What changed in this filing

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Item 1. Financial Statements

2021-08-13 compared with 2021-05-13 · 260 added, 179 removed, 543 unchanged (45% of the section changed)

7 unchanged sentences

Accounts and other receivables, net of allowance for doubtful accounts of:

$ 368,000 at March 31, 2021;

$ 398,000 at June 30, 2021;

$ 341,000 at September 30, 2020

8 unchanged sentences

Operating lease right-of-use assets 173,000 249,000

Other non-current asset 250,000 —

Property and equipment 79,412,000 73,431,000

21 unchanged sentences

authorized, 20,000,000 shares:

8,445,060 issued at March 31, 2021 and September 30, 2020

9,031,606 issued at June 30, 2021;

8,445,060 issued at September 30, 2020

4,516,000 4,223,000

Additional paid-in capital 3,023,000 1,350,000

Accumulated deficit ( 4,169,000 ) ( 3,897,000 )

Retained earnings (accumulated deficit) 809,000 ( 3,897,000 )

Accumulated other comprehensive loss, net ( 1,195,000 ) ( 1,435,000 )

Treasury stock, at cost:

167,900 shares at March 31, 2021 and September 30, 2020

167,900 shares at June 30, 2021 and September 30, 2020

( 2,286,000 ) ( 2,286,000 )

Total stockholders’ deficit

Total stockholders’ equity (deficit)

4,867,000 ( 2,045,000 )

Non-controlling interests ( 62,000 ) 92,000

Total deficit ( 2,415,000 ) ( 1,953,000 )

Total equity (deficit) 4,805,000 ( 1,953,000 )

Total liabilities and equity $ 19,822,000 $ 15,182,000

4 unchanged sentences

Three months ended

March 31, Six months ended

June 30, Nine months ended

2021 2020 2021 2020

11 unchanged sentences

Interest expense 2,000 1,000 6,000 1,000

Gain on debt extinguishment ( 149,000 ) — ( 149,000 ) —

Gain on termination of post-retirement medical plan ( 2,341,000 ) — ( 2,341,000 ) —

Gain on sale of asset — — — ( 1,336,000 )

2,717,000 7,364,000 12,734,000 18,667,000

Loss before equity in income (loss) of affiliates and income taxes ( 1,384,000 ) ( 1,493,000 ) ( 1,632,000 ) ( 1,871,000 )

Earnings (loss) before equity in income (loss) of affiliates and income taxes 2,397,000 ( 3,380,000 ) 765,000 ( 5,251,000 )

Equity in income (loss) of affiliates 3,348,000 ( 111,000 ) 5,026,000 ( 179,000 )

(Loss) earnings before income taxes ( 760,000 ) ( 1,518,000 ) 46,000 ( 1,939,000 )

Earnings (loss) before income taxes 5,745,000 ( 3,491,000 ) 5,791,000 ( 5,430,000 )

Income tax provision (benefit) 191,000 ( 24,000 ) 288,000 ( 26,000 )

Net loss ( 794,000 ) ( 1,518,000 ) ( 51,000 ) ( 1,937,000 )

Net earnings (loss) 5,554,000 ( 3,467,000 ) 5,503,000 ( 5,404,000 )

Net earnings (loss) attributable to non-controlling interests 576,000 ( 11,000 ) 797,000 ( 20,000 )

Net loss attributable to Barnwell Industries, Inc.

Net earnings (loss) attributable to Barnwell Industries, Inc.

$ 4,978,000 $ ( 3,456,000 ) $ 4,706,000 $ ( 5,384,000 )

Basic and diluted net loss per common share attributable to Barnwell Industries, Inc.

Basic and diluted net earnings (loss) per common share attributable to Barnwell Industries, Inc.

stockholders $ 0.59 $ ( 0.42 ) $ 0.57 $ ( 0.65 )

4 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three months ended

March 31, Six months ended

June 30, Nine months ended

2021 2020 2021 2020

Net loss $ ( 794,000 ) $ ( 1,518,000 ) $ ( 51,000 ) $ ( 1,937,000 )

Other comprehensive (loss) income:

Net earnings (loss) $ 5,554,000 $ ( 3,467,000 ) $ 5,503,000 $ ( 5,404,000 )

Other comprehensive income (loss):

Foreign currency translation adjustments, net of taxes of $ 0

7 unchanged sentences

— — — 1,699,000

Total other comprehensive (loss) income ( 52,000 ) 104,000 ( 253,000 ) 2,748,000

Total comprehensive (loss) income ( 846,000 ) ( 1,414,000 ) ( 304,000 ) 811,000

Gain on termination of post-retirement medical plan, net of taxes of $ 0

541,000 — 541,000 —

Total other comprehensive income (loss) 493,000 ( 105,000 ) 240,000 2,643,000

Total comprehensive income (loss) 6,047,000 ( 3,572,000 ) 5,743,000 ( 2,761,000 )

Comprehensive (income) loss attributable to non-controlling interests ( 576,000 ) 11,000 ( 797,000 ) 20,000

Comprehensive (loss) income attributable to Barnwell Industries, Inc.

Comprehensive income (loss) attributable to Barnwell Industries, Inc.

$ 5,471,000 $ ( 3,561,000 ) $ 4,946,000 $ ( 2,741,000 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

Six months ended March 31, 2021 and 2020

Three months ended June 30, 2021 and 2020

Outstanding Common

6 unchanged sentences

Equity (Deficit)

Balance at March 31, 2020 8,277,160 $ 4,223,000 $ 1,350,000 $ ( 1,069,000 ) $ ( 169,000 ) $ ( 2,286,000 ) $ 91,000 $ 2,140,000

Net loss — — — ( 3,456,000 ) — — ( 11,000 ) ( 3,467,000 )

Foreign currency translation adjustments, net of taxes of $ 0

— — — — ( 125,000 ) — — ( 125,000 )

Retirement plans:

Amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $ 0

— — — — 20,000 — — 20,000

Balance at June 30, 2020 8,277,160 $ 4,223,000 $ 1,350,000 $ ( 4,525,000 ) $ ( 274,000 ) $ ( 2,286,000 ) $ 80,000 $ ( 1,432,000 )

Balance at March 31, 2021 8,277,160 $ 4,223,000 $ 1,501,000 $ ( 4,169,000 ) $ ( 1,688,000 ) $ ( 2,286,000 ) $ 4,000 $ ( 2,415,000 )

Net earnings — — — 4,978,000 — — 576,000 5,554,000

Foreign currency translation adjustments, net of taxes of $ 0

— — — — ( 74,000 ) — — ( 74,000 )

Distributions to non-controlling interests — — — — — — ( 642,000 ) ( 642,000 )

Share-based compensation — — 238,000 — — — — 238,000

Issuance of common stock, net of costs 586,546 293,000 1,284,000 — — — — 1,577,000

Retirement plans:

Amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $ 0

— — — — 26,000 — — 26,000

Gain on termination of post-retirement medical plan, net of taxes of $ 0

— — — — 541,000 — — 541,000

Balance at June 30, 2021 8,863,706 $ 4,516,000 $ 3,023,000 $ 809,000 $ ( 1,195,000 ) $ ( 2,286,000 ) $ ( 62,000 ) $ 4,805,000

See Notes to Condensed Consolidated Financial Statements

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

Nine months ended June 30, 2021 and 2020

Outstanding Common

Stock Additional

Capital Retained Earnings

(Accumulated Deficit) Accumulated

Comprehensive Loss Treasury

Stock Non-controlling

Interests Total

Equity (Deficit)

Balance at September 30, 2019 8,277,160 $ 4,223,000 $ 1,350,000 $ 859,000 $ ( 2,917,000 ) $ ( 2,286,000 ) $ 100,000 $ 1,329,000

