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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 June 30, 2001
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[ ] 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 ------- -------
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CROFF ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
Utah 87-0233535
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
621 17th St., Suite 830, Denver, Colorado 80293
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(Address of principal executive offices) (Zip Code)
(303) 383-1555
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(Registrant's telephone number, including area code)
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(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 requirementsts for the past 90 days.
X Yes No
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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
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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: 526,060 shares, one class
only as of July 31, 2001.
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, 2001(UNAUDITED).
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Page
Number
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PART I. UNAUDITED FINANCIAL INFORMATION
Balance Sheets as of December 31, 2000 and
June 30, 2001 3,4
Statements of Operations for the three and
six months ended June 30, 2000 and 2001 5
Statements of Cash Flows for the three and
six months ended June 30, 2000 and 2001 6
Notes to Unaudited Condensed Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 5 OTHER INFORMATION 9
Reports on Form 8-K 9
Signatures 9
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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. UNAUDITED FINANCIAL INFORMATION
CROFF ENTERPRISES, INC.
BALANCE SHEETS
(Unaudited)
December 31, June 30,
2000 2001
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ASSETS
Current assets:
Cash and cash equivalents $ 191,634 $ 293,337
Marketable equity securities 6,125 5,750
Accounts receivable 91,742 66,384
Note receivable, related party - 15,062
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289,501 380,533
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Oil and gas properties, successful
efforts method:
Proved properties 611,960 617,165
Unproved properties 97,102 97,102
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709,062 714,267
Accumulated depreciation and depletion (370,391) (390,391)
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338,671 323,876
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Total assets $ 628,172 $ 704,409
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See accompanying notes to unaudited condensed financial statements.
CROFF ENTERPRISES, INC.
BALANCE SHEETS
(Unaudited)
December 31, June 30,
2000 2001
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,838 $ 17,412
Accrued liabilities 5,368 3,898
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16,206 21,310
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Stockholders' equity:
Class A Preferred stock, no par value;
5,000,000 shares authorized,
none issued or outstanding - -
Class B Preferred stock, no par value;
1,000,000 shares authorized,
500,659 shares issued and outstanding 475,359 475,359
Common stock, $.10 par value
20,000,000 shares authorized,
589,143 shares issued and outstanding 58,914 58,914
Capital in excess of par value 415,797 415,797
Accumulated deficit (255,153) (183,820)
Treasury stock, at cost 62,883
and 63,083 shares, respectively (82,951) (83,151)
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611,966 683,099
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Total liabilities and
stockholders' equity $ 628,172 $ 704,409
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See accompanying notes to unaudited condensed financial statements.
CROFF ENTERPRISES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
June 30, June 30,
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2000 2001 2000 2001
-------- -------- -------- --------
Revenues
Oil and gas sales $ 77,604 $ 93,143 $145,870 $215,504
Other income 774 2,768 2,421 5,794
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78,378 95,911 148,291 221,298
-------- -------- -------- --------
Expenses
Lease operating expense 25,812 27,555 45,630 74,307
Depreciation and depletion 10,500 10,000 21,000 20,000
General and administrative 24,092 25,117 49,818 48,458
Rent expense - related party 2,940 1,200 5,880 7,200
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63,344 63,872 122,328 149,965
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Net income $ 15,034 $ 32,039 $ 25,963 $ 71,333
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Net income applicable to
Class B Preferred stockholders' $ 12,800 $ 29,877 $ 22,100 $ 67,760
======== ======== ======== ========
Net income applicable to
Common stockholders' $ 2,234 $ 2,162 $ 3,863 $ 3,573
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Basic and diluted net income
per common share * * $ .01 $ .01
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*-Less than $.01 per share
See accompanying notes to unaudited condensed financial statements.
CROFF ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
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2000 2001
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Cash flows from operating activities:
Net income $ 25,963 $ 71,333
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 21,000 20,000
Changes in operating assets and liabilities:
(Increase) decrease in marketable securities (875) 375
(Increase) decrease in accounts receivable (7,830) 25,358
(Increase) decrease in other assets (1,450) (62)
Increase (decrease) in accounts payable 3,674 6,574
Increase (decrease) in accrued liabilities 456 (1,470)
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Net cash provided by operating activities 40,938 122,108
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Cash flows from investing activities:
Purchased working interest in proved properties - (5,205)
Issuance of short term note receivable - (15,000)
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Net cash (used in) investing activities - (20,205)
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Cash flows from financing activities:
Purchase of treasury stock - (200)
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Net cash (used in) financing activities - (200)
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Increase in cash and cash equivalents 40,938 101,703
Cash and cash equivalents at beginning of period 57,716 191,634
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Cash and cash equivalents at end of period $ 98,654 $ 293,337
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See accompanying notes to unaudited condensed financial statements
CROFF ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basis of preparation
The condensed financial statements for the three and six month periods
ended June 30, 2001 and 2000 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 condensed financial statements to conform to the 2001
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, 2000, 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 months ended June 30, 2001 compared to three months ended June 30, 2000.
