FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018

TABLE OF CONTENTS

Cautionary Note Regarding Forward-Looking Statements

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the “Safe Harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, without limitation, the information contained under the heading “Outlook for Fiscal Year 2019” in Item 7 of this report, and any statements containing forward-looking terminology including “may,” ”should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “projects,” or other similar words. These statements are not a guarantee of future performance and are subject to risks, uncertainties and other factors, some of which are set forth in “Item 1A. Risk Factors.” Many risks are beyond our control and difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in 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 contained in the Company’s future reports periodically filed with the SEC.

The “Company”, “we,” “us,” and “our,” refer to CKX Lands, Inc.

PART I

GeneralBusiness Description

CKX Lands, Inc. is, a Louisiana corporation, organizedbegan operations in 1930 asunder the name Calcasieu Real Estate & Oil Co., Inc. to receive non-producing mineral royalties spun offIt was originally organized as a spin-off by a bank operating in southwest Louisiana bank.Louisiana. The purpose of the spin-off was to form an entity to hold non-producing mineral interests which regulatory authorities required the bank to dispose of. Over the years, as some of the royalties yielded oil and gas income,mineral interests began producing, the Company used part of the proceeds to purchaseacquire land. On May 17, 2005,In 1990, the Company changedmade its name from Calcasieu Real Estate & Oil Co., Inc. to CKX Lands, Inc. The primary reason for the changelargest acquisition when it was to help clarifyone of four purchasers that the Company is not directly involvedbought a fifty percent undivided interest in oil and gas exploration or operations. As used herein, the “Company” or “CKX” refers to CKX Lands, Inc.approximately 35,575 acres in southwest Louisiana.

The Company’s shares are listed on the NYSE MKT (previously known as NYSE AMEX), under the symbol CKX. As of March 24, 2018, 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 smaller reporting company under the Securities and 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 SEC for the registrant's most recent fiscal year.  Requests should be sent to CKX Lands, Inc., 1508 Hodges Street, Lake Charles, LA 70601. Copies may also be obtained throughToday the Company’s website, www.ckxlands.com.

The Company owns land, timber, andincome is derived from mineral interests and collects income through its ownership in the form of oil and gas royalties, timber sales and surface payments from its lands. CKX receives income from royalty interests 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 activities in that CKX does not explore for oil and gas or operate wells. These oil and gas activities are performed by unrelated third parties.

Oil and gas royalties are paid by the operators who own the wells. Timber income is paid by the highest bidder for the timber. There are several mills that compete for timber. Surface income is received for farming, right of wayways or other surface land uses. The prices paid for oil, gas and othertimber depend on national and international market conditions. Prices paid for surface leases depend on regional and local market conditions.

The source of all raw materials for the Company is the land itself. All oil and gas from our lands will eventually deplete, but we have no access to this depletion information. Timber and agriculture are renewable resources. The Company’s three reportable business segments are oil and gas, timber, and surface. Segment revenue and related business segment financial information are included in the notes to financial statements.

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. The volatility in the daily commodity pricing of a barrel of oil or a thousand cubic feet (“MCF”) of gas will also cause fluctuations in the Company’s oil and gas income. Oil and gas revenues were 49% of the Company’s total revenues in 2018 and 53% in 2017.

CKX has small royalty interests in 29 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 0.0045% 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. 

Timber income is derived from sales of timber on Company lands. The timber income will fluctuate depending on our ability to secure stumpage agreements in the regional markets, timber stand age, and/or stumpage commodity prices. Timber is a renewable resource that the Company actively manages.

Surface income is earned from various recurring and non-recurring sources. Recurring surface income is earned from lease arrangements for farming, recreational and commercial uses. Non-recurring surface income can include such activities as pipeline right of ways, and temporary worksite rentals.

In managing its lands, the Company relies on and has established relationships with real estate, forestry, environmental and agriculture consultants as well as attorneys with legal expertise in general corporate matters, real estate, and minerals.

