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Item 8. Financial Statements and Supplementary Data

2021-12-21 compared with 2020-12-16 · 512 added, 418 removed, 944 unchanged (50% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

To the Board of Stockholders and Board of Directors of

Barnwell Industries, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Barnwell Industries, Inc.

and subsidiaries (the Company) as of September 30, 2020, and the related consolidated statement of operations, comprehensive loss, equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency.

These conditions raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might results from the outcome of this uncertainty.

We have audited the accompanying consolidated balance sheets of Barnwell Industries, Inc.

and subsidiaries (the Company) as of September 30, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss), equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

These financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Estimation of Proved Reserves Impacting the Recognition and Valuation of Depletion Expense and Impairment and Oil and Gas Properties

Critical Audit Matter Description

As described in Note 1 to the financial statements, the Company accounts for its oil and gas properties using the full cost method of accounting which requires management to make estimates of proved reserve volumes and future revenues and expenses to calculate depletion expense and measure its oil and gas properties for potential impairment.

To estimate the volume of proved reserves and future revenues, management makes significant estimates and assumptions, including forecasting the production decline rate of producing properties and forecasting the timing and volume of production associated with the Company’s development plan for proved undeveloped properties.

In addition, the estimation of proved reserves is also impacted by management’s judgments and estimates regarding the financial performance of wells associated with proved reserves to determine if wells are expected, with reasonable certainty, to be economical under the appropriate pricing assumptions required in the estimation of depletion expense and potential impairment measurements.

We identified the estimation of proved reserves of oil and gas properties, due to its impact on depletion expense and impairment evaluation, as a critical audit matter.

The principal consideration for our determination that the estimation of proved reserves is a critical audit matter is that changes in certain inputs and assumptions, which require a high degree of subjectivity necessary to estimate the volume and future revenues of the Company’s proved reserves could have a significant impact on the measurement of depletion expense or the impairment assessment.

In turn, auditing those inputs and assumptions required subjective and complex auditor judgement.

How the Critical Audit Matter was Addressed in the Audit

We obtained an understanding of the design and implementation of management’s controls and our audit procedures related to the estimation of proved reserves included the following, among others.

• We evaluated the level of knowledge, skill, and ability of the Company’s reservoir engineering specialists and their relationship to the Company, made inquiries of those reservoir engineers regarding the process followed and judgments made to estimate the Company’s proved reserve volumes, and read the reserve report prepared by the Company’s specialists.

• To the extent key, sensitive inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from Company’s accounting records, such as commodity pricing, historical pricing differentials, operating costs, estimated capital costs and working and net revenue interests, we tested management’s process for determining the assumptions, including examining the underlying support, on a sample basis.

Specifically, our audit procedures involved testing management’s assumptions as follows:

◦ Compared the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the current year and examined contractual support for the pricing differentials;

◦ Evaluated the models used to estimate the operating costs at year-end compared to historical operating costs;

◦ Compared the models used to determine the future capital expenditures and compared estimated future capital expenditures used in the reserve report to amounts expended for recently drilled and completed wells with similar locations;

◦ Evaluated the working and net revenue interests used in the reserve report by inspecting a sample of ownership interests, historical pricing differentials, and operating costs to underlying support from the Company’s accounting records;

◦ Evaluated the Company’s evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining support for the Company’s or the operator’s ability and intent to develop the proved undeveloped properties;

◦ Applied analytical procedures to the reserve report by comparing to historical actual results and to the prior year reserve report.

Revenue Recognition Based on the Percentage of Completion Method

Critical Audit Matter Description

As described further in Note 1 to the financial statements, revenues derived from contract drilling contracts are recognized over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer, using the percentage-of-completion method of accounting, based primarily on contract cost incurred to date compared to total estimated contract cost.

Revenue recognition under this method is judgmental, particularly on lump-sum contracts, as it requires the Company to prepare estimates of total contract revenue and total contract costs, including costs to complete in-process contracts.

Auditing the Company’s estimates or total contract revenue and costs used to recognize revenue on contract drilling contracts involved significant auditor judgment, as it required the evaluation of subjective factors such as assumptions related to project schedule and completion, forecasted labor, and material and subcontract costs.

These assumptions involved significant management judgment, which affects the measurement of revenue recognized by the Company.

How the Critical Audit Matter was Addressed in the Audit

We obtained an understanding of the design and implementation of management’s controls and our audit procedures related to the estimation of proved reserves included the following, among others.

• We obtained an understanding of the Company’s estimation process that affected revenue recognized on engineering and construction contracts.

This included controls over management’s monitoring and review of project costs, including the Company’s procedures to validate the completeness and accuracy of data used to determine the estimates.

• We selected a sample of projects and, among other procedures, obtained and inspected the contract agreements, amendments and change orders to test the existence of customer arrangements and understand the scope of pricing of the related contracts;

• Evaluated the Company’s estimated revenue and costs to complete by obtaining and analyzing supporting documentation of management’s estimates of variable consideration and contract costs;

• Compared contract profitability estimates in the current year to historical estimates and actual performance.

Calculation of Gain Associated with Sale of Oil and Gas Properties

Critical Audit Matter Description

As described further in Note 7 to the consolidated financial statements, the Company recorded a gain to the statement of operations from sale of certain oil and gas properties.

Determination of the accounting for

this transaction is challenging as it requires the Company to prepare significant assumptions and estimates regarding the associated fair value of the oil and gas reserves sold as compared to costs capitalized.

The fair value estimate allows the Company to determine if the sale of the oil and gas assets are significant to the total full cost pool to record a gain on sale under the full cost method of accounting.

Auditing the Company’s estimates and assumptions used to calculate the fair value of the oil and gas reserves used to determine the relationship between capitalized costs and proved reserves of the Spirit River properties sold as compared to the properties retained by the Company, as it required the evaluation of the significant inputs and assumptions used in the reserve reports prepared by a third party reserve engineer (the Company’s specialist).

Further, such fair values determined by the Company’s specialist also determined the gain calculation under the full cost method of accounting used by the Company.

How the Critical Audit Matter was Addressed in the Audit

We obtained an understanding of the design and implementation of management’s controls and our audit procedures related to the fair value of oil and gas reserves sold in relationship with the capitalized costs utilized in the calculation of the gain associated with the sale of oil and gas properties included the following:

• Utilized the support of auditor’s specialists to recalculate independently of reserve engineer the fair value of oil and gas reserves sold vs.

retained based on reserve information provided by the Company’s through their third party reserve engineer;

• We evaluated management’s application of gain accounting under full cost method related to the sale of the oil and gas properties to determine proper treatment was applied.

• Compared the calculation inputs for the gain recorded to the purchase and sale agreement.

/s/ WEAVER AND TIDWELL, L.L.P.

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December 21, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

BARNWELL INDUSTRIES, INC.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Barnwell Industries, Inc.

and subsidiaries (the Company) as of September 30, 2019, the related consolidated statements of operations, comprehensive loss, equity, and cash flows for the year ended September 30, 2019 and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2019, and the results of its operations and its cash flows for the year ended September 30, 2019, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 1990 to 2020.

Honolulu, Hawaii

December 20, 2019

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

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Income taxes receivable 530,000 472,000

Asset held for sale 699,000 —

Assets held for sale 687,000 699,000

Other current assets 2,470,000 1,556,000

Total current assets 18,035,000 9,487,000

Income taxes receivable, net of current portion — 230,000

Asset for retirement benefits 2,229,000 771,000

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Operating lease right-of-use assets 296,000 249,000

Property and equipment, net 3,774,000 8,388,000

Oil and natural gas properties, full cost method of accounting:

Proved properties, net 2,423,000 2,303,000

Unproved properties 962,000 —

Total oil and natural gas properties, net 3,385,000 2,303,000

Drilling rigs and other property and equipment, net 490,000 1,471,000

Total assets $ 24,435,000 $ 15,182,000

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Accrued operating and other expenses 1,171,000 1,325,000

Current portion of operating lease liabilities 111,000 —

Current portion of asset retirement obligation 713,000 647,000

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Total current liabilities 5,901,000 6,364,000

Deferred rent — 193,000

Long-term debt 47,000 58,000

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authorized, 20,000,000 shares:

8,445,060 issued at September 30, 2020 and 2019

9,613,525 issued at September 30, 2021;

8,445,060 issued at September 30, 2020

4,807,000 4,223,000

Additional paid-in capital 4,590,000 1,350,000

(Accumulated deficit) retained earnings ( 3,897,000 ) 859,000

Accumulated other comprehensive loss, net ( 1,435,000 ) ( 2,917,000 )

Retained earnings (accumulated deficit) 2,356,000 ( 3,897,000 )

Accumulated other comprehensive income (loss), net 32,000 ( 1,435,000 )

Treasury stock, at cost:

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

Total stockholders’ (deficit) equity ( 2,045,000 ) 1,229,000

Total stockholders’ equity (deficit) 9,499,000 ( 2,045,000 )

Non-controlling interests 8,000 92,000

Total (deficit) equity ( 1,953,000 ) 1,329,000

Total equity (deficit) 9,507,000 ( 1,953,000 )

Total liabilities and equity $ 24,435,000 $ 15,182,000

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Interest expense 13,000 3,000

Gain on sale of asset ( 1,336,000 ) —

Gain on debt extinguishment ( 149,000 ) —

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

Gain on sale of assets ( 1,982,000 ) ( 1,336,000 )

16,371,000 23,373,000

Loss before equity in income (loss) of affiliates and income taxes ( 5,026,000 ) ( 12,372,000 )

Equity in income (loss) of affiliates 352,000 ( 276,000 )

Loss before income taxes ( 4,674,000 ) ( 12,648,000 )

Income tax provision (benefit) 3,000 ( 231,000 )

Net loss ( 4,677,000 ) ( 12,417,000 )

Net earnings (loss) attributable to non-controlling interests 79,000 ( 3,000 )

Net loss attributable to Barnwell Industries, Inc.

Earnings (loss) before equity in income of affiliates and income taxes 1,742,000 ( 5,026,000 )

Equity in income of affiliates 5,793,000 352,000

Earnings (loss) before income taxes 7,535,000 ( 4,674,000 )

Income tax provision 332,000 3,000

Net earnings (loss) 7,203,000 ( 4,677,000 )

Net earnings attributable to non-controlling interests 950,000 79,000

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

stockholders $ 6,253,000 $ ( 4,756,000 )

Basic net loss per common share

Basic net earnings (loss) per common share

attributable to Barnwell Industries, Inc.

stockholders $ 0.73 $ ( 0.57 )

Diluted net loss per common share

Diluted net earnings (loss) per common share

attributable to Barnwell Industries, Inc.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year ended September 30,

Net loss $ ( 4,677,000 ) $ ( 12,417,000 )

Net earnings (loss) $ 7,203,000 $ ( 4,677,000 )

Other comprehensive income (loss):

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101,000 120,000

Net actuarial loss arising during the period, net of taxes of $ 0

Net actuarial gain (loss) arising during the period, net of taxes of $ 0

1,108,000 ( 218,000 )

Curtailment gain, net of taxes of $ 0

Total other comprehensive income (loss) 1,482,000 ( 2,403,000 )

Total comprehensive loss ( 3,195,000 ) ( 14,820,000 )

Comprehensive income (loss) attributable to non-controlling interests 79,000 ( 3,000 )

Comprehensive loss attributable to Barnwell Industries, Inc.

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

Total other comprehensive income 1,467,000 1,482,000

Total comprehensive income (loss) 8,670,000 ( 3,195,000 )

Comprehensive income attributable to non-controlling interests ( 950,000 ) ( 79,000 )

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

$ 7,720,000 $ ( 3,274,000 )

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Earnings (Accumulated Deficit) Accumulated

Comprehensive Loss Treasury

Comprehensive Income (Loss) Treasury

Stock Non-controlling

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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

Cumulative impact from the adoption of ASU No.

2014-09 — — — 20,000 — — — 20,000

Distributions to non-controlling interests — — — — — — ( 110,000 ) ( 110,000 )

Net loss — — — ( 12,414,000 ) — — ( 3,000 ) ( 12,417,000 )

Net (loss) earnings — — — ( 4,756,000 ) — — 79,000 ( 4,677,000 )

Foreign currency translation adjustments, net of taxes of $ 0

— — — — ( 146,000 ) — — ( 146,000 )

Distributions to non-controlling interests — — — — — — ( 87,000 ) ( 87,000 )

Retirement plans:

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— — — — ( 218,000 ) — — ( 218,000 )

Curtailment gain, net of taxes of $ 0

— — — — 1,726,000 — — 1,726,000

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 )

Distributions to non-controlling interests — — — — — — ( 87,000 ) ( 87,000 )

Net (loss) earnings — — — ( 4,756,000 ) — — 79,000 ( 4,677,000 )

Net earnings — — — 6,253,000 — — 950,000 7,203,000

Foreign currency translation adjustments, net of taxes of $ 0

— — — — ( 283,000 ) — — ( 283,000 )

Distributions to non-controlling interests — — — — — — ( 1,034,000 ) ( 1,034,000 )

Share-based compensation — — 643,000 — — — — 643,000

Issuance of common stock, net of costs 1,167,987 583,000 2,596,000 — — — — 3,179,000

Issuance of common stock for services 478 1,000 1,000 — — — — 2,000

Retirement plans:

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— — — — 101,000 — — 101,000

Net actuarial loss arising during the period, net of taxes of $ 0

Net actuarial gain arising during the period, net of taxes of $ 0

— — — — 1,108,000 — — 1,108,000

Curtailment gain, net of taxes of $ 0

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

— — — — 541,000 — — 541,000

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Cash flows from operating activities:

Net loss $ ( 4,677,000 ) $ ( 12,417,000 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Equity in (income) loss of affiliates ( 352,000 ) 276,000

Net earnings (loss) $ 7,203,000 $ ( 4,677,000 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Equity in income of affiliates ( 5,793,000 ) ( 352,000 )

Depletion, depreciation, and amortization 963,000 2,147,000

Impairment of assets 668,000 4,376,000

Gain on sale of asset ( 1,336,000 ) —

Gain on sale of oil and natural gas properties ( 818,000 ) —

Gain on sale of other assets ( 1,164,000 ) ( 1,336,000 )

Sale of interest in leasehold land, net of fees paid ( 1,526,000 ) ( 285,000 )

Distributions of income from equity investees 5,045,000 75,000

Retirement benefits (income) expense ( 60,000 ) 177,000

Income tax receivable, noncurrent — ( 31,000 )

Retirement benefits income ( 88,000 ) ( 60,000 )

Accretion of asset retirement obligation 580,000 561,000

Deferred income tax expense (benefit) 26,000 ( 144,000 )

Deferred income tax expense 165,000 26,000

Asset retirement obligation payments ( 421,000 ) ( 498,000 )

Share-based compensation benefit — ( 42,000 )

Non-cash rent expense 48,000 86,000

Share-based compensation expense 643,000 —

Common stock issued for services 1,000 —

Non-cash rent (income) expense ( 4,000 ) 48,000

Retirement plan contributions and payments ( 14,000 ) ( 8,000 )

Bad debt expense 32,000 285,000

Increase from changes in current assets and liabilities 448,000 1,242,000

Net cash provided by (used in) operating activities 750,000 ( 2,133,000 )

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 ( 2,151,000 ) 448,000

Net cash provided by operating activities 831,000 750,000

Cash flows from investing activities:

Proceeds from the maturity of certificates of deposit — 741,000

Distributions from equity investees in excess of earnings 1,649,000 305,000

Proceeds from sale of interest in leasehold land, net of fees paid 1,526,000 285,000

Proceeds from sale of oil and natural gas assets 608,000 1,519,000

Proceeds from final acquisition purchase price adjustments — 172,000

Proceeds from the sale of asset 1,100,000 —

Proceeds from the sale of oil and natural gas assets 581,000 608,000

Proceeds from the sale of other assets, net of closing costs 1,864,000 1,100,000

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

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Capital expenditures - all other ( 63,000 ) ( 415,000 )

Issuance of note receivable — ( 300,000 )

Proceeds from repayment of note receivable — 300,000

Net cash (used in) provided by investing activities ( 833,000 ) 905,000

Net cash provided by (used in) investing activities 3,686,000 ( 833,000 )

Cash flows from financing activities:

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Distributions to non-controlling interests ( 1,034,000 ) ( 87,000 )

Net cash provided by (used in) financing activities 60,000 ( 110,000 )

Proceeds from issuance of stock, net of costs 3,179,000 —

Net cash provided by financing activities 2,192,000 60,000

Effect of exchange rate changes on cash and cash equivalents ( 14,000 ) ( 6,000 )

Net decrease in cash and cash equivalents ( 29,000 ) ( 1,352,000 )

Net increase (decrease) in cash and cash equivalents 6,695,000 ( 29,000 )

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

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Barnwell is engaged in the following lines of business:

1) acquiring, developing, producing and selling oil and natural gas in Canada, 2) investing in land interests in Hawaii, and 3) drilling wells and installing and repairing water pumping systems in Hawaii.

1) acquiring, developing, producing and selling oil and natural gas in Canada and Oklahoma, 2) investing in land interests in Hawaii, and 3) drilling wells and installing and repairing water pumping systems in Hawaii.

Principles of Consolidation

The 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).

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), 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.

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Barnwell operates in and derives revenue from the following three principal business segments:

• Oil and Natural Gas Segment - Barnwell engages in oil and natural gas development, production, acquisitions and sales in Canada.

• Oil and Natural Gas Segment - Barnwell engages in oil and natural gas development, production, acquisitions and sales in Canada and Oklahoma.

• Land Investment Segment - Barnwell invests in land interests in Hawaii.

• Contract Drilling Segment - Barnwell provides well drilling services and water pumping system installation and repairs in Hawaii.

Oil and Natural Gas - Barnwell’s investments in oil and natural gas properties are located in Alberta, Canada.

Oil and Natural Gas - Barnwell’s investments in oil and natural gas properties are located in Alberta, Canada and Oklahoma.

These property interests are principally held under governmental leases or licenses.

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The nature of accounting for these contracts is such that refinements of the estimated costs to complete may occur and are characteristic of the estimation process due to changing conditions and new developments.

Many factors and assumptions can and do change during a contract performance obligation period which can result in a change to contract profitability including unforeseen underground geological conditions (to the extent that contract remedies are unavailable), the availability and costs of skilled contract labor, the performance of major material suppliers, the performance of major subcontractors, unusual weather conditions and unexpected changes in material costs, changes in the scope and nature of the work to be performed, and unexpected construction execution errors, among others.

These factors may result in revisions to costs and income and

are recognized in the period in which the revisions become known.

construction execution errors, among others.

These factors may result in revisions to costs and income and are recognized in the period in which the revisions become known.

Revenue and profit in future periods of contract performance are recognized using the adjusted estimate.

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The allowance for doubtful accounts is Barnwell’s best estimate of the amount of probable credit losses in Barnwell’s existing accounts receivable and is based on historical write-off experience and the application of the specific identification method.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Account balances are charged off against the allowance after all means of

collection have been exhausted and the potential for recovery is considered remote.

Barnwell does not have any off-balance sheet credit exposure related to its customers.

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All costs of the sales of Increment I and Increment II leasehold land interests were recognized at the time of sale and were not deferred to future periods when any contingent profits will be recognized.

Variable Interest Entities

The consolidation of VIEs 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).

Equity Method Investments

2 unchanged sentences

Gains or losses are realized when such investments are sold.

Barnwell classifies distributions received from equity method investments using the cumulative earnings approach in the Consolidated Statements of Cash Flows.

Under the cumulative earnings approach, distributions received up to the amount of cumulative equity in earnings recognized are treated as returns on investment and are classified within operating cash flows and those in excess of that amount are treated as returns of investment and are classified within investing cash flows.

Investments in equity method investees are evaluated for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

3 unchanged sentences

If the decline in fair value is determined by management to be other-than-temporary, the carrying value of the investment is written down to its estimated fair value as of the balance sheet date of the reporting period in which the assessment is made.

Variable Interest Entities

The consolidation of VIEs 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:

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

Barnwell analyzes its unconsolidated affiliates in which it has an investment to determine whether the unconsolidated entities are VIEs and, if so, whether the Company is the primary beneficiary.

Our unconsolidated affiliates that have been determined to be VIEs are accounted under the equity method

because we do not have a controlling financial interest and are therefore not the VIE’s primary beneficiary (see Note 6).

Oil and Natural Gas Properties

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We capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities.

The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized as depreciation, depletion and amortization expense using the units-of-production method based on estimated proved recoverable oil and gas reserves.

Costs associated with unevaluated and unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves.

Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease.

Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property.

Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.

All items classified as unevaluated and unproved properties are assessed on a quarterly basis for possible impairment or reduction in value.

Properties are assessed on an individual basis or as a group if properties are individually insignificant.

The assessment includes consideration of various factors, including, but not limited to, the following:

intent to drill;

remaining lease term;

geological and geophysical evaluations;

drilling results and activity;

assignment of proved reserves;

and economic viability of development if proved reserves are assigned.

During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization.

Under the full cost method of accounting, we review the carrying value of our oil and natural gas properties, on a country-by-country basis, each quarter in what is commonly referred to as the ceiling test.

Under the ceiling test, capitalized costs, net of accumulated depletion and oil and natural gas related deferred income taxes, may not exceed an amount equal to the sum of 1) the discounted present value (at 10 %), using average first-day-of-the-month prices during the 12-month period ending as of the balance sheet date held constant over the life of the reserves, of Barnwell’s estimated future net cash flows from estimated production of proved oil and natural gas reserves as determined by independent petroleum reserve engineers, less estimated future expenditures to be incurred in developing and producing the proved reserves but excluding future cash outflows associated with settling asset retirement obligations with the exception of those associated with proved undeveloped reserves from wells that are to be drilled in the future;

estimated production of proved oil and natural gas reserves as determined by independent petroleum reserve engineers, less estimated future expenditures to be incurred in developing and producing the proved reserves but excluding future cash outflows associated with settling asset retirement obligations with the exception of those associated with proved undeveloped reserves from wells that are to be drilled in the future;

plus 2) the cost of major development projects and unproven properties not subject to depletion, if any;

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Proceeds from the disposition of oil and natural gas properties are credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves in a particular country.

Given the volatility of oil and gas prices, it is reasonably possible that the estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term.

If oil and gas prices decline in the future, even if only for a short period of time, it is possible that impairments of oil and gas properties could occur.

In addition, it is reasonably possible that impairments could occur if costs are incurred in excess of any increases in the present value of future net cash flows from proved oil and gas reserves, or if properties are sold for proceeds less than the discounted present value of the related proved oil and gas reserves.

Barnwell’s sales reflect its working interest share after royalties.

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Recoverability is measured by comparing the carrying amount of the asset to the future net cash flows expected to result from use of the asset (undiscounted and without interest charges).

