______________________________________________________________________________________________

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 5(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Year ended December 31, 2020

  OR

[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

  FOR THE TRANSITION PERIOD FROM             TO         

  Commission File Number 000-08187

NEW CONCEPT ENERGY, INC.

(Exact name of registrant as specified in its charter)

Nevada   75-2399477

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1603 LBJ Freeway

Suite 800

Dallas, Texas

  (Address of principal executive offices)  
  75234  
  (Zip Code)  
  (972) 407-8400  
  (Registrant’s telephone number, including area code)  
     

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

 
  Title of each class Trading Symbol(s) Name of each exchange on which registered  
  Common Stock, par value $0.01 GBR NYSE AMERICAN  
                     

 

Securities registered pursuant to Section 12(g) of the Act:               None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ]   No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X]    No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes [  ]   No [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.  Yes [  ]   No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” ”accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

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 Large accelerated filer [  ] Accelerated filer [  ]
 Non-accelerated filer [  ](Do not check if a smaller reporting Company) Smaller reporting company [X]
Emerging growth company  [  ]

 

The aggregate market value of the shares of voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the closing price at which the common equity was last sold which was the sales price of the Common Stock on the NYSE American as of June 30, 2020 (the last business day of the Registrant’s most recently completed second fiscal quarter) was $2,394,000 based upon a total of 1,946,935 shares held as of June 30, 2020 by persons believed to be non-affiliates of the Registrant.  The basis of the calculation does not constitute a determination by the Registrant as defined in Rule 405 of the Securities Act of 1933, as amended, such calculation, if made as of a date within sixty days of this filing, would yield a different value.

 

As of March 30, 2021 there were 5,131,934 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:  NONE 

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NEW CONCEPT ENERGY, INC.

Index to Annual Report on Form 10-K

Fiscal year ended December 31, 2020

 

 

Forward-Looking Statements 3
   
PART I 3
   
Item 1.  Business 4
Item 1A.  Risk Factors 5
Item 1B.  Unresolved Staff Comments 5
Item 2.  Properties 5
Item 3.  Legal Proceedings 6
   
PART II 6
   
Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities         6
Item 6.  Selected Financial Data 6
Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operation 6
Item 7a:  Quantitative And Qualitative Disclosures About Market Risk 8
Item 8.  Financial Statements 8
Item 9.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 8
Item 9a.  Controls and Procedures 8
Item 9b.  Other Information 9
   
PART III 9
   
Item 10.  Directors, Executive Officers and Corporate Governance 9
Item 11.  Executive Compensation 12
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters        13
Item 13.  Certain Relationships and Related Transactions, and Director Independence 14
Item 14.  Principal Accounting Fees and Services 14
   
PART IV 16
   
Item 15.  Exhibits and Financial Statement Schedules 16
   
Item 16.  Form 10-K Summary        21
   
SIGNATURES 34

 

 

 

 

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NEW CONCEPT ENERGY, INC.

 

Forward-Looking Statements

 

 

Certain statements in this Form 10-K are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934.  The words “estimate”, “plan”, “intend”, “expect”, “anticipate”, “and believe” and similar expressions are intended to identify forward-looking statements.  These forward-looking statements are found at various places throughout this Report and in the documents incorporated herein by reference.  New Concept Energy, Inc. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Although we believe that our expectations are based upon reasonable assumptions, we can give no assurance that our goals will be achieved.  Important factors that could cause our actual results to differ from estimates or projections contained in any forward-looking statements are described under Item 1A. Risk Factors beginning on page 5.

 

PART I

 

Item 1.  Business

 

New Concept Energy, Inc. (“New Concept”, “NCE” or the “Company” or “we” or “us”) was incorporated in Nevada on May 31, 1991, under the name Medical Resource Companies of America, Inc.  The Company is the successor-by-merger to Wespac Investors Trust, a California business trust that began operating in 1982.  On March 26, 1996, the name was changed to Greenbriar Corporation.  On February 8, 2005, the name of the Company was changed to CabelTel International Corporation.  On May 21, 2008, the name of the company was changed to New Concept Energy, Inc.

 

Real Estate Operations

 

The Company, owns approximately 190 acres of land located in Parkersburg West Virginia. Located on the land are four structures totaling approximately 53,000 square feet. Of this total area the main industrial / office building contains approximately 24,800 square feet of which as of December 31, 2020 approximately 16,000 of industrial area is leased for $101,000 per annum.

 

Oil and Gas Operations

 

In August 2020 the Company sold its oil and gas wells and mineral leases which were located in Ohio and West Virginia. The oil and operations for the periods included in this report are reflected as discontinued operations.

 

Business Strategy

 

The Company is a Nevada corporation.

 

The Company intends to continue operate and or sell its West Virginia property while management of the Company explores alternatives, seeking to establish or acquire new business operations.

 

Insurance

 

The Company currently maintains property and liability insurance intended to cover claims for its real estate and corporate operations.  

 

Employees

 

At December 31, 2020, the Company employed the services of 2 people with the remainder of the work contracted to third parties. The Company believes it maintains good relationships with its employees.  None of the Company’s employees are represented by a collective bargaining group.

 

The Company’s operations are subject to the Fair Labor Standards Act.

 

Management is not aware of any non-compliance by the Company as regards applicable regulatory requirements that would have a material adverse effect on the Company’s financial condition or results of operations.

 

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Available Information

 

The Company maintains an internet website at www.newconceptenergy.com.  The Company has available through the website, free of charge, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed pursuant to Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) and amendments to those reports as soon as rea-sonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission.  In addition, the Company has posted the charters for our Audit Committee, Compensation Committee and Governance and Nominating Committee, as well as our Code of Business Conduct and Ethics, Corporate Governance Guidelines on Director Independence and other information on the website.  These charters and principles are not incorporated in this Report by reference.  The Company will also provide a copy of these documents free of charge to stockholders upon request.  The Company issues Annual Reports containing audited financial statements to its common stockholders.

 

 

 

Item 1A.  Risk Factors

 

Risks Related to the Company

 

During 2020, a strain of coronavirus (“COVID – 19”) was reported worldwide, resulting in decreased economic activity and concerns about the pandemic, which would adversely affect the broader global economy. At this point, the extent to which COVID – 19 may impact the global economy and our business is uncertain, but pandemics or other significant public health events could have a material adverse effect on our business and results of operations.

An investment in our securities involves various risks.  An investor should carefully consider the following risk factors in conjunction with the other information in this report before trading our securities.

 

Our governing documents contain anti-takeover provisions that may make it more difficult for a third party to acquire control of us.  Our Articles of Incorporation contain provisions designed to discourage attempts to acquire control of the Company by a merger, tender offer, proxy contest or removal of incumbent management without the approval of our Board of Directors.  As a result, a transaction which otherwise might appear to be in your best interests as a stockholder could be delayed, deferred or prevented altogether, and you may be deprived of an opportunity to receive a premium for your shares over prevailing market rates.  The provisions contained in our Articles of Incorporation include:

 

the requirement of an 80% vote to make, adopt, alter, amend, change or repeal our Bylaws or certain key provisions of the Articles of Incorporation that embody, among other things, the anti-takeover provisions;

 

the so-called business combination “control act” requirements involving the Company and a person that beneficially owns 10% or more of the outstanding common stock except under certain circumstances; and

 

the requirement of holders of at least 80% of the outstanding Common Stock to join together to request a special meeting of stockholders.

 

 

Item 1B.  Unresolved Staff Comments

 

Not applicable.

