Quarterly report [Sections 13 or 15(d)]

Interest in oil and gas royalties

Interest in oil and gas royalties

9 Months Ended

Sep. 30, 2026

Note 8 – 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, for total consideration of $1,369,899 as follows:

	○	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.

	○	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.

	○	On 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.

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 are 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 Company’s royalty interests are analyzed for impairment at least annually or if events or changes in circumstances indicate the asset may be significantly impaired. As of September 30, 2026, the total carrying value of all royalty interests taken together was $1,163,906, which was calculated as the beginning March 2025 balance of our royalty interests of $1,369,899 less accumulated amortization of $205,993 at September 30, 2026. No indicators of impairment were identified during the nine months ended September 30, 2026.

The following table summarizes activity related to the royalty interests at September 30, 2026 and December 31, 2025:

	September 30, 2026			December 31, 2025
Beginning balance ⁽¹⁾	$	1,266,648		$	1,369,899
Additions		-			-
Amortization		(102,742	)		(103,251	)
Impairment		-			-
Ending balance	$	1,163,906		$	1,266,648

(1)	The beginning balance reflects 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 was $55,480 and $40,430 for the three months ended September 30, 2026, and 2025, respectively, and royalty revenue was $163,843 and $117,430 for the nine months ended September 30, 2026, and 2025, respectively.

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 $33,156 and $38,456 for the nine months ended September 30, 2026 and 2025, respectively, which represented the Company’s estimated receivables for approximately two months as of September 30, 2026 and for approximately two and a half months as of September 30, 2025 due to the recent purchase of our royalty interests in 2025. Net accrual of estimated royalty income was $7,156 at September 30, 2026, which represents the Company’s $137,460 estimated receivables, less ($130,304) reversals related to November 2025 through July 2026 prior accruals related to such payments being received in the nine months ended September 30, 2026. Royalty payments received were $156,687 for the nine months ended September 30, 2026, which represents the royalty income earned by the Company from November 2025 through July 2026. Royalty payments received as of September 30, 2025 were $78,974, which represent income earned by the Company for the period March 2025 through July 2025. Actual and estimated severance taxes were approximately 5.10% of actual and accrued royalty income at the three and nine months ended September 30, 2026 and 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.

Estimated annual ad valorem tax liability was $4,750 and $0 for the nine months ended September 30, 2026, and 2025. 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 quarter end, the Company received a total of $15,900 in royalty interest payments, gross, which, after payment of $829 in severance taxes paid by the Company, were $15,071, net, which represents a portion of the royalty income earned by the Company in August, 2026. See Note 18.