Item 1. Financial Statements
NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
(amounts in thousands)
|
|
|
|
|
March 31, 2021
|
|
|
|
December 31, 2020
|
|
Assets
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
43
|
|
|
$
|
27
|
|
Current portion note receivable (including $3,584 and $3,631 in 2021 and 2020 from related parties)
|
|
|
3,636
|
|
|
|
3,683
|
|
Other current assets
|
|
|
220
|
|
|
|
92
|
|
Total current assets
|
|
|
3,899
|
|
|
|
3,802
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation
|
|
|
|
|
|
|
|
|
Land, buildings and equipment
|
|
|
653
|
|
|
|
656
|
|
|
|
|
|
|
|
|
|
|
Note Receivable
|
|
|
145
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,697
|
|
|
$
|
4,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS - CONTINUED
|
(dollars in thousands, except par value amount)
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
December 31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable - (including $80 and $55 due to related parties in 2021 and 2020)
|
|
$
|
108
|
|
|
$
|
80
|
|
Accrued expenses
|
|
|
18
|
|
|
|
32
|
|
Current portion of long term debt
|
|
|
52
|
|
|
|
52
|
|
Total current liabilities
|
|
|
178
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
Notes payable less current portion
|
|
|
115
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
293
|
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Preferred stock, Series B
|
|
|
1
|
|
|
|
1
|
|
Common stock, $.01 par value; authorized, 100,000,000
|
|
|
|
|
|
|
|
|
shares; issued and outstanding, 5,131,934 and 2,036,935 shares
|
|
|
|
|
|
|
|
|
at March 31, 2021 and December 31, 2020
|
|
|
51
|
|
|
|
51
|
|
Additional paid-in capital
|
|
|
63,579
|
|
|
|
63,579
|
|
Accumulated deficit
|
|
|
(59,227
|
)
|
|
|
(59,306
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
4,404
|
|
|
|
4,325
|
|
|
|
|
|
|
|
|
|
|
Total liabilities & equity
|
|
$
|
4,697
|
|
|
$
|
4,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
|
CONSOLIDATED STATEMENT OF OPERATIONS
|
(unaudited)
|
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
For the Three Months ended
March 31,
|
|
|
2021
|
|
2020
|
Revenue
|
|
|
|
|
Rent
|
|
$
|
26
|
|
|
$
|
26
|
|
Total Revenues
|
|
|
26
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
18
|
|
|
|
16
|
|
Corporate general and administrative
|
|
|
74
|
|
|
|
104
|
|
Total Operating Expenses
|
|
|
92
|
|
|
|
120
|
|
Operating earnings (loss)
|
|
|
(66
|
)
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest income (including $52 and $60 for the three months ended 2021 and 2020 from related parties)
|
|
|
56
|
|
|
|
64
|
|
Interest expense
|
|
|
(2
|
)
|
|
|
(4
|
)
|
Other income (expense), net
|
|
|
91
|
|
|
|
—
|
|
|
|
|
145
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
79
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued operations
|
|
|
—
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) applicaable to common shares
|
|
|
79
|
|
|
|
(97
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share-basic and diluted
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and equivalent shares outstanding - basic
|
|
|
5,132
|
|
|
|
5,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
(amounts in thousands)
|
|
|
For the Three Months Ended
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
79
|
|
|
$
|
(97
|
)
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
3
|
|
|
|
3
|
|
Other current and non-current assets
|
|
|
(73
|
)
|
|
|
45
|
|
Accounts payable and other liabilities
|
|
|
16
|
|
|
|
32
|
|
Net cash provided by (used) in operating activities
|
|
|
25
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Payment on notes payable
|
|
|
(9
|
)
|
|
|
(12
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(9
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
16
|
|
|
|
(29
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
27
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
43
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest on notes payable
|
|
$
|
3
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B
|
|
Common Stock
|
|
Additional
|
|
Accum-
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
paid in
|
|
ulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
capital
|
|
deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
1
|
|
|
|
1
|
|
|
|
5,132
|
|
|
$
|
51
|
|
|
$
|
63,579
|
|
|
|
(59,306
|
)
|
|
|
4,325
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
79
|
|
Balance at March 31, 2021
|
|
|
1
|
|
|
$
|
1
|
|
|
|
5,132
|
|
|
$
|
51
|
|
|
$
|
63,579
|
|
|
$
|
(59,227
|
)
|
|
$
|
4,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
1
|
|
|
|
1
|
|
|
|
5,132
|
|
|
$
|
51
|
|
|
$
|
63,579
|
|
|
|
(61,222
|
)
|
|
|
2,409
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
126
|
|
Balance at March 31, 2020
|
|
|
1
|
|
|
$
|
1
|
|
|
|
5,132
|
|
|
$
|
51
|
|
|
$
|
63,579
|
|
|
$
|
(61,319
|
)
|
|
$
|
2,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
NOTE A: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of New Concept Energy, Inc. and its majority-owned subsidiaries (collectively, “NCE” or the “Company”). All
significant intercompany transactions and accounts have been eliminated. Certain reclassifications have been made to the prior
year revenue and operating expense amounts in the statement of operations to conform to the current year presentation.
The unaudited financial statements included herein have been prepared by
the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments
are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented
not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included
in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been
condensed or omitted pursuant to such rules and regulations.
