UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
[X] QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended September 30, 2008
or
[_] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
File Number: 000-16731
CROFF ENTERPRISES,
INC.
(Exact
name of registrant as specified in its charter)
|
Utah
|
87-0233535
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
9903 Santa Monica
Blvd, Suite 287, Beverly Hills, California
|
90212
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(818) 735-0050
(Registrant's
telephone number, including area code)
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 was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.YES [X] NO [ ]
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule12b-2 of the Exchange Act.
|
Large
accelerated filer [_]
|
Accelerated
filer [_]
|
|
Non-accelerated
filer [_]
|
Smaller
reporting
company [X]
|
Indicate
by checkmark whether the registrant is a shell company (as defined by Rule12b-2
of the Exchange Act). YES
[X] NO [_]
As of
September 30, 2008, the registrant had outstanding 1,018,099 shares of its $.10
par value common stock (its only class of common stock), excluding 102,644
common shares held as treasury stock.
CROFF
ENTERPRISES, INC.
INDEX TO
INFORMATION INCLUDED IN THE QUARTERLY REPORT ON FORM 10-Q
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2008
|
Page
Number
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||||
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PART
I - FINANCIAL INFORMATION
|
||||
|
Item 1. Financial
Statements.
|
3 –
8
|
|||
|
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations.
|
9
|
|||
|
Item 3. Quantitative and
Qualitative Disclosures About Market Risk.
|
11
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|||
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Item 4. Controls and
Procedures.
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12
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|||
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PART
II - OTHER INFORMATION
|
||||
|
Item 6.
Exhibits.
|
12
|
|||
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Signatures
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12
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|||
|
Certifications
|
Attached
|
|||
-2-
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This
report on Form 10-Q and other reports filed by Croff Enterprises, Inc. (“Croff”
or the "Company") from time-to-time with the Securities and Exchange Commission
(collectively the “Filings”) contain forward-looking statements and information
that are based upon beliefs of, and information currently available to, the
Company's management, as well as estimates and assumptions made by the Company's
management. When used in the Filings, the words "anticipate",
"believe", "estimate", "expect", "future", "intend", "plan" or the negative of
those terms and similar expressions as they relate to the Company or the
Company's management identify forward-looking statements. Such statements
reflect the current view of the Company with respect to future events and are
subject to risks, uncertainties, assumptions and other factors relating to the
Company's industry, operations and results of operations and any businesses that
may be acquired by the Company. Should one or more of those risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements.
The
financial statements included herein have been prepared in conformity with
generally accepted accounting principles. The statements are unaudited but
reflect all adjustments, which, in the opinion of management, are necessary to
fairly present the Company’s financial position and results of operations. All
such adjustments are of a normal recurring nature.
(The
financial statements commence on the following page.)
-3-
CROFF
ENTERPRISES, INC.
CONDENSED
BALANCE SHEETS
|
September
30, 2008
(Unaudited)
|
December
31, 2007
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$ | 63,866 | $ | 408,634 | ||||
|
Accounts
receivable
|
- | 86,730 | ||||||
|
TOTAL
CURRENT ASSETS
|
63,866 | 495,364 | ||||||
|
TOTAL
ASSETS
|
$ | 63,866 | $ | 495,364 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
LIABILITIES
|
||||||||
|
Accounts
payable
|
$ | 1,191 | $ | 7,159 | ||||
|
Dividends
payable
|
32,076 | - | ||||||
|
Accrued
liabilities
|
- | 70,667 | ||||||
|
TOTAL
LIABILITIES
|
33,267 | 77,826 | ||||||
|
STOCKHOLDERS’
EQUITY
|
||||||||
|
Class
A Preferred stock; no par value
|
||||||||
|
Authorized
– 10,000,000 shares
|
||||||||
|
Issued
and outstanding – 0 shares
|
- | - | ||||||
|
Common
stock, par value $0.10 per share
|
||||||||
|
Authorized
– 50,000,000 shares
|
||||||||
|
Issued
and outstanding – 1,120,743 and 620,743, respectively
|
112,064 | 62,064 | ||||||
|
Additional
paid-in capital
|
639,615 | 439,615 | ||||||
|
Treasury
stock, at cost – 102,644 and 69,399 shares, respectively
|
(154,364 | ) | (107,794 | ) | ||||
|
Retained
(deficit) earnings
|
(566,716 | ) | 23,653 | |||||
|
TOTAL
STOCKHOLDERS’ EQUITY
|
30,599 | 417,538 | ||||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 63,866 | $ | 495,364 | ||||
The
accompanying notes are an integral part of the financial
statements
-4-
CROFF
ENTERPRISES, INC.
