New Concept Energy, Inc. - FORM 10-Q

Attached files

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EX-31.1 - New Concept Energy, Inc.	nce10qex311063015.htm
EX-32.1 - New Concept Energy, Inc.	nce10qex321063015.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED JUNE 30, 2015

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

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: R No: Ј

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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: R No Ј

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

	Large accelerated filer £	Accelerated filer £
	Non-accelerated filer £	Smaller reporting company R

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: £No: R

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Common Stock, $.01 par value	1,946,934 shares
(Class)	(Outstanding at August 13, 2015)

NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES

Index to Quarterly Report on Form 10-Q

Period ended June 30, 2015

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements	3
Consolidated Balance Sheets	3
Consolidated Statements of Operations	5
Consolidated Statements of Cash Flows	6
Notes To Consolidated Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3. Quantitative and Qualitative Disclosures About Market Risk	13

Item 4. Controls and Procedures	13

PART II: OTHER INFORMATION	14

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 6. Exhibits	15

Signatures	16

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(amounts in thousands)
	June 30, 2015		December 31, 2014

Assets

Current assets
Cash and cash equivalents	$	437	$	300
Accounts receivable from oil and gas sales		137		216
Other current assets		362		182
Total current assets		936		698


Oil and natural gas properties (full cost accounting method)
Proved developed and undeveloped oil and gas properties, net of depletion		8,776		8,809

Property and equipment, net of depreciation
Land, buildings and equipment - oil and gas operations		845		1,476
Other		152		162
Total property and equipment		997		1,638

Other assets (including $124 due from related parties in 2014)		1,275		1,129

Total assets	$	11,984	$	12,274

The accompanying notes are an integral part of these consolidated financial statements.

NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
(unaudited)
(amounts in thousands, except share amounts)

	June 30, 2015			December 31, 2014

Liabilities and stockholders' equity

Current liabilities
Accounts payable (includes $494 due to related parties in 2014)	$	165		$	673
Accrued expenses		252			229
Current portion of long term debt		775			881
Total current liabilities		1,192			1,783

Long-term debt
Notes payable less current portion		1,305			1,428
Asset retirement obligation		2,770			2,770
Total liabilities		5,267			5,981

Stockholders' equity
Preferred stock, Series B		1			1
Common stock, $.01 par value; authorized, 100,000,000
shares; issued and outstanding, 1,946,935 shares
at June 30, 2015 and December 31, 2014		20			20
Additional paid-in capital		58,838			58,838
Accumulated deficit		(52,142	)		(52,566	)

		6,717			6,293

Total liabilities & equity	$	11,984		$	12,274

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 June 30,						For the Six Months ended June 30,
	2015			2014			2015			2014
Revenue
Oil and gas operations, net of royalties	$	259		$	485		$	431		$	829
Real estate operations		744			728			1,461			1,453
		1,003			1,213			1,892			2,282


Operating expenses
Oil and gas operations		440			425			910			908
Real estate operations		415			387			825			783
Real Estate - Lease Expense		245			241			490			481
Corporate general and administrative		155			205			309			397
		1,255			1,258			2,534			2,569
Operating earnings (loss)		(252	)		(45	)		(642	)		(287	)


Other income (expense)
Interest income		-			1			-			2
Interest expense		(16	)		(22	)		(42	)		(53	)
Recovery of bad debt expense		386			-			1,124			-
Other income (expense)		(8	)		(33	)		(16	)		199
		362			(54	)		1066			148


Net income (loss) applicable to common shares	$	110		$	(99	)	$	424		$	(139	)

Net income (loss) per common share-basic and diluted	$	0.06		$	(0.05	)	$	0.22		$	(0.07	)


Weighted average common and equivalent shares outstanding - basic		1,947			1,947			1,947			1,947

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 Six Months Ended
	June 30,
	2015			2014


Cash flows from operating activities
Net income (loss)	$	424		$	(139	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation, depletion and amortization		333			338
Write-off (recovery) of affiliate receivable		(1,124	)		-
Changes in operating assets and liabilities
Other current and non-current assets		68			(121	)
Accounts payable and other liabilities		639			(598	)
Net cash provided by (used) in operating activities		340			(520	)

Cash flows from investing activities
Investment in oil and gas		(191	)		(21	)
Fixed asset additions		(21	)		(156	)
Cash portion from the sale of land		116			-
Repayment of loans from affiliates		126			128
Real estate held for investment		-			(631	)
Net cash provided by (used in) investing activities		30			(680	)

Cash flows from financing activities

Payment on notes payable		(233	)		(120	)
Net cash provided by (used in) financing activities		(233	)		(120	)


Net increase (decrease) in cash and cash equivalents		137			(1,320	)
Cash and cash equivalents at beginning of year		300			1,620

Cash and cash equivalents at end of year	$	437		$	300

Supplemental disclosures of cash flow information
Cash paid for interest on notes payable	$	42		$	53
Cash paid for principal on notes payable	$	234		$	120
Non Cash Portion of the Sale of Land	$	415			-

he 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.

