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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarter Ended March 31, 2007 | Commission File Number 0-9392 |
CLX INVESTMENT COMPANY, INC. (Exact Name of Registrant as Specified in Its Charter) |
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Colorado | 84-0749623 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
43180 Business Park Drive #202, Temecula, CA | 92590 |
(Address of principal executive offices) | (Zip Code) |
(951) 587-9100 Issuer's telephone number, including area code N/A (Registrant's Former Name and Address) |
Check whether the Issuer (1) 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 check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ X ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No[ X ]
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 class of common stock, as of the last practicable date.
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Class | Outstanding at May 9, 2007 |
Common Stock, $0.01 par value | 118,310,668 shares |
PART I – FINANCIAL INFORMATION
CLX INVESTMENT COMPANY, INC.
FINANCIAL STATEMENTS
MARCH 31, 2007
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CLX Investment Company, Inc.
Balance Sheets
ASSETS |
| | | March 31, | | September 30, |
| | | | | | |
| | | (Unaudited) | | (Audited) |
Current Assets | | | | |
| Cash | $ | 1,354 | $ | 8,179 |
Total Current Assets | | 1,354 | | 8,179 |
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Investments | | | | |
| Advances on credit lines-affiliates | | 448,692 | | 469,498 |
| Investments - nonaffiliates | | 15,034 | | 64,285 |
| Investments - affiliates | | 105,820 | | 166,900 |
| Total Investments | | 569,546 | | 700,683 |
| Total Assets | $ | 570,900 | $ | 708,862 |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
Current Liabilities | | | | |
| Accounts payable | $ | 224,876 | $ | 143,908 |
| Interest payable | | 31,155 | | 38,641 |
| Line of credit | | 84,000 | | 64,000 |
| Notes payable related party | | 50,000 | | 60,000 |
| Total Current Liabilities | | 390,031 | | 306,549 |
Long-Term Liabilities | | | | |
| Notes Payable | | 190,000 | | 200,000 |
| Total Liabilities | | 580,031 | | 506,549 |
Stockholders' Equity (Deficit) | | | | |
| Common stock, authorized 1,980,000,000 shares, $0.01 par value, 118,310,668 and 118,060,668 shares issued and outstanding respectively | | 1,183,107 | | 1,180,607 |
| Additional paid in capital | | 1,078,013 | | 1,078,513 |
| Retained deficit | | (2,270,251) | | (2,056,807) |
Total Stockholders' Equity (Deficit) | | (9,131) | | 202,313 |
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 570,900 | $ | 708,862 |
| Net Asset Value per share | $ | (0.0001) | $ | 0.0017 |
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The accompanying notes are an integral part of these financial statements. |
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CLX Investment Company, Inc. |
Statements of Changes in Net Assets
(Unaudited) |
| For the Six Months Ended |
| March 31, |
| 2007 | | 2006 |
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OPERATIONS: | | | | | |
Net investment loss | $ | (174,948) | | $ | (131,157) |
Unrealized gain (loss) on investment
transactions | | (49,251) | | | 6,429 |
Gain on sale of investments | | 10,755 | | | - |
Gain on extinguishment of debt | | - | | | 2,400 |
Net decrease in net assets resulting from
operations | | (213,444) | | | (122,328) |
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SHAREHOLDER ACTIVITY: | | | | | |
Stock sales and conversion | | 2,000 | | | 504,849 |
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NET INCREASE (DECREASE) IN ASSET VALUE | | (211,444) | | | 382,521 |
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NET ASSETS: | | | | | |
Beginning of Period | | 202,313 | | | 93,314 |
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End of Period | $ | (9,131) | | $ | 475,835 |
The accompanying notes are an integral part of these financial statements.
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CLX Investment Company, Inc. | |
Schedule of Investments |
March 31, 2007 (Unaudited) |
EQUITY INVESTMENTS: | | | | | | | | | | | |
| Description | | Percent | | | | | | | | |
Company | of Business | | Ownership | | Investment | | | Fair Value | | | |
Non affiliated companies: | | | | | | | | | | | |
ActionView International, Inc. | Advertising | | less than 1% | | 80,895 | (1) | | 15,034 | (1) | | |
Total non affiliated companies | | | | $ | 80,895 | | $ | 15,034 | | | |
Affiliated Companies: | | | | | | | | | | | |
Zonda, Incorporated | Medical diagnostic | | 31% | | - | (2) | | 105,820 | (2) | | |
Total affiliated companies | | | | | - | | | 105,820 | | | |
Total Investments | | | | $ | 80,895 | | $ | 120,854 | | | |
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COMMERCIAL LOANS: | | | | | | | | | | | |
| Description | | Percent | | | | | | | | |
Company | of Business | | Ownership | | Type of Credit | | | | | | |
Non affiliated companies: | | | | | | | | | | | |
Action View International, Inc. | Advertising | | less than 1% | | Credit Line | | $ | - | (1) | | |
Total loans to non affiliates | | | | | | | $ | - | | | |
Affiliated Companies: | | | | | | | | | | | |
Zonda, Incorporated | Medical diagnostic | | 31% | | Credit Line | | | 448,692 | (2) | | |
Total loans to affiliates | | | | | | | | 448,692 | | | |
Total Loans | | | | | | | | 448,692 | | | |
TOTAL INVESTMENTS AND LOANS | | | | | | | $ | 569,546 | | | |
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(1) The Company agreed to extend a credit line of $350,000 to AVWI and was to receive up to 2,000,000 shares of restricted AVWI common stock as consideration for providing a $350,000 line of credit. The shares are delivered to the Company on a pro-rata basis as the credit line is drawn down. The line of credit bears interest at an eight percent (8%) per annum and the principal and interest are due on December 31, 2008. The due date for repaying the line of credit, plus accrued interest, shall be accelerated following the third consecutive month in which ActionView International generates net income (EBIT) of at least $50,000. The Company has only extended $221,693 on the line of credit and added $27,033 of interest for a total due of $248,706 as of March 31, 2007. As a result, ActionView had issued 1,285,700 shares of its restricted common stock to CLX. The Company has since liquidated 476,749 sha res, with 808,951 shares remaining. These shares have a fair value of $15,034 based on the closing price of $.019 at March 31, 2007. The fair value of the shares of AVWI at the date of the financing agreement was executed was $0.10 per share; therefore the Company has recorded a cost basis of all shares received from AVWI at $128,570 (1,285,700 at $0.10). This value was recognized as interest income on the operating statement with subsequent changes to fair value being recorded as unrealized gains or losses. During the quarter ending December 31, 2006 the Company was apprised of the fact that certain of the AVWI sales contracts on which financial projections had been based were invalid. While AVWI is trying to get valid sales contracts in place, we believe that there is substantial doubt that AVWI will continue as a going concern. The Company has notified AVWI that the loan is in default and has requested conversion of the loan into common stock according to the remedies u nder default. As of 4/18/07, there has been no resolution on this matter. The value of the credit line has therefore been valued at $0.00 to reflect the uncertainty that the debt will be repaid. |