9 unchanged sentences

— — — — 1,699,000 — — 1,699,000

Balance at March 31, 2020 8,277,160 $ 4,223,000 $ 1,350,000 $ ( 1,069,000 ) $ ( 169,000 ) $ ( 2,286,000 ) $ 91,000 $ 2,140,000

Balance at June 30, 2020 8,277,160 $ 4,223,000 $ 1,350,000 $ ( 4,525,000 ) $ ( 274,000 ) $ ( 2,286,000 ) $ 80,000 $ ( 1,432,000 )

Balance at September 30, 2020 8,277,160 $ 4,223,000 $ 1,350,000 $ ( 3,897,000 ) $ ( 1,435,000 ) $ ( 2,286,000 ) $ 92,000 $ ( 1,953,000 )

Net (loss) earnings — — — ( 272,000 ) — — 221,000 ( 51,000 )

Net earnings — — — 4,706,000 — — 797,000 5,503,000

Foreign currency translation adjustments, net of taxes of $ 0

2 unchanged sentences

Share-based compensation — — 389,000 — — — — 389,000

Issuance of common stock, net of costs 586,546 293,000 1,284,000 — — — — 1,577,000

Retirement plans:

1 unchanged sentence

— — — — 92,000 — — 92,000

Balance at March 31, 2021 8,277,160 $ 4,223,000 $ 1,501,000 $ ( 4,169,000 ) $ ( 1,688,000 ) $ ( 2,286,000 ) $ 4,000 $ ( 2,415,000 )

Gain on termination of post-retirement medical plan, net of taxes of $ 0

— — — — 541,000 — — 541,000

Balance at June 30, 2021 8,863,706 $ 4,516,000 $ 3,023,000 $ 809,000 $ ( 1,195,000 ) $ ( 2,286,000 ) $ ( 62,000 ) $ 4,805,000

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

Cash flows from operating activities:

Net loss $ ( 51,000 ) $ ( 1,937,000 )

Adjustments to reconcile net loss to net cash

used in operating activities:

Net earnings (loss) $ 5,503,000 $ ( 5,404,000 )

Adjustments to reconcile net earnings (loss) to net cash

provided by operating activities:

Equity in (income) loss of affiliates ( 5,026,000 ) 179,000

4 unchanged sentences

Distributions of income from equity investees 4,278,000 —

Retirement benefits (income) expense ( 17,000 ) 26,000

Retirement benefits income ( 38,000 ) ( 18,000 )

Non-cash rent (income) expense ( 3,000 ) 48,000

5 unchanged sentences

Bad debt expense 33,000 280,000

Decrease from changes in current assets and liabilities ( 1,170,000 ) ( 145,000 )

Net cash used in operating activities ( 338,000 ) ( 252,000 )

Gain on debt extinguishment ( 149,000 ) —

Gain on termination of post-retirement medical plan ( 2,341,000 ) —

(Decrease) increase from changes in current assets and liabilities ( 659,000 ) 582,000

Net cash provided by operating activities 2,105,000 472,000

Cash flows from investing activities:

3 unchanged sentences

Proceeds from the sale of oil and natural gas assets 60,000 608,000

Payments to acquire oil and natural gas properties ( 348,000 ) —

Capital expenditures - oil and natural gas ( 904,000 ) ( 2,509,000 )

Capital expenditures - all other ( 28,000 ) ( 315,000 )

Payment for other non-current asset ( 250,000 ) —

Net cash provided by (used in) investing activities 1,955,000 ( 1,116,000 )

2 unchanged sentences

Distributions to non-controlling interests ( 951,000 ) —

Payment of deferred offering costs ( 23,000 ) —

Net cash used in financing activities ( 285,000 ) —

Proceeds from issuance of stock, net of costs 1,736,000 —

Net cash provided by financing activities 832,000 147,000

Effect of exchange rate changes on cash and cash equivalents 24,000 ( 10,000 )

Net decrease in cash and cash equivalents ( 197,000 ) ( 1,227,000 )

Net increase (decrease) in cash and cash equivalents 4,916,000 ( 507,000 )

Cash and cash equivalents at beginning of period 4,584,000 4,613,000

7 unchanged sentences

The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc.

and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6 %-owned land investment general partnership (Kaupulehu Developments) and a 75 %-owned land investment partnership (KD Kona 2013 LLLP).

and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6 %-owned land investment general partnership (Kaupulehu Developments), a 75 %-owned land investment partnership (KD Kona 2013 LLLP), and a variable interest entity (Teton Barnwell Fund I, LLC) for which the Company is deemed to be the primary beneficiary.

All significant intercompany accounts and transactions have been eliminated.

8 unchanged sentences

The Condensed Consolidated Balance Sheet as of September 30, 2020 has been derived from audited consolidated financial statements.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2021, results of operations and comprehensive (loss) income for the three and six months ended March 31, 2021 and 2020, and equity (deficit) and cash flows for the six months ended March 31, 2021 and 2020, have been made.

The results of operations for the period ended March 31, 2021 are not necessarily indicative of the operating results for the full year.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at June 30, 2021, results of operations, comprehensive income (loss), and equity (deficit) for the three and nine months ended June 30, 2021 and 2020, and cash flows for the nine months ended June 30, 2021 and 2020, have been made.

The results of operations for the period ended June 30, 2021 are not necessarily indicative of the operating results for the full year.

Use of Estimates in the Preparation of Condensed Consolidated Financial Statements

18 unchanged sentences

Deferred Offering Costs

The Company will incur certain incremental costs directly associated with its at-the-market offering in which the Company can sell, from time to time, shares of its common stock (see Note 15).

The Company will incur certain incremental costs directly associated with its at-the-market offering program (“ATM”) in which the Company can sell, from time to time, shares of its common stock (see Note 15).

These costs typically include fees paid to underwriters, attorneys, accountants, and other third parties.

The offering costs incurred by the Company are currently capitalized as current assets and are recorded as “Deferred offering costs” on the Company’s Condensed Consolidated Balance Sheet.

Upon the initial sale of the Company’s shares, the deferred offering costs will be recorded in stockholder’s equity as a reduction of additional paid-in capital generated as a result of the offering.

If the sale of the Company’s shares are determined to be no longer probable, the deferred offering costs will be charged to expense.

Deferred costs associated with the ATM offering will be amortized to additional paid-in capital on a pro-rata basis as the Company raises funds under the ATM offering, based on the total estimated proceeds necessary for the ATM offering to be deemed successful with any remaining deferred offering costs charged to the results of operations at the end of the life of the related registration statement.

Variable Interest Entities

The consolidation of a variable interest entity (“VIE”) is required when an enterprise has a controlling financial interest and is therefore the VIE’s primary beneficiary.

A controlling financial interest will have both of the following characteristics:

(a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The determination of whether an entity is a VIE and, if so, whether the Company is the primary beneficiary, may require significant judgment.

Barnwell analyzes its entities in which it has a variable interest to determine whether the entities are VIEs and, if so, whether the Company is the primary beneficiary.

This analysis includes a qualitative review based on an evaluation of the design of the entity, its organizational structure, including decision making ability and financial agreements, as well as a quantitative review.

Entities that have been determined to be VIEs and for which we have a controlling financial interest and are therefore the VIE’s primary beneficiary are consolidated (see Note 5).

Entities that have been determined to be VIEs and for which we do not have a controlling financial interest and are therefore not the VIE’s primary beneficiary are not consolidated.

These unconsolidated entities are accounted for under the equity method (see Note 4).

Recently Adopted Accounting Pronouncements

7 unchanged sentences

Targeted Improvements to Related Party Guidance for Variable Interest Entities,” which modifies the guidance related to indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interest.

