CKX LANDS, INC. (Form: 10-K, Received: 03/21/2019 17:32:21)

Note 1 :

Nature of Business and Significant Accounting Policies

Nature of B usiness

The Company was incorporated in the State of Louisiana on June 27, 1930. 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 A ccounting P olicies

Use 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.

Concentration of Credit Risk

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

Cash E quivalents

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

Certificate of D eposits

Certificates of deposit have maturities greater than three months when purchased, in amounts not greater than $250,000. All certificates of deposit are held until maturity and recorded at cost which approximates fair value. Certificates of deposit mature through 2020.

Equity Investment

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition of Financial Assets and Financial Liabilities,” (ASU 2016-01), which makes targeted amendments to the guidance for recognition, measurement, presentation and disclosure of financial instruments. The guidance under ASU 2016-01 requires equity investments, other than equity method investments, to be measured at fair value with changes in fair value recognized in net income. As of December 31, 2018, the Company classified $244,831 of mutual funds as equity securities. The Company invests in ultra-short, high quality U.S. dollar money market, foreign funds, and obligations issued by the US Government. The Company did not hold any equity investments until the fourth quarter of 2018, accordingly, there are no effects on the Company’s investments under the adoption of ASU 2016-01.”

Accounts Receivable

The Company’s 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, the Company estimates the amount to be received based on the last month’s royalties that were received from that particular company. The Company does not maintain an allowance for doubtful accounts because other than the accrual for earned but not received royalties, it has no accounts receivable.

Property, Building and Equipment

Property, building, and equipment is stated at cost. Major additions are capitalized. Maintenance and repairs are charged to income as incurred. Depreciation is computed on the straight-line and accelerated methods over the following estimated useful lives of the assets:

Furniture and equipment (years)			5	-	7
Land improvements (years)				15

Impairment of L ong-lived Assets

Long-lived assets, such as land, timber and property, buildings, and equipment, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If events or circumstances arise that require a long-lived asset to be tested for potential impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to its carrying value. If the carrying amount of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying value exceeds the fair value. Fair value maybe determined through various valuation techniques including quoted market prices, third-party independent appraisals and discounted cash flow models. The Company recorded no impairment charges during 2018 and 2017.

F-7

Revenue Recognition

Effective January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under the new standard, we recognize revenues when the following criteria are met: (i) persuasive evidence of a contract with a customer exists, (ii) identifiable performance obligations under the contract exist, (iii) the transaction price is determinable for each performance obligation, (iv) the transaction price is allocated to each performance obligation, and (v) when the performance obligations are satisfied. We derive a majority of our revenues from oil and gas royalties, timber sales, and surface leases. Surface leases are not within the scope of ASC 606. See Note 9 for more detailed information about the Company’s reportable segments.

Oil and Gas

Oil and gas revenue is generated through customer contracts, where we provide the customer access to a designated tract of land upon which the customer performs exploration, extraction, production and ultimate sale of the oil and gas. The Company receives royalties on all oil and gas produced by the customer. The performance obligation identified in oil and gas related contracts is the oil and gas produced on the designated tract of land. The performance obligation is satisfied at a point in time, which is when the customer produces oil and gas. The transaction price is comprised of fixed fees (royalties) on all oil and gas produced The Company accrues monthly royalty revenues based upon estimates and adjusts to actual as the Company receives payments. Accrued royalty income was $93,594 and $84,333 as of December 31, 2018 and 2017, respectively. There are no capitalized contract costs associated with oil and gas contracts. The accounting of royalty income remains largely unchanged upon implementation of ASC 606.

Timber

Timber revenue is generated through customer contracts executed as a pay-as-cut arrangement, where the customer acquires the right to harvest specified timber on a designated tract for a set period of time at agreed-upon unit prices. The performance obligation identified in timber related contracts is a single tree severed.

