for timberland that has mineral potential. 

 

 
4

 

 

Results of Operations

 

Fiscal Year 2014 Compared to Fiscal Year 2013

 

Total revenues for 2014 were $2,618,741, an increase 23.89% when compared with 2013 revenues of $2,113,828. Total revenue consists of oil and gas, timber, and surface revenues.

 

Oil and gas revenues were 56.66% and 85.50% of total revenues for 2014 and 2013, respectively. Oil and gas revenues consist of royalty revenue and lease rental revenue. During 2014 these revenues changed from 2013 as follows:

 

   

2014

   

2013

   

$ Change

   

% Change

 
                                 

Royalty

  $ 1,366,281     $ 1,716,192     $ (349,911 )     (20.39 )%

Lease Rental

    117,499       91,128       26,371       28.94 %

Total

  $ 1,483,780     $ 1,807,320     $ (323,540 )     (17.90 )%

 

 

During 2014, royalty revenues from gas production increased by approximately 4,340 MCF, and the average gas sales price per MCF increased by approximately $0.63 resulting in an increase in gas revenue of $48,536. Revenue from oil production, including plants, decreased by $399,897. This decrease was due to the net effect of a decrease of $6.59 in the average barrel sales price, not including plants, and a decrease in production of approximately 2,680 barrels, not including plants, and a decrease in plants revenue of $49,740.

 

The following four fields produced 77.82% of the Company’s oil and gas revenues in 2014. The following table shows the number of barrels of oil (Bbl Oil) and MCF of gas (MCF Gas) produced from these fields.

 

Field

 

Bbl Oil

   

MCF Gas

 

South Bear Head Creek

    5,149       3,948  

Cowards Gully

    2,061       4,602  

South Lake Charles

    744       7,935  

South Gordon

    672       4,035  

 

Notes to above schedule:

 

(1)

Before deduction of severance taxes and other charges.

 

(2)

Excludes plant products.

 

In 2013, the following three fields produced 70.75% of the Company’s oil and gas revenues. The following table shows the number of barrels of oil (Bbl Oil) and MCF of gas (MCF Gas) produced from these fields.

 

Field

 

Bbl Oil

   

MCF Gas

 

South Bear Head Creek

    5,781       5,965  

Cowards Gully

    2,317       7,555  

South Jennings

    623       14,518  

 

Notes to above schedule:

 

(1)

Before deduction of severance taxes and other charges.

 

(2)

Excludes plant products.

  

From review of the limited information provided by the field operators, it appears that three new wells went into production in existing fields during 2014.

 

 
5

 

 

In 2014, the Company was a lessor in 9 new mineral leases covering a total of 1,518.829 gross acres or 173.871 net acres. The new leased acres are located in 3 different parishes.

 

Timber income increased by $532,136 from 2013. The Company harvested timber during 2014 due to acceptable timber prices. In addition, the Company will continue to perform its internal maintenance programs for age class timber and storm protection measures and thus the Company does sell a fluctuating minimal timber volume each year regardless of market conditions.

 

Surface income increased by $296,317 from 2013. Surface income includes income from farm leases, right of way grants, hunting leases and other surface leases. This increase was due to two right of way agreements executed during 2014 which are not recurring revenue.

 

Outlook for Fiscal Year 2015

 

The Company continues to actively search for lands that meet our criteria of timberland with mineral potential. During 2014, the Company purchased 380 acres of timberland. The Company anticipates that finding acceptable land at reasonable fair values during 2015 is likely. The Company may consider land purchases outside of southwest Louisiana.

 

Oil and gas prices have dropped significantly from the 2014 average per Bbl and MCF prices in the last quarter of 2014 and the first quarter of 2015. The Company expects oil and gas revenues to be significantly less in 2015 than in 2014 due to this drop in prices as well as oil and gas companies reportedly decreasing exploration and production capital expenditure budgets.

 

Currently, there are 28 non-producing mineral leases covering approximately 3,243.91 gross acres or 599.48 net acres. The Company believes that it is likely that some of these leases will be drilled and production discovered.

 

The Company does expect to continue to harvest timber in 2015 assuming timber prices remain stable or improve. Timber revenue in 2015 is expected to remain flat when compared to 2014 revenue levels.