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.

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, 2014. Operating results for the six month period ended June 30, 2015 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2015.

NOTE B: NATURE OF OPERATIONS

The Company operates oil and gas wells and mineral leases in Athens and Meigs Counties in Ohio and in Calhoun, Jackson and Roane Counties in West Virginia through its wholly owned subsidiaries Mountaineer State Energy, LLC and Mountaineer State Operations, LLC.

The Company also leases and operates a retirement community in King City Oregon, with a capacity of 114 residents.

NOTE C: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We consider accounting policies related to our estimates of depreciation amortization and depletion, segments, oil and gas properties, oil and gas reserves, gas gathering assets, office and field equipment, revenue recognition and gas imbalances, leases, 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, 2014.

NOTE D: OIL AND GAS RESERVES

The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas properties (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred.

The full cost method requires the Company to calculate quarterly, by cost center, a “ceiling,” or limitation on the amount of properties that can be capitalized on the balance sheet. To the extent capitalized costs of oil and natural gas properties, less accumulated depletion and related deferred taxes exceed the sum of the discounted future net revenues of proved oil and natural gas reserves, the lower of cost or estimated fair value of unproved properties subject to amortization, the cost of properties not being amortized, and the related tax amounts, such excess capitalized costs are charged to expense.

The standardized measure of discounted future net cash flows and changes in such cash flows are prepared using assumptions required by the Financial Accounting Standards Board and the Securities and Exchange Commission. Such assumptions include a standardized method for determining pricing and require that future cash flow be discounted using a 10% rate. The valuation that results may not represent management’s estimated current market value of proved reserves.

During the past few years the exploration, development and production of natural gas has resulted in an oversupply of natural gas which has resulted in a substantial reduction in the market price. Management of the Company believes that this oversupply will last for some time and does not anticipate an increase in the price we can receive in the market place. In April 2012 the Company entering into an agreement to fix the price it receives for the sale of its gas. For the five years ended April 2017 the Company will receive $4.53 per MCF.

NOTE E: LAND HELD FOR INVESTMENT

In February 2014 the company acquired 7.4 acres of undeveloped land in Desoto, Texas for $624,000.The Company believes the highest and best use of this property is for the construction and development of multifamily housing. The Company acquired the property for investment purposes.

When the Company acquired Mountaineer State Energy in 2008 the acquisition included certain undeveloped land adjacent to the Company’s operational facility. On June 30, 2015 we sold a portion of the land for $580,000 of which $415,000 was in the form of a note receivable over 10 years. The property was sold for book value. The Company used the cash portion of the transaction to pay down a note owed to a bank.

NOTE F: CONTINGENCIES

Carlton Energy Group, LLC

In December 2006, Carlton Energy Group, LLC (“Carlton”) instituted litigation against an individual, Eurenergy Resources Corporation (“Eurenergy”) and several other entities including New Concept Energy, Inc., which was then known as CabelTel International Corporation (the “Company”) alleging tortuous conduct, breach of contract and other matters and as to the Company that it was the alter ego of Eurenergy. The Carlton claims were based upon an alleged tortuous interference with a contract by the individual and Eurenergy related to the right to explore a coal bed methane concession in Bulgaria which had never (and has not to this day) produced any hydrocarbons. At no time during the pendency of this project or since did the company or any of its officers or directors have any interest whatsoever in the success or failure of the so-called “Bulgaria Project”. However, in the litigation, Carlton alleged that the Company was the alter-ego of certain of the other Defendants including Eurenergy.

Following a jury trial in 2009, the Trial Court (295th District Court of Harris County, Texas) reduced the actual damages found by the jury of $66.5 million and entered judgment against EurEnergy and The individual jointly and severally for $31.16 million in actual damages on its tortuous-interference claim and the Court further assessed exemplary damages against The individual and EurEnergy in the amount of $8.5 million each. The Court granted a judgment for the Company that it was not the alter ego of any of the other parties and thereby would not incur any damages.

Cross appeals were filed by Carlton, The individual and EurEnergy to the Court of Appeals for the First District of Texas (the “Court of Appeals”) which rendered its opinion on February 14, 2012. The Court of Appeals opinion, among other things, reinstated the jury award of actual damages jointly and severely against The individual and EurEnergy in the amount of $66.5 million and overturned the Trial Court’s ruling favorable to the Company rendering a judgment for that amount plus exemplary damages against the Company as the “alter ego” of Eurenergy.

