UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment #1
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly and six month Period Ended SeptemberJune 30, 20052006
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 01-100000-16731
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.) | |
| 3773 Cherry Creek Drive North, Suite 1025 | 80209 | |
| Denver, Colorado | (Zip Code) | |
| (Address of principal executive office) | (303)-383-1555 | |
| Securities registered pursuant to Section 12(b) of the Act: | Name of each exchange on which registered: | |
| Common - $0.10 Par Value | None | |
Securities registered pursuant to Section 12(g) of the Act: None
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. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
There were 567,400551,244 shares of common stock outstanding on NovemberAugust 1, 2005,2006, exclusive of 54,74369,399 common shares held in treasury stock.
EXPLANATORY NOTE
The following is Amendment No. 1 to the Quarterly Report on Form 10-Q for the three months and nine months ended September 30, 2005 (the “Form 10-Q”). This Amendment No. 1 is being filed to reflect certain restatement of the Company’s financial statements for the three months and nine months ended September 30, 2005 (see Note 1 of Notes to the Financial Statements) and to revise certain disclosures and presentations in other parts of the Form 10-Q to be consistent with the restated financial statements. The Form 10-Q for the three months and nine months ended September 30, 2005, as originally filed, was not reviewed by our independent registered public accounting firm. This Amendment amends and supplements Items 1 and 2 of Part I. All other statements and provisions in the Form 10-Q have not been updated and remain unchanged.
CROFF ENTERPRISES, INC.
FORM 10-Q10-Q/A
For the Quarter and Six Months ended Ended SeptemberJune 30, 20052006
Explanatory Note:
Management is filing this amended 10-Q/A to correct certain inadvertent minor errors in the 10Q for the quarterly and six month period ended June 30, 2006. None of these changes are material in nature or affect the financial statements.
INDEX
| Page | ||||||||
Part I. | UNAUDITED FINANCIAL INFORMATION | |||||||
Item 1. | Unaudited Financial Statements | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 | ||||||
Item 4. | Controls and Procedures | |||||||
Part II | OTHER INFORMATION | |||||||
Item 5. | Material | |||||||
Item 6. | Exhibits and Reports on Form 8-K | |||||||
Signatures | ||||||||
Certifications | ||||||||
Forward-Looking Statements
Certain information included in this report, other materials filed or to be filed by the Company with the Securities and Exchange Commission (“SEC”("SEC"), as well as information included in oral statements or other written statements made or to be made by the Company contain or incorporate by reference certain forward looking statements (other than statements of historical or present fact) that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements, other than statements of historical or present facts, that address activities, events, outcomes or developments that the Company plans, expects, believes, assumes, budgets, predicts, forecasts, estimates, projects, intends or anticipates (and other similar expressions) will or may occur in the future are forward-lookingforward looking statements. These forward-looking statements are based on management’smanagement's current belief, based on currently available information, as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the cautionary statements in this Form 10-Q and the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 2004.2005. Such forward-looking statements appear in a number of places and include statements with respect to, among other things, such matters as: future capital, development and exploration expenditures (including the amount and nature thereof), drilling, deepening or refracing of wells, oil and natural gas reserve estimates (including estimates of future net revenues associated with such reserves and the present value of such future net revenues), estimates of future production of oil and natural gas, business strategies, expansion and growth of the Company’sCompany's operations, cash flow and anticipated liquidity, prospects and development and property acquisitions, obtaining financial or industry partners for prospect or program development, or marketing of oil and natural gas. We caution you that these forward-looking statements are subject to risks and uncertainties.
1
These risks include but are not limited to: general economic conditions, the Company’sCompany's ability to finance acquisitions and drilling, the market price of oil and natural gas, the risks associated with exploration, the Company’sCompany's ability to find, acquire, market, develop and produce new properties, operating hazards attendant to the oil and natural gas business, uncertainties in the estimation of proved reserves and in the projection of future rates of production and timing of development expenditures, the strength and financial resources of the Company’sCompany's competitors, the Company’sCompany's ability to find and retain skilled personnel, climatic conditions, labor relations, availability and cost of material and equipment, environmental risks, the results of financing efforts, regulatory developments and the other risks described in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 2004.
2005.
Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data and the interpretation of that data by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, these revisions could change the schedule of any further production and/or development drilling. Accordingly, reserve estimates are generally different from the quantities of oil and natural gas that are ultimately recovered.
Should one or more of the risks or uncertainties described above or elsewhere in this Form 10-Q or presented in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20042005 occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. We specifically disclaim all responsibility to publicly update any information contained in a forward-looking statement or any forward-looking statement in its entirety and therefore disclaim any resulting liability for potentially related damages.
All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.
Part I. Unaudited Financial Information
ItemITEM 1. Unaudited 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’sCompany's financial position and results of operations. All such adjustments are of a normal recurring nature.
2
2
CROFF ENTERPRISES, INC.
