Annual report [Section 13 and 15(d), not S-K Item 405]

Interest in oil and gas royalties

Interest in oil and gas royalties

12 Months Ended

Dec. 31, 2025

Note 10 – Interest in oil and gas royalties

In March 2025, the Company acquired three fractional, non-operating royalty interests in oil and gas properties covering approximately one hundred twenty-one (121) wells in the Spraberry Field of the Permian Basin in West Texas, through related public auctions for total consideration of $1,369,899 as follows:

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On March 20, 2025, Mentor Capital, Inc. purchased an average of 0.0332439% oil and gas royalty interests in seven (7) producing horizontal wells and a royalty interest of approximately 0.15625% in two (2) non-producing mineral wells located in the Permian Basin situated in Howard County, Texas from Bluestem Royalty Partners, LP, a Texas limited partnership, for a total acquisition cost of $60,980. Prior to the Company’s purchase, average daily production in the last six months was approximately 5,252 BBLs and 5,580 MCF. Transfer of title to oil, gas, and mineral royalty interests and other interests in the name of Mentor Capital, Inc. was recorded on April 3, 2025 in Howard County, Texas by a certain Mineral and Royalty Deed effective March 1, 2025. Therefore, royalty payments owed to the Company commenced and were recognized as of March 1, 2025.

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On March 25, 2025, Mentor Capital, Inc. purchased an overriding royalty interest of approximately 0.06% in seventy-one (71) producing oil and gas wells in a nearly 3.5 square mile pooled horizontal drilling project located in the Permian Basin situated in Martin County, Texas from Gatorex Holdings, LLC, a Texas limited liability company, for a total acquisition cost of $720,690. Prior to the Company’s purchase, average daily production in the last six months was approximately 16,572 BBLs and 37,496 MCF. Transfer of title to overriding royalty interests together with all interests in any units, bonuses, rents, royalties, and other benefits which may accrue in the name of Mentor Capital, Inc. was recorded on April 9, 2025 in Martin County, Texas by a certain Assignment of Overriding Royalty Interests effective April 1, 2025. Royalty payments owed to the Company commenced and were recognized effective April 1, 2025.

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As of March 31, 2025, Mentor Capital, Inc. purchased royalty interests of approximately 0.050099% in forty-one (41) producing oil and gas wells in the Permian Basin situated in Martin County, Texas from Maven Royalty 2, LP, a Delaware limited partnership, for $588,229. Prior to the Company’s purchase, average daily production in the last six months was approximately 15,734 BBLs and 20,645 MCF. Transfer of title to all oil, gas, and associated liquid or liquefiable hydrocarbons, including royalty, overriding royalty, unit interest and mineral interests of whatever nature, in, on, and under that may be produced from or attributable to the property including royalty interests in the name of Mentor Capital, Inc. was recorded on April 9, 2025 in Martin County, Texas by a certain Mineral and Royalty Deed effective April 1, 2025. Therefore, royalty payments owed to the Company commenced and were recognized on April 1, 2025.

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2025 and 2024

The royalty interests entitle the Company to receive a proportional share of revenues generated from the production of hydrocarbons from the underlying property, without incurring any operating or production costs. Working interest owners operating the wells will participate in and bear the costs of operation and development.

The Company’s ownership in various non-operating royalty interests that result in future economic benefit in the form of royalty payments following production is classified as intangible assets in accordance with ASC 350, “Intangibles – Goodwill and Other.” The Company determined that the royalty interests have an estimated useful life of ten years, which is not uncommon in the oil and gas industry. Therefore, the acquisition purchase price and associated transaction costs of our royalty interests are amortized on a straight-line basis over an estimated useful life of ten years. In contemplation of the purchase of oil and gas royalty interests, management studied the historical production curves of the wells individually and in the aggregate, along with studying its estimated percentage of royalty income based on historical royalty payments in alignment with the percentage it purchased.

The following table summarizes activity related to the royalty interests at December 31, 2025 and 2024:

	December 31, 2025			December 31, 2024
Additions⁽¹⁾	$	1,369,899		$	-
Amortization		(103,251	)		-
Impairment		-			-
Ending balance	$	1,266,648		$	-

(1)

Additions reflect the Company’s total royalty interest acquisitions as of December 31, 2025. A total of $1,369,899 royalty interests had been acquired as of March 31, 2025.

Royalty revenue over approximately eight months of operation was $166,811 and $0 for the twelve months ended December 31, 2025 and 2024.

Accrued royalty income and incurred severance taxes are estimated and recognized in the month oil is produced, when royalty income is earned. The difference between accrued royalty income and the amount received is adjusted when royalty payments are received.

Accrual of estimated royalty income was $26,000 and $0 as of December 31, 2025 and 2024, respectively, which represent the Company’s estimated receivables for approximately two months in November and December 2025. Royalty payments received for approximately eight months of production were $140,811 and $0 for the twelve months ended December 31, 2025 and 2024, which represent a portion of the royalty income earned by the Company. Actual and estimated severance taxes were approximately 5.10% of actual and accrued royalty income at the twelve months ended December 31, 2025. The difference between the estimated incurred severance tax liability and the amount paid is adjusted upon the Company’s receipt of royalty statements. The Company monitors changes in market conditions, commodity prices, production volumes, and other factors, which may materially impact the recoverability of our royalty interests.

Mentor Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2025 and 2024

Ad valorem tax liability was $4,571 and $0 as of December 31, 2025, and 2024. This liability is assessed according to value by the county assessor in the locality where our royalty interests are located, in accordance with local and state law.

Subsequent to year-end, the Company received a total of $30,588 in royalty interest payments, gross, which, after payment of $1,481 in severance taxes paid by the Company, were $29,107, net, which represents a portion of the royalty income earned by the Company in November 2025 and December 2025. See Note 21.