The Company and the other defendants filed a Petition for Review of the Court of Appeals Opinion with the Supreme Court of the State of Texas. On May 8, 2015, the Supreme Court of Texas affirmed, in part, and reversed, in part, the Court of Appeals Judgment, remanding the case to that Court for further proceedings. In its opinion, the Supreme Court concluded that the evidence supports the Jury’s verdict that the individual used the Company and other entities, that it would be unjust to require Carlton to treat them separately and found that the Company was an alter ego as a matter of law. The Supreme Court determined that the Court of Appeals erred in reinstating the jury’s verdict on damages in the amount of $66.5 million as the amount was speculative and not supported by competent evidence. The court declined to reinstate the trial court’s judgment of $31.16 million. The Supreme Court did rule that there was some evidence to support an award of actual damages and therefore remanded the case to the Court of Appeals to make a factual sufficiency determination, if possible, as to as to the amount. The defendants have filed a Motion for Rehearing requesting clarification of the Supreme Court’s ruling and/or a remand to the trial court for a new trial.

Management’s preliminary analysis of these developments suggests it is reasonably possible that the claim will result in an unfavorable outcome. Management notes that in connection with the original appeal, the individual defendant deposited alternative security with the court to supersede the judgment which the court determined to have a value in excess of $56 million. Management believes that the maximum exposure would be in an amount significantly less than the amount on deposit. Accordingly, management believes that any adverse outcome is fully secured by that deposit.

Other

The Company has been named as a defendant in other 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 G: OPERATING SEGMENTS

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

Three months ended June 30, 2015	Oil and Gas Operations			Retirement Facility		Corporate			Total


Operating revenue	$	259		$	744	$	-			1,003

Operating expenses		324			400		155			879
Depreciation, Depletion and Amortization		116			15		-			131
Lease Expense		-			245		-			245
Total Operating Expenses		440			660		155			1255
Interest Income		-			-		0			0
Interest expense		(16	)		-		-			(16	)
Recovery of Bad Debt Expense		-			-		386			386
Other income		-			-		(8	)		(8	)
Segment operating income	$	(197	)	$	84	$	223		$	110



Three months ended June 30, 2014	Oil and Gas Operations			Retirement Facility		Corporate			Total


Operating revenue	$	485		$	728	$	-		$	1,213

Operating expenses		300			372		189			861
Depreciation, Depletion and Amortization		125			15		16			156
Lease Expense		-			241		-			241
Total Operating Expenses		425			628		205			1,258
Interest Income		-			-		1			1
Interest expense		(22	)		-		-			(22	)
Recovery of Bad Debt Expense		-			-		-			0
Other income		(16	)		-		(17	)		(33	)
Segment operating income	$	22		$	100	$	(221	)	$	(99	)

Six months ended June 30, 2015	Oil and Gas Operations			Retirement Facility		Corporate			Total


Operating revenue	$	431		$	1,461	$	-		$	1,892

Operating expenses		628			794		309			1,731
Depreciation, Depletion and Amortization		282			31		-			313
Lease Expense		-			490		-			490
Total Operating Expenses		910			1,315		309			2,534
Interest Income		-			-		0			0
Interest expense		(42	)		-		-			(42	)
Recovery of Bad Debt Expense		-			-		1,124			1,124
Other income		-			-		(16	)		(16	)
Segment operating income	$	(521	)	$	146	$	799		$	424



Six months ended June 30, 2014	Oil and Gas Operations			Retirement Facility		Corporate			Total


Operating revenue	$	829		$	1,453	$	-		$	2,282

Operating expenses		617			752		381			1,750
Depreciation, Depletion and Amortization		291			31		16			338
Lease Expense		-			481		-			481
Total Operating Expenses		908			1,264		397			2,569
Interest Income		-			-		2			2
Interest expense		(53	)		-		-			(53	)
Recovery of Bad Debt Expense		-			-		-			0
Other income		-			-		199			199
Segment operating income	$	(132	)	$	189	$	(196	)	$	(139	)

NOTE H: NEWLY ISSUED ACCOUNTING STANDARDS

We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our consolidated statements, including that which we have not yet adopted. We do not believe that any such guidance will have a material effect on our financial position or results or operation.

NOTE I: SUBSEQUENT EVENTS

The Company has evaluated subsequent events through August 13, 2014, the date the financial statements were available to be issued, and has 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.

Oil and Gas Property Accounting

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 June 30, 2015, 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 June 30, 2015, the Company had current assets of $936,000 and current liabilities of $1,192,000.

Cash and cash equivalents at June 30, 2015 were $437,000 as compared to $300,000 at December 31, 2014.

Net cash provided from operating activities was $340,000 for the six months ended June 30, 2015. During the six-month period, the Company had net income of $424,000.