The Company adopted the provisions of this ASU

effective October 1, 2020.

The Company adopted the provisions of this ASU effective October 1, 2020.

The adoption of this update did not have an impact on Barnwell's consolidated financial statements.

1 unchanged sentence

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business for the twelve-month period following the date of issuance of these condensed consolidated financial statements.

Our ability to sustain our business in the future will depend on sufficient oil and natural gas operating cash flows, which are highly sensitive to volatile oil and natural gas prices, sufficient contract drilling operating cash flows, which are subject to large changes in demand, and sufficient future land investment segment proceeds and distributions from the Kukio Resort Land Development Partnerships, the timing of which are both highly uncertain and not within Barnwell’s control.

A sufficient level of such cash inflows are necessary to fund discretionary oil and natural gas capital expenditures, which must be economically successful to provide sufficient returns, as well as fund our non-discretionary outflows such as oil and natural gas asset retirement obligations and ongoing operating and general and administrative expenses.

Our ability to sustain our business in the future will depend on the sufficiency of our cash on hand, oil and natural gas operating cash flows, which are highly sensitive to volatile oil and natural gas prices, contract drilling operating cash flows, which are subject to large changes in demand, and future land investment segment proceeds and distributions from the Kukio Resort Land Development Partnerships, the timing of which are both highly uncertain and not within Barnwell’s control.

A sufficient level of such cash and cash inflows are necessary to fund discretionary oil and natural gas capital expenditures, which must be economically successful to provide sufficient returns, as well as fund our non-discretionary outflows such as oil and natural gas asset retirement obligations and ongoing operating and general and administrative expenses.

In addition, as discussed in the "Asset Retirement Obligation" section of "Liquidity and Capital Resources," a significant amount of funds will be required to be put on deposit with Canadian regulatory authorities to fund abandonments at the Company's oil and natural gas properties in the Manyberries area.

Other sources and potential sources of funding are discussed below.

The Company listed its corporate office on the 29th floor of a commercial office building in downtown Honolulu, Hawaii for sale to generate liquidity in order to help mitigate the substantial doubt about our ability to continue as a going concern.

The corporate office is currently under a purchase and sales contract with a buyer with a tentative closing to occur prior to September 30, 2021.

While the Company believes the likelihood of the sale occurring as per the terms of the contract is more likely than not, the Company’s ability to successfully consummate the sale cannot be assured.

Company believes the likelihood of the sale occurring as per the terms of the contract is more likely than not, the Company’s ability to successfully consummate the sale cannot be assured.

On March 16, 2021, the Company initiated an at-the-market offering program (“ATM”) pursuant to which the Company may offer and sell, from time to time, shares of its common stock under price and volume guidelines set by the Company's Board of Directors and the terms and conditions described in the Registration Statement.

As of the filing date of this Quarterly Report, no shares have been sold under the ATM, and there is no assurance that a sufficient level of funds can be raised by the ATM.

The sale of shares under the ATM began in May 2021 and as of June 30, 2021, the Company sold 586,546 shares of common stock resulting in net proceeds of $ 1,860,000 after commissions and fees of $ 59,000 .

From July 1, 2021 to the date of this Quarterly Report, an additional 581,441 shares of common stock were sold resulting in net proceeds of $ 1,924,000 after commissions and fees of $ 64,000 .

In April 2021, the Company re-initiated the marketing of its non-core oil and natural gas properties in the Spirit River, Wood River, Medicine River, Kaybob, Bonanza, Balsam and Thornbury areas for sale.

These properties were previously marketed for sale in January 2020, before the COVID-19 lockdowns began, but the Company did not receive any suitable offers, in part due to the impact of COVID-19 on oil and gas markets.

There is no assurance that the sale of these properties will occur.

Subsequent to June 30, 2021, Barnwell entered into and completed a purchase and sale agreement with an independent third party and sold its interests in certain natural gas and oil properties located in the Spirit River area of Alberta, Canada.

The sales price per the agreement was adjusted for customary purchase price adjustments to $ 1,047,000 in order to, among other things, reflect an economic effective closing date of sale of July 8, 2021.

$ 524,000 of the sales proceeds was withheld for remittance by the buyers to the Canada Revenue Agency for potential amounts due for Barnwell’s Canadian income taxes related to the sale.

Negotiations regarding the potential sales of other non-core oil and natural gas properties is ongoing, however there is no assurance that the sale of any of the other non-core properties will occur.

We have experienced a trend of losses and negative operating cash flows in three of the last four years.

While potential sources of liquidity may come from the aforementioned initiatives, due to the continuing uncertainties regarding the impacts of the COVID-19 pandemic on our business and the sufficiency of our cash balances and future cash inflows as described above, there is substantial doubt about our ability to meet our estimated cash outflows or continue as a going concern for one year from the date of the filing of this report.

These financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NET LOSS PER COMMON SHARE

Basic loss per share is computed using the weighted-average number of common shares outstanding for the period.

Diluted loss per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities, which consist of outstanding stock options.

Potentially dilutive shares are excluded from the computation of diluted loss per share if their effect is anti-dilutive.

Options to purchase 665,000 and 60,000 shares of common stock were excluded from the computation of diluted shares for the three and six months ended March 31, 2021 and 2020, respectively, as their inclusion would have been anti-dilutive.

Reconciliations between net loss attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net loss per share computations are detailed in the following tables:

Three months ended March 31, 2021

During fiscal 2020 and 2021, continuing uncertainties regarding the impacts of the COVID-19 pandemic on our business and the sufficiency of our cash balances and future cash inflows as described above raised substantial doubt about our ability to meet our estimated cash outflows or continue as a going concern for one year from the date of the filing of this report.

However, due to the $ 3,784,000 of funds raised by the ATM through the date of this Quarterly Report, as well as the $ 3,965,000 of net cash inflows in the quarter ended June 30, 2021 from land segment percentage of sales proceeds and distributions from the Kukio Resort Land Development Partnerships, such substantial doubt has been overcome.

EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding for the period.

Diluted earnings (loss) per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities, which consist of outstanding stock options.

Potentially dilutive shares are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive.

Options to purchase 615,000 and 60,000 shares of common stock were excluded from the computation of diluted shares for the three and nine months ended June 30, 2021 and 2020, respectively, as their inclusion would have been anti-dilutive.

Reconciliations between net earnings (loss) attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net earnings (loss) per share computations are detailed in the following tables:

Three months ended June 30, 2021

(Numerator) Shares

(Denominator) Per-Share

Basic net loss per share $ ( 856,000 ) 8,277,160 $ ( 0.10 )

Basic net earnings per share $ 4,978,000 8,398,001 $ 0.59

Effect of dilutive securities -

common stock options — —

Diluted net loss per share $ ( 856,000 ) 8,277,160 $ ( 0.10 )

Six months ended March 31, 2021

Diluted net earnings per share $ 4,978,000 8,398,001 $ 0.59

Nine months ended June 30, 2021

(Numerator) Shares

(Denominator) Per-Share

Basic net loss per share $ ( 272,000 ) 8,277,160 $ ( 0.03 )

Basic net earnings per share $ 4,706,000 8,317,440 $ 0.57

Effect of dilutive securities -

common stock options — —

Diluted net loss per share $ ( 272,000 ) 8,277,160 $ ( 0.03 )

Three months ended March 31, 2020

Diluted net earnings per share $ 4,706,000 8,317,440 $ 0.57

Three months ended June 30, 2020

(Numerator) Shares

4 unchanged sentences

Diluted net loss per share $ ( 3,456,000 ) 8,277,160 $ ( 0.42 )

Six months ended March 31, 2020

Nine months ended June 30, 2020

(Numerator) Shares

5 unchanged sentences

Investment in Kukio Resort Land Development Partnerships

On November 27, 2013, Barnwell, through a wholly-owned subsidiary, entered into two limited liability limited partnerships, KD Kona 2013 LLLP and KKM Makai, LLLP (“KKM”), and indirectly acquired a 19.6 % non-controlling ownership interest in each of KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD Kaupulehu, LLLP (“KDK”) for $ 5,140,000 .