CONDENSED
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
Three
Months Ended September 30, 2008
|
Three
Months Ended September 30, 2007
(as
restated)
|
Nine
Months Ended September 30, 2008
|
Nine
Months Ended September 30, 2007
(as
restated)
|
|||||||||||||
|
EXPENSES
|
||||||||||||||||
|
General
and administrative
|
$ | 46,505 | $ | 28,840 | $ | 137,080 | $ | 69,613 | ||||||||
|
Consulting
fees, non-cash compensation
|
- | - | 250,000 | - | ||||||||||||
|
TOTAL
EXPENSES
|
46,505 | 28,840 | 387,080 | 69,613 | ||||||||||||
|
(LOSS)
FROM OPERATIONS
|
(46,505 | ) | (28,840 | ) | (387,080 | ) | (69,613 | ) | ||||||||
|
OTHER
INCOME (EXPENSE)
|
||||||||||||||||
|
Interest
income
|
- | 11,065 | 3,429 | 33,397 | ||||||||||||
|
OTHER
INCOME (EXPENSE)
|
- | 11,065 | 3,429 | 33,397 | ||||||||||||
|
(LOSS)
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(46,505 | ) | (17,775 | ) | (383,651 | ) | (36,216 | ) | ||||||||
|
Provision
for income taxes
|
- | - | - | - | ||||||||||||
|
(LOSS)
FROM CONTINUING OPERATIONS
|
(46,505 | ) | (17,775 | ) | (383,651 | ) | (36,216 | ) | ||||||||
|
DISCONTINUED
OPERATIONS
|
||||||||||||||||
|
Income
discontinued operations
|
- | 132,711 | - | 322,970 | ||||||||||||
|
Provision
for income taxes
|
- | (22,000 | ) | - | (74,000) | |||||||||||
|
INCOME
FROM DISCONTINUED OPERATIONS
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- | 110,711 | - | 248,970 | ||||||||||||
|
NET
(LOSS)
|
$ | (46,505 | ) | $ | 92,936 | $ | (383,651 | ) | $ | 212,754 | ||||||
|
NET
(LOSS) INCOME PER COMMON SHARE
|
||||||||||||||||
|
Basic
and diluted:
|
||||||||||||||||
|
Continuing
operations
|
$ | (0.04 | ) | $ | (0.03 | ) | $ | (0.47 | ) | $ | (0.07 | ) | ||||
|
Discontinued
operations
|
- | 0.20 | - | 0.44 | ||||||||||||
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Net
(loss) income
|
$ | (0.04 | ) | $ | 0.17 | $ | (0.47 | ) | $ | 0.39 | ||||||
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
||||||||||||||||
|
Basic
and diluted
|
1,120,743 | 551,224 | 810,524 | 551,224 | ||||||||||||
The
accompanying notes are an integral part of the financial statements
-5-
CROFF
ENTERPRISES, INC.
CONDENSED
STATEMENT OF STOCKHOLDERS’ EQUITY
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008
(UNAUDITED)
|
Common
Stock
|
Additional
Paid-in
|
Treasury
|
Retained
|
|||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Stock
|
Deficit
|
Total
|
|||||||||||||||||||
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Balance,
December 31, 2007
|
620,743
|
$
|
62,064
|
$
|
439,615
|
$
|
(107,794)
|
|
$
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23,653
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$
|
417,538
|
||||||||||||
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Issuance
of common stock for
|
||||||||||||||||||||||||
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deferred
consulting fees
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500,000
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50,000
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200,000
|
-
|
-
|
250,000
|
||||||||||||||||||
|
Purchase
of treasury stock
|
-
|
-
|
-
|
(46,570)
|
|
-
|
(46,570)
|
|
||||||||||||||||
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Dividend
|
-
|
-
|
-
|
-
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(206,718)
|
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(206,718)
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|
||||||||||||||||
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Net
(loss) for the nine months
|
||||||||||||||||||||||||
|
Ended
September 30, 2008
|
-
|
-
|
-
|
-
|
(383,651)
|
|
(383,651)
|
|
||||||||||||||||
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Balance,
September 30, 2008
|
1,120,743
|
$
|
112,064
|
$
|
639,615
|
$
|
(154,364)
|
|
$
|
(566,716)
|
|
$
|
30,599
|
|||||||||||
The
accompanying notes are an integral part of the financial statements
-6-
CROFF
ENTERPRISES, INC.
CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
Nine
Months Ended September 30, 2008
|
Nine
Months Ended September 30, 2007
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
(loss) from continuing operations
|
$ | (383,651 | ) | $ | (36,216 | ) | ||
|
Adjustments
to reconcile net (loss) to net cash (used) by operating
activities:
|
||||||||
|
Income
from discontinued operations
|
- | 248,970 | ||||||
|
Depletion,
depreciation and accretion
|
- | 42,341 | ||||||
|
Consulting
fees, non-cash compensation
|
250,000 | - | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
86,730 | 757 | ||||||
|
Accounts
payable
|
(5,968 | ) | (19,658 | ) | ||||
|
Accrued
liabilities
|
(70,667 | ) | (28,730 | ) | ||||
|
NET
CASH (USED) PROVIDED BY OPERATING ACTIVITIES
|
(123,556 | ) | 207,464 | |||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Acquisition
of property leases and improvements
|
- | (64,209 | ) | |||||
|
NET
CASH (USED) PROVIDED BY INVESTING ACTIVITIES
|
- | (64,209 | ) | |||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Dividends
paid
|
(174,642 | ) | - | |||||
|
Purchase
of treasury stock
|
(46,570 | ) | - | |||||
|
NET
CASH (USED) BY FINANCING ACTIVITIES
|
(221,212 | ) | - | |||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(344,768 | ) | 143,256 | |||||
|
CASH
AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
|
408,634 | 985,729 | ||||||
|
CASH
AND CASH EQUIVALENTS AT THE END OF THE PERIOD
|
$ | 63,866 | $ | 1,128,984 | ||||
The
accompanying notes are an integral part of the financial statements
-7-
CROFF
ENTERPRISES, INC.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basis
of Preparation.
The
condensed financial statements for the nine month periods ended September 30,
2008 and 2007 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 information in footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America 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, 2007, which report has been
filed with the Securities and Exchange Commission. The Annual Report is
available online at the Securities and Exchange Commission’s website at www.sec.gov/edgar.
Discontinued
Operations.
As of
December 31, 2007, pursuant to a plan adopted by the Company’s shareholders, the
Company had transferred its oil and gas operations to a company owned by the
holders of the Company’s Series B preferred shares. The effect of
those discontinued operations on the Company is included in the Schedule of
Discontinued Operations as of September 30, 2007, set out
below:
SCHEDULE
OF DISCONTINUED OPERATIONS
For the
nine months ended September 30, 2007
|
Revenues:
|
||||
|
Oil
and natural gas sales
|
$
|
664,984
|
||
|
Other
income
|
2,760
|
|||
|
$
|
667,744
|
|||
|
Expenses:
|
||||
|
Lease
operating expense including production taxes
|
212,795
|
|||
|
General
and administrative
|
89,638
|
|||
|
Accretion
expense
|
4,841
|
|||
|
Depletion
and depreciation
|
37,500
|
|||
|
344,774
|
||||
|
Income
from discontinued operations
|
322,970
|
|||
|
Provision
for income taxes
|
74,000
|
|||
|
Net
income from discontinued operations
|
$
|
248,970
|
||
-8-
Item
2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Overview.
Croff
Enterprises, Inc. (“Croff’ or the “Company”) was incorporated in Utah in
1907. Due to the Spin-Off (as described below), the Company currently
has no business operations or revenue source and has reduced its operations to a
minimal level (although it continues to file reports required under
the Securities Exchange Act of 1934). As a result, the Company
is a “shell company” under the rules of the Securities and Exchange Commission
(the “SEC”). As of September 30, 2008, the Company had available cash
and cash equivalents of $63,866, which it believes will provide funding for its
minimal operations until approximately December 31, 2008. During that
period, it is expected that the Company’s management will seek opportunities for
a merger or other business combination with a privately-held operating company
(on terms that may or may not be favorable to the Company's existing
shareholders). Should the Company exhaust its available funds before
a merger or other business combination is completed and be unable to obtain
additional funds from the sale of debt or equity securities and/or other
financing sources (again on terms that may or may not be favorable to the
Company's existing shareholders), it is expected that the Company will be
required to discontinue operations entirely, seek protection under federal
bankruptcy laws, or both.
