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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 and
Exchange Act of 1934 For the period ended September, 30 2000
[ ] 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 St., Suite 830, Denver, Colorado 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 class
of common stock, as of the latest practicable date: 526,260 shares,
one class only, as of September 30, 2000.
INDEX
INDEX TO INFORMATION INCLUDED IN THE QUARTERLY REPORT (FORM 10-Q) TO
THE SECURITIES AND EXCHANGE COMMISSION FOR THE THREE AND NINE
MONTH PERIODS ENDED September 30, 2000 (UNAUDITED).
PART I. FINANCIAL INFORMATION Page Number
Balance Sheets as of December 31, 1999
and September 30, 2000 3
Statements of Operations for Three Months &
Nine Months
Ended September 30, 1999 and 2000 5
Statements of Cash Flows
for the Nine Months
Ended September 30, 1999 and 2000 6
Notes to Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES 9
ITEM 5 OTHER INFORMATION 10
ITEM 6 B REPORTS ON FORM 8-K 11
Signatures 11
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, objective, 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.
PART I: FINANCIAL INFORMATION
CROFF ENTERPRISES, INC.
BALANCE SHEET
(UNAUDITED)
Dec. 31, Sept 30,
1999 2000
CURRENT ASSETS:
Cash and Cash Equivalents:
$57,716 140,246
Marketable equity securities 4,375 6,250
Accounts receivable:
Oil and gas purchasers 43,915 53,309
Refundable income taxes 2,500 4,297
Total current assets $108,506 $204,102
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) (367,506)
Net property and equipment $389,656 358,156
Total assets $498,162 $562,258
PART I: FINANCIAL INFORMATION
CROFF ENTERPRISES, INC.
BALANCE SHEET
(UNAUDITED)
Dec. 31, Sept, 30
CURRENT LIABILITIES 1999 2000
ACCOUNT PAYABLE $14,451 15,433
Accrued liabilities 3,358 3,812
Total current liabilities $17,809 $19,245
ONTINGENCIES (NOTE 2)
STOCKHOLDERS' EQUITY:
Class A preferred stock, no par value;
5,000,000 shares, none issue
Class B Preferred stock, no par value;
1,000,000 shares authorized, 500,659
shares (1999 and 2000) issued
and outstanding 350,359 350,359
Common stock, $.10 par value,
20,000,000 shares 58,914 58,914
authorized 589,143 shares issued
Capital in excess of par value 540,797 540,797
Accumulated deficit
(386,821) (324,106)
$563,249 $625,964
Less treasury stock at cost,
62,828 shares in 1999 and
62,883 in 2000 $(82,896) (82,951)
Total stockholders' equity $480,353 $543,013
Total liabilities & equity $498,162 $562,258
CROFF ENTERPRISES, INC.
Statement of Operations
For Three and Nine Months ended September 30, 1999 and 2000
For Three Month Ended For Nine Month Ended
9/30/99 9/30/00 9/30/99 9/30/00
REVENUE:
Oil and gas sales $ 58,113 91,586 $145,550 237,456
Gain on disposal
of oil and gas properties
Other income. 406 2,399 412 4,821
Total revenue $ 58,519 93,985 145,962 $242,277
COSTS AND EXPENSES:
Lease operating expense 15,854 23,472 36,718 69,101
Depreciation and depletion 9,800 10,500 29,400 31,500
General and administrative 18,087 20,323 56,813 70,141
Interest Expenses 0 0 395 0
Rent Expense-Related Party 2,940 2,940 8,820 8,820
Total cost and expenses $46,681 57,234 132,146 179,562
Net Income $11,839 36,751 13,816 62,715
Net Income applicable to
Preferred stock 11,433 35,794 13,404 57,894
Net-Income-applicable-to
common shareholders 406 957 412 4,821
Basic and diluted net income
per common share
* * * .01
*Less than .01 Per share
CROFF ENTERPRISES, INC.
Statement of Cash Flows
For Nine Month Ended
September 30, 2000
(UNAUDITED)
1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $13,816 $62,715
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and depletion 29,400 31,500
Change in assets and liabilities:
Accounts receivable (16,199) (9,394)
Other assets 400 (1,797)
Notes payable (23,369)
Accounts payable 1,805 982
Accrued liabilities (4,023) 454
Marketable securities (313) (1,875)
Total adjustments $(12,299) 19,870
Net cash provided by operating activities: $1,517 82,585
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/depreciation of marketable equity 0 0
securities
Sale/purchase of producing properties 0 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (55)
Exercise of Option Sale of Common Stock 10,000 0
Net cash provided by and used in
financing acct 10,000 (55)
Increase in cash 11,517 82,530
Cash and cash equivalents at beginning 14,294 57,716
Of period
Cash and cash equivalents at end of
period
$25,811 140,246
CROFF ENTERPRISES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2000
PART I FINANCIAL INFORMATION
BASIS OF PREPARATION.