 

Liquidity and Capital Resources

 

The Company’s current assets totaled $7,102,092 and total liabilities equaled $285,663 at December 31, 2014. Additional sources of liquidity include the Company’s available bank line of credit for $5,000,000.

 

In the opinion of management, current cash flow from operations, cash and cash equivalents, investments and the available line of credit are adequate for projected operation, possible land purchases and continuation of the regular cash dividend. 

 

 
6

 

 

Critical Accounting Policies

 

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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of our financial statements include the following items:

 

Our accounts receivable consist of incomes received after year end for royalties produced prior to year end. When there are royalties that have not been received at the time of the preparation of the financial statements for months in the prior year, we estimate the amount to be received based on the last month’s royalties that were received from that particular company. We do not maintain an allowance for doubtful accounts because other than the accrual for earned but not received royalties, we have no accounts receivable.

 

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities.

 

When land is purchased with standing timber, the cost is divided between land and timber based on timber cruises contracted by the Company. Reforestation costs are capitalized and added to the timber asset account. The timber asset is depleted 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.

 

 

Forward Looking Statements

 

Certain matters contained in this report are forward-looking statements including, without limitation, the information contained under the heading “Outlook for Fiscal Year 2015” in Item 7 of this report. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information may be obtained by reviewing the information set forth below under “Significant Risk Factors” and information contained in the Company’s reports periodically with the SEC. 

 

 
7

 

 

Item 7A.

QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Significant Risk Factors

 

The Company’s business and operations are subject to certain risks and uncertainties, including:

 

Reliance upon Oil and Gas Discoveries

 

The Company’s most significant risk is its reliance upon others to perform exploration and development for oil and gas on its land. Future income is dependent on others finding new production on the Company’s land to replace present production as it is depleted. Oil and gas prices as well as new technology will affect the possibility of new discoveries.

 

Commodity Prices

 

The majority of the Company’s operating income comes from the sale of commodities produced from its lands: oil and gas, and forest products. Fluctuations in these commodity prices will directly impact net income. In 2014, average gas prices paid to the Company were 14.31% higher than the average in 2013, and average oil prices, excluding plants, were lower in 2014 than in 2013, by 6.30%. If the average oil and gas prices in 2014 reverted to the 2013 averages, income before income tax would have increased by approximately 1.96%.

 

Natural Disasters

 

The Company has approximately 9,637 net acres of timberland in various stages of growth. A typical timber stand will be harvested after 35 years of growth with some thinning occurring during this time. A natural disaster can have a material adverse effect on timber growth, reducing its value. Natural disasters could include a hurricane, tornado, high winds, heavy rains and/or fire cause by lightning.

 

Interest Rate Risks

 

The Company has no direct exposure to changes in foreign currency exchange rates and minimal direct exposure to interest rates. The Company has an unsecured line of credit with Whitney National Bank with no outstanding balance. The Company has no current plans to draw against this line.

 

Item 8.

FINANCIAL STATEMENTS

 

All financial statements required by this item are listed in the Table of Contents to Financial Statements appearing immediately after the signature page of this Form 10-K and are included herein by reference.

 

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

Item 9A.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

 
8

 

 

As of December 31, 2014, an evaluation was performed under the supervision and with the participation of the Company’s management, including the principal executive and financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the principal executive and financial officer, concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2014.

 

 

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) for the Company. In assessing the Company’s ICFR, management follows the Committee of Sponsoring Organizations of the Treadway Commission’s (“COSO”) Internal Control - Integrated Framework (2013) in assessing the effectiveness of the Company’s ICFR. Management shall determine ICFR ineffective if a material weakness exists in the controls.

 

Management has assessed the Company’s ICFR as effective as of December 31, 2014.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

During the quarter ending December 31, 2014, the Company’s Management followed the COSO Internal Control - Integrated Framework (2013) when assessing the ICFR. During the quarter ending December 31, 2014, there have been no changes in the Company’s internal control over financial reporting that has materially affected or is reasonably likely to affect, the Company’s internal control over financial reporting.

 

Item 9B.

OTHER INFORMATION

 

None. 

 

 
9

 

 

PART III

 

Item 10.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

 

The information required by Item 10 as to directors, nominees for directors, reports under Section 16 of the Securities Exchange Act of 1934, the Registrant’s audit committee and an audit committee financial expert is included in the Registrant’s definitive proxy statement to be filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 and is incorporated herein by reference.

 

Executive officers of Registrant are as follows:

 

Name

Age

Position with Registrant

     

Brian R. Jones

54

President, Treasurer and Director

     

Charles D. Viccellio

81

Secretary and Director

 

 

The occupations of such executive officers during the last five years and other principal affiliations are:

 

Name

Occupations

   

Brian R. Jones

President since April 25, 2013, Treasurer and Director since December 1, 2006; Managing member of Brian R. Jones CPA, LLC.

   

Charles D. Viccellio

Secretary since 1997 and Director since 1996. Retired attorney from the law firm of Stockwell, Sievert, Viccellio, Clements & Shaddock, LLP.

 

 

There are no family relationships between any of our directors, except Mrs. Leach and Mrs. Werner are mother and daughter, and executive officers or any arrangement or understanding between any of our executive officers and any other person pursuant to which any executive officer was appointed to his office.

 

Mrs. Leach inherited 25,575 shares in the fourth quarter of 2014 but did not timely file a Form 5 reporting that inheritance.

  

The Company has adopted a Code of Ethics that applies to officers, directors and employees. A copy of the code of ethics will be provided by writing the President at P.O. Box 1864, Lake Charles, Louisiana 70602. 

 

 
10

 

 

Item 11.

EXECUTIVE COMPENSATION

 

The information required by Item 11 is included in the Registrant’s definitive proxy statement to be filed pursuant to Section 14(a) of the Securities and Exchange Act of 1934 and is incorporated herein by reference.

 

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The information required by Item 12 is included in the Registrant’s definitive proxy statement to be filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 and is incorporated herein by reference.

 

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

The information required by Item 13 is included in the Registrant’s definitive proxy statement to be filed pursuant to Section 14(a) of the Securities and Exchange Act of 1934 and is incorporated herein by reference.

 

Item 14.

PRINCIPAL ACCOUNTANTS FEES AND SERVICES

 

The information required by Item 14 is included in the Registrant’s definitive proxy statement to be filed pursuant to Section 14(a) of the Securities and Exchange Act of 1934 and is incorporated herein by reference. 

 

 
11

 

 

PART IV

 

Item 15.

EXHIBITS, FINANCIAL STATEMENTS SCHEDULES

 

 

(a)

Documents filed as part of this report:

 

(1)

Financial Statements. The financial statements filed as part of this report are listed in the Table of Contents to Financial Statements appearing immediately after the signature page of this Form 10-K and are included herein by reference.

 

(2)

Financial Statement Schedules. Financial Statement Schedules are not required.

 

(3)

Exhibits. See (b) below

 

 

(b)

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-Q for the quarterly period ended March 31, 2013.

     
 

10

Contract to Purchase and Sell approximately 3,495 acres in Cameron Parish, Louisiana effective July 3, 2007 is incorporated by reference to Exhibit (10) to Form 10-QSB filed August 13, 2007.

     
 

23.1

Consent of McElroy, Quirk & Burch filed herewith.

     
 

31

Certification of Brian R. Jones, President and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

     
 

32

Certification of Brian R. Jones, President and Treasurer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.

 

101.INS**

XBRL Instance

101.SCH**

XBRL Taxonomy Extension Schema

101.CAL**

XBRL Taxonomy Extension Calculation

101.DEF**

XBRL Taxonomy Extension Definition

101.LAB**

XBRL Taxonomy Extension Labels

101.PRE**

XBRL Taxonomy Extension Presentation

   

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
12

 

  

SIGNATURES

 

Pursuant to the requirement of Section 13 or 15(d) 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 on March 23, 2015.

 

 

 

CKX LANDS, INC.  

 

 

 

 

 

 

 

 

 

 

BY: 

/s/Brian R. Jones   

 

 

Name:   

Brian R. Jones 

 

 

Title: 

President and Treasurer

 

 

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons in the capacities indicated with regard to CKX Lands, Inc. on March 23, 2015.

 

/s/Brian R. Jones    
Brian R. Jones   President, Treasurer and Director

 

 

(Principal Executive and Financial Officer)

     

/s/Charles D. Viccellio

 

 

Charles D. Viccellio   Secretary and Director
     

/s/Laura A. Leach

 

 

Laura A. Leach   Director
     

/s/B. James Reaves, III

 

 

B. James Reaves, III   Director
     

/s/Mary W. Savoy

 

 

Mary W. Savoy   Director
     

/s/William Gray Stream

 

 

William Gray Stream   Director
     

/s/Mary Leach Werner

 

 

Mary Leach Werner   Director
     

/s/Michael B. White

 

 

Michael B. White   Director

 

 
13

 

 

CKX LANDS, INC.