The Company actively manages its lands and timber, howeversearches for additional real estate for purchase in Louisiana with a focus on southwest Louisiana. When evaluating unimproved real estate for purchase, the Company iswill consider numerous characteristics including but not involved inlimited to timber fitness, agriculture fitness, future development opportunities and/or mineral potential. When evaluating improved real estate for purchase, the exploration Company will consider characteristics including but not limited to geographic location, quality of existing revenue streams, and/or productionquality of oil and gas nor does it actively farm for agricultural purpose its lands.

the improvements. CKX owns a 100% interest in 7,5177,500 acres and undivided interests ranging from 1.660% to 77.778% in 37,85543,514 acres, resulting in an ownership of approximately 14,31513,991 net acres.

CKX does not perform or cause to havebe 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 for the timber. There are several mills 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 53.22% of the Company’s total revenues in 2017 and 59.17% in 2016.

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. The Company’s three reportable business segments are oil and gas, timber, and surface. Segment revenue and related business segment financial information are included in the notes to financial statements.

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 permit the size & location of all oil and gas producing units. The operator of the oil & gas units is responsible for this permitting process.

Employees

The Company has three employees, all of whom areone employee, who is part-time. There are two officers, and one clerical person. The Company is not subject to union contracts nor does the Company have any hospitalization,medical benefit, pension, profit sharing, option or deferred compensation programs.

Customers

The Company’sCompany’s customers are those who have mineral leases on Company lands, purchase timber in competitive bids or execute surface leases for farming, hunting, right of ways or other purposes. During 2017,2018, the Company received approximately 62.93%46.41% of its total revenues from the following customers:

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 Company does not need government approval of its principal products or services except that the State of Louisiana must permit the size and location of all oil and gas producing units. The operator of the oil and gas units is responsible for this permitting process.

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.

Significant Risk Factors

In addition to the other information set forth in this report, you should carefully consider the following risks, which could materially affect our business, financial condition, or results of operations in future periods. The Company’srisks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, andfinancial condition, or results of operations are subject to certain risks and uncertainties, including:in future periods.

Reliance upon Oil and Gas Discoveries

The Company’s mostA significant riskportion of our revenues is its reliance upon others to perform exploration and development forderived from oil and gas activities on its land. Future incomeour lands. We rely on third parties to conduct that activity.

We rely on third parties to conduct oil and gas exploration and production activity on our lands. If we are not successful in attracting third parties to conduct that activity or if there is dependentany significant interruption in existing activity on othersour lands, our results of operations, financial condition and cash flows, would be adversely affected. Additionally, our ability to generate future earnings depends on third parties finding new production on the Company’sour 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.replacing present production.

Commodity PricesOur revenues could be negatively impacted by declines in commodity prices for oil, natural gas, and timber, among others.

The majorityWe earn a significant portion of the Company’sour operating income comes from the sale of commodities produced from itsour lands: oil and gas, and timber. Fluctuations in the prices for these commodity pricescommodities will directly impact our cash flow, net income. In 2017, average gas prices paid to the Company were 34.01% higher than the average in 2016,income and average oil prices, excluding plants, were higher in 2017 than in 2016, by 21.19%. If the average oil and gas prices in 2017 reverted to the 2016 averages, income before income tax would have decreased by approximately 16.21%.

Natural Disastersfinancial condition.

The Company hasAdditionally, because certain of our lands are leased to farmers, declines in the commodity prices for the crops they grow may impact their ability to make lease payments, and therefore could adversely affect our cash flow, results of operations and financial condition.

Our operations and properties could be adversely affected by hurricanes or other adverse weather events, natural disasters, or other significant disruptions.

Our properties are located principally in southwest Louisiana, where major hurricanes and flooding have occurred. Depending on where any hurricane makes landfall or flooding occurs, our properties could be significantly damaged, and income-producing activities on our properties could be disrupted. In addition, the occurrence and frequency of hurricanes and flooding in Louisiana could also negatively impact demand for the use of our real estate assets because of perceptions of hurricane and flooding risks. In addition to hurricanes, the occurrence of other natural disasters and climate conditions in Louisiana, such as tornadoes, fires, unusually heavy or prolonged rain, droughts, and heat waves, could have an adverse effect on our ability to use our properties or realize income from our properties.