BALANCE SHEETS (Unaudited)
| December 31, 2005 | June 30, 2006 | |||||||
ASSETS: | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 902,257 | $ | 778,254 | ||||
Accounts receivable | 157,959 | 138,726 | ||||||
| 1,060,216 | 916,980 | |||||||
Oil and natural gas properties, at cost, successful efforts method: | 1,282,616 | 1,333,070 | ||||||
Accumulated depletion and depreciation | (535,330) | (559,830) | ||||||
| 747,286 | 773,240 | ||||||
| ||||||||
Total Assets: | $ | 1,807,502 | $ | 1,690,220 | ||||
| ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilites: | ||||||||
Accounts payable | $ | 37,945 | $ | 31,131 | ||||
Farmout agreement liability | 300,621 | -- | ||||||
Current portion of ARO liability | 23,000 | 23,000 | ||||||
Deposit on sale of assets | -- | 100,000 | ||||||
Accrued liabilities | 72,788 | 23,885 | ||||||
| 434,354 | 178,016 | ||||||
| ||||||||
Long-term portion of ARO liability | 58,828 | $ | 61,761 | |||||
| ||||||||
Stockholders' equity: | ||||||||
Class A Preferred stock, no par value | ||||||||
5,000,000 shares authorized, none issued | -- | -- | ||||||
Class B Preferred stock, no par value | ||||||||
1,000,000 shares authorized, 540,659 shares issued and outstanding | 1,089,233 | 1,221,324 | ||||||
Common stock, $.10 par value | ||||||||
20,000,000 shares authorized, 620,643 shares issued and outstanding | 62,064 | 62,064 | ||||||
Capital in excess of par value | 155,715 | 155,715 | ||||||
Treasury stock, at cost, 69,399 | ||||||||
issued and outstanding in 2005 and 2006 | (107,794) | (107,794) | ||||||
Retained earnings | 115,102 | 119,134 | ||||||
| 1,314,320 | 1,450,443 | |||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,807,502 | $ | 1,690,220 | ||||
| December 31, 2004 | As Restated | |||||||
ASSETS: | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 257,667 | $ | 523,593 | ||||
Accounts receivable | $ | 109,691 | $ | 154,583 | ||||
| $ | 367,358 | $ | 678,176 | |||||
Oil and natural gas properties, at cost, successful efforts method: | $ | 1,219,119 | $ | 1,249,944 | ||||
Accumulated depletion and depreciation | $ | (497,924) | $ | (523,330) | ||||
| $ | 721,195 | $ | 726,614 | ||||
| ||||||||
Total Assets: | $ | 1,088,553 | $ | 1,404,790 | ||||
| ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilites: | ||||||||
Accounts payable | $ | 28,410 | $ | 31,017 | ||||
Payable to related party | $ | -- | $ | 2,362 | ||||
Current portion of ARO liability (1) | $ | -- | $ | 23,000 | ||||
Accrued liabilities | $ | 8,705 | $ | 45,783 | ||||
| $ | 37,115 | $ | 102,162 | ||||
| ||||||||
Long-term portion of ARO liability | -- | $ | 56,281 | |||||
| ||||||||
Stockholders' equity: | ||||||||
Class A Preferred stock, no par value | ||||||||
5,000,000 shares authorized, none issued | $ | -- | $ | -- | ||||
Class B Preferred stock, no par value | ||||||||
1,000,000 shares authorized, 540,659 shares issued and outstanding | $ | 772,929 | $ | 989,621 | ||||
Common stock, $.10 par value | ||||||||
20,000,000 shares authorized, 622,143 shares issued and outstanding | $ | 62,214 | $ | 62,214 | ||||
Capital in excess of par value | $ | 157,927 | $ | 157,927 | ||||
Treasury stock, at cost, 53,243 and 54,743 | ||||||||
issued and outstanding in 2004 and 2005 | $ | (83,151) | $ | (85,513) | ||||
Retained earnings | $ | 141,519 | $ | 122,098 | ||||
| $ | 1,051,438 | $ | 1,246,347 | |||||
| $ | 1,088,553 | $ | 1,404,790 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
(1) See accompanying notes to unaudited condensed financial statements.
3
CROFF ENTERPRISES, INC.
STATEMENT OF OPERATIONS
(Unaudited)
| Three Months Ended September 30 | Nine Months Ended September 30 | Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||||||
| 2004 | 2005 | 2004 | 2005 as restated | 2005 | 2006 | 2005 | 2006 | |||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Oil and natural gas sales | $ | 176,707 | $ | 247,288 | $ | 446,849 | $ | 627,274 | $ | 198,694 | $ | 209,032 | $ | 379,986 | $ | 435,106 | ||||||||
Loss on natural gas "put" contracts | -- | -- | $ | (7,599) | -- | |||||||||||||||||||
Loss on sale of marketable equity securities | -- | -- | $ | (38,166) | -- | |||||||||||||||||||
Interest income | $ | -- | $ | 7,221 | $ | -- | $ | 13,879 | ||||||||||||||||
Other income | $ | 228 | $ | 7,059 | $ | 1,851 | $ | 25,669 | $ | 5,473 | $ | -- | $ | 18,610 | $ | -- | ||||||||
| $ | 176,935 | $ | 254,347 | $ | 402,935 | $ | 652,943 | $ | 204,167 | $ | 216,253 | $ | 398,596 | $ | 448,985 | ||||||||
Expenses: | ||||||||||||||||||||||||
Lease operating expense including production taxes | $ | 50,278 | $ | 46,253 | $ | 156,981 | $ | 209,016 | $ | 116,097 | $ | 57,469 | $ | 162,763 | $ | 123,158 | ||||||||
Yorktown Re-entry Program | $ | 16,435 | -- | $ | 24,903 | -- | ||||||||||||||||||
General and administrative | $ | 26,543 | $ | 35,327 | $ | 88,887 | $ | 124,105 | $ | 47,518 | $ | 35,874 | $ | 88,778 | $ | 98,826 | ||||||||
Overhead expense, related party | $ | 12,000 | $ | 11,674 | $ | 36,000 | $ | 36,371 | $ | 12,697 | $ | 8,126 | $ | 24,697 | $ | 24,444 | ||||||||
Accretion expense | $ | -- | $ | 1,467 | $ | -- | $ | 2,934 | ||||||||||||||||
Depletion and depreciation | $ | 10,500 | $ | 12,000 | $ | 31,500 | $ | 33,000 | $ | 10,500 | $ | 12,000 | $ | 21,000 | $ | 24,500 | ||||||||
Accretion expense (1) | $ | -- | $ | 7,640 | $ | -- | $ | 7,640 | ||||||||||||||||
| ||||||||||||||||||||||||
| $ | 115,756 | $ | 112,894 | $ | 338,271 | $ | 410,132 | $ | 186,812 | $ | 114,936 | $ | 297,238 | $ | 273,862 | |||||||||
| ||||||||||||||||||||||||