 

Table of Contents

      

 

Page

REPORT OF INDEPENDENT AUDITORS ON THE FINANCIAL STATEMENTS

15

   

FINANCIAL STATEMENTS

 
   

Balance Sheets

16

Statements of Income

17

Statements of Changes in Stockholders’ Equity

18

Statements of Cash Flows

19

Notes to Financial Statements

20-25

  

 
14

 

 

[MCELROY, QUIRK & BURCH LETTERHEAD]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To:

The Board of Directors, and

Stockholders of CKX Lands, Inc.

Lake Charles, Louisiana

 

 

We have audited the accompanying balance sheets of CKX Lands, Inc. as of December 31, 2014 and 2013, and the related statements of income, stockholders' equity, and cash flows for each of the years in the two year period ended December 31, 2014. CKX Lands, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CKX Lands, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

 

 

 

/s/McElroy, Quirk & Burch

Lake Charles, Louisiana

March 23, 2015

 

 
15

 

 

CKX Lands, Inc.

 

Balance Sheets

December 31, 2014 and 2013

 

 

   

2014

   

2013

 
Assets    

Current Assets:

               

Cash and cash equivalents

  $ 5,225,594     $ 4,529,051  

Certificates of deposit

    1,680,000       2,421,000  

Accounts receivable

    146,413       228,014  

Prepaid expense and other assets

    50,085       29,482  

Total current assets

    7,102,092       7,207,547  

Non-current Assets

               

Certificates of deposit

    240,000       --  

Property and equipment:

               

Building and equipment less accumulated depreciation of $90,432 and $84,191, respectively

    --       6,241  

Timber less accumulated depletion of $803,189 and $742,248 respectively

    1,527,425       1,301,639  

Land

    4,957,135       4,531,179  

Total property and equipment, net

    6,484,560       5,839,059  

Total assets

  $ 13,826,652     $ 13,046,606  
                 

Liabilities and Stockholders’ Equity

 

Current Liabilities:

               

Trade payables and accrued expenses

  $ 61,237     $ 76,188  

Total current liabilities

    61,237       76,188  

Deferred income tax payable

    224,426       181,818  

Total liabilities

    285,663       258,006  

Stockholders’ Equity:

               

Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued

    72,256       72,256  

Retained earnings

    13,844,249       13,091,860  

Less cost of treasury stock (157,505 shares)

    (375,516 )     (375,516 )

Total stockholders’ equity

    13,540,989       12,788,600  

Total liabilities and stockholders’ equity

  $ 13,826,652     $ 13,046,606  

 

 

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

 

 
16

 

 

CKX Lands, Inc.

 

Statements of Income

Years Ended December 31, 2014 and 2013

 

 

   

2014

   

2013

 

Revenues:

               

Oil and gas

  $ 1,483,780     $ 1,807,320  

Timber

    698,773       166,637  

Surface

    436,188       139,871  

Total revenues

    2,618,741       2,113,828  

Costs and Expenses:

               

Oil and gas production

    97,702       114,204  

Timber

    23,242       24,212  

Surface

    1,325       1,649  

General and administrative

    520,540       503,280  

Depreciation and depletion

    67,182       101,842  

Total cost and expenses

    709,991       745,187  

Income from operations

    1,908,750       1,368,641  

Other Income / (Expense):

               

Interest income

    16,907       16,974  

Gain on sale of land and other assets

    350       --  

Net other income

    17,257       16,974  

Income before income taxes

    1,926,007       1,385,615  

Federal and State Income Taxes:

               

Current

    598,524       415,844  

Deferred

    42,609       --  

Total federal and state income taxes

    641,133       415,844  

Net income

  $ 1,284,874     $ 969,771  
                 

Per Common Stock (1,942,495 shares):

               

Net income

  $ 0.66     $ 0.50  

Dividends

  $ 0.28     $ 0.28  

 

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

 

 
17

 

 

CKX Lands, Inc. 