We have approximately 10,61810,601 net acres of timberland (pine and hardwood) in various stages of growth or age classes. A typical pine timber stand will be harvested after 30 to 35 years of growth with some thinning occurring during this time. A hardwood stand will be harvested after 45 to 50 years of growth. A natural disaster can have a material adverse effect on timber growth, reducing its value. Natural disasters that could affect our timber lands include a hurricane, tornado, high winds, heavy rains and flooding, and/or fire causecaused by lightning.lightning or other sources.

If any of the events described above occurs, we may experience disruptions to our operations and damage to our properties, which could have an adverse effect on our business, our financial condition, our results of operations, and our cash flows.

Interest Rate RisksOur land holdings are concentrated in southwest Louisiana, and we therefore may suffer economic harm because of adverse conditions in that region.

Our land holdings are located principally in southwest Louisiana. Due to the concentration of our properties in this area, our performance is dependent on local economic conditions. This area has experienced periods of economic decline in the past and may do so in the future.

We rely on third party managers for day-to-day property management of certain of our properties.

We rely on local third-party managers for the day-to-day management of our timberland properties. The cash flows from our timberland properties may be adversely affected if the property manager fails to provide quality services. These third-party managers may fail to manage our properties effectively or in accordance with the terms of our agreement with them. If any of these events occur, we could incur losses or face liabilities from the loss or injury to our property or to persons at our properties. In addition, disputes may arise between us and third-party managers, and we may incur significant expenses to resolve those disputes or terminate the relevant agreement with the third parties and locate and engage competent and cost-effective alternative service providers to manage the relevant properties. Additionally, third party managers may manage and own other properties that may compete with our properties, which may result in conflicts of interest and decisions regarding the operation of our properties that are not in our best interests.

Potential environmental liabilities could result in substantial costs to us or cause our land to lose value.

Under federal, state, and local environmental laws, ordinances and regulations, we may be required to investigate and clean up the effects of releases of hazardous substances or petroleum products on our properties because of current or past ownership or operation of oil and gas activities on our lands. If previously unidentified environmental problems arise, we may have to make substantial payments, which could adversely affect our cash flow. As an owner of properties, we may have to pay for property damage and for investigation and cleanup costs incurred in connection with a contamination. The law typically imposes cleanup responsibility and liability regardless of whether an owner knew of or caused the contamination. Changes in environmental regulations or the discovery of environmental damage on our lands may cause the value of our lands to decline, may impact the development potential of our undeveloped land or could increase operating costs due to the cost of complying with new regulations.

Our overall business is subject to risks associated with the real estate industry.

We are subject to all risks related to investment in real estate, many of which relate to the general lack of liquidity of real estate investments, including, but not limited to:

Our common stock may not have an active, liquid, and orderly trading market, and our stock price may be volatile.

Our common stock may not have an active, liquid, and orderly trading market. Active, liquid, and orderly trading markets usually result in less price volatility and more efficiency in carrying out purchase and sale orders. The trading volume in our common stock may fluctuate and cause price variations to occur.

The Companymarket price of our common stock could also vary significantly because of a number of other factors, some of which are beyond our control, including the following:

If the per share trading price of our common stock declines significantly, stockholders may be unable to resell their shares at or above the price paid for them. We cannot assure stockholders that the per share trading price of our common stock will not fluctuate or decline significantly in the future.

In the past, securities class action litigation has no direct exposureoften been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have an adverse effect on our financial condition, results of operations, cash flows and our ability to changespay dividends on, and the per share trading price of, our common stock.

Our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2018.

Our principal executive and financial officer evaluated our internal control over financial reporting as of December 31, 2018, and concluded that as of that date, they were not effective due to material weaknesses. A material weakness is a deficiency, or combination of deficiencies, in foreign currency exchange ratesinternal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In addition, as a result of the material weaknesses, our principal executive and minimal direct exposurefinancial officer concluded that, as of December 31, 2018, our disclosure controls and procedures were not effective. Until our disclosure controls and procedures and internal control over financial reporting are remediated, they could lead to interest rates. The Company haserrors in our financial results and other public filings, which could have an unsecured lineadverse effect on our business, our financial condition, our results of credit with Whitney National Bank with no outstanding balance. The Company has no current plansoperations, and our cash flows.