Net cash provided from investing activities was $30,000 for the six months ended June 30, 2015. This included the purchase of equipment and other capitalized drilling costs at the Company’s oil and gas operations of $191,000. Also included is $116,000 which is the cash portion for the sale of land in West Virginia and $126,000 for the collection of a Note Receivable.

Net cash used in financing activities was $233,000 for the six months ended June 30, 2015, consisting of the repayment of bank loans of $233,000.

Results of Operations

The following discussion is based on our Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014 as included in Part 1, Item 1: Financial statements of this report.

Comparison of the three months ended June 30, 2015 to the same period ended 2014

The Company reported net income of $110,000 for the three months ended June 2015, as compared to a net loss of $99,000 for the similar period in 2014.

For the three months ended June 30, 2015, the Company recorded oil and gas revenues, net of royalty expenses of $259,000 as compared to $485,000 for the comparable period of 2014. The decline in oil and gas revenue was principally due to the price the Company was receiving for its oil sales in 2015 as compared to 2014

The Company recorded revenues of $744,000 for the three months ended June 30, 2015 from its retirement property compared to $728,000 for the comparable period in 2014. The increase was primarily due rate increases.

For the three months ended June 30, 2015, the Company recorded oil and gas operating expenses of $440,000 as compared to $425,000 for the comparable period of 2014.

For the three months ended June 30, 2015, operating expenses at the retirement property were $415,000 as compared to $387,000 for the comparable period in 2013. The increases in operating expenses were due to an overall increase in non-payroll related expenses.

For the three months ended June 30, 2015, corporate general & administrative expenses were $155,000 as compared to $205,000 for the comparable periods in 2014. The decrease is primarily due to a reduction in legal costs.

For the three months ended June 30, 2015 the company recorded a bad debt expense recovery of $386,000 with respect to a note receivable that was fully reserved in a prior year (For a more complete discussion of history of the receivable, the establishment of a reserve due to concerns regarding collectability if the receivable and the recovery efforts refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 in Item 13. on page 21 and Footnote C on page 34)

Comparison of the six months ended June 30, 2015 to the same period ended 2014

The Company reported net income of $424,000 for the six months ended June 2014, as compared to a net loss of $139,000 for the similar period in 2014.

For the six months ended June 30, 2015, the Company recorded oil and gas revenues, net of royalty expenses of $431,000 as compared to $829,000 for the comparable period of 2014. The decline in oil and gas revenue was principally due to the price the Company was receiving for its oil sales in 2015 as compared to 2014. The decline was also affected by difficult weather conditions during the first quarter which hampered our operations

The Company recorded revenues of $1,461,000 for the six months ended June 30, 2015 from its retirement property compared to $1,453,000 for the comparable period in 2014. The increase was primarily due rate increases.

For the six months ended June 30, 2015, the Company recorded oil and gas operating expenses of $910,000 as compared to $908,000 for the comparable period of 2014.

For the six months ended June 30, 2015, operating expenses at the retirement property were $825,000 as compared to $783,000 for the comparable period in 2014. The increases in operating expenses were due to an overall increase in non-payroll related expenses.

For the six months ended June 30, 2015, corporate general & administrative expenses were $309,000 as compared to $397,000 for the comparable periods in 2014. The decrease is primarily due to a reduction in legal costs.

For the six months ended June 30, 2015 the company recorded a bad debt expense recovery of $1,124,000 with respect to a note receivable that was fully reserved in a prior year (For a more complete discussion of history of the receivable, the establishment of a reserve due to concerns regarding collectability if the receivable and the recovery efforts refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 in Item 13. on page 21 and Footnote C on page 34)

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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Nearly 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 4. CONTROLS AND PROCEDURES

(a) 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.

(b) 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.

PART II: OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 6. Exhibits

The following exhibits are filed herewith or incorporated by reference as indicated below.

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	Bylaws of Registrant (incorporated by reference to Exhibit 3.2 to Registrant’s Form S-4 Registration Statement No. 333-55968 dated December 21, 1992)

3.6	Amendment to Section 3.1 of Bylaws of Registrant adopted October 9, 2003 (incorporated by reference to Exhibit 3.2.1 to Registrant’s Form S-4 Registration Statement No. 333-55968 dated December 21, 1992)

3.7	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)

3.8	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)

3.9	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)

3.10	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)

3.11	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)

3.12	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)

3.13	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)

31.1*	Certification pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended, of 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

101	Interactive data files pursuant to Rule 405 of Regulation S-T.

*Filed herewith.

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	New Concept Energy, Inc.

Date: August 13, 2015	By:	/s/ Gene Bertcher
		Gene S. Bertcher, Principal Executive
		Officer, President and Chief Financial
		Officer

New Concept Energy, Inc. - FORM 10-Q - August 13, 2015

Attached files

New Concept Energy, Inc. Reports