 

Statements of Changes in Stockholders’ Equity

Years ended December 31, 2014 and 2013

 

   

Total

   

Retained
Earnings

   

Capital
Stock
Issued

   

Treasury
Stock

 

December 31, 2013 Balance

  $ 12,788,600     $ 13,091,860     $ 72,256     $ 375,516  
                                 

Net income

    1,284,874       1,284,874       --       --  

Dividends Paid

    (543,899 )     (543,899 )     --       --  

Dividends Reversion

    11,414       11,414       --       --  

December 31, 2014 Balance

  $ 13,540,989     $ 13,844,249     $ 72,256     $ 375,516  

 

   

Total

   

Retained
Earnings

   

Capital
Stock
Issued

   

Treasury
Stock

 
                                 

December 31, 2012 Balance

  $ 12,362,728     $ 12,665,988     $ 72,256     $ 375,516  
                                 

Net income

    969,771       969,771       --       --  

Dividends Paid

    (543,899 )     (543,899 )     --       --  

December 31, 2013 Balance

  $ 12,788,600     $ 13,091,860     $ 72,256     $ 375,516  

 

 

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

 

 
18

 

 

CKX Lands, Inc.

 

Statements of Cash Flows

Years Ended December 31, 2014 and 2013

 

   

2014

   

2013

 

Cash flows from operating activities:

               

Net income

  $ 1,284,874     $ 969,771  

Less non-operating activities:

               

Gain from sale of land

    (350 )     --  

Less non-cash (income) expenses included in net income:

               

Depreciation and depletion

    67,182       101,842  

Deferred income tax expense

    42,608       --  

Change in operating assets and liabilities:

               

(Increase) decrease in current assets

    60,998       71,574  

Increase (decrease) in current liabilities

    (14,951 )     35,314  

Net cash provided from operating activities

    1,440,361       1,178,501  
                 

Cash flows from investing activities:

               

Certificate of deposits:

               

Maturity proceeds

    3,131,000       1,476,384  

Purchase

    (2,630,000 )     (3,156,000 )

Timber:

               

Purchases

    (286,727 )     (161,004 )

Land:

               

Proceeds

    350       --  

Purchases and improvements

    (425,956 )     (97,098 )

Net cash provided from (used in) investing activities

    (211,333 )     (1,937,718 )
                 

Cash flows from financing activities:

               

Dividends paid

    (543,899 )     (543,899 )

Dividend reversions

    11,414       --  

Net cash used in financing activities

    (532,485 )     (543,899 )
                 

Net increase (decrease) in cash and cash equivalents

    696,543       (1,303,116 )

Cash and cash equivalents:

               

Beginning

    4,529,051       5,832,167  

Ending

  $ 5,225,594     $ 4,529,051  
                 

Supplemental disclosures of cash flow information

               

Cash payments for:

               

Interest

  $ --     $ --  

Income taxes

  $ 612,000     $ 378,304  

 

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

 

 
19

 

 

CKX Lands, Inc.

Notes to Financial Statements

 

Note 1.

Nature of Business and Significant Accounting Policies

 

Nature of business:

 

The Company’s business is the ownership and management of land. The primary activities consist of leasing its properties for minerals (oil and gas), raising and harvesting timber, and surface use (agriculture, right of ways, hunting).

 

Significant accounting policies:

 

Pervasiveness of estimates:

 

The preparation of financial statements in conformity with GAAP 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.

 

Cash equivalents:

 

Cash equivalents are highly liquid debt instruments with original maturities of three months or less when purchased.

 

Certificate of deposits:

 

Certificates of deposit have maturities greater than three months when purchased, in amounts not greater than $250,000 and no more than one certificate issued per financial institution. All certificates of deposit are held until maturity and recorded at amortized cost which approximates fair value. Certificates of deposit mature through 2016.

 

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. Reforestation costs are capitalized. The timber asset is depleted 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 well’s operator as to the Company’s share of the revenue proceeds together with the withheld severance taxes. In addition, the Company does accrue estimated oil and gas net income based on actual amounts collected from producers. This accrued amount is recorded as accounts receivable.

 

The Company has no capitalized costs relating to oil and gas producing activities and no costs for property acquisition, exploration and development activities.

 

Net Income and Dividends Paid per common stock:

 

Net income and dividends paid per common stock are based on the weighted average number of common stock shares outstanding during the period.