These entities, collectively referred to hereinafter as the “Kukio Resort Land Development Partnerships,” own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations.

On November 27, 2013, Barnwell, through a wholly-owned subsidiary, entered into two limited liability limited partnerships, KD Kona 2013 LLLP (“KD Kona”) and KKM Makai, LLLP (“KKM”), and indirectly acquired a 19.6 % non-controlling ownership interest in each of KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD Kaupulehu, LLLP (“KDK”) for $ 5,140,000 .

residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations.

KDK holds interests in KD Acquisition, LLLP (“KD I”) and KD Acquisition II, LP, formerly KD Acquisition II, LLLP (“KD II”).

1 unchanged sentence

Barnwell’s ownership interests in the Kukio Resort Land Development Partnerships is accounted for using the equity method of accounting.

The partnerships derive income from the sale of residential parcels, of which 15 lots remain to be sold at Increment I as of March 31, 2021, as well as from commissions on real estate sales by the real estate sales office.

The partnerships derive income from the sale of residential parcels, of which nine lots remain to be sold at Increment I as of June 30, 2021, as well as from commissions on real estate sales by the real estate sales office.

Two ocean front parcels approximately two to three acres in size fronting the ocean were developed within Increment II by KD II, of which one was sold in fiscal 2017 and one was sold in fiscal 2016.

6 unchanged sentences

Cumulative distributions from the Kukio Resort Land Development Partnerships have reached the $ 45,000,000 threshold and in the quarter ended December 31, 2020, the Kukio Resort Land Development Partnerships made distributions in excess of the threshold out of the proceeds from the sale of two lots in Increment I.

Accordingly, Barnwell received a total of $ 459,000 in preferred return payments, which is reflected as an additional equity pickup in the "Equity in income (loss) of affiliates" line item on the accompanying Condensed Consolidated Statement of Operations for the six months ended March 31, 2021.

The preferred return payments received in the quarter ended December 31, 2020, brought the cumulative preferred return total to $ 656,000 , which is the total amount Barnwell was entitled to, and thus there is no more preferred return outstanding as of March 31, 2021.

During the six months ended March 31, 2021, Barnwell received net cash distributions in the amount of $ 2,205,000 from the Kukio Resort Land Development Partnerships after distributing $ 215,000 to non-controlling interests.

Of the $ 2,205,000 of net cash distributions received from the Kukio Resort Land Development Partnerships, $ 459,000 represented a payment of the preferred return from KKM, as

discussed above.

There were no distributions from the Kukio Resort Land Development Partnerships for the six months ended March 31, 2020.

Barnwell’s share of the operating results of its equity affiliates was income of $ 624,000 and $ 1,678,000 , which includes the $ 459,000 payment of the preferred return from KKM discussed above, for the three and six months ended March 31, 2021, respectively, compared to losses of $ 25,000 and $ 68,000 for the three and six months ended March 31, 2020, respectively.

The equity in the underlying net assets of the Kukio Resort Land Development Partnerships exceeds the carrying value of the investment in affiliates by approximately $ 233,000 as of March 31, 2021, which is attributable to differences in the value of capitalized development costs and a note receivable.

The basis difference will be recognized as the partnerships sell lots and recognize the associated costs and sell memberships for the Kuki`o Golf and Beach Club for which the receivable relates.

The basis difference adjustments of $ 50,000 and $ 5,000 for the six months ended March 31, 2021 and 2020, respectively, increased equity in income of affiliates.

During the nine months ended June 30, 2021, Barnwell received net cash distributions in the amount of $ 5,328,000 from the Kukio Resort Land Development Partnerships after distributing $ 599,000 to non-controlling interests.

Of the $ 5,328,000 of net cash distributions received from the Kukio Resort Land Development Partnerships, $ 459,000 represented a payment of the preferred return from KKM, as discussed above.

There were no distributions from the Kukio Resort Land Development Partnerships for the nine months ended June 30, 2020.

Barnwell’s share of the operating results of its equity affiliates was income of $ 3,348,000 and $ 5,026,000 , which includes the $ 459,000 payment of the preferred return from KKM discussed above, for the three and nine months ended June 30, 2021, respectively, compared to losses of $ 111,000 and $ 179,000 for the three and nine months ended June 30, 2020, respectively.

The equity in the underlying net assets of the Kukio Resort Land Development Partnerships exceeds the carrying value of the investment in affiliates by approximately $ 190,000 as of June 30, 2021, which is attributable to differences in the value of capitalized development costs and a note receivable.

The basis difference will

be recognized as the partnerships sell lots and recognize the associated costs and sell memberships for the Kuki`o Golf and Beach Club for which the receivable relates.

The basis difference adjustments of $ 94,000 and $ 5,000 for the nine months ended June 30, 2021 and 2020, respectively, increased equity in income of affiliates.

Summarized financial information for the Kukio Resort Land Development Partnerships is as follows:

Three months ended March 31,

Three months ended June 30,

Revenue $ 21,521,000 $ 496,000

1 unchanged sentence

Net earnings (loss) $ 11,618,000 $ ( 501,000 )

Six months ended March 31,

Nine months ended June 30,

Revenue $ 37,220,000 $ 3,486,000

1 unchanged sentence

Net earnings (loss) $ 16,932,000 $ ( 804,000 )

As of March 31, 2021 and September 30, 2020, Barnwell's non-current investment in Kukio Resort Land Development Partnerships was $ 159,000 and $ 901,000 , respectively.

In the quarter ended June 30, 2021, the Company received cumulative distributions from the Kukio Resort Land Development Partnerships in excess of our investment balance and in accordance with applicable accounting guidance, the Company suspended its equity method earnings recognition and reduced its Kukio Resort Land Development Partnership investment balance to zero as of June 30, 2021.

In addition, the Company recorded the distributions received in excess of our investment balance of $ 748,000 as equity in income of affiliates during the three and nine months ended June 30, 2021.

The Company records the distributions in excess of our investment in the Kukio Resort Land Development Partnerships as income because the distributions are not refundable by agreement or by law and the Company is not liable for the obligations of or otherwise committed to provide financial support to the Kukio Resort Land Development Partnerships.

The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnership’s cumulative earnings during the suspended period exceeds our share of the Kukio Resort Land Development Partnership’s income recognized for the excess distributions.

At September 30, 2020, the Company’s investment in the Kukio Resort Land Development Partnerships was $ 901,000 .

Sale of Interest in Leasehold Land

3 unchanged sentences

and 14 % of such aggregate gross proceeds in excess of $ 300,000,000 .

The total amount of gross proceeds from single-family lots sales was $ 224,500,000 through March 31, 2021.

Two single-family lots were sold during the six months ended March 31, 2021 and 15 single-family lots, of the 80 lots developed within Increment I, remained to be sold as of March 31, 2021.

Under the terms of the Increment II agreement with KD II, Kaupulehu Developments is entitled to 15 % of the distributions of KD II, the cost of which is to be solely borne by KDK out of its 55 % ownership interest in KD II, plus a priority payout of 10 % of KDK’s cumulative net profits derived from

Increment II sales subsequent to Phase 2A, up to a maximum of $ 3,000,000 as to the priority payout.

The total amount of gross proceeds from single-family lots sales was $ 237,038,000 through June 30, 2021.