We satisfy our performance obligation when timber is severed, at which time revenue is recognized. The transaction price for timber sales is determined using contractual rates applied to harvest volumes. The Company may receive a deposit at the time of entering into a stumpage agreement and this deposit is recorded in trade payables and accrued expenses until earned. The Company held stumpage agreement deposits of $30,600 and $94,600 at December 31, 2018 and 2017, respectively. There are no capitalized contract costs associated with timber contracts. The accounting of timber revenue remains largely unchanged upon implementation of ASC 606.

Surface

Surface revenue is earned through annual leases for agricultural and hunting activities and the Company records revenues evenly over the term of these leases. Surface revenues from these sources are recurring on an annual basis. Unearned surface revenues are recorded in trade payables and accrued expenses and were $58,893 and $45,651 at December 31, 2018 and 2017, respectively.

Surface revenue is also earned through right of way and related temporary work space leases, both of which are not unusual in occurrence and are not recurring sources of revenue. Generally, a right of way lease relates to either a utility or pipeline right of way that is a permanent servitude or exists for fixed periods of time greater than thirty years. The Company retains ownership of the land and the servitude is limited to the use of the surface. Revenue is recorded at the time of the agreement’s execution date. For income tax purposes, these types of agreements are treated as sales of business assets.

Other sources of surface revenue can be commercial activities leases and sales of surface minerals, such as dirt.

Basic and Diluted Earnings per share

Net earnings per share is provided in accordance with FASB ASC 260-10, "Earnings per Share". Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive income per share excludes all potential common shares if their effect is anti-dilutive. As of December 31, 2018, and 2017 there were no dilutive shares outstanding.

F-8

Dividends

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 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. Dividends paid per common stock are based on the weighted average number of common stock shares outstanding during the period.

Pursuant to a dividend reversion clause in the Company’s Articles of Incorporation, dividends not claimed within one year after the dividend becomes payable will expire and revert in full ownership to the Company and the Company’s obligation to pay such dividend will cease. Any dividend reversions are recorded in equity upon receipt.

In come Taxes

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.

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.

Other T axes

Taxes, other than income taxes, of $159,573 and $154,167, were charged to expense during 2018 and 2017, respectively.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606 ), which supersedes the most current revenue recognition guidance, including industry-specific guidance. Subsequently, the FASB issued updates that provide additional implementation guidance. The new guidance requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The Company adopted this guidance in the first quarter of 2018 applying the modified retrospective approach. The Company has completed its review of all revenue sources in scope for the new standard, and oil, gas and mineral agreements and stumpage agreements are within this scope. In accordance with the new standard, the basis for determining revenue and expenses allocable to oil, gas and mineral agreements (royalty revenue) and stumpage agreements (timber revenue) was not modified. There was no net cumulative effect adjustment for this change as of January 1, 2018.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), which provides guidance requiring companies to report net cash provided or used by operating, investing and financing activities and the net effect of those flows on the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents during the period. The statement of cash flows shall report that information in a manner that reconciles beginning and ending totals of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Companies shall also disclose information about the nature of the restrictions on restricted cash and restricted cash equivalents. The Company adopted this guidance in the first quarter of 2018. In accordance with the new standard, no modification to our presentation for restricted cash was made.

In February 2016, the FASB issued ASU 2016-02, which amended the accounting treatment for leases. Lessees (for capital and operating leases) and lessors (for sales-type leases, direct financing leases and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11. ASU 2018-10 provides certain areas for improvement in ASU 2016-02 and ASU 2018-11 provides an additional optional transition method by allowing entities to initially apply the new leasing standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The new leasing standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is reviewing its service agreements and other arrangements to evaluate whether they meet the definition of a lease under ASU 2016-02 and what impact, if any, that the adoption of the new leasing standard may have on its financial statements.

F-9

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Note 4: Fair Value of Financial Instruments

ASC 820 Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

F-10

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.

The estimated fair value of the Company's financial instruments at December 31, 2018 and 2017 are as follows:

			2018				2017
Financial Assets:	Level		Carrying Value		Fair Value		Carrying V alue		Fair Value

Cash and cash equivalents		1	$	1,860,736	$	1,860,736	$	1,618,583	$	1,618,583
Certificate of deposit - short term		1		3,370,000		3,370,000		2,662,890		2,662,890
Certificate of deposit - long term		1		725,000		725,000		950,000		950,000
Total			$	5,955,736	$	5,955,736	$	5,231,473	$	5,231,473

Note 9 : Segment Reporting

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.