 

 
20

 

 

CKX Lands, Inc.

Notes to Financial Statements

 

Dividends

 

Pursuant to a dividend reversion clause in the Company’s Articles of Incorporation, dividends not claimed within one year after the dividend became payable will expire and revert in full ownership to the Company and the Company’s obligation to pay such dividend will cease.

 

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.

 

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 3 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 2.

Oil and Gas Leases

 

Results of oil and gas leasing activities for the year ending December 31, 2014 and 2013 are as follows:

 

   

2014

   

2013

 

Gross revenues

               

Royalty interests

  $ 1,366,281     $ 1,716,192  

Lease Fees

    117,499       91,128  
      1,483,780       1,807,320  

Production costs

    97,702       114,204  

Results before income tax expense

    1,386,078       1,693,116  

Estimated income tax expense (40%)

    554,431       677,246  

Results of operations from producing activities excluding corporate overhead

  $ 831,647     $ 1,015,870  

 

There were no major costs, with the exception of severance taxes, incurred in connection the Company's oil and gas leasing activities, which are located entirely within the United States, during the years ended December 31, 2014 and 2013.

 

Reserve quantities (unaudited):

 

Reserve information relating to estimated quantities of the Company's interest in proved reserves of natural gas and crude including condensate and natural gas liquids is not available. Such reserves are located entirely within the United States. A schedule indicating such reserve quantities is, therefore, not presented. All oil and gas royalties come from Company owned properties that were developed and produced by producers, unrelated to Company, under oil and gas mineral lease agreements. 

 

 
21

 

 

CKX Lands, Inc.

Notes to Financial Statements

 

Note 2.

Oil and Gas Leases (continued)

 

Company’s royalty and working interests share of oil and gas, exclusive of plant products, produced from leased properties:

 

   

2014

   

2013

 
                 

Net gas produced (MCF)

    46,457       42,117  

Net oil produced (Bbl)

    10,593       13,273  

 

Note 3.

Income Taxes     

 

The Company files federal and state income tax returns on a calendar year basis.

 

The net deferred tax liability in the accompanying balance sheets includes the following components at December 31, 2014 and 2013:

 

   

2014

   

2013

 
   

Current

   

Non-Current

   

Current

   

Non-Current

 
                                 

Deferred tax assets

  $ --     $ --     $ --     $ --  

Deferred tax liabilities

    --       (224,426 )     --       (181,818 )
    $ --     $ (224,426 )   $ --     $ (181,818 )

 

Reconciliations between the United States Federal statutory income tax provision, using the statutory rate of 34%, and the Company’s provision for income taxes at December 31, 2014 and 2013 are as follows:

 

   

2014

   

2013

 

Income tax on income before extraordinary item:

               

Tax at statutory rates

  $ 654,842     $ 471,109  

Tax effect of the following:

               

Statutory depletion

    (69,680 )     (87,526 )

Section 1033 deferred gain

    (36,217 )     --  

State income tax

    49,519       33,546  

Other

    60       (1,285 )

Income tax on income

  $ 598,524     $ 415,844  

 

Deferred income taxes result from timing differences in the recognition of revenue and expenses for tax and financial statement purposes. The effect of these timing differences at December 31, 2014 and 2013 is as follows:

 

   

2014

   

2013

 
   

Current

   

Non-Current

   

Current

   

Non-Current

 

Casualty loss

    --       (121,239 )     --       (121,239 )

Deferred gain

    --       (103,187 )     --       (60,579 )
    $ --       (224,426 )   $ --       (181,818 )

  

 
22

 

 

Note 4.

1033 Exchange:

 

During the third quarter of 2014, the Company sold a right of way to a utility company under threat of expropriation for $106,521 and the gain was $106,521. This transaction was structured as a “deferred exchange” pursuant to Paragraph 1033 of the Internal Revenue Code (1033 Exchange) for income tax purposes and as such the gain of $106,521 was deferred for income tax purposes. During September, 2014, the Company purchased 180 acres of timberland located in Jefferson Davis Parish, Louisiana for $279,828 of which $63,000 was the value of timber on the land. The land valued at $216,828 was used as replacement property for the 1033 Exchange deferred gain above. The Company recognized a deferred income tax of $42,609 on this transaction.

 

Note 5.

Company Operations

 

The Company’s operations are classified into three principal operating segments that are all located in the United States: oil and gas, surface and timber. 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.