We may not have the personnel necessary to draw against this line.remediate our disclosure controls and procedures and internal control over financial reporting. We presently have one part-time employee, who is both our principal executive and financial officer. We cannot assure you that we will be able to develop and implement the necessary controls and procedures without hiring additional employees, incurring significant additional expense, or at all.

Not applicable.

The Company owns approximately 14,31513,991 net acres all located in Louisiana. The approximate gross and net acres located in each Louisiana parish are presented below.

Included in the 14,315net13,991 net acres presented above, are approximately 7,5177,500 acres owned 100% by the Company. The Louisiana parish location for these 100% owned lands is presented below.below:

For management purposes, the Company classifies the 14,315the 13,991 net acres owned by CKX as follows: 10,61810,522 net acres are timber lands, 2,5592,380 net acres are agriculture lands, 944895 net acres are marsh lands and 194 net acres are located in metropolitan areas.

The table below shows, for the years ended December 31, 2017 and December 31, 2016, 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.

Notes to above schedule:

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

⁽²⁾ Excludes plant products.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The Company was not involved in any legal proceedingsproceedings as of December 31, 2017.2018.

Not applicable.

PART II

The Company’s Common Stock is tradedCompany’s common stock trades on the NYSE MKT (previously known as NYSE AMEX)American 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 CKX. 

Common Stock and there had been only limited and sporadic trading in the Common Stock, principally among the Company’s shareholders.  On

As of March 21, 2018,15, 2019, there were approximately 456 stockholders of record.1,942,495 shares outstanding. There were no sales of unregistered securities of the Company and no purchases or sales of CKX equity securities during 2017 by the Company.  The closing price for the Common Stock was $10.30 on March 21,Company during 2018. The following table sets forth the high and low sales prices for the Common Stock by quarter during 2017 and 2016.

Holders

On March 15, 2019, we had 452 stockholders of record.

Dividend Policy

The Company has changed the manner in which it determines whether a dividend will be declared.  The Company will no longer have a “regular” or “extra” dividend as have been defined in prior filings.reports.  In determining whether a dividend will be declared, the Board of Directors will take into account the Company’s prior fiscal year’s cash flows from operations and the current economic conditions among other information deemed relevant.

Pursuant to a dividend reversion clause in the Company’sCompany’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 20172018 and 2016,2017, the Company received no dividend reversions.

Not applicableDisclosure in response to this item is not required of a smaller reporting company.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.

Overview

CKX Lands, Inc. began operations in 1930 under the name Calcasieu Real Estate & Oil Co., Inc. It was originally organized as a spin-offspin-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 the Company’sCompany’s income is derived from mineral royalties, timber sales and surface payments from its 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.

CKX leases its property to oil and gas operators and collects income through its land ownership in the form of oil and gas royalties and lease rentals and geophysical revenues. The Company’sCompany’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. The volatility in the daily commodity pricing of a barrel of oil or aan MCF of gas will also cause fluctuations in the Company’s oil and gas income.

CKX has small royalty interests in 3129 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 0.0045% 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 reserves under the Company’s current land holdings will be depleted.

Timber income is derived from sales of timber on Company lands. The timber income will fluctuate depending on our ability to secure stumpage agreements in the regional markets, timber stand age, and/or stumpage commodity prices. Timber is a renewable resource that the Company actively manages.

Surface income is earned from various recurring and non-recurring sources. Recurring surface income is earned from lease arrangements for farming, recreational and commercial uses. Non-recurring surface income can include such activities as pipeline right of ways, and temporary worksite rentals.

In managing its lands, the Company relies on and has established relationships with real estate, forestry,, environmental and agriculture consultants as well as attorneys with legal expertise in general corporate matters, real estate, and minerals.