The condensed financial statements for the three month and nine
month periods ended September 30, 2000 and 1999 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 the 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 year's
financial statements to conform to the 2000 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, 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 September 30, 2000
as Compared to the Three-Month Period Ended September 30, 1999.
OIL AND GAS OPERATIONS
Oil and gas revenue, primarily from royalties, for the three months
ended September 30, 2000, was $91,586 compared to $58,113 for the quarter
ending September 30, 1999. Overall revenues were approximately fifty
percent higher. This significant increase in revenue resulted from natural
gas prices rising from around $2.20 an MCF one year ago to approximately
$3.70 an MCF in the current quarter. Prices for oil increased from
approximately $21 per barrel during the September 30, 1999 quarter,
to over $30 per barrel for the quarter ending September 30, 2000.
Production costs include lease operating expenses and all production
related taxes. Comparing the three months ended September 30, 2000, with
the quarter ending September 30, 1999, production costs increased from
$15,854 to $23,472. The primary reason for this increase was that
production taxes, which are based on the sales price of oil and natural
gas, greatly increased. In addition, operators were doing less work on
the wells because of lower prices during 1999, and doing more workovers
in 2000. Depletion increased slightly due to additional leases.
OTHER INCOME
During the three month period ended September 30, 2000, the
Company had other income of $2,399 compared to $406 for the quarter
ending September 30, 1999. This was a due to higher interest income
in the current year as the Company built up cash.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the current quarter ending
September 30, 2000, were $20,323 plus rent expense of $2,940 for a total
of $23,263 compared to $18,087 plus rent expense of $2,940 for a total of
$21,027 in the quarter ending September 30, 1999. This increase was due
to costs of the annual meeting, review fees to auditors, and higher fees
to the transfer agent. The Company expects general and administrative
costs to increase moderately this year.
Nine-Month Period Ended September 30, 2000
as Compared to the Nine-Month Period Ended September 30, 1999
OIL AND GAS OPERATIONS
Oil and gas income, primarily from royalties, for the nine months
ending September 30, 2000, was $237,456 compared to $145,550 for the
nine months ended September 30, 1999. This significant increase was due
to oil prices rising from approximately $20 per barrel to approximately
$29 per barrel, and natural gas prices increasing from just over $2.20
per MCF to approximately $3.70 per MCF. Production increased slightly
due to wells being put on line and workovers increasing production.
Production costs, which include lease operating expenses and all
production, related taxes, for the nine months ended September 30, 2000,
were $69,101 as compared to $36,718 in the first nine months of 1999.
This was due primarily to much higher production taxes, which are levied
as a percentage of the revenues paid for oil and natural gas. The other
factor was the increase in workovers on wells as better prices encouraged
more oilfield activity.
OTHER INCOME
During the nine month period ended June 30, 2000, the Company had
other income of $4,821, from interest and dividends. During the first
nine months of 1999, the Company had other income of only $412 since cash
reserves were low and consequently, interest was also low. Despite higher
prices, the Company has not yet seen any new leasing on its perpetual
mineral interests, which would result in lease bonus income.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the nine month period ending
September 30, 2000, were $70,141 plus rent expense of $8,820, for a total
of $78,961, compared to $56,813 plus rent expense of $8,820 for a total of
$65,633 for the nine month period ending September 30, 1999. This
increase was due to higher charges from the transfer agent, costs of the
annual meeting, and review fees to the auditors.
FINANCIAL CONDITION
As of September 30, 2000, the Company's current assets were
$204,102 while current liabilities were $19,245, providing working capital
of $185,000, and a ratio of over 10 to 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. This increase was due to the strong cash flow the
Company has received this year. The Company has no current bank debt.
The current excellent energy prices have increased the Company's cash
flow. The Company expects in the fourth quarter, 2000 to have accumulated
all of the cash necessary to repay the common stock for the money borrowed
in 1998 to purchase producing leases. At this time the Company may
resume purchasing oil and natural gas interests which benefit the
Preferred B shareholders.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
For the last several years the Company has conducted a clearinghouse
where it brings together buyers and sellers of its Preferred B stock,
which is not otherwise publicly traded. This year the clearinghouse
traded almost 7,000 shares of the Preferred B stock at a price of $1.05
per share. The Company is currently working on putting this clearinghouse
on the Internet, which would allow the clearinghouse to be conducted on
the Internet on a year round basis.
ITEM 6(B) REPORTS ON FORM 8-K
The registrant has filed no reports on Form 8-K for the period
ending September 30, 2000.
SIGNATURES
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
Dated: