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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE A: BASIS OF PRESENTATION</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">The accompanying unaudited consolidated financial statements
include the accounts of New Concept Energy, Inc. and its majority-owned subsidiaries (collectively, “NCE” or the “Company”).  All
significant intercompany transactions and accounts have been eliminated.  Certain reclassifications have been made to
the prior year revenue and operating expense amounts in the statement of operations to conform to the current year presentation.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">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.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">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, 2018.  Operating results for the three and six month periods ended September 30, 2019
are not necessarily indicative of the results that may be expected for any subsequent quarter or for the fiscal year ending December
31, 2019.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE B: NATURE OF OPERATIONS</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">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, Inc. and Mountaineer State Operations, LLC.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE C: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">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, 2018.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE F: CONTINGENCIES</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/107% new times roman,serif; margin: 0">Litigation. The Company and its subsidiaries, from time to time,
have been involved in various items of litigation incidental to and in the ordinary course of its business and, in the opinion
of management, the outcome of such litigation will not have a material adverse impact upon the Company’s financial condition,
results of operations or liquidity.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE G:  SUBSEQUENT EVENTS </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">The Company has evaluated subsequent events through August
13, 2019, the date the financial statements were available to be issued, and determined that there are none to be reported.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE E: LIQUIDITY</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">The Company’s ability to meet current cash obligations
relies on cash received from current operations and the collection of notes receivable. The Company is evaluating business opportunities
to provide both additional income and cash flow.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE D: OIL AND GAS RESERVES</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2019 the
Company unsuccessfully drilled a well which resulted in dry hole. As the well did not prove up the estimated probable and
possible reserves, the Company had to deem the applicable reserve estimates as impaired. In the third quarter the company
booked an impairment expense of $2,285,000 which represents a reduction of both the estimated probable and possible reserves
as well as the cost of drilling the failed well.</p>