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Item 1. Financial Statements

2023-02-13 compared with 2022-08-12 · 172 added, 301 removed, 391 unchanged (55% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

2022 September 30,

December 31, 2022 September 30, 2022

Current assets:

1 unchanged sentence

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

$ 114,000 at June 30, 2022;

$ 249,000 at December 31, 2022;

$ 231,000 at September 30, 2022

4,316,000 4,361,000

Income taxes receivable 575,000 530,000

Asset held for sale — 687,000

Other current assets 3,246,000 2,932,000

5 unchanged sentences

Proved properties 69,421,000 67,883,000

Advances to operators for capital expenditures 3,464,000 —

Unproved properties 1,890,000 —

1 unchanged sentence

Total property and equipment 81,710,000 74,806,000

Accumulated depletion, impairment, depreciation, and amortization ( 64,605,000 ) ( 63,537,000 )

Accumulated depletion, depreciation, and amortization ( 62,712,000 ) ( 61,205,000 )

Total property and equipment, net 18,998,000 13,601,000

18 unchanged sentences

authorized, 40,000,000 shares:

10,124,587 issued at June 30, 2022;

9,613,525 issued at September 30, 2021

10,124,587 issued at December 31, 2022 and September 30, 2022

5,062,000 5,062,000

1 unchanged sentence

Retained earnings 8,660,000 7,720,000

Accumulated other comprehensive (loss) income, net ( 89,000 ) 32,000

Accumulated other comprehensive income, net 1,276,000 1,294,000

Treasury stock, at cost:

167,900 shares at June 30, 2022 and September 30, 2021

167,900 shares at December 31, 2022 and September 30, 2022

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

Total stockholders' equity 20,178,000 19,141,000

17,934,000 9,499,000

Non-controlling interests 32,000 20,000

6 unchanged sentences

Three months ended

June 30, Nine months ended

2022 2021 2022 2021

Oil and natural gas $ 5,226,000 $ 3,920,000

8 unchanged sentences

Depletion, depreciation, and amortization 840,000 483,000

Impairment of assets — — — 630,000

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

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

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

Foreign currency gain ( 78,000 ) —

Gain on sale of assets ( 551,000 ) —

6,761,000 5,209,000

16 unchanged sentences

Three months ended

June 30, Nine months ended

2022 2021 2022 2021

Net earnings $ 1,209,000 $ 1,340,000

3 unchanged sentences

Retirement plans:

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

— 26,000 — 92,000

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

— 541,000 — 541,000

Total other comprehensive (loss) income ( 108,000 ) 493,000 ( 121,000 ) 240,000

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

Total other comprehensive loss ( 18,000 ) ( 25,000 )

Total comprehensive income 1,191,000 1,315,000

5 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

Three months ended June 30, 2022 and 2021

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended December 31, 2022 and 2021

Outstanding Common

Stock Additional

Capital Retained Earnings

(Accumulated Deficit) Accumulated

Comprehensive (Loss) Income Treasury

Capital Retained

Earnings Accumulated

Comprehensive

Income Treasury

Stock Non-controlling

Interests Total

Equity (Deficit)

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

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

Foreign currency translation adjustments, net of taxes of $ 0

— — — — ( 74,000 ) — — ( 74,000 )

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

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

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

Retirement plans:

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

— — — — 26,000 — — 26,000

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

— — — — 541,000 — — 541,000

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

Balance at March 31, 2022 9,956,687 $ 5,062,000 $ 7,121,000 $ 5,481,000 $ 19,000 $ ( 2,286,000 ) $ 64,000 $ 15,461,000

Balance at September 30, 2021 9,445,625 $ 4,807,000 $ 4,590,000 $ 2,356,000 $ 32,000 $ ( 2,286,000 ) $ 8,000 $ 9,507,000

Net earnings — — — 1,073,000 — — 267,000 1,340,000

3 unchanged sentences

Share-based compensation — — 254,000 — — — — 254,000

Balance at June 30, 2022 9,956,687 $ 5,062,000 $ 7,235,000 $ 8,012,000 $ ( 89,000 ) $ ( 2,286,000 ) $ 50,000 $ 17,984,000

See Notes to Condensed Consolidated Financial Statements

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

Nine months ended June 30, 2022 and 2021

Outstanding Common

Stock Additional

Capital Retained Earnings

(Accumulated Deficit) Accumulated

Comprehensive (Loss) Income Treasury

Stock Non-controlling

Interests Total

Equity (Deficit)

Issuance of common stock for services 1,158 — 2,000 — — — — 2,000

Balance at December 31, 2021 9,446,783 $ 4,807,000 $ 4,846,000 $ 3,429,000 $ 7,000 $ ( 2,286,000 ) $ 24,000 $ 10,827,000

Balance at September 30, 2022 9,956,687 $ 5,062,000 $ 7,351,000 $ 7,720,000 $ 1,294,000 $ ( 2,286,000 ) $ 20,000 $ 19,161,000

4 unchanged sentences

Share-based compensation — — 115,000 — — — — 115,000

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

Retirement plans:

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

— — — — 92,000 — — 92,000

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

Dividends declared, $ 0.015 per share

— — — ( 149,000 ) — — — ( 149,000 )

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

Balance at September 30, 2021 9,445,625 $ 4,807,000 $ 4,590,000 $ 2,356,000 $ 32,000 $ ( 2,286,000 ) $ 8,000 $ 9,507,000

Net earnings — — — 5,656,000 — — 671,000 6,327,000

Foreign currency translation adjustments, net of taxes of $ 0

Retirement plans:

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

— — — — ( 20,000 ) — — ( 20,000 )

Distributions to non-controlling interests — — — — — — ( 629,000 ) ( 629,000 )

Share-based compensation — — 541,000 — — — — 541,000

Issuance of common stock for services 1,595 — 3,000 — — — — 3,000

Issuance of common stock, net of costs 509,467 255,000 2,101,000 — — — — 2,356,000

Balance at June 30, 2022 9,956,687 $ 5,062,000 $ 7,235,000 $ 8,012,000 $ ( 89,000 ) $ ( 2,286,000 ) $ 50,000 $ 17,984,000

Balance at December 31, 2022 9,956,687 $ 5,062,000 $ 7,466,000 $ 8,660,000 $ 1,276,000 $ ( 2,286,000 ) $ 32,000 $ 20,210,000

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

Three months ended

Cash flows from operating activities:

4 unchanged sentences

Depletion, depreciation, and amortization 840,000 483,000

Impairment of assets — 630,000

Gain on sale of assets ( 551,000 ) —

Sale of interest in leasehold land, net of fees paid ( 233,000 ) ( 527,000 )

1 unchanged sentence

Retirement benefits income ( 63,000 ) ( 68,000 )

Non-cash rent income ( 1,000 ) ( 3,000 )

Accretion of asset retirement obligation 194,000 159,000

Non-cash rent income ( 5,000 ) ( 1,000 )

Deferred income tax (benefit) expense ( 12,000 ) 32,000

3 unchanged sentences

Retirement plan contributions and payments ( 1,000 ) —

Bad debt (recovery) expense ( 27,000 ) 33,000

Gain on debt extinguishment — ( 149,000 )

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

Bad debt expense 18,000 —

Foreign currency gain ( 78,000 ) —

Decrease from changes in current assets and liabilities ( 241,000 ) ( 682,000 )

4 unchanged sentences

Proceeds from the sale of contract drilling assets — 687,000

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

Payments to acquire oil and natural gas properties — ( 317,000 )

1 unchanged sentence

Capital expenditures - all other ( 9,000 ) ( 1,000 )

Advances to operators for capital expenditures ( 3,464,000 ) —

Net cash (used in) provided by investing activities ( 6,891,000 ) 194,000

Cash flows from financing activities:

Borrowings on long-term debt — 47,000

Distributions to non-controlling interests ( 108,000 ) ( 251,000 )

Proceeds from issuance of stock, net of costs 2,356,000 1,736,000

Net cash provided by financing activities 1,727,000 832,000

Net cash used in financing activities ( 108,000 ) ( 251,000 )

Effect of exchange rate changes on cash and cash equivalents 34,000 11,000

Net increase in cash and cash equivalents 1,295,000 4,916,000

Net (decrease) increase in cash and cash equivalents ( 6,068,000 ) 863,000

Cash and cash equivalents at beginning of period 12,804,000 11,279,000

13 unchanged sentences

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements and notes have been prepared by Barnwell in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”).

Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S.

3 unchanged sentences

The Condensed Consolidated Balance Sheet as of September 30, 2022 has been derived from audited consolidated financial statements.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at June 30, 2022, results of operations, comprehensive income, and equity (deficit) for the three and nine months ended June 30, 2022 and 2021, and cash flows for the nine months ended June 30, 2022 and 2021, have been made.

The results of operations for the period ended June 30, 2022 are not necessarily indicative of the operating results for the full year.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at December 31, 2022, results of operations, comprehensive income, equity and cash flows for the three months ended December 31, 2022 and 2021, have been made.

The results of operations for the period ended December 31, 2022 are not necessarily indicative of the operating results for the full year.

Use of Estimates in the Preparation of Condensed Consolidated Financial Statements

5 unchanged sentences

Significant Accounting Policies

There have been no changes to Barnwell's significant accounting policies as described in the Notes to Consolidated Financial Statements included in Item 8 of the Company's 2021 Annual Report.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,” which enhances and simplifies various aspects of the income tax accounting guidance in ASC 740.

The Company adopted the provisions of this ASU effective October 1, 2021.

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

Other than as set forth below, there have been no changes to Barnwell's significant accounting policies as described in the Notes to Consolidated Financial Statements included in Item 8 of the Company's 2022 Annual Report.

Advances to Operators for Capital Expenditures

The Company participates in the drilling of crude oil and natural gas wells with other working interest partners.

Due to the capital intensive nature of crude oil and natural gas drilling activities, the working interest partner responsible for conducting the drilling operations may request advance payments from other working interest partners for their share of the costs.

The Company expects such advances to be applied by working interest partners against joint interest billings for its share of drilling operations within 90 days from when the advance is paid.

EARNINGS PER COMMON SHARE

2 unchanged sentences

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

Options to purchase 615,000 shares of common stock were excluded from the computation of diluted shares for the three and nine months ended June 30, 2022 and 2021, as their inclusion would have been anti-dilutive.

Options to purchase 615,000 shares of common stock were excluded from the computation of diluted shares for the three months ended December 31, 2022 and 2021, as there inclusion would have been anti-dilutive.

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

Three months ended June 30, 2022

(Numerator) Shares

(Denominator) Per-Share

Basic net earnings per share $ 2,531,000 9,956,687 $ 0.25

Effect of dilutive securities -

common stock options — —

Diluted net earnings per share $ 2,531,000 9,956,687 $ 0.25

Nine months ended June 30, 2022

(Numerator) Shares

(Denominator) Per-Share

Basic net earnings per share $ 5,656,000 9,657,532 $ 0.59

Effect of dilutive securities -

common stock options — —

Diluted net earnings per share $ 5,656,000 9,657,532 $ 0.59

Three months ended June 30, 2021

Three months ended December 31, 2022

(Numerator) Shares

4 unchanged sentences

Diluted net earnings per share $ 1,089,000 9,956,687 $ 0.11

Nine months ended June 30, 2021

(Numerator) Shares

Three months ended December 31, 2021

Net Earnings (Numerator) Shares

(Denominator) Per-Share

3 unchanged sentences

Diluted net earnings per share $ 1,073,000 9,446,291 $ 0.11

NOTE RECEIVABLE

In February 2022, the Company loaned $ 400,000 to an unrelated third party and recorded a $ 400,000 note receivable in the quarter ended March 31, 2022.

In April 2022, the loan was repaid in full and no interest was accrued during the outstanding period.

Investment in Kukio Resort Land Development Partnerships

4 unchanged sentences

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

The partnerships derive income from the sale of residential parcels, of which two lots, one being a large lot that is now a consolidation of two previous separate lots and one being an original size lot, remain to be sold at Increment I as of June 30, 2022, as well as from commissions on real estate sales by the real estate sales office and revenues resulting from the sale of private club memberships.

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 Kaupulehu Development, LLC (“Replay”), a party unrelated to Barnwell, in an effort to move forward with development of the remainder of Increment II at Kaupulehu.

1 unchanged sentence

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

Barnwell has the right to receive distributions from the Kukio Resort Land Development Partnerships via its non-controlling interest in KD Kona and KKM, based on its respective partnership sharing ratios of 75 % and 34.45 %, respectively.

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 was reflected as an additional equity pickup in the "Equity in income of affiliates" line item in the accompanying Condensed Consolidated Statement of Operations for the nine months ended June 30, 2021.

The preferred return payments received in the quarter ended December 31, 2020 brought the cumulative preferred return total to $ 656,000 , which was the total amount to which Barnwell was entitled.

During the nine months ended June 30, 2022, Barnwell received cash distributions of $ 3,400,000 from the Kukio Resort Land Development Partnership resulting in a net amount of $ 3,028,000 , after distributing $ 372,000 to non-controlling interests.

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

Of the $ 5,328,000 net cash distributions received during the nine months ended June 30, 2021, $ 459,000 represented a payment of the preferred return from KKM, as discussed above.

Equity in income of affiliates was $ 433,000 and $ 3,400,000 for the three and nine months ended June 30, 2022, respectively, as compared to equity in income of affiliates of $ 3,348,000 and $ 5,026,000 , which includes the $ 459,000 payment of the preferred return from KKM discussed above, for the three and nine months ended June 30, 2021, respectively.

The partnerships derive income from the sale of residential parcels in Increment I, of which only one lot remains to be sold as of December 31, 2022, as well as from commissions on real estate sales by the real estate sales office and revenues resulting from the sale of private club memberships.

Increment II is not yet under development, and there is no assurance that development of such acreage will occur.

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

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 of 75 % and 34.45 %, respectively.

During the three months ended December 31, 2022, Barnwell received cash distributions of $ 538,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $ 478,000 , after distributing $ 60,000 to non-controlling interests.

During the three months ended December 31, 2021, Barnwell received cash distributions $ 1,207,000 from the Kukio

Resort Land Development Partnerships resulting in a net amount of $ 1,075,000 , after distributing $ 132,000 to non-controlling interests.

Equity in income of affiliates was $ 538,000 for the three months ended December 31, 2022, as compared to equity in income of affiliates of $ 1,207,000 for the three months ended December 31, 2021.

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

Three months ended June 30,

Revenue $ 4,574,000 $ 21,521,000

Gross profit $ 3,004,000 $ 12,656,000

Net earnings $ 2,209,000 $ 11,618,000

Nine months ended June 30,

Three months ended

Revenue $ 3,712,000 $ 9,253,000

3 unchanged sentences

The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnership’s cumulative earnings in excess of distributions during the suspended period exceeds our share of the Kukio Resort Land Development Partnership’s income recognized for the excess distributions, and during this suspended period any distributions received will be recorded as equity in income of affiliates.

Accordingly, the amount of equity in income of affiliates recognized in the nine months ended June 30, 2022 was equivalent to the $ 3,400,000 of distributions received in that period.

Accordingly, the amount of equity in income of affiliates recognized in the three months ended December 31, 2022 was equivalent to the $ 538,000 of distributions received in that period.

Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $ 1,198,000 at December 31, 2022 and $ 958,000 at September 30, 2022.

Sale of Interest in Leasehold Land

1 unchanged sentence

With respect to Increment I, Kaupulehu Developments is entitled to receive payments from KD I based on 10 % of the gross receipts from KD I’s sales of single-family residential lots in Increment I.

Six single-family lots were sold during the nine months ended June 30, 2022 and two single-family lots, of the 80 lots developed within Increment I, remained to be sold as of June 30, 2022.

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 also obligated to pay an amount equal to 0.72 % and 0.2 % 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.

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

One single-family lot was sold during the three months ended December 31, 2022 and one single-family lot, of the 79 lots developed within Increment I, remained to be sold as of December 31, 2022.

The following table summarizes the Increment I revenues from KD I and the amount of fees directly related to such revenues:

Three months ended

June 30, Nine months ended

2022 2021 2022 2021

Sale of interest in leasehold land:

3 unchanged sentences

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.

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

Investment in Leasehold Land Interest - Lot 4C

4 unchanged sentences

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 previously affiliated with the Company (see Note 18 for additional details), entered into the Limited Liability Agreement (the “Teton Operating 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 Teton Operating Agreement, the profits of Teton Barnwell are split between BOK and Gros Ventre at 98 % and 2 %, respectively, and as the manager of Teton Barnwell, Gros Venture is paid an annual asset management fee equal to 1 % of the cumulative capital contributions made to Teton Barnwell as compensation for its management services.

BOK is responsible for 100 % of the capital contributions made to Teton Barnwell and as of June 30, 2022, the Company has made a total of $ 1,250,000 in

cumulative capital contributions to Teton Barnwell to fund its initial oil and natural gas investment in Oklahoma and has received a total of $ 1,176,000 in distributions, net of non-controlling interests, from Teton Barnwell out of Teton Barnwell's operating cash flows.

In July 2022, an additional $ 882,000 distribution, net of non-controlling interests, was received from Teton Barnwell.

These contributions and distributions between Teton Barnwell and the Company do not affect our reported consolidated cash flows as Teton Barnwell is a consolidated entity, as discussed further below.

BOK and Gros Ventre Partners, LLC (“Gros Ventre”) entered into the Limited Liability Agreement (the “Teton Operating 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 Teton Operating 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.

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

8 unchanged sentences

Proved properties, net 607,000 655,000

Unproved properties — 962,000

Total assets $ 1,518,000 $ 1,884,000

Accounts payable $ 7,000 $ 15,000

Accrued capital expenditures 124,000 581,000

Accrued operating and other expenses 21,000 26,000

1 unchanged sentence

ASSET HELD FOR SALE

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 was recorded as “Assets held for sale” on the Company's Condensed Consolidated Balance Sheet at September 30, 2021.

In October 2021, the Company sold the drilling rig and related ancillary equipment for proceeds of $ 687,000 , net of related costs, which was equivalent to its net carrying value.

In September 2022, the Company entered into a purchase and sale agreement with an independent third party for the sale of a contract drilling segment drilling rig and received a payment of $ 551,000 , net of related costs.

At September 30, 2022, the legal title for the drilling rig had not yet transferred to the buyer and therefore, the Company did not record a sale during the year ended September 30, 2022.

The proceeds received from the buyer was recognized as a deposit and recorded in “Other Current Liabilities” on the Company's Consolidated Balance Sheet at September 30, 2022.

No amount was recorded as assets held for sale at September 30, 2022 as the drilling rig was fully depreciated and therefore had a net book value of zero.

In October 2022, the legal title for the drilling rig was transferred to the buyer and as a result, the Company recognized a $ 551,000 gain on the sale of the drilling rig during the three months ended December 31, 2022.

OIL AND NATURAL GAS PROPERTIES

Oil and Natural Gas Investments

In December 2022, Barnwell Texas, LLC (“Barnwell Texas”), a new wholly-owned subsidiary of the Company, entered into a purchase and sale agreement with an independent third party whereby Barnwell Texas acquired a 22.3 % non-operated working interest in oil and natural gas leasehold acreage in the Permian Basin in Texas for cash consideration of $ 806,000 .

In connection with the purchase of such leasehold interests, Barnwell Texas acquired a 15.4 % non-operated working interest in the planned drilling of two oil wells in the Wolfcamp Formation in Loving and Ward Counties, Texas and made a pre-payment of $ 4,293,000 to pay its share of the estimated costs to drill, complete and equip the wells.

As of December 31, 2022, the total costs incurred for these two oil wells was $ 829,000 and thus, the remaining prepaid balance of $ 3,464,000 was recorded as “Advances to operators for capital expenditures” on the Company's Condensed Consolidated Balance sheet.

Additionally, in connection with the agreement, the Company is obligated to pay a broker’s fee of 5.0 % of the capital invested under this arrangement to Four Pines Exploration LLC - Exploration - Series 1 (“Four Pines”).

Four Pines is controlled by Mr.

Colin O’Farrell who is an affiliate of Teton Barnwell

(see Note 17 for additional details).

During the three months ended December 31, 2022, the Company paid $ 255,000 in broker fees to Four Pines related to this arrangement.

Oil and Natural Gas Acquisitions

There were no oil and gas working interest acquisitions during the three months ended December 31, 2022.

In the quarter ended December 31, 2021, Barnwell acquired working interests in oil and natural gas properties located in the Twining area of Alberta, Canada, for cash consideration of $ 317,000 .

In January 2022, Barnwell acquired additional working interests in oil and natural gas properties located in the Twining area of Alberta, Canada for consideration of $ 1,246,000 .

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.

Barnwell also assumed $ 1,500,000 in asset retirement obligations associated with the acquisition.

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.

There were no significant oil and natural gas property dispositions during the nine months ended June 30, 2022.

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 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.

Impairment of Oil and Natural Gas Properties

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

There was no ceiling test impairment during the three months ended June 30, 2022 and 2021.

There was no ceiling test impairment during the nine months ended June 30, 2022 and a $ 630,000 ceiling test impairment during the nine months ended June 30, 2021.

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.

RETIREMENT PLANS

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

Additionally, Barnwell sponsors a Supplemental Executive

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

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 by resolution of the Board of Directors of the Company and sixty days ’ notice to each participant in the plan.

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 three and nine months ended June 30, 2021.

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

Pension Plan SERP Post-retirement Medical

Three months ended June 30,

2022 2021 2022 2021 2022 2021

Interest cost $ 73,000 $ 64,000 $ 15,000 $ 13,000 $ — $ 12,000

Expected return on plan assets ( 156,000 ) ( 136,000 ) — — — —

Amortization of net actuarial loss — 10,000 — — — 16,000

Net periodic benefit (income) cost $ ( 83,000 ) $ ( 62,000 ) $ 15,000 $ 13,000 $ — $ 28,000

Pension Plan SERP Post-retirement Medical

Nine months ended June 30,

employees and a noncontributory Supplemental Executive Retirement Plan (“SERP”), which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan.

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

Pension Plan SERP

Three months ended December 31,

2022 2021 2022 2021

1 unchanged sentence

Expected return on plan assets ( 167,000 ) ( 156,000 ) — —

Amortization of net actuarial loss — 30,000 — — — 62,000

Amortization of net actuarial gain — — ( 20,000 ) —

Net periodic benefit (income) cost $ ( 65,000 ) $ ( 83,000 ) $ 2,000 $ 15,000

6 unchanged sentences

Three months ended

June 30, Nine months ended

2022 2021 2022 2021

United States $ 18,000 $ 892,000

3 unchanged sentences

Three months ended

June 30, Nine months ended

2022 2021 2022 2021

Current $ 91,000 $ 80,000

4 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 Barnwell receives no benefit from consolidated or unitary losses and, therefore, is subject to Oklahoma state taxes.

In addition, net operating loss carryforwards, all of which had a full valuation allowance at the end of the previous fiscal year, are being partially utilized in the current year periods to offset taxable income in the U.S.

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

federal and Canadian jurisdictions.

The net operating loss carryforwards beyond the current year’s utilization continue to have a full valuation allowance as realization of their benefit is not more likely than not.

Included in the current income tax provision for the three and nine months ended June 30, 2022 is a $ 61,000 expense for income tax penalties and interest thereon for the non-filing of IRS Form 8858 in each of our U.S.

federal income tax returns for fiscal years 2019, 2020 and 2021.

The Company is in the process of amending its U.S.

federal tax returns to include Form 8858 and plans to request abatement of the potential penalties and interest.

There was no such expense included in the current income tax provision for the three and nine months ended June 30, 2021.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables provide information about disaggregated revenue by revenue streams, reportable segments, geographical region, and timing of revenue recognition for the three and nine months ended June 30, 2022 and 2021.

Three months ended June 30, 2022

Oil and natural gas Contract drilling Land investment Other Total

Revenue streams:

Oil $ 4,951,000 $ — $ — $ — $ 4,951,000

Natural gas 1,652,000 — — — 1,652,000

Natural gas liquids 689,000 — — — 689,000

Drilling and pump — 736,000 — — 736,000

Total revenues before interest income $ 7,292,000 $ 736,000 $ — $ — $ 8,028,000

Geographical regions:

United States $ 840,000 $ 736,000 $ — $ — $ 1,576,000

Canada 6,452,000 — — — 6,452,000

Total revenues before interest income $ 7,292,000 $ 736,000 $ — $ — $ 8,028,000

Timing of revenue recognition:

Goods transferred at a point in time $ 7,292,000 $ — $ — $ — $ 7,292,000

Services transferred over time — 736,000 — — 736,000

Total revenues before interest income $ 7,292,000 $ 736,000 $ — $ — $ 8,028,000

Three months ended June 30, 2021

Oil and natural gas Contract drilling Land investment Other Total

Revenue streams:

Oil $ 2,156,000 $ — $ — $ — $ 2,156,000

Natural gas 514,000 — — — 514,000

Natural gas liquids 217,000 — — — 217,000

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

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

Other — — — 79,000 79,000

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

Geographical regions:

United States $ 41,000 $ 889,000 $ 1,253,000 $ 2,000 $ 2,185,000

Canada 2,846,000 — — 77,000 2,923,000

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

Timing of revenue recognition:

Goods transferred at a point in time $ 2,887,000 $ — $ 1,253,000 $ 79,000 $ 4,219,000

Services transferred over time — 889,000 — — 889,000

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

Nine months ended June 30, 2022

The following tables provides information about disaggregated revenue by revenue streams, reportable segments, geographical region, and timing of revenue recognition for the three months ended December 31, 2022 and 2021.

Three months ended December 31, 2022

Oil and natural gas Contract drilling Land investment Other Total

15 unchanged sentences

Total revenues before interest income $ 5,226,000 $ 1,948,000 $ 265,000 $ 43,000 $ 7,482,000

Nine months ended June 30, 2021

Three months ended December 31, 2021

Oil and natural gas Contract drilling Land investment Other Total

17 unchanged sentences

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

June 30, 2022 September 30, 2021

December 31, 2022 September 30, 2022

Accounts receivables from contracts with customers $ 4,008,000 $ 4,038,000

9 unchanged sentences

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

As of June 30, 2022 and September 30, 2021, the Company had $ 1,145,000 and $ 455,000 , respectively, included in “Other current liabilities” on the balance sheets for those performance obligations expected to be completed in the next twelve months.

During the nine months ended June 30, 2022 and 2021, the amount of revenue recognized that was previously included in contract liabilities as of the beginning of the respective period was $ 342,000 and $ 978,000 , respectively.

As of December 31, 2022 and September 30, 2022, the Company had $ 746,000 and $ 1,087,000 , respectively, included in “Other current liabilities” on the balance sheets for those performance obligations expected to be completed in the next twelve months.

During the three months ended December 31, 2022 and 2021, the amount of revenue recognized that was previously included in contract liabilities as of the beginning of the respective period was $ 523,000 and $ 186,000 , respectively.

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

7 unchanged sentences

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

At June 30, 2022, the Company had five contract drilling jobs with original expected durations of greater than one year.

For these contracts, 35 % of the remaining performance obligation of $ 7,490,000 is expected to be recognized in the next twelve months and the remaining, thereafter.

At December 31, 2022, the Company had six contract drilling jobs with original expected durations of greater than one year.

For these contracts, approximately 70 % of the remaining performance obligation of $ 4,764,000 is expected to be recognized as revenue in the next twelve months and the remaining, thereafter.

Contract Fulfillment Costs

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

As of June 30, 2022 and September 30, 2021, the Company had $ 228,000 and $ 326,000 , respectively, in unamortized preconstruction costs related to contracts that were not completed.

During the three and nine months ended June 30, 2022 and 2021, the amortization of preconstruction costs related to contracts were not material and were included in the accompanying Condensed Consolidated Statements of Operations.

Additionally, no impairment charges in connection with the Company’s preconstruction costs were recorded during the three and nine months ended June 30, 2022 and 2021.

As of December 31, 2022 and September 30, 2022, the Company had $ 717,000 and $ 689,000 , respectively, in unamortized preconstruction costs related to contracts that were not completed.

During the three months ended December 31, 2022 and 2021, the amortization of preconstruction costs related to contracts were not material and were included in the accompanying Condensed Consolidated Statements of Operations.

Additionally, no impairment charges in connection with the Company’s preconstruction costs were recorded during the three months ended December 31, 2022 and 2021.

SEGMENT INFORMATION

Barnwell operates the following segments:

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

1) acquiring, developing, producing and selling oil and natural gas in Canada and the U.S.

(oil and natural gas);

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

3 unchanged sentences

Three months ended

June 30, Nine months ended

2022 2021 2022 2021

Oil and natural gas $ 5,226,000 $ 3,920,000

10 unchanged sentences

Total depletion, depreciation, and amortization $ 840,000 $ 483,000

Oil and natural gas $ — $ — $ — $ 630,000

Total impairment $ — $ — $ — $ 630,000

Operating profit (loss) (before general and administrative expenses):

3 unchanged sentences

Other 42,000 57,000

Gain on sale of assets 551,000 —

Total operating profit 2,892,000 2,074,000

2 unchanged sentences

General and administrative expenses ( 2,249,000 ) ( 1,830,000 )

Interest expense ( 1,000 ) ( 2,000 ) ( 1,000 ) ( 6,000 )

Foreign currency gain 78,000 —

Interest income 29,000 1,000

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

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

Earnings before income taxes $ 1,288,000 $ 1,452,000

ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in each component of accumulated other comprehensive loss were as follows:

ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in each component of accumulated other comprehensive income were as follows:

Three months ended

June 30, Nine months ended

2022 2021 2022 2021

Foreign currency translation:

2 unchanged sentences

Income taxes — —

Net current period other comprehensive loss ( 108,000 ) ( 74,000 ) ( 121,000 ) ( 393,000 )

Net current period other comprehensive income (loss) 2,000 ( 25,000 )

Ending accumulated foreign currency translation 224,000 237,000

Retirement plans:

Beginning accumulated retirement plans benefit cost ( 230,000 ) ( 1,914,000 ) ( 230,000 ) ( 1,980,000 )

Amortization of net actuarial loss — 26,000 — 92,000

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

Beginning accumulated retirement plans benefit income (cost) 1,072,000 ( 230,000 )

Amortization of net actuarial gain ( 20,000 ) —

Income taxes — —

Net current period other comprehensive income — 567,000 — 633,000

Ending accumulated retirement plans benefit cost ( 230,000 ) ( 1,347,000 ) ( 230,000 ) ( 1,347,000 )

Accumulated other comprehensive loss, net of taxes $ ( 89,000 ) $ ( 1,195,000 ) $ ( 89,000 ) $ ( 1,195,000 )

The amortization of net actuarial loss 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 Condensed Consolidated Statements of Operations (see Note 8 for additional details).

Net current period other comprehensive loss ( 20,000 ) —

Ending accumulated retirement plans benefit income (cost) 1,052,000 ( 230,000 )

Accumulated other comprehensive income, net of taxes $ 1,276,000 $ 7,000

The amortization of net actuarial gain 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 Condensed Consolidated Statements of Operations (see Note 7 for additional details).

FAIR VALUE MEASUREMENTS

4 unchanged sentences

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

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.

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.

and properties.

Asset retirement obligation fair value measurements in the current period were Level 3 fair value measurements.

5 unchanged sentences

If the Company repays 66.7 % of the principal amount prior to December 31, 2023, there will be loan forgiveness of 33.3 % up to a maximum of CAD$ 20,000 .

Paycheck Protection Program Loan

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

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

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

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

The current loan balance of $ 44,000 is included in “Other current liabilities” in the Company's Condensed Consolidated Balance sheet at December 31, 2022.