 

 

Item 2.  Properties

 

The Company’s principal offices are located at 1603 LBJ Freeway Suite 800, Dallas, Texas 75234.  The Company believes this space is presently suitable, fully utilized and will be adequate for the foreseeable future.

 

 

The Company, owns approximately 190 acres of land located in Parkersburg West Virginia. Located on the land are four structures totaling approximately 53,000 square feet. Of this total area the main industrial / office building contains approximately 24,800 square feet.

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Item 3.  Legal Proceedings

 

The Company has been named as a defendant in lawsuits in the ordinary course of business.  Management is of the opinion that these lawsuits will not have a material effect on the financial condition, results of operations or cash flows of the Company.

 

 

 

PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

The common stock of the Company is listed and traded on the NYSE American using the symbol “GBR”.  The following table sets forth the high and low sales prices as reported in the reporting system of the NYSE American and other published financial sources

 

    2020   2019
                 
      High       Low       High       Low  
First Quarter   $ 1.47     $ 0.55     $ 2.24     $ 1.50  
Second Quarter   $ 1.64     $ 0.64     $ 2.39     $ 1.66  
Third Quarter   $ 2.19     $ 1.27     $ 1.88     $ 1.41  
Fourth Quarter   $ 3.50     $ 1.40     $ 1.47     $ 1.20  

 

On March 31, 2021 the closing price of the Company’s Common Stock was $4.39 per share. The Company’s Common Stock was held by approximately 2,500 holders of record.

 

Dividends

 

The Company paid no dividends on its Common Stock in 2020 or 2019.  The Company has not paid cash dividends on its Common stock during at least the last ten fiscal years and it has been the policy of the Board of Directors of the Company to retain all earnings to pay down debt and finance future expansion and development of its businesses.  The payment of dividends, if any, will be determined by the Board of Directors in the future in light of conditions then existing, including the Company’s financial condition and requirements, future prospects, restrictions in financing agreements, business conditions and other factors deemed relevant by the Board of Directors.

 

Purchases of Equity Securities

 

The Board of Directors has not authorized the repurchase of any shares of its Common Stock under any share repurchase program. However, from time to time in the past, the Company has purchased from stockholders, less than 100 shares on request of such persons to save the cost of commissions. No such purchases were made in 2019 or 2020.

 

 

Item 6.  Selected Financial Data

 

Optional and not included

 

 

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

Overview

 

The Company current operations include leasing its office building located in Parkersburg West Virginia, Its principal source of cash and income is the interest it receives from notes receivables.

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In August 2020 the Company sold its oil and gas wells and mineral leases which were located in Ohio and West Virginia. The oil and operations for the periods included in this report are reflected as discontinued operations.

 

Critical Accounting Policies and Estimates

 

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  Certain of the Company’s accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates.  By their nature, these judgments are subject to an inherent degree of uncertainty.  These judgments and estimates are based upon the Company’s historical experience, current trends and information available from other sources that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

 

Deferred Tax Assets

 

Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.  The future recoverability of the Company’s net deferred tax assets is dependent upon the generation of future taxable income prior to the expiration of the loss carry forwards.  At December 31, 2020, the Company had a deferred tax asset due to tax deductions available to it in future years.  However, as management could not determine that it was more likely than not that the benefit of the deferred tax asset would be realized, a 100% valuation allowance was established.

 

Liquidity and Capital Resources

 

At December 31, 2020, the Company had current assets of $3,802,000 and current liabilities of $164,000.

 

Cash and cash equivalents totaled $27,000 at December 31, 2020 and $22,000 at December 31, 2019.  New Concept’s principal sources of cash are rent from the tenant occupying part of its building in West Virginia and interest from its notes receivable.

 

Results of Operations

 

Fiscal 2020 as compared to 2019

 

Revenues: Total revenues from rent for the leased property was $101,000 in 2020 and $98,000 in 2019.

 

Operating Expenses: Operating expenses for the real estate property was $72,000 in 2020 and $61,000 in 2019. General and administrative expenses were $396,000 in 2020 and 418,000 in 2019.

 

Interest Income: Interest Income was $242,000 in 2020 as compared to $257,000 in 2019. The decrease was due to the reduction in the principal balance outstanding due to payments received.

 

Other Income: Other income was $85,000 in 2020 which is an income tax refund for prior years. Other income was $199,000 in 2019 which is comprised of a gain on sale of equipment of $46,000 and the settlement of a legal claim of $153,000.

 

Discontinued Operations: During the first nine months of 2020 the Company recorded a net loss from its oil and gas operations of $170,000. In August 2020 the Company sold the oil and gas operation and recorded a gain of $2,138,000.

 

Fiscal 2019 as compared to 2018

 

Revenues: Total revenues from rent for the leased property was $98,000 in 2019 and $123,000 in 2018.

 

Operating Expenses: Operating expenses for the real estate property was $61,000 in 2019 and $59,000 in 2018. General and administrative expenses were $418,000 in 2019 and $359,000 in 2018. The increase was principally due to an increase in consulting expenses.

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Interest Income: Interest Income was $257,000 in 2019 as compared to $37,000 in 2018. The increase was due to the interest earned from investing the proceeds from the issuance and sale of common stock in December 2018.

 

Discontinued Operations: The Company recorded a loss from its oil and gas operation of $2,412,000 in 2019 and $219,000 in 2018. The Company recorded an impairment loss from its oil and gas operations of $2,285,000 resulting in an overall loss from the oil and gas operation of $2,412,000.

 

 

Item 7a:  Quantitative and Qualitative Disclosures about Market Risk

 

All of the Company’s debt is financed at fixed rates of interest.  Therefore, the Company has minimal risk from exposure to changes in interest rates.

  

 

Item 8.  Financial Statements

 

The consolidated financial statements required by this Item begin at page 16 of this Report.

  

 

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

 

Item 9A.  Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Based on an evaluation by our management (with the participation of our Principal Executive Officer and Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

 

There has been no change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.  There are inherent limitations to the effectiveness of any system of internal control over financial reporting.  These limitations include the possibility of human error, the circumvention of overriding of the system and reasonable resource constraints.  Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting.  In making this assessment, management used the criteria set forth in Internal Control - Integrated Framework -2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on management’s assessments and those criteria, management has concluded that Company’s internal control over financial reporting was effective as of December 31, 2020.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial report.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

In preparation for management’s report on internal control over financial reporting, we documented and tested the design and operating effectiveness of our internal control over financial reporting.  There were no changes in our internal controls over

8 
 

financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

Item 9B.  Other Information

 

Not applicable.

 

 

PART III

 

 

Item 10.  Directors, Executive Officers and Corporate Governance

 

Directors

 

The affairs of the Company are managed by the Board of Directors.  The directors are elected at the Annual Meeting of Stockholders or appointed by the incumbent Board and serve until the next Annual Meeting of Stockholders, until a successor has been elected or approved, or until earlier resignation, removal or death.

 

It is the Board’s objective that a majority of the Board consists of independent directors.  For a director to be considered “independent”, the Board must determine that the director does not have any direct or indirect material relationship with the Company.  The Board has established guidelines to assist it in determining director independence, which conform to, or are more exacting than, the independence requirements in the NYSE American Stock Exchange listing rules.  The independence guidelines are set forth in the Company’s “Corporate Governance Guidelines”.  The text of this document has been posted on the Company’s internet website at http://www.newconceptenergy.com, and is available in print to any stockholder who requests it.  In addition to applying these guidelines, the Board will consider all relevant facts and circumstances in making an independent determination.