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(2) The Company received 615,385 shares of restricted common stock of Zonda, Inc. for providing a $500,000 line of credit. The Company valued the original investment of Zonda at $0.00 based on its start up nature. As of March 31, 2007 the Company has advanced Zonda $441,098 under an operating line of credit and added $7,594 of quarter-end interest for a total of $448,692. The line of credit bears interest at an eight percent (8%) per annum and the principal and interest are due on December 31, 2007. The repayment of the line of credit, plus accrued interest, shall be accelerated following the third consecutive month in which Zonda generates net income (EBIT) of at least $50,000. The line of credit was not deemed impaired since the obligation is collateralized by intangible assets of Zonda including patents, FDA submissions, product formulations, etc. At March 31, 2007, the Company estimates the fair value of the Zonda co mmon stock to be $105,820, which is based on their annualized sales of $341,355 multiplied by CLX's ownership position of 31%. Based on these factors, the Company believes that the presentation of its Zonda investments represent the fair value at March 31, 2007. | |
The accompanying notes are an integral part of these financial statements.
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CLX Investment Company, Inc.
Statements of Operations
(Unaudited)
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| | | | For Six Months Ended
Ended March 31, | | For Three Months Ended
Ended March 31, |
| | | | 2007 | | 2006 | | 2007 | | 2006 |
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Investment Revenue | | | | | | | | |
Interest income from non-affiliates | $ | - | $ | 8,310 | $ | - | $ | 4,400 |
Interest income from affiliates | | 14,097 | | 81,521 | | 7,594 | | 19,990 |
Total income | | 14,097 | | 89,831 | | 7,594 | | 24,390 |
Expenses | | | | | | | | |
General & administrative | | 6,808 | | 64,004 | | 4,553 | | 31,214 |
Accounting fees | | 20,551 | | 17,554 | | 4,143 | | 3,440 |
Interest expense | | 11,996 | | 13,394 | | 6,325 | | 4,576 |
Investor relations | | 11,872 | | 34,761 | | 4,229 | | 17,510 |
Administrative fees | | 75,000 | | 63,476 | | 37,500 | | 31,900 |
Professional fees | | 62,818 | | 27,799 | | 24,455 | | 23,200 |
Total expenses | | 189,045 | | 220,988 | | 81,205 | | 111,840 |
Net investment loss | | (174,948) | | (131,157) | | (73,611) | | (87,450) |
Other Income (Expense) | | | | | | | | |
Unrealized gain (loss) on non affiliated investment | | (49,251) | | 6,429 | | (20,821) | | 29,287 |
Gain on sale of investments | | 10,755 | | - | | - | | - |
Gain on extinguishments of debt | | - | | 2,400 | | - | | - |
Net realized and unrealized gain (loss) from investments | | (38,496) | | 8,829 | | (20,821) | | 29,287 |
Net decrease in net assets resulting from operations | $ | (213,444) | $ | (122,328) | $ | (94,432) | $ | (58,163) |
Net loss per share | $ | (0.002) | $ | (0.002) | $ | (0.001) | $ | (0.001) |
Weighted Average Shares Outstanding | | 118,310,668 | | 72,921,744 | | 118,310,668 | | 92,615,258 |
The accompanying notes are an integral part of these financial statements. |
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CLX Investment Company, Inc.
Statements of Cash Flows
(Unaudited) |
| | For the Six Months ended
March 31, |
| | 2007 | | 2006 | |
Cash Flows from Operating Activities: | | | | | |
Net Loss | $ | (213,444) | $ | (122,328) | |
Adjustments to Reconcile Net Loss to Net Cash Provided by Operations: | | | | | |
Unrealized loss (gain) on investment | | 49,251 | | (6,429) | |
Stock received for interest | | - | | (71,419) | |
Gain on extinguishments of debt | | - | | (2,400) | |
Changes in Operating Assets and Liabilities: | | | | | |
Increase in prepaid interest | | - | | (600) | |
Increase (decrease) in accrued expense | | (7,486) | | 13,379 | |
Increase in accounts payable | | 80,968 | | 26,096 | |
Net Cash Used by Operating Activities | | (90,711) | | (163,701) | |
Cash Flows from Investing Activities: | | | | | |
Proceeds from sale of investment | | 251,016 | | - | |
Advances on line of credit | | (169,130) | | (293,214) | |
Net Cash Provided (Used) by Investing Activities | | 81,886 | | (293,214) | |
Cash Flows from Financing Activities: | | | | | |
Proceeds from issuance of common stock | | 2,000 | | 280,361 | |
Proceeds from credit line | | 20,000 | | - | |
Payments on Notes | | (20,000) | | - | |
Net Cash from Financing Activities | | 2,000 | | 280,361 | |
Decrease in Cash | | (6,825) | | (176,554) | |
Cash and Cash Equivalents at Beginning of Period | | 8,179 | | 185,849 | |
Cash and Cash Equivalents at End of Period | $ | 1,354 | $ | 9,295 | |
Cash Paid For: | | | | | |
Interest | $ | 19,445 | $ | - | |
Income Taxes | $ | - | $ | - | |
Non-Cash Investing and Financing Activities: | | | | | |
Stock issued for conversion on debentures | $ | - | $ | 3,000 | |
The accompanying notes are an integral part of these financial statements. | |
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CLX Investment Company, Inc. | |
Financial Highlights
(Unaudited) | |
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Per Unit Operating Performance: | | | | | | | |
| | For the Six Months Ended | |
| | March 31, | |
| | 2007 | | | Cumulative | |
NET ASSET VALUE, BEGINNING OF PERIOD | | $ | 0.001710 | | $ | 0.004061 | |
INCOME FROM INVESTMENT OPERATIONS: | | | | | | |
Net investment loss | | (0.001479) | | | (0.019901) | |
Net realized and unrealized gain (loss) on investment transactions | | (0.000416) | | | (0.000823) | |
Gain on sale of investments | | 0.000091 | | | - | |
Gain on extinguishment of debt | | | - | | | 0.000128 | |
Total from investment operations | | (0.00009) | | | (0.016535) | |
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Increase in net assets resulting from stock sales and conversions | | | 0.00002 | | | 0.018245 | |
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NET ASSET VALUE, END OF PERIOD | | $ | (0.000077) | | $ | 0.001710 | |
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TOTAL NET ASSET VALUE RETURN | | (104.51) | % | (57.89) | % |
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RATIOS AND SUPPLEMENTAL DATA: | | | | | | |
Net assets, end of period | | $ | (9,131) | | $ | 85,301 | |
Ratios to average net assets: | | | | | | |
Net expenses | | 2,070.36 | % | 505.69 | % |
Net investment loss | | (1,915.98) | % | (475.20) | % |
Portfolio Turnover Rate | | | 1.63 | | | 1.63 | |
The accompanying notes are an integral part of these financial statements.