The Company actively searches for additional real estate for purchase in Louisiana with a focus on southwest Louisiana. When evaluating unimproved real estate for purchase, the Company will consider numerous characteristics including but not limited to timber fitness, agriculture fitness, future development opportunities and/or mineral potential. When evaluating improved real estate for purchase, the Company will consider characteristics including but not limited to geographic location, quality of existing revenue streams, and/or quality of the improvements.

Results of Operations - for the years ended December 31, 2018 and 2017

Fiscal Year Revenue2017 Compared to Fiscal Year 2016

Total revenues for 20172018 were $1,144,585,$1,194,763, an increase of 32.57%approximately 4% when compared with 20162017 revenues of $863,402.$1,144,585. Total revenue consists of oil and gas, timber, and surface revenues. Components of revenues for the year ended December 31, 2018 as compared to 2017, are as follows:

Oil and Gas

Oil and gas revenues were 53.22%49% and 59.17%53% of total revenues for 2018 and 2017, and 2016, respectively. OilA breakdown of oil and gas revenues consist of royalty revenue and lease rental revenue. Oil and gas revenues changed betweenfor the years ended December 31, 2018 as compared to 2017 and 2016are as follows:

During CKX received oil and/or gas revenues from 95 and 103 wells during the years ended December 31, 2018 and 2017, reported gas production decreased by approximately 5,831 MCF, and the average gas sales price per MCF increased by approximately $0.87 to $3.42 resulting in an increase in gas revenue of $22,389. Revenue from oil production, including plants, increased by $76,785. This increase was a net result from an increase in the average barrel sales price of $8.45 to $48.32, not including plants, and a decrease in production of approximately 243 barrels, not including plants, and an increase in plants revenue of $17,478.respectively.

The following schedule summarizes barrels and MCF produced and average price per barrel and per MCF for the years ended December 31, 2018 and 2017:

The following 8 fields produced 91.72% of the Company’s oil and gas revenues in 2017. The following table shows the number of barrels of oil (Bbl Oil) and MCF of gas (MCF Gas) produced from these fields.

Note to above schedule:

In 2016, the following 6 fields produced 90.29% 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.

Note to above schedule:

The Company was a lessor in the following non-producing mineral leases:

Lease and geophysical revenues decreased for the year ended December 31, 2018, as compared to 2017, by $16,514. These revenues are dependent on oil and gas producers’ activities, are not predictable and can vary significantly from year to year.

Timber

Timber revenuerevenues were 38% and 20% of total revenues for 2018 and 2017, respectively. Timber revenues increased $98,251 from 2016.for the year ended December 31, 2018, as compared to the year ended December 31, 2017, by $230,066. The Company actively marketed itsincrease in revenues is due to our continued marketing of our timber during 2017 and entered into four (4)securing stumpage agreements. Generally,agreements over the last two years and dryer weather, conditions were too wet in 2017which was favorable for harvesting activity to occur on much of the acreage under contract for harvest and thinning, however conditions improved in the latter part of the 4^th quarter allowing for limited harvesting.activity.

Surface

Surface revenues were 13% and 27% of total revenues for 2018 and 2017, respectively. Surface revenues decreased for the year ended December 31, 2018, as compared to 2017, by $152,229. This is primarily due to revenue increased by $84,666 from 2016. Surface revenue includes revenue from farm leases,related to pipeline right of way grants, hunting leasesagreements that were received in 2017 and not in 2018.  As previously noted, pipeline, utility and other surface leases.

Costs, expenseright of ways are not unusual to the Company; however, these types of revenue are not predictable and (gains) decreasedcan vary significantly from 2016 by $72,586year to $603,456 primarily due to

Other increases and decreases were comparative to prior year expense amounts.year.

Costs and Expenses

Oil and gas costs increased slightly for the year ended December 31, 2018 as compared to 2017 by $916. These changes were due to an increase in production taxes on oil and gas revenue. Production taxes consist of federal, state, and local taxes. 

