Basis of Presentation, Restatement of Financials and Accounting Principles (Policies)

6 Months Ended

Mar. 31, 2020

The accompanying unaudited condensed financial statements of Panhandle Oil and Gas Inc. have been prepared in accordance with the instructions to Form 10-Q as prescribed by the SEC. Management believes that all adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for the periods have been included. All such adjustments are of a normal recurring nature. The results are not necessarily indicative of those to be expected for the full year. The Company’s fiscal year runs from October 1 through September 30.

Certain amounts and disclosures have been condensed or omitted from these financial statements pursuant to the rules and regulations of the SEC. Therefore, these condensed financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019. Unless indicated otherwise or the context requires, the terms “we,” “our,” “us,” “Panhandle” or “Company” refer to Panhandle Oil and Gas Inc.

Restatement of Previously Issued Unaudited Financial Statements

Restatement of Previously-Issued Unaudited Financial Statements

The Company has restated its unaudited financial statements to correct an error in its oil, NGL and natural gas revenue accrual, which impacted oil, NGL and natural gas receivables and oil, NGL and natural gas sales. This error was identified during the process of collecting receivables recorded in the oil, NGL and natural gas sales receivable balance as of March 31, 2020.

The following tables illustrate the effect of the error correction on all affected line items of our previously-issued Balance Sheets as of March 31, 2020; Statements of Operations for the three and six months ended March 31, 2020; Statements of Stockholders' Equity for the three months ended March 31, 2020; and Statements of Cash Flows for the six months ended March 31, 2020.

Balance Sheets

	March 31, 2020
	As Reported		Adjustments			As Restated
Oil, NGL and natural gas sales receivables (net of allowance for uncollectable accounts)		3,913,347		(704,644	)		3,208,703
Refundable income taxes		3,401,870		176,000			3,577,870
Total current assets		12,632,321		(528,644	)		12,103,677
Total assets	$	98,763,950		(528,644	)	$	98,235,306

Deferred income taxes, net		1,312,007		(47,000	)		1,265,007

Retained earnings		62,447,346		(481,644	)		61,965,702
		68,085,664		(481,644	)		67,604,020
Total stockholders' equity		60,532,781		(481,644	)		60,051,137
Total liabilities and stockholders' equity	$	98,763,950		(528,644	)	$	98,235,306

Statements of Operations

	Three Months Ended March 31, 2020
	As Reported			Adjustments			As Restated
Oil, NGL and natural gas sales	$	7,982,905			(765,287	)	$	7,217,618
Total revenues		12,076,574			(765,287	)		11,311,287

Transportation, gathering and marketing		1,386,297			(29,669	)		1,356,628
Production taxes		404,728			(30,974	)		373,754
Total cost and expenses		38,813,744			(60,643	)		38,753,101
Income (loss) before provision (benefit) for income taxes		(26,737,170	)		(704,644	)		(27,441,814	)
Provision (benefit) for income taxes		(6,764,000	)		(223,000	)		(6,987,000	)
Net income (loss)	$	(19,973,170	)		(481,644	)	$	(20,454,814	)
Basic and diluted earnings (loss) per common share (Note 5)	$	(1.21	)	$	(0.03	)	$	(1.24	)

	Six Months Ended March 31, 2020
	As Reported			Adjustments			As Restated
Oil, NGL and natural gas sales	$	15,576,743			(765,287	)	$	14,811,456
Total revenues		22,653,105			(765,287	)		21,887,818

Transportation, gathering and marketing		2,769,298			(29,669	)		2,739,629
Production taxes		732,009			(30,974	)		701,035
Total cost and expenses		47,244,161			(60,643	)		47,183,518
Income (loss) before provision (benefit) for income taxes		(24,591,056	)		(704,644	)		(25,295,700	)
Provision (benefit) for income taxes		(6,510,000	)		(223,000	)		(6,733,000	)
Net income (loss)	$	(18,081,056	)		(481,644	)	$	(18,562,700	)
Basic and diluted earnings (loss) per common share (Note 5)	$	(1.09	)	$	(0.03	)	$	(1.12	)

Statements of Stockholders’ Equity

	Retained Earnings
	As Reported			Adjustments			As Restated
Net income (loss)		(19,973,170	)		(481,644	)		(20,454,814	)
Balances at March 31, 2020	$	62,447,346			(481,644	)	$	61,965,702

	Total Stockholders' Equity
	As Reported			Adjustments			As Restated
Net income (loss)		(19,973,170	)		(481,644	)		(20,454,814	)
Balances at March 31, 2020	$	60,532,781			(481,644	)	$	60,051,137

Statements of Cash Flows

	Six Months Ended March 31, 2020
	As Reported			Adjustments			As Restated
Operating Activities
Net income (loss)	$	(18,081,056	)		(481,644	)	$	(18,562,700	)
Provision for deferred income taxes		(4,664,000	)		(47,000	)		(4,711,000	)
Cash provided (used) by changes in assets and liabilities:
Oil, NGL and natural gas sales receivables		464,299			704,644			1,168,943
Income taxes receivable		(1,896,428	)		(176,000	)		(2,072,428	)
Total adjustments		24,189,398			481,644			24,671,042

Adoption of New Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which will supersede the lease requirements in Topic 840, Leases by requiring lessees to recognize lease assets and lease liabilities classified as operating leases on the balance sheet. See Note 2: Leases for further details related the Company’s adoption of this standard.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which would allow entities to apply the transition provisions of the new standard at the adoption date instead of at the earliest comparative period presented in the financial statements, and will allow entities to continue to apply the legacy guidance in Topic 840, including disclosure requirements, in the comparative period presented in the year the new leases standard is adopted. Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if any, rather than in the earliest period presented. See Note 2: Leases for further discussion.

New Accounting Pronouncements yet to be Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the currently required incurred loss approach with an expected loss model for instruments measured at amortized cost. The standard is effective for interim and annual periods beginning after December 15, 2019, and shall be applied using a modified retrospective approach resulting in a cumulative effect adjustment to retained earnings upon adoption. This standard will be effective for Panhandle starting October 1, 2020. The Company is evaluating the new standard and is currently in the process of estimating its financial statement impact; however, the impact is not expected to be material. Historically, the Company's credit losses on oil, NGL and natural gas sales receivables have been immaterial.

Other accounting standards that have been issued or proposed by the FASB, or other standards-setting bodies, that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.