If it is determined that the asset may not be recoverable, impairment loss is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

If it is determined that the asset may not be recoverable, impairment loss is measured as the

amount by which the carrying amount of the asset exceeds the fair value of the asset.

Long-lived assets to be disposed of are reported at the lower of the asset carrying value or fair value, less cost to sell.

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The expected terms of the options represent expectations of future employee exercise and are estimated based on factors such as vesting periods, contractual expiration dates, historical trends in Barnwell’s stock price, and historical exercise behavior.

If the Company does not have sufficient historical data regarding employee exercise behavior, the “simplified method” as permitted by the SEC’s Staff Accounting Bulletin No.

110, Share-Based Payment is utilized to estimate the expected terms of the options.

The risk-free rates for periods within the contractual life of the options are based on the yields of U.S.

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Retirement Plans

Barnwell accounts for its defined benefit pension plan, Supplemental Executive Retirement Plan, and postretirement medical insurance benefits plan by recognizing the over-funded or under-funded status as an asset or liability in its Consolidated Balance Sheets and recognizes changes in that funded status in the year in which the changes occur through comprehensive income.

Barnwell accounts for its defined benefit pension plan, Supplemental Executive Retirement Plan, and post-retirement medical insurance benefits plan, which was terminated in June 2021, by recognizing the over-funded or under-funded status as an asset or liability in its Consolidated Balance Sheets and recognizes changes in that funded status in the year in which the changes occur through comprehensive income.

See further discussion at Note 9.

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The actual fair value of plan assets and estimated rate of return is used to determine the expected investment return during the year.

The estimated rate of return on plan assets is based on an

estimate of future experience for plan asset returns, the mix of plan assets, current market conditions, and expectations for future market conditions.

The estimated rate of return on plan assets is based on an estimate of future experience for plan asset returns, the mix of plan assets, current market conditions, and expectations for future market conditions.

A decrease (increase) of 50 basis points in the expected return on assets assumption would increase (decrease) pension expense by approximately $ 62,000 based on the assets of the plan at September 30, 2021.

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Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority on a jurisdiction-by-jurisdiction basis.

Liabilities for unrecognized tax benefits related to such tax positions are included in long-term liabilities unless the tax position is expected to be settled within the

upcoming year, in which case the liabilities are included in current liabilities.

Liabilities for unrecognized tax benefits related to such tax positions are included in long-term liabilities unless the tax position is expected to be settled within the upcoming year, in which case the liabilities are included in current liabilities.

Interest and penalties related to uncertain tax positions are included in income tax expense.

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Operating results of foreign subsidiaries are translated at average exchange rates during the period.

Translation adjustments have no effect on net income and are included in “Accumulated other comprehensive loss, net” in stockholders’ equity.

Translation adjustments have no effect on net income and are included in “Accumulated other comprehensive income (loss), net” in stockholders’ equity.

Fair Value Measurements

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Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, “Leases (Topic 842),” which requires an entity to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with terms greater than 12 months at the lease commencement date.

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement:

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement,” which provides changes to certain fair value disclosure requirements.

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

See Note 16 “Leases and Gain on Sale of Asset.”

In February 2018, the FASB issued ASU No.

2018-02, “Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated

other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017.

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

In August 2018, the FASB issued ASU No.

2018-14, “Compensation - Retirement Benefits-Defined Benefit Plans - General:

Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans,” which provides changes to certain pension and postretirement plan disclosures.

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.

In July 2018, the FASB issued ASU No.

2018-09, “Codification Improvements,” which provides further clarification to the codification literature.

In October 2018, the FASB issued ASU No.

2018-17, “Consolidation:

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

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic and the United States and Canadian governments declared the virus a national emergency shortly thereafter.

As a result, the normal operations of many businesses have been disrupted, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.

The global economy, our markets and our business have been materially and adversely affected by COVID-19.

The COVID-19 outbreak has caused and continues to cause significant reductions in demand for oil and oil prices, which has caused the Company to suspend the development of proved undeveloped reserves and has impacted and continues to impact the Company’s financial condition and outlook.

While the Company’s contract drilling segment remained operational throughout fiscal 2020 and continues to work, the continuing impact of COVID-19 on the ability or desire for customers to continue such work is uncertain, and any discontinuation of contracts currently in backlog would result in a material adverse impact to the Company’s financial condition and outlook.

Both the health and economic aspects of the COVID-19 pandemic remain highly fluid and the future course of each is uncertain.

We cannot foresee whether the outbreak of COVID-19 will be effectively contained on a sustained basis, nor can we predict the severity and duration of its impact.

If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may continue to be materially and adversely affected as a result of the deteriorating market outlook, the global economic recession, weakened liquidity or factors that we cannot foresee.

Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

GOING CONCERN

The accompanying 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 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 potentially 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.

In fiscal 2020, the Company listed its corporate office on the 29th floor of a commercial office building in downtown Honolulu, Hawaii for sale and on September 30, 2021, the Company’s Honolulu corporate office was sold for approximately $ 1,864,000 , net of related costs.

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.

The sale of shares under the ATM began in May 2021 and as of September 30, 2021, the Company sold 1,167,987 shares of common stock resulting in net proceeds of $ 3,784,000 after commissions and fees of $ 123,000 .

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.

On July 8, 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.

From Barnwell's net proceeds, $ 526,000 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.

Due to the additional impacts of the COVID-19 pandemic, we now face a greater uncertainty about our cash inflows as described above, which in turn leads to substantial doubt regarding our ability to make the required discretionary cash outflows for the capital expenditures necessary to convert our proved undeveloped reserves to proved developed reserves.

Furthermore, because of the greater uncertainty about our cash inflows described above, there is substantial doubt about our ability to fund our non-discretionary cash outflows and thus substantial doubt about our ability to continue as a going concern for one year from the date of the filing of this report.

Prior to and during fiscal 2020 and subsequently, the Company investigated potential sources of funding, including non-core oil and natural gas property sales, however, no probable sources of such funding have yet been secured.

Additionally, the Company has 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.

However, the Company’s ability to sell its corporate office at an appropriate time or for a sufficient price is outside of the Company's control and is therefore not probable.

Because of this uncertainty as well as uncertainties regarding the potential duration and depth of the impacts of the COVID-19 pandemic on our business as described above, substantial doubt about our ability to continue as a going concern for one year from the date of the filing of this report exists.

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

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.

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.

However, due to the $ 3,784,000 of net proceeds raised by the ATM through September 30, 2021, the proceeds received from the sale of the Company's corporate office and its interests in certain natural gas and oil properties in the Spirit River area, as well as the $ 7,156,000 of net cash inflows in the year ended September 30, 2021 from land segment percentage of sales proceeds and distributions from the Kukio Resort Land Development Partnerships, 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 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 shares were excluded from the computation of diluted shares for the year ended September 30, 2021, as their inclusion would have been antidilutive.

There were no options outstanding at September 30, 2020.

Options to purchase 318,750 shares of common stock was excluded from the computation of diluted shares for the year ended September 30, 2019, as their inclusion would have been antidilutive.

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:

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:

Year ended September 30, 2021

Net Loss Shares Per-Share

Net Earnings Shares Per-Share

(Numerator) (Denominator) Amount

Basic net loss per share $ ( 4,756,000 ) 8,277,160 $ ( 0.57 )

Basic net earnings per share $ 6,253,000 8,592,154 $ 0.73

Effect of dilutive securities - common stock options — —

Diluted net loss per share $ ( 4,756,000 ) 8,277,160 $ ( 0.57 )

Diluted net earnings per share $ 6,253,000 8,592,154 $ 0.73

Year ended September 30, 2020

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Diluted net loss per share $ ( 4,756,000 ) 8,277,160 $ ( 0.57 )

SHARE-BASED PAYMENTS

The Company’s share-based compensation benefit and related income tax effects are as follows:

Year ended September 30,

Share-based benefit $ — $ ( 42,000 )

Income tax effect $ — $ —

There was no share-based compensation expense or benefit recognized for the year ended September 30, 2020.

The share-based compensation benefit recognized for the year ended September 30, 2019 is reflected in “General and administrative” expenses in the Consolidated Statements of Operations.

There was no impact on income taxes for the years ended September 30, 2020 and 2019 due to a full valuation allowance on the related deferred tax asset.

As of September 30, 2020, there was no unrecognized compensation cost related to non-vested share options.

Description of Share-Based Payment Arrangements

The Company’s stock option plans are administered by the Compensation Committee of the Board of Directors.

2008 Equity Incentive Plan:

Under the stockholder-approved 2008 Stock Option Plan (the "2008 Plan"), Barnwell was authorized to grant up to 800,000 shares of common stock to employees.

A total of 737,500 share options were granted under this plan;

as the 2008 Plan previously reached its tenth anniversary, option shares are no longer available for grant.

Stock options grants included nonqualified stock options that had exercise prices equal to Barnwell’s stock price on the date of grant, vested annually over a service period of four years commencing one year from the date of grant and expired ten years from the date of grant.

Certain options had stock appreciation rights that permitted the holder to receive stock, cash or a combination thereof equal to the amount by which the fair market value, at the time of exercise of the option, exceeded the option price.

All of the outstanding share options under the plan expired

unexercised during the year ended September 30, 2020.

2018 Equity Incentive Plan:

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 September 30, 2020, a total of 800,000 share options remain available for grant as no options have yet been issued under this plan.

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

Equity-classified Awards

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.

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2019 through September 30, 2020 is presented below:

Options Shares Weighted-

Exercise Price Weighted-

Contractual Term Aggregate

Intrinsic Value

Outstanding at October 1, 2019 30,000 $ 3.01

Exercised — —

Expired/Forfeited ( 30,000 ) 3.01

Outstanding at September 30, 2020 — $ — — $ —

Exercisable at September 30, 2020 — $ — — $ —

There was no shared-based compensation expense for equity-classified awards vested in the years ended September 30, 2020 and 2019.

Liability-classified Awards

Compensation cost for liability-classified awards is remeasured to current fair value using a closed-form valuation model based on current values at each period end with the change in fair value recognized as an expense or benefit until the award is settled.

The following assumptions were used in estimating fair value for all liability-classified share options outstanding:

Year ended September 30,

Expected volatility range — 87.8 % to 91.1 %

Weighted-average volatility — 90.8 %

Expected dividends — None

Expected term (in years) — 0.2 to 0.5

Risk-free interest rate — 1.8 % to 1.9 %

Expected forfeitures — None

The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the Consolidated Statements of Operations.

A summary of the activity in Barnwell’s liability-classified share options from October 1, 2019 through September 30, 2020 is presented below:

Options Shares Weighted-

Exercise Price Weighted-

Contractual Term Aggregate

Intrinsic Value

Outstanding at October 1, 2019 288,750 $ 4.18

Exercised — —

Expired/Forfeited ( 288,750 ) 4.18

Outstanding at September 30, 2020 — $ — — $ —

Exercisable at September 30, 2020 — $ — — $ —

The following table summarizes the components of the total share-based compensation for liability-classified awards:

Year ended September 30,

Due to vesting $ — $ —

Due to remeasurement — ( 42,000 )

Total share-based compensation benefit for liability-based awards $ — $ ( 42,000 )

ASSET HELD FOR SALE

In August 2020, the Company listed its Honolulu corporate office for sale.

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

A summary of Barnwell’s non-current investments is as follows:

September 30,

Investment in Kukio Resort Land Development Partnerships

Investment in leasehold land interest – Lot 4C — 50,000

Total non-current investments $ 901,000 $ 980,000

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 and KKM, and indirectly acquired a 19.6 % non-controlling ownership interest in each of KD Kukio Resorts, KD Maniniowali, and KDK for $ 5,140,000 .