CLX INVESTMENT COMPANY, INC.
Notes to the Financial Statements
March 31, 2007 and 2006
NOTE 1 - NATURE OF ORGANIZATION
This summary of significant accounting policies of CLX Investment Company, Inc. is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. In the opinion of management, all adjustments which are necessary for a fair presentation of the financial statements have been included. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
a)
Organization and Business Activities
The Company was incorporated on December 12, 1977 under the laws of the State of Colorado as Calvin Exploration Company, Inc. to engage in any lawful activity as shall be appropriate under laws of the State of Colorado. The Company was organized to engage in on-shore oil and gas exploration, development and production in the continental United States. In 1993 the name of the Company was changed to CLX Energy, Inc. Until 2004, the Company engaged solely in the acquisition, exploration, development and operation of oil and gas properties for its own account.
On September 13, 2004, the Company filed with the Securities and Exchange Commission to become a Business Development Corporation as defined under the Investment Act of 1940. In anticipation of the election to become a BDC, the Company on September 1, 2004 changed its name to CLX Investment Company, Inc. to properly reflect the nature of its business.
The Company’s Board of Directors determined that it was both necessary and appropriate to withdraw the Company’s election to be regulated as a Business Development Company (“BDC”) under the Investment Company Act of 1940 (“the Act”). On April 20, 2007, the Company filed a definitive prospectus seeking shareholder approval to withdraw its BDC election. Should the Company succeed in withdrawing the BDC election, the Company would no longer be eligible to report its investments at fair market value. Rather, controlled companies would be consolidated in the financial statements and minority-held investments would be carried at cost. See “Valuation of Portfolio Investments” below.
b)
Revenue Recognition
The Company recognizes income and expense on the accrual basis of accounting. As a business development company, the Company can recognize revenues from several sources. Management fees will be recognized when earned, dividends from portfolio investments will be recognized when declared and interest income on loans to portfolio companies will be accrued and compounded quarterly. Fair value of investments based on stock received from financing agreements will be recognized as interest income. Increases and decreases in the market value of the Company's portfolio investments will be recognized as unrealized gains or losses until the time of disposition. See Note 2 for a discussion on the recognition methods of the Company for increases and decreases in the market value of the portfolio companies.
NOTE 2 – VALUATION OF PORTFOLIO INVESTMENTS
As of March 31, 2007, the Company had investments in two portfolio companies. Of these, one investment representing 97% of all portfolio assets qualified as an “eligible” portfolio investment as defined by the Investment Company Act of 1940. As a result, the Company’s investment portfolio meets the Act’s requirement that at least 70% of the Company’s assets be invested in eligible companies.
As required by ASR 118, the Board of Directors of the company is required to assign a fair value to all investments. To comply with Section 2(a)(41) of the Investment Company Act and Rule 2a-4 under the Investment Company Act, it is incumbent upon the board of directors to satisfy themselves that all appropriate factors relevant to the value of securities for which market quotations are not readily available have been considered and to determine the method of arriving at the fair value of each such security. To the extent considered necessary, the board may appoint persons to assist them in the determination of such value, and to make the actual calculations pursuant to the board's direction. The board must also, consistent with this responsibility, continuously review the appropriateness of the method used in valuing each issue of security in the company's portfolio. The directors must recognize their responsibilities in this matter and whenever technical assistance is requested from individuals who are not directors, the findings of such intervals must be carefully reviewed by the directors in order to satisfy themselves that the resulting valuations are fair.
Fair market value is determined on at least a quarterly basis. Where there are material changes in portfolio operations, fair market value is re-examined as such material changes occur. In the event the stock trading price is within 10% of Net Book Value, and the Company wishes to sell stock, fair market value is calculated on a monthly basis to ensure that stock is not sold below NBV.
The value of loans and lines of credit are adjusted down if there is a reasonable expectation that the Company will not be able to recoup the investment or if there is reasonable doubt about the investment’s ability to continue as a going concern. Additionally, where available, the Board reviews other relevant factors affecting repayment including historical cash flows, material contracts, collateral, debt maturity, alternate financing resources, etc.
During 2006, the Company became appraised that one of its portfolio investments, ActionView, Inc., announced that a substantial purchase order contract had been deemed fraudulent. The basis of this contract had formed the primary motivation behind the Company’s decision to invest in ActionView. Without this contract, the Company is doubtful of ActionView’s ability to repay the credit line extended. As a result, the Company has written off the credit line receivable from ActionView and eliminated the interest income for all periods presented. The common stock of ActionView held by the Company is carried at fair market value based on the price per share as of March 31, 2007.