 

Following is a summary of segmented operations information for 2014 and 2013:

 

   

2014

   

2013

 

Revenues

               

Oil and Gas

  $ 1,483,780     $ 1,807,320  

Timber

    698,773       166,637  

Surface

    436,188       139,871  

Total

    2,618,741       2,113,828  

Cost and Expenses

               

Oil and Gas

    97,702       114,204  

Timber

    84,183       119,368  

Surface

    1,325       1,649  

Total

    183,210       235,221  

Income from Operations

               

Oil and Gas

    1,386,078       1,693,116  

Timber

    614,590       47,269  

Surface

    434,863       138,222  

Total

    2,435,531       1,878,607  

Other Income (Expense) before Income Taxes

    (509,524 )     (492,992 )

Income before Income Taxes

    1,926,007       1,385,615  
                 

Identifiable Assets, net of accumulated depreciation and depletion

               

Oil and Gas

    --       --  

Timber

    1,527,425       1,301,639  

Surface

    --       --  

General Corporate Assets

    12,299,227       11,744,967  

Total

    13,826,652       13,046,606  

  

 
23

 

 

 

Note 5.

Company Operations (continued)

 

Capital Expenditures

               

Oil and Gas

    --       --  

Timber

    286,727       161,004  

Surface

    --       --  

General Corporate Assets

    425,956       97,098  

Total

    712,683       258,102  
                 

Depreciation and Depletion

               

Oil and Gas

    --       --  

Timber

    60,941       95,155  

Surface

    --       --  

General Corporate Assets

    6,241       6,686  

Total

  $ 67,182     $ 101,841  

 

There are no intersegment sales reported in the accompanying income statements. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on income or loss from operations before income taxes excluding nonrecurring gains and losses on securities held available-for-sale. 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.

 

Revenue from customers representing 5% or more of total revenue was:

 

Count

   

2014

   

2013

 
1     $ 680,000     $ 759,000  
2       624,000       236,000  
3       173,000       177,000  
4       173,000       153,000  
5       160,000       129,000  
6     $ 138,000        

 

Note 6.

Line of Credit

 

The Company has available an unsecured line of credit in the amount of $5,000,000. The balance on this line of credit was $-0- at December 31, 2014 and 2013.

 

Note 7.

Supplementary Income Statement Information

 

Taxes, other than income taxes, of $186,161 and $203,287, were charged to expense during 2014 and 2013, respectively.

 

Note 8.

Contingencies:

 

There are no material contingencies known to Management. The Company does not participate in off balance sheet arrangements.

 

Note 9.

Concentration of Credit Risk

 

The Company maintains its cash balances in two financial institutions. The amount on deposit in the financial institution is insured by the Federal Deposit Insurance Corporation up to $250,000.

 

 
24

 

 

Note 10.

Related Party Transactions

 

Office rent of $4,800 and $4,600, was paid to a company owned by President in 2014 and 2013, respectively.

 

During 2014 and 2013, $4,517 and $4,311, respectively, was paid to the President’s spouse’s law firm.

 

During 2013, $3,810 was paid to the Secretary’s prior law firm for legal work. No amounts were paid to his prior law firm in 2014.

 

Note 11.

Subsequent Events

 

On March 19, 2015, the Company’s Board of Directors declared a dividend of seven cents ($0.07) per common share to shareholders of record April 2, 2015 and payment date of April 16, 2015.

 

Note 12.

Disclosures about Fair Value of Financial Instruments

 

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.

   

Certificate of Deposit:

Held until maturity and recorded at amortized cost which approximates fair value.

   

Securities available-for-sale

Valued at fair value which equals quoted market price.

 

The estimated fair value of the Company's financial instruments at December 31, 2014 and 2013 are as follows.

 

(Presented in thousands)

         

2014

     

2013

 
      Level    

Carrying
Value

   

Fair Value

   

Carrying
Value

   

Fair Value

 

Financial Assets:

                                       

Cash and cash equivalents

    1     $ 5,226     $ 5,226     $ 4,529     $ 4,529  

Certificate of deposit – short term

    1       1,680       1,680       2,421       2,421  

Certificate of deposit – Long term

    1       240       240       --       --  
            $ 7,146     $ 7,146     $ 6,950     $ 6,950  

 

 

 25