Timber costs increased for the year ended December 31, 2018 as compared to 2017 by $9,948. This is primarily due to the increased timber revenue occurring during the year ended December 31, 2018.

Surface costs decreased for the year ended December 31, 2018 as compared to 2017 by $20,293. This is primarily due to lower repair and maintenance cost and no legal contract review as the Company did not enter into any new contracts in 2018.

General and administrative expenses increased for the year ended December 31, 2018 as compared to 2017 by $78,492. This is primarily due to officer bonuses for land disposition administration paid in the first quarter of 2018 and increased accounting, legal and professional services fees, offset by decreases in director fees.

Gain on Sale of Land and Equipment

Gain on sale of land and equipment was $881,654 and $34,711 for the years ended December 31, 2018 and 2017, respectively. For the year ended December 31, 2018, this represented a gain on sale of land of $111,174 wholly owned, $767,147 from a 1/6^th interest, and of equipment of $3,333. For the year ended December 31, 2017, this represented a gain on sale of land of $6,150 wholly owned, and $28,561 from a 1/6^th interest.

Outlook for Fiscal Year 20189

The Company will continue to consider and evaluate commercial, agricultural and timber lands for acquisitions and evaluate its current holdings for divestiture. The Company maywill consider purchases outside of southwest Louisiana.  

The 2017 average price per BblLouisiana and MCF both increased from 2016 average prices. The Company expects oil and gas average prices to increase from 2017 levels andwill consider developing its properties for production levels to be lower resulting in flat oil and gas revenues for 2018 when compared to 2017 revenues.commercial or residential purposes.  

The Company will continue to actively market its timber. Although 2018 did not seetimber. The rain levels were lower in 2018 when compared with 2017, so the harvesting of timber was not as highhampered as 2017, the rains were unseasonable high and did hamper harvesting activities.2017. Stumpage prices have also been depressed when compared to recent historical prices. The companyCompany will seek to enter into additional stumpage agreement.agreements.

The Company began directly managing its lands in 2017, andexcept for approximately 5,030 acres of timber property in which the Company owns an undivided 1/6 interest, which is managed by Walker Louisiana Properties. The Company believes the direct land management and continuing economic activity in southwest Louisiana will be a catalyst for increased surface revenue.

Liquidity and Capital Resources

Sources of Liquidity

The Company’sCompany’s current assets totaled $4,478,715$5,631,013 and totalcurrent liabilities equaled $408,176$216,815 at December 31, 2017.2018.

The Company has an unsecured revolving line of credit with Hancock Whitney Bank. The line of credit permits the Company to draw a maximum aggregate amount of $1,000,000. The line of credit matures on June 25, 2019, and borrowings under the line of credit bear interest at a rate of 4.25%. As of December 31, 2018, there was no outstanding balance under the line of credit.

In the opinion of management, current cash flow from operations, cash and investmentscash equivalents, and certificates of deposit are adequate for projected operations and possible land purchases.

Additional sources of liquidity include the Company’s available bank line of credit for $1,000,000. The Company has no outstanding balance nor does it plan to draw on this line of credit. The Company does not include this line of credit availability when assessing the adequacy of liquidity or capital resources for projected operations or possible land purchases.

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 consists 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.acquisitions.

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, which requiresdeclared and paid a $0.12 per common share dividend during the recognitionquarter ended March 31, 2018. During the first quarter of deferred tax assetseach future calendar year, the Company anticipates determining whether a dividend will be declared. In determining whether a dividend will be declared, the board of directors will take into account the Company’s prior fiscal year’s cash flows from operations 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. Reforestation costs are capitalized and added to the timber asset account. The timber asset is depleted when the timber is harvested based on the relationship between the carrying value of the timber and the total timber volume estimated to be harvested over the harvest cycle.current economic conditions among other information deemed relevant.