 

The Company has adopted a code of conduct that applies to all directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer.  Stockholders may find our Code of Conduct on our internet website address at http://www.newconceptenergy.com.  We will post any amendments to the Code of Conduct as well as any waivers that are required to be disclosed by the rules of the SEC or the NYSE AMERICAN on our website.

 

Our Board of Directors has adopted charters for our Audit, Compensation and Governance and Nominating Committees of the Board of Directors.  Stockholders may find these documents on our website by going to the website address http://www.newconceptenergy.com. Stockholders may also obtain a printed copy of the materials referred to by contacting us at the following address:

 

New Concept Energy, Inc.

Attn: Investor Relations

1603 LBJ Freeway, Suite 800

Dallas, Texas 75234

972-407-8400 (Telephone)

 

The Audit Committee of the Board of Directors is an “audit committee” for the purposes of Section 3(a) (58) of the Exchange Act.  The members of that Committee are Dan Locklear (Chairman), Raymond D. Roberts, Cecilia Maynard and Victor L. Lund.  Mr. Locklear is qualified as an “audit committee financial expert” within the meaning of SEC regulations and the Board has determined that he has the accounting and related financial management expertise within the meaning of the listing standards of the NYSE American.  All of the members of the Audit Committee meet the independence and experience requirements of the listing standards of the NYSE American.

 

 All members of the Audit Committee, Compensation Committee and the Governance and Nominating Committee must be independent directors.  Members of the Audit Committee must also satisfy additional independence requirements which provide (i) that they may not accept, directly or indirectly, any consulting, advisory or compensatory fee from the Company or any of its subsidiaries other than their director’s compensation (other than in their capacity as a member of the Audit Committee, the Board of Directors or any other Committee of the Board), and (ii) no member of the Audit Committee may be an “affiliated person” of the Company or any of its subsidiaries, as defined by the Securities and Exchange Commission.

 

The current directors of the Company are listed below, together with their ages, terms of service, all positions and offices with the Company, their principal occupations, business experience and directorships with other companies during the last five years or more.  The designation “affiliated”, when used below with respect to a director, means that the director is an officer or employee of the Company or one of its subsidiaries.  The designation “independent”, when used below with respect to a director, means that

9 
 

the director is neither an officer of the Company nor a director, officer or employee of a subsidiary of the Company, although the Company may have certain business or professional relationships with the director as discussed in Item 13. Certain Relationships and Related Transactions. No family relationship exists between any executive officer and any of the directors of the company.

 

Raymond D. Roberts, age 89, (Independent) Director since June 2015

 

Mr. Roberts is currently retired. He is a director of American Realty Investors, Inc. (“ARL”), Transcontinental Realty Investors, Inc. (“TCI”) and Income Opportunity Realty Investors, Inc. (IOR”) ARL and TCI common stock are listed and traded on the New York Stock Exchange and IOR common stock is listed and traded on the NYSE American Exchange. These Companies are affiliated with both Realty Advisors, Inc. and Pillar Income Asset Management. Mr. Roberts is a member of the Governance and Nominating Committee of the Board of Directors of the Registrant.

 

Gene S. Bertcher, age 72, (Affiliated) Director November 1989 to September 1996 and since June 1999

 

Mr. Bertcher was elected President and Chief Financial Officer effective November 1, 2004.  He was elected Chairman and Chief Executive Officer in December 2006.  Mr. Bertcher has been Chief Financial Officer and Treasurer of the Company since November 1989 and Executive Vice President from November 1989 until he was elected President.  Also, Mr. Bertcher was until June 30, 2019 Executive Vice-President and Chief Financial Officer of American Realty Investors, Inc. and Transcontinental Realty Investors, Inc., both of which are traded on the NYSE. Mr. Bertcher is currently Executive Vice-President and Chief Financial Officer Income Opportunity Realty Investors, Inc. which is traded on the NYSE American exchange, positions he has occupied since February 2008. Further Mr. Bertcher as of August 2020 is a Director of Pillar Income Asset Management. He has been a certified public accountant since 1973.  

 

Dan Locklear, age 67, (Independent) Director since December 2003

 

Mr. Locklear has been Chief Financial Officer of Sunridge Management Group, a real estate management company, for more than five years.  Mr. Locklear was formerly employed by Johnstown Management Company, Inc. and Trammel Crow Company.  Mr. Locklear has been a certified public accountant since 1981 and a licensed real estate broker in the State of Texas since 1978.

 

Richard W. Humphrey, age 73, (Affiliated) Director since October 2020

 

 Mr. Humphrey has been, for more than the past five years, Vice President of Regis Realty Prime, LLC, involved in sales and acquisitions of real estate properties. Mr. Humphrey received from Southern Methodist University Cox School of Business both a Bachelors of Business Administration and Masters of Business Administration degree with emphasis in real estate. From 1976 to 1979, he was also a part-time faculty member at Southern Methodist University Cox School of Business in Dallas, teaching real estate classes in undergraduate and graduate school. Regis Realty Prime, LLC and its predecessors are affiliated with Realty Advisors, Inc. ("RAI").

 

Cecilia Maynard, age 68, (Independent) Director since January 2019

 

Ms. Maynard was employed by Pillar Income Asset Management, Inc. (“Pillar”) from January 2011 through December 31, 2018. Pillar is a Nevada corporation which provides management services to other entities. Ms. Maynard has also (since May 31, 2018) been a director, Vice President and Secretary of First Equity Properties, Inc., a Nevada corporation, the common stock of which is registered under Section 12(g) of the Securities Exchange Act of 1934.

 

Board Committees

 

The Board of Directors held four meetings during 2020.  For such year, no incumbent director attended fewer than 75% of the aggregate of (i) the total number of meetings held by the Board during the period for which he or she had been a director, and (ii) the total number of meetings held by all Committees of the Board on which he or she served during the period that he or she served.

 

The Board of Directors has standing Audit, Compensation and Governance and Nominating Committees.  The Audit Committee was formed on December 12, 2003, and its function is to review the Company’s operating and accounting procedures.  A Charter of the Audit Committee has been adopted by the Board.  The current members of the Audit Committee, all of whom are independent within the SEC regulations, the listing standards of the NYSE American and the Company’s Corporate Governance Guidelines are Messrs. Locklear (Chairman), Roberts and Lund.  Mr. Dan Locklear is qualified as an Audit Committee financial expert within the meaning of SEC regulations, and the Board has determined that he has the accounting and related financial management expertise within the meaning of the listing standards of the NYSE American. The Audit Committee met four times in 2020.

 

The Governance and Nominating Committee is responsible for developing and implementing policies and practices relating to the corporate governance, including reviewing and monitoring implementation of the Company’s Corporate Governance

10 
 

Guidelines.  In addition, the Committee develops and reviews background information on candidates for the Board and makes recommendations to the Board regarding such candidates.  The Committee also prepares and supervises the Board’s annual review of director independence and the Board’s performance and self-evaluation. The members of the Committee are Messrs. Lund (Chairman), Roberts and Ms. Maynard. 

 

The Board has also formed a Compensation Committee of the Board of Directors, adopted a Charter for the Compensation Committee on October 20, 2004, The committee members are Mr. Roberts (Chairman) and Messrs. Locklear and Ms. Maynard.