Eight single-family lots were sold

during the nine months ended June 30, 2021 and nine single-family lots, of the 80 lots developed within Increment I, remained to be sold as of June 30, 2021.

Such interests are limited to distributions or net profits interests and Barnwell does not have any partnership interests in KD II or KDK through its interest in Kaupulehu Developments.

5 unchanged sentences

Three months ended

March 31, Six months ended

June 30, Nine months ended

2021 2020 2021 2020

7 unchanged sentences

The lease terminates in December 2025.

OTHER NON-CURRENT ASSET

CONSOLIDATED VARIABLE INTEREST ENTITY

In February 2021, Barnwell Industries, Inc.

established a new wholly-owned subsidiary named BOK Drilling, LLC (“BOK”) for the purpose of indirectly investing in oil plays in Oklahoma.

BOK and Gros Ventre Partners, LLC, an entity not affiliated with the Company, entered into the Limited Liability Agreement of Teton Barnwell Fund I, LLC (“Teton Barnwell”), an entity formed for the purpose of directly entering into such an oil play, and in connection therewith, on March 25, 2021, the Company, on behalf of BOK, contributed $ 250,000 to Teton Barnwell to fund its initial investments in the oil play.

The Company has classified the $ 250,000 as an “Other non-current asset” at March 31, 2021 pending the

receipt of additional information from its partners in the play and completion of the Company’s evaluation of the appropriate accounting treatment.

established a new wholly-owned subsidiary named BOK Drilling, LLC (“BOK”) for the purpose of indirectly investing in oil and natural gas exploration and development in Oklahoma.

BOK and Gros Ventre Partners, LLC (“Gros Ventre”), an entity affiliated with the Company, entered into the Limited Liability Agreement (the “Agreement”) of Teton Barnwell Fund I, LLC (“Teton Barnwell”), an entity formed for the purpose of directly entering into such oil and natural gas investments.

Under the terms of the Agreement, the profits of Teton Barnwell are split between BOK and Gros Ventre at 98 % and 2 %, respectively, and as the manager of Teton Barnwell, Gros Venture is paid an annual asset management fee equal to 1 % of the cumulative capital contributions made to Teton Barnwell as compensation for its management services.

BOK is responsible for 100 % of the capital contributions made to Teton Barnwell and in March 2021, the Company made a capital contribution of $ 250,000 to Teton Barnwell to fund its initial oil and natural gas investment in Oklahoma.

The Company has determined that Teton Barnwell is a VIE as the entity is structured with non-substantive voting rights and that the Company is the primary beneficiary.

This is due to the fact that even though Teton Barnwell has a unanimous consent voting structure, BOK is responsible for 100 % of the capital contributions required to fund Teton Barnwell’s future oil exploration and development investments pursuant to the Agreement and thus, BOK has the power to steer the decisions that most significantly impact Teton Barnwell’s economic performance and has the obligation to absorb any potential losses that could be significant to Teton Barnwell.

As BOK is the primary beneficiary of the VIE, Teton Barnwell’s operating results, assets and liabilities are consolidated by the Company.

On July 12, 2021, Colin R.

O'Farrell, who is the sole member of Four Pines Operating LLC which owns a 25 % interest in Gros Ventre, became a member of the Board of Directors of the Company.

The following table summarizes the carrying value of the assets and liabilities of Teton Barnwell that are consolidated by the Company.

Intercompany balances are eliminated in consolidation and thus, are not reflected in the table below.

Cash and cash equivalents $ 118,000

Accounts and other receivables 38,000

Property and equipment, net 584,000

Total assets $ 740,000

Accounts payable $ 1,000

Accrued capital expenditures 464,000

Accrued operating and other expenses 5,000

Total liabilities $ 470,000

ASSET HELD FOR SALE

The Company's Honolulu corporate office is currently listed for sale.

Accordingly, the Company has designated this property as an asset held for sale and the carrying value in the aggregate amount of $ 699,000 is included in “Asset held for sale” on the Company's Condensed Consolidated Balance Sheets at March 31, 2021 and September 30, 2020.

In March 2021, the Company entered into a purchase and sales contract with a buyer for the sale of our corporate office with a tentative closing to occur prior to September 30, 2021.

OIL AND NATURAL GAS PROPERTIES

There were no oil and natural gas property dispositions during the six months ended March 31, 2021.

On April 8, 2021, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in properties located in the Hillsdown area of Alberta, Canada.

The sales price per the agreement was adjusted for customary purchase price adjustments to $ 132,000 in order to, among other things, reflect an economic effective date of October 1, 2020.

$ 72,000 of the sales proceeds was withheld by the buyers for potential amounts due for Barnwell’s Canadian income taxes related to the sale.

The final determination of the customary adjustments to the purchase price has not yet been made, however it is not expected to result in a material adjustment.

The proceeds were credited to the full cost pool, with no gain or loss recognized, as the sale did not result in a significant alteration of the relationship between capitalized costs and proved reserves.

In the quarter ended December 31, 2019, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in properties located in the Progress area of Alberta, Canada.

1 unchanged sentence

There were no significant amounts paid for oil and natural gas property acquisitions during the six months ended March 31, 2021, and 2020.

On April 8, 2021, Barnwell acquired additional working interests in oil and natural gas properties located in the Twining area of Alberta, Canada for cash consideration of $ 348,000 .

The purchase price per the agreement was adjusted for customary purchase price adjustments to reflect the economic activity from the effective date to the closing date.

The final determination of the customary adjustments to the purchase price has not yet been made, however it is not expected to result in a material adjustment.

There were no significant amounts paid for oil and natural gas property acquisitions during the nine months ended June 30, 2020.

Impairment of Oil and Natural Gas Properties

Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations.

There was no ceiling test impairment during the three months ended March 31, 2021 and a $ 630,000 ceiling test impairment during the six months ended March 31, 2021.

There was a ceiling test impairment of $ 1,637,000 during the three and six months ended March 31, 2020.

There was no ceiling test impairment during the three months ended June 30, 2021 and there was a $ 630,000 ceiling test impairment during the nine months ended June 30, 2021.

There was a ceiling test impairment of $ 2,689,000 and $ 4,326,000 during the three and nine months ended June 30, 2020, respectively.

Changes in the mandated 12-month historical rolling average first-day-of-the-month prices for oil, natural gas and natural gas liquids prices, the value of reserve additions as compared to the amount of capital expenditures to obtain them, and changes in production rates and estimated levels of reserves, future development costs and the estimated market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties.

1 unchanged sentence

Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S.

Additionally, Barnwell sponsors a Supplemental Executive Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain

current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering eligible U.S.

Additionally, Barnwell sponsors a Supplemental Executive Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and previously sponsored a post-retirement medical insurance benefits plan (“Post-retirement Medical”) covering eligible U.S.

In December 2019, the Company’s Board of Directors approved a resolution to freeze all future benefit accruals for all participants under the Company’s Pension Plan and SERP effective December 31, 2019.

1 unchanged sentence

The freezing of the Pension Plan and SERP triggered a curtailment which required a remeasurement of the projected benefit obligations of the Pension Plan and SERP and resulted in an $ 880,000 actuarial gain in accumulated other comprehensive loss and a $ 1,699,000 reduction in unrecognized pension benefit costs that were previously included in accumulated other comprehensive loss, with a corresponding benefit in other comprehensive income which were recorded in the quarter ended December 31, 2019.

In April 2021, the Company's Board of Directors initiated the termination of the Postretirement Medical plan and the Company provided all participants of the plan with a sixty-day notice of termination.

The Postretirement Medical plan is an unfunded plan and the Company currently estimates that it will recognize a non-cash gain of approximately $ 2,000,000 upon the termination of the Postretirement Medical plan in the quarter ending June 30, 2021.