NOTE 3 – RELATED PARTY TRANSACTIONS
On September 6, 2006, the Company issued a note payable to Stone Investment Group in the amount of $50,000. The note bears interest at the rate of ten (10%) per annum and was due in lump sum on March 6, 2007. The note payable does not have any conversion option or privileges. Stone Investment Group is partially owned and controlled by Arthur Stone, who served as a Director of the Company at the time of the loan origination. The Company received the unanimous consent of the Board of Directors prior to accepting the loan from Stone Investment Group.
Line of Credit
During the quarter ended March 31, 2007, the Company received $20,000 under a line of credit provided by Sequoia International, Inc. The line of credit is for $200,000 and bears interest at 8% per annum. The line and accrued interest are due on April 1, 2009. As of March 31, 2007, the total amount advanced under the credit line was $84,000. Sequoia could be deemed an affiliated entity by virtue of the 22,888,800 shares of common stock being held in escrow for their benefit; though, since Sequoia can neither liquidate nor vote such shares, they are not deemed to be beneficial owners of the stock. The Company received the unanimous consent of the Board of Directors prior to accepting the credit line from Sequoia.
Equity Transactions
During the six months ended March 31, 2007, the Company issued 250,000 restricted shares of stock in exchange for cash of $1,000 to Canyon Investments, a company controlled by Robert McCoy, our Chairman of the Board of Directors and Interim Chief Executive Officer. The Company recorded $2,000 to common stock resulting from this transaction to reflect the market value of the shares issued since the sale was to a related party. The price per share was considered reasonable for restricted securities given the stock price at the time of the transaction. The Board of Directors approved the sale of the stock to Canyon Investments. The shares were issued based upon the exemption from registration found in Section 4(2) of the Securities Act and/or Regulation D of the Securities Act Rules.
NOTE 4 – NOTES PAYABLE
During the year ended September 30, 2006, the Company eliminated all of its convertible debentures in part by restructuring $200,000 of such debentures into a promissory note payable. The promissory note is due December 19, 2007 and bears interest at the rate of eight percent (8%) per annum. The Company previously paid $10,000 towards the principle balance, leaving a total payable of $190,000 at March 31, 2007.
NOTE 5 – GOING CONCERN
The auditor’s opinion letter accompanying our financial statements for the year ended September 30, 2006 contained a “going concern” qualification. The ability of the Company to continue as a going concern is dependant upon its ability to successfully seek out and consummate investments, or to secure other sources of financing such that it may commence profitable operations. Further, if the Company is not able to generate positive cash flow from operations, or is unable to secure adequate funding under acceptable terms, there is substantial doubt that the company an continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 6 – SUBSEQUENT EVENTS
Subsequent to March 31, 2007, the Company’s Board of Directors voted to withdraw the Company’s election as a Business Development Company under the Investment Company Act of 1940. The principle reason for withdrawing the BDC election is that the Board believes that the current structure of the investment portfolio, with virtually all of its investment being in one company, does not create an obligation on the part of the Company to file under the 1940 Act. The Company does not have any immediate plans to expand its investments into other portfolio companies. Under the provisions of the 1940 Act, the Company can only withdraw its BDC election if such action is approved by a majority of its voting shareholders. Accordingly, in April 26, 2007, the Company filed a definitive proxy statement under Form 14-A seeking shareholder approval to withdraw its BDC election. The BDC election can only be withdrawn after receiving shareholder approval and filing a Form N-54C. Until such time, the Company will continue operating as a BDC and required to comply with the 1940 Act.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The statements contained in this Quarterly Report on Form 10-Q that are not historical facts may contain forward-looking statements that involve a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated by management. Potential risks and uncertainties include, among other factors, general business conditions, government regulations, manufacturing practices, competitive market conditions, success of the Company's business strategy, delay of orders, changes in the mix of products sold, availability of suppliers, concentration of sales in markets and to certain customers, changes in manufacturing efficiencies, development and introduction of new products, fluctuations in margins, timing of significant orders, and other risks and uncertainties currently unknown to management.
CRITICAL ACCOUNTING POLICIES
The Company's financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States of America ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We review valuations based on estimates for reasonableness and conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions an d the application of judgment include acquisitions, valuation of long-lived and intangible assets, and the realizability of deferred tax assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.
Valuation Of Long-Lived And Intangible Assets
The recoverability of long lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events or circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment rules as required by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of" as amended by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate of fair value and, thus, the recoverability of the asset.
Income Taxes
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of March 31, 2007, we estimated the allowance on net deferred tax assets to be one hundred percent of the net deferred tax assets.
Valuation of Investments
To comply with Section 2(a)(41) of the Investment Company Act and Rule 2a-4 under the Investment Company Act, it is incumbent upon the board of directors to satisfy themselves that all appropriate factors relevant to the value of securities for which market quotations are not readily available have been considered and to determine the method of arriving at the fair value of each such security. To the extent considered necessary, the board may appoint persons to assist them in the determination of such value, and to make the actual calculations pursuant to the board's direction. The board must also, consistent with this responsibility, continuously review the appropriateness of the method used in valuing each issue of security in the company's portfolio. The directors must recognize their responsibilities in this matter and, whenever technical assistance is requested from individuals who are not directors, the directors must carefull y review the findings of such individuals in order to satisfy themselves that the resulting valuations are fair.
No single standard for determining "fair value...in good faith" can be laid down, since fair value depends upon the circumstances of each individual case. As a general principle, the current "fair value" of an issue of securities being valued by the board of directors would appear to be the amount that the owner might reasonably expect to receive for them upon their current sale. Methods that are in accord with this principle may, for example, be based on a multiple of earnings, or a discount from market of a similar freely traded security, or yield to maturity with respect to debt issues, or a combination of these and other methods. Some of the general factors which the directors should consider in determining a valuation method for an individual issue of securities include: 1) the fundamental analytical data relating to the investment, 2) the nature and duration of restrictions on disposition of the securities, and 3) an evaluat ion of the forces which influence the market in which these securities are purchased and sold. Among the more specific factors which are to be considered are: type of security, financial statements, cost at date of purchase, size of holding, discount from market value of unrestricted securities of the same class at time of purchase, special reports prepared by analysis, information as to any transactions or offers with respect to the security, existence of merger proposals or tender offers affecting the securities, price and extent of public trading in similar securities of the issuer or comparable companies, and other relevant matters.