Revenues for the second quarter of 2001 totaled $95,911, a 22% increase
from the prior year period. Net income for the second quarter of 2001 totaled
$32,039, an increase of 113% compared to the second quarter of 2000. Oil and
gas sales for the second quarter totaled $93,143, a 20% increase from the prior
year period. This increase was primarily attributable to higher oil and gas
prices. There were minimal changes in the levels of production. The Company's
oil and gas revenues are generally divided equally between royalties and
working interest. Other income for the second quarter of 2001 totaled $2,768,
a 258% increase from the prior year period. This increase was due to higher
interest and dividend income due to an increase in the value of the Company's
cash and cash equivalents as well as marketable securities held.
Lease operating expense, which includes all production related taxes for
the second quarter of 2001, totaled $27,555, an increase of 6% compared to the
second quarter of 2000. This increase was due to wells being put back
into production, and higher production taxes.
Depreciation and depletion expense for the second quarter of 2001 totaled
$10,000, a 5% decrease from the prior year period.
General and administrative expense, including rent for the second quarter
of 2001 totaled $26,317, a 3% decrease from the prior year period.
Six months ended June 30, 2001 compared to six months ended June 30, 2000.
Revenues for the six months ended June 30, 2001 totaled $221,298, a 50%
increase from the prior year period. Net income for the six months ended
June 30, 2001 totaled $71,333, an increase of 175% compared to the prior year
period. Oil and gas sales for the six months ended June 30, 2001 totaled
$215,504, a 48% increase from the prior year period. This increase was
primarily attributable to higher oil and gas prices. There were only slight
increases in the levels of production, primarily from coalbed methane gas in
New Mexico. The Company's oil and gas revenues are generally divided equally
between royalties and working interest. Other income for the six months ended
June 30, 2001, totaled $5,794, a 139% increase from the prior year period.
This increase was due to higher interest and dividend income due to an increase
in the value of the Company's cash and cash equivalents as well as marketable
securities held.
Lease operating expense, which includes all production related taxes for
the six months ended June 30, 2001, totaled $74,307, an increase of 63%
compared to the prior year period. The primary reason for this increase was
the expenditure of $22,000 incurred in a five percent participation in an
unsuccessful new well in Oklahoma. The well was completed but has not
produced. The remaining increase was due to higher production taxes due to
higher prices and inflation in oil field costs.
Depreciation and depletion expense for the six months ended June 30, 2001
totaled $20,000, a 5% decrease from the prior year period.
General and administrative expense, including rent for the six months
ended June 30, 2001 totaled $55,658, compared to $55,698 from the prior year
period. The Company expects general and administrative costs to remain stable
this year.
Financial condition and capital resources
At June 30, 2001, the Company had $704,409 of assets and $683,099 of
stockholders' equity. In the first six months of 2001, net cash provided by
operations totaled $122,108 as compared to $40,908 for the prior year period.
Working capital at June 30, 2001 totaled $359,223, an increase of 31% compared
to $273,295 at June 30, 2000. The Company's current ratio at June 30, 2001 is
approximately 18:1. At June 30, 2001, there were no significant commitments
for capital expenditures. The Company is currently accumulating cash and liquid
assets to prepare for a possible reverse merger of the Company. The Company
expects to continue to operate at a positive cash flow for the remainder of
this year and resume buying producing oil and natural gas properties.
In the first six months 2001, the Company repurchased 200 shares of its
common stock for $200.
On June 15, 2001, the Company loaned $15,000 to a related party
corporation, whose President is also the President of the Company. This
short-term secured note bears interest at 10% per annum.
PART II. OTHER INFORMATION
ITEM 6(B) REPORTS ON FORM 8-K
The registrant has filed no reports on Form 8-K for the quarter ended
June 30, 2001.
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: /s/ Gerald L. Jensen
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Gerald L. Jensen
Chief Executive Officer and Chief Financial Officer
By: /s/ Stuart D. Kroonenberg
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Stuart D. Kroonenberg
Chief Accounting Officer
Dated: August 10,2001
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