 

The members of the Board of Directors at the date of this Report and the Committees of the Board on which they serve are identified below:

 

Director Audit Committee Governance and Nominating Committee Compensation Committee
Raymond D. Roberts Chairman
Gene S. Bertcher      
Cecilia Maynard Chairman
Dan Locklear Chairman
Richard W. Humphrey      

 

 

Executive Officers

 

The following person currently serves as the sole executive officer of the Company:  Gene S. Bertcher, Chairman of the Board, President, Chief Executive Officer and Treasurer.  His position with the Company is not subject to a vote of stockholders.  His age, term of service and all positions and offices with the Company, other principal occupations, business experience and directorships with other companies during the last five years or more are listed under the caption “Directors” above.

 

In addition to the foregoing officers, the Company has other officers not listed herein who are not considered executive officers.

 

Code of Ethics

 

The Board of Directors has adopted a code of ethics entitled “Code of Business Conduct and Ethics” that applies to all directors, officers and employees of the Company and its subsidiaries.  In addition, the Company has adopted a code of ethics entitled “Code of Ethics for Senior Financial Officers” that applies to the principal executive officer, president, principal financial officer, chief financial officer, principal accounting officer and controller.  The text of these documents is posted on the Company’s internet website address at http://www.newconceptenergy.com and is available in print to any stockholder who requests them.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Based solely upon a review of Forms 3, 4 and 5 furnished to the Company pursuant to Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act“), upon written representations received by the Company, the Company is not aware of any failure by any director, officer or beneficial owner of more than 10% of the Company’s common stock to file with the Securities and Exchange Commission on a timely basis.

 

 

Item 11.  Executive Compensation

 

The following tables set forth the compensation in all categories paid by the Company for services rendered during the fiscal years ended December 31, 2020, 2019 and 2018 by the Chief Executive Officer of the Company and to the other executive officers and Directors of the Company whose total annual salary in 2020 exceeded $50,000.

 

11 
 

 

SUMMARY COMPENSATION TABLE
                                             
                                Change in            
                            Non-   Pension            
                            Equity   Value and            
  Name                         Incentive   Nonqualified   All        
  and                         Plan   Deferred   Other        
  Principal                 Stock   Option   Compen-   Compensation   Compen-        
  Position   Year     Salary   Bonus   Awards   Awards   sation   Earnings   sation     Total  
                                             
 

Gene S. Bertcher (1)

  2020   $ 56,500                           $ 56,500  
  Chairman, President   2019   $ 56,500                           $ 56,500  
  & Chief Financial   2018   $ 53,650                           $ 53,650  
  Officer                                          
                                             
                                             

 

 

(1) The salary in the above table represents Mr. Bertcher’s compensation paid by the Company; he also receives additional compensation for services to three other publicly traded entities which are unrelated to the Company.

 

 

 

 

 

 

 

 

 

GRANTS OF PLAN-BASED AWARDS

 

None

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

None

  

OPTION EXERCISES AND STOCK VESTED

 

None

 

PENSION BENEFITS

 

None

 

NONQUALIFIED DEFERRED COMPENSATION

 

None

 

 

12 
 

 

DIRECTOR COMPENSATION
Name    

Fees Earned

Or Paid in

Cash

   

Stock

Awards

 

Option

Awards

 

Non-Equity

Incentive Plan

Compensation

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

 

All Other

Compensation

    Total  
                                     
                                     
Gene S. Bertcher   $ —                           $ —    
Raymond D. Roberts   $ 10,500                         $ 10,500  
Dan Locklear   $ 10,500                         $ 10,500  
Richard W. Humphrey   $ 4,000                         $ 4,000  
Cecilia Maynard   $ 10,500                         $ 10,500  

 

MANAGEMENT AND CERTAIN SECURITY HOLDERS

 

None

 

Compensation of Directors

 

The Company pays each non-employee director a fee of $2,500 per year, plus a meeting fee of $2,000 for each board meeting attended.  Employee directors serve without compensation.

 

 

Item 12.  Security Ownership of Certain Beneficial Owners

 

The following table sets forth the ownership of the Company’s Common Stock, both beneficially and of record, both individually and in the aggregate, for those persons or entities known by the Company to be the beneficial owners of more than 5% of its outstanding Common Stock as of the close of business on March 31, 2021.

 

Name and Address of

Beneficial Owner

 

Amount and Nature of

Beneficial Ownership

 

Approximate

Percent of Class *

 

Realty Advisors, Inc.

             1,403,354 shares

 

27.34%

 

· based on 5,131,934 shares outstanding at March 31, 2021.

 

Security Ownership of Management

 

The following table sets forth the ownership of the Company’s Common Stock, both beneficially and of record, both individually and in the aggregate for the directors and executive officers of the Company, as of the close of business on March 31, 2021.

 

Name and Address of Beneficial Owner

 

Amount and Nature of Beneficial Ownership*

Approximate Percent of Class**

 

Gene S. Bertcher

 

-

 

0%

 

Raymond Roberts

 

-

 

0%

 

Dan Locklear

 

-

 

0%

 

Richard w. Humphrey

 

-

 

0%

 

Cecilia Maynard

 

-

 

0%

 

All directors and executive officers as a group (5 people)

 

 

-

 

0%

 

13 
 

 

 

* Beneficial Ownership means the sole or shared power to vote, or to direct the voting of, a security or investment power with respect to a security, or any combination thereof.

 

** Percentages are based upon 5,131, 934 shares of Common Stock outstanding at March 31, 2021.

 

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence

 

Beginning in 2011 Pillar became the contractual advisor to three other publically traded entities which are related to Realty Advisors, Inc. (“RAI”) through stock ownership by RAI. In addition the relationship with Mr. Bertcher New Concept conducts business with Pillar whereby Pillar provided the Company with services including processing payroll, acquiring insurance and other administrative matters. The Company believes that by purchasing these services through certain large entities it can get lower costs and better service. Pillar does not charge the Company a fee for providing these services. Pillar is a wholly owned subsidiary of Realty Advisors, Inc.

 

Except as set forth above, the Reporting Persons do not have any contracts, arrangements, understandings or relationships, legal or otherwise, with any person with respect to any securities of the Issuer, including but not limited to, transfer or voting of any of the securities, finders’ fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or losses, or the giving or withholding of proxies.

 

It is the policy of the Company that all transactions between the Company and any officer or director, or any of their affiliates, must be approved by independent members of the Board of Directors of the Company.  All of the transactions described above were so approved.

 

See Item 10. Directors, Executive Officers and Corporate Governance for information on the independence of Directors and the standards of the NYSE American Exchange.

 

Item 14.  Principal Accounting Fees and Services

 

The following table sets forth the aggregate fees for professional services rendered to the Company for the years 2020 and 2019 by the Company’s principal accounting firm Swalm & Associates, P.C.:

 

Type of Fees   2020   2019
Audit Fees   $ 70,250     $ 69,000  
Tax Fees     10,550       9,000  
Total Fees   $ 80,800     $ 78,000  

 

All services rendered by the principal auditors are permissible under applicable laws and regulations and were pre-approved by either of the Board of Directors or the Audit Committee, as required by law.  The fees paid to principal auditors for services described in the above table fall under the categories listed below:

 

Audit Fees: These are fees for professional services performed by the principal auditor for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q filings and services that are normally provided in connection with statutory and regulatory filings or engagements.

 

Audit-Related Fees: These are fees for assurance and related services performed by the principal auditor that are reasonably related to the performance of the audit or review of the Company’s financial statements.  These services include attestation by the principal auditor that is not required by statute or regulation and consulting on financial accounting/reporting standards.

 

Tax Fees: These are fees for professional services performed by the principal auditor with respect to tax compliance, tax planning, tax consultation, returns preparation and reviews of returns.  The review of tax returns includes the Company and its consolidated subsidiaries.

