10-Q

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 SEPTEMBER 30, 2017

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 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: ☒ No: ☐

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: ☒   No ☐

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 November 14, 2017)

1

NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES

Index to Quarterly Report on Form 10-Q

Period ended September 30, 2017

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	9
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.  Controls and Procedures	11
PART II:  OTHER INFORMATION	12
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 6.  Exhibits	13
Signatures	14

2

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(amounts in thousands)
	September 30, 2017		December 31, 2016
Assets
Current assets
Cash and cash equivalents	$	427	$	113
Accounts receivable from oil and gas sales		129		119
Other current assets		61		206
Total current assets		617		438
Oil and natural gas properties (full cost accounting method)
Proved developed and undeveloped oil and gas properties, net of depletion		5,428		5,608
Property and equipment, net of depreciation
Land, buildings and equipment - oil and gas operations		675		706
Other		—		25
Total property and equipment		675		731
Other assets		308		401
Total assets	$	7,028	$	7,178

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

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NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
(unaudited)
(amounts in thousands, except share amounts)
	September 30, 2017			December 31, 2016
Liabilities and stockholders' equity
Current liabilities
Accounts payable - trade (including $513 and $160 at 2017 and 2016 due to related parties)	$	525		$	238
Accrued expenses		67			59
Current portion of long term debt		85			96
Total current liabilities		677			393
Long-term debt
Notes payable less current portion		259			296
Asset retirement obligation		2,770			2,770
Total liabilities		3,706			3,459
Stockholders' equity
Preferred stock, Series B		1			1
Common stock, $.01 par value; authorized, 100,000,000
shares; issued and outstanding, 1,946,934 shares
at September 30, 2017 and December 31, 2016		20			20
Additional paid-in capital		58,838			58,838
Accumulated deficit		(55,537	)		(55,140	)
		3,322			3,719
Total liabilities & equity	$	7,028		$	7,178

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

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NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(amounts in thousands, except per share data)
	For the Three Months ended September 30,						For the Nine Months ended September 30,
	2017			2016			2017			2016
Revenue
Oil and gas operations, net of royalties	$	194		$	190		$	632		$	579
Total Revenue		194			190			632			579
Operating expenses
Oil and gas operations		254			295			766			924
Corporate general and administrative		95			52			317			319
		349			347			1,083			1,243
Operating earnings (loss)		(155	)		(157	)		(451	)		(664	)
Other income (expense)
Interest income		5			6			20			17
Interest expense		(6	)		(8	)		(19	)		(26	)
Other income (expense), net		66			(11	)		51			(21	)
Other income (expense)		65			(13	)		52			(30	)
Loss from continuing operations	$	(90	)	$	(170	)	$	(399	)	$	(694	)
Earnings (loss) from discontinued operations		(11	)		6			2			101
Net loss applicaable to common shares		(101	)		(164	)		(397	)		(593	)
Net income (loss) per common share-basic and diluted	$	(0.05	)	$	(0.08	)	$	(0.20	)	$	(0.30	)
Weighted average common and equivalent shares outstanding		1,947			1,947			1,947			1,947

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

5

NEW CONCEPT ENERGY, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(amounts in thousands)
	For the Nine Months Ended
	September 30,
	2017			2016
Cash flows from operating activities
Net income (loss)	$	(397	)	$	(593	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation, depletion and amortization		303			393
Write-off of assets from discontinued operations		24			—
Changes in operating assets and liabilities
Other current and non-current assets		153			(20	)
Accounts payable and other liabilities		295			361
Net cash provided by (used) in operating activities		378			141
Cash flows from investing activities
Investment in undeveloped land		(10	)		—
Fixed asset additions		(2	)		(45	)
Cash portion from the sale of land		—			—
Repayment of loan from affiliate		—			—
Net cash provided by (used in) investing activities		(12	)		(45	)
Cash flows from financing activities
Payment on notes payable		(52	)		(39	)
Net cash provided by (used in) financing activities		(52	)		(39	)
Net increase (decrease) in cash and cash equivalents		314			57
Cash and cash equivalents at beginning of year		113			473
Cash and cash equivalents at end of year	$	427		$	530
Supplemental disclosures of cash flow information:
Cash paid for interest on notes payable	$	19		$	13
Cash paid for principal on notes payable	$	71		$	66

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

6

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, 2016.  Operating results for the nine month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2017.