The board has arrived at the following valuation methodology for its portfolio investments:
All portfolio investments shall be carried on the books at “fair market value.”
Where market values can be readily determined via stock quotations in a reasonably liquid market, the fair market shall be based on the quoted bid price on the day of calculation.
Fair market value shall be determined on at least a quarterly basis. Where there are material changes in portfolio operations, fair market value shall be re-examined as such material changes occur. In the event the stock trading price is within 10% of Net Book Value, and the Company wishes to sell stock, fair market value shall be calculated on the date of stock sale to ensure that stock is not sold below NBV.
Where there is not a readily available source for determining the market value of any investment, either because the investment is not publicly traded, or is thinly traded, the Board of Directors shall analyze the following factors, where available, for determining the estimated price that could be obtained from selling the investment in an arm’s length transaction:
i.
Total amount of the Company’s actual investment. This amount shall include all loans, purchase price of securities, and fair value of securities given at the time of exchange.
ii.
Total revenues for the preceding twelve months
iii.
Total revenues for the preceding five years
iv.
Historic earnings before interest, taxes and depreciation for each of the past five years
v.
Bona fide purchase offers from third parties
vi.
Net assets of investment
vii.
Likelihood of investment generating positive returns (going concern)
viii.
Financial projections for coming 24 months
ix.
Independent appraisal reports
x.
Budget to actual performance reports
Baring other factors, including default remedies and collateralization, the value of the loans and lines of credit may be adjusted down if there is a reasonable expectation that the Company will not be able to recoup the investment or if there is reasonable doubt about the investment’s ability to continue as a going concern. In order to assess impairment of loan value, the portfolio investment’s budget to actual performance criteria is evaluated along with 12-month financial projections. Additionally, where available, the Board shall review other relevant factors affecting repayment including historical cash flows, material contracts, collateral, debt maturity, alternate financing resources, etc.
COMPANY STRATEGY
CLX Investment Company, Inc. (“the Company” or “CLXN”) is an investment company reporting under the Investment Company Act of 1940 as a “Business Development Company”. The Company was incorporated on December 12, 1977 under the laws of the State of Colorado as Calvin Exploration Company, Inc. to engage in any lawful activity as shall be appropriate under laws of the State of Colorado. The Company was organized to engage in on-shore oil and gas exploration, development and production in the continental United States. The Company's oil and gas activities concentrated primarily in Colorado, Kansas, Oklahoma and Wyoming. In 1993 the name of the Company was changed to CLX Energy, Inc. Up until September 1, 2004 the Company engaged in only one industry segment and line of business; the acquisition, exploration, development and operation of oil and gas properties for its own account.
On May 24, 2004 the Company appointed new management and moved its headquarters to Temecula, CA. At the same time the Company formed CLX Oil & GAS, LLC a wholly owned subsidiary of CLX Energy, Inc. and transferred all of the oil and gas operations of the Company (including the assets and liabilities pertaining to such operations) into CLX Oil & Gas, LLC. On September 1, 2004 the Company sold 100% of its interest in CLX Oil & Gas, LLC to certain shareholders of the Company in exchange for shares of CLX Energy, Inc. The shareholders returned 1,433,552 shares in exchange for 100% interest in CLX Oil & GAS, LLC. The Board of Directors approved the "Securities Purchase and Sale Agreement" and also obtained a fairness opinion from Lehrer Financial and Economic Advisory Service indicating that the Securities Purchase and Sale Agreement was a fair and equitable exchange. The sale of the subsidiary has been accounted for as an asset sale transaction and all gas and oil operations are reported as discontinued operations on the financial records.
On September 13, 2004, the Company filed with the Securities and Exchange Commission to become a Business Development Corporation as defined under the Investment Act of 1940. Additionally, on March 28, 2006, the Company filed an amended offering circular with the SEC for up to $5,000,000 of common stock under Regulation E of the Investment Act to raise capital and to make investments in eligible emerging or early-stage companies in various fields of business by arranging for and contributing capital and providing management assistance. In anticipation of the election to become a BDC, the Company changed its name to CLX Investment Company, Inc. on September 1, 2004 to properly reflect the nature of its business.
Historically, the Company intended to seek out investment securities as its core business. As a BDC, the Company is required to maintain at least 70% of its assets in eligible portfolio companies, as defined under the 1940 Act (“EPC”) An EPC must meet certain criteria, among which is the requirement that they be domestic (U.S.) companies.
In consideration of the 1940 Act compliance restraints, and the planned future operations of the Company, the Board has evaluated and discussed the feasibility of the Company continuing as a BDC. The Board believes that given the changing nature of the Company’s business and investment focus in on one primary subsidiary rather than on a portfolio of companies, the structure of the Company as an investment company under the 1940 Act is no longer appropriate and will hinder the Company’s future growth. Given the size of the existing portfolio investments, and the non-diversified nature of the Company’s portfolio, the Board believes that the Company will not be required to be regulated under the 1940 Act once it withdraws its BDC election. The Board intends to manage the Company in a manner in the future so that it would not be subject to the Investment Company Act.
On April 27, 2007, the Company filed a definitive proxy statement under 14-A seeking shareholder approval to withdraw its BDC election. Should the Company succeed in withdrawing the BDC election, the Company would no longer be eligible to report its investments at fair market value. Rather, controlled companies would be consolidated in the financial statements and minority-held investments would be carried at cost.
As a Business Development Company, the Company is required to have at least 70% of its assets in "eligible portfolio companies." It is stated in the Investment Committee Charter that the Company will endeavor to maintain this minimum asset ratio. Subsequent to withdrawing the BDC election the Company will not be obligated to comply with the provisions of the Investment Company Act of 1940, including the restriction on the type and amount of assets held. The Company’s Board of Directors and management intend to operate the Company in such a manner as to not be deem an “investment company” as defined by the 1940 Act and will therefore not be subject to the requirements of such Act.