 

All Other Fees: These are fees for other permissible work performed by the principal auditor that does not meet the above category descriptions.

 

14 
 

These services are actively monitored (as to both spending level and work content) by the Audit Committee to maintain the appropriate objectivity and independence in the principal auditor’s core work, which is the audit of the Company’s consolidated financial statements.

 

Financial Information Systems Design and Implementation Fees

 

Swalm & Associates, P.C. did not render professional services to the Company in 2020 with respect to financial information systems design and implementation.

 

Under the Sarbanes-Oxley Act of 2002 (the “SO Act”), and the rules of the Securities and Exchange Commission (the “SEC”), the Audit Committee of the Board of Directors is responsible for the appointment, compensation and oversight of the work of the independent auditor.  The purpose of the provisions of the SO Act and the SEC rules for the Audit Committee’s role in retaining the independent auditor is two-fold.  First, the authority and responsibility for the appointment, compensation and oversight of the auditors should be with directors who are independent of management.  Second, any non-audit work performed by the auditors should be reviewed and approved by these same independent directors to ensure that any non-audit services performed by the auditor do not impair the independence of the independent auditor.  To implement the provisions of the SO Act, the SEC issued rules specifying the types of services that an independent auditor may not provide to its audit client, and governing the Audit Committee’s administration of the engagement of the independent auditor.  As part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that they do not impair the auditor’s independence.  Accordingly, the Audit Committee has adopted a pre-approval policy of audit and non-audit services (the “Policy”), which sets forth the procedures and conditions pursuant to which services to be performed by the independent auditor are to be pre-approved.  Consistent with the SEC rules establishing two different approaches to pre-approving non-prohibited services, the Policy of the Audit Committee covers pre-approval of audit services, audit-related services, international administration tax services, non-U.S. income tax compliance services, pension and benefit plan consulting and compliance services, and U.S. tax compliance and planning.  At the beginning of each fiscal year, the Audit Committee will evaluate other known potential engagements of the independent auditor, including the scope of work proposed to be performed and the proposed fees, and the approve or reject each service, taking into account whether services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management.  Typically, in addition to the generally pre-approved services, other services would include due diligence for an acquisition that may or may not have been known at the beginning of the year.  The Audit Committee has also delegated to any member of the Audit Committee designated by the Board or the financial expert member of the Audit Committee responsibilities to pre-approve services to be performed by the independent auditor not exceeding $25,000 in value or cost per engagement of audit and non-audit services, and such authority may only be exercised when the Audit Committee is not in session.

 

15 
 

 

PART IV

 

 

Item 15.  Exhibits, Financial Statement and Supplementary Schedules

 

 

INDEX TO FINANCIAL STATEMENTS

 

         Page

  FINANCIAL STATEMENTS
  Report of Swalm & Associates, P.C.     21
  Consolidated Balance Sheets 22
  Consolidated Statements of Operations 24
  Consolidated Statements of Cash Flows 25
  Consolidated Statements of Changes in Stockholders’ Equity 26
  Notes to Consolidated Financial Statements 27

 

FINANCIAL STATEMENT SCHEDULES:  Other financial statement schedules have been omitted because they are not required, are not applicable, or the information required is included in the Consolidated Financial Statements or the notes thereto.

 

Item 16. FORM 10-K SUMMARY

Optional and not included herein.

 

16 
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of

New Concept Energy, Inc.

Dallas, Texas

Opinion on the Financial Statements

We have audited the accompanying balance sheets of New Concept Energy, Inc. and Subsidiaries (the Company) as of December 31, 2020 and 2019, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December31, 2020, and the related notes and schedules 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 December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCOAB”) 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 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 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 audits, we are required to obtain and 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. Accordingly, we express no such 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.

 

Transactions with and Balances Due from Related Parties

 

Description of the Matter

 

The Company has significant transactions and balances due from related parties. The Company performs an assessment as to whether substantially all the amounts due under these receivables are deemed probable of collection. When the Company concludes that it is not probable that it will collect amounts, the Company creates an allowance for the amount not probable of collection.

 

Auditing the Company’s collectability assessment is complex due to the judgment involved in the Company’s determination of the collectability of these receivables. The determination involves consideration of the terms of the receivable, whether the receivable is currently performing, and any security for the receivable.

 

 

17 
 

How We addressed the Matter in Our Audit

 

We obtained an understanding of the Company’s controls over related party receivables and their collectability assessment. Our testing included, among other things, confirmation of the receivables, reviewing selected financial information of the related parties, reviewing collections and evaluating transaction documentation. The relevant financial statement accounts are notes and interest receivable from related parties and interest income from related parties.

 

Emphasis of Related Party Transactions

 

As described in the notes to the consolidated financial statements New Concepts Energy, Inc. and Subsidiaries has significant transactions with and balances due from related parties.

 

/s/ Swalm & Associates, P.C.

Swalm & Associates, P.C.

 

We have served as the Company’s auditor since 2008.

Richardson, Texas

March 31, 2021

 

 

 

 

 

 

 

 

18 
 

NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
         
    December 31,
    2020   2019
Assets        
         
Current assets                
Cash and cash equivalents   $ 27     $ 22  
Current portion note receivable (including $ $3,631 and $4,005 in 2020 and 2019 from related parties)     3,683       4,046  
Other current assets     92       —    
Total current assets     3,802       4,068  
                 
Property and equipment, net of depreciation                
Land, buildings and equipment     656       668  
                 
Note Receivable     153       214  
                 
Assets held for sale     —         840  
                 
Total assets   $ 4,611     $ 5,790  
                 
The accompanying notes are an integral part of these consolidated financial statements.

 

 

19 
 
NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
(amounts in thousands, except share amounts)
         
    December 31,
    2020   2019
Liabilities and stockholders' equity                
                 
Current liabilities                
    Accounts payable - trade (including $55 and $180  in 2020 and 2019 due to related parties)   $ 80     $ 226  
    Accrued expenses     32       20  
    Current portion of long term debt     52       44  
Total current liabilities     164       290  
                 
Long-term debt                
    Notes payable less current portion     122       177  
                 
Liabilities of assets held for sale     —         2,914  
                 
Total liabilities     286       3,381  
                 
Stockholders' equity                
 Series B convertible preferred stock, $10 par value, liquidation value                
 of $100 authorized 100 shares, issued and outstanding one share     1       1  
Common stock, $.01 par value; authorized, 100,000,000                
shares; issued and outstanding, 5,131,934 shares                
at December 31, 2020 and 2019     51       51  
    Additional paid-in capital     63,579       63,579  
    Accumulated deficit     (59,306 )     (61,222 )
      4,325       2,409  
                 
Total liabilities & stockholders' equity   $ 4,611     $ 5,790  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements.

 

 

20 
 
NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
             
    Year Ended December 31,
    2020   2019   2018
Revenue            
Rent   $ 101     $ 98     $ 123  
      101       98       123  
                         
Operating expenses                        
Operating Expenses     72       61       59  
Corporate general and administrative     396       418       359  
      468       479       418  
Operating loss     (367 )     (381 )     (295 )
                         
Other income (expense)                        
Interest income (including $226 and $240 for the year ended 2020 and 2019 from related parties)     242       257       37  
Interest expense     (12 )     (15 )     (18 )
Other income (expense), net     85       199       11  
      315       441       30  
                         
Net income (loss) from continuing operations     (52 )     60       (265 )
                         
Net income (loss) from discontinued operations                        
     Gain (loss) from discontinued operations     (170 )     (2,412 )     (219 )
     Gain from Disposal of oil and gas operations     2,138       —         —    
      1,968       (2,412 )     (219 )
                         
Net income (loss) applicable to common shares   $ 1,916     $ (2,352 )   $ (484 )
                         
Net income (loss) per common share-basic and diluted   $ 0.37     $ (0.46 )   $ (0.21 )
                         
Weighted average common and equivalent shares outstanding - basic     5,132       5,132       2,358  
                         
                         
The accompanying notes are an integral part of these consolidated financial statements.