| ||||||||||||||||||||||||
| Pretax income | $ | 61,179 | $ | 141,453 | $ | 64,664 | $ | 242,811 | ||||||||||||||||
| Pretax income (loss) | $ | 17,355 | $ | 101,317 | $ | 101,358 | $ | 175,123 | ||||||||||||||||
| Provision for income taxes: | $ | 6,397 | $ | 29,690 | $ | 6,877 | $ | 45,540 | $ | 8,000 | $ | 23,000 | $ | 15,850 | $ | 39,000 | ||||||||
Net income | $ | 54,782 | $ | 111,763 | $ | 57,787 | $ | 197,271 | ||||||||||||||||
Net income (loss) | $ | 9,355 | $ | 78,317 | $ | 85,508 | $ | 136,123 | ||||||||||||||||
| ||||||||||||||||||||||||
| Net income applicable to preferred B shares: | $ | 71,041 | $ | 95,551 | $ | 119,603 | $ | 216,692 | $ | 58,579 | $ | 76,682 | $ | 121,141 | $ | 132,091 | ||||||||
| ||||||||||||||||||||||||
| Net income (loss) applicable to common shares | $ | (16,259) | $ | 16,212 | $ | (61,816) | $ | (19,421) | $ | (49,224) | $ | 1,635 | $ | (35,633) | $ | 4,032 | ||||||||
| ||||||||||||||||||||||||
| ||||||||||||||||||||||||
Basic and diluted net income (loss) per common share | $ | (0.03) | $ | 0.03 | $ | (0.11) | $ | (0.03) | $ | (0.09) | $ | * | $ | (0.06) | $ | 0.01 | ||||||||
| ||||||||||||||||||||||||
| ||||||||||||||||||||||||
Weighted average common shares outstanding | $ | 566,900 | $ | 567,400 | $ | 566,900 | $ | 567,400 | $ | 567,400 | $ | 551,224 | $ | 567,400 | $ | 551,224 | ||||||||
| ||||||||||||||||||||||||
* less than $0.01 per share
(1) See accompanying notes to unaudited condensed financial statements.
4
| Preferred B stock | Common stock | Capital in Excess of | Treasury | Accumulated | |||
Shares | Amount | Shares | Amount | Par Value | stock | Earnings | |
Balance at December 31, 2004 | 540,659 | $772,929 | 622,143 | $ 62,214 | $157,927 | $ (83,151) | $ 141,519 |
| Net income for the nine months ended September 30, 2005 | - | - | - | - | - | - | 197,271 |
| Purchase of treasury stock | - | - | - | - | - | (2,362) | - |
| Preferred Stock reallocation | - | 216,692 | - | - | - | - | (216,692) |
Balance at September 30, 2005 | 540,659 | $989,621 | 622,143 | $ 62,214 | $ 157,927 | $ (85,513) | $ 122,098 |
During the three month period ended March 31, 2005, the Company purchased 1,500 shares of itscommon stock for $2,362, now included in the treasury.
| Preferred B stock | Common stock | Capital in Excess of | Treasury | Accumulated | |||
Shares | Amount | Shares | Amount | Par Value | stock | Earnings | |
Balance at December 31, 2005 | 540,659 | $1,089,233 | 620,643 | $ 62,064 | $155,715 | $ (107,794) | $ 115,102 |
Net income for the six months ended June 30, 2006 | -- | -- | -- | -- | -- | -- | 136,123 |
Preferred Stock reallocation | -- | 132,091 | -- | -- | -- | -- | (132,091) |
Balance at June 30, 2006 | 540,659 | $1,221,324 | 620,643 | $ 62,064 | $ 155,715 | $ (107,794) | $ 119,134 |
See accompanying notes to unaudited condensed financial statements.
5
CROFF ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
For the ninesix months ended SeptemberJune 30, 20042005 and 20052006
(Unaudited)
| 2004 | As Restated 2005 | 2005 | 2006 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 57,787 | $ | 197,271 | $ | 85,508 | $ | 136,123 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activies: | ||||||||||||||||
Depletion depreciation and accretion | $ | 31,500 | $ | 40,640 | ||||||||||||
Loss on abandonment | $ | -- | 56,089 | |||||||||||||
Gain on sale of equipment | $ | -- | (14,173) | |||||||||||||
Realized loss on marketable equity securities | $ | 38,166 | -- | |||||||||||||
Loss on natural gas "put" contracts | $ | 7,599 | -- | |||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depletion, depreciation, and accretion | 21,000 | 27,434 | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | $ | (25,949) | $ | (44,892) | (2,480) | 19,232 | ||||||||||
Accounts payable | $ | 33,159 | $ | 2,607 | 3,464 | (6,814) | ||||||||||
Accrued liabilities | $ | 8,195 | $ | 37,078 | 7,145 | (48,903) | ||||||||||
Net cash provided by operating activities | $ | 150,457 | $ | 274,620 | 114,637 | 127,072 | ||||||||||
| ||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Proceeds from sale of equipment | 61 | $ | 48,500 | 48,500 | -- | |||||||||||
Acquisition of treasury stock | (2,362) | -- | ||||||||||||||
Deposit received for sale of assets | -- | 100,000 | ||||||||||||||
Acquisition of property leases and improvements | $ | (352,776) | $ | (57,194) | -- | (50,454) | ||||||||||
Proceeds from sale of marketable equity securities | $ | 51,514 | -- | |||||||||||||
Proceeds from sale of mutual fund | $ | 77,429 | -- | |||||||||||||
Net cash used in investing activities | $ | (223,772) | $ | (8,694) | ||||||||||||
Net cash provided in investing activities | 46,138 | 49,546 | ||||||||||||||
| ||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Costs incurred for the benefit of farmout agreement | -- | (300,621) | ||||||||||||||
| ||||||||||||||||
Net cash (used) by financing activities | -- | (300,621) | ||||||||||||||
| ||||||||||||||||
| ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | $ | (73,315) | $ | 265,926 | 160,775 | (124,003) | ||||||||||
Cash and cash equivalents at beginning of period | $ | 154,490 | $ | 257,667 | 257,667 | 902,257 | ||||||||||
Cash and cash equivalents at end of period | $ | 81,175 | $ | 523,593 | $ | 418,442 | $ | 778,254 | ||||||||
Supplemental disclosure of non-cash investing and financing activities:
During the threesix month period ended March 31,end June 30, 2005, the Company purchased 1,500 shares of its common stock for $2,362 now included in the treasury.
