FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-9392
CLX ENERGY, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0749623
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
518 17th Street, Suite 745, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 825-7080
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
As of February 11, 2000, there were 10,548,132 shares of the Registrant's sole
class of Common Stock outstanding.
Transitional Small Business Disclosure Format Yes X No
----- -----
CLX ENERGY, INC.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheet - December 31, 1999 1
Condensed Statements of Operations
Three Months Ended December 31, 1999 and 1998 2
Condensed Statement of Stockholders' Equity
Three Months Ended December 31, 1999 3
Condensed Statements of Cash Flows
Three Months Ended December 31, 1999 and 1998 4
Notes to Unaudited Condensed Financial Statements
Three Months Ended December 31, 1999 and 1998 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION 8
CLX ENERGY, INC.
Condensed Balance Sheets
December 31, 1999
(Unaudited)
ASSETS
- ------
Current assets:
Cash $ 389,466
Accounts Receivable:
Trade 48,717
Oil and Gas Sales 115,783
Prepaid Expenses 1,138
---------
Total current assets 555,104
---------
Property and Equipment, at cost:
Oil and Gas Properties (successful effort method):
Proved 807,897
Unproved 60,302
Office Equipment 12,381
---------
880,580
Less accumulated depreciation and depletion ( 276,066)
---------
604,514
---------
Other assets - oil and gas bond deposit 25,000
---------
$ 1,184,618
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable:
Trade $ 126,195
Oil and gas sales 248,308
Prepaid drilling costs 63,273
Current portion of long-term debt 83,628
Accrued liabilities and other 35,642
---------
Total current liabilities 557,046
---------
Long-term debt, less current portion 312,857
Stockholder's Equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, 600,000 shares designated
Series A $.06 cumulative convertible
no shares outstanding -
Common Stock, $.01 par value, 50,000,000 shares
authorized, 10,548,132 issued and outstanding 105,481
Additional Paid in Capital 743,270
Accumulated Deficit ( 534,036)
---------
Net Stockholders' Equity 314,715
---------
$ 1,184,618
=========
<FN>
The accompanying notes are an integral part of these financial statements.
1
CLX ENERGY, INC.
Condensed Statements of Operations
Three Months Ended December 31, 1999 and 1998
(Unaudited)
Three Months Ended
December 31
--------------------
1999 1998
---- ----
Revenues:
Oil and gas sales $ 94,215 14,619
Operating income and management fees 61,761 -
Other 7,254 -
------- -------
Total revenue 163,230 14,619
------- -------
Operating costs and expenses:
Lease operating and production taxes 26,710 4,389
Lease rentals and abandonments 4,171 71
Depreciation and depletion 19,532 4,720
General and administrative 69,393 21,701
Interest expense 12,010 972
------- -------
Total operating costs and expenses 131,816 31,853
------- -------
Net income(loss) $ 31,414 ( 17,234)
======= =======
Net income(loss) per common share
- basic and diluted * ( * )
======= =======
* Less than $(.01) per share
<FN>
The accompanying notes are an integral part of these financial statements.
2
CLX ENERGY, INC.
Condensed Statement of Stockholders' Equity
Three Months Ended December 31, 1999
(Unaudited)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
------ ------ ------ -------
Balances,
September 30, 1999 10,548,132 $105,481 743,270 (565,450)
Net income - - - 31,414
---------- ------- ------- -------
Balances,
December 31, 1999. 10,548,132 $105,481 743,270 (534,036)
========== ======= ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
3
CLX ENERGY, INC.