 

 

21 
 
NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
    Year ended December 31,
    2020   2019   2018
Cash flows from operating activities                        
Net income (loss) from continuing operations   $ (52 )   $ 60     $ (265 )
Net income (loss) from discontinued operations   $ 1,968     $ (2,412 )   $ (219 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities                        
         Gain on sale of oil and gas operations     (2,138 )     —         —    
      Depreciation, depletion and amortization     12       18       43  
       Impairment of oil & gas properties     —         2,285       —    
Changes in operating assets and liabilities                        
Other current and non-current assets     (197 )     42       182  
Accounts payable and other liabilities     (128 )     (232 )     (378 )
Net cash provided by (used) in operating activities     (535 )     239       (637 )
Cash flows from investing activities                        
      Note receivables - related party     —         —         (4,000 )
      Proceeds from the sale of discontinued operations     85       —         —    
      Fixed asset addition     —         (68 )     —    
     Collections of note receivable     508       12       40  
Net cash provided by (used) in investing activities     593       (56 )     (3,960 )
Cash flows from financing activities                        
      Payment on notes payable     (53 )     (44 )     (70 )
      Proceeds from the sale of common stock     —         —         4,609  
Net cash provided by (used) in financing activities     (53 )     (44 )     4,539  
Net increase (decrease) in cash and cash equivalents     5       (339 )     (58 )
Cash and cash equivalents at beginning of year     22       361       419  
Cash and cash equivalents at end of year   $ 27     $ 22     $ 361  
Supplemental disclosures of cash flow information                        
Cash paid for interest on notes payable:   $ 15     $ 15     $ 18  
Cash paid for principal on notes payable:   $ 47     $ 44     $ 70  
The accompanying notes are an integral part of these consolidated financial statements.

 

 

22 
 

 

NEW CONCEPT ENERGY, INC AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(amounts in thousands)

 

 

    Series B       Additional   Accum-    
    Preferred stock   Common Stock   paid in   ulated        
    Shares   Amount   Shares   Amount   capital   deficit   Total
Balance at December 31, 2017     1     $ 1       2,037     $ 21     $ 59,000     $ (58,386 )   $ 636  
Isaunce of Common Stock                     3,095     $ 30     $ 4,579             $ 4,609  
Net Income                                             (484 )     (484 )
Balance at December 31, 2018     1       1       5,132     $ 51     $ 63,579       (58,870 )     4,761  
Issuance of Common Stock                                                        
Net Income                                             (2,352 )     (2,352 )
Balance at December 31, 2019     1       1       5,132     $ 51     $ 63,579       (61,222 )     2,409  
Issuance of Common Stock                                                        
Net Income                                             1,916       1,916  
Balance at December 31, 2020     1     $ 1       5,132     $ 51     $ 63,579     $ (59,306 )   $ 4,325  
                                                         
The accompanying notes are an integral part of these consolidated financial statements.

 

 

23 
 

 

New Concept Energy Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2020

 

NOTE A – BUSINESS DESCRIPTION AND PRESENTATION

 

The Company, owns approximately 190 acres of land located in Parkersburg West Virginia. Located on the land are four structures totaling approximately 53,000 square feet. Of this total area the main industrial / office building contains approximately 24,800 square feet of which as of December 31, 2020 approximately 16,000 of industrial area is leased for $101,000 per annum.

 

In August 2020 the Company sold its oil and gas wells and mineral leases which were located in Ohio and West Virginia. The oil and operations for the periods included in this report are reflected as discontinued operations.

 

The Company’s ability to meet current cash obligations relies on cash received from operations and the collection of notes receivable, including a $3.6 million dollar receivable from a related party.

 

 

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows:

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of New Concept Energy, Inc. and its majority-owned subsidiaries (collectively, the “Company”, New Concept or “NCE”) and are prepared on the basis of accounting principles generally accepted in the United States of America “GAAP”.  All significant intercompany transactions and accounts have been eliminated. Certain accounting balances have been reclassified to conform to the current year presentation.

 

Depreciation

 

Depreciation is provided for in amounts sufficient to relate the cost of property and equipment to operations over their estimated service lives, ranging from 3 to 40 years. Depreciation is computed by the straight-line method.

 

Depreciation expense, which is included in operations, was $12,000, $18,000 and $43,000 for 2020, 2019 and 2018, respectively.

 

Segments

 

The Company operates one primary business segment: real estate rental.  Segment data is provided in “Note J” to these consolidated financial statements.

 

On August 31, 2020 the Company sold its oil and gas segment which is now reflected as Discontinued Operations.

 

Accounting for Leases

 

Leases of property, plant and equipment where the Company assumes substantially all the benefits and risks of ownership are classified as finance leases. Finance leases are capitalized at the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance charge is charged to the income statement over the lease period. Property, plant and equipment acquired under finance leasing contracts are depreciated over the useful life of the asset.

24 
 

 

Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.  When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place.

 

Revenue Recognition

 

Rental income for property leases are recorded when due from the tenant and is recognized monthly as it is earned.

 

Use of Estimates

 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Cash Equivalents

 

The Company considers all short-term deposits and money market investments with a maturity of less than three months to be cash equivalents.

 

Impairment of Notes Receivable

 

Notes receivable are identified as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the note agreements.  The accrual of interest is discontinued on such notes, and no income is recognized until all past due amounts of principal and interest are recovered in full.

 

Impairment of Long-Lived Assets

 

The Company reviews its long-lived assets and certain identifiable intangibles for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  In reviewing recoverability, the Company estimates the future cash flows expected to result from use of the assets and eventually disposing of them.  If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based on the asset’s fair value.

 

The Company determines the fair value of assets to be disposed of and records the asset at the lower of fair value less disposal costs or carrying value. Assets are not depreciated while held for disposal.

 

Sales of Real Estate

 

Gains on sales of real estate are recognized to the extent permitted by Accounting Standards Codification Topic 360-20, “Real Estate Sales – Real Estate Sales”, (“ASC 360-20”). Until the requirements of ASC 360-20 have been met for full profit recognition, sales are accounted for by the installment or cost recovery method, whichever is appropriate.

 

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification, (“ASC”) No. 740, “Accounting for Income Taxes”. ASC 740 requires an asset and liability approach to financial accounting for income taxes. In the event differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities result in deferred tax assets, ASC 740 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance is provided for a portion or all of the deferred tax assets when there is an uncertainty regarding the Company’s ability to recognize the benefits of the assets in future years. Recognition of the benefits of deferred tax assets will require the Company to generate future taxable income. There is no assurance that the Company will generate earnings in future years. Since management could not determine the likelihood that the benefit of the deferred tax asset would be realized, no deferred tax asset was recognized by the Company.

 

 

 

25 
 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12. Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions from ASC 740. Also, the amendments in this Update simplify the accounting for income tax by requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax, requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination, and other targeted changes. The effective date of the amendments is for fiscal years, and interim periods within those years, beginning after December 15, 2020. The adoption of the standard on January 1, 2020, did not have a material impact on our financial position and results of operations.

