Edgar Filing: New Concept Energy, Inc.

nce10q033113.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 MARCH 31, 2013

¨ 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: X 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: X 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	1,946,935 shares
(Class)	(Outstanding at May 9, 2013)

NEW CONCEPT ENERGY, INC. AND SUBSIDIARIES

Index to Quarterly Report on Form 10-Q

Period ended March 31, 2013

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements	3
Consolidated Balance Sheets	4
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	10

Item 3. Quantitative and Qualitative Disclosures About Market Risk	14

Item 4. Controls and Procedures	14

PART II: OTHER INFORMATION	15

Item 1. Legal Proceedings	15

Item 6. Exhibits	16

Signatures	17

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEW CONCEPT ENERGY, INC. AND SUBSIDARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(amounts in thousands)
	March 31, 2013		December 31, 2012

Assets

Current assets
Cash and cash equivalents	$	688	$	398
Accounts receivable from oil and gas sales		187		210
Other current assets		2		2
Total current assets		877		610


Oil and natural gas properties (full cost accounting method)
Proved developed and undeveloped oil and gas properties, net of depletion		9,558		9,717

Property and equipment, net of depreciation
Land, buildings and equipment - oil and gas operations		1,427		1,410
Other		203		204
Total property and equipment		1,630		1,614

Other assets (including $112,500 and $161,300 due from related parties
in 2013 and 2012		576		543

Total assets	$	12,641	$	12,484


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)

	March 31, 2013			December 31, 2012

Liabilities and stockholders' equity

Current liabilities
Accounts payable - trade	$	174		$	38
Accrued expenses		139			173
Current portion of long term debt		156			93
Total current liabilities		469			304

Long-term debt
Notes payable less current portion		2,234			2,273
Asset retirement obligation		2,770			2,770
Other long-term liabilities		491			491
Total liabilities		5,964			5,838

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 March 31, 2013 and December 31, 2012		20			20
Additional paid-in capital		58,838			58,838
Accumulated deficit		(52,182	)		(52,213	)

		6,677			6,646

Total liabilities & equity	$	12,641		$	12,484


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,
	2013			2012
Revenue
Oil and gas operations, net of royalties	$	340		$	290
Real estate operations		680			674
		1,020			964


Operating expenses
Oil and gas operations		456			471
Real estate operations		386			366
Lease expense		236			231
Corporate general and administrative		173			159
Accretion of asset retirement obligation		-			34
Impairment of natural gas and oil properties		-			912
		1,251			2,173
Operating earnings (loss)		(231	)		(1,209	)

Other income (expense)
Interest income		6			0
Interest expense		(49	)		(62	)
Recovery of bad debt expense		339			-
Other income (expense), net		(34	)		4
Expense		262			(58	)


Net income (loss) applicable to common shares	$	31		$	(1,267	)

Net income (loss) per common share-basic and diluted	$	0.02		$	(0.65	)

Weighted average common and equivalent shares outstanding - basic		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 theThree Months
	Ended March 31,
	2013			2012


Cash flows from operating activities
Net income	$	31		$	(1,267	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation, depletion and amortization		240			201
Accretion of asset retirement obligation		-			34
Write-off (recovery) of affiliate receivable		(339	)
Changes in operating assets and liabilities
Other current and non-current assets		(23	)		(61	)
Accounts payable and other liabilities		441			143
Interest payable		30			30
Impairment of oil and gas properties					912
Net cash provided by (used) in operating activities		380			(8	)

Cash flows from investing activities
Fixed asset additions		(83	)		(8	)
Net cash provided by (used in) investing activities		(83	)		(8	)

Cash flows from financing activities
Proceeds from loans					42
Repayment of loans to affiliates		(7	)		-
Payment on notes payable					(12	)
Net cash provided by (used in) financing activities		(7	)		30


Net increase (decrease) in cash and cash equivalents		290			14
Cash and cash equivalents at beginning of year		398			109

Cash and cash equivalents at end of year	$	688		$	123



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.

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, 2012. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December 31, 2013.

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, 2012.

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 palace. 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: 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. After requesting a response from the Plaintiff the Supreme Court requested full briefing on the merits. In March 2013 the Supreme Court granted the Petition for Review and the court is scheduled to hear oral arguments in September 2013.

The Company vigorously denies that it is the “alter ego” of any other entity; further the Company strongly believes that the Court of Appeals opinion is erroneous in concluding that the Company is an “alter ego” of any other entity which is contrary to Nevada substantive law. There are also questions regarding the underlying liability of EurEnergy and if Eurenergy is successful in its petition for review or, even if unsuccessful if the Company is successful on its positions described above, the Trial Court’s judgment could be reinstated and the Company would have no liability on this claim.

Chesapeake Exploration Limited Partnership and Chesapeake Operating, Inc. (“Chesapeake”)

In January 2006, the Company entered into a joint operating agreement evidencing its acquisition of a 5% interest in two gas wells being drilled and ultimately operated by Chesapeake. The Company relied on the cost projections provided by Chesapeake to make its investment decision. Subsequent to its investment, the Company received an invoice from Chesapeake for $556,217 which, according to Chesapeake, represents the Company’s 5% share of additional costs incurred by Chesapeake in drilling the wells. The Company believes that these additional costs far exceed any reasonable expense that should have been incurred in drilling the two wells and were incurred without notifying the Company of such expenses. The Company has requested an accounting of the additional expenses and a reconciliation of the final costs to the cost estimates previously presented. In April 2007, Chesapeake filed a lawsuit against the Company and others in District Court of Tarrant County, Texas.

In March 2011, Chesapeake received a summary judgment award including prejudgment interest for $686,874 plus $65,000 in legal fees. The judgment did however acknowledge that the plaintiff did not pay the company for it’s pro rata share of the gas produced by the two wells.

The Company appealed the judgment to the Court of Appeals which reduced the judgment by approximately $16,000 but otherwise affirmed the lower court ruling. The company filed an appeal with the Texas Supreme Court however on February 15, 2013 the Supreme Court denied the petition.

The Company is pursuing its legal remedies to offset the revenue for gas that has been previously produced and held by Chesapeake against the amount due Chesapeake. As of March 31 2013 the Company has recorded a net liability due Chesapeake of $491,000.

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 F: 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 March 31, 2013	Oil and Gas Operations			Retirement Facility		Corporate		Total


Operating revenue	$	340		$	680	$	-	$	1,020

Operating expenses		231			371		173		775
Depreciation, Depletion and Amortization		225			15		-		240
Lease Expense		-			236		-		236
Accretion of Asset Retirement Obligation		-			-		-		-
Total Operating Expenses		456			622		173		1,251
Interest Income		-			-		6		6
Interest expense		(49	)		-		-		(49	)
Recovery of Bad Debt Expense					-		339		339
Other income		(34	)		-		-		(34	)
Segment operating income	$	(199	)	$	58	$	172	$	31

Three months ended March 31, 2012	Oil and Gas Operations			Retirement Facility		Corporate			Total


Operating revenue	$	290		$	674	$	-		$	964

Operating expenses		290			355		159			804
Depreciation, Depletion and Amortization		181			11		-			192
Lease Expense		0			231		-			231
Accretion of Asset Retirement Obligation		34			-		-			34
Impairment of oil and gas properties		912			-		-			912
Total Operating Expenses		1417			597		159			2,173
Interest expense		(62	)		-		-			(62	)
Other income		-			-		4			4
Segment operating income	$	(1,189	)	$	77	$	(155	)	$	(1,267	)

NOTE G: 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 H: SUBSEQUENT EVENTS

The Company has evaluated subsequent events through May 9, 2013, 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.

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 March 31, 2013, 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, 2013, the Company had current assets of $877,000 and current liabilities of $469,000.

Cash and cash equivalents at March 31, 2013 were $688,000 as compared to $398,000 at December 31, 2012.

Net cash provided in operating activities was $380,000 for the three months ended March 31, 2013. During the three-month period, the Company had net income of $31,000.

Net cash used in investing activities was $83,000 for the three months ended March 31, 2013, consisting of the purchase of equipment and other capitalized drilling costs at the Company’s oil and gas production facility.

Net cash used in financing activities was $7,000 for the three months ended March 31, 2013, consisting of repayments of loans to a bank.

Results of Operations

Comparison of the three months ended March 31, 2013 to the same period in 2012

The Company reported net income of $31,000 for three months ended March 31, 2013, as compared to a net loss of $1,267,000 for the similar period in 2012.

For the three months ended March 31, 2013, the Company recorded oil and gas revenues of $340,000 as compared to $290,000 for the comparable period of 2012. The change in oil & gas revenue was due to an increase of approximately $50,000 due to new oil wells that were drilled in late 2012.

The Company recorded revenues of $680,000 for the three months ended March 31, 2013 from its retirement property compared to $674,000 for the comparable period in 2012.

For the three months ended March 31, 2013, the Company recorded oil and gas operating expenses of $456,000 as compared to $471,000 for the comparable period of 2012. The net decrease of $15,000 consists of an increase in depletion expense of $44,000 and a decrease in other operating expenses of $59,000. There was less overall development activity in 2013 resulting in less need for outside services.

For the three months ended March 31, 2013, operating expenses including lease expense at the retirement property were $622,000, as compared to $597,000 for the comparable period in 2012.

For the three months ended March 31, 2013, corporate general & administrative expenses were $173,000 as compared to $159,000 for the comparable periods in 2012. The increase is primarily due to legal fees incurred by the company to defend itself against certain lawsuits.

For the three months ended March 31, 2013 the company recorded a bad debt expense recovery of $339,000 with respect to a note receivable of approximately $10 million 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, 2012 in Item 13. on page 26 and Footnote C on page 45)

Comparison of the three months ended March 31, 2012 to the same period in 2011

The Company reported a net loss of $1,267,000 for three months ended March 31, 2012, as compared to net income of $97,000 for the similar period in 2011.

For the three months ended March 31, 2012, the Company recorded oil and gas revenues of $290,000 as compared to $280,000 for the comparable period of 2011. The changes in oil & gas revenue was due to an increase of approximately $70,000 due to new oil wells that were drilled in late 2011 and a decrease of approximately $60,000 due to lower prices being received for the sale of our natural gas.

The Company recorded revenues of $674,000 for the three months ended March 31, 2012 from its retirement property compared to $729,000 for the comparable period in 2011. The decrease was due almost entirely to a reduction in the number of residence in the facility.

For the three months ended March 31, 2012, the Company recorded oil and gas operating expenses of $471,000 as compared to $335,000 for the comparable period of 2011. The increase was principally due to an increase in depletion expense. The marked decrease in the market price being paid for natural gas resulted in a modification in the valuation the company placed on its gas reserves which impacted the anticipated production life of its wells. This lead to an acceleration of the depletion expense being recorded.

For the three months ended March 31, 2012, operating expenses and lease expense at the retirement property were $597,000 as compared to $581,000 for the comparable period in 2011. The increase was due to an increase in the lease payment being recorded on the property of $40,000 offset by a general reduction in operating costs.

For the three months ended March 31, 2012, corporate general & administrative expenses were $159,000 as compared to $124,000 for the comparable periods in 2011. The increase is primarily due to legal fees incurred by the company to defend itself against certain lawsuits.

For the three months ended March 31, 2012, interest income was $0 as compared to $119,000 for the comparable period in 2011. In December 2011 the Company became concerned about the collectability of a certain note receivable and determined that the note and any accrued interest be fully reserved. The company continues to accrue interest but provides a full reserve should it be unable to collect.

For the three months ended March 31, 2012 the Company recorded interest expense of $62,000 as compared to $31,000 for the comparable periods in 2011. The increase is due to additional interest due on financing obtained in late 2011. The proceeds were used to drill wells.

The Company recorded other expense of $4,000 for the three months ended March 31, 2012. In 2011 other expense was $72,000 for the comparable period. The expense in 2011 was the result of a one-time legal settlement for $71,000 that was not anticipated.

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 1. Legal Proceedings

The Company is a defendant in a legal action brought by Carlton Energy Group, LLC (see Note: E)

During 2012 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. After requesting a response from the Plaintiff the Supreme Court requested full briefing on the merits. In March 2013 the Supreme Court granted the Petition for Review and the Court is scheduled to hear oral arguments in September 2013.

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: May 9, 2013	By:	/s/ Gene Bertcher
		Gene S. Bertcher, Principal Executive
		Officer, President and Chief Financial
		Officer