Portfolio Investments
The Company presently has two portfolio investments: ActionView International, Inc. and Zonda, Inc.
ActionView International, Inc.
On July 15, 2005, the Company entered into a financing agreement with ActionView International, Inc. ("AVWI") wherein the Company will provide a line of credit to AVWI in the amount of $350,000. The line of credit accrues interest at 8% per annum and is to be repaid in an amount equal to the greater of 25% of net monthly income (EBIT) or $25,000 per month commencing on the earlier of nine months from the date of the final draw down, or the month following the third consecutive month in which AVWI generates net income (EBIT) of at least $50,000. During the quarter ending December 31, 2006 the Company was apprised of the fact that certain of the AVWI sales contracts on which financial projections had been based were invalid. While AVWI is trying to get valid sales contracts in place, we believe that there is substantial doubt that AVWI will continue as a going concern. The Company has notified AVWI that the loan is in default and has requested conversion of the loan into common stock according to the remedies under default. As of May 14, 2007, there has been no resolution on this matter.
AVWI custom-designs, develops and manufactures “smart” scrolling advertising billboards. AVWI attempts to place its signs into high traffic locations and then markets advertising space on the signs. Advertising revenues generated from the billboards will be shared with advertising agencies, the local business partner and the location owner. The benefit to advertisers is big, bold exposure at top tier locations at very reasonable costs. AVWI’s plan for proceeds is manufacturing the remaining billboards at the Guangzhous airport just outside of Hong Kong and general working capital purposes. With all 150 airport signs in place, advertising revenue is expected to be $3.9mm for the calendar year 2006.
Zonda, Inc.
On August 30, 2005, the Company entered into a financing agreement with Zonda, Inc. (“Zonda”) wherein the Company will provide a line of credit to Zonda in the amount of $500,000. The line of credit accrues interest at 8% per annum, in consideration for the line of credit Zonda shall issue an equity position of 20% to the Company.
Zonda, Inc. is a privately held company that specializes in test products that serve the medical diagnostic (IVD), food safety, and sanitation testing markets. Zonda is currently expanding the distribution of its product lines into broader markets around the world. The first product that has been targeted for accelerated marketing and distribution efforts is an innovative, rapid, self-contained diagnostic device for the detection of Chlamydia. The device, which is marketed under the HandiLab name, is superior to its competition due to its comparable accuracy, ease of use, compact design, long shelf life, rapid results and cost effectiveness.
RESULTS OF OPERATIONS
Three months ended March 31, 2007 compared to three months ended March 31, 2006
During the quarter ended March 31, 2007, the Company experienced a net loss of $94,432 or ($0.001) per share compared to a net loss of $58,163 or ($0.001) per share for the same period in 2006.
The current loss is due to a loss on investments of $20,821 related to the Company’s portfolio investments and expenses, which were $81,205 for the quarter ended March 31, 2007. The Company will be able to keep future operating costs at a minimum based on the management agreement it has in place to outsource all its administrative support.
Revenues for the quarter ended March 31, 2007 were $7,594 compared with revenues of $24,930 for the quarter ended March 31, 2006. The revenue was generated from interest income from portfolio investments.
Six months ended March 31, 2007 compared to six months ended March 31, 2006
During the six months ended March 31, 2007, the Company experienced a net loss of $213,444 or ($0.002) per share compared to a net loss of $122,328 or ($0.002) per share for the same period in 2006.
The loss for the six months ended March 31, 2007 is due to a loss on investments of $49,251 related to the Company’s portfolio investments and expenses, which were $189,045 for the quarter ended March 31, 2007. The Company will be able to keep future operating costs at a minimum based on the management agreement it has in place to outsource all its administrative support.
Revenues for the six months ended March 31, 2007 were $14,097 compared with revenues of $89,831 for the six months ended March 31, 2006. The revenue was generated from interest income from portfolio investments.
Liquidity and Capital Resources
The accompanying financial statements have been prepared in conformity with principles of accounting applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has accumulated $2,270,251 in losses through March 31, 2007, which may be used to reduce taxes in future years through 2006.
As of March 31, 2007, the Company had total cash and current assets of $1,354 and current liabilities of $1,354. As of March 31, 2007, the Company has a promissory note in the amount of $190,000 due December 19, 2007 and bears interest at the rate of eight percent (8%) per annum. In addition, as of March 31, 2007, the Company has a note payable in the amount of $50,000. The note bears interest at the rate of ten percent (10%) per annum and was due in lump sum on March 6, 2007. The Company requires additional capital to meet its operating requirements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. Management plans to increase cash flows through the sale of securities and, eventually, through the development of profitable operations. There are no assurances that such plans will be successful. No adjustments have been made to the accompanying financial statements as a result of this uncertainty. If the Company is not able to generate positive cash flow from operations, or is unable to secure adequate funding under acceptable terms, there is substantial doubt that the company can continue as a going concern.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
An investment in the Company involves a high degree of risk. In addition to matters discussed elsewhere in this report, careful consideration should be given to the following risk factors. This report contains certain forward-looking statements that involve risks and uncertainties. Our actual results could be substantially different from the results we anticipate in these forward-looking statements because of one or more of the factors described below and/or elsewhere in this report. If any of these risks were to actually occur, our business, results of operations and financial condition would likely suffer materially. The risks outlined below are those which management believes are material to an understanding of our business and the risks inherent in it, but such list is not exclusive of every possible risk which may impact the Company and its shareholders in the future. Additional risks and uncertainties not presently known to us or th at we currently deem immaterial may also appear or increase in significance, and could therefore impair our projected business results of operations and financial condition.
RISKS RELATED TO OUR BUSINESS
We Have Historically Lost Money and Losses May Continue in the Future
We have historically lost money. The loss for the 2006 fiscal year was $304,465 and future losses are likely to occur. Accordingly, we may experience significant liquidity and cash flow problems if we are not able to raise additional capital as needed and on acceptable terms. No assurances can be given we will be successful in reaching or maintaining profitable operations.