In June 2021, the Company terminated its Post-retirement Medical plan, which covered officers of the Company who had attained at least 20 years of service of which at least 10 years were at the position of Vice President or higher, their spouses and qualifying dependents, effective June 4, 2021.

The Post-retirement Medical plan was an unfunded plan and the Company funded benefits when payments were made.

As result of the plan termination, the Company recognized a non-cash gain of $ 2,341,000 during the three and nine months ended June 30, 2021.

The following tables detail the components of net periodic benefit (income) cost for Barnwell’s retirement plans:

Pension Plan SERP Postretirement Medical

Three months ended March 31,

Pension Plan SERP Post-retirement Medical

Three months ended June 30,

2021 2020 2021 2020 2021 2020

3 unchanged sentences

Net periodic benefit (income) cost $ ( 62,000 ) $ ( 100,000 ) $ 13,000 $ 16,000 $ 28,000 $ 40,000

Pension Plan SERP Postretirement Medical

Six months ended March 31,

Pension Plan SERP Post-retirement Medical

Nine months ended June 30,

2021 2020 2021 2020 2021 2020

8 unchanged sentences

Currently, no contributions are expected to be made to the Pension Plan during fiscal 2021.

The SERP and Postretirement Medical plans are unfunded, and Barnwell funds benefits when payments are made.

Expected payments under the Postretirement Medical plan and the SERP for fiscal 2021 are not material.

The SERP plan is unfunded and Barnwell funds benefits when payments are made.

Expected payments under the SERP for fiscal 2021 is not material.

Fluctuations in actual equity market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

The components of loss before income taxes, after adjusting the (loss) earnings for non-controlling interests, are as follows:

The components of earnings (loss) before income taxes, after adjusting the earnings (loss) for non-controlling interests, are as follows:

Three months ended

March 31, Six months ended

June 30, Nine months ended

2021 2020 2021 2020

4 unchanged sentences

Three months ended

March 31, Six months ended

June 30, Nine months ended

2021 2020 2021 2020

4 unchanged sentences

based on consolidated operations, and essentially all deferred tax assets, net of relevant offsetting deferred tax liabilities, are not estimated to have a future benefit as tax credits or deductions.

Income from our non-controlling interest in the Kukio Resort Land Development Partnerships is treated as non-unitary for state of Hawaii unitary filing purposes, thus unitary Hawaii losses provide limited sheltering of such non-unitary income.

Income from our non-

controlling interest in the Kukio Resort Land Development Partnerships is treated as non-unitary for state of Hawaii unitary filing purposes, thus unitary Hawaii losses provide limited sheltering of such non-unitary income.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act (the “Act”), an omnibus spending bill to fund the federal government that also includes an array of COVID-related tax relief for individuals and businesses.

2 unchanged sentences

Additionally, the Act provides for a 100% deduction for certain business meals incurred in calendar years 2021 and 2022.

The Company determined that income tax effects related to the passage of the Act were not material to the financial statements for the three and six months ended March 31, 2021.

The Company determined that income tax effects related to the passage of the Act were not material to the financial statements for the three and nine months ended June 30, 2021.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables provide information about disaggregated revenue by revenue streams, reportable segments, geographical region, and timing of revenue recognition for the three and six months ended March 31, 2021 and 2020.

Three months ended March 31, 2021

Three months ended June 30, 2021

Oil and natural gas Contract drilling Land investment Other Total

4 unchanged sentences

Drilling and pump — 889,000 — — 889,000

Contingent residual payments — — 1,253,000 — 1,253,000

Other — — — 79,000 79,000

8 unchanged sentences

Total revenues before interest income $ 2,887,000 $ 889,000 $ 1,253,000 $ 79,000 $ 5,108,000

Three months ended March 31, 2020

Three months ended June 30, 2020

Oil and natural gas Contract drilling Land investment Other Total

14 unchanged sentences

Total revenues before interest income $ 830,000 $ 3,040,000 $ — $ 113,000 $ 3,983,000

Six months ended March 31, 2021

Nine months ended June 30, 2021

Oil and natural gas Contract drilling Land investment Other Total

15 unchanged sentences

Total revenues before interest income $ 7,326,000 $ 4,220,000 $ 1,738,000 $ 209,000 $ 13,493,000

Six months ended March 31, 2020

Nine months ended June 30, 2020

Oil and natural gas Contract drilling Land investment Other Total

16 unchanged sentences

The following table provides information about accounts receivables, contract assets and contract liabilities from contracts with customers:

March 31, 2021 September 30, 2020

June 30, 2021 September 30, 2020

Accounts receivables from contracts with customers $ 1,753,000 $ 1,772,000

9 unchanged sentences

Such deferred revenue typically results from billings in excess of costs and estimated earnings on uncompleted contracts.

As of March 31, 2021 and September 30, 2020, the Company had $ 391,000 and $ 1,097,000 , respectively, included in “Other current liabilities” on the balance sheets for those performance obligations expected to be completed in the next twelve months.

During the six months ended March 31, 2021 and 2020, the amount of revenue recognized that was previously included in contract liabilities as of the beginning of the respective period was $ 789,000 and $ 707,000 , respectively.

As of June 30, 2021 and September 30, 2020, the Company had $ 184,000 and $ 1,097,000 , respectively, included in “Other current liabilities” on the balance sheets for those performance obligations expected to be completed in the next twelve months.

During the nine months ended June 30, 2021 and 2020, the amount of revenue recognized that was previously included in contract liabilities as of the beginning of the respective period was $ 978,000 and $ 707,000 , respectively.

Contracts are sometimes modified for a change in scope or other requirements.

7 unchanged sentences

Nearly all of the Company's contract drilling segment contracts have original expected durations of one year or less.

At March 31, 2021, the Company had three contract drilling jobs with original expected durations of greater than one year.

For these contracts, approximately 7 % of the remaining performance obligation of $ 2,609,000 is expected to be recognized in the next twelve months and the remaining, thereafter.

At June 30, 2021, the Company had three contract drilling jobs with original expected durations of greater than one year.

For these contracts, 7 % of the remaining performance obligation of $ 2,613,000 is expected to be recognized in the next twelve months and the remaining, thereafter.

Contract Fulfillment Costs

Preconstruction costs, which include costs such as set-up and mobilization, are capitalized and allocated across all performance obligations and deferred and amortized over the contract term on a progress towards completion basis.

As of March 31, 2021 and September 30, 2020, the Company had $ 105,000 and $ 145,000 , respectively, in unamortized preconstruction costs related to contracts that were not completed.

During the three and six months ended March 31, 2021 and 2020, the amortization of preconstruction costs related to contracts were not material and were included in the accompanying Condensed Consolidated Statements of Operations.

Additionally, no impairment charges in connection with the Company’s preconstruction costs were recorded during the three and six months ended March 31, 2021 and 2020.

As of June 30, 2021 and September 30, 2020, the Company had $ 119,000 and $ 145,000 , respectively, in unamortized preconstruction costs related to contracts that were not completed.

During the three and nine months ended June 30, 2021 and 2020, the amortization of preconstruction costs related to contracts were not material and were included in the accompanying Condensed Consolidated Statements of Operations.

Additionally, no impairment charges in connection with the Company’s preconstruction costs were recorded during the three and nine months ended June 30, 2021 and 2020.