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KD I is the developer of Increment I and KD II is the developer of Increment II.

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

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 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.

The remaining acreage within Increment II is not yet under development, and there is no assurance that development of such acreage will in fact occur.

No definitive development plans have been made by the developer of Increment II as of the date of this report.

In March 2019, KD II admitted a new development partner, Replay, a party unrelated to Barnwell, in an effort to move forward with development of the remainder of Increment II at Kaupulehu.

Effective March 7, 2019, KDK and Replay hold ownership interests of 55 % and 45 %, respectively, of KD II.

Accordingly, Barnwell has a 10.8 % indirect non-controlling ownership interest in KD II through KDK as of that date that will continue to be accounted for using the equity method of accounting.

KDK and Replay hold ownership interests of 55 % and 45 %, respectively, of KD II and Barnwell has a 10.8 % indirect non-controlling ownership interest in KD II through KDK, which is accounted for using the equity method of accounting.

Barnwell continues to have an indirect 19.6 % non-controlling ownership interest in KD Kukio Resorts, KD Maniniowali, and KD I.

Barnwell has the right to receive distributions from the Kukio Resort Land Development Partnerships via its non-controlling interests in KD Kona and KKM, based on its respective partnership sharing ratios.

Additionally, Barnwell is entitled to a preferred return from KKM on any allocated equity in income of the Kukio Resort Land Development Partnerships in excess of its partnership sharing ratio for cumulative distributions to all of its partners in excess of $ 45,000,000 from those partnerships.

Cumulative distributions from the Kukio Resort Land Development Partnerships have reached the $ 45,000,000 threshold and in August 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 in that month.

Accordingly, Barnwell received a $ 197,000 partial payment of the preferred return in August 2020, which is reflected as an additional equity pickup in the "Equity in income (loss) of affiliates" line item on the accompanying Consolidated Statement of Operations for the year ended September 30, 2020.

Additionally, subsequent to September 30, 2020, the Kukio Resort Land Development Partnerships sold one lot in Increment I and made additional net cash distributions of $ 1,034,000 to the Company.

Accordingly, Barnwell received additional preferred return payments of $ 459,000 , which will be reflected in Barnwell's financial results for the quarter ending December 31, 2020.

The preferred return payments received after September 30, 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 the date of this report.

During the year ended September 30, 2020, Barnwell received net cash distributions in the amount of $ 360,000 from the Kukio Resort Land Development Partnerships after distributing $ 20,000 to non-controlling interests.

Of the $ 360,000 net cash distribution received from the Kukio Resort Land Development Partnerships, $ 197,000 represented a partial payment of the preferred return from KKM, as discussed above.

Additionally, Barnwell was entitled to a preferred return from KKM on any allocated equity in income of the Kukio Resort Land Development Partnerships in excess of its partnership sharing ratio for cumulative distributions to all of its partners in excess of $ 45,000,000 from those partnerships.

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 of affiliates" line item on the accompanying Consolidated Statement of Operations for the year ended September 30, 2021.

The preferred return payments received in the quarter ended December 30, 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 September 30, 2021.

During the year ended September 30, 2021, Barnwell received net cash distributions in the amount of $ 6,011,000 from the Kukio Resort Land Development Partnerships after distributing $ 683,000 to non-controlling interests.

Barnwell's share of the operating results of its equity affiliates was income of $ 352,000 for the year ended September 30, 2020, which includes the $ 197,000 partial payment of the preferred return from KKM discussed above, as compared to a loss of $ 276,000 for the year ended September 30, 2019.

Of the $ 6,011,000 net cash distribution received from the Kukio Resort Land Development Partnerships, $ 459,000 represented a payment of the preferred return from KKM, as discussed above.

During the year ended September 30, 2020, Barnwell received net cash distributions in the amount of $ 360,000 from the Kukio Resort Land Development Partnerships after distributing $ 20,000

to non-controlling interests.

Of the $ 360,000 net cash distribution received from the Kukio Resort Land Development Partnerships, $ 197,000 represented a payment of the preferred return from KKM.

Barnwell's share of the operating results of its equity affiliates was income of $ 5,793,000 , which includes the $ 459,000 payment of the preferred return from KKM discussed above, for the year ended September 30, 2021, as compared to income of $ 352,000 , which includes a preferred return payment of $ 197,000 from KKM, for the year ended September 30, 2020.

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 $ 138,000 as of September 30, 2021, which is attributable to differences in the value of capitalized development costs and a note receivable.

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Gross profit $ 24,759,000 $ 4,071,000

Net earnings (loss) $ 618,000 $ ( 1,095,000 )

Net earnings $ 20,612,000 $ 618,000

During the year ended September 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 September 30, 2021.

In addition, the Company recorded the distributions received in excess of our investment balance of $ 654,000 as equity in income of affiliates during the year ended September 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

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10 % of such aggregate gross proceeds greater than $ 100,000,000 up to $ 300,000,000 ;

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

In fiscal 2020, two single-family lots in Increment I were sold bringing the total amount of gross proceeds from single-family lot sales through September 30, 2020 to $ 219,700,000 .

As of the date of this report, with the inclusion of the November 2020 lot sale mentioned above, 16 single-family lots, of the 80 lots developed within Increment I, remained to be sold.

Under the terms of the former Increment II agreement with KD II, Kaupulehu Developments was entitled to receive payments from KD II resulting from the sale of lots and/or residential units by KD II within Increment II.

Through March 6, 2019, the payments were based on a percentage of gross receipts

from KD II's sales ranging from 8 % to 10 % of the price of improved or unimproved lots or 2.60 % to 3.25 % of the price of units constructed on a lot, to be determined in the future depending upon a number of variables, including whether the lots are sold prior to improvement.

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.

The remaining acreage within Increment II is not yet under development.

Through March 6, 2019, Kaupulehu Developments was also entitled to receive 50 % of distributions otherwise payable from KD II to its members after the members of KD II have received distributions equal to the original basis of capital invested in the project, up to $ 8,000,000 .

Through March 6, 2019, a cumulative total of $ 3,500,000 was received from KD II under this arrangement, out of the $ 8,000,000 maximum.

The former arrangement also included the rights to three single-family residential lots in Phase 2 of Increment II when developed, at no cost to Barnwell, with a commitment by Barnwell to begin to construct a residence upon each lot within six months of transfer.

Concurrent with the transaction whereby KD II admitted Replay as a new development partner, Kaupulehu Developments entered into new agreements with KD II whereby the aforementioned terms of the former Increment II arrangement were eliminated and Kaupulehu Developments will instead be 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.

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

The new arrangement also gives Barnwell rights to three single-family residential lots in Phase 2A of Increment II, and four single-family residential lots in phases subsequent to Phase 2A when such lots are developed by KD II, all at no cost to Barnwell.

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

In fiscal 2021, eight single-family lots in Increment I were sold bringing the total amount of gross proceeds from single-family lot sales through September 30, 2021 to $ 237,038,000 .

As of September 30, 2021, nine single-family lots, of the 80 lots developed within Increment I, remained to be sold.

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.

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.

The arrangement also gives Barnwell rights to three single-family residential lots in Phase 2A of Increment II, and four single-family residential lots in phases subsequent to Phase 2A when such lots are developed by KD II, all at no cost to Barnwell.

Barnwell is committed to commence construction of improvements within 90 days of the transfer of the four lots in the phases subsequent to Phase 2A as a condition of the transfer of such lots.

Also, in addition to Barnwell’s existing obligations to pay professional fees to certain parties based on percentages of its gross receipts, Kaupulehu Developments is now also obligated to pay an amount equal to 0.72 % and 0.20 % of the cumulative net profits of KD II to KD Development, LLC and a pool of various individuals, respectively, all of whom are partners of KKM and are unrelated to Barnwell, in compensation for the agreement of these parties to admit the new development partner for Increment II.

Also, in addition to Barnwell’s existing obligations to pay professional fees to certain parties based on percentages of its gross receipts, Kaupulehu Developments is also obligated to pay an amount equal to 0.72 % and 0.20 % of the cumulative net profits of KD II to KD Development and a pool of various individuals, respectively, all of whom are partners of KKM and are unrelated to Barnwell, in compensation for the agreement of these parties to admit the new development partner for Increment II.

Such compensation will be reflected as the obligation becomes probable and the amount of the obligation can be reasonably estimated.

The new agreements also specify that Kaupulehu Developments was to be paid $ 1,000,000 by KD II prior to admission of Replay as a partner.

This $ 1,000,000 payment had already been received in June 2018 and is included in the $ 3,500,000 cumulative total as of March 6, 2019 discussed above.

The Increment I percentage of sales arrangement between Barnwell and KD I remains unchanged.

The following table summarizes the Increment I and Increment II revenues from KD I and KD II and the amount of fees directly related to such revenues (see Note 17 “Commitments and Contingencies - Other Matters”):

The following table summarizes the Increment I revenues from KD I and the amount of fees directly related to such revenues (see Note 18 “Commitments and Contingencies - Other Matters”):

Year ended September 30,

3 unchanged sentences

Sale of interest in leasehold land, net of fees paid $ 1,526,000 $ 285,000

In November 2020, subsequent to the close of the year ended September 30, 2020, Kaupulehu Developments received a percentage of sales payment of $ 170,000 from the sale of one lot within Phase II of Increment I.

Financial results from the receipt of this payment will be reflected in Barnwell's quarter ending December 31, 2020.

There is no assurance with regards to the amounts of future payments from Increment I or Increment II to be received.

There is no assurance with regards to the amounts of future payments from Increment I or Increment II to be received, or that the remaining acreage within Increment II will be developed.

No definitive development plans have been made by the developer of Increment II as of the date of this report.

Investment in Leasehold Land Interest – Lot 4C

1 unchanged sentence

The lease terminates in December 2025.

Due to recent uncertainty regarding the timing of future development and potential use of water rights within Lot 4C prior to the expiration of the lease term, management determined there was an impairment in the carrying value of Lot 4C and the Company recorded a $ 50,000 write-off in its investment in leasehold land interest in Lot 4C, which is included in “Impairment of assets” in the accompanying Consolidated Statements of Operations for the year ended September 30, 2020.

In the year ended September 30, 2020, the Company recorded a $ 50,000 impairment in the carrying value of its investment in leasehold land interest in Lot 4C as a result of the uncertainty regarding the timing of future development and potential use of water rights within Lot 4C prior to the expiration of the lease term.

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 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 Ventre 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 as of September 30, 2021, the Company made a total of $ 750,000 in capital contributions to Teton Barnwell to fund its oil and natural gas investments 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.

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.

O'Farrell's influence as a member of the Board of Directors of the Company further supports the consolidation of Teton Barnwell's operating results, assets and liabilities as discussed above.

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.

September 30,

Cash and cash equivalents $ 136,000

Accounts and other receivables 118,000

Oil and natural gas properties, full cost method of accounting:

Proved properties, net 203,000

Unproved properties 962,000

Total assets $ 1,419,000

Accounts payable $ 3,000

Accrued capital expenditures 581,000

Accrued operating and other expenses 20,000

Total liabilities $ 604,000

ASSETS HELD FOR SALE

Honolulu Corporate Office

The Company’s Honolulu corporate office was designated as an asset held for sale and the carrying value in the aggregate amount of $ 699,000 was included in “Asset held for sale” on the Company's Consolidated Balance Sheet at September 30, 2020.

On September 30, 2021, the Company’s Honolulu corporate office was sold for approximately $ 1,864,000 , net of related costs, resulting in a gain of $ 1,164,000 , which was recognized in the year ended September 30, 2021.

Contract Segment Drilling Rig and Equipment

In September 2021, the Company designated a contract drilling segment drilling rig and related ancillary equipment, with an aggregate net carrying value of $ 725,000 , as assets held for sale and recorded an impairment of $ 38,000 to reduce the value of these assets to its fair value, less estimated selling costs.

The fair value of these assets in the aggregate amount of $ 687,000 is recorded as “Assets held for sale” on the Company's Consolidated Balance Sheet at September 30, 2021.

OIL AND NATURAL GAS PROPERTIES

In October 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.

In April 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.

There were no oil and natural gas property dispositions during the year ended September 30, 2019.

The $ 1,519,000 of proceeds from sale of oil and natural gas properties included in the Consolidated Statement of Cash Flows for the year ended September 30, 2019 primarily represents the refund of income taxes previously withheld from what otherwise would have been proceeds on prior years' oil and natural gas property sales.

From Barnwell's net proceeds, $ 526,000 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 difference in the relationship between capitalized costs and proved reserves of the Spirit River properties sold as compared to the properties retained by Barnwell was significant as there was a 93 % difference in capitalized costs divided by proved reserves if the gain was recorded versus the gain being credited against the full-cost pool.

Accordingly, Barnwell recorded a gain on the sale of Spirit River of $ 818,000 in the year ended September 30, 2021 in accordance with the guidance in Rule 4-10(c)(6)(i) of Regulation S-X of the rules and regulations of the SEC, which requires an allocation of capitalized costs to the reserves sold and reserves retained on the basis of the relative fair values of the properties as there was a substantial economic difference between the properties sold and those retained.

Also included in the gain calculation were asset retirement obligations of $ 77,000 assumed by the purchaser.

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.

The sales price per the agreement was adjusted for customary purchase price adjustments to $ 594,000 in order to, among other things, reflect an economic effective date of October 1, 2019.

In April 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 year ended September 30, 2020.

In the quarter ended December 31, 2018, Barnwell acquired additional working interests in oil and natural gas properties located in the Wood River and Twining areas of Alberta, Canada for cash consideration of $ 355,000 .

The purchase prices per the agreements were adjusted for customary purchase price adjustments to reflect the economic activity from the effective date to the closing date.

The customary adjustments to the purchase prices were finalized in the quarter ended June 30, 2019 and resulted in an immaterial adjustment.

There were no other oil and natural gas working interest acquisitions during the year ended September 30, 2019.

Impairment of Oil and Natural Gas Properties

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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.

Prior to the quarter ended March 31, 2020, the ceiling test calculation included management’s estimation that the Company had the ability to fund all of the future capital expenditures necessary over the next five years to develop proved undeveloped reserves in the Twining area of Alberta, Canada.

However, due to the impact on oil prices and the extreme uncertainties created by the COVID-19 pandemic on the Company's financial outlook, management is no longer reasonably certain that the Company will have the financial resources necessary to make any of the capital expenditures necessary to develop the proved undeveloped reserves.

Therefore, the proved undeveloped reserves were excluded from the quarterly ceiling test calculations subsequent to December 31, 2019.

As discussed above, the ceiling test mandates the use of the 12-month historical rolling average first-day-of-the-month prices.

If oil prices remain at current levels or decline further, it is more likely than not that the Company will incur further impairment write-downs in future periods in the absence of any offsetting factors that are not currently known or projected.

PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

4 unchanged sentences

At September 30, 2021:

Land $ — $ — $ —

Oil and natural gas properties:

(full cost accounting)

Proved properties $ 58,490,000 $ ( 56,067,000 ) $ 2,423,000

Unproved properties 962,000 — 962,000

Total oil and natural gas properties 59,452,000 ( 56,067,000 ) 3,385,000

Drilling rigs and equipment 3 – 10 years

6 unchanged sentences

At September 30, 2020:

Land $ 200,000 $ — $ 200,000

Oil and natural gas properties:

(full cost accounting)

Proved properties $ 64,142,000 $ ( 61,839,000 ) $ 2,303,000

Unproved properties — — —

Total oil and natural gas properties 64,142,000 ( 61,839,000 ) 2,303,000

Drilling rigs and equipment 3 – 10 years

8,244,000 ( 6,793,000 ) 1,451,000

Office 40 years

857,000 ( 338,000 ) 519,000

Other property and equipment 3 – 17 years

16 unchanged sentences

Asset retirement obligations were reduced by $ 375,000 and $ 169,000 , in fiscal 2021 and 2020, respectively, for those obligations that were assumed by purchasers of Barnwell's oil and natural gas properties.

Asset retirement obligations were also reduced by $ 279,000 and $ 958,000 in fiscal 2020 and 2019, respectively, due to downward revisions related to deferrals in the estimated timing of future abandonments as a result of changes in the estimated funds available to develop the Company's reserves in the Twining area.

Asset retirement obligations also increased by $ 279,000 in fiscal 2021 as compared to a reduction of $ 279,000 in fiscal 2020 primarily due to upward revisions from acceleration in the estimated timing of future abandonments as a result of changes in the estimated economic life of certain wells and changes in management's discretionary timing of abandonment projects due to an increase in estimated funds available as well as an increase in the estimated cost of abandonments at the Manyberries area, as further discussed below.

Asset retirement obligations increased by $ 532,000 and $ 227,000 in fiscal 2021 and 2020, respectively, due primarily to our acquisitions (see Note 7 for additional details).

2 unchanged sentences

The credit-adjusted risk-free rate for the entire asset retirement obligation is a blended rate which ranges from 6 % to 13.5 %.

In September 2019, the AER issued an abandonment/closure order for all wells and facilities in the Manyberries area which had been largely operated by LGX, an operating company that went into receivership in 2016.

The estimated asset retirement obligation for the Company's interest in the wells and facilities in the Manyberries area is included in “Asset retirement obligation” in the Consolidated Balance Sheets.

Recently, the OWA created a WIP program for specific areas where there are a significant number of orphaned wells to abandon.

The OWA has the ability and expertise to abandon wells using its internal resources and network of service providers resulting in efficiencies that companies such as Barnwell, would not be able to obtain on its own.

Under the WIP program, the Company would be required to provide payment for only Barnwell’s working interest share, however, all WIP’s would have to participate in the program for the OWA to begin its work.

In March 2021, the Company was notified by the OWA that Barnwell’s Manyberries wells were confirmed to be in the WIP program.

Under the new agreement with the OWA, the Company is required to pay the abandonment and reclamation costs in advance through a cash deposit.

The total cash deposit amount was calculated to be approximately $ 1,525,000 and the Company paid $ 888,000 of the total deposit in July and August 2021

and will need to pay the remaining balance of $ 637,000 by August 2022.

The deposit balance at September 30, 2021, less draw-downs by the OWA for OWA-performed abandonments, was $ 809,000 and is reflected in "Other current assets" in the Consolidated Balance Sheet as of September 30, 2021.

There is no right of offset between the deposit with the OWA and the Company's ARO liability balance.

The Company revised its Manyberries ARO liability based on the OWA’s revised abandonment and reclamation estimates, which resulted in an increase of approximately $ 213,000 in the current year.

The increase in the ARO liability was a result of higher reclamation and remediation costs than anticipated, partially offset by lower abandonment estimates.

A remaining excess deposit, if any, would ultimately be refunded to the Company upon completion of all of the work.

RETIREMENT PLANS

2 unchanged sentences

Barnwell’s funding policy is intended to provide for both benefits attributed to service to date and for those expected to be earned in the future.

In addition, 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 officers of Barnwell Industries, Inc., the parent company, who have 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.

In addition, 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 officers of Barnwell Industries, Inc., the parent company, who have 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.

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.

Consequently, current participants in the Pension Plan and SERP no longer accrue new benefits under the plans and new employees of the Company are no longer eligible to enter the Pension Plan and SERP as participants after December 31, 2019.

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 a $ 1,726,000 reduction in unrecognized pension benefit costs that were previously included in accumulated other comprehensive loss, with a corresponding curtailment gain in other comprehensive income which was recorded during the year ended September 30, 2020.

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 a $ 1,726,000 reduction in unrecognized pension benefit costs that were previously included in accumulated other comprehensive loss, with a corresponding curtailment gain in other comprehensive income which was recorded during the year ended September 30, 2020.

In June 2021, the Company terminated its Post-retirement Medical plan effective June 4, 2021.

Pursuant to the Post-retirement Medical plan document, the Company, as the sponsor of the Post-retirement Medical plan, had the right to terminate the plan within sixty days ’ notice to each participant and the plan may be terminated by the resolution of the Board of the Directors of the Company.

Further, under the terms of the plan document, the participants in the Post-retirement Medical plan were not entitled to any unpaid vested benefits thereunder upon termination of the plan.

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

As a result of the plan termination, the Company recognized a non-cash gain of $ 2,341,000 during the year ended September 30, 2021.

The following tables detail the changes in benefit obligations, fair values of plan assets and reconciliations of the funded status of the retirement plans:

Pension SERP Postretirement Medical

Pension SERP Post-retirement Medical

September 30,

4 unchanged sentences

Interest cost 258,000 304,000 51,000 63,000 48,000 80,000

Actuarial loss (gain) 504,000 1,426,000 ( 90,000 ) 236,000 134,000 161,000

Actuarial (gain) loss ( 15,000 ) 504,000 63,000 ( 90,000 ) — 134,000

Benefits paid ( 158,000 ) ( 153,000 ) ( 9,000 ) — ( 5,000 ) ( 8,000 )

Curtailments — ( 1,396,000 ) — ( 330,000 ) — —

Termination of post-retirement medical plan — — — — ( 2,882,000 ) —

Benefit obligation at end of year 10,365,000 10,280,000 2,136,000 2,031,000 — 2,839,000

6 unchanged sentences

Funded status $ 2,229,000 $ 771,000 $ ( 2,136,000 ) $ ( 2,031,000 ) $ — $ ( 2,839,000 )

Pension SERP Postretirement Medical

Pension SERP Post-retirement Medical

September 30,

5 unchanged sentences

Net amount $ 2,229,000 $ 771,000 $ ( 2,136,000 ) $ ( 2,031,000 ) $ — $ ( 2,839,000 )

Amounts recognized in accumulated other comprehensive loss (income) before income taxes:

Amounts recognized in accumulated other comprehensive income (loss) before income taxes:

Net actuarial loss $ 471,000 $ 1,681,000 $ 135,000 $ 72,000 $ — $ 721,000

2 unchanged sentences

Currently, no contributions will be made to the Pension Plan during fiscal 2022.

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

Expected payments under the Postretirement Medical plan and 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 2022 is not material.

Fluctuations in actual 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 Pension Plan actuarial gains in fiscal 2021 were primarily due to an increase in the discount rate and actual investment returns that were greater than the assumed rate of return.

The SERP actuarial losses in fiscal 2021 were primarily due to an updated mortality projection scale and adjustments due to experience, partially offset by an increase in the discount rate.

The Pension Plan actuarial losses in fiscal 2020 were primarily due to a decrease in the discount rate.

The SERP actuarial gains in fiscal 2020 were primarily due to the freezing of the plan benefit accruals which decreased the net periodic cost and improved the funded position.

The Postretirement Medical plan actuarial losses in fiscal 2020 were primarily due to a decrease in the discount rate.

The Pension Plan actuarial losses in fiscal 2019 were primarily due to a decrease in the discount rate and actual investment returns that were lower than the assumed rate of return.

The SERP actuarial losses in fiscal 2019 were primarily due to a decrease in the discount rate.

The Postretirement Medical plan actuarial losses in fiscal 2019 were primarily due to a decrease in the discount rate and an increase in the medical insurance premium assumptions.

The Post-retirement Medical plan actuarial losses in fiscal 2020 were primarily due to a decrease in the discount rate.

The following table presents the weighted-average assumptions used to determine benefit obligations and net benefit (income) costs:

Pension SERP Postretirement Medical

Pension SERP Post-retirement Medical

Year ended September 30,

1 unchanged sentence

Assumptions used to determine fiscal year-end benefit obligations:

Discount rate 2.54 % 3.06 % 2.54 % 3.06 % 2.54 % 3.06 %

Rate of compensation increase N/A 4.00 % N/A 4.00 % N/A N/A

Discount rate 2.84 % 2.54 % 2.84 % 2.54 % N/A 2.54 %

Rate of compensation increase N/A N/A N/A N/A N/A N/A

Assumptions used to determine net benefit costs (years ended):

3 unchanged sentences

Expected return on plan assets 5.00 % 6.50 % N/A N/A N/A N/A

Rate of compensation increase 4.00 % 4.00 % 4.00 % 4.00 % N/A N/A

Rate of compensation increase N/A 4.00 % N/A 4.00 % N/A N/A

_______________________________________________

(1) 3.06% as of September 30, 2019 and 3.15% as of December 31, 2019 remeasurement.

(2) 2.54% as of September 30, 2020 and 3.00% as of May 31, 2021 termination.

We select a discount rate by reference to yields available on the FTSE High Grade Credit Index at our consolidated balance sheet date.

1 unchanged sentence

The components of net periodic benefit (income) cost are as follows:

Pension SERP Postretirement Medical

Pension SERP Post-retirement Medical

Year ended September 30,

8 unchanged sentences

Net periodic benefit (income) cost $ ( 249,000 ) $ ( 237,000 ) $ 51,000 $ 17,000 $ 110,000 $ 160,000

The amounts that are estimated to be amortized from accumulated other comprehensive loss into net periodic benefit (income) cost in the next fiscal year are as follows:

Pension SERP Postretirement

Prior service cost (credit) $ — $ — $ —

Net actuarial loss 39,000 — 94,000

$ 39,000 $ — $ 94,000

The accumulated benefit obligation differs from the projected benefit obligation in that it assumes future compensation levels will remain unchanged.

2 unchanged sentences

The benefits expected to be paid under the retirement plans as of September 30, 2021 are as follows:

Pension SERP Postretirement

Expected Benefit Payments:

5 unchanged sentences

Fiscal years ending September 30, 2027 through 2031 $ 2,840,000 $ 636,000

The following table provides the assumed health care cost trend rates related to the measurement of Barnwell’s postretirement medical obligations.

Year ended September 30,

Health care cost trend rates assumed for next year 6.75 % 7.00 %

Ultimate cost trend rate 5.00 % 5.00 %

Year that the rate reaches the ultimate trend rate 2028 2028

A 7.00 % annual rate of increase in the per capita cost of covered health care benefits was assumed for fiscal 2020.

This assumption is based on the plans’ recent experience.

It is assumed that the rate will decrease gradually to 5 % for fiscal 2028 and remain level thereafter.

The assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement medical obligations.

A one-percentage-point change in the assumed health care cost trend rates would have the following effects:

Point Increase 1-Percentage

Point (Decrease)

Effect on total service and interest cost components $ 18,000 $ ( 14,000 )

Effect on accumulated postretirement benefit obligations $ 620,000 $ ( 488,000 )

Management communicates periodically with its professional investment advisors to establish investment policies, direct investments and select investment options.

25 unchanged sentences

Financial Assets:

Cash $ 25,000 $ 25,000 $ — $ —

Corporate bonds 1,000 1,000 — —

Fixed income exchange-traded funds 3,809,000 3,809,000 — —

Preferred securities 48,000 48,000 — —

Equity securities exchange-traded funds 459,000 459,000 — —

6 unchanged sentences

Financial Assets:

Cash $ 4,000 $ 4,000 $ — $ —

Corporate bonds $ 1,000 $ 1,000 $ — $ —

3 unchanged sentences

Total $ 11,051,000 $ 11,051,000 $ — $ —

The components of loss before income taxes, after adjusting the loss 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:

Year ended September 30,

2 unchanged sentences

$ 6,585,000 $ ( 4,753,000 )

The components of the income tax provision (benefit) related to the above loss are as follows:

The components of the income tax provision related to the above earnings (loss) are as follows:

Year ended September 30,

Current benefit:

Current provision (benefit):

United States – Federal

Before operating loss carryforwards $ 60,000 $ —

Benefit of operating loss carryforwards ( 60,000 ) —

After operating loss carryforwards — —

United States – State

Canadian — ( 4,000 )

Before operating loss carryforwards 174,000 ( 23,000 )

Benefit of operating loss carryforwards ( 7,000 ) —

After operating loss carryforwards 167,000 ( 23,000 )

Total current 167,000 ( 23,000 )

Deferred provision (benefit):

Deferred provision:

United States – State 165,000 26,000

Canadian — ( 120,000 )

Total deferred 165,000 26,000

3 unchanged sentences

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 investment in the Oklahoma oil venture is 100% allocable to Oklahoma, and therefore, receives no benefit from consolidated or unitary losses.

On June 28, 2019, the Canadian province of Alberta enacted legislation that decreased the provincial general corporate tax rate from 12% to 11% effective July 1, 2019, with further 1% rate reductions on January 1 of every year until the provincial general corporate tax rate is 8% on January 1, 2022, bringing Barnwell of Canada’s and Octavian Oil’s total Canadian statutory tax rates from 30.65% and 27.00%, respectively, to 29.70% and 26.00%, respectively, effective July 1, 2019 and to 26.85% and 23.00%, respectively, effective January 1, 2022.

On June 29, 2020, the Government of Alberta introduced Alberta’s Recovery Plan which will, among other things, reduce Alberta’s general corporate income tax rate to 8% (from 10%) effective July 1, 2020.

This reduction, however, had not been enacted as of September 30, 2020.

This reduction was enacted in the quarter ended December

Canadian deferred tax assets and liabilities have been measured using the enacted tax rates in effect for the year in which the differences are expected to reverse.

Alberta rate changes have no significant impact to earnings/loss as a result of a full valuation allowance being applied to Canadian deferred tax assets.

On March 27, 2020, the CARES Act was signed into law to provide economic relief to businesses that were negatively impacted by the COVID-19 pandemic.

Key tax provisions of the CARES Act impacting the Company include the modification of rules related to corporate AMT credits and NOLs, as discussed further below.

The repeal of the corporate AMT by the TCJA provided a mechanism for the refund over time of any unused AMT credit carryovers.

Under the TCJA, 50% of the Company's total credit ($ 230,000 = $ 460,000 x 50%) was refundable effective for tax years beginning after December 31, 2017 (i.e., our fiscal 2019) and was reclassified to current taxes receivable as of September 30, 2019.

The CARES Act subsequently provided for an election to take the entire refundable credit in the Company’s 2018 tax year (fiscal year 2019 return).

As such, the Company reclassified the remaining 50% from non-current to current taxes receivable as of March 31, 2020 as a result of the CARES Act legislation.

The TCJA imposed an 80% limitation on the utilization of U.S.

federal NOLs generated in tax years beginning after December 31, 2017, which is the Company’s fiscal 2019, however the CARES Act suspended this limitation through the 2020 tax year (the Company’s fiscal 2021).

This limitation will be reinstated effective for tax years beginning on or after January 1, 2021.

A reconciliation between the reported income tax expense (benefit) and the amount computed by multiplying the loss attributable to Barnwell before income taxes by the U.S.

On December 27, 2020, then President Donald 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.

The tax-related measures contained in the Act revise and expand provisions enacted earlier in the year by the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act.

The Act also extends a number of expiring tax provisions.

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 Consolidated Appropriations Act were not material to the financial statements for the year ended September 30, 2021.

A reconciliation between the reported income tax expense and the amount computed by multiplying the earnings (loss) attributable to Barnwell before income taxes by the U.S.

federal tax rate of 21 % is as follows:

Year ended September 30,

Tax benefit computed by applying statutory rate $ ( 998,000 ) $ ( 2,655,000 )

Tax provision (benefit) computed by applying statutory rate $ 1,383,000 $ ( 998,000 )

Impact of TCJA limitation on post-TCJA net operating loss carryforwards — ( 260,000 )

Increase in the valuation allowance 1,978,000 3,003,000

Impact of TCJA on alternative minimum tax credit carryovers — ( 31,000 )

(Decrease) increase in the valuation allowance ( 1,482,000 ) 1,978,000

Additional effect of the foreign tax provision on the total tax provision 87,000 ( 762,000 )

2 unchanged sentences

$ 332,000 $ 3,000

The changes in the valuation allowance shown in the table above exclude the impact of changes in state taxes and refundable alternative minimum tax credit carryovers, the valuation allowance impacts of which are incorporated within the respective reconciliation line items elsewhere in the table.

The changes in the valuation allowance shown in the table above exclude the impact of changes in state taxes and foreign tax credit expiries, the valuation allowance impacts of which are incorporated within the respective reconciliation line items elsewhere in the table.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

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state non-unitary tax law ( 352,000 ) ( 194,000 )

oil and gas property and equipment accumulated tax depreciation and depletion in excess of book under U.S.

tax law ( 142,000 ) —

oil and gas property and equipment accumulated tax depreciation and depletion in excess of book under U.S.

state tax law ( 7,000 ) —

Total deferred income tax liabilities ( 1,657,000 ) ( 848,000 )

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Net deferred income tax liability $ ( 359,000 ) $ ( 194,000 )

The total valuation allowance increased $ 1,670,000 for the year ended September 30, 2020.

The increase was primarily due to a $ 1,540,000 increase in the valuation allowance for deferred tax assets under Canadian law related to property and equipment accumulated book depletion in excess of tax and Canadian jurisdiction net operating loss carryforwards that may not be realizable and a $ 438,000 increase in the U.S.

The total valuation allowance decreased $ 2,959,000 for the year ended September 30, 2021.

The decrease was primarily due to a $ 1,225,000 decrease in the U.S.

federal tax law valuation allowance related to U.S.

federal net operating loss carryforwards.

Of the total net increase in the valuation allowance for fiscal 2020, $ 1,978,000 was recognized as an income tax expense and $ 308,000 was credited to accumulated other comprehensive loss.

federal net operating loss carryforwards, a $ 1,224,000 decrease in the U.S.

federal tax law valuation allowance related to foreign tax credit carryovers, and a $ 257,000 decrease in the valuation allowance for deferred tax assets under Canadian law related to property and equipment accumulated book depletion in excess of tax and Canadian jurisdiction net operating loss carryforwards that may not be realizable.

Of the total net decrease in the valuation allowance for fiscal 2021, $ 2,830,000 was recognized as an income tax benefit and $ 129,000 was credited to accumulated other comprehensive loss.

Net deferred tax assets at September 30, 2021 of $ 1,298,000 consists of the portion of U.S.

federal consolidated deferred tax assets that are estimated to be partially realized through corresponding reversals of U.S.

federal consolidated deferred tax liabilities related to the Kukio Resort Land Development Partnership excess of book income over taxable income.

federal consolidated deferred tax liabilities related to the Kukio Resort Land Development Partnerships' excess of book income over taxable income and the Oklahoma oil venture's book basis of property and equipment in excess of tax basis.

At September 30, 2021, Barnwell had U.S.

