At the end of each reporting period, the Company performs a “ceiling test” on the value of the net capitalized cost of oil and gas properties. This test compares the net capitalized cost (capitalized cost of oil and gas properties, net of accumulated depreciation, depletion and amortization and related deferred income taxes) to the present value of estimated future net revenues from oil and gas properties using an average price (arithmetic average of the beginning of month prices for the prior 12 months) and current cost discounted at 10%  plus cost of properties not being amortized and the lower of cost or estimated  fair value of unproven properties included in the cost being amortized (ceiling). If the net capitalized cost is greater than the ceiling, a write-down or impairment is required.  A write-down of the carrying value of the asset is a non-cash charge that reduces earnings in the current period.  Once incurred, a write-down may not be reversed in a later period.  The Company did not record any impairment of its oil and gas properties during the ninethree months ended September 30, 2018March 31, 2019 and 2017.2018.

Accounts receivable consist of uncollateralized joint interest owner obligations due within 30 days of the invoice date, uncollateralized accrued revenues due under normal trade terms, generally requiring payment within 30 days of sales of oil and gas production, and within 60 days of sales of produced electricity, and other miscellaneous receivables. No interest is charged on past-due balances. Payments made on accounts receivable are applied first to the earliest unpaid items. We review accounts receivable periodically and reduce the carrying amount by a valuation allowance that reflects our best estimate of the amount that may not be collectible. AnThere was no allowance was recorded at September 30, 2018March 31, 2019 and December 31, 2017.2018.

Certain prior year amounts have been reclassified to conform to current year presentation with no effect on net income.

We report basic earnings per common share, which excludes the effect of potentially dilutive securities, and diluted earnings per common share which include the effect of all potentially dilutive securities unless their impact is anti-dilutive. The following are reconciliations of the numerators and denominators of our basic and diluted earnings per share, (in thousands except for share and per share amounts):

On September 17, 2007, Hoactzin Partners, L.P. (“Hoactzin”) subscribed to a drilling program offered by the Company consisting of wells to be drilled on the Company’s Kansas Properties (the “Program”).  Peter E. Salas, the Chairman of the Board of Directors of the Company, is the controlling person of Hoactzin and of Dolphin Offshore Partners, L.P., the Company’s largest shareholder.  Hoactzin was also conveyed a net profits interest in the MMC facility at the Carter Valley municipal solid waste landfill owned and operated by Republic Services, Inc. in Church Hill, Tennessee where the Company installed a propriety combination of advanced gas treatment technology to extract the methane component of the purchased gas stream (the “Methane Project”).  As a result of the startup costs, monthly operating expenses, and gas production levels experienced, no net profits as defined were realized during the period from startup in April, 2009 through January 26, 2018, the date the Company sold the Methane Project to a third party, for payment to Hoactzin under the net profits interest.  In addition, during the fourth quarter of 2018, the Company acquired all of Hoactzin’s working interest in the drilling program wells for $134,690.

On December 18, 2007, the Company entered into a Management Agreement with Hoactzin to manage on behalf of Hoactzin all of its working interest in certain oil and gas properties owned by Hoactzin and located in the onshore Texas Gulf Coast, and offshore Texas and offshore Louisiana. As part of the consideration for the Company’s agreement to enter into the Management Agreement, Hoactzin granted to the Company an option to participate in up to a 15% working interest on a dollar for dollar cost basis in any new drilling or workover activities undertaken on Hoactzin’s managed properties during the term of the Management Agreement.  The Management Agreement expired on December 18, 2012.

The Company entered into a transition agreement with Hoactzin effective December 18, 2012 whereby the Company no longer performs operations, but administratively assists Hoactzin in becoming operator of record of these wells and transferring all bonds from the Company to Hoactzin.  This assistance is primarily related to signing the necessary documents to effectuate this transition.  Hoactzin and its controlling member are indemnifying the Company for any costs or liabilities incurred by the Company resulting from such assistance or the fact that the Company is the listed operator of record on an expired lease owned by Hoactzin where a production platform remains located.  The Company performs no operations on any property in the Gulf including that expired lease and platform, but regulations do not allow removalcertain of the last listed operator on any expired lease.these wells.  As of the date of this Report, the Company continues to administratively assist Hoactzin with this transition process.