The tables below present financial information for the Company’s three operating business segments:

	Year Ended
	December 31,
	2018		2017
Revenues:
Oil and gas	$	581,463	$	609,122
Timber sales		454,177		224,111
Surface revenue		159,123		311,352
Total segment revenues		1,194,763		1,144,585

Cost and expenses:
Oil and gas costs		63,231		62,315
Timber costs		45,640		35,692
Surface costs		23,636		43,929
Total segment costs and expenses		132,507		141,936

Income from operations:
Oil and gas		518,232		546,807
Timber		408,537		188,419
Surface		135,487		267,423
Total segment income from operations		1,062,256		1,002,649
Other income (expense) before income taxes		403,597		(416,562	)
Income before income taxes	$	1,465,853	$	586,087

F-13

	Year Ended
	December 31,
	2018		2017
Identifiable Assets, net of accumulated depreciation
Timber	$	2,162,390	$	2,119,180
General corporate assets		13,439,611		12,604,557
Total		15,602,001		14,723,737

Capital expenditures:
Timber		45,067		62,473
Surface		4,900		-
General corporate assets		5,471		92,157
Total segment costs and expenses		55,438		154,630

Depreciation and depletion
Oil and gas		1,858		-
Timber		-		15,661
General corporate assets		2,027		1,191
Total	$	3,885	$	16,852

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 equity investment. 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.

Note 1 1 : 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, 2018 and 2017:

	2018			2017
Deferred tax assets		-			-
Deferred tax liabilities		(187,664	)		(187,664	)
	$	(187,664	)	$	(187,664	)

Reconciliations between the United States Federal statutory income tax provision, using the statutory rate of 21% and 34%, respectively, and the Company’s provision for income taxes at December 31, 2018 and 2017 are as follows:

	2018			2017
Income tax on income before extraordinary item:
Tax at statutory rates	$	307,830		$	199,270
Tax effect of the following:
Statutory depletion		(18,175	)		(29,994	)
Section 179 deduction		(1,149	)		-
State income tax		62,137			12,475
Other		-			(7,272	)
Income tax on income	$	350,643		$	174,479

The income tax on income for 2018 is slightly different from the stated income tax expense on the statement of operations due to penalties being grouped with income tax expense.

Deferred income taxes payable results 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, 2018 and 2017 is as follows:

	2018			2017
Casualty loss	$	(77,714	)	$	(77,714	)
Deferred gain		(109,950	)		(109,950	)
	$	(187,664	)	$	(187,664	)

On December 22, 2017, H.R. 1, also known as the Tax Cuts and Jobs Act (the “2017 Tax Act”), was enacted. This enactment resulted in a number of significant changes to U.S. federal income tax law for U.S. corporations. Most notably for the Company, the statutory U.S. federal corporate income tax rate was changed from 35% to 21% for corporations.

F-15

The Company files income tax returns for federal and state purposes. Generally, the Company’s tax returns remain open for three years for tax examination purposes. Tax positions are recognized when they are more likely than not to be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is more likely than not to be realized upon settlement. The Company is subject to periodic audits by the Internal Revenue Service and other state and local taxing authorities. These audits may challenge certain of the Company’s tax positions such as timing and amount of income and deductions and the allocation of taxable income to various tax jurisdictions. The Company evaluates its tax positions and establishes liabilities if significant in accordance with the applicable accounting guidance on uncertainty in income taxes. There were no uncertain tax positions as of December 31, 2018.