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federal net operating loss carryovers, U.S.

state net operating loss carryovers and Canadian net operating loss

carryovers totaling $ 2,421,000 , $ 42,257,000 , $ 13,810,000 and $ 5,506,000 , respectively.

state net operating loss carryovers and Canadian net operating loss carryovers totaling $ 1,197,000 , $ 42,125,000 , $ 14,674,000 and $ 5,716,000 , respectively.

All four items were fully offset by valuation allowances at September 30, 2021, except for a portion of Hawaii NOLs which is expected to shelter a portion of the reversal of the Company’s Hawaii non-unitary taxable temporary difference related to its investment in Hawaii land development partnerships.

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

At September 30, 2020, the Company had three contract drilling jobs with original expected durations of greater than one year.

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

For these contracts, approximately 13 % of the remaining performance obligation of $ 2,817,000 is expected to be recognized in the next twelve months and the remaining, thereafter.

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In September 2020, while making progress towards the drilling of a replacement well in different location, the drill string twisted off and became lodged in the well borehole, which required a stoppage of drilling and the need to dislodge and retrieve the broken drill string.

Accordingly, estimated total rework costs to remediate the situation have been accrued at September 30, 2020.

As a result of all of the above, $ 390,000 of revenue previously recognized was reversed in the year ended September 30, 2020 and the Company recognized a decrease of approximately $ 1,440,000 in the margin of this contract in the year ended September 30, 2020.

Accordingly, the estimated total rework costs to remediate the situation was accrued at September 30, 2020.

In January 2021, the broken drill string was retrieved from the well borehole and drilling of the replacement well recommenced.

Uninstalled Materials

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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);

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Oil and natural gas $ 630,000 $ 4,326,000

Contract drilling 38,000 —

Land investment — 50,000

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Other 291,000 273,000

Gain on sales of asset 1,336,000 —

Total operating profit (loss) 779,000 ( 6,905,000 )

Equity in income (loss) of affiliates:

Gain on sale of assets 1,982,000 1,336,000

Total operating profit 6,345,000 779,000

Equity in income of affiliates:

Land investment 5,793,000 352,000

2 unchanged sentences

Interest income 8,000 18,000

Loss before income taxes $ ( 4,674,000 ) $ ( 12,648,000 )

Gain on debt extinguishment 149,000 —

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

Earnings (loss) before income taxes $ 7,535,000 $ ( 4,674,000 )

Capital Expenditures:

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Land investment (2)

901,000 980,000

Cash and cash equivalents 11,279,000 4,584,000

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______________

(1) Primarily located in the province of Alberta, Canada.

(1) L ocated primarily in the province of Alberta, Canada with a minor portion in Oklahoma.

(2) Located in Hawaii.

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Total (excluding interest income) $ 18,105,000 $ 18,329,000

ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive loss, net of taxes, are as follows:

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of accumulated other comprehensive income (loss), net of taxes, are as follows:

Year ended September 30,

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Amortization of net actuarial loss and prior service cost 101,000 120,000

Net actuarial gain (loss) arising during the period 1,508,000 ( 2,224,000 )

Net actuarial gains arising during the period 1,108,000 1,508,000

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

Income taxes — —

Net current period other comprehensive income (loss) 1,628,000 ( 2,169,000 )

Net current period other comprehensive income 1,750,000 1,628,000

Ending accumulated retirement plans benefit cost ( 230,000 ) ( 1,980,000 )

Accumulated other comprehensive loss, net of taxes $ ( 1,435,000 ) $ ( 2,917,000 )

Accumulated other comprehensive income (loss), net of taxes $ 32,000 $ ( 1,435,000 )

The amortization of net actuarial loss and prior service cost for the retirement plans are included in the computation of net periodic benefit (income) cost which is a component of “General and administrative” expenses on the accompanying Consolidated Statements of Operations (see Note 9 for additional details).

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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.

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Asset retirement obligations are not measured at fair value subsequent to initial recognition.

Paycheck Protection Program Loan

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 PPP pursuant to the 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 first six months of principal and interest deferred.

Under the terms of the CARES Act, as amended by the Flexibility Act, 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 the date of this filing, the Company is in the process of applying for forgiveness and believes that its use of the loan proceeds will meet the conditions for forgiveness under the PPP and expects the loan to be recorded as income when legal forgiveness is obtained.

As of September 30, 2020, the current and long-term portions of the loan were $ 89,000 and $ 58,000 , respectively, and the current portion is included in “Other current liabilities” in the Company's Consolidated Balance Sheet.

In October 2020, the Company was notified by the lender of our PPP loan of changes to certain terms of our PPP loan to conform with the amendments to the CARES Act implemented by the Flexibility Act which included, but was not limited to, the extension of the initial deferment period of the loan’s principal and interest payments from six months to ten months after the last day of the covered period.

The current and long-term portions of the loan as of September 30, 2020 were not adjusted for this October 2020 loan modification by our lender.

LEASES AND GAIN ON SALE OF ASSET

On October 1, 2019, the Company adopted ASU No.

2016-02, “Leases (Topic 842),” using the modified retrospective transition approach and applied the new standard to leases in place as of the adoption date.

Results for reporting periods prior to October 1, 2019 have not been adjusted.

The Company elected the package of practical expedients allowed upon adoption of ASC 842 which, among other things, allowed us to (1) not reassess whether any expired or existing contracts contain leases, (2) carry forward the historical lease classification, and (3) not have to reassess any initial direct cost of any expired or existing leases.

As a result of the adoption of ASC 842, the Company recorded operating lease right-of-use (“ROU”) assets of $ 2,589,000 and corresponding total operating lease liabilities of $ 2,589,000 in the Consolidated Balance Sheets as of October 1, 2019.

There was no impact to retained earnings or the Consolidated Statements of Operations.

In March 2020, the Company sold its leasehold interest in a three-quarter of an acre contract drilling segment maintenance and storage yard in Honolulu, Hawaii to an unrelated third party for a $ 1,100,000 cash payment.

As a result of the sale transaction, the Company recognized a gain of $ 1,336,000 , inclusive of a $ 236,000 gain from the reversal of the storage yard's lease liability in excess of the right-of-use asset, in the quarter ended March 31, 2020.

The Company’s remaining ROU assets and lease liabilities at September 30, 2020, primarily relate to non-cancelable operating leases for our Canadian office space and our leasehold land interest for Lot 4C held by Kaupulehu Developments.

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 year ended September 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.

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.

If the Company repays 66.6 % of the principal amount prior to December 31, 2022, there will be loan forgiveness of 33.3 % up to a maximum of CAD$ 20,000 .

The Company’s right-of-use (“ROU”) assets and lease liabilities at September 30, 2021, primarily relate to non-cancelable operating leases for our Hawaii corporate and Canadian office spaces and our leasehold land interest for Lot 4C held by Kaupulehu Developments.

Management determines if a contract is or contains a lease at inception of the contract or modification of the contract.

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therefore, management uses the Company’s incremental borrowing rate to discount lease payments based on information available at lease commencement.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain we will exercise that option.

lease terms may include options to extend or terminate the lease when it is reasonably certain we will exercise that option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease terms.

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The components of lease expenses are as follows:

September 30, 2020

Year ended September 30,

Operating lease cost $ 130,000 $ 334,000

Short-term lease cost 254,000 69,000

Variable lease cost 103,000 —

Total lease cost $ 487,000 $ 403,000

2 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases $ 189,000

Operating cash flows from operating leases $ 133,000 $ 189,000

Operating leases:

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The future lease payment disclosures above assume the minimum lease payments for leasehold land in effect at December 31, 2005 remain unchanged through December 2025, the end of the lease term.

Gain on sale of leased asset

STOCKHOLDERS' EQUITY (DEFICIT)

Share-based Compensation

2018 Equity Incentive Plan

The Company’s stock option plans are administered by the Compensation Committee of the Board of Directors.

800,000 shares of Barnwell common stock have been reserved for issuance and as of September 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.

Equity-classified Awards

On February 9, 2021, the Board of Directors of the Company granted options to purchase 665,000 shares of common stock, 310,000 shares to independent directors and 355,000 shares to employees.

605,000 shares of the stock options granted have an exercise price equal to the closing market price of Barnwell’s stock on the date of grant of $ 3.33 , vest annually over three years , and expire in ten years from the date of grant.

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 September 30, 2021 is presented below:

Options Shares Weighted-

Exercise Price Weighted-

Contractual Term Aggregate

Intrinsic Value

Outstanding at October 1, 2020 — $ —

Granted 665,000 3.36

Exercised — —

Expired/Forfeited ( 50,000 ) 3.33

Outstanding at September 30, 2021 615,000 $ 3.36 8.9 $ —

Exercisable at September 30, 2021 — $ — — $ —

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

> 10% Owner-Employee Others

Number of shares 60,000 605,000

Expected volatility 127.4 % 105.8 %

Expected dividends None None

Expected term (in years) 3.5 6.0

Risk-free interest rate 0.19 % 0.82 %

Expected forfeitures None None

Fair value per share $ 2.51 $ 2.70

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.

During the year ended September 30, 2021, the Company recognized total share-based compensation expense of $ 643,000 .

There was no share-based compensation expense recognized during the year ended September 30, 2020.

Additionally, there was no impact on income taxes for the years ended September 30, 2021 and 2020 due to a full valuation allowance on the related deferred tax asset.

As of September 30, 2021, the total remaining unrecognized compensation cost related to nonvested share options was $ 1,005,000 , which is expected to be recognized over the weighted-average remaining requisite service period of 2.4 years.

At The Market Offering

On March 16, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P,”), with respect to the ATM pursuant to which the Company may offer and sell, from time to time, shares of its common stock, par value $ 0.50 per share, having an aggregate sales price of up to $ 25 million (subject to certain limitations at any time our public float remains under $ 75 million), through or to A.G.P as the Company’s sales agent or as principal.

Sales of our common stock under the ATM, if any, will be made by any methods deemed to be “at the market offerings” as defined in Rule 415(a)(4) under the Securities Act, including sales made directly on the NYSE American, on any other existing trading market for our Common Stock, or to or through a market maker.

Shares of common stock sold under the ATM are offered pursuant to the Company’s Registration Statement on Form S-3 (File No.

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.

COMMITMENTS AND CONTINGENCIES

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In the year ended September 30, 2019, two of the water wells drilled by the contract drilling segment for one customer were determined to not meet the contract specifications for plumbness.

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.

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.

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

On July 28, 2020, the Staff of the 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.

In July 2020, the Staff of the 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.

The wells were drilled to a depth to penetrate certain layers of impermeable rock necessary to access the aquifer at the instructions and on the advice of the hydrologist hired by the owner of the well.

The Company’s share of the proposed penalties and fines were originally calculated to approximately $ 1,200,000 .

The Company’s share of the proposed penalties and fines was originally calculated to approximately $ 1,200,000 .

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 recalculated and reduced to approximately $ 300,000 as to the Company.

The Commission and the aforementioned four parties have worked on a possible proposed alternative settlement in lieu of the penalties and fines whereby the named parties would be responsible for providing the Commission with assistance to monitor the aquifer, at no cost to the Commission, to aid in the Commission’s efforts to monitor water quality in the subject area.

The Company and the other three parties are currently evaluating proposals that it believes would likely satisfy the Commission's request under the proposed alternative settlement but it is currently uncertain as to whether or not they will be acceptable to the Commission.

Additionally, it is uncertain as to how the cost of the alternative settlement would be allocated to the named parties of the subject violations.

Accordingly, the Company recorded a contingent liability of approximately $ 300,000 at September 30, 2020.

