-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ap6XZQUu3s26Pi4ffGFoZCVrdtuIVoliJk1dhJVtFQpI6FNl3qlfM6+zR7HkYIL4 8w3bA5wn+rJK+0rAIxEf6A== 0000025743-98-000018.txt : 19980814 0000025743-98-000018.hdr.sgml : 19980814 ACCESSION NUMBER: 0000025743-98-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROFF ENTERPRISES INC CENTRAL INDEX KEY: 0000025743 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870233535 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16731 FILM NUMBER: 98685724 BUSINESS ADDRESS: STREET 1: 1675 BROADWAY STREET 2: STE 1030 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3036281963 MAIL ADDRESS: STREET 1: 1675 BROADWAY STREET 2: SUITE 1030 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: CROFF OIL CO DATE OF NAME CHANGE: 19920703 10-Q 1 10 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, 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: 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.) 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: 516,265 shares, one class only, as of June 30, 1998. 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, 1998 (UNAUDITED). _________________________________________________________________ PART I. FINANCIAL INFORMATION Page Number Balance Sheets as of December 31, 1997 and June 30, 1998 3, 4 Statements of Operations for the Three and Six Months Ended June 30, 1997 and 1998 5 Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1998 6 Notes to Financial Statements 7 Management's' Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Changes in Securities 9 Other Information 9 Exhibits and Reports on Form 8-K 10 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, 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 December 31, June 30, 1997 1998 CURRENT ASSETS: Cash and Cash Equivalents: $166,883 $48,459 Marketable equity securities 15,687 3,125 Accounts receivable: Oil and gas purchasers 26,552 22,970 Refundable income taxes 3,200 5,400 Total current assets $212,322 $79,954 PROPERTY AND EQUIPMENT, AT COST: Oil & gas properties, successful efforts method: Proved properties $429,903 $640,825 Unproved properties 97,102 97,102 527,005 737,927 Less accumulated depletion and depreciation (250,729) (263,544) Net property and equipment 276,276 474,383 Coal Investment 16,277 16,277 Total Assets $ 504,875 $570,614 PART I: FINANCIAL INFORMATION CROFF ENTERPRISES, INC. BALANCE SHEET December 31 June 30, 1997 1998 Current Liabilities: Accounts payable $ 4,378 $14,247 Accrued liabilities 2,605 2,839 Note payable 0 68,402 Total current liabilities 6,983 $85,488 Stockholders' equity: Class A Preferred, none issued Class B Preferred stock, no par value; 520,000 authorized, 516,265 shares issued 12/31/97 364,328 520,000 authorized, 490,860 shares issued 6/30/98 346,232 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) (378,339) 580,788 568,022 Less common stock at cost, 62,628 shares in 1996 and 62,878 in 1997 (82,896) (82,896) Total stockholders' equity 497,892 485,126 $504,875 $570,614 CROFF ENTERPRISES, INC. Statement of Operations For the Three And Six Months Ended June 30, 1998 (Unaudited) For Three Months For Six Months, Ended Ended 6/30/97 6/30/98 6/30/97 6/30/98 ______ ______ _______ _______ Revenue: Oil and gas sales........ $ 47,515 $47,675 105,517 $90,405 Other income (loss)..... 1,772 1,521 3,994 6,243 Total revenue $ 49,287 $49,196 $109,511 96,648 Costs and expenses: Lease operating expense.. $ 8,897 10,179 18,171 21,252 Depreciation and depletion 6,000 6,657 12,000 12,815 General and administrative 21,631 20,510 41,648 43,052 Interest Expense 2,228 2,228 Rent Expense - Related Party 2,940 2,940 5,880 5,880 $ 39,468 $42,514 $77,699 $85,227 Net income (loss) $ 9,819 $ 6,682 $ 31,812 $11,421 Earnings (Loss) Per Share $ .01 $ .01 $ .06 $ .02 CROFF ENTERPRISES, INC. Statement of Cash Flows For the Six Months Ended June 30, 1997 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $31,812 11,421 Adjustments to reconcile net income to net cash provided by operating activities and depletion: 12,000 12,815 Change in assets and liabilities: Decrease(Increase) in Receivables 4,041 1,382 Decrease(Increase) in other assets 0 (2,422) Decrease(Increase) in accounts payable 1,688 (9,869) Decrease(Increase) in accrued liabilities (1,409) (234) (Gains) on marketable securities 0 (3,829) Total adjustments 16,320 ) (2,157) Net cash provided by operating activities: 48,132 9,264 CASH FLOWS FROM INVESTING ACTIVITIES: (Purchase)Sale of oil & gas properties: (19,052) (208,500) (Purchase) of Preferred Stock (24,188) Sale of marketable equity securities 750 15,000 (18,302) (217,688) CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (250) Proceeds from Note Payable 90,000 Increase (decrease) in cash: 29,580 (118,424) Cash at beginning of period: $ 184,565 $ 166,883 Cash at end of period: $ 214,145 $ 48,459 CROFF ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 BASIS OF PREPARATION The condensed financial statements for the three and six month periods ended June 30, 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 1997 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. MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three-Month Period Ended June 30, 1998, as Compared to the Three-Month Period Ended June 30, 1997. OIL AND GAS OPERATIONS Oil and gas income, primarily from royalties, for the three months ended June 30, 1998 was $47,675 compared to $47,515 for the quarter ending June 30, 1997. This slight increase in revenue was caused by the drastic drop in oil prices and a smaller drop in natural gas prices, that offset the additional production from new leases. Prices for oil decreased from approximately $17-$18 per barrel in this quarter in 1997, to slightly over $12-$13 per barrel, this year. Natural gas prices declined by approximately ten percent. Production increased as the Company purchased five new producing leases this quarter which produce primarily natural gas. Production costs, which include lease operating expenses and all production related taxes, for the three months ended June 30, 1998, due to new operating leases, increased to $10,179 in 1998, compared to $8,897 during the same quarter year of 1997. The operating expenses increased on working interests, which were purchased. Overall, operating expenses are low due to the large amount of royalty income. Depletion increased due to the purchase of new wells. OTHER INCOME During the three month period ended June 30, 1998, the Company had other income of $1,521 compared to $1,772 for the quarter ending June 30, 1997. This was due to higher interest income last year as the Company held accumulated cash which was used to purchase oil leases, reducing interest this year. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses for the quarter ending June 30, 1998, were $20,510 plus rent expense of $2,940 for a total of $23,450 compared to $21,631, plus rent expense of $2,940, for a total of $24,571 in the same period in 1997. The Company expects general and administrative costs to remain stable this year. Six Month Period Ended June 30, 1998, as Compared to the Six Month Period Ended June 30, 1997. OIL AND GAS OPERATIONS Oil and gas income, primarily from royalties, for the six months ending June 30, 1998, was $90,405 compared to $105,517 for the six months ended June 30, 1997. This decrease was caused by much lower prices for oil, approximately five dollars a barrel less this year, and a drop of about twenty-five cents per MCF for natural gas. This drastic drop in price was offset somewhat by higher oil and natural gas production, primarily increased natural gas from coal seam methane wells, and the new working interests in natural gas wells in Oklahoma. Production costs, which include lease operating expenses and all production related taxes, for the six months ended June 30, 1998, were $21,252 in 1998, an increase from $18,171 during the six months ended June 30, 1997. The higher production costs were due primarily to the purchase of working interests in five new wells in Oklahoma in 1998, and the purchase of working interests in Texas and Michigan in the fourth quarter of 1997. OTHER INCOME. During the six month period ended June 30, 1998, the Company had other income of $6,243, primarily from interest, dividends, and lease bonuses. During the first six months of 1997, the Company had other income of $3,994, primarily from the dividends and interest. The increase was due to receiving a small bonus from leasing acreage during the first six months of 1998. GENERAL AND ADMINISTRATIVE. General and administrative expenses for the period ending June 30, 1998, were $43,052 plus rent expense of $5,880, for a total of $48,932, compared to $41,648 plus rent expense of $5,880 for a total of $47,528 for the six month period ending June 30, 1997. There was no significant change in general and administrative expenses. FINANCIAL CONDITION As of June 30, 1998, the Company's current assets were $79,954 which were exceeded by current liabilities of $85,488, for a negative ratio of .9 to 1. As of December 31, 1997, the Company's current assets were $212,322, and current liabilities were $6,983, giving the Company a working capital position of over $200,000, and a ratio of 30 to 1. This decrease was due to the Company spending much of its accumulated cash and borrowing an additional $90,000 to purchase oil and gas leases during late 1997 through April 1, 1998. The Company intends to repay its current bank debt during the next year. Although the current low energy prices greatly reduce the Company's cash flow, the Company expects to continue to operate at a positive cash flow for the calendar year. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES For the last two years the Company has conducted a clearing house where it brings together buyers and sellers of its Preferred B stock, which is not otherwise traded. At the conclusion of the trading period, one large purchaser was unable to complete its intended purchases, due to lack of financing. The Board of Directors discussed this matter, and determined to purchase the tendered shares at the request of the sellers. In April, 1998, the Company completed these transactions, purchasing 25,646 shares of the Preferred B stock for the purchase price of $24,188.20. This purchase reduced the issued and outstanding Preferred B shares these 25,646 shares, leaving a balance of issued and outstanding Preferred B shares remaining of 490,860 shares. The Board of Directors did this as a response to a unique situation, and does not intend to be a bidder at the next clearing house. ITEM 5. OTHER INFORMATION On April 7, 1998, the Company purchased five working leasehold interests in oil and gas wells in Oklahoma. The Company paid the sum of $208,000 for the working and minor royalty interests in these leases. The wells are commonly known as the Harper #1 and Miller Wells in Woodward County, Oklahoma, the Fanny Brown Well in Caddo County, Oklahoma, the Dickerson and Mueggenborg Wells in Kingfisher County, Oklahoma, and the Duncan Well in LeFlore County, Oklahoma. In addition, Jenex Operating Company, which is owned by the President of Croff Enterprises, Inc., and which is the operator of these wells, agreed to provide a credit of $150 per month per well against the operating expenses of these wells for each month that Croff Oil Company was the owner of such wells. In order to complete this purchase the Company borrowed the sum of $90,000 from Union Bank and Trust Company on a one-year note payable monthly in twelve installments. The balance was paid from the Company's cash reserves. The effective date of this transfer was April 1, 1998. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. The registrant has filed no reports on Form 8-K for the period ending June 30, 1998. EXHIBITS: A. Purchase Agreement of April 7, 1998, with St. James Oil, Ltd. 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 -----END PRIVACY-ENHANCED MESSAGE-----