Water Well Re-drill

7 unchanged sentences

Barnwell operates the following segments:

1) acquiring, developing, producing and selling oil and natural gas in Canada (oil and natural gas);

1) acquiring, developing, producing and selling oil and natural gas in Canada and Oklahoma (oil and natural gas);

2) investing in land interests in Hawaii (land investment);

3 unchanged sentences

Three months ended

March 31, Six months ended

June 30, Nine months ended

2021 2020 2021 2020

19 unchanged sentences

Gain on sale of asset — — — 1,336,000

Total operating profit 547,000 529,000 1,485,000 1,640,000

Total operating profit (loss) 2,130,000 ( 2,132,000 ) 3,615,000 ( 492,000 )

Equity in income (loss) of affiliates:

3 unchanged sentences

Interest income 6,000 1,000 6,000 17,000

(Loss) earnings before income taxes $ ( 760,000 ) $ ( 1,518,000 ) $ 46,000 $ ( 1,939,000 )

Gain on debt extinguishment 149,000 — 149,000 —

Gain on termination of post-retirement medical plan 2,341,000 — 2,341,000 —

Earnings (loss) before income taxes $ 5,745,000 $ ( 3,491,000 ) $ 5,791,000 $ ( 5,430,000 )

ACCUMULATED OTHER COMPREHENSIVE LOSS

1 unchanged sentence

Three months ended

March 31, Six months ended

June 30, Nine months ended

2021 2020 2021 2020

3 unchanged sentences

Income taxes — — — —

Net current period other comprehensive (loss) income ( 85,000 ) 84,000 ( 319,000 ) 89,000

Net current period other comprehensive loss ( 74,000 ) ( 125,000 ) ( 393,000 ) ( 36,000 )

Ending accumulated foreign currency translation 152,000 655,000 152,000 655,000

3 unchanged sentences

Net actuarial gains arising during the period — — — 2,579,000

Gain on termination of post-retirement medical plan 541,000 — 541,000 —

Income taxes — — — —

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Barnwell estimates the fair value of asset retirement obligations based on the projected discounted future cash outflows required to settle abandonment and restoration liabilities.

Such an estimate requires

assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments.

Such an estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments.

Abandonment and restoration cost estimates are determined in conjunction with Barnwell’s reserve engineers based on historical information regarding costs incurred to abandon and restore similar well sites, information regarding current market conditions and costs, and knowledge of subject well sites and properties.

2 unchanged sentences

On April 28, 2020, the Company, as obligor, entered into a promissory note evidencing an unsecured loan in the approximate amount of $ 147,000 under the Paycheck Protection Program (“PPP”) pursuant to the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Act that was signed into law in March 2020.

The note matures two years after the date of the loan disbursement and bears interest at a fixed annual rate of 1.00 %, with the principal and interest payments deferred until ten months after the last day of the covered period.

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, and the PPP, the Company can apply for and be granted forgiveness for all or a portion of the loan issued under the PPP and the loan is expected to be forgiven to the extent the proceeds are used in accordance with the PPP to cover payroll, mortgage interest, rent, and utility costs incurred by the Company over the 24-week period following the loan disbursement date.

As of March 31, 2021, the current and long-term portions of the loan were $ 131,000 and $ 16,000 , respectively, and the current portion is included in “Other current liabilities” in the Company's Condensed Consolidated Balance Sheet.

On April 18, 2021, the Company was notified by the lender of our PPP loan that the entire PPP loan amount of $ 147,000 and related accrued interest was forgiven by the Small Business Administration.

As a result of the loan forgiveness, the Company expects to recognize a gain on debt extinguishment in the Company's Condensed Consolidated Statement of Operations in the quarter ending June 30, 2021.

The note was to mature two years after the date of the loan disbursement with interest at a fixed annual rate of 1.00 %, and with the principal and interest payments deferred until ten months after the last day of the covered period.

In April 2021, the Company was notified by the lender of our PPP loan that the entire PPP loan amount and related accrued interest was forgiven by the Small Business Administration.

As a result of the loan forgiveness, the Company recognized a gain on debt extinguishment of $ 149,000 during the three and nine months ended June 30, 2021.

Canada Emergency Business Account Loan

In the quarter ended December 31, 2020, the Company’s Canadian subsidiary, Barnwell of Canada, received a loan of CAD$ 40,000 (in Canadian dollars) under the Canada Emergency Business Account (“CEBA”) loan program for small businesses.

During the quarter ended March 31, 2021, the Company applied for an increase to our CEBA loan and received an additional CAD$ 20,000 for a total loan amount received of CAD$ 60,000 ($ 47,000 ) under the program.

In the quarter ended March 31, 2021, the Company applied for an increase to our CEBA loan and received an additional CAD$ 20,000 for a total loan amount received of CAD$ 60,000 ($ 47,000 ) under the program.

The CEBA loan is interest-free with no principal payments required until December 31, 2022, after which the remaining loan balance is converted to a three year term loan at 5 % annual interest paid monthly.

5 unchanged sentences

The stockholder-approved 2018 Equity Incentive Plan provides for the issuance of incentive stock options, nonstatutory stock options, stock options with stock appreciation rights, restricted stock, restricted stock units and performance units, qualified performance-based awards, and stock grants to employees, consultants and non-employee members of the Board of Directors.

800,000 shares of Barnwell common stock have been reserved for issuance and as of March 31, 2021, a total of 135,000 share options remain available for grant.

800,000 shares of Barnwell common stock have been reserved for issuance and as of June 30, 2021, a total of 135,000 share options

remain available for grant.

Barnwell currently has a policy of issuing new shares to satisfy share option exercises when the optionee requests shares.

3 unchanged sentences

60,000 shares of the stock options granted have an exercise price of $ 3.66 (110% of the closing market price on the date of grant for options granted to affiliates), vest annually over three years , and expire in five years from the date of grant.

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2020 through March 31, 2021 is presented below:

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2020 through June 30, 2021 is presented below:

Options Shares Weighted-

6 unchanged sentences

Expired/Forfeited ( 50,000 ) 3.33

Outstanding at March 31, 2021 665,000 $ 3.36 9.4 $ —

Exercisable at March 31, 2021 — $ — — $ —

Outstanding at June 30, 2021 615,000 $ 3.36 9.1 $ —

Exercisable at June 30, 2021 — $ — — $ —

The following assumptions were used in estimating the fair value of the equity-classified share options granted on February 9, 2021:

9 unchanged sentences

Compensation cost for equity-classified awards is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period.

As of March 31, 2021, the total remaining unrecognized compensation cost related to nonvested share options was $ 1,649,000 , which is expected to be recognized over the weighted-average remaining requisite service period of 2.9 years.

During the three and six months ended March 31, 2021, the Company recognized total share-based compensation expense of $ 151,000 .

There was no share-based compensation expense recognized during the three and six months ended March 31, 2020.

As of June 30, 2021, the total remaining unrecognized compensation cost related to nonvested share options was $ 1,259,000 , which is expected to be recognized over the weighted-average remaining requisite service period of 2.6 years.

During the three and nine months ended June 30, 2021, the Company recognized total share-based compensation expense of $ 238,000 and $ 389,000 , respectively.

There was no share-based compensation expense recognized during the three and nine months ended June 30, 2020.

At The Market Offering

3 unchanged sentences

333-254365), filed with the Securities and Exchange Commission on March 16, 2021, and declared effective on March 26, 2021 (the "Registration Statement”), and the prospectus dated March 26, 2021, included in the Registration Statement.

As of the filing date of this Quarterly Report, no shares have been sold under the ATM.

The incremental costs related to the ATM, which include legal, accounting, and underwriting fees, are currently capitalized as current assets and are recorded as “deferred offering costs” on the Company’s Condensed Consolidated Balance Sheet.

Upon the initial sale of the Company’s shares, the deferred offering costs will be recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering.

If the sale of the Company’s shares are determined to be no longer probable, the deferred offering costs will be charged to expense.

As of March 31, 2021, total deferred offering costs was $ 483,000 .

From July 1, 2021 to the date of this Quarterly Report, an additional 581,441 shares of common stock were sold resulting in net proceeds of $ 1,924,000 after commissions and fees of $ 64,000 .