Restructure
of Operations.
In
December 2007, Croff spun-off its oil and gas assets, related bank accounts, and
all related assets and liabilities to a new wholly-owned subsidiary named Croff
Oil Company, Inc. (the “Spin-Off”). All shares of Croff Oil Company,
Inc. were then exchanged for Croff’s outstanding Series B preferred
shares and the Series B preferred shares were then cancelled. All of
Croff’s oil and gas assets, including perpetual mineral interests, had been
pledged to its Series B preferred shareholders at the creation of the Series B
preferred class in 1996. All shareholders of Croff at the date of issuance in
1996 were given an equivalent number of shares of Series B preferred stock,
while keeping their common stock.
The
Spin-Off occurred approximately three years after Croff’s Board of Directors had
determined to review its strategic alternatives with a view to obtain more
liquidity for the Company’s two classes of stock and to increase the value to
its shareholders. In the first quarter of 2005, the Board believed
the combined value of $2.30 for a common share plus a Series B preferred share
did not reflect the total value of the Company. Therefore, in the fourth quarter
of 2007 the Board of Directors set the value of a combined Series B preferred
share and a common share at $5.25, allowing shareholders to receive this cash
buyout. Under the Utah Dissenting Shareholder’s Rights Act, Croff’s
common and Series B preferred shareholders had the option to receive cash from
the Company in exchange for their shares. Common shares were redeemed
at $1.00 per share and Series B preferred shares were redeemed at $4.25 per
share. If a shareholder did not approve of the price, the shareholder was able
to propose a different price with justification. Pursuant to the
buyout, 24,030 common shares of Croff were redeemed at $1.00 per share, and
an additional 10,415 common shares were redeemed at various prices from $1.00 to
$2.70. In addition, 35,930 shares of Series B preferred stock were
redeemed, all for the $4.25 per share price. As a result of shareholders
exercising their rights, the number of outstanding common shares was reduced
from 551,244 to 516,799 by September 30, 2007.
Liquidity
and Capital Resources.
At
September 30, 2008, the Company had assets of $63,866 and current assets totaled
$63,866 compared to current liabilities of $33,267. At September 30, 2007, the
Company had assets of $2,036,367 and current assets totaled $1,253,126 compared
to current liabilities of $66,743. During the nine month period ended September
30, 2008, net cash used by operations totaled $123,556, as compared to cash
provided by operations of $207,464 during the nine months ended September 30,
2007. All of those changes are due to the Spin-Off, which left the
Company with no active business in 2008. The Company had no short-term or
long-term debt outstanding at September 30, 2008. During the nine
months ended September 30, 2008, the Company purchased 33,245 shares of its
common stock at a cost of $46,570; all purchased shares were included in the
Company’s treasury stock at September 30, 2008.
-9-
Results
of Operations - Three months and nine months ended September 30,
2008, compared to three months and nine months ended September 30,
2007.
The
Company had a net loss for the three months ended September 30, 2008, which
totaled $46,505 compared to a net income of $92,936 for the same period in
2007. As a result of the Spin-Off, there was no income in the three
months ended September 30, 2008, while there were oil revenues in the three
months ended September 30, 2007.
General
and administrative expense, for the three months ended September 30, 2008,
totaled $46,505 compared to $28,840 for the same period in 2007. This cost
included the costs of the audit, expenses relating to the division of the
Company, and additional accounting and legal costs. Provision for
income taxes for the three months ended September 30, 2008, was zero compared to
$22,000 from the same period in 2007. This decrease is attributable to the net
loss for 2008.
The
Company had a net loss for the nine months ended September 30, 2008, which
totaled $383,651 compared to a net income of $212,754 for the same period in
2007. As a result of the Spin-Off, there was only interest income in the nine
months ended September 30, 2008, while there were oil revenues in the nine
months ended September 30, 2007.
