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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 March 31, 1998
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: 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: 516,315
shares, one class only.
INDEX
INDEX TO INFORMATION INCLUDED IN THE QUARTERLY REPORT (FORM 10-Q)
TO THE SECURITIES AND EXCHANGE COMMISSION FOR THE THREE MONTHS
ENDED MARCH 31, 1998 (UNAUDITED).
_________________________________________________________________
PART I. FINANCIAL INFORMATION Page Number
Balance Sheets as of December 31, 1997
and March 31, 1998 3
Statements of Operations for
the Three Months Ended March 31, 1998 and 1997 5
Statements of Cash Flows
for the Three Months
Ended March 31, 1998 and 1997 6
Notes to Financial Statements 7
Managements' Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 5 OTHER INFORMATION 8
Reports on Form 8-K 9
Signatures. 10
_________________________________________________________________
The condensed financial statements included herein are for the
Registrant, Croff Enterprises, Inc. The financial statements for
the three months ended March 31, 1998 and 1997 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
Dec 31, March 31,
1997 1998
CURRENT ASSETS:
Cash and Cash Equivalents: $ 166,883 $ 264,438
Marketable equity securities 15,687 18,563
Accounts receivable:
Oil and gas purchasers 26,552 22,654
Refundable income taxes 3,200 4,300
Total current assets $ 212,322 $ 309,955
PROPERTY AND EQUIPMENT, AT COST:
Oil & gas properties, successful
efforts method:
Proved properties 429,903 432,014
Unproved properties 97,102 97,102
527,005 529,116
Less accumulated depletion and
depreciation (250,729) (256,886)
Net Property Value 276,276 272,230
Coal investment 16,277 16,277
$ 504,875 $ 598,462
============= ==============
PART I: FINANCIAL INFORMATION
CROFF ENTERPRISES, INC.
BALANCE SHEET
Dec 31, March 31,
1997 1998
Current Liabilities:
Accounts payable $ 4,378 $ 2,094
Accrued Liabilities 2,605 3,736
Notes Payable (Union Bank and Trust) 0 90,000
Total current liabilities 6,983 95,830
Stockholders' equity:
Class A Preferred, non issued
Class B Preferred stock, no par
value; 520,000 authorized,
516,506 shares issued 364,328 364,328
Common stock, $.10 par value
20,000,000 shares authorized
579,143 shares issued 57,914 57,914
Capital in excess of par value 542,215 542,215
Accumulated deficit (383,669) (378,929)
580,788 585,528
Less treasury stock at cost,
62,628 shares in 1996 and
62,878 in 1997 (82,896) (82,896)
Total stockholders' equity 497,892 502,632
$ 504,875 $ 598,462
============= ==============
CROFF ENTERPRISES, INC.
Statement of Operations
For the Three Months Ended March 31
1997 1998
Revenue:
Oil and gas sales.............. $ 58,002 $ 42,730
Other income (loss)............ 1,222 4,723
Total revenue 59,224 47,453
Costs and expenses:
Lease operating expense........ $ 9,274 $ 11,052
Depreciation and depletion..... 6,000 6,000
General and administrative..... 19,017 22,721
Rent Expense - Related Party... 2,940 2,940
Total cost and expenses 37,231 42,713
Net income (loss) $ 21,993 $ 4,740
======== ========
Earnings (Loss) Per Share $ .04 $ .01
========= =========
CROFF ENTERPRISES, INC.
Statement of Cash Flows
For the Three
Months Ended
March 31,
1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 21,993 $ 4,740
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and depletion 6,000 6,157
Change in assets and liabilities: (1,100)
Decrease in accounts receivable 6,155 3,899
Decrease in other assets (368) (2,111)
Decrease in accounts payable (898) (2,284)
Decrease in accrued liabilities 0 1,130
Gain on marketable securities 0 (2,876)
Total adjustments 10,889 2,815
Net cash provided by operating activities: 32,882 7,555
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/depreciation of marketable
equity securities 500 0
Sale/purchase of producing properties (16,575) 0
- --------- ---------
(16,075) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Treasury Stock (250) 0
Note Payable-Union Bank and Trust 0 90,000
--------- ---------
(250) 90,000
Increase (decrease) in cash: 16,557 97,555
Cash at beginning of period: $184,565 $166,883
======== ========
Cash at end of period: $201,122 $264,438
======== ========
CROFF ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
1. BASIS OF PREPARATION.
The condensed financial statements for the three month
periods ended March 31, 1998 and 1997 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 reclassifications have been
made to the prior years' financial statements to conform to the
1998 presentation. 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, 1997, which report has been filed with the Securities and
Exchange Commission, and is available from the Company.
