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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 June 30, 2000
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.)
621 17th Street, Suite 830, Denver, CO 80293
(Address of principal executive offices) (Zip Code)
(303) 383-1555
-
(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:
516,265 shares, one class only, as of June 30, 2000.
INDEX
INDEX TO INFORMATION INCLUDED IN THE QUARTERLY REPORT (FORM 10-Q)
TO THE SECURITIES AND EXCHANGE COMMISSION FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 2000 (UNAUDITED).
_________________________________________________________________
PART I. FINANCIAL INFORMATION Page Number
Balance Sheets as of December 31, 1999
and June 30, 2000 3, 4
Statements of Operations for the Three and
Six Months Ended June 30, 1999 and 2000 5
Statements of Cash Flows
for the Six Months
Ended June 30, 1999 and 2000 6
Notes to Financial Statements 7
Management's' Discussion and Analysis of Financial
Condition and Results of Operations
7
PART II. OTHER INFORMATION
Changes in Securities 9
Other Information 9
Exhibits and 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 six months ended June 30, 2000 and 1999 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)
December 31,
June 30,
1999
2000
CURRENT ASSETS:
Cash and Cash Equivalents: $ 57,716
$ 98,654
Marketable equity securities 4,375
5,250
Accounts receivable:
Oil and gas purchasers 43,915
51,745
Refundable income taxes 2,500
3,950
Total current assets $ 108,506
$ 159,599
PROPERTY AND EQUIPMENT, AT COST:
Oil & gas properties, successful efforts method:
Proved properties 628,560
628,560
Unproved properties 97,102
97,102
$ 725,662 $
725,662
Less accumulated depletion and depreciation
(336,006) (357,006)
Net property and equipment $ 389,656
$ 368,656
Total Assets $ 498,162 $
528,255
PART I: FINANCIAL INFORMATION
CROFF ENTERPRISES, INC.
BALANCE SHEET
(Unaudited)
December 31,
June 30,
1999
2000
CURRENT LIABILITIES:
Accounts payable $ 14,451
$ 18,125
Accrued liabilities 3,358
3,814
Total current liabilities $ 17,809
$ 21,939
CONTINGENCIES (NOTE 2)
STOCKHOLDERS' EQUITY:
Class A Preferred stock, no par value;
5,000,000 shares authorized, none issue
Class B Preferred stock, no par value;
520,000 shares authorized, (1999-2000)
(500,659 shares for 1999 and 2000) 350,359
350,359
issued and outstanding
Common stock, $.10 par value 20,000,000 shares
authorized 589,143 shares issued
(1999 and 2000) 58,914
58,914
Capital in excess of par value 540,797
540,797
Accumulated deficit (386,821)
(360,858)
$ 563,249 $
589,212
Less treasury stock at cost, 62,628 shares
(1999 and 2000) (82,896)
(82,896)
Total stockholders' equity $ 480,353
$ 506,316
Total liabilities & equity $ 498,162
$ 528,255
CROFF ENTERPRISES, INC.
Statement of Operations
For the Three And Six Months Ended June 30, 2000
(Unaudited)
For Three Months For Six Months,
Ended Ended
6/30/99 6/30/00 6/30/99
6/30/00
Revenue:
Oil and gas sales $ 46,929 $ 77,604 $ 87,437 $
145,870
Other income (loss) 271 774
6 2,421
Total revenue $ 47,200 $ 78,378 $ 87,443 $
148,291
Costs and expenses:
Lease operating expense $ 8,465 $ 25,812 $ 18,602
$ 45,630
Depreciation and depletion 9,800 10,500
19,600 21,000
General and administrative 16,585 24,092
40,990 49,818
Interest Expense 0 0 395
0
Rent Expense - Related Party 2,940 2,940
5,880 5,880
Total costs and expenses $ 37,790 $ 63,344 $ 85,467 $
122,328
Net income (loss) $ 9,410 $ 15,034 $ 1,976
$ 25,963
Net Income(loss) applicable to
Preferred stock $ 8,000 $ 12,800 0
$ 22,100
Net Income (loss) applicable to
common shareholder $ 1,410 $ 2,234 $1,976
$ 3,863
Basic and diluted net loss per
Common share * *
* .01
* less than .01 per share
CROFF ENTERPRISES, INC.
Statement of Cash Flows
For the Six Months ending June 30, 1999 and 2000
(Unaudited)
1999
2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,976 $
25,963
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 19,600
21,000
Change in assets and liabilities:
(Increase) decrease on accounts receivable
(15,923) (7,830)
(Increase) decrease in other assets
(1,450)
Increase (decrease) in accounts payable
1,127 3,674
Increase (decrease) in accrued liabilities
9,768 456
(Increase) decrease in marketable securities
62 (875)
Total adjustments $ 14,634
$ 14,975
Net cash provided by operating activities:
$ 16,610 $ 40,938
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable-Union Bank and Trust
(23,369)
Net cash used in financing
(23,369)
Increase (decrease) in cash
(6,759) 40,938
Cash and cash equivalents at beginning of period
14,294 57,716
Cash and cash equivalents at end of period: $
7,535 $ 98,654
CROFF ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTH UNAUDITED
PERIODS ENDED JUNE 30, 2000
BASIS OF PREPARATION
Forward-looking statements in this report, including without
limitation, statements relating to the Company's plans,
strategies, objectives, expectations, intentions and adequacy of
resources, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are
cautioned that such forward-looking statements involve risks and
uncertainties; including without limitation to, the following:
(i) the Company's plans, strategies, objectives, expectations
and intentions are subject to change at any time at the
discretion of the Company; (ii) the Company's plans and results
of operations will be affected by the Company's ability to manage
its growth and inventory (iii) other risks and uncertainties
indicated from time to time in the Company's filings with the
Securities and Exchange Commission. Neither the Securities and
Exchange Commission nor any other regulatory body takes any
position as to the accuracy of forward looking statements. 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, 1999, 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 June 30, 2000,
as Compared to the Three-Month Period Ended June 30, 1999.