There is Substantial Doubt About Our Ability to Continue as a Going Concern Due to Recurring Losses and Working Capital Shortages, Which Means that We May Not Be Able to Continue Operations Unless We Obtain Additional Funding
Our September 30, 2006 financial statements included an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to recurring losses and working capital shortages. Our ability to continue as a going concern will be determined by our ability to obtain additional funding. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our Common Stock May Be Affected By Limited Trading Volume and May Fluctuate Significantly
Prior to this offering there has been a limited public market for our common stock and there can be no assurance an active trading market for our common stock will develop. This could adversely affect our shareholders' ability to sell our common stock in short time periods or possibly at all. Our common stock has experienced and is likely to experience significant price and volume fluctuations that could adversely affect the market price of our common stock without regard to our operating performance. We also believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our stock price could significantly reduce the price of our stock.
There is no Assurance of Continued Public Trading Market and Being a Low Priced Security may Affect the Market Value of Our Stock
To date, there has been only a limited public market for our common stock. Our common stock is currently quoted on the OTCBB. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of our stock. Our stock is subject to the low-priced security or so called "penny stock" rules that impose additional sales practice requirements on broker-dealers who sell such securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to recent regulations adopted by the SEC, any equity security that has a market price of less than $5.00 per share, subject to certain exceptions that we no longer meet). For example, brokers/dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities. Included in this document are the following:
- the bid and offer price quotes in and for the "penny stock," and the number of shares to which the quoted prices apply,
- the brokerage firm's compensation for the trade, and
- the compensation received by the brokerage firm's sales person for the trade.
In addition, the brokerage firm must send the investor:
- a monthly account statement that gives an estimate of the value of each "penny stock" in the investor's account, and
- a written statement of the investor's financial situation and investment goals.
If the person purchasing the securities is someone other than an accredited investor or an established customer of the broker/dealer, the broker/dealer must also approve the potential customer's account by obtaining information concerning the customer's financial situation, investment experience and investment objectives. The broker/dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the Commission's rules may limit the number of potential purchasers of the shares of our common stock.
Resale restrictions on transferring "penny stocks" are sometimes imposed by some states, which may make transaction in our stock more difficult and may reduce the value of the investment. Various state securities laws pose restrictions on transferring "penny stocks" and as a result, investors in our common stock may have the ability to sell their shares of our common stock impaired.
There can be no assurance we will have market makers in our stock. If the number of market makers in our stock should decline, the liquidity of our common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market.
We Could Fail to Retain or Attract Key Personnel
Our future success depends in significant part on the continued services of Robert McCoy, our Chief Executive. We cannot assure you we would be able to find an appropriate replacement for key personnel. Any loss or interruption of our key personnel's services could adversely affect our ability to develop our business plan. We have no employment agreements or life insurance on Mr. McCoy.
Colorado Law and Our Charter May Inhibit a Takeover of Our Company That Stockholders May Consider Favorable
Provisions of Colorado law, such as its business combination statute, may have the effect of delaying, deferring or preventing a change in control of our company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.
Our Portfolio of Investments is Non-Diversified
The Company is a non-diversified company. As a result, if ActionView International, Inc. or Zonda, Inc. fails to perform as expected, our financials results could be more negatively affected and the magnitude of the loss could be more significant than if we had multiple investments to spread the risk. At present, our portfolio investments consist of two investments, ActionView International, Inc., and Zonda, Inc.
Our Expenses exceed investment income
Our operating expenses have exceeded investment income, which could affect our ability to continue as a going concern. To maintain operations we will need to borrow money or raise additional capital to fund our ongoing operating expenses. We cannot be assured that that financing whether from external sources or related parties will be available, or if available, on favorable terms. Also the sale of our common stock to raise capital may cause dilution to our existing shareholders. It may also cause our stock price to decline or, if we are not successful in raising additional capital, we would need to curtail business operations, or cease to continue as a going concern.
RISKS RELATED TO OUR OPERATION AS A BUSINESS DEVELOPMENT COMPANY
We May Change Our Investment Policies Without Further Shareholder Approval
Although we are limited by the Investment Company Act of 1940 with respect to the percentage of our assets that must be invested in qualified investment companies, we are not limited with respect to the minimum standard that any investment company must meet, nor the industries in which those investment companies must operate. We may make investments without shareholder approval and such investments may deviate significantly from our historic operations. Any change in our investment policy or selection of investments could adversely affect our stock price, liquidity, and the ability of our shareholders to sell their stock.
Our Investments May Not Generate Sufficient Income to Cover Our Operations
We intend to make investments into qualified companies that will provide the greatest overall return on our investment. However, certain of those investments may fail, in which case we will not receive any return on our investment. In addition, our investments may not generate income, either in the immediate future, or at all. As a result, we may have to sell additional stock, or borrow money, to cover our operating expenses. The effect of such actions could cause our stock price to decline or, if we are not successful in raising additional capital, we could cease to continue as a going concern.
Investing in Private Companies Involves a High Degree of Risk
Our portfolio will consist of primarily long-term loans to and investments in private companies. Investments in private businesses involve a high degree of business and financial risk, which can result in substantial losses and accordingly should be considered speculative. There is generally no publicly available information about the companies in which we invest, and we rely significantly on the diligence of our employees and agents to obtain information in connection with our investment decisions. In addition, some smaller businesses have narrower product lines and market shares than their competition, and may be more vulnerable to customer preferences, market conditions or economic downturns, which may adversely affect the return on, or the recovery of, our investment in such businesses.
Our Portfolio of Investments are Recorded at Fair Value as Determined in Good Faith by our Board of Directors, as a result, there is uncertainty regarding the value of our Portfolio Investment. Illiquid
There is uncertainty regarding the value of our portfolio investments. At December 31, 2006, the Company had investments in two portfolio companies. Of these, one investment representing 91% of all portfolio assets qualified as an “eligible” portfolio investment as defined by the Investment Company Act of 1940. As a result, the Company’s investment portfolio meets the Act’s requirement that at least 70% of the Company’s assets be invested in eligible companies. Pursuant to the requirements of the 1940 Act, we value all of our investments at fair value as determined in good faith by our Board of Directors on a quarterly basis. Since there is typically no readily available market value for the investments in our portfolio, our Board of Directors determines in good faith the fair value of these investments pursuant to a valuation policy and a consistently applied valuation process.