General
and administrative expense, for the nine months ended September 30, 2008,
totaled $137,080 compared to $69,613 for the same period in 2007. This cost
included the costs of the audit, expenses relating to the division of the
Company, and additional accounting and legal costs. During the nine months ended
September 30, 2008, the Company issued 500,000 shares of its common stock valued
at $0.50 per share based on the fair market value in payment of consulting fees
and recorded an expense of $250,000. Provision for income taxes for the nine
months ended September 30, 2008, was zero compared to $74,000 from the same
period in 2007. This decrease is attributable to the net loss for
2008.
Results
of Discontinued Operations.
Total
revenues for the three months ended September 30, 2008, totaled $0 compared to
$253,928 for the three months ended September 30, 2007, a decrease due to the
Spin-Off. Interest income decreased to $0 during the three months
ended September 30, 2008, from $11,065 during the three months ended September
30, 2007, due to the purchase of Series B preferred stock, cash accounts, and
lower interest rates. Oil and gas revenues decreased to $0 during the
three months ended September 30, 2008, from $242,863 during the three months
ended September 30, 2007.
During
the three months ended September 30, 2008, there were no lease operating
expenses, compared to $74,372 incurred during the three months ended September
30, 2007. This decrease was due to the Spin-Off that occurred prior to December
31, 2007. Depreciation and depletion expense during the three months ended
September 30, 2008, was $0 compared to $12,500 during the three months ended
September 30, 2007.
Total
revenues for the nine months ended September 30, 2008, totaled $3,429 compared
to $701,237 for the nine months ended September 30, 2007, a decrease due to the
Spin-Off. Interest income decreased to $3,429 during the nine months
ended September 30, 2008, from $33,397 during the nine months ended September
30, 2007, due to the purchase of Series B preferred stock, cash accounts, and
lower interest rates. Oil and gas revenues decreased to $0 during the nine
months ended September 30, 2008, from $664,984 during the nine months ended
September 30, 2007.
During
the nine months ended September 30, 2008, there were no lease operating
expenses, compared to $212,795 incurred during the nine months ended September
30, 2007. This decrease was due to the Spin-Off that occurred prior to December
31, 2007. Depreciation and depletion expense during the nine months ended
September 30, 2008, was $0 compared to $37,500 during the nine months ended
September 30, 2007.
-10-
Accounting
Pronouncements Regarding Interim Financial Statements.
SFAS 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
- - an amendment of SFAS 87, 88, 106, and 132(R), requires an employer to
recognize the over-funded or under-funded status of a defined benefit
postretirement plan (other than a multi-employer plan) as an asset or liability
in its statement of financial position and to recognize changes in that funded
status in the year in which the changes occur through comprehensive income of a
business entity or changes in unrestricted net assets of a not-for-profit
organization. This statement requires an employer to measure the funded status
of a plan as of the date of its year-end statement of financial position, with
limited exceptions. The Company does not maintain a defined benefit pension plan
and offers no other post-retirement benefits.
In
February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS
159, The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of SFAS 115 (“SFAS 159”), which became
effective for fiscal periods beginning after November 15, 2007. Under SFAS 159,
companies may elect to measure specified financial instruments and warranty and
insurance contracts at fair value on a contract-by-contract basis, with changes
in fair value recognized in earnings each reporting period. This election,
called the “fair value option”, will enable some companies to reduce volatility
in reported earnings caused by measuring related assets and liabilities
differently. Croff does not expect the impact of adoption to have a
material impact on its consolidated financial statements.
In
December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations
(“SFAS 141 R”). SFAS 141R establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, including goodwill, the liabilities assumed and
any non-controlling interest in the acquiree. SFAS 141R also
establishes disclosure requirements to enable users of the financial statements
to evaluate the nature and financial effects of the business
combination. SFAS 141R is effective for business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. The impact
of adopting SFAS 141R will be dependent on the future business combinations that
the Company may pursue after its effective date.
In
December 2007, the SEC issued SAB 110, Share-Based Payment (“SAB 110"). SAB 110
amends and replaces Question 6 of Section D.2 of Topic 14, “Share-Based
Payment,” of the Staff Accounting Bulletin series. Question 6 of
Section D.2 of Topic 14 expressed the views of the staff regarding the use of
the “simplified” method in developing an estimate of the expected term of “plain
vanilla” share options and allows usage of the “simplified” method for share
option grants prior to December 31, 2007. SAB 110 allows public companies which
do not have historically sufficient experience to provide a reasonable estimate
to continue use for the “simplified” method for estimating the expected term of
“plain vanilla” share option grants after December 31, 2007. SAB 110
became effective January 1, 2008. Croff currently uses the
“simplified” method to estimate the expected term for share option grants as it
does not have enough historical experience to provide a reasonable estimate.
Croff will continue to use the “simplified” method until it has enough
historical experience to provide a reasonable estimate of expected term in
accordance with SAB 110. Croff does not expect SAB 110 will have a
material impact on its consolidated balance sheets, statements of income and
cash flows.
Item
3. Quantitative and Qualitative Disclosures About
Market Risk.
As noted
above in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Overview,” the Company is a “shell
company.” As of September 30, 2008, the Company had available cash
and cash equivalents of $63,866, which it believes will provide funding for its
minimal operations until approximately December 31, 2008. At this
time, it is believed that the Company’s sole market risk exposure is its ability
to find and complete a suitable merger or other business combination with a
privately-held operating company prior to the exhaustion of its available
funds.
-11-
Item
4. Controls and Procedures.
Evaluation of Disclosure Controls
and Procedures.
The
Company maintains controls and procedures designed to ensure that information
required to be disclosed in its filings with the SEC is recorded,
processed, summarized and reported within the time periods required by the SEC.
As of September 30, 2008, the Company’s management, under the supervision and
with the participation of the Company’s Chief Executive Officer, who is also the
Company’s Chief Financial Officer, evaluated the effectiveness of the design and
operation of the Company’s disclosure controls and procedures. Based
on that evaluation, the Company’s Chief Executive Officer and Chief Financial
Officer concluded that, as of the end of the fiscal quarter ended September 30,
2008, the Company’s disclosure control and procedures are effective in alerting
him to material information that is required to be included its SEC
filings.
Changes in Internal Control Over
Financial Reporting.
There
have been no changes in the Company’s internal control over financial reporting
during the fiscal quarter ended September 30, 2008, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART
II - OTHER INFORMATION
Item
6. Exhibits.
The
following Exhibits are attached hereto:
|
31
|
Rule
13a-14(a)/15d-14(a) Certification.
|
|
32
|
Section
1350 Certification.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Dated:
October
29, 2008
|
CROFF
ENTERPRISES, INC.
|
|
| By: |
/s/ GREGORY R.
WOODHILL
|
|
|
Gregory
R. Woodhill, President and
|
||
|
Chief
Financial Officer
|
||
-12-
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
|
|
|
31
|
Rule
13a-14(a)/15d-14(a) Certification.
|
|
|
32
|
Section
1350 Certification.
|
-13-
EXHIBIT
31
CERTIFICATION
I, Gregory R. Woodhill, certify
that:
1. I
have reviewed this quarterly report on Form 10-Q of Croff Enterprises,
Inc. (the "Company");
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Company as of, and for,
the periods presented in this report;
4. The
Company's other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
(a) designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b) designed
such internal control over financial reporting, or caused such internal control
over financial reporting to the designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principals;
(c) evaluated the
effectiveness of the Company's disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure
controls and procedures as of the end of the period covered by this report based
on such evaluation; and
(d) disclosed
in this report any change in the Company's internal control over financial
reporting that occurred during the Company's most recent fiscal quarter (the
Company's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting; and
5. The
Company's other certifying officers and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the Company's
auditors and the audit committee of the Company's board of directors (or persons
performing the equivalent functions):
(a) all
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and report
financial information; and
(b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company's internal control over financial
reporting.
| Dated: October 29, 2008 | /s/ GREGORY R. WOODHILL |
| Gregory R. Woodhill, President and | |
| Chief Financial Officer |
EXHIBIT
32
CERTIFICATE
OF CROFF ENTERPRISES, INC.
CHIEF
EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT
TO SECTION 1350
OF
CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE
I, Gregory R. Woodhill, the Chief
Executive Officer and Chief Financial Officer of Croff Enterprises, Inc. (the
"Company"), do hereby certify, pursuant to 18 U.S.C. 1350 that, to my
knowledge:
(1) the
Quarterly Report on Form 10-Q of the Company for the quarter ended September 30,
2008, as filed with the Securities and Exchange Commission (the "Report"), fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
| Dated: October 29, 2008 | /s/ GREGORY R. WOODHILL |
| Gregory R. Woodhill, President and | |
| Chief Financial Officer |