See accompanying notes to unaudited condensed financial statements.
6
CROFF ENTERPRISES, INC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Footnote 1 to Balance Sheets and Statement of Operations
Historically, Croff has not operated any oil and natural gas wells, its assets consisting of royalties and non-operated working interests. It recently started operating four wells and has established a working interest reserve for retirement costs less discount on expected cash flows relating to the costs of capital and related and length of the leases, in the quarter ending September 30, 2005. This reserve, based on the estimates of management, complies with the Financial Accounting Standards Board Rule 143 (FAS 143).
The following is a summary of the restatement of the three months and nine months ended financial statements:
BALANCE SHEETS
September 30
As filed | As Restated | |||||||
ASSETS: | ||||||||
Current Assets | $ | 678,176 | $ | 678,176 | ||||
| Oil and natural gas properties, net | 654,973 | 726,614 | ||||||
Total Assets: | $ | 1,333,149 | $ | 1,404,790 | ||||
| ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilites | $ | 97,564 | $ | 102,162 | ||||
Long-term portion of ARO liaibility | -- | 56,281 | ||||||
Stockholders’ equity | 1,235,585 | 1,246,347 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,333,149 | $ | 1,404,790 | ||||
| ||||||||
STATEMENT OF OPERATIONS
For the nine months ended September 30
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||
| As Filed |
| as Filed | as Restated | |||||||||
| ||||||||||||
| Revenues: | $ | 254,347 | $ | 254,347 | $ | 652,943 | $ | 652,943 | ||||
| ||||||||||||
| ||||||||||||
| Expenses: | 123,656 | 112,894 | 420,894 | 410,132 | ||||||||
| ||||||||||||
Net income | $ | 101,001 | $ | 111,763 | $ | 186,509 | $ | 197,271 | ||||
| ||||||||||||
| Net income applicable to preferred B shares: | $ | 95,551 | $ | 95,551 | $ | 216,692 | $ | 216,692 | ||||
| ||||||||||||
| Net income (loss) applicable to common shares | $ | 5,450 | $ | 16,212 | $ | (30,183) | $ | (19,421) | ||||
| ||||||||||||
| ||||||||||||
Basic and diluted net income (loss) per common share | $ | 0.01 | $ | 0.03 | $ | (0.05) | $ | (0.03) | ||||
| ||||||||||||
STATEMENT OF CASH FLOWS
For the nine months ended September 30
| As Filed | As Restated | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 186,509 | $ | 197,271 | ||||
Adjustments to reconcile net income to net cash provided by operating activies: | ||||||||
Depletion depreciation and accretion | $ | 33,000 | $ | 40,640 | ||||
Loss on abandonment | $ | 56,089 | $ | 56,089 | ||||
Gain on sale of equipment | $ | (14,173) | $ | (14,173) | ||||
Realized loss on marketable equity securities | -- | -- | ||||||
Loss on natural gas "put" contracts | -- | -- | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | $ | (44,892) | $ | (44,892) | ||||
Accounts payable | $ | 2,607 | $ | 2,607 | ||||
Accrued liabilities | $ | 55,480 | $ | 37,078 | ||||
Net cash provided by operating activities | $ | 274,620 | $ | 274,620 | ||||
| ||||||||
Net cash used in investing activities | $ | (8,694) | $ | (8,694) | ||||
| ||||||||
| ||||||||
Net increase (decrease) in cash and cash equivalents | $ | 265,926 | $ | 265,926 | ||||
Cash and cash equivalents at beginning of period | $ | 257,667 | $ | 257,667 | ||||
Cash and cash equivalents at end of period | $ | 523,593 | $ | 523,593 | ||||
7
Basis of Preparation
The condensed financial statements for the three and ninesix month periods ended SeptemberJune 30, 20042005 and 20052006 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’sCompany's Annual Report on Form 10-K10- K for the year ended December 31, 2004,2005, which report has been filed with the Securities and Exchange Commission. The Annual Report is available from the Company’sCompany's website at www.croff.com, and online at the Securities and Exchange Commission website at www.sec.gov/edgar.
ItemITEM 2. MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current Items
The Company announced on April 8, 2005 that its Board of Directors had voted to seek strategic alternatives for the Company. The Company has continued to seek a merger or acquisition participant, and other strategic steps.Overview
On July 15, 2005, the President and Chairman, through Jensen Development Company and C.S. Finance L.L.C., private companies controlled by the President (”Offerors”), tendered for the Preferred B shares of the Company at a cash price of $3 per share. Offerors collectively owned 253,191 Preferred B shares prior to the tender. The Tender Offer for Preferred B shares of the Company expired on August 19, 2005. The Offerors reported to the Company that 75,050 Preferred B shares were successfully tendered and not withdrawn by the expiration of the Offer. The tendered shares represent approximately 13.9% of the outstanding Class B Preferred stock of Croff Enterprises, Inc.
8
Immediately following the Tender Offer, the Offerors acquired an additional 29,365 shares, at the same price, from two of Croff’s directors in return for promissory notes in lieu of cash. Currently, Gerald L. Jensen and the Offerors own 359,580 Preferred B shares or approximately 66.5% of the outstanding Preferred B shares and the remaining non-tendering shareholders hold approximately 181,079 shares or approximately 33.5%.
Overview
Croff Enterprises, Inc. (“Croff’ or the “Company”) was incorporated in Utah in 1907. Croff is an independent energy company engaged in the business of oil and natural gas exploration and production, primarily through the acquisition of producing oil and natural gas leases as well as the ownership of perpetual mineral interests. Other companies operate almost all of the wells from which Croff receives revenues and Croff has no control over the factors which determine royalty or working interest revenues, such as markets, prices and rates of production. Today, Croff participates as a working interest owner in approximately 40 wells or units of several wells. Croff holds small royalty interests in approximately 250212 wells.
Croff’s business strategy is focused on targeting opportunities that are of lower risk with the potential for stable cash flow and long asset life while seeking to keep operating costs low. The Company has no short-term or long-term debt outstanding. Over the last fivesix years, the Company acquired an interest in three wells in Michigan, one well in Montana, six wells in Oklahoma and nine wells in Texas. In 2006 the Company has a small working interest in three wells being drilled in Wyoming and one scheduled in Utah. In 2004, the Company sold its Yorktown Re-entry Program to Tempest Energy Resources LP, retaining a 25% interest in the Area of Mutual Interest (AMI). The first re-entry well in this program was unsuccessful.unsuccessful, and Tempest declined to participate in the balance of the acreage. In June, 2006, the Company reached an agreement to sell all of its assets in the Yorktown Program except a working interest in two leases. The sale was for approximately the Company’s cost in the program.
During the last 12 months, the Company has been involved in seeking strategic alternatives to its previous business. On April 8, 2005, the Company announced that it would seek such strategic alternatives to attempt to enhance shareholder value and liquidity. Beginning in June and completed in August 2005, shareholders received a tender offer for their Preferred B shares from private companies owned by the Company’s President and Chairman.
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Critical Accounting Policies and Estimates
The Company’s discussion and analysis of its financial condition and results of operation are based upon financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The Company analyzes its estimates, including those related to oil and natural gas revenues, oil and natural gas properties, marketable securities, income taxes and contingencies.
The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its financial statements and the uncertainties that it could impact results of operations, financial conditions and cash flows. The Company accounts for its oil and natural gas properties under the successful efforts method of accounting. Depletion, depreciation and amortization of oil and natural gas properties and the periodic assessments for impairment are based on underlying oil and natural gas reserve estimates and future cash flows using then current oil and natural gas prices combined with operating and capital development costs. There are numerous uncertainties inherentin herent in estimating quantities of proved oil and natural gas reserves and in projecting future rates of production and timing of development expenditures.
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Liquidity and Capital Resources
At SeptemberJune 30, 2005,2006, the Company had assets of $1,404,790$1,690,220 and current assets totaled $678,176$916,980 compared to current liabilities of $102,162.$178,016. Working capital at SeptemberJune 30, 20052006 totaled $576,014,$738,946, an increase of 76%18% compared to $330,243$625,862 at December 31, 2004.2005. The Company had a current ratio at SeptemberJune 30, 20052006 of approximately 7:5:1. During the ninesix month period ended SeptemberJune 30, 2005,2006, net cash provided by operations totaled $274,620,$127,072, as compared to $150,457, during$114,637 for the same period in 2004. During the first quarter of 2004, the Company sold its portfolio of marketable equity securities and mutual fund for a net realized loss of $38,166. The Company spent a significant portion of its2005. This increase was primarily due to lower operating capital during the first nine monthsexpenses in 2004 on the Yorktown Re-entry program in Dewitt County, Texas.2006. The Company’s cash flow from operations is highly dependent on oil and natural gas prices. The Company had no short-term or long-term debt outstand ingoutstanding at SeptemberJune 30, 2005.2006. In January,December, 2005, the Company purchased 1,50016,156 shares of its common stock at a cost of $2,362,$24,643, which is included in the treasury at SeptemberJune 30, 2005.
2006.
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Capital expenditures in the second quarter included $40,000 paid for the first nine months of 2005 consisted of expenditures for the acquisition of expiring leasesPanther Pipeline in Yorktown,Dewitt County, Texas. In July, 2005, Croff (25% interest) and Tempest (75% interest) determined to abandon the Helen Gips #1 and to pull the tubing to useThis pipeline was then included in the Wiggins well. Croff’ssale of the Dewitt County assets completed in July, 2006. (See Item 5, Subsequent Events). Capital costs in the Helen Gips #1 wellborefirst quarter of $52,638 were written off2006, totaled $10,454 incurred to pay for costs in the June 30, 2005 financial statements.Dixel Gips well in Dewitt County, Texas. As of September 30, 2005,March 31, 2006, the Company hashad capitalized approximately $198,000$210,000 related to the 2004 Yorktown Re-Entry Program.Program, and by June 30, 2006, approximately $250,000. The Dewitt County assets sale was for approximately $255,000. The Company’s only oil and natural gas assets not pledged to the Preferred B shares isin the Yorktown Re-Entry Program in Dewitt County, Texas. This approximate 1,100 acre project was sold or optionedTexas, are allocated to Tempest Energy Resources LPthe Company’s common shareholders. The Company has not incurred any substantial cash expenditures for assets in the fourthsecond quarter of 2004 with thedue to high prices for asset acquisition. The Company retaining a carried 15% interest in the re-entry wells, and an additional 10% paid participation for a 25% working interest. The first wel l in this project, the Helen Gips #1, had been started by Croff in 2004 and was completed by Tempest during the first quarter 2005. Tempest and Croff have determined that the formation is too tight and the well will be non-commercial and determined to abandon it. Tempest purchased a second lease in the Area of Mutual Interest (AMI) known as the Wiggins well, a producing Wilcox well, with an additional plugged and abandoned re-entry well. Croff exercised its righthas commitments to participate with respect to a 25% interest in this lease, but has no carried interest. The Wiggins well is currently producing from the Wilcox formation at a rate of approximately 30 mcf per day. Tempestsma ll fractional amounts in wells in Utah and Croff have agreed to attempt to re-complete this well in an upper formation of the Wilcox which has not been depleted. The remaining leases in the Yorktown re-entry program, on which Tempest has not exercised its option, are retained by Croff, which is planning to participate with other oil and gas companies to re-enter existing wellbores. As part of the Yorktown Re-entry Program, Croff had purchased 3 ½ inch casing and other equipment for a re-entry well, which equipment Tempest has declined to use. Croff then sold this equipment during the first quarter of 2005 for approximately $48,500, yielding an approximate $14,000 gain over its cost in the casing. The only current commitment of Croff for future capital expenditures is for lease renewals and future drilling or re-entries in the Yorktown program in Dewitt County, Texas.