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.

Until March 30, 2017 the Company leased and operated a retirement center in King City, Oregon with a capacity of 114 residents. The terms of the lease agreement provided that if the facility was sold to a third party the lease would be terminated. On March 30, 2017 the owners of the facility sold the facility. The operations of the retirement center have been reflected as a discontinued operation.

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, 2016.

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.

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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 entered into an agreement to fix the price it receives for the sale of its gas. For the five years ended April 2017 the Company received $4.53 per MCF. For the month period June thru August the Company received $3.77 per MCF and for the period September 1, 2017 through December 31, 2017 the Company is receiving $3.40 per MCF. 

NOTE E: CONTINGENCIES

Carlton Litigation

Since December 2006, Carlton Energy Group, LLC (“Carlton”), 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”), have been involved in contentious litigation 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 (295^th District Court of Harris County, Texas) 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, in February 2012, rendered an opinion. 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 the Court of Appeals for further proceedings. On remand, the Court of Appeals reinstated a verdict on damages in the amount of $31.16 million against the individual and Eurenergy.

During August 2017, the parties to the litigation reached an arrangement, the final terms of which will not be determined until the outcome of another appeal to the Supreme Court. Under the terms of the arrangement, the Company should have no financial responsibility, nor should any potential final outcome materially adversely affect the Company, in management’s opinion.

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 operation or cash flows of the Company. 

NOTE F:  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 G:  SUBSEQUENT EVENTS

During the fourth quarter the Company, in a private placement, sold 90,000 newly issued shares for $1.80 per share. The proceeds were used for general working capital purposes.

The Company has evaluated subsequent events through November 14, 2017, the date the financial statements were available to be issued, and has determined that there are none to be reported.

8

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

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. 

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 September 30, 2017 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 September 30, 2017, the Company had current assets of $617,000 and current liabilities of $677,000.

Cash and cash equivalents at September 30, 2017 were $427,000 as compared to $113,000 at December 31, 2016.

Net cash provided from operating activities was $378,000 for the nine months ended September 30, 2017.  During the nine-month period, the Company had a net loss of $397,000.

9

Net cash used in investing activities was $12,000 for the nine months ended September 30, 2017. This represents land and fixed assets acquired to support the Company’s oil & gas operation

Net cash used in financing activities was $52,000 for the nine months ended September 30, 2017, consisting of the repayment of bank loans.

 Results of Operations

The following discussion is based on our Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 as included in Part 1, Item 1: Financial statements of this report.

Comparison of the three months ended September 30, 2017 to the same period ended 2016

The Company reported a net loss of $101,000 for the three months ended September 2017, as compared to a net loss of $170,000 for the similar period in 2016.

For the three months ended September 30, 2017, the Company recorded oil and gas revenues, net of royalty expenses of $194,000 as compared to $190,000 for the comparable period of 2016.

For the three months ended September 30, 2017, the Company recorded oil and gas operating expenses of $254,000 as compared to $295,000 for the comparable period of 2016. The decrease was principally due to a reduction of depletion expenses.

For the three months ended September 30, 2017, corporate general & administrative expenses were $95,000 as compared to $52,000 for the comparable periods in 2016. The increase was due to overall operating expenses during the quarter.

For the three months ended September 30, 2017 other income was $66,000 as compared to an expense of $11,000 for the comparable period of 2016. The most significant item is in August 2017 the Company received a payment of $64,000 for a receivable it had written of a number of years ago. 

Comparison of the nine months ended September 30, 2017 to the same period ended 2016

The Company reported a net loss of $397,000 for the nine months ended September 2017, as compared to a net loss of $694,000 for the similar period in 2016.

For the nine months ended September 30, 2017, the Company recorded oil and gas revenues, net of royalty expenses of $632,000 as compared to $579,000 for the comparable period of 2016. The increase in oil and gas revenue was principally due to an increase production in 2017 as compared to 2016.

For the nine months ended September 30, 2017, the Company recorded oil and gas operating expenses of $766,000 as compared to $924,000 for the comparable period of 2016. The decrease was due to a decrease in depletion expense and in overall operating expenses as the Company has actively been reducing costs.

For the nine months ended September 30, 2017, corporate general & administrative expenses were $317,000 as compared to $319,000 for the comparable periods in 2016.

For the nine months ended September 30, 2017 other income was $51,000 as compared to an expense of $21,000 for the comparable period of 2016. The most significant item is in August 2017 the Company received a payment of $64,000 for a receivable it had written of a number of years ago. 

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. 

10

 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.

11

PART II:  OTHER INFORMATION

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

None.

12

 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

13

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: November 14, 2017	By:	/s/ Gene Bertcher
		Gene S. Bertcher, Principal Executive
		Officer, President and Chief Financial
		Officer

14

EX-31

CERTIFICATIONS   EXHIBIT 31.1  

PRINCIPAL EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER’S RULE 13a-14(a)/15d-14(a)

I, Gene S. Bertcher, certify that:

1)       I have reviewed this quarterly report of Form 10-Q of New Concept Energy, Inc.;

2)       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made in light of the circumstances under which such statements were made, and is not misleading with respect to the period covered by this report;

3)       Based on my knowledge, the financial statements and other financial information included in this report fairly present, in all material respects, the financial condition, results of operations and cash flows of the Registrant as of and for the periods presented in this report;

4)       I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the Registrant and have:

(a)       Designed such disclosure controls and procedures, or used such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

(c)       Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)       Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

5)       I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls.

Dated: November 14, 2017

/s/ Gene S. Bertcher

Gene S. Bertcher, Principal Executive

Officer, President and Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of New Concept Energy, Inc. (the “Company”) of Form 10-Q for the period ended September 30, 2017, as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Gene S. Bertcher, President and Chief Financial Officer of the Company, do hereby certify pursuant to 18 U.S.C. §1350 that:

(i) The Report fully complies with the requirements of Section 13(a) or I 5(d) of the Securities Exchange Act of 1934, as amended; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, at the end of the period indicated and for the periods indicated.

Dated: November 14, 2017 

 

/s/ Gene S. Bertcher

Gene S. Bertcher, Principal Executive

Officer, President and Chief Financial Officer

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 14, 2017
Document And Entity Information
Entity Registrant Name	New Concept Energy, Inc.
Entity Central Index Key	0000105744
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,946,934
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

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CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 427	$ 113
Accounts receivable from oil and gas sales	129	119
Other current assets	61	206
Total current assets	617	438
Oil and natural gas properties (full cost accounting method)
Proved developed and undeveloped oil and gas properties, net of depletion	5,428	5,608
Property and equipment, net of depreciation
Land, buildings and equipment - oil and gas operations	675	706
Other	0	25
Total property and equipment	675	731
Other assets	308	401
Total assets	7,028	7,178
Current liabilities
Accounts payable - trade (including $513 and $160 at 2017 and 2016 due to related parties)	525	238
Accrued expenses	67	59
Current portion of long term debt	85	96
Total current liabilities	677	393
Long-term debt
Notes payable less current portion	259	296
Asset retirement obligation	2,770	2,770
Total liabilities	3,706	3,459
Stockholders' equity
Preferred stock, Series B	1	1
Common stock, $.01 par value; authorized, 100,000,000 shares; issued and outstanding, 1,946,934 shares at September 30, 2017 and December 31, 2016	20	20
Additional paid-in capital	58,838	58,838
Accumulated deficit	(55,537)	(55,140)
Total shareholders' equity	3,322	3,719
Total liabilities & equity	$ 7,028	$ 7,178

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Accounts payable due to related parties	$ 513	$ 160
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	100,000,000	100,000,000
Common Stock, Shares Issued	1,946,934	1,946,934
Common Stock, Shares Outstanding	1,946,934	1,946,934

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CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Oil and gas operations, net of royalties	$ 194	$ 190	$ 632	$ 579
Total Revenue	194	190	632	579
Operating expenses
Oil and gas operations	254	295	766	924
Corporate general and administrative	95	52	317	319
Total Operating Expenses	349	347	1,083	1,243
Operating earnings (loss)	(155)	(157)	(451)	(664)
Other income (expense)
Interest income	5	6	20	17
Interest expense	(6)	(8)	(19)	(26)
Other income (expense), net	66	(11)	51	(21)
Total Other income (expense)	65	(13)	52	(30)
Loss from continuing operations	(90)	(170)	(399)	(694)
Earnings (loss) from discontinued operations	(11)	6	2	101
Net loss applicaable to common shares	$ (101)	$ (164)	$ (397)	$ (593)
Net income (loss) per common share-basic and diluted	$ (0.05)	$ (0.09)	$ (0.20)	$ (0.36)
Weighted average common and equivalent shares outstanding	1,947	1,947	1,947	1,947

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Statement of Cash Flows [Abstract]
Net income (loss)	$ (397)	$ (593)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation, depletion and amortization	303	393
Write-off of assets from discontinued operations	24	0
Changes in operating assets and liabilities
Other current and non-current assets	153	(20)
Accounts payable and other liabilities	295	361
Net cash provided by (used) in operating activities	378	141
Cash flows from investing activities
Investment in undeveloped land	(10)	0
Fixed asset additions	(2)	(45)
Cash portion from the sale of land	0	0
Repayment of loan from affiliate	0	0
Net cash provided by (used in) investing activities	(12)	(45)
Cash flows from financing activities
Payment on notes payable	(52)	(39)
Net cash provided by (used in) financing activities	(52)	(39)
Net increase (decrease) in cash and cash equivalents	314	57
Cash and cash equivalents at beginning of year	113	473
Cash and cash equivalents at end of year	427	530
Supplemental disclosures of cash flow information:
Cash paid for interest on notes payable	19	13
Cash paid for principal on notes payable	$ 71	$ 66

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

BASIS OF PRESENTATION

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, 2016.  Operating results for the nine month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2017.

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NATURE OF OPERATIONS

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF OPERATIONS

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.

Until March 30, 2017 the Company leased and operated a retirement center in King City, Oregon with a capacity of 114 residents. The terms of the lease agreement provided that if the facility was sold to a third party the lease would be terminated. On March 30, 2017 the owners of the facility sold the facility. The operations of the retirement center have been reflected as a discontinued operation.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2016

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OIL AND GAS RESERVES

9 Months Ended

Sep. 30, 2017

Extractive Industries [Abstract]

OIL AND GAS RESERVES

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 entered into an agreement to fix the price it receives for the sale of its gas. For the five years ended April 2017 the Company received $4.53 per MCF. For the month period June thru August the Company received $3.77 per MCF and for the period September 1, 2017 through December 31, 2017 the Company is receiving $3.40 per MCF.

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CONTINGENCIES

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

NOTE E: CONTINGENCIES

Carlton Litigation

Since December 2006, Carlton Energy Group, LLC (“Carlton”), 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”), have been involved in contentious litigation 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 (295^th District Court of Harris County, Texas) 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, in February 2012, rendered an opinion. 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 the Court of Appeals for further proceedings. On remand, the Court of Appeals reinstated a verdict on damages in the amount of $31.16 million against the individual and Eurenergy.

During August 2017, the parties to the litigation reached an arrangement, the final terms of which will not be determined until the outcome of another appeal to the Supreme Court. Under the terms of the arrangement, the Company should have no financial responsibility, nor should any potential final outcome materially adversely affect the Company, in management’s opinion.

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 operation or cash flows of the Company.

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NEWLY ISSUED ACCOUNTING STANDARDS

9 Months Ended

Sep. 30, 2017

Accounting Changes and Error Corrections [Abstract]

NEWLY ISSUED ACCOUNTING STANDARDS

NOTE F:  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.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE G:  SUBSEQUENT EVENTS

During the fourth quarter the Company, in a private placement, sold 90,000 newly issued shares for $1.80 per share. The proceeds were used for general working capital purposes.

The Company has evaluated subsequent events through November 14, 2017, the date the financial statements were available to be issued, and has determined that there are none to be reported.

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NATURE OF OPERATIONS (Details Narrative)	Mar. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Capacity of residents in retirement community	114

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OIL AND GAS RESERVES (Details Narrative) - $ / shares	3 Months Ended	4 Months Ended	61 Months Ended
	Aug. 31, 2017	Dec. 31, 2017	Apr. 30, 2017
MCF price	$ 3.77		$ 4.53
Subsequent Event [Member]
MCF price		$ 3.40

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CONTINGENCIES (Details Narrative)	May 08, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Court declined to reinstate the trial court's judgment	$ 31,160,000

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SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member]	Nov. 06, 2017 $ / shares shares
Newly issued shares from private placement | shares	90,000
Per share amount of newly issued shares from private placement | $ / shares	$ 1.80