Note

–

SUMMARY OF

SIGNIFICANT

ACCOUNTING POLICIES

Cash

and

Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity of

three

months or less to be cash equivalents.

Investments

Marketable Securities:

The Company classifies its debt and marketable equity securities in

one

two

categories: equity or available-for-sale. Equity securities are bought and held principally for the purposes of selling them in the near term. All other securities are classified as available-for-sale debt securities. Equity securities and available-for-sale debt securities are recorded at fair value. Unrealized gains and losses on equity securities are reported in current earnings. Unrealized gains and losses on available-for-sale debt securities, which consist entirely of U.S. Government securities, are reported as a component of other comprehensive income when significant to the financial statements. There are

significant cumulative unrealized gains or losses on available-for-sale debt securities as of

December

31,

2019

2018.

Equity Method and Other Investments:

The Company accounts for its non-marketable investment in partnerships on the equity method if ownership allows the Company to exercise significant influence.

The Financial Accounting Standards Board (FASB) issued ASU

2016

01,

Financial Instruments - Overall

(Subtopic

825

Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

01”

). The Company early adopted ASU

2016

effective

July

2018.

ASU

2016

applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation and disclosure of financial instruments. Among other things, ASU

2016

(i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are

not

public business entities; (iv) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (v) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (vi) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vii) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The adoption of this guidance did

not

have a material effect on the Company’s financial position, results of operation or cash flows.

Other investments, without readily determinable fair values, that are

not

accounted for under the equity method are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Management reviews our other investments and the underlying projects and activity periodically and assesses the need for any impairment. Management does

not

believe any investments need to be impaired at the present time.

See Note

for additional information on investments.

Receivables and Revenue Recognition

Oil and gas sales and resulting receivables are recognized when the product is delivered to the purchaser and title has transferred. Sales are to credit-worthy major energy purchasers with payments generally received within

days of transportation from the well site. Historically, the Company has had little, if any, uncollectible receivables; therefore, an allowance for uncollectible accounts has

not

been provided.

The FASB issued

Revenue from Contracts with Customers

(Topic

606

) superseding virtually all existing revenue recognition guidance. We adopted this new standard in the

first

quarter of

2018

using the modified retrospective approach. Adoption of the new standard did

not

require an adjustment to the opening balance of equity and did

not

have an impact on income from operations, earnings per share or cash flows.

The Company’s revenues are primarily derived from its interests in the sale of oil and natural gas production. Each barrel of oil or thousand cubic feet of natural gas delivered is considered a separate performance obligation. The Company recognizes revenue from its interests in the sales of oil and natural gas in the period that its performance obligations to provide oil and natural gas to customers are satisfied. Performance obligations are satisfied when the Company has

further obligations to perform related to the sale and the customer obtains control of product. The sales of oil and natural gas are made under contracts which the

third

-party operators of the wells have negotiated with customers, which typically include variable consideration that is based on pricing tied to local indices and volumes delivered in the current month. The Company receives payment from the sale of oil and natural gas production from

one

three

months after delivery. At the end of each month, as performance obligations are satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in accounts receivable in the balance sheets. Variances between the Company’s estimated revenue and actual payments are recorded in the month the payment is received; however, differences have been and are insignificant. Accordingly, the variable consideration is

not

constrained. A portion of oil and gas sales recorded in the statements of operation are the result of estimated volumes and pricing for oil and gas product

not

yet received for the period. For the periods ending

December

31,

2019

and

2018,

that estimate represented approximately

$366,148

and

$346,711,

respectively, of accrued oil and gas sales included in the statements of operation.

The Company’s contracts with customers originate at or near the time of delivery and transfer of control of oil and natural gas to the purchasers. As such, the Company does

not

have significant unsatisfied performance obligations.

The Company’s oil is typically sold at delivery points under contract terms that are common in our industry. The Company's natural gas produced is delivered by the well operators to various purchasers at agreed upon delivery points under a limited number of contract types that are also common in our industry. However, under these contracts, the natural gas

may

be sold to a single purchaser or

may

be sold to separate purchasers. Regardless of the contract type, the terms of these contracts compensate the well operators for the value of the oil and natural gas at specified prices, and then the well operators will remit payment to the Company for its share in the value of the oil and natural gas sold.

The Company’s disaggregated revenue has

two

primary revenue sources which are oil sales and natural gas sales. The following is an analysis of the components of oil and gas sales:

	Year Ended December 30,
	2019		2018
Oil Sales	$	4,504,738	$	5,109,773
Natural Gas Sales		1,806,272		2,387,612
Miscellaneous Oil and Gas Product Sales		180,052		267,929
	$	6,491,062	$	7,765,314

The Company recognizes revenue from lease bonuses when it has received an executed lease agreement with a

third

party transferring the rights to explore for and produce any oil or gas they

may

find within the term of the lease, the payment has been collected, and the Company has

obligation to refund the payment. The Company recognizes the lease bonus as a cost recovery with any excess above its cost basis in the mineral properties being treated as income.

Property

, Plant

and Equipment

Oil and gas properties are accounted for on the successful efforts method. The acquisition, exploration and development costs of producing properties are capitalized. The Company has

not

historically had any capitalized exploratory drilling costs that are pending determination of reserves for more than

one

year. All costs relating to unsuccessful exploratory wells, geological and geophysical costs, delay rentals, and abandoned properties are expensed. Lease costs related to unproved properties are amortized over the life of the lease and are assessed for impairment when indicators of impairment are present. Any impairment of value is charged to expense.

Depreciation, depletion and amortization of producing properties is computed on the units-of-production method on a property-by-property basis. The units-of-production method is based primarily on estimates of proved reserve quantities. Due to uncertainties inherent in this estimation process, it is at least reasonably possible that reserve quantities will be revised in the near term. Changes in estimated reserve quantities are applied to depreciation, depletion and amortization computations prospectively.

Other property and equipment are depreciated on the straight-line, declining-balance, or other accelerated methods as appropriate.

The following estimated useful lives are used for property and equipment:

	In years
Office furniture and fixtures	5	to	10
Automotive equipment	5	to	8

Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present. The Company uses its oil and gas reserve reports to test each producing property for impairment quarterly. See Note

for discussion of impairment losses.

Income Taxes

The Company utilizes an asset/liability approach to calculating deferred income taxes. Deferred income taxes are provided to reflect temporary differences in the basis of net assets and liabilities for income tax and financial reporting purposes. Deferred tax assets are reduced by a valuation allowance if a determination is made that it is more likely than

not

that some or all of the deferred assets will

not

be realized based on the weight of all available evidence.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than

not

that the position will be sustained upon examination, based upon the technical merits of the position. The Company will record the largest amount of tax benefit that is greater than

50%

likely of being realized upon settlement with taxing authorities.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. There were

uncertain tax positions as of

December

31,

2019

and

2018.

The federal income tax returns for

2016,

2017

and

2018

are subject to examination.

Earnings Per Share

Accounting guidance for Earnings Per Share (EPS) establishes the methodology of calculating basic earnings per share and diluted earnings per share. The calculations of basic earnings per share and diluted earnings per share differ in that instruments convertible to common stock (such as stock options, warrants, and convertible preferred stock) are added to weighted average shares outstanding when computing diluted earnings per share. For

2019

and

2018,

the Company had

dilutive shares outstanding; therefore, basic and diluted earnings per share are the same.

Concentrations of Credit Risk and Major Customers

The Company’s receivables relate primarily to sales of oil and natural gas to purchasers with operations in Texas, Oklahoma, Kansas and South Dakota. The Company had

two

purchasers in both

2019

and

2018

whose purchases were

27%

and

30%,

respectively, of total oil and gas sales.

The Company maintains its cash in bank deposit accounts, which at times

may

exceed federally insured limits. The Company has

not

experienced any losses in such accounts, and believes that it is

not

exposed to any significant credit risk with respect to cash and cash equivalents.

The Company’s investment in marketable equity securities consists of equity interests in both U.S. and international entities involved in a broad range of industries. These marketable equity securities are subject to overall market risks, which could result in a temporary or permanent decline in the fair value of these securities.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates include oil and natural gas reserve quantities that form the basis for the calculation of amortization of oil and natural gas properties. Management emphasizes that reserve estimates are inherently imprecise and that estimates of more recent reserve discoveries are more imprecise than those for properties with long production histories. Actual results could differ from the estimates and assumptions used in the preparation of the Company’s financial statements.

Gas Balancing

Gas imbalances are accounted for under the sales method whereby revenues are recognized based on production sold. A liability is recorded when the Company’s excess takes of natural gas volumes exceed our estimated remaining recoverable reserves (over-produced).

receivables are recorded for those wells where the Company has taken less than our ownership share of gas production (under-produced).

Guarantees

At the inception of a guarantee or subsequent modification, the Company records a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company records a liability for its obligations when it becomes probable that the Company will have to perform under the guarantee. The Company has issued guarantees associated with the Company’s equity method investments.

Asset Retirement Obligation

The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of

first

sales). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators, inflating it over the life of the property and discounting the estimated obligation to its present value. Current year inflation rate used is

4.08%.

When the liability is

first

recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased annually for the change in its present value, which is currently

3.25%.

The following table summarizes the asset retirement obligation for

2019

and

2018:

	2019			2018
Beginning balance at January 1	$	1,774,114		$	1,774,634
Liabilities incurred		44,994			11,386
Liabilities settled (wells sold or plugged)		(24,148	)		(64,129	)
Accretion expense		45,590			47,139
Revision to estimate		(19,023	)		5,084
Ending balance at December 31	$	1,821,527		$	1,774,114

New Accounting Pronouncements

January

16,

2020,

the FASB issued ASU

2020

01,

Investments—Equity Securities (Topic

321

), Investments—Equity Method and Joint Ventures (Topic

323

), and Derivatives and Hedging (Topic

815

)—Clarifying the Interactions between Topic

321,

Topic

323,

and Topic

815.

This ASU among other things clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic

323,

Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic

321

immediately before applying or upon discontinuing the equity method. The new ASU clarifies that, when determining the accounting for certain forward contracts and purchased options a company should

not

consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2020.

Early application is permitted, including early adoption in an interim period for:

Public business entities for periods for which financial statements have

not

yet been issued, and

All other entities for periods for which financial statements have

not

yet been made available for issuance. An entity should apply ASU

No.

2020

prospectively at the beginning of the interim period that includes the adoption date. The Company does

not

anticipate the adoption of this update to have a material impact on the Company’s financial position, results of operations or cash flows.

December

18,

2019,

the FASB issued ASU

2019

19,

Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes

. This ASU removes specific exceptions to the general principles in Topic

740

in Generally Accepted Accounting Principles (GAAP). It eliminates the need for an organization to analyze whether the following apply in a given period:

Exception to the incremental approach for intraperiod tax allocation; exceptions to accounting for basis differences when there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for:

Franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are

not

subject to tax; and enacted changes in tax laws in interim periods.

The ASU is effective for public business entities, for fiscal years beginning after

December

15,

2020,

and interim periods within those fiscal years. Early adoption is permitted for periods for which financial statements have

not

yet been issued. An entity that elects early adoption in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption should adopt all the amendments in the same period. The Company does

not

anticipate the adoption of this update to have a material impact on the Company’s financial position, results of operations or cash flows.

Pronouncements Adopted in

201

January

2019,

the Company adopted ASU

No.

2016

02,

Leases

. The Company currently has

significant financing or operating leases. The new guidance is

not

applicable for leases with a term of

months or less, nor is it applicable for oil and gas leases. The Company’s building lease is a month to month contract. The new guidance does

not

have any impact on the Company’s financial position, results of operations or cash flows.

There were

other accounting pronouncements issued or that have become effective since

December

31,

2018,

other than those discussed in Note

which were directly applicable to the Company or will have any material impact on the Company’s financial position, results of operations or cash flows.