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Wyoming.
The Company’s plans for ongoing development, acquisition and exploration expenditures, and possible equity repurchases over and beyond the Company’s operating cash flows will depend entirely on the Company’s ability to secure acceptable financing.financing, and reasonably priced opportunities. Bank borrowings may be utilized to finance the Company’s 20052006 capital budget. In addition, the Company will utilize its internal operating cash flows. Future cash flows are subject to a number of variables, including the level of production and oil and natural gas prices. There can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain planned levels of capital expenditures or that increased capital expenditures will not be undertaken.
The Company believes that borrowings from financial institutions, projected operating cash flows and the cash on hand will be sufficient to cover its working capital requirements for the next 12 months. In connection with consummating any significant acquisition or funding an exploratory or development drilling program, additional debt or equity financing will be required, which may or may not be available on terms that are acceptable to the Company.
While certain costs are affected by the general level of inflation, factors unique to the oil and natural gas industry result in independent price fluctuations. Over the past five years, significant fluctuations have occurred in oil and natural gas prices. Although it is particularly difficult to estimate future prices of oil and natural gas, price fluctuations have had, and will continue to have, a material effect on the Company. Overall, it is management’s belief that inflation is generally favorable to the Company since it does not have significant operating expenses.
Results of Operations
Three months ended SeptemberJune 30, 20052006 compared to three months ended SeptemberJune 30, 2004.2005.
The Company had a net income for the thirdsecond quarter of 20052006 which totaled $111,763$78,317 compared to a net income of $54,782$9,355 for the same period in 2004. An additional expense of $7,640 was accrued as accretion of the increase of the discounted value of the costs forward for the creation of a reserve for the retirement cost of the Company's working interest wells. Because this expense has never been accrued, the Company has chosen to add this amount into this quarterly report and will continue with a quarterly charge based on a calculation of the2005. This increase in costs of the future retirment costs. Generalincome in 2006 was due to higher prices for oil and natural gas, lower lease operating expenses, and lower general and administrative expenses. The major factor was the lower operating expenses also increased by approximately $10,000in Dewitt County, and less workover cost elsewhere. The Company’s costs for lease operating expenses are expected to increase in the next quarter, due to costs of responding to the tender offer for the Preferred B sharesparticipation in drilling and higher accounting and legal fees.workovers.
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Revenues for the thirdsecond quarter of 20052006 totaled $254,347,$216,253, a 44% increase from the $176,935 during the same period in 2004. Oil and gas sales for the third quarter of 2005 totaled $247,288, a 40%slight increase from the same period in 2004. A large2005. Oil and natural gas sales for the second quarter of 2006 totaled $209,032, a 5% increase from the same period in 2005. Increased oil and natural gas prices, combined with slight increases in oil production levels during the thirdfirst quarter of 2005,2006, were majorthe factors causing this increase in oil and natural gas sales compared to the same period in 2004.2005. The Company’s average salesales price per barrel of oil in the thirdsecond quarter of 20052006 was approximately $55$10 per barrel compared to $30 per barrel forhigher than the same period in 2004.2005. The Company’s average salesales price of natural gas in the thirdsecond quarter of 2006 was approximately $5.50 per Mcf ( Mcf equates to one thousand cubic feet). The price in the second quarter of 2005 was approximately $7 per Mcf (Mcf equates to one thousand cubic feet),the same.
For the second quarter of 2006, lease operating expenses, which includes all production related taxes, totaled $57,469 compared to $5.20 per Mcf$116,097 incurred for the same period in 2004. Other2005. This decrease was due to much lower expenses in Dewitt County, Texas, which included a write off in 2005, and less workover costs.
Estimated depreciation and depletion expense for the second quarter of 2006 totaled $12,000 and for 2005, totaled $10,500.
General and administrative expense, including overhead expense paid to a related party, for the second quarter of 2006, totaled $44,000 compared to $60,215 for the same period in 2005. This decrease related primarily to timing of year end expenses related to the audit, and expenses involved in responding to a tender offer in 2005. The Company has incurred additional costs during the second quarter in both 2005 and 2006, associated with compliance with the Sarbanes-Oxley Act of 2002. Legal and accounting expenses were higher in the second quarter of 2005.
Provision for income taxes for the second quarter of 2006 totaled $23,000 compared to $8,000 from the same period in 2005. This increase is primarily attributable to an increase in net income for the threequarter, which also results in a higher tax bracket.
Six Months ended June 30, 2006 compared to the six months ended SeptemberJune 30, 2005.