 

 

NOTE C– RELATED PARTIES

 

Commencing in February 2008, three publicly traded entities needed a chief financial officer, American Realty Investors, Inc. (“ARL”), Transcontinental Realty Investors, Inc. (“TCI”) and Income Opportunity Realty Investors, Inc. (“IOR”), Mr. Bertcher, is a certified public accountant and has a long history in their industry. New Concept made arrangements with the three entities whereby, in addition to his responsibilities to New Concept Mr. Bertcher would be Chief Financial Officer for the three entities. Mr. Bertcher was paid directly for such services by the contractual advisor for the three companies. Mr. Bertcher resigned as an officer of American Realty Investors, Inc. (“ARI”) and Transcontinental Realty Investors, Inc. (“TCI”) on June 30, 2019, but continued on as an officer of Income Opportunity Realty Investors, Inc. (“IOR”).

 

Beginning in 2011 Pillar Income Asset Management (“Pillar”) became the contractual advisor to the three publically traded entities. Pillar is a wholly owned subsidiary of RAI. In addition to the relationship with Mr. Bertcher, New Concept conducts business with Pillar whereby Pillar provided the Company with services including processing payroll, acquiring insurance and other administrative matters. The Company believes that by purchasing these services through certain large entities it can get lower costs and better service. Pillar does not charge the Company a fee for providing these services. The Company reimburses Pillar for the direct cost for such services.

 

Realty Advisors, Inc., (“RAI”) is a privately owned investment company and by virtue of its stock ownership, the controlling shareholder for the three public entities. Mr. Bertcher was an officer of RAI until June 30, 2019.

 

 

NOTE D – DISCONTINUED OPERATIONS

 

On August 31, 2020, the Company sold its entire oil and gas operation for $85,000 to an independent third party. In prior years the Company accrued a liability of $2,745,000 to plug and abandon the existing wells. This obligation was assumed by the buyer. Upon the sale of the wells the Company recorded a gain on sale of $2,138,000.

 

Also included in discontinued operations are net operating expenses the Company incurred during the period presented. For the years ended December 31, 2020, 2019 and 2018 the Company recorded operating losses of $170,000, $2,412,000 and $219,000. In September 2019 the Company wrote down the accounting value of its oil and gas reserves by $2,285,000.

 

26 
 

 

NOTE E – NOTES RECEIVABLE

 

Notes Receivable are comprised of the following (in thousands):

 

      Interest              
      Rate   2020   2019
 American Realty Investors, Inc. (a related party) receivable upon maturity                        
 in September 2021     6%   $ 3,631     $ 4,005  
 Third Party receivable payable monthly and  matures in July 2025     6%     205       255  
            3,836       4,260  
 less: current portion of notes receivable           3,683       4,046  
 Notes Receivable         $ 153     $ 214  

 

The Company holds a note receivable from a non related party. The original note was $415,000 payable in 120 monthly payments at 6% interest. Balance due at December 31, 2020 is $205,000 with $52,000 due currently.

 

 

NOTE F – FIXED ASSETS

 

Land, building and furniture, fixtures and equitpment are recorded at cost incurred to acquire the assets.

At December 31, 2020, fixed assets are as follows:

 

    2020   2019
 Land and improvements   $ 432     $ 432  
 Buildings and improvements     341       341  
 Total fixed assets     773       773  
 Less:  Accumulated depreciation     (117 )     (105 )
 Net Fixed Assets   $ 656     $ 668  

 

 

NOTE G – NOTES PAYABLE

 

Notes payable is comprised of the following (in thousands):

 

    2020   2019
         
Bank Debt   $ 192     $ 245  
Less current portion of long term debt   $ (52 )   $ (44 )
    $ 140     $ 201  
Less deferred borrowing costs - net of amortization   $ (18 )   $ (24 )
    $ 122     $ 177  

 

27 
 

 

Bank debt represent loan from a bank to finance drilling and equipment at the Company’s oil and gas operation. The interest rate ranges from 5% to 5 ½ %. The loans are collateralized by the Company’s oil & gas leases as well as real property

and equipment.

 

Aggregate annual principal maturities of long-term debt at December 31, 2020 are as follows (in thousands):

 

  2021       52  
  2022       55  
  2023       58  
  2024       27  
        $ 192  

 

 

NOTE H – INCOME TAXES

 

At December 31, 2020, the Company had net operating loss carry forwards of approximately $8.5 million, which expire between 2021 and 2036.

 

Forms 1120, U.S, Corporation Income Tax Returns, for the years ending December 31, 2020, 2019, 2018 are subject to examination, by the IRS, generally for three years after they are filed.

 

The following table presents the principal reasons for the difference between the Company's effective tax rate and the United States statutory income tax rate.

 

    2020   2019   2018
Earned income tax at statutory rate   $ —       $ —       $ —    
Net operating loss utilization     —         —         —    
Deferred tax asset from NOL carry forwards     1,786       2,200       2,183  
Valuation allowance     (1,786 )     (2,200 )     (2,183 )
Reported income tax expense (benefit)   $ 0     $ 0     $ 0  
                         
Effective income tax rate     0.00 %     0.00 %     0.00 %

 

 

28 
 

 

NOTE I – STOCKHOLDERS’ EQUITY

 

Outstanding Preferred Stock

 

Preferred stock consists of the following (amounts in thousands):

 

    Year Ended
    December 31,
    2020   2019
Series B convertible preferred stock, $10 par value, liquidation value of
$100, authorized 100 shares, issued and outstanding one share
    1       1  

 

 

The Series B preferred stock has a liquidation value of $100 per share. The right to convert expired April 30, 2003.  Dividends at a rate of 6% are payable in cash or preferred shares at the option of the Company.

 

 

NOTE J – CONTINGENCIES

 

The Company has been named as a defendant in lawsuits in the ordinary course of business. Management is of the opinion that these lawsuits will not have a material effect on the financial condition, results of operations or cash flows of the Company.

 

 

NOTE K – OPERATING SEGMENTS

 

The following table reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations and assets from continuing operations:

 

 

29 
 

 

Year ended December 31, 2020   Current Operations   Corporate    Total   Discontinued Operations Oil & Gas
                 
                 
Operating revenue    $            101    $               -       $         101    $                  225
                 
Operating expenses                    60                   390               450                        395
Depreciation, depletion and amortization                    12                       6                 18                           -   
Impairment of oil and gas properties                     -                        -                     -                              -   
Total Operating Expenses                    72                   396               468                        395
Interest income                     -                      242               242                           -   
Interest expense                     -                      (12)               (12)                           -   
Gain in sale of oil & gas operations                     -                        -                     -                        2,138
Other income (expense), net                     -                        85                 85                           -   
Segment operating income (loss)    $              29    $             (81)    $         (52)    $               1,968
                 

 

Year ended December 31, 2019   Current Operations   Corporate    Total   Discontinued Operations Oil & Gas
                 
                 
Operating revenue    $              98    $               -       $           98    $                  492
                 
Operating expenses                    50                   412               462                        550
Depreciation, depletion and amortization                    11                       6                 17                          69
Impairment of oil and gas properties                     -                        -                     -                        2,285
Total Operating Expenses                    61                   418               479                     2,904
Interest income                     -                      257               257                           -   
Interest expense                     -                      (15)               (15)                           -   
Other income (expense), net                     -                      199               199                           -   
Segment operating income (loss)    $              37    $               23    $           60    $             (2,412)
                 

 

Year ended December 31, 2018   Current Operations   Corporate    Total   Discontinued Operations Oil & Gas
                 
                 
Operating revenue    $            123    $               -       $         123    $                  559
                 
Operating expenses                    50                   353               403                        540
Depreciation, depletion and amortization                      9                       6                 15                        238
Impairment of oil and gas properties                     -                        -                     -                              -   
Total Operating Expenses                    59                   359               418                        778
Interest income                     -                        37                 37                           -   
Interest expense                     -                      (18)               (18)                           -   
Other income (expense), net                     -                        11                 11                           -   
Segment operating income (loss)    $              64    $           (329)    $       (265)    $                (219)

 

 

30 
 

 

NOTE L - QUARTERLY DATA (UNAUDITED)

 

The table below reflects the Company’s selected quarterly information for the years ended December 31, 2020, 2017 and 2016.  Amounts shown are in thousands except per share amounts.