At September 30, 2018,March 31, 2019, installment notes are recorded to Lease liabilities – finance leases.

At March 31, 2019, the Company had a revolving credit facility with Prosperity Bank.  This has historically been the Company’s primary source to fund working capital and future capital spending.  Under the credit facility, loans and letters of credit are available to the Company on a revolving basis in an amount outstanding not to exceed the lesser of $50 million or the Company’s borrowing base in effect from time to time. As of September 30, 2018,March 31, 2019, the Company’s borrowing base was $3 million, subject to a credit limit based on current covenants of approximately $2.74 million.  The credit facility is secured by substantially all of the Company’s producing and non-producing oil and gas properties.  The credit facility includes certain covenants with which the Company is required to comply.  At September 30, 2018,March 31, 2019, these covenants include the following: (a) Current Ratio > 1:1; (b) Funded Debt to EBITDA < 3.5x; and (c) Interest Coverage > 3.0x.  At September 30, 2018,March 31, 2019, the interest rate on this credit facility was 5.75%6.00%.  The Company was in compliance with all covenants during the quarter ended September 30, 2018.

The Discontinued Operationsoperations are related to the Manufactured Methane facilities.  The Company sold all its methane facility assets, except the applicable U.S. patent, on January 26, 2018 for $2.65 million.

FASB ASC 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Upon completion of wells, the Company records an asset retirement obligation at fair value using Level 3 assumptions.

Nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis upon impairment.  The carrying amounts of other financial instruments including cash and cash equivalents, accounts receivable, account payables, accrued liabilities and long term debt in our balance sheet approximates fair value as of September 30, 2018March 31, 2019 and December 31, 2017.2018.

The Company as designated operator of the Hoactzin properties was administratively issued an “Incident of Non-Compliance” by the Bureau of Safety and Environmental Enforcement (“BSEE”) during the quarter ended September 30, 2012 concerning one of Hoactzin’s operated properties.  This action called for payment of a civil penalty of $386,000 for failure to provide, upon request, documentation to the BSEE evidencing that certain safety inspections and tests had been conducted in 2011.  On July 14, 2015, the federal district court in the Eastern District of Louisiana affirmed the civil penalty without reduction.  The Company did not further appeal.  In the third quarter of 2015, the Company paid the civil penalty and statutory interest thereon from funds borrowed under its credit facility.  In the fourth quarter of 2015, the Company received a return of the cash collateral previously provided to RLI Insurance Company.  The Company has not advanced any funds to pay any obligations of Hoactzin and no borrowing capability of the Company has been used in connection with its obligations under the Management Agreement, except for those funds used to pay the civil penalty and interest thereon.

During the second quarter of 2015, the Company received from Hoactzin a copy of a preliminaryan internal analysis prepared by Hoactzin setting out certain issues that Hoactzin may consider to form the basis of operational and other claims against the Company primarily under the Management Agreement.  This preliminary analysis raised issues other than the “Incident of Non-Compliance” discussed above.  The Company is discussing this preliminary analysis, as well as the civil penalty discussed above, with Hoactzin in an effort to determine whether there is possibility of a reasonable resolution of some or all of these matters on a negotiated basis.

Commencing in the quarter ended March 31, 2015 and continuing into the quarter ended June 30, 2018, the Company implemented cost reduction measures including compensation reductions for each employee as well as members of the Board of Directors.  These compensation reductions were to remain in place until such time, if any, that the market price of crude oil, calculated as a thirty day trailing average of WTI postings as published by the U.S. Energy Information Administration meets or exceeds $70 per barrel.  In May 2018, oil prices as so calculated exceeded $70 and compensation reverted to the levels in place before the reductions became effective. At such time, if any, that the market price of crude oil, calculated as a thirty day trailing average of WTI postings as published by the U.S. Energy Information Administration meets or exceeds $85 per barrel, all previous reductions made will be reimbursed, a portion which may be paid in stock, to each employee and members of the Board of Directors if is still employed by the Company or still a member of the Board of Directors.  For the period January 1, 2015 through September 30, 2018,March 31, 2019, the reductions were approximately $445,000.$432,000.  Of the $432,000, approximately $103,000 will be paid in the Company’s common stock.  The $103,000 value represents approximately 100,000 common share valued at $1.03 per share which represents the closing price on March 29, 2019.  The Company has not accrued any liabilities associated with these compensation reductions.

The Company is not a party to any pending material legal proceeding.   To the knowledge of management, no federal, state, or local governmental agency is presently contemplating any proceeding against the Company which would have a result materially adverse to the Company.  To the knowledge of management, no director, executive officer or affiliate of the Company or owner of record or beneficially of more than 5% of the Company’s common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

Production cost and taxes decreased $45,000increased $49,000 from $907,000$730,000 during the thirdfirst quarter of 20172019 to $862,000$779,000 during the thirdfirst quarter of 2018.  This decrease was primarily due to an $118,000 decrease related to an amendment to the 2016 Delaware franchise taxes recorded in the third quarter of 2017, a $32,000 decrease in accrued Delaware franchise taxes, partially offset by a $54,000$51,000 increase related to change in the oil inventory quarterly adjustments, $22,000a $20,000 increase in pumping charges primarily related to replacement of a company pumper with a contract pumper, and a $17,000 increase in chemical costs, and a $20,000 increase in compensation expense as a result of reinstating compensation to pre-reduction levels as a result of increased oil prices.

Gain on sale of assets increased $29,000 from $5,000$16,000 during the first nine monthsquarter of 20172018 to $34,000$45,000 during the first nine monthsquarter of 2018.2019.  This increase was primarily related to recording sale of equipment inventory to a third party during the first quarter of 2019, partially offset by recording gains on disposalsales of fieldcompany vehicles recorded during the first quarter of 2018.

At September 30, 2018,March 31, 2019, the Company had a revolving credit facility with Prosperity Bank.  This has historically been the Company’s primary source to fund working capital and future capital spending.  Under the credit facility, loans and letters of credit are available to the Company on a revolving basis in an amount outstanding not to exceed the lesser of $50 million or the Company’s borrowing base in effect from time to time. As of September 30, 2018,March 31, 2019, the Company’s borrowing base was $3 million, subject to a credit limit based on current covenants of approximately $2.74 million.  The credit facility is secured by substantially all of the Company’s producing and non-producing oil and gas properties.  The credit facility includes certain covenants with which the Company is required to comply.  At September 30, 2018,March 31, 2019, these covenants include the following: (a) Current Ratio > 1:1; (b) Funded Debt to EBITDA < 3.5x; and (c) Interest Coverage > 3.0x.  At September 30, 2018,March 31, 2019, the interest rate on this credit facility was 5.75%6.00%.  The Company was in compliance with all covenants during the quarter ended September 30, 2018.

Net cash provided byused in operating activities from continuing operations was $1.0 million$18,000 during the first ninethree months of 20182019 compared to $191,000$71,000 provided by operating activities from continuing operations during the first ninethree months of 2017.2018.  Cash flow used in working capital was $190,000$102,000 during the first ninethree months of 20182019 compared to $170,000 provided by$270,000 used in working capital during the first ninethree months of 2017.2018. The $360,000 increase$168,000 decrease in cash flow used in working capital was primarily due to changes in inventory, changes in accrued liabilities, and changes in accounts receivable, partially offset by changes in accounts payable.  The $827,000 increase$89,000 decrease in cash provided by operating activities was primarily due to a $1.1 million$196,000 decrease in revenues, and a $49,000 increase in revenues,production cost and taxes, partially offset by the $360,000 increase$168,000 decrease in cash flow used in working capital.  Net cash used inprovided by investing activities from continuing operations was $466,000$139,000 during the first ninethree months of 20182019 compared to $153,000$(41,000) used in investing activities from continuing operations during the first ninethree months of 2017.2018.  This increase in cash flow used inprovided by investing activities was primarily due to drilling and polymers performed in 2018.sale of materials inventory to a third party during the first three months of 2019.  Cash flow used in financing activities from continuing operations during the first ninethree months of 20182019 was $30,000$(12,000) compared to $153,000 provided by$(16,000) used in financing activities during the first ninethree months of 2017.  During the first nine months of 2017, the Company raised approximately $2.7 million in proceeds as a result of a rights offering which closed on February 2, 2017.  The direct costs associated with this rights offering were approximately $242,000, of which $140,000 were incurred during 2016.  The net proceeds from this offering were used primarily to pay off the Company’s credit facility.2018.

The Company as designated operator of the Hoactzin properties was administratively issued an “Incident of Non-Compliance” by the Bureau of Safety and Environmental Enforcement (“BSEE”) during the quarter ended September 30, 2012 concerning one of Hoactzin’s operated properties.  This action called for payment of a civil penalty of $386,000 for failure to provide, upon request, documentation to the BSEE evidencing that certain safety inspections and tests had been conducted in 2011.  On July 14, 2015, the federal district court in the Eastern District of Louisiana affirmed the civil penalty without reduction.  The Company did not further appeal.  In the third quarter of 2015, the Company paid the civil penalty and statutory interest thereon from funds borrowed under its credit facility.  In the fourth quarter of 2015, the Company received a return of the cash collateral previously provided to RLI Insurance Company.  The Company has not advanced any funds to pay any obligations of Hoactzin and no borrowing capability of the Company has been used in connection with its obligations under the Management Agreement, except for those funds used to pay the civil penalty and interest thereon.

During the second quarter of 2015, the Company received from Hoactzin a copy of a preliminaryan internal analysis prepared by Hoactzin setting out certain issues that Hoactzin may consider to form the basis of operational and other claims against the Company primarily under the Management Agreement.  This preliminary analysis raised issues other than the “Incident of Non-Compliance” discussed above.  The Company is discussing this preliminary analysis, as well as the civil penalty discussed above, with Hoactzin in an effort to determine whether there is possibility of a reasonable resolution of some or all of these matters on a negotiated basis.

Commencing in the quarter ended March 31, 2015 and continuing into the quarter ended June 30, 2018, the Company implemented cost reduction measures including compensation reductions for each employee as well as members of the Board of Directors.  These compensation reductions were to remain in place until such time, if any, that the market price of crude oil, calculated as a thirty day trailing average of WTI postings as published by the U.S. Energy Information Administration meets or exceeds $70 per barrel.  In May 2018, oil prices as so calculated exceeded $70 and compensation reverted to the levels in place before the reductions became effective. At such time, if any, that the market price of crude oil, calculated as a thirty day trailing average of WTI postings as published by the U.S. Energy Information Administration meets or exceeds $85 per barrel, all previous reductions made will be reimbursed, a portion which may be paid in stock, to each employee and members of the Board of Directors if is still employed by the Company or still a member of the Board of Directors.  For the period January 1, 2015 through September 30, 2018,March 31, 2019, the reductions were approximately $445,000.$432,000.  Of the $432,000, approximately $103,000 will be paid in the Company’s common stock.  The $103,000 value represents approximately 100,000 common share valued at $1.03 per share which represents the closing price on March 29, 2019.  The Company has not accrued any liabilities associated with these compensation reductions.

The Company is not a party to any pending material legal proceeding.   To the knowledge of management, no federal, state, or local governmental agency is presently contemplating any proceeding against the Company which would have a result materially adverse to the Company.  To the knowledge of management, no director, executive officer or affiliate of the Company or owner of record or beneficially of more than 5% of the Company’s common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

The borrowing base under the Company’s revolving credit facility will be determined from time to time by the lender, consistent with its customary natural gas and crude oil lending practices. Reductions in estimates of the Company’s natural gas and crude oil reserves could result in a reduction in the Company’s borrowing base, which would reduce the amount of financial resources available under the Company’s revolving credit facility to meet its capital requirements. Such a reduction could be the result of lower commodity prices or production, inability to drill or unfavorable drilling results, changes in natural gas and crude oil reserve engineering, the lender’s inability to agree to an adequate borrowing base or adverse changes in the lenders’ practices regarding estimation of reserves.  If cash flow from operations or the Company’s borrowing base decreases for any reason, the Company’s ability to undertake exploration and development activities could be adversely affected.  As a result, the Company’s ability to replace naturally declining production may be limited. In addition, if the borrowing base is reduced, the Company may be required to pay down its borrowings under the revolving credit facility so that outstanding borrowings do not exceed the reduced borrowing base. This requirement could further reduce the cash available to the Company for capital spending and, if the Company did not have sufficient capital to reduce its borrowing level, could cause the Company to default under its revolving credit facility.

As of September 30, 2018,March 31, 2019, the Company’s borrowing base was $3 million, subject to a credit limit based on current covenants of approximately $2.74 million, of which zero had been drawn down by the Company.  The Company’s next periodic borrowing base review will take place in MarchMay 2019.

The Company's major market risk exposure is in the pricing applicable to its oil production.  Realized pricing is primarily driven by the prevailing worldwide price for crude oil.  Historically, prices received for oil and gas production have been volatile and unpredictable and price volatility is expected to continue.  The average monthly Kansas oil prices received during the first ninethree months of 20182019 ranged from a low of $56.66$46.39 per barrel to a high of $65.70$52.93 per barrel.

As of September 30, 2018,March 31, 2019, the Company has no open positions related to derivative agreements relating to commodities.

At September 30, 2018,March 31, 2019, the Company had debtbalances on financing leases outstanding of approximately $136,000, none of which was$112,000, and no balance owed on its credit facility with Prosperity Bank.  As of September 30, 2018,March 31, 2019, the interest rate on the credit facility was variable at a rate equal to prime plus 0.50% per annum.  The Company’s credit facility interest rate at September 30, 2018March 31, 2019 was 5.75%6.00%.  The Company’s remaining debtfinancing leases of $136,000 has$112,000 have fixed interest rates ranging from 4.16%5.0% to 4.60%6.5%.

The annual impact on interest expense and the Company’s cash flows of a 10% increase in the interest rate on the credit facility would be approximately zero assuming borrowed amounts under the credit facility remained at the same amount owed as of September 30, 2018.March 31, 2019.  The Company did not have any open derivative contracts relating to interest rates at September 30, 2018March 31, 2019 or December 31, 2017.2018.

Certain statements in this report, including statements of the future plans, objectives, and expected performance of the Company, are forward-looking statements that are dependent upon certain events, risks and uncertainties that may be outside the Company’s control, and which could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to, the market prices of oil and gas, economic and competitive conditions, inflation rates, legislative and regulatory changes, financial market conditions, political and economic uncertainties of foreign governments, future business decisions, and other uncertainties, all of which are difficult to predict.

There are numerous uncertainties inherent in projecting future rates of production and the timing of development expenditures. The total amount or timing of actual future production may vary significantly from estimates. The drilling of exploratory wells can involve significant risks, including those related to timing, success rates and cost overruns. Lease and rig availability, complex geology and other factors can also affect these risks.  Additionally, fluctuations in oil and gas prices, or a prolonged period of low prices, may substantially adversely affect the Company's financial position, results of operations, and cash flows.

The Company’s Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer has concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Report, were adequate and effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The effectiveness of a system of disclosure controls and procedures is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of internal controls, and fraud. Due to such inherent limitations, there can be no assurance that any system of disclosure controls and procedures will be successful in preventing all errors or fraud, or in making all material information known in a timely manner to the appropriate levels of management.

During the ninethree months ended September 30, 2018,March 31, 2019, there have been no changes to the Company’s system of internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s system of controls over financial reporting.  As part of a continuing effort to improve the Company’s business processes, management is evaluating its internal controls and may update certain controls to accommodate any modifications to its business processes or accounting procedures.

None.

Refer to Item 1A Risk Factors in the Company’s Report on Form 10-K for the year ended December 31, 20172018 filed on March 28, 20182019 which is incorporated by this reference.

None.

None.

Not Applicable

None.

The following exhibits are filed with this report:

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