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS.
Three-Month Period Ended March 31, 1998,
as Compared to the Three-Month Period Ended March 31, 1997.
OIL AND GAS OPERATIONS
Oil and gas revenue, primarily from royalties, for the three
months ended March 31, 1998, was $42,730 compared to $58,002 for
the quarter ending March 31, 1997. The primary cause for this
decrease was the drastic drop in oil prices, which declined over
thirty percent, during the first quarter. In addition, natural
gas sales were lower due to a warm winter. A more fundamental
development was the completion of a pipeline from Canada,
bringing cheaper Canadian oil south across Wyoming, which further
decreased prices for oil in Northeast Utah and Wyoming.
Production costs, which includes lease operating expenses
and all production related taxes, for the three months ended
March 31, 1998, increased slightly to $11,052 when compared to
the production costs of $9,274 incurred during the quarter ended
March 31, 1997. This increase was due to more workovers and the
addition of three new working interests in wells, which incur
expenses, in Michigan and Texas.
OTHER INCOME
During the three month period ended March 31, 1998, the
Company had other income of $4,723 from interest, capital gains,
dividends, and lease payments. This was an increase from $1,222
in the same period in 1997. The increase was due to more
interest and dividend income based on higher cash balances and a
lease bonus payment.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the quarter ending
March 31, 1998, were $22,721 plus rent expense of $2,940 for a
total of $25,661 compared to $19,017 plus $2,940 for a total of
$21,957 in the same period in 1997. This increase was due
primarily to an increase in the President's salary which had not
been raised for the previous ten years. The Company expects
general and administrative costs to remain stable this year.
FINANCIAL CONDITION
As of March 31, 1998, the Company's current assets exceeded
current liabilities by $214,125. As of December 31, 1997, the
Company's current assets exceeded current liabilities by
$205,339. The Company's current ratio is 3:1. On March 23,
1998, the Company borrowed $90,000 from its bank in order to
provide sufficient cash to close on the purchase of working
interests in six natural gas wells in Oklahoma. See Part II for
a more complete description of this transaction.
The Company expects to continue to operate at a positive
cash flow for the next calendar year, even with low oil prices.
The Company intends to use its' cash flow to repay the bank loan.
PART II. OTHER INFORMATION
ITEM 5 OTHER INFORMATION
On April 8, 1998, Croff Oil Company purchased from Saint
James Oil, Ltd., a working interest in six natural gas wells
located in the state of Oklahoma. The purchase price for these
six wells was $208,000. The Company purchased a 43.3% interest
in the Mueggenborg and a 30.1% interest in the Dickerson well,
both located in Kingfisher County, Oklahoma; a 32.9% interest in
the Duncan well located in LeFlore County, Oklahoma; a 22.1%
interest in the Fannie Brown well located in Caddo County,
Oklahoma, and a 16.3% interest in the Miller well and a 13%
interest in the Harper well both located in Woodward County,
Oklahoma, plus some small royalties in the same wells. In order
to extend the commercial operating life of the wells, Jenex
Operating Company, the operator of the wells, agreed to credit a
rebate against the operating charges of $150 per month for each
well, as long as this interest in the wells is owned by Croff Oil
Company. This will equal a credit of $900 per month on operating
costs.
The effective date of the purchase was April 1, 1998. The
purchase was financed by a $90,000 bank loan from Union Bank and
Trust of Denver, Colorado, and the balance from the cash funds of
the Company. Saint James Oil, Ltd. is owned by the brother of
Gerald L. Jensen, the President of the Company. The President of
the Company owns, through a private oil company, working
interests of approximately the same percentage in all of these
wells, which the President intends to retain. James Jensen, who
owned a 50% interest in Jenex Operating Company sold this
interest to Gerald L. Jensen, the President of Croff, whose
interest in the operating company increased from 50% to 100%.
Because there is a two month lag in payment of revenues, the
first full quarter of revenues from this purchase will be
included in the Company's financial statements beginning in the
third quarter of 1998.
ITEM 6(b). REPORTS ON FORM 8-K.
The registrant has filed no reports on Form 8-K for the
period ending March 31, 1998.
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 and
Chief Financial Officer
By_________________________________
Beverly Licholat
Chief Accounting Officer
Date:___________________, 1998