Common Stock with no par value		NYSE American
Title of each class		Name of each exchange on which registered

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	2
Item 1B.	Unresolved Staff Comments	5
Item 2.	Properties	5
Item 3.	Legal Proceedings	6
Item 4.	Mine Safety Disclosure	6

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	6
Item 6.	Selected Financial Data	6
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 8.	Financial Statements and Supplementary Data	11
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	11
Item 9A.	Controls and Procedures	11
Item 9B.	Other Information	11

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	12
Item 11.	Executive Compensation	12
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	12
Item 13.	Certain Relationships and Related Transactions, and Director Independence	12
Item 14.	Principal Accountant Fees and Services	12

PART IV
Item 15.	Exhibits, Financial Statement Schedules	12
Item 16.	Form 10-K Summary	14
Signatures		14

Customer	Revenue Type	% of Total Revenue
Louisiana Timber Procurement	Timber		21.26	%
Pintail Oil & Gas, LLC	Oil & Gas		13.13	%
Texegy Operating Company, LLC	Oil & Gas		7.83	%
Universal Timber Services	Timber		7.83	%

Parish	Gross Acres		Net Acres		Segment(s)

Calcasieu		16,145		4,839	Oil and gas, timber and surface
Jefferson Davis		9,737		2,326	Oil and gas, timber and surface
Allen		8,148		2,483	Oil and gas, timber and surface
Beauregard		7,357		3,588	Oil and gas, timber and surface
Cameron		1,248		274	Oil and gas, surface
LaFourche		240		40	Oil and gas
Natchitoches		200		200	Timber
Vermilion		180		30	Oil and gas, surface
Rapides		129		129	Timber
St. Landry		80		32	Timber
Sabine		50		50	Timber

Total		43,514		13,991

Parish	Acres		Segment(s)

Beauregard		2,754	Oil and gas, timber and surface
Calcasieu		2,400	Oil and gas, timber and surface
Allen		1,121	Oil and gas, timber and surface
Jefferson Davis		684	Timber and surface
Natchitoches		200	Timber and surface
Cameron		162	None
Rapides		129	Timber
Sabine		50	Timber

Total		7,500

Field	Bbl Oil (1)		MCF Gas
South Bear Head Creek		2,172		2,513
South Gordon		220		4,290
Cowards Gully		720		458
South Jennings		429		8,102
Gonzales County		660		500
South Lake Charles		548		5,782
Caster Creek		705		19
South Elton		136		2,993

Activity	2018		2017
Bonus lease		1		3
Delay lease		2		1
Gross acres		200		400
Net acres		33		100

	3.3*	Articles of Amendment to the Restated Articles of Incorporation of the Registrant.

	3.4	By-Laws of the Registrant ( incorporated by reference to Exhibit 3.3 to Form 10-Q (File No. 001-31905) for the quarterly period ended March 31, 2013 filed on May 10, 2013) .

	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


*/s/ Lee Boyer*
Lee Boyer
President and Treasurer
(Principal Executive and Financial Officer)

/s/ Lee W. Boyer
Lee W. Boyer		President, Treasurer and Director (Principal Executive and Financial Officer)

/s/ Mary Leach Werner
Mary Leach Werner		Secretary and Director

/s/Max H. Hart
Max H. Hart		Director

/s/Eugene T. Minvielle, IV
Eugene T. Minvielle, IV		Director

/s/Mary W. Savoy
Mary W. Savoy		Director

/s/ Michael B. White
Michael B. White		Director

/s/ Keith Duplechin
Keith Duplechin		Director

/s/ Daniel J. Englander
Daniel J. Englander		Director

FINANCIAL STATEMENTS	Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2

CONSOLIDATED BALANCE SHEETS	F-3

CONSOLIDATED STATEMENTS OF OPERATIONS	F-4

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS	F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-7

	December 31, 2018		December 31, 2017

ASSETS
Current assets:
Cash	$	1,860,736	$	1,618,583
Restricted cash		-		33,821
Certificates of deposit		3,370,000		2,662,890
Equity investment in mutual funds		244,825		-
Accounts receivable		118,463		113,067
Prepaid expense and other assets		36,989		50,354
Total current assets		5,631,013		4,478,715
Long-term certificate of deposit		725,000		950,000
Property and equipment, net		9,245,988		9,295,022
Total assets	$	15,602,001	$	14,723,737

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Trade payables and accrued expenses	$	205,161	$	207,166
Income tax payable		11,654		13,346
Total current liabilities		216,815		220,512
Deferred income tax payable		187,664		187,664
Total liabilities		404,479		408,176