In connection with our ATM offering, the Company incurred approximately $ 577,000 of incremental costs, which include legal, accounting, and underwriting fees, of which $ 283,000 has been recorded in stockholders’ equity as a reduction of additional paid-in capital generated from the offering and $ 294,000 has been capitalized as a current asset and recorded in “Deferred offering costs” on the Company’s Condensed Consolidated Balance Sheet as of June 30, 2021.

CONTINGENCIES

5 unchanged sentences

Subsequently, in the quarter ended March 31, 2020, the Company executed a separate five-year warranty agreement with the customer for one of the wells that did not meet plumbness.

Under the terms of the agreement, if the lack of plumbness is determined to be the cause of a pump failure within the warranty period, the Company would be obligated to replace the pump at no cost to the customer.

Under the terms of the agreement, if the lack of plumbness is determined to be the cause of a pump failure within the warranty

period, the Company would be obligated to replace the pump at no cost to the customer.

If the Company is unable to replace the pump using industry-standard methods, or if there are two or more pump failures attributable to lack of plumbness within the five-year warranty period, the Company would be obligated to drill a new well at no cost to the customer.

1 unchanged sentence

Management believes the degrees of deviation for both wells are not impactful to the performance of the submersible pumps that will be installed in those wells.

Accordingly, no accruals have been recorded as of March 31, 2021 as there is no probable or estimable contingent liability.

Accordingly, no accruals have been recorded as of June 30, 2021 as there is no probable or estimable contingent liability.

In July 2020, the Staff of the State of Hawaii’s Commission on Water Resource Management (“Commission”) circulated a draft of a proposed recommendation to the Commission under which the Company, the water utility, the water utility's independent hydrologist firm and the owner of the land on which the two aforementioned water wells were drilled would be assessed penalty fines because each of the wells were calculated to have been drilled beyond the depth permitted by the permit.

2 unchanged sentences

Subsequently, the Staff of the Commission acknowledged that one well had not been drilled to a depth beyond its permitted depth and the fines on that well were eliminated.

Additionally, the fines applicable to the depth of the second well were dropped in lieu of the parties entering into an agreement to perform a water quality study and turn a current well into a monitoring well.

Accordingly, the Company recorded a contingent liability of approximately $ 300,000 at September 30, 2020 and there has been no change to the accrual as of March 31, 2021.

Additionally, the fines applicable to the depth of the second well were dropped in lieu of the parties entering into an agreement to perform a water quality study and repurpose a current well into a monitoring well.

Accordingly, the Company recorded a contingent liability of approximately $ 300,000 at September 30, 2020 and there has been no change to the accrual as of June 30, 2021.

INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

Supplemental disclosure of cash flow information:

Cash paid (received) during the year for:

Income taxes paid (refunded), net $ 85,000 $ ( 94,000 )

Capital expenditure accruals related to oil and natural gas exploration and development decreased $ 381,000 during the six months ended March 31, 2021 and increased $ 670,000 during the six months ended March 31, 2020.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations decreased $ 12,000 during the six months ended March 31, 2021 and increased $ 527,000 during the six months ended March 31, 2020.

Income taxes refunded, net $ ( 290,000 ) $ ( 166,000 )

Supplemental disclosure of non-cash investing and financing activities:

Canadian income tax withholdings on proceeds from the sale of oil and natural gas properties $ 72,000 $ —

Accrued offering costs included in deferred offering costs, additional paid-in capital, and accounts payable $ 453,000 $ —

Capital expenditure accruals related to oil and natural gas exploration and development decreased $ 7,000 during the nine months ended June 30, 2021 and increased $ 635,000 during the nine months ended June 30, 2020.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $ 463,000 and $ 545,000 during the nine months ended June 30, 2021 and 2020, respectively.

RELATED PARTY TRANSACTIONS

3 unchanged sentences

Changes to the arrangement above, effective March 7, 2019, are discussed in Note 4.

During the six months ended March 31, 2021, Barnwell received $ 485,000 in percentage of sales payments from KD 1 from the sale of two single-family lots within Phase II of Increment I.

No lots were sold during the six months ended March 31, 2020.

During the nine months ended June 30, 2021, Barnwell received $ 1,738,000 in percentage of sales payments from KD 1 from the sale of eight single-family lots within Phase II of Increment I.

No lots were sold during the nine months ended June 30, 2020.

O'Farrell, a member of the Board of Directors of the Company effective July 12, 2021, is the sole member of Four Pines Operating LLC which owns a 25 % interest in Gros Ventre.

In February 2021, Gros Ventre and BOK, a wholly-owned subsidiary of Barnwell, entered into the Agreement of Teton Barnwell, an entity formed for the purpose of directly investing in oil and natural gas exploration and development in Oklahoma.

Under the terms of the Agreement, Gros Ventre makes no capital contributions and receives 2 % of the profits of Teton Barnwell.

Additionally, as the manager of Teton Barnwell, Gros Venture is paid an annual asset management fee equal to 1 % of the cumulative capital contributions made to Teton Barnwell as compensation for its management services.

SUBSEQUENT EVENTS

Kukio Resort Land Development Partnerships and Sale of Interest in Leasehold Land

Subsequent to March 31, 2021, Barnwell received net cash distributions in the amount of $ 1,554,000 from the Kukio Resort Land Development Partnerships.

Financial results of this distribution will be reflected in Barnwell's quarter ending June 30, 2021.

Additionally, subsequent to March 31, 2021, Kaupulehu Developments received percentage of sales payments totaling $ 548,000 from the sale of three lots within Phase II of Increment I.

Financial results from the receipt of these payments will be reflected in Barnwell's quarter ending June 30, 2021.

Paycheck Protection Program Loan Forgiveness

On April 18, 2021, the Company was notified by the lender of our PPP loan that the entire PPP loan amount of $ 147,000 and related accrued interest was forgiven by the Small Business Administration.

Postretirement Medical Plan Termination

Oil and Natural Gas Property Dispositions and Acquisitions

On April 8, 2021, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in properties located in the Hillsdown area of Alberta, Canada.

The sales price per the agreement was adjusted for customary purchase price adjustments to $ 138,000 in order to, among other things, reflect an economic effective date of October 1, 2020.

Kukio Resort Land Development Partnerships

Subsequent to June 30, 2021, Barnwell received net cash distributions in the amount of $ 683,000 from the Kukio Resort Land Development Partnerships.

Financial results of this distribution will be reflected in Barnwell's quarter ending September 30, 2021.

Oil and Natural Gas Property Dispositions

$ 524,000 of the sales proceeds was withheld for remittance by the buyers to the Canada Revenue Agency for potential amounts due for Barnwell’s Canadian income taxes related to the sale.

The final determination of the customary adjustments to the purchase price has not yet been made, however it is not expected to result in a material adjustment.

Additionally, on April 8, 2021, Barnwell acquired additional working interests in oil and natural gas properties located in the North Twining area of Alberta, Canada for cash consideration of $ 340,000 .

The purchase price per the agreement was adjusted for customary purchase price adjustments to reflect the economic activity from the effective date to the closing date.

The final determination of the customary adjustments to the purchase price has not yet been made, however it is not expected to result in a material adjustment.

The oil and natural gas property transactions above will be reflected in Barnwell's quarter ending June 30, 2021.

Barnwell expects to report a gain on this transaction which will be recognized in its quarter ending September 30, 2021.

At The Market Offering

From July 1, 2021 to the date of this Quarterly Report, an additional 581,441 shares of common stock were sold under the ATM resulting in net proceeds of $ 1,924,000 after commissions and fees of $ 64,000 .

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What changed 10-Q

Item 1. Financial Statements