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 no subsequent revision to the accrual has been recorded as of September 30, 2021.

Other Matters

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These fees are included in general and administrative expenses.

Effective March 2019, Barnwell is now also obligated to pay an amount equal to 0.72 % and 0.20 % of the cumulative net profits of KD II to KD Development, LLC and a pool of various individuals, respectively, all of whom are partners of KKM and are unrelated to Barnwell, in compensation for the agreement of these parties to admit the new development partner for Increment II.

Kaupulehu Developments is also obligated to pay an amount equal to 0.72 % and 0.20 % of the cumulative net profits of KD II to KD Development and a pool of various individuals, respectively, all of whom are partners of KKM and are unrelated to Barnwell, in compensation for the agreement of these parties to admit the new development partner for Increment II.

Such compensation will be reflected as the obligation becomes probable and the amount of the obligation can be reasonably estimated.

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Other current liabilities ( 796,000 ) ( 470,000 )

Increase from changes in current assets and liabilities $ 448,000 $ 1,242,000

(Decrease) increase from changes in current assets and liabilities $ ( 2,151,000 ) $ 448,000

Supplemental disclosure of cash flow information:

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Income taxes refunded, net $ ( 303,000 ) $ ( 166,000 )

Supplemental disclosure of non-cash investing activities:

Canadian income tax withholding on proceeds from the sale of oil and natural gas properties $ 598,000 $ —

Capital expenditure accruals related to oil and natural gas acquisition and development increased $ 346,000 and $ 435,000 during the years ended September 30, 2021 and 2020, respectively.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations decreased $ 52,000 and $ 755,000 during the years ended September 30, 2020 and 2019, respectively.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $ 811,000 during the year ended September 30, 2021 and decreased $ 52,000 during the year ended September 30, 2020.

RELATED PARTY TRANSACTIONS

Kaupulehu Developments is entitled to receive payments from the sales of lots and/or residential units by KD I and KD II.

Through March 6, 2019, Kaupulehu Developments was also entitled to receive 50 % of distributions otherwise payable from KD II to its members up to $ 8,000,000 , of which $ 3,500,000 was received.

KD I and KD II are part of the Kukio Resort Land Development Partnerships in which Barnwell holds indirect 19.6 % and 10.8 % non-controlling ownership interests, respectively, accounted for under the equity method of investment.

The percentage of sales payments and percentage of distribution payments are part of transactions which took place in 2004 and 2006 where Kaupulehu Developments sold its leasehold interests in Increment I and Increment II to KD I's and KD II's predecessors in interest, respectively, which was prior to Barnwell’s affiliation with KD I and KD II which commenced on November 27, 2013, the acquisition date of our ownership interest in the Kukio Resort Land Development Partnerships.

The percentage of sales payments are part of transactions which took place in 2004 and 2006 where Kaupulehu Developments sold its leasehold interests in Increment I and Increment II to KD I's and KD II's predecessors in interest, respectively, which was prior to Barnwell’s affiliation with KD I and KD II which commenced on November 27, 2013, the acquisition date of our ownership interest in the Kukio Resort Land Development Partnerships.

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

During the year ended September 30, 2021, Barnwell received $ 1,738,000 in percentage of sales payments from KD I from the sale of eight lots within Phase II of Increment I.

During the year ended September 30, 2020, Barnwell received $ 325,000 in percentage of sales payments from KD I from the sale of two lots within Phase II of Increment I.

During the year ended September 30, 2019, Barnwell received $ 165,000 in percentage of sales payments from KD I from the sale of one lot within Phase II of Increment I.

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 Ventre 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

Under the Flexibility Act, key changes to our PPP loan included, but were not limited to, the extension of the initial deferment period of the loan’s principal and interest payments from six months to ten months after the last day of the covered period and if the Company does not apply for forgiveness of the loan within ten months after the last day of the covered period, the PPP loan is no longer deferred and the borrower must begin paying principal and interest.

In November 2020, Kaupulehu Developments received a percentage of sales payment of $ 170,000 from the sale of one lot within Phase II of Increment I.

Financial results from the receipt of this payment will be reflected in Barnwell's quarter ending December 31, 2020.

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

Subsequent to September 30, 2021, Kaupulehu Developments received percentage of sales payments totaling $ 600,000 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 December 31, 2021.

Additionally, subsequent to September 30, 2021, Barnwell received net cash distributions in the amount of $ 1,075,000 from the Kukio Resort Land Development Partnerships.

Of the $ 1,034,000 in net cash distributions received from the Kukio Resort Land Development Partnerships, $ 459,000 represents preferred return payments from KKM and will be recorded as an additional equity pickup in the quarter ending December 31, 2020, as discussed in more detail in Note 6.

The preferred return payments received after September 30, 2020 brought the cumulative preferred return to $ 656,000 , which is the total amount Barnwell was entitled to, and thus there is no more preferred return outstanding as of the date of this report.

Financial results of this distribution will be reflected in Barnwell's quarter ending December 31, 2021.

Contract Segment Drilling Rig and Equipment

Subsequent to September 30, 2021, the Company sold a contract segment drilling rig and related ancillary equipment for proceeds of $ 687,000 , net of related costs, which is equivalent to its net carrying value at September 30, 2021.

Financial results from this sale will be reflected in Barnwell's quarter ending December 31, 2021.

SUMMARY OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

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SUPPLEMENTARY OIL AND NATURAL GAS INFORMATION (UNAUDITED)

The following tables summarize information relative to Barnwell’s oil and natural gas operations, which are conducted in Canada.

The following tables summarize information relative to Barnwell’s oil and natural gas operations, which are conducted in Canada and in the U.S state of Oklahoma.

Proved reserves are the estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

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The following table summarizes changes in the estimates of Barnwell’s net interests in total proved reserves of oil and natural gas liquids and natural gas, which are all in Canada.

All of the information regarding reserves in this Form 10-K is derived from the report of our independent petroleum reserve engineers, InSite, and is included as an Exhibit to this Form 10-K.

Proved oil, natural gas liquids and natural gas reserves located in the U.S.

state of Oklahoma are not significant and are therefore not included in the table below.

All of the information regarding Canadian reserves in this Form 10-K is derived from the report of our independent petroleum reserve engineers, InSite, and is included as an Exhibit to this Form 10-K.

The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and natural gas properties.

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Revisions of previous estimates ( 740,000 ) ( 1,746,000 ) ( 1,041,000 )

Extensions, discoveries and other additions 14,000 33,000 20,000

Acquisitions of reserves 68,000 628,000 176,000

Less sales of reserves ( 38,000 ) ( 443,000 ) ( 114,000 )

Less production ( 174,000 ) ( 649,000 ) ( 286,000 )

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(B) Capitalized Costs Relating to Oil and Natural Gas Producing Activities

All capitalized costs relating to oil and natural gas producing activities, which were being depleted in all years, are summarized as follows:

All capitalized costs relating to oil and natural gas producing activities in Canada and the U.S.

are summarized as follows:

September 30, 2021

Canada United States Total

Proved properties $ 58,273,000 $ 217,000 $ 58,490,000

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Net capitalized costs $ 2,220,000 $ 1,165,000 $ 3,385,000

September 30, 2020

Canada United States Total

Proved properties $ 64,142,000 $ — $ 64,142,000

Unproved properties — — —

Total capitalized costs 64,142,000 — 64,142,000

Accumulated depletion, depreciation, and impairment 61,839,000 — 61,839,000

Net capitalized costs $ 2,303,000 $ — $ 2,303,000

Year ended September 30, 2021

Canada United States Total

Acquisition of properties:

Proved $ 1,032,000 $ 70,000 $ 1,102,000

Unproved — — —

Exploration costs 255,000 — 255,000

Development costs 563,000 1,108,000 1,671,000

Total $ 1,850,000 $ 1,178,000 $ 3,028,000

Year ended September 30, 2020

Canada United States Total

Acquisition of properties:

Proved $ 242,000 $ — $ 242,000

Unproved — — —

Development costs 2,857,000 — 2,857,000

Total $ 3,099,000 $ — $ 3,099,000

Costs incurred in the table above include additions and revisions to Barnwell’s asset retirement obligation of $( 52,000 ) and $( 755,000 ) for the years ended September 30, 2020 and 2019, respectively.

Costs incurred in the tables above include additions and revisions to Barnwell’s asset retirement obligation of $ 811,000 and $( 52,000 ) for the years ended September 30, 2021 and 2020, respectively.

(D) Results of Operations for Oil and Natural Gas Producing Activities

Year ended September 30, 2021

Canada United States Total

Net revenues $ 10,136,000 $ 118,000 $ 10,254,000

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Estimated income tax expense (2)

Results of operations (1)

$ 2,343,000 $ 80,000 $ 2,423,000

Year ended September 30, 2020

Canada United States Total

Net revenues $ 6,693,000 $ — $ 6,693,000

Production costs ( 4,850,000 ) — ( 4,850,000 )

Depletion ( 1,747,000 ) — ( 1,747,000 )

Reduction of carrying value of oil and natural gas properties ( 4,326,000 ) — ( 4,326,000 )

Pre-tax results of operations (1)

( 4,230,000 ) — ( 4,230,000 )

Estimated income tax expense (2)

Results of operations (1)

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(1) Before gain on sale of oil and natural gas properties, general and administrative expenses, interest expense, and foreign exchange gains and losses.

(2) Estimated income tax expense includes changes to the deferred income tax valuation allowance necessary for the portion of Canadian tax law deferred tax assets that may not be realizable.

(2) Estimated income tax expense includes changes to the deferred income tax valuation allowance necessary for the portion of Canadian and U.S.

federal tax law deferred tax assets that may not be realizable.

(E) Standardized Measure, Including Year-to-Year Changes Therein, of Estimated Discounted Future Net Cash Flows

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Moreover, the projections should not be construed as realistic estimates of future cash flows, nor should the standardized measure be viewed as representing current value.

Additionally, proved oil, natural gas and natural gas liquids reserves located in the United States are not significant and are therefore not included in the tables below.

The estimated future cash flows at September 30, 2021 and 2020 were based on average sales prices in effect on the first day of the month for the preceding twelve month period in accordance with SEC Release No.

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The future income tax expenses were computed by applying statutory income tax rates in existence at September 30, 2021 and 2020 to the future pre-tax net cash flows relating to proved reserves, net of the tax basis of the properties involved.

Material revisions to reserve estimates may occur in the future, development and production of the oil and natural gas reserves may not occur in the periods assumed and actual prices realized and actual costs incurred are expected to vary significantly from those used.

costs incurred are expected to vary significantly from those used.

Management does not rely upon this information in making investment and operating decisions;

rather, those decisions are based upon a wide range of factors, including estimates of probable reserves as well as proved reserves and price and cost assumptions different than those reflected herein.

In December 2018, the Society of Petroleum Evaluation Engineers and associated industry professionals updated the COGE Handbook.

The updates clarify and streamline existing guidelines and offer additional guidance regarding Canadian reserves evaluations.

Barnwell has included all abandonment, decommissioning and reclamation costs and inactive well costs in accordance with best practice recommendations into the Company’s September 30, 2020 and September 30, 2019 year-end reserve reports.

Barnwell has included all abandonment, decommissioning and reclamation costs and inactive well costs in accordance with best practice recommendations into the Company’s reserve reports.

Standardized Measure of Discounted Future Net Cash Flows

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Net changes in prices and production costs, net of royalties and wellhead taxes 5,702,000 ( 1,876,000 )

Extensions and discoveries — 891,000

Net change due to purchases and sales of minerals in place ( 882,000 ) 467,000

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data