STOCKHOLDERS' EQUITY

In May 2022, Barnwell’s stockholders approved the amendment to increase the Company’s number of authorized shares of common stock from 20,000,000 to 40,000,000 shares and approved amendments to the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) which included the amendment to increase the total number of shares of stock authorized for awards granted under the 2018 Plan from 800,000 to 1,600,000 shares among other amendments.

Cash Dividend

In December 2022, the Company's Board of Directors declared a cash dividend of $ 0.015 per share that was paid on January 11, 2023 to stockholders of record on December 27, 2022.

No dividends were declared or paid during the three months ended December 31, 2021.

The Tax Benefits Preservation Plan

On October 17, 2022, the Board of Directors of the Company adopted a Tax Benefits Preservation Plan (the “Tax Plan”) designed to protect the availability of the Company’s existing net operating loss carryforwards and certain other tax attributes (collectively, the “Tax Benefits”).

The Company has generated substantial Tax Benefits, which could potentially be used in certain circumstances to reduce its future income tax obligations.

Utilization of these NOLs and other Tax Benefits depends on many factors, including the Company’s future taxable income.

Additionally, the Company’s ability to use its Tax Benefits would be substantially limited if it were to experience an “ownership change,” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”).

In general, a corporation would experience an ownership change if the percentage of the corporation’s stock owned by one or more “5% stockholders,” as defined under Section 382, were to increase by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period (or, if a shorter period, since the Company’s last ownership change).

The purpose of the Tax Plan is to reduce the likelihood that the Company will experience an ownership change under Section 382, which would limit the Company’s future use of its Tax Benefits and, in turn, significantly impair the value of such Tax Benefits.

Absent the adoption of the Tax Plan, the Company would be at a greater risk of experiencing an ownership change under Section 382 in the future as a result of certain changes in its investor base and subsequent shifts in its stock ownership that cannot be predicted or controlled.

If the Company were to

undergo an ownership change, limitations would be placed on the Company’s ability to utilize the Tax Benefits in future years in which it has taxable income, and the Company would pay more taxes than if it were able to utilize the Tax Benefits fully.

This could result in a negative impact on the Company’s financial position, results of operations, and cash flows.

The Tax Plan is designed to preserve the Tax Benefits by reducing the risk of an ownership change under Section 382.

The Tax Plan adopted by the Board of Directors is similar to plans adopted by other publicly held companies with substantial Tax Benefits and has a limited duration of three years.

The Tax Plan is not designed to prevent any action that the Board of Directors determines to be in the best interest of the Company and its stockholders.

To implement the Tax Plan, the Board of Directors declared a dividend of one right (a “Right”) for each outstanding share of the Company's common stock.

The Rights were issued to stockholders of record at the close of business on October 27, 2022 pursuant to the Tax Plan.

The Rights are exercisable if a person or group of persons acquires 4.95% or more of the Company’s common stock.

The Rights are also exercisable if a person or group of persons that already owns 4.95% or more of the Company’s common stock acquires an additional share other than as a result of a dividend or a stock split.

Existing stockholders that beneficially own in excess of 4.95% of the Company’s common stock are “grandfathered in” at their current ownership level.

If the Rights become exercisable, all holders of Rights, other than the person or group of persons triggering the Rights, will be entitled to purchase shares of the Company’s common stock at a 50% discount.

Rights held by the person or group of persons triggering the Rights will become void and will not be exercisable.

The Tax Plan also includes an exchange option.

At any time after any person or group of persons acquires 4.95% or more of the Company’s common stock, but less than 50% or more of the outstanding shares of the Company’s common stock, the Board of Directors, at its option, may exchange the Rights (other than Rights owned by such person or group of persons which will have become void), in whole or in part, at an exchange ratio of three shares of the Company’s common stock per outstanding Right (subject to adjustment).

The Rights will trade with the Company’s common stock and will expire at the close of business on October 17, 2025.

The Rights will expire under other circumstances as described in the Tax Plan, including on the date set by the Board of Directors following a determination that the Tax Plan is no longer necessary or desirable for the preservation of the Tax Benefits or no significant Tax Benefits are available to be carried forward or are otherwise available.

The Board of Directors may terminate the Tax Plan prior to the time the Rights are triggered or may redeem the Rights prior to the Distribution Date, as defined in the Tax Plan.

In January 2023, the Company terminated the Tax Plan (see Note 18 for additional details).

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 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, par value $ 0.50 per share, having an aggregate sales price of up to $ 25 million (subject to certain limitations set forth in the Sales Agreement and applicable securities laws, rules and regulations), 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.

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.

During the nine months ended June 30, 2022, the Company sold 509,467 shares of common stock resulting in net proceeds of $ 2,356,000 after commissions and fees of $ 75,000 and ATM-related professional services of $ 22,000 .

During the nine months ended June 30, 2021, the Company sold 586,546 shares of common stock resulting in net proceeds of $ 1,736,000 after commissions and fees of $ 59,000 and ATM-related professional services of $ 124,000 .

In August 2022, the Company’s Board of Directors suspended the sales of our common stock under the ATM until further notice.

COMMITMENTS AND CONTINGENCIES

CONTINGENCIES

Legal and Regulatory Matters

6 unchanged sentences

Barnwell’s management believes the plumbness deviation is not impactful to the performance of the submersible pumps that will be installed in the well.

Accordingly, while costs for the centralizers, armored cabling and the pump installation and removal test have been accrued, no accrual has been recorded as of June 30, 2022 for any further costs as there is no related probable or estimable contingent liability.

Subscription Receipts Agreement

In May 2022, Barnwell Investments LLC, a new wholly-owned subsidiary of Barnwell Industries Inc., entered into an agreement to participate in a private placement offering (the “Offering”) of subscriptions receipts (the “Subscription Agreement”) with 1287398 B.C.

(the “Issuer”) and agreed to purchase 1,724,138 subscription receipts at a price of $ 1.16 per subscription receipt for a total of $ 2,000,000 from the Issuer.

is a Canadian reporting issuer.

The Offering is subject to regulatory approvals, including the conditional listing approval by the TSX Venture Exchange.

The Subscription Agreement is currently held in escrow by the Issuer until certain escrow release conditions are met which includes the Issuer raising an additional $ 3,000,000 in gross proceeds from other parties under the private placement offering for total minimum gross proceeds of $ 5,000,000 .

As of the date of this report, the escrow release condition has not been satisfied and no cash has been paid by the Company to the Issuer.

Accordingly, while costs for the centralizers, armored cabling and the pump installation and removal test have been accrued, no accrual has been recorded as of December 31, 2022 for any further costs related to this contract as there is no related probable or estimable contingent liability.

INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

Supplemental disclosure of cash flow information:

Cash paid (received) during the year for:

Income taxes paid (refunded), net $ 352,000 $ ( 290,000 )

Supplemental disclosure of non-cash investing and financing activities:

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

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

Capital expenditure accruals related to oil and natural gas exploration and development increased $ 812,000 during the nine months ended June 30, 2022 and decreased $ 7,000 during the nine months ended June 30, 2021.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $ 2,476,000 and $ 463,000 during the nine months ended June 30, 2022 and 2021, respectively.

Capital expenditure accruals related to oil and natural gas exploration and development decreased $ 1,405,000 during the three months ended December 31, 2022 and increased $ 1,851,000 during the three months ended December 31, 2021.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $ 150,000 and $ 304,000 during the three months ended December 31, 2022 and 2021, respectively.

RELATED PARTY TRANSACTIONS

3 unchanged sentences

Changes to the arrangement above, effective March 7, 2019, are discussed in Note 3.

During the nine months ended June 30, 2022, Barnwell received $ 1,295,000 in percentage of sales payments from KD 1 from the sale of six single-family lots within Increment I.

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

During the three months ended December 31, 2022, Kaupulehu Developments received $ 265,000 in percentage of sales payments from KD I from the sale of one single-family lot within Phase II of Increment I.

During the three months ended December 31, 2021, Kaupulehu Developments received $ 600,000 in percentage of sales payments from KD I from the sale of three single-family lots within Phase II of Increment I.

O'Farrell, formerly a member of the Board of Directors of the Company through March 7, 2022, 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 Teton Operating Agreement of Teton Barnwell, an entity formed for the purpose of directly investing in

oil and natural gas exploration and development in Oklahoma.

In February 2021, Gros Ventre and BOK, a wholly-owned subsidiary of Barnwell, entered into the Teton Operating 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 Teton Operating Agreement, Gros Ventre makes no capital contributions and receives 2 % of the profits of Teton Barnwell.

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

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

Cooperation and Support Agreement

In January 2023, the Company entered into a cooperation and support agreement (the “Agreement”) with Alexander C.

Kinzler , the Company’s CEO and President in his capacity as a stockholder , MRMP-Managers LLC, the Ned L.

Sherwood Revocable Trust, NLS Advisory Group, Inc.

Sherwood (collectively, the “MRMP Stockholders”), with respect to the potential proxy contest pertaining to the election of directors to our Board of Directors (the “Board”).

The Agreement extends for two years the standstill terms of the previous agreement entered into with the MRMP Stockholders in 2021, ending the potential of a proxy contest at the 2023 annual meeting of stockholders (the “2023 Annual Meeting”).

Pursuant to the terms of the Agreement, among other things, the Company has agreed to promptly appoint Joshua S.

Horowitz and Laurance Narbut to serve on the Board, subject to certain customary board procedures (effective February 9, 2023, Mr.

Horowitz and Mr.

Narbut became members of the Board).

In addition, the Company has agreed to nominate a five-person board comprised of Mr.

Kinzler, Kenneth Grossman, Douglas Woodrum, and Messrs.

Horowitz and Narbut as candidates for election to the Board at the 2023 Annual Meeting and the 2024 annual meeting of stockholders (the “2024 Annual Meeting”) and Mr.

Kinzler and the MRMP Stockholders have agreed to vote their respective shares of common stock of the Company in favor of the election of the Company’s slate at the 2023 Annual Meeting and 2024 Annual Meeting.

Additionally, pursuant to the terms of the Agreement, the Company has terminated the previously enacted Tax Benefits Preservation Plan, although the MRMP Stockholders have agreed to limit their beneficial and economic ownership of the Company to 28 % of the outstanding common stock of the Company for the next 12 months and 30 % for the subsequent 12-month period.

In exchange for this arrangement, the Company has agreed to reimburse the MRMP Stockholders and Mr.

Kinzler for their reasonable, documented out-of-pocket fees and expenses (including legal expenses) in connection with the negotiation and execution of the Agreement and the transactions contemplated hereby and the proposed nomination of directors by the MRMP Stockholders in connection with the 2023 Annual Meeting.

Cash Dividend

In February 2023, the Company's Board of Directors declared a cash dividend of $ 0.015 per share payable on March 13, 2023 to stockholders of record on February 23, 2023.

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-Q

Item 1. Financial Statements