The Company’s ability to meet current cash obligations relies on cash received
from current operations and the collection of notes receivable and interest thereon. The Company is evaluating business opportunities
to provide both additional income and cash flow.
These financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ending December
31, 2020. Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results that
may be expected for any subsequent quarter or for the fiscal year ending December 31, 2021.
NOTE B: NATURE OF 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 approximately 16,000 square feet is leased at a rate of $101,000 per annum.
NOTE C: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
We consider accounting policies related to our estimates of depreciation,
amortization, leases, and revenue recognition for real estate operations, impairment, and sales of real estate as significant accounting
policies. The policies include significant estimates made by management using information available at the time the estimates
are made. However, these estimates could change materially if different information or assumptions were used. These
policies are summarized in our Annual Report on Form 10-K for the year ended December 31, 2020.
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 has 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 of $2,138,000.
Also included in discontinued operations are net operating expenses the Company incurred during the period presented. For the three months ended March 31, 2020 the Company recorded operating losses of $63,000 from the oil and gas operation.
NOTE E: CONTINGENCIES
During 2020 and 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 will 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.
NOTE F: SUBSEQUENT EVENTS
The Company has evaluated subsequent events through May 13, 2021, the date
the financial statements were available to be issued, and determined that there are none to be reported.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of 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.
The Company’s significant accounting policies are summarized in
Note B to our consolidated financial statements in our annual report on Form 10-K. The Company believes the following critical
accounting policies are more significant to the judgments and estimates used in the preparation of its consolidated financial statements. Revisions
in such estimates are recorded in the period in which the facts that give rise to the revisions become known.
Doubtful Accounts
The Company’s allowance for doubtful accounts receivable and notes
receivable is based on an analysis of the risk of loss on specific accounts. The analysis places particular emphasis on past
due accounts. Management considers such information as the nature and age of the receivable, the payment history of the tenant,
customer or other debtor and the financial condition of the tenant or other debtor. Management’s estimate of the required
allowance, which is reviewed on a quarterly basis, is subject to revision as these factors change.
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 March 31, 2021, 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 March 31, 2021, the Company had current assets of $3,899, 000 and current
liabilities of $178, 000.
Cash and cash equivalents at March 31, 2021 were $43,000 as compared to
$27,000 at December 31, 2020.
Net cash provided by operating activities was $25,000 for the three months
ended March 31, 2021.
Net cash used in financing activities was $9,000 for the three months ended
March 31, 2021, consisting of the repayments of loans to a bank.
Results of Operations
Comparison of the three months ended March 31, 2021 to the same period
in 2020
The Company reported net income from continuing operations of $79,000 for
three months ended March 31, 2021, as compared to a net loss of ($34, 000) for the similar period in 2020.
For the three months ended March 31, 2021, corporate general & administrative
expenses were $74,000 as compared to $104,000 for the comparable periods in 2020. The decrease was due, for the most
part, to consulting fees paid by the Company regarding oil and gas matters in 2020 that were not incurred in 2021.
For the three months ended March 31, 2021 the Company recorded a tax refund
from prior years of $91,000.
For the three months ended March 31, 2020 the Company recorded a loss from
discontinued operations of $63,000 for the oil and gas operations that were sold in August 2020.
Forward Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation
Reform Act of 1995: A number of the matters and subject areas discussed in this filing that are not historical or current facts
deal with potential future circumstances, operations and prospects. The discussion of such matters and subject areas is qualified
by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from the Company’s
actual future experience involving any one or more of such matters and subject areas relating to interest rate fluctuations, the ability
to obtain adequate debt and equity financing, demand, pricing, competition, construction, licensing, permitting, construction delays on
new developments, contractual and licensure, and other delays on the disposition, transition, or restructuring of currently or previously
owned, leased or managed properties in the Company’s portfolio, and the ability of the Company to continue managing its costs and
cash flow while maintaining high occupancy rates and market rate charges in its retirement community. The Company has attempted
to identify, in context, certain of the factors that it currently believes may cause actual future experience and results to differ from
the Company’s current expectations regarding the relevant matter of subject area. These and other risks and uncertainties
are detailed in the Company’s reports filed with the Securities and Exchange Commission (“SEC”), including the Company’s
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
Inflation
The Company’s principal source of revenue is rents from a retirement
community and fees for services rendered. The real estate operation is affected by rental rates that are highly dependent upon
market conditions and the competitive environment in the areas where the property is located. Compensation to employees and
maintenance are the principal cost elements relative to the operation of this property. Although the Company has not historically
experienced any adverse effects of inflation on salaries or other operating expenses, there can be no assurance that such trends will
continue or that, should inflationary pressures arise, the Company will be able to offset such costs by increasing rental rates in its
real estate operation.
Environmental Matters
The Company has conducted environmental assessments on most of its existing
owned or leased properties. These assessments have not revealed any environmental liability that the Company believes would
have a material adverse effect on the Company’s business, assets or results of operations. The Company is not aware of
any such environmental liability. The Company believes that all of its properties are in compliance in all material respects
with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products. The
Company has not been notified by any governmental authority and is not otherwise aware of any material non-compliance, liability or claim
relating to hazardous or toxic substances or petroleum products in connection with any of its communities.