MARINE PETROLEUM TRUST 10-K

ITEM 9A. CONTROLS AND PROCEDURES Effectiveness of Disclosure Controls and Procedures As of June 30, 2020, the Trustee carried out an evaluation of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, the Trustee concluded that Marine’s disclosure controls and procedures were effective as of June 30, 2020. Changes in Internal Control Over Financial Reporting There have not been any changes in Marine’s internal control over financial reporting during the fourth quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, Marine’s internal control over financial reporting. Trustee’s Report on Internal Control Over Financial Reporting The Trustee is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act. The Trustee conducted an evaluation of the effectiveness of Marine’s internal control over financial reporting based on the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Trustee’s evaluation under the “Internal Control-Integrated Framework,” the Trustee concluded that Marine’s internal control over financial reporting was effective as of June 30, 2020. This Annual Report on Form 10-K does not include an attestation report of Marine’s registered public accounting firm regarding internal control over financial reporting since the Trustee’s report was not subject to attestation by Marine’s registered public accounting firm pursuant to an exemption for smaller reporting companies pursuant to Section 404(c) of the Sarbanes-Oxley Act of 2002. ITEM 9B. OTHER INFORMATION None. 17 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Officers. The Trust is a trust created under the laws of the State of Texas. The Trust’s Indenture does not provide for directors or officers or the election or appointment of directors or officers. Under the Indenture, Simmons Bank, serves as the Trustee. Code of Ethics. Because the Trust has no employees, it does not have a code of ethics. Employees of the Trustee must comply with the Trustee’s code of ethics, a copy of which will be made available to unitholders without charge, upon request by appointment at Simmons Bank, 2911 Turtle Creek Blvd., Suite 850, Dallas, Texas 75219. Committees. The Trust has no directors and therefore has no audit committee or audit committee financial expert and no nominating committee or compensation committee. ITEM 11. EXECUTIVE COMPENSATION The Trust has no directors or officers and is administered by the Trustee. Accordingly, the Trust does not have a compensation committee or maintain any equity compensation plans, and there are no units reserved for issuance under any such plans. During the past three fiscal years, the Trust paid or accrued fees to the Trustee, as set forth below. Name of Individual or Entity Fiscal Year Other Annual Compensation (1) Simmons Bank, Trustee 2020 $ 28,000 Simmons Bank, Trustee 2019 $ 28,000 Simmons Bank, Trustee (2) Southwest Bank, Trustee 2018 2018 $ $ 14,000 14,000 (1) Under the Indenture, the Trustee is entitled to reasonable and customary fees and compensation for its services. (2) Simmons Bank has served as Trustee since February 20, 2018, the effective date of its merger with Southwest Bank. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS The following table sets forth the persons known to the Trust who beneficially own more than five percent of the outstanding units of beneficial interest as of September 1, 2020, based solely on the Trust’s review of information filed with the SEC and information provided by such persons: Name and Address Amount and Nature of Beneficial Ownership Percent of Class Robert H. Paslay 1007 Gasserway Circle Brentwood, TN 37027 213,837 units 10.7 % Patricia Martin 110 Woodbine Place Missoula, MT 59803 174,529 units 8.7 % There are no executive officers or directors of the Trust. The Trustee does not beneficially own any units of beneficial interest. The Trust does not maintain any equity compensation plans and the Trust has not repurchased any units during the fourth quarter of fiscal 2020. The Trustee knows of no arrangements the operation of which may at a subsequent date result in a change of control of the Trust. 18 Table of Contents ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE None. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Fees for services performed by Weaver and Tidwell, L.L.P. for the fiscal years ended June 30, 2020 and 2019 were as follows: 2020 2019 Audit Fees $ 50,000 $ 50,000 Audit-Related Fees — — Tax Fees — — All Other Fees — — As referenced in “ Item 10. Directors, Executive Officers and Corporate Governance ” above, the Trust has no audit committee, and as a result, has no audit committee pre-approval policy with respect to fees paid to its independent registered public accounting firm. 19 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Financial Statements — see “ Item 8. Financial Statements and Supplementary Data ” above. (b) Exhibits: 4.1 Indenture, as amended on December 8, 2000, of Marine Petroleum Trust, filed as Exhibit 4.1 to the Annual Report on Form 10-K of Marine for the fiscal year ended June 30, 2001 (File No. 000-08565), and incorporated by reference herein . 4.2 Description of Securities, filed as Exhibit 4.2 to the Annual Report on Form 10-K of Marine for the fiscal year ended June 30, 2019 (File No. 000-08565), and incorporated by reference herein . 21.1 Subsidiaries of Marine, filed as Exhibit 21.1 to the Annual Report on Form 10-K of Marine for the fiscal year ended June 30, 2002 (File No. 000-08565), and incorporated by reference herein . 31.1* Certification of the Corporate Trustee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 . 32.1* Certification of the Corporate Trustee pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 . *Filed herewith. (c) Financial Statement Schedules – All required schedules are included in the financial statements included in this Annual Report on Form 10-K. ITEM 16. FORM 10-K SUMMARY None. 20 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustee and Unitholders of Marine Petroleum Trust and Subsidiary Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of assets, liabilities, and trust corpus of Marine Petroleum Trust and Subsidiary (the Trust) as of June 30, 2020 and 2019, and the related consolidated statements of distributable income and changes in trust corpus for each of the three years in the period ended June 30, 2020, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the assets, liabilities, and trust corpus of the Trust as of June 30, 2020 and 2019, and the distributable income and changes in trust corpus for each of the three years in the period ended June 30, 2020, in conformity with the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. As described in Note 2 to the consolidated financial statements, these consolidated financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Trustee. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by the Trustee, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Emphasis of Matter As discussed in Note 1 to the consolidated financial statements, the Trust Indenture is set to expire June 1, 2021. /s/ WEAVER AND TIDWELL, L.L.P We have served as the Trust’s auditor since 2011. Dallas, Texas September 28, 2020 21 Table of Contents MARINE PETROLEUM TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS As of June 30, 2020 and 2019 Assets June 30, 2020 June 30, 2019 Current assets: Cash and cash equivalents $ 933,745 $ 966,619 Federal income taxes refundable 2,800 2,800 Producing oil and gas properties 7 7 Total assets $ 936,552 $ 969,426 Liabilities and Trust Corpus Current liabilities: Federal income taxes payable — — Total current liabilities $ — $ — Trust Corpus – authorized 2,000,000 units of beneficial interest, issued 2,000,000 units at nominal value 936,552 969,426 $ 936,552 $ 969,426 See accompanying notes to consolidated financial statements. 22 Table of Contents MARINE PETROLEUM TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME For The Fiscal Years Ended June 30, 2020 2019 Income: Oil and natural gas royalties $ 773,828 $ 839,113 Oil and natural gas royalties from affiliate — — Interest and other income 14,357 21,430 Total income $ 788,185 $ 860,543 Expenses: General and administrative 214,075 226,471 Distributable income before Federal income taxes 574,110 634,072 Federal income taxes of subsidiary — — Distributable income $ 574,110 $ 634,072 Distributable income per unit $ 0.29 $ 0.32 Units outstanding 2,000,000 2,000,000 See accompanying notes to consolidated financial statements. 23 Table of Contents MARINE PETROLEUM TRUST AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN TRUST CORPUS For The Fiscal Years Ended June 30, 2020 2019 Trust corpus, beginning of year $ 969,426 $ 987,023 Distributable income 574,110 634,072 Distributions to unitholders (606,984 ) (651,669 ) Trust corpus, end of year $ 936,552 $ 969,426 Distributions per unit $ 0.30 $ 0.33 See accompanying notes to consolidated financial statements. 24 Table of Contents MARINE PETROLEUM TRUST AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies (a) General Marine Petroleum Trust (the “Trust”) was established on June 1, 1956 with the transfer of property to the Trust consisting of certain contract rights, units of beneficial interest and common stock in exchange for units of beneficial interest in the Trust. The contract rights entitled the Trust to receive an overriding royalty interest in oil, natural gas and other mineral leasehold interests acquired by Gulf Oil Corporation, now Chevron U.S.A., Inc. (“Chevron”), a subsidiary of Chevron Corporation, in certain areas of the Gulf of Mexico acquired prior to January 1, 1980. The Trust must distribute to its unitholders all cash accumulated each quarter, less an amount reserved for accrued liabilities and estimated future expenses. The Trust and its subsidiary cannot engage in a trade or business. Funds held by Marine Petroleum Corporation, a wholly owned subsidiary of the Trust, (“MPC,” and collectively with the Trust, “Marine”) pending distribution to the Trust are invested in U.S. Treasury and agency bonds. The unitholders assigned their contract rights offshore of Louisiana to MPC reserving a 98% net profits interest to themselves. The net profits interest contract was transferred to the Trust along with the other properties. The Trust is authorized to pay expenses of MPC should it be necessary. The Trust is to continue until June 1, 2021, or until such later date as holders of the units owning a majority of the outstanding units may designate, but in any event, not more than 20 years from such designation. However, the unitholders owning eighty percent (80%) or more of the outstanding units may terminate the Trust on any date. Following the filing of this Annual Report with the SEC, the unitholders will be asked to approve an amendment to the Indenture to extend the life of the Trust beyond the current expiration date of June 1, 2021. (b) Principles of Consolidation The consolidated financial statements include the Trust and its wholly owned subsidiary, MPC. All material intercompany accounts and transactions have been eliminated upon consolidation. (c) Producing Oil and Gas Properties At the time the Trust was established, no determinable market value was available for the assets transferred to the Trust; consequently, nominal values were assigned. Accordingly, no allowance for depletion has been included. All income from oil and natural gas royalties relate to proved developed oil and natural gas reserves. (d) U.S. Federal Income Taxes No provision has been made for U.S. Federal income taxes on the Trust’s income since such taxes are the liability of the unitholders. U.S. Federal income taxes have been provided on the income of MPC (which specifically excludes the 98% net profits interest to be retained by and delivered to the Trust), after deducting statutory depletion. MPC uses the cash method of reporting for U.S. Federal income taxes. The primary difference between the actual tax expense of MPC and the expected tax expense is due to the fact that only 2% of MPC’s income ( i.e. , excluding the 98% net profits interest retained by, and delivered to, the Trust) is subject to U.S. Federal income tax. 25 Table of Contents Tax positions taken by the Trust related to the Trust’s pass-through status and federal state tax positions have been reviewed, and the Trustee is of the opinion that material positions taken would more likely than not be sustained upon an examination. In accordance with the Trust’s basis of accounting discussed in Note 2, the Trust would only recognize the impact of tax positions that were not upheld at the time of payment. As of June 30, 2020, the Trust’s tax years 2016 through 2019 remain subject to examination. MPC recognizes interest and penalties related to unrecognized tax benefits in income tax expense. (e) Credit Risk Concentration and Cash Equivalents Financial instruments which potentially subject Marine to concentrations of credit risk are primarily investments in cash equivalents, U.S. Treasury and agency bonds. The Trust and MPC place their cash investments with financial institutions or companies that the Trustee considers credit worthy and limit the amount of credit exposure from any one financial institution. Marine had cash and cash equivalents of $933,745 and $966,619 at June 30, 2020 and 2019, respectively, which consisted of cash deposits, U.S. Treasury and agency bonds and money market accounts. (f) Use of Estimates The preparation of financial statements in conformity with the modified cash basis method of accounting requires the Trustee to make various estimates and assumptions that affect the reported amount of liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Actual results may differ from such estimates. (g) Distributable Income per Unit and Distributions Distributable income per unit is determined by dividing distributable income by the number of units of beneficial interest outstanding during the period. Distributions to unitholders are calculated and paid out net of reserve for future expenses, which are estimated by the Trustee on a quarterly basis. (h) Significant Royalty Sources Percent of royalty revenue received by Marine from producers is summarized as follows: Fiscal Year Ended June 30, Company 2020 2019 2018 Arena Energy, LP 96% 92% 90% Chevron USA, Inc. 1% 3% 6% Fieldwood Energy LLC 3% 5% 4% 100% 100% 100% (2) Basis of Accounting The financial statements of Marine have been prepared on the modified cash basis method and are not intended to present financial position and results of operations in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Under the modified cash basis method: • Royalty income is recognized when received by Marine. • Marine’s expenses (which include accounting, legal, and other professional fees, Trustees’ fees and out-of-pocket expenses) are recorded on an actual paid basis. Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary. • Distributions to unitholders are recognized when declared by the Trustee of the Trust. 26 Table of Contents The financial statements of Marine differ from financial statements prepared in conformity with GAAP because of the following: • Royalty income is recognized in the month received rather than in the month of production. • Reserves may be established for contingencies that would not be recorded under GAAP. • Expenses are recorded in the month paid rather than in the month incurred. • Depletion is not recorded. This comprehensive basis of accounting corresponds to the accounting principles permitted for royalty trusts by the Securities and Exchange Commission (the “SEC”), as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts. Revenue Recognition . In May 2014, the FASB issued updated guidance for recognizing revenue from contracts with customers. This update amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods and services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services and revenue streams related solely to oil and gas royalties. The Trust adopted the disclosure standards of this update, as required, beginning with the first quarter of fiscal year 2019. The adoption of this standard has not had a significant impact on its financial statements due to the modified cash basis of reporting used by the Trust. (3) Investment in Affiliate – Tidelands Royalty Trust “B” At June 30, 2020 and 2019, the Trust owned 32.6% of the outstanding units of beneficial interest in Tidelands Royalty Trust “B” (“Tidelands”). The 452,366 units owned by the Trust had a market value of $13,591 and $85,950 at June 30, 2020 and 2019, respectively, based on the closing price of Tideland’s units on the OTC Pink marketplace on such dates. The following summary financial statements have been derived from the unaudited consolidated financial statements of Tidelands: TIDELANDS CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS Assets June 30, 2020 June 30, 2019 Current assets: Cash and cash equivalents $ 469,783 $ 477,352 Oil, natural gas and other mineral properties 2 2 Total assets $ 469,785 $ 477,354 Liabilities and Trust Corpus Current liabilities: Income distributable to unitholders $ — $ — Other payable $ 76,096 $ 66,272 Federal income taxes payable $ — $ — Total current liabilities $ 76,096 $ 66,272 Trust corpus – 1,386,525 units of beneficial interest authorized, 1,386,375 issued at nominal value $ 393,689 $ 411,082 $ 469,785 $ 477,354 27 Table of Contents TIDELANDS CONSOLIDATED STATEMENTS OF DISTRIBUTABLE INCOME Twelve Months Ended June 30, 2020 2019 2018 Income $ 5,872 $ 60,536 $ 128,193 Expenses 23,265 114,359 128,195 Distributable income before Federal income taxes (17,393 ) (53,823 ) (2 ) Federal income taxes of Tidelands’ subsidiary — — — Distributable income $ (17,393 ) $ (53,823 ) $ (2 ) Tidelands was a reporting company under the Securities Exchange Act of 1934, as amended. On March 8, 2019, Tidelands terminated the registration of its units under Section 12(g) of the Exchange Act, and suspended its reporting obligations under Section 13(a) of the Exchange Act. As of that date, Tidelands’ obligations to file certain reports with the SEC, including annual, quarterly and current reports on Form 10-K, Form 10-Q and Form 8-K, respectively, were automatically and immediately suspended. (4) Summary of Quarterly Financial Data (Unaudited) The following quarterly financial information for fiscal years 2020 and 2019 is unaudited; however, in the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim periods have been included. Income Expenses Distributable Income Distributable Income Per Unit Quarter ended: September 30, 2018 $ 243,233 $ 21,224 $ 222,009 $ 0.11 December 31, 2018 237,304 94,854 142,450 0.07 March 31, 2019 181,117 73,694 107,421 0.05 June 30, 2019 198,889 36,699 162,192 0.08 $ 860,543 $ 226,471 $ 634,072 $ 0.32 Quarter ended: September 30, 2019 $ 203,692 $ 68,154 $ 135,538 $ 0.07 December 31, 2019 145,648 37,196 108,452 0.05 March 31, 2020 218,016 67,265 150,841 0.08 June 30, 2020 220,739 41,460 179,279 0.09 $ 788,185 $ 214,075 $ 574,110 $ 0.29 (5) Supplemental Information Relating to Oil and Gas Reserves (Unaudited) Oil and natural gas reserve information relating to Marine’s and Tidelands’ royalty interests is not presented because such information is not available to Marine or Tidelands. Marine’s share of oil and natural gas sold for its royalty interests and Marine’s equity in oil and natural gas sold for Tidelands’ royalty interests were as follows: 28 Table of Contents Twelve Months Ended June 30, 2020 2019 2018 Marine: Oil (bbls) 12,628 11,382 15,138 Gas (mcf) 33,639 22,147 20,664 Tidelands: Oil (bbls) 0 922 1,794 Gas (mcf) 0 1,114 14,203 (6) Texas Franchise Tax Texas imposes a franchise tax that applies to most business entities that are formed or qualified to do business, or which are otherwise doing business, in Texas. Under the Texas franchise tax, a 0.75% tax is imposed for reports due in 2020 on each taxable entity’s taxable margin that is apportioned to Texas. Taxable margin is generally defined as revenues less certain costs. Taxable entities include most entities that provide owners with limited liability protection, including trusts. There are certain exemptions from the franchise tax, including exclusions for certain “passive entities” that satisfy specified statutory requirements as described below and entities with total revenues below a specified threshold. Under the Texas franchise tax, “passive entities” include trusts that meet the following requirements: (a) the trust cannot be a business trust within the meaning of U.S. Treasury Regulation section 301.7701-4(b); (b) at least 90% of the trust’s income for the taxable year must be derived from passive sources (e.g., royalties, bonuses, delay rental income from mineral properties, dividends, interest, and gains from the sale of securities); and (c) no more than 10% of the trust’s income for the taxable year can be derived from an active trade or business (e.g., rent and certain income received by a non-operator under a joint operating agreement pursuant to which the operator is the member of an affiliated group that includes such non-operator). An entity will determine on an annual basis whether it meets the requirements to be treated as a “passive entity” for the Texas franchise tax. The Trustee believes that all or substantially all of the income of the Trust currently is passive, as it consists of royalty income from the sale of oil and natural gas, dividends and interest income. Thus, the Trust anticipates that it will be a passive entity in the tax year ending in 2020. Subject to any change in the sources of income derived by the Trust or any change in the Indenture, the Trust expects that it will continue to qualify as a passive entity that is not subject to the Texas franchise tax. If the Trust is exempt from the Texas franchise tax as a passive entity, each unitholder that is subject to the Texas franchise tax as a taxable entity under the Texas Tax Code should generally include its share of the Trust’s revenue in its franchise tax computation. The Texas franchise tax does not apply to natural persons. In the event the Trust does not qualify as a passive entity, it would not be required to pay any tax and is not considered to owe any Texas franchise tax for any period in which its annualized total revenue is less than or equal to a certain threshold. For reports due on or after January 1, 2020 and before January 1, 2022, this no tax due threshold is $1,180,000. Each unitholder is urged to consult its own tax advisor regarding the requirements for filing state tax returns. 29 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARINE PETROLEUM TRUST (Registrant) Simmons Bank, in its capacity as trustee of Marine Petroleum Trust and not in its individual capacity or otherwise Date: September 28, 2020 By: /s/ Ron E. Hooper Ron E. Hooper Senior Vice President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Simmons Bank, in its capacity as trustee of Marine Petroleum Trust and not in its individual capacity or otherwise Dated: September 28, 2020 By: /s/ Ron E. Hooper Ron E. Hooper Senior Vice President (The registrant has no directors or executive officers.)