Revenues for the six months ended June 30, 2005 totaled $7,059$ 448,985 a 12% increase from the revenues of $398,596 at June 30, 2005. Net income for the six months ended June 30, 2006 and 2005 totaled $136,123 and $85,508 respectively. This increase in the net income was due to an increase in the revenue, and much reduced lease operating expenses due to lower workover costs overall, and the lack of significant expenses in Dewitt County, Texas. Interest income also increased.
Oil and gas sales for the six months ended June 30, 2006 totaled $435,106 a 14% increase from the $379,986 for the same period in 2005. The increase in oil and gas sales in 2006 compared to 2005 and $228 in 2004, reflectingis primarily attributed to increased oil prices as well as slightly higher interest on money deposits and proceeds from sale of equipment.oil production levels during 2006.
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Depletion and depreciation expense for the third quarter of 2005 totaled $12,000 and is comparable to the $10,500 incurred for the same period in 2004.
There were minimal costs associated with the Yorktown Re-entry Program for the third quarter of 2005, compared with expenses incurred during the third quarter of 2004.
Provision for income taxes for the third quarter of 2005 totaled $29,690 compared to $6,397 from the same period in 2004, due to higher pretax income.
Nine Months ended September 30, 2005 compared to ninesix months ended SeptemberJune 30, 2004.
Revenues for the nine months ended September 30, 20052006 totaled $652,943,$123,158 a 62% increase25% decrease from the revenues of $402,935 at September 30, 2004. Net income for the nine months ended September 30, totaled $197,271$162,763 in 2005 and $57,787 in 2004. The increase in revenues and net income is due to significantly increased prices for crude oil and natural gas. Production did not increase materially, although a few new royalty interests were added. During the first quarter of 2004, the Company sold its portfolio of marketable equity securities and mutual funds for a net realized loss of $38,166 and sold its remaining contracts for natural gas “put” contracts for a net realized loss of $ 7,599.
Oil and gas sales for the nine months ended September 30, 2005 totaled $627,274, a 40% increase from the $446,849 for the same period in 2004. The increase in oil and gas sales in 2005 compared to 2004 is primarily attributed to significantly increased oil and natural gas prices. Small interests in new wells in Utah and New Mexico on the Company’s mineral acreage gave a small production increase.
Lease operation expense, which includes all production related taxes for the nine months ended September 30, 2005 totaled $209,016 a 33% increase from $156,981 in 2004.2005. Included in the 2005 lease operating expense is an approximately $52,638 for the write off of the Helen Gips well.well In Dewitt County, Texas. Otherwise, lease operating costs were relatively stable compared toincreased slightly during the ninesame period in 2006, from the six month period ending SeptemberJune 30, 2004.2005.
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Depletion and depreciation expense for the ninesix months ended SeptemberJune 30, 20052006 totaled $33,000 compared to$24,500 from the $31,500sum of $21,000 incurred for the same period in 2004. The Company has ceased2005. This increase was due to separately classify expensesthe small increase in the Yorktown drilling programproducing assets in 2005.2006.
General and administrative expenses, including overhead expense paid to related party, for the ninesix months ended SeptemberJune 30, 20052006 totaled $160,476$113,475 compared to $124,887$86,344 for the same period in 2004.2005. Overhead expense paid to related party for the ninesix months ended SeptemberJune 30, 20052006 totaled $36,371$24,444 compared to $36,000$24,697 incurred for the same period in 2004. This2005. The increase in overhead expenses is primarily attributed to the costs of the audit increasing, and the extra legal and accounting expenditureshigher professional fees of the Company. The Company responding to a tender offer forhas also incurred additional costs during 2006 associated with compliance with the Preferred B shares.Sarbanes-Oxley Act of 2002.
Provision for income taxes for the ninesix months ending SeptemberJune 30, 2005 totaled $45,540$39,000 compared to $6,877 for$15,850 from the same period in 2004.2005. This increase is due to expected higher income in 2005 and is also attributable2006 which will cause the Company to an overpayment of the Company’s 2003 federalreach a higher income taxes which was taken as a credit during the second quarter of 2004.tax bracket.
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Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 123R, "Share-Based Payment." This revised standard addresses the accounting for share-based payment transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments. Under the new standard, companies will no longer be able to account for share-based compensation transactions using the intrinsic method in accordance with APB 25. Instead, companies will be required to account for such transactions using a fair-value method and recognize the expense in the statements of operations. SFAS 123R will be effective for all interim or annual periods beginning after June 15, 2005. The adoption of this announcement in JulyMay 2005, is not expected to have a material impact on the Company’s financial condition or results of operations as the Company currently does not receive employee services in exchange for either equity instruments of the Company or liabilities that are based on the fair value of the Company's equity instruments or that may be settled by the issuance of such equity instruments.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets154, "Accounting Changes and Error Corrections - an amendmenta replacement of APB Opinion No. 29". This standard20 and FASB Statement No. 3." SFAS No. 154 replaces APB Opinion ("APB") No. 20, "Accounting Changes", and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements," and changed the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 will apply to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 requires exchangesretrospective application to prior perio ds' financial statements of productivechanges in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received noropening balance of retained earnings (or other appropriate components of equity or net assets in the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. The Statement is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company has not entered into these typesstatement of nonmonetary asset exchanges during the last five years. Accordingly, the adoption of this pronouncement is not expected to have a material impact on the Company’s current financial condition or results of operations.condition).
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Quantitative and Qualitative Disclosures Regarding Market RiskITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’sCompany's major market risk exposure is in crude oil and natural gas prices. Realized pricing is primarily driven by the prevailing domestic price for oil and natural gas. Historically, prices received for oil and natural gas production have been volatile and unpredictable. Pricing volatility is expected to continue. Natural gas prices averaged approximately $4/mcf during 2004 and increased to approximately $7/mcf duringprice realizations for the nineSix months ended SeptemberJune 30, 2005.2006, ranged from a monthly low of approximately $5.00 per Mcf to a monthly high of approximately $12 per Mcf. Oil prices ranged from a monthly averagelow of approximately $30$45 per barrel in 2004 to a monthly high of approximately $55$70 per barrel during the first nine months 2005.barrel. A decline in prices of oil or natural gas could have a material adverse effect on the Company’sCompany's financial condition and results of operations.
For the six months ended June 30, 2006, a 10% reduction in oil and natural gas prices would have reduced revenues by approximately $44,000.
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Item 3.ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Croff’s principal executive officer, also acting as principal financial officer, has evaluated the effectiveness of Croff’s “disclosureThe Company maintains controls and procedures” as such term designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is definedrecorded, processed, summarized and reported within the time periods specified in Rule 13a-14(c)the rules and 15d-14(c)forms of the Securities and Exchange Act of 1934, as amended, within 90 daysCommission. At the end of the filing date ofperiod covered by this Quarterly Report on Form 10-Q. Based upon his evaluation,10-Q, the principal executive officerCompany's management, under the supervision and principal financial officer concluded thatwith the Company’sparticipation of the Company's Chief Executive Officer who also serves as Acting 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 concluded that as of the end of such period, the Company's disclosure control and procedures are effective. effective in alerting them to material information that is required to be included in the reports the Company files or submits under the Securities Exchange Act of 1934. The Company also maintains an independent Audit Committee of the Board of Directors as part of its internal controls.
Changes in Internal Controls Over Financials Reporting
There werehave been no significant changes in the Company’sCompany's internal controlscontrol over financial reporting during the most recent fiscal quarter that have materially affected, or in other factors that could significantlyare reasonably likely to materially affect, these controls, since the date the controls were evaluated.Company's internal control over financial reporting.
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Part II. Other Information
ItemITEM 5. Material Subsequent EventsSUBSEQUENT EVENTS
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ItemITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits – The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:
1. Schedule 14D9 filed July 6, 2005 in response to Tender Offer for Preferred B shares.* 2. Schedule 14D9/A filed July 20, 2005 in response to Tender Offer for Preferred B shares.* 3. Schedule 14D9/A filed July 20, 2005 in response to Tender Offer for Preferred B shares.* 4. Schedule 14D9 filed July 27, 2005 in response to Tender Offer for Preferred B shares.*
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ***
31.2 Certification of Acting Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ***
32.1 Certification of Chief Executive Officer, dated November 14, 2005,May 12, 2006, pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2 Certification of Acting Chief Financial Officer, dated November 14, 2005,May 12, 2006, pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002.**
* Previously filed with the SEC** Filed herewith
(b) For the period ended September 30, 2005, the Company filed noThe following reports on Form 8-K.8-K were filed by Registrant during the quarter ended June 30, 2006**:
The Company filed a current report on Form 8-K on March 31, 2005 to announce that Causey Demgen and Moore, who had served as the Company's independent certified accountants since 1987, declined to stand for re-appointment due to restrictions imposed by section 208(a) of the Sarbanes Oxley Act of 2002, and the rules and regulations of the Securities and Exchange Commission that prohibit partners on the audit engagement team from providing audit services to the issuer for more than five consecutive years and from returning to audit services with the same issuer within five years. There was no disagreement with this firm on any accounting principles or practices. On April 12, 2006, Croff filed an amended 8-KA reporting this event. Both versions also contained the engagement of Ronald R. Chadwick, P.C. as the Company's new independent public accounting firm.
.
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SIGNATURE
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.
CROFF ENTERPRISES, INC. | ||||
Date: | By: | /s/ Gerald L. Jensen | ||
| Gerald L. Jensen, | ||||
| President, | ||||
| Chief Executive Officer | ||||
CROFF ENTERPRISES, INC. | ||||
Date: | By: | /s/ Gerald L. Jensen | ||
| Gerald L. Jensen, | ||||
| Acting Chief Financial Officer | ||||
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Exhibit 31.1
CERTIFICATIONS
I, Gerald L. Jensen, certify that :
CROFF ENTERPRISES, INC. | ||||
Date: | By: | /s/ Gerald L. Jensen | ||
| Gerald L. Jensen, | ||||
| President, | ||||
| Chief Executive Officer | ||||
1715
Exhibit 31.2
CERTIFICATIONS
I, Gerald L. Jensen, certify that :
CROFF ENTERPRISES, INC. | ||||
Date: | By: | /s/ Gerald L. Jensen | ||
| Gerald L. Jensen, | ||||
| Acting Chief Financial Officer | ||||
1816
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of Croff Enterprises, Inc. (the "Company") on Form 10-Q/A10-Q for the period ended September 30, 2005March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald L. Jensen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) This Report on form 10Q/A10Q for the period ended September 30, 2005March 31, 2006 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) I further certify to the best of my knowledge that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Croff Enterprises, Inc.
CROFF ENTERPRISES, INC. | ||||
Date: August 16, 2006 | By: | /s/ Gerald L. Jensen | ||
| Gerald L. Jensen, | ||||
| President, | ||||
| Chief Executive Officer | ||||
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Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of Croff Enterprises, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald L. Jensen, Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) This Report on form 10Q for the period ended March 31, 2006 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) I further certify to the best of my knowledge that the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Croff Enterprises, Inc.
CROFF ENTERPRISES, INC. | ||||
Date: |
|
| ||
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Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of Croff Enterprises, Inc. (the "Company") on Form 10-Q/A for the period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald L. Jensen, Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) This Report on form 10Q/A for the period ended September 30, 2005 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) I further certify to the best of my knowledge that the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Croff Enterprises, Inc.
| ||||
| By: | /s/ Gerald L. Jensen | ||
| Gerald L. Jensen, | ||||
| Acting Chief Financial Officer | ||||
2018