Business Context and Reporting Period
This Form 10-Q covers the quarterly and six-month periods ended June 30, 2002, for Croff Enterprises, Inc. (Note: The input metadata referenced "Therapeuticsmd, Inc.", but the filing text explicitly identifies the registrant as Croff Enterprises, Inc., an oil and gas company). The company operates under the successful efforts method of accounting, focusing on oil and gas sales, royalties, and working interests. As of August 10, 2002, there were 566,060 shares of common stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2002 | Six Months Ended June 30, 2001 |
|---|---|---|
| Revenues | $141,240 | $221,298 |
| Oil and Gas Sales | $114,858 | $215,504 |
| Net Income | $39,441 | $71,333 |
| Net Income (Common Stockholders) | $24,112 | $3,573 |
| Cash Flow from Operations | $38,929 | $122,108 |
| Cash and Equivalents (Ending) | $247,267 | $293,337 |
| Total Assets | $691,636 | $695,124 |
| Working Capital | $354,809 | $385,816 |
| Debt | $0 (No short/long-term debt) | $0 |
Liquidity: The company maintains a current ratio of approximately 22:1. It holds $72,920 in marketable equity securities.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 36% year-over-year, driven by a 47% drop in oil and gas sales. This was caused by lower commodity prices (oil avg. $22 vs. $25; gas avg. $2.45 vs. $5.80) and reduced production volumes.
- Net Income: Consolidated net income fell 45% to $39,441. However, net income applicable to common stockholders increased significantly to $24,112 from $3,573 due to reallocation of preferred stock dividends.
- Operating Expenses: Lease operating expenses dropped 62% to $28,585, largely due to lower production taxes and the absence of a $22,000 unsuccessful well cost incurred in 2001.
- Investing Activities: The company invested $49,585 in working interests in Michigan and Texas properties. It also realized a $23,026 gain on the sale of marketable equity securities.
Outlook, Risks, and Management Commentary
- Strategic Focus: Management is accumulating cash and liquid assets to prepare for a possible reverse merger. The company expects to continue operating at a positive cash flow and acquiring producing oil and gas properties.
- Financing: On June 11, 2002, the company secured a $100,000 revolving line of credit (Prime + 1.5%, floor 7%, ceiling 12%) to fund future investments, though no borrowings were made as of the reporting date.
- Risks: Operations are highly sensitive to oil and natural gas price fluctuations and production levels. Forward-looking statements regarding the reverse merger and growth plans are subject to significant uncertainty.
- Related Party Transactions: The company holds notes receivable from directors ($41,276) and a related party note to Reef Energy Corporation ($15,000).
Investor Verification Checklist
- Verify the status and timeline of the planned reverse merger.
- Confirm current oil and natural gas production volumes and pricing trends relative to the $22/$2.45 averages cited.
- Review the terms and utilization of the new $100,000 line of credit.
- Assess the valuation and liquidity of the $72,920 in marketable equity securities.
- Monitor the repayment status of related-party notes receivable from directors and Reef Energy Corporation.