 

  First   Second   Third   Fourth
Year ended December 31, 2020 Quarter   Quarter   Quarter   Quarter
               
Revenue   $            25    $                25    $                25    $                26
Operating (expense)               (18)                     (18)                     (18)                     (18)
Corporate general and administrative expense             (104)                   (127)                     (65)                   (100)
Other income (expense) net                 60                      60                    137                      58
Income (loss) allocable to common shareholders               (97)                   (137)                 2,182                     (32)
Income (loss) per common share – basic ($0.02)   ($0.03)   $0.43   $0.00
               

 

  First   Second   Third   Fourth
Year ended December 31, 2019 Quarter   Quarter   Quarter   Quarter
               
Revenue   $            24    $                24    $                25    $                25
Operating (expense)               (15)                     (15)                     (15)                     (16)
Corporate general and administrative expense               (88)                   (134)                     (92)                   (104)
Other income (expense) net                 60                    213                    106                      62
Income (loss) allocable to common shareholders              126                   (141)                (2,320)                     (17)
Income (loss) per common share – basic $0.02   ($0.03)   ($0.45)   $0.00
               

 

  First   Second   Third   Fourth
Year ended December 31, 2018 Quarter   Quarter   Quarter   Quarter
               
Revenue   $            37    $                36    $                25    $                25
Operating (expense)               (15)                     (15)                     (15)   (14)
Corporate general and administrative expense               (75)                   (108)                     (99)                     (77)
Other income (expense) net                   5                        5                        5   15
Income (loss) allocable to common shareholders  $         (134)    $             (174)    $             (121)    $                 (4)
Income (loss) per common share – basic ($0.07)   ($0.08)   ($0.06)   $0.00

 

 

31 
 

 

NOTE M: LIQUIDITY

 

The Company’s ability to meet current cash obligations relies in cash received from operations and the collection of notes receivable, including a $3.6 million dollar receivable from a related party.

 

 

NOTE N – SUBSEQUENT EVENTS

 

During 2021, a strain of coronavirus (“COVID – 19”) was reported worldwide, resulting in decreased economic activity and concerns about the pandemic, which would adversely affect the broader global economy. At this point, the extent to which COVID – 19 may impact the global economy and our business is uncertain, but pandemics or other significant public health events could have a material adverse effect on our business and results of operations.

The Company has evaluated subsequent events through March 31, 2021, the date the financial statements were available to be issued, and has determined that there are none to be reported. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following documents are filed as exhibits (or are incorporated by reference as indicated) into this Report:

 

32 
 

 

Exhibit Designation Exhibit Description
3.1 Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit 3.1 to Registrant’s Form S-4 Registration Statement No. 333-55968 dated December 21, 1992)
3.2 Amendment to the Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit 3.5 to Registrant’s Form 8-K dated April 1, 1993)
3.3 Restated Articles of Incorporation of Greenbriar Corporation (incorporated by reference to Exhibit 3.1.1 to Registrant’s Form 10-K dated December 31, 1995)
3.4 Amendment to the Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit to Registrant’s PRES 14-C dated February 27, 1996)
3.5 Certificate of Decrease in Authorized and Issued Shares effective November 30, 2001 (incorporated by reference to Exhibit 2.1.7 to Registrant’s Form 10-K dated December 31, 2002)
3.6 Certificate of Designations, Preferences and Rights of Preferred Stock dated May 7, 1993 relating to Registrant’s Series B Preferred Stock (incorporated by reference to Exhibit 4.1.2 to Registrant’s Form S-3 Registration Statement No. 333-64840 dated June 22, 1993)
3.7 Certificate of Voting Powers, Designations, Preferences and Rights of Registrant’s Series F Senior Convertible Preferred Stock dated December 31, 1997 (incorporated by reference to Exhibit 2.2.2 of Registrant’s Form 10-KSB for the fiscal year ended December 31, 1997)
3.8 Certificate of Voting Powers, Designations, Preferences and Rights of Registrant’s Series G Senior Non-Voting Convertible Preferred Stock dated December 31, 1997 (incorporated by reference to Exhibit 2.2.3 of Registrant’s Form 10-KSB for the fiscal year ended December 31, 1997)
3.9 Certificate of Designations dated October 12, 2004 as filed with the Secretary of State of Nevada on October 13, 2004 (incorporated by reference to Exhibit 3.4 of Registrant’s Current Report on Form 8-K for event occurring October 12, 2004)
3.10 Certificate of Amendment to Articles of Incorporation effective February 8, 2005 (incorporated by reference to Exhibit 3.5 of Registrant’s Current Report on Form 8-K for event occurring February 8, 2005)
3.11 Certificate of Amendment to Articles of Incorporation effective March 21, 2007 (incorporated by reference to Exhibit 3.13 of Registrant’s Current Report on Form 8-K for event occurring March 21, 2005)
3.12 Amended and restated bylaws of New Concept Energy, Inc. dated November 18, 2008.
10.1 Registrant’s 1997 Stock Option Plan (filed as Exhibit 4.1 to Registrant’s Form S-8 Registration Statement, Registration No. 333-33985 and incorporated herein by this reference).
 10.2 Registrant’s 2000 Stock Option Plan (filed as Exhibit 4.1 to Registrant’s Form S-8 Registration Statement, Registration No. 333-50868 and incorporated herein by this reference)
14.0 Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14.0 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003)
21.1* Subsidiaries of the Registrant
31.1* Rule 13a-14(a) Certification by Principal Executive Officer and Chief Financial Officer
32.1* Certification of Principal Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1* Reserve Study dated March 16, 2015 prepared by Lee Keeling and Associates, Inc is included as an exhibit
99.2 Shared Services Agreement effective December 31, 2010 (incorporated by reference to Exhibit 99.2 to Registrants Form 10K/A for the year ended December 31, 2011 filed March 21, 2013)
101 Interactive data files pursuant to Rule 405 of Regulation S-T
 
*Filed herewith.
 
     

 

33 
 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  NEW CONCEPT ENERGY, INC.
   
March 31, 2021 By: /s/ Gene S. Bertcher
  Gene S. Bertcher, Principal Executive
  Officer, President and Chief Financial Officer

    

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.

 

 

Signature Title Date

/s/ Gene S. Bertcher

Gene S. Bertcher

Chairman, President, Principal Executive Officer, Chief Financial Officer and Director March 31, 2021

/s/ Raymond D Roberts

Raymond D Roberts

Director March 31, 2021

/s/ Victor L. Lund

Victor L. Lund

Director March 31, 2021

/s/ Dan Locklear

Dan Locklear

Director March 31, 2021

/s/ Cecilia Maynard

Cecilia Maynard

Director March 31, 2021

 

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