OIL AND GAS OPERATIONS
Oil and gas income, primarily from royalties, for the three
months ended June 30, 2000 was $77,604 compared to $46,929 for
the quarter ending June 30, 1999. This significant increase in
revenue was caused by the increase in the price of crude oil,
which increased by approximately 50%, and the increase in natural
gas prices, which increased by around 35%. Prices for oil
increased from approximately $18 per barrel in this quarter in
1999, to around $27 per barrel, average for sweet and sour oil
this year. Natural gas prices increased by approximately one
dollar per MCF. There was no material increase in production and
no wells were purchased.
Production costs, which include lease operating expenses and
all production related taxes, for the three months ended June 30,
2000, were significantly higher, increasing to $25,812 compared
to $8,465 in the same quarter in 1999. The operating expenses
increased due to much larger production taxes, based on the new
higher prices, and increased workover expenses due to a larger
amount of workovers on wells to improve production during a time
of higher prices. Overall, operating expenses are low due to the
large amount of royalty income. Depletion increased slightly.
OTHER INCOME
During the three month period ended June 30, 2000, the
Company had other income of $774 compared to $271 for the quarter
ending June 30, 1999. This was due to higher interest income
this year as the Company accumulated cash to restore the cash
used to purchase oil and gas assets in 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the quarter ending
June 30, 2000, were $24,092 plus rent expense of $2,940 for a
total of $27,032 compared to $16,585, plus rent expense of
$2,940, for a total of $19.525 in the same period in 1999. This
increase was due to not holding an annual meeting in 1999 and
higher printing costs, legal costs, and directors costs for the
annual meeting in 2000. The Company expects general and
administrative costs to remain stable the balance of this year.
Six Month Period Ended June 30, 2000,
as Compared to the Six Month Period Ended June 30, 1999.
OIL AND GAS OPERATIONS
Oil and gas income, primarily from royalties, for the six
months ending June 30, 2000, was $145,870 compared to $87,437 for
the six months ended June 30, 1999. This significant increase
was caused by much higher prices for oil, the price increased by
approximately ten dollars a barrel and an increase in natural gas
prices of approximately one dollar per MCF. Production was
stable, so the increase was due to higher commodity prices. The
increase in oil and natural gas prices seems to have topped out
in the third quarter of 2000, so we do not expect further
increases in revenues, but do expect revenue for the remainder of
the year to be in line with the first six months.
Production costs, which include lease operating expenses and
all production related taxes, for the six months ended June 30,
2000, were $45,630, an increase from $18,602 during the six
months ended June 30, 1999. The higher production costs were due
primarily to higher production taxes which are in proportion to
the higher revenue, and to higher workover costs, as wells are
reworked to take advantage of the higher prices.
OTHER INCOME.
During the six month period ended June 30, 2000, the Company
had other income of $2,421, primarily from interest and
dividends. During the first six months of 1999, the Company had
other income of $6, from interest. The difference was due to the
higher cash balances on which interest was earned in 2000, and
the increase in value of securities.
GENERAL AND ADMINISTRATIVE.
General and administrative expenses for the period ending
June 30, 2000, were $49,818 plus rent expense of $5,880, for a
total of $55,698, compared to $40,990 plus rent expense of $5,880
for a total of $46,870 for the six month period ending June 30,
1999. This increase was due to the annual meeting not being held
in 1999, and the printing, legal and director expenses being
incurred in 2000 for the annual meeting.
FINANCIAL CONDITION
As of June 30, 2000, the Company's current assets were
$159,599 and current liabilities were $21,939, giving the Company
working capital of approximately $137,000 and a current ratio of
7:1. As of December 31, 1999, the Company's current assets were
$108,506, and current liabilities were $17,809, giving the
Company a working capital position of about $90,000, and a ratio
of 6 to 1. The Company intends to accumulate cash and
investments during the year 2000 to restore to the Companys'
common share position the money that was utilized to buy oil and
gas assets. The Companys' liquidity should continue to improve
during the year 2000.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On June 20, 2000, the annual meeting of shareholders was
held. The shareholders authorized the increase in the number of
Preferred B shares authorized from 520,000 shares to 1,000,000
Preferred B shares. The Board authorized the issuance of 50,000
of these Preferred B shares to the Board of Directors to be
issued upon the exercise and payment for the existing stock
options on the common shares. These options had been issued
originally before the Preferred B shares were authorized and
while it had been intended that the options would include the
Preferred B shares, the amount authorized was not sufficient to
do this. Of 60,000 common and Preferred B shares available in
options to the Board of Directors, 10,000 have been exercised and
50,000 remain unexercised.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K.
The registrant has filed no reports on Form 8-K for the
period ending June 30, 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: ___________________, 2000