Stockholders' equity:
Common stock, 3,000,000 authorized, no par value, 1,942,495 issued and outstanding as of December 31, 2018 and 2017		59,335		59,335
Retained earnings		15,138,187		14,256,226
Total stockholders' equity		15,197,522		14,315,561
Total liabilities and stockholders' equity	$	15,602,001	$	14,723,737

	Year Ended December 31,
	2018			2017

Revenues:
Oil and gas	$	581,463		$	609,122
Timber sales		454,177			224,111
Surface revenue		120,790			273,019
Surface revenue - related party		38,333			38,333
Total revenue		1,194,763			1,144,585
Costs, expenses and (gains):
Oil and gas costs		63,231			62,315
Timber costs		45,640			35,692
Surface costs		23,636			43,929
General and administrative expense		573,532			495,040
Depreciation expense		2,027			1,191
Gain on sale of land and equipment		(881,654	)		(34,711	)
Total costs, expenses and (gains)		(173,588	)		603,456
Income from operations		1,368,351			541,129

Interest income		97,502			44,958
Income before income taxes		1,465,853			586,087
Federal and state income tax expense:
Current		350,793			174,479
Deferred		-			(111,255	)
Total income taxes		350,793			63,224
Net income	$	1,115,060		$	522,863

Per common stock, basic and diluted
Net income	$	0.57		$	0.27
Dividends	$	0.12		$	0.10

Weighted average shares outstanding, basic and diluted		1,942,495			1,942,495

	Common Stock				Retained			Total
	Shares		Amount		Earnings			Equity
Balances, December 31, 2016		1,942,495	$	59,335	$	13,927,613		$	13,986,948
Dividends paid		-		-		(194,250	)		(194,250	)
Net income		-		-		522,863			522,863
Balances, December 31, 2017		1,942,495	$	59,335	$	14,256,226		$	14,315,561
Dividends paid		-		-		(233,099	)		(233,099	)
Net income		-		-		1,115,060			1,115,060
Balances, December 31, 2018		1,942,495	$	59,335	$	15,138,187		$	15,197,522

	Year Ended
	December 31,
	2018		2017		Change from Prior Year			Percent Change from Prior Year
Oil	$	487,276	$	424,036	$	63,240			14.9	%
Gas		89,700		164,085		(74,385	)		(45.3	)%
Lease and geophysical		4,487		21,001		(16,514	)		(78.6	)%
Total revenues	$	581,463	$	609,122	$	(27,659	)		(4.5	)%

	+/-		Louisiana								Mineral
Quarter	Acres		Parish	Ownership			Land		Timber		Rights %
1st		17	Calcasieu		100	%	$	128,000		-		0	%
1st		20	Calcasieu		16.7	%	$	147,625		-		0	%
1st		211	Calcasieu		16.7	%	$	536,572		-		100	%
1st		76	Calcasieu		16.7	%	$	189,167		-		0	%

	2018		2017
Gross revenues
Royalty interests	$	4,487	$	588,121
Lease fees		576,976		21,001
		581,463		609,122
Production costs		63,231		62,315
Results before income tax expense		518,232		546,807
Estimated income tax expense		150,287		169,510
Results of operations from producing activities excluding corporate overhead	$	367,945	$	377,297

	2018		2017
Net gas produced (MCF)		25,776		42,927
Net oil produced (Bbl)		6,956		8,169

Count	2018		2017
1	$	254,018	$	179,292
2		156,854		163,483
3		93,575		131,837
4		93,563		113,280
5		-		70,760
6		-		61,677
7		-		51,814

Dated: April 16, 1981.	By:	/s/ Arthur Hollins, III
		Arthur Hollins, III, President


	By:	/s/ Carl G. Patton
		Carl G. Patton, Secretary

/s/ Gloria Gardner		/s/ Arthur Hollins, III
		Arthur Hollins, III, President


/s/ Alta M. Johnson		/s/ Carl G. Patton
		Carl G. Patton, Secretary