There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Unlike banks, we are not permitted to provide a general reserve for anticipated loan losses; we are instead required by the 1940 Act to specifically value each individual investment on a quarterly basis and record unrealized depreciation for an investment that we believe has become impaired, including where collection of a loan or realization of an equity security is doubtful, or when the enterprise value of the portfolio company does not currently support the cost of our debt or equity investment. Enterprise value means the entire value of the company to a potential buyer, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. We will record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and/or our equity security has appreciated in value. Without a readily available market value and because of the inherent uncertainty of valuation, the fair value of our investments determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material. Our net asset value could be affected if our determination of the fair value of our investments is materially different than the value that we ultimately realize.
We will adjust quarterly the valuation of our portfolio to reflect the board of directors' determination of the fair value of each investment in our portfolio. Any changes in estimated fair value will be recorded in our statement of operations as "Net unrealized gains (losses)."
Our Common Stock Price May be Volatile
The trading price of our common stock may fluctuate substantially. The price of the common stock may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include the following:
-
Price and volume fluctuations in the overall stock market from time to time;
-
Significant volatility in the market price and trading volume of securities of business development companies or other financial services companies;
-
Volatility resulting from trading in derivative securities related to our common stock including puts, calls, long-term equity anticipation securities, or Leaps, or short trading positions;
-
Changes in regulatory policies or tax guidelines with respect to business development companies or regulated investment companies;
-
Actual or anticipated changes in our earnings or fluctuations in our operating results;
-
General economic conditions and trends; or
-
Departures of key personnel
Our Expenses Exceed Investment Income
Our operating expenses have exceeded investment income, which could affect our ability to continue as a going concern. To date we have reported minimal returns from our investments. We have funded our investments from raising capital, which causes additional dilution to shareholders.
We May Not Have Adequate Resource to Comply with Rules and Provisions
The Company’s size and capital resources may have an effect on its ability to adequately comply with the Investment Company Act of 1940. Specifically, the Company is required to maintain a fidelity bond and additional internal controls, employ a chief compliance officer and remain current on all 1933 and 1934 Act filings. If the cost of compliance becomes prohibitive, we may fall out of compliance or unwittingly violate sections of the 1940 Act. Failure to comply with the 1940 Act may affect our ability to continue as a going concern.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the Exchange Act"), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures within the 90 days prior to the filing date of this report. This evaluation was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Principle Accounting Officer and Chief Compliance Officer, Mr. Robert McCoy. Based upon that evaluation, Robert McCoy concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to us and required to be included in our periodic SEC filings. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out our evaluation.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, Chief Compliance Officer and Principle Accounting Officer, to allow timely decisions regarding required disclosures.
PART II.
Other Information
Item 1.Legal Proceedings
None
Item 2.Changes in Securities
During the six months ended March 31, 2007, the Company issued 250,000 restricted shares of stock in exchange for cash of $1,000 to Canyon Investments, a company controlled by Robert McCoy, our Chairman of the Board of Directors and Interim Chief Executive Officer. The price per share was considered reasonable for restricted securities given the stock price at the time of the transaction. The Board of Directors approved the sale of the stock to Canyon Investments. This transaction was exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the issuer not involving any public offering. The shares were sold directly by the Registrant without an underwriter. There was no general solicitation, no advertisement and resale restrictions were imposed by placing a Rule 144 legend on the stock certificates.
Item 3.Defaults Upon Senior Securities
None
Item 4.Submission of Matters to Vote of Security Holders
None
Item 5.Other Information
None
Item 6.Exhibits
The exhibits listed below are required by Item 601 of Regulation S-K.
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Exhibit No. | Description | Location |
3.1 | Articles of Incorporation | * |
3.2 | Amendment to the articles of incorporation, dated December 15, 1977 | * |
3.3 | Amendment to the articles of incorporation, dated June 4, 1991 | * |
3.4 | Amendment to the articles of incorporation, dated March 26, 1993 | * |
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3.5 | Amendment to the articles of incorporation, dated August 30, 2004 | * |
3.6 | By-laws | * |
14 | Code of Ethics | ** |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith |
99(i) | Audit Committee Charter adopted December 7, 2004 | ** |
99.2(ii) | Investment Committee Charter adopted December 7, 2004 | ** |
* Incorporated by reference from CLX Investment Company’s Annual Report on Form 10-K/A for the Fiscal Year Ended September 30, 2005 filed on June 19, 2006.
** Incorporated by reference from CLX Investment Company’s Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2005 filed on December 29, 2005.
SIGNATURE PAGE
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Dated: May 14, 2007 | |
/s/ Robert McCoy | |
Robert McCoy | |
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Chief Executive Officer and Chairman of the Board of Directors |
EXHIBIT 31.1
SECTION 302
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Robert McCoy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CLX Investment Company, Inc.;
(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 registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer(s) 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 registrant 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 registrant, 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 be 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 principles;
(c) Evaluated the effectiveness of the registrant'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 registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting.
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Date: May 14, 2007 | By:/s/ Robert McCoy Robert McCoy, Chief Executive Officer |
EXHIBIT 31.2
SECTION 302
CERTIFICATION OF PRINCIPLE ACCOUNTING OFFICER
I, Robert McCoy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CLX Investment Company, Inc.;
(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 registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer(s) 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 registrant 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 registrant, 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 be 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 principles;
(c) Evaluated the effectiveness of the registrant'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 registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting.
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Date: May 14, 2007 | By:/s/ Robert McCoy Robert McCoy, Treasurer (Principle Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CLX Investment Company, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert McCoy, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) 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 the operation of the Company.
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/s/ Robert McCoy Robert McCoy Chief Executive Officer May 14, 2007 |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CLX Investment Company, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert McCoy, Treasurer (Principle Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) 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 the operation of the Company.
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/s/ Robert McCoy Robert McCoy Treasurer (Principle Accounting Officer) May 14, 2007 |