Forward Looking StatementsAnalysis of Cash Flows

Certain matters containedNet cash provided by operating activities decreased by $162,697 to $241,562 for the year ended December 31, 2018, compared to $404,253 for the year ended December 31, 2017. The decrease in this report are forward-looking statements withincash provided by operating activities was attributable primarily to the meaninggain on the sale of the “Safe Harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements include, without limitation, the information contained under the heading “Outlook for Fiscal Year 2018”land partially offset by an increase in Item 7 of this report, and any statements containing forward-looking terminology including “may”, ”should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “plan,” “intend,” “projects,” or other similar words. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors set forth in “Item 1A. Risk Factors” above, 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 above under “Item 1A Risk Factors” and information contained in the Company’s reports periodically filed with the SEC.net income.

Net cash provided by investing activities was $199,869 and $361,213 for the year ended December 31, 2018, and 2017, respectively.  For the year ended December 31, 2018, this included purchases of certificates of deposit of $3,145,000 and purchases of fixed assets of $55,438, offset by proceeds from maturity of certificates of deposit of $2,662,890 and from the sales of fixed assets of $982,242.   For the year ended December 31, 2017, this includes purchases of certificates of deposits of $3,132,890, purchases of fixed assets of $155,285, offset by proceeds from maturity of certificates of deposits of $3,610,000 and proceeds from the sale of fixed assets of $39,388. 

Net cash used in financing activities was $233,099 and $194,250 for the year ended December 31, 2018, and 2017, respectively. For the year ended December 31, 2018, and 2017 this included dividends paid.

Significant Accounting Policies

For a discussion of significant accounting policies, see Note 1 in the notes to our audited financial statements included elsewhere in this Form 10-K.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Not applicableDisclosure in response to this item is not required of a smaller reporting company.

AllThe Company’s financial statements, required together with the report of the independent registered public accounting firm thereon and the notes thereto, are presented beginning at page F-1. The Company’s balance sheets as of December 31, 2018 and 2017 and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended have been audited by this item are listedMaloneBailey, LLP. MaloneBailey, LLP is an independent registered public accounting firm. These financial statements have been prepared in accordance with accounting principles generally accepted in the TableUnited States of ContentsAmerica and pursuant to Financial Statements appearing immediately afterRegulation S-K as promulgated by the signature page of this Form 10-KSecurities and Exchange Commission and are included herein by reference.pursuant to Part II, Item 8 of this Form 10-K. 

None.

Evaluation of Disclosure Controls and Procedures

The Company maintainsPursuant to Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, the Company’s principal executive and financial officer carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report.   Disclosure controls and procedures mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the Company’s Securitiesreports that it files or submits under the Exchange Act reports is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’sissuer’s management, including its principal executive and principal financial officerofficers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As  Based on its evaluation, management concluded that as of December 31, 2017, 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 that2018, the Company’s disclosure controls and procedures were not effective asdue to the existence of December 31, 2017.material weaknesses in internal control over financial reporting, discussed more fully below.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’sCompany’s management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) for the Company.  In assessingThe Company’s management, specifically its principal executive and financial officer, has assessed the effectiveness of the Company’s ICFR, management followsinternal control over financial reporting as of December 31, 2018 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission’s (“COSO”)Commission (COSO) in Internal Control -– Integrated Framework (2013). Management shall determine ICFR ineffective if a material weakness exists in the controls.

Management and SEC guidance on conducting such assessments.  Based on this assessment, management has assessed the Company’s ICFR as effectiveconcluded that, as of December 31, 2017.2018, the Company’s internal control over financial reporting is not effective due primarily to a lack of internal staffing resulting in a lack segregation of duties, and a lack of evidence of review and oversight of certain financial processes, including processes that have been outsourced to a third-party service organization.  Management is currently evaluating the steps that would be necessary to eliminate these material weaknesses. 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding ICFR 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 reportChanges in this annual report.Internal Controls over Financial Reporting

During the quarter ending December 31, 2017, there have beenThere were no changes in the Company’s ICFRinternal control over financial reporting that hasoccurred during its fourth fiscal quarter ended December 31, 2018 that have materially affected, or isare reasonably likely to materially affect, the Company’s ICFR.internal control over financial reporting.

None.

PART III

TheThe 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 iswill be 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:

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

Directors, principal occupation or experience, and related business name and activity follows: