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FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended September 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________ to
_____________________
Commission File Number: 1-100
CROFF ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0233535
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1675 Broadway, Suite 1030, Denver, CO 80202
(Address of principal executive offices) (Zip Code)
(303) 628-1963
(Registrant's telephone number, including area code)
_________________________________________________________________
______
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant has required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes
______ No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
_______ Yes ______
No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
516,305 shares, one class only, as of September 30, 1997.
INDEX
INDEX TO INFORMATION INCLUDED IN THE QUARTERLY REPORT (FORM 10-Q)
TO THE SECURITIES AND EXCHANGE COMMISSION FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED).
_________________________________________________________________
PART I. FINANCIAL INFORMATION Page Number
Balance Sheets as of December 31, 1996
and September 30, 1997 3-4
Statements of Operations for the Three and
Nine Months Ended September 30, 1997 and 1996
5
Statements of Cash Flows
for the Three and Nine Months
Ended September 30, 1997 and 1996 6
Notes to Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations
7-9
PART II. OTHER INFORMATION
Signatures. 9
_________________________________________________________________
The condensed financial statements included herein are for the
Registrant, Croff Enterprises, Inc. The financial statements for
the three and nine months ended September 30, 1997 and 1996 are
unaudited; however, they reflect all adjustments which, in the
opinion of management, are necessary to present fairly the
results of the interim periods. All adjustments necessary to a
fair representation of the financial statements are of a normal
recurring nature.
PART I: FINANCIAL INFORMATION
CROFF ENTERPRISES, INC.
BALANCE SHEET
Unaudited
Dec 31, Sept 30,
1996
1997
CURRENT ASSETS:
Cash and Cash Equivalents: $184,565
$216,953
Marketable equity securities
10,500 15,250
Accounts receivable:
Oil and gas purchasers 31,764
22,070
Refundable income taxes 4,362
2,206
Total current assets 231,191
256,479
PROPERTY AND EQUIPMENT, AT COST:
Oil & gas properties, successful efforts method:
Proved properties 329,700
368,196
Unproved properties 101,901
101,901
Less wazzu accumulated depletion and depreciation
(229,621) (247,621)
Net property and equipment 201,980
222,476
Coal Investment 82,533
20,533
$ 515,704
$ 499,488
PART I: FINANCIAL INFORMATION
CROFF ENTERPRISES, INC.
BALANCE SHEET
Unaudited
Dec 31, Sept 30,
1996
1997
Current Liabilities:
Accounts payable $3,164
$1,451
Accrued liabilities 1,660
2,153
Total current liabilities 4,824
3,604
Stockholders' equity
Class B Preferred stock, no par value; 520,000 shares
authorized, 516,506 shares issued and outstanding
233,744 233,744
Common stock, $.10 par value 20,000,000 share
authorized, 579,143 shares issued
57,914 57,914
Capital in excess of par value
672,799 672,799
Accumulated deficit (370,931)
(385,677)
593,526
578,780
Less treasury stock at cost,
62,628 shares in 1996 and 62,878 in 1997
(82,646) (82,896)
Total stockholders' equity
510,880 495,884
$ 515,704
$ 499,488
CROFF ENTERPRISES, INC.
Statement of Operations
For the Three and Nine Months Ended September 30, 1997
(Unaudited)
For Nine Months For Three
Months
Ended
Ended
9/30/96 9/30/97
9/30/96 9/30/97
Revenue:
Oil and gas sales........ $133,784
$151,054 $46,315 $45,537
Other income...... 23,298 7364
611 4,120
Total revenue 157,082 158,418
46,926 49,657
Costs and expenses:
Lease operating expense.. 29,636 25,760
9,324 7,589
Depreciation and depletion 16,500 18,000
4,500 6,000
General and administrative 61,447 58,584
21,857 17,686wazzu
Interest 223 0
0 0
Rent Expense - Related Party 8,820 8,820
2,940 2,940
Write down of coal investment 0 62,000
0 62,000
116,626 173,164
38,621 96,215
Net income (loss) $ 40,456 $(14,746)
$ 8,305 $(46,558)
Earnings (Loss) Per Common Share $ .08 $
(.03) $ .02 $ (.09)
CROFF ENTERPRISES, INC.
Statement of Cash Flows
Unaudited
For the
Nine
Months
Ended
September 30,
1996 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/loss $40,456
$(14,746)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 16,500
18,000
Write down of coal investment 0
62,000
Change in assets and liabilities:
Decrease in accounts receivable 2,585
11,850
Decrease/Increase in other assets 4,800
0
Increase/Decrease in accounts payable (2,433)
(1,713)
Gain/Loss sale of producing lease
(20,966) 0
Decrease/Increase in accrued liabilities
45 493
Total adjustments 531
90,630
Net cash provided by operating activities:
40,987 75,884
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/Purchase of Securities 4,557
(4,750)
Sale of oil & gas field
118,020 0
Purchase/Return of coal investment 8,511
0
Purchase of producing leases
(12,675) (38,496)
118,413
(43,246)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Treasury Stock 0
(250)
Proceeds/Payoff of Note for Coal Purchase
(50,000) 0
(50,000)
(250)
Increase in cash: 122,230
32,388
Cash at beginning of period:
37,933 184,565
Cash at end of period: $160,163
$216,953
CROFF ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997
BASIS OF PREPARATION.
The condensed financial statements for the three and nine
month periods ended September 30, 1997 and 1996 in this report
have been prepared by the Company without audit pursuant to the
rules and regulations of the Securities and Exchange Commission
and reflect, in the opinion of management, all adjustments
necessary to present fairly the results of the operations of the
interim periods presented herein. Certain information in
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and
regulations, although the Company believes the disclosures
presented herein are adequate to make the information presented
not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, which report has been
filed with the Securities and Exchange Commission, and is
available from the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS.
Three-Month Period Ended September 30, 1997,
as Compared to the Three-Month Period Ended September 30, 1996.
OIL AND GAS OPERATIONS
Oil and gas income, primarily from royalties, for the three
months ended September 30, 1997 was $45,537 compared to $46,315
for the same time period of the prior year. This small decrease
was due to lower oil and natural gas prices, offset somewhat by
increased production. Oil prices were down about $2.00 per
barrel and natural gas prices were flat compared to the quarter
ending September 30, 1996.
Production costs, which include lease operating expenses and
production related taxes, for the three months ended September
30, 1997, decreased when compared to the same time period of the
prior year, $7,589 in 1997 compared to $9,324 in 1996. This
decrease was due to more royalty income, and less workovers on
operated wells.
Nine Month Period Ended September 30, 1997,
as Compared to the Nine Month Period Ended September 30, 1996.
OIL AND GAS OPERATIONS
Oil and gas income, primarily from royalties, for the nine
months ending September 30, 1997, was $151,054 compared to
$133,784 for the same time period of the prior year. This
increase was due to higher royalties, primarily from higher
production of coal seam natural gas in the Four Corners region of
Colorado and New Mexico, and to increased production from
purchased working interests, offset by lower prices.
Production costs, which include lease operating expenses and
all production related taxes, for the nine months ended September
30, 1997, decreased when compared to the same time period of the
prior year, $25,760 in 1997 compared to $29,636 in 1996. This
difference was due to less workovers in 1997.
OTHER INCOME.
During the nine month period ended September 30, 1997, the
Company had other income of $7,364 from interest earned, dividend
payments, and lease bonuses. During the same nine month period
in 1996, the Company had other income of $23,298. The Company's
other income was lower due primarily to the sale of producing
leases in Texas in the year earlier period.
GENERAL AND ADMINISTRATIVE.
General and administrative expenses for the nine month
period ending September 30, 1997, were $58,584 compared to
$61,447 for the nine month period ending September 30, 1996.
This difference was due to moving costs in 1996 when the Company
moved its offices in Denver. During the nine month period ended
September 30, the Company's total expenses increased to $173,164
in 1997 from $116,626 in 1996. The increase was due to the write
off of $62,000 in the value of the note and coal leases in
Indiana, as explained below. General and administrative expenses
remain at approximately the same level during both years. The
Company is currently operating with two part time officers and
employees, and is contracting for its accounting services, office
space and supplies.
FINANCIAL CONDITION
As of September 30, 1997, the Company's current assets
exceeded current liabilities by $252,875, compared to working
capital of $226,367 at December 31, 1996. This increase of
$26,508 in the Company's working capital position during the nine
month period ending September 30, 1997 was due to the build-up of
cash flow less the purchase of producing properties. The
Company's ratio of current assets to current liabilities was
approximately 48 to 1 on December 31, 1996 and 70 to 1 on
September 30, 1997.
The Company is continuing its program to invest its cash in
non-operated oil and gas working interests and royalties, and
retaining cash to assist in expenses of any acquisition.
As of September 30, 1997, the Company determined that it
must write down the value of its coal investment. This was an
approximate two percent investment in a limited liability company
(L.L.C.) that held a mortgage note with an option to own two
percent of a coal mine in Indiana. The major purchaser of this
coal canceled the contract in December, 1995, and the coal
company subsequently filed for Chapter 11 Bankruptcy protection.
The assets were being liquidated while the L.L.C. sued the
utility. In July, 1997, the trial court ruled against the L.L.C.
Without a cash recovery from this litigation, which is being
appealed, recovery of most of this investment is unlikely and the
Company determined to reduce its investment to the estimated
liquidation value of cash, land and equipment remaining.
PART II. OTHER INFORMATION
ITEM 6(b). NONE.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
REGISTRANT: CROFF ENTERPRISES,
INC.
By_________________________________
Gerald L. Jensen
Chief Executive Officer
By_________________________________
Beverly Licholat
Chief Accounting Officer
Date:__________________, 1997