Condensed Statements of Cash Flows
Three Months Ended December 31, 1999 and 1998
(Unaudited)
Three Months Ended
December 31,
------------
1999 1998
---- ----
Cash flows from operating activities:
Net income (loss) $ 31,414 ( 17,234)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion 19,532 4,720
(Increase) decrease in accounts receivable 211,372 ( 345)
Increase in prepaid expense - ( 1,138)
Increase (decrease) in accounts payable ( 204,012) 12,871
Increase in accrued liabilities and other 22,398 -
Other 500 -
--------- --------
Net cash provided by (used in)
operating activities 81,204 ( 1,126)
Cash flows from investing activities:
Reduction in assets held for sale 1,585,640 -
Purchase of property and equipment ( 25,526) ( 1,829)
--------- --------
Net cash provided by (used in)
investing activities 1,560,114 ( 1,829)
Cash flows from financing activities:
Reductions to long-term debt (1,570,182) -
--------- --------
Net cash provided by (used in)
financing activities (1,570,182) -
--------- --------
Net increase (decrease) in cash 71,136 ( 2,955)
Cash, beginning of period 318,330 30,024
--------- --------
Cash, end of period $ 389,466 27,069
========= ========
Supplemental disclosures of cash flow
information - cash paid during period for
interest $ 22,398 -
========= ========
<FN>
The accompanying notes are an integral part of these financial statements.
4
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
Note A - Basis of Presentation
The condensed balance sheet as of December 31, 1999, the condensed statements of
operations for the three months ended December 31, 1999 and 1998, the condensed
statement of stockholders' equity for the three months ended December 31, 1999
and the condensed statements of cash flows for the three months ended December
31, 1999 and 1998 have been prepared by the company without audit. The
preparation of financial statements requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
December 31, 1999 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as permitted by the rules and regulations of the
Securities and Exchange Commission. While the Company believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these financial statements be read in conjunction with the
September 30, 1999 financial statements the Company the notes thereto and the
independent Auditors' Report thereon.
Note B - Net income(loss) per common share
Net income(loss) per common share is computed on the basis of the weighted
average number of common shares outstanding during the period as illustrated and
described below:
Three months ended
December 31,
------------
1999 1998
---- ----
Net income(loss) $ 31,414 ( 17,234)
Preferred stock dividends - ( 2,010)
--------- --------
Net income(loss), basic and diluted,
applicable to common stockholders $ 31,414 ( 19,244)
========= ========
Weighted average number of shares
outstanding - basic 10,548,132 4,054,154
========== =========
Net income(loss) per share, basic
and diluted, applicable to common
shareholders $ * ( * )
========= ========
* Less than $.01 per share.
5
Basic income per share is computed using the weighted average number of shares
outstanding. Diluted earnings per share reflects the potential dilution that
would occur if stock options were exercised using the average market price for
the Company's stock for the period. The assumed exercise of stock options would
increase the weighted average shares outstanding from 10,548,132 to 10,803,857
in 1999. The assumed conversion had no dilutive effect compared to basic
earnings per share in 1999.
Options to purchase 475,000 shares of common stock were outstanding at December
31, 1998 but were not included in the computation of diluted net loss per share
because the result would be antidilutive.
Note C - Contingency
The Company has been advised by the Panhandle Eastern Pipe Line Company that on
September 10, 1997, the Federal Energy Regulatory Commission (FERC) issued an
order that requires first sellers of gas to make refunds for all Kansas Ad
Valorem tax reimbursements collected for the period from October 3, 1983 through
June 28, 1988, with interest.
This claim resulted from a FERC order issued September 10, 1997 which stated
that ad valorem tax levied by the State of Kansas could not be considered as an
add-on to the Maximum Lawful Price (MLP) of gas sold under the NGPA of 1978 for
the period from October 3, 1983 through June 28, 1988. This order reversed the
FERC rules in effect during the time periods that ad valorem taxes paid to the
State of Kansas by producers could be recovered from the pipeline company by the
producers over and above the MLP of gas sold under the guidelines set forth in
the NGPA of 1978.
The predecessor of the Company, Calvin Exploration Inc. was operator of certain
Kansas gas wells during the period covered by the order. Panhandle Eastern Pipe
Line Company has advised the Company that Calvin Exploration, Inc., as first
seller, was paid $57,732 in Kansas ad valorem taxes. The Company was also
advised that as successor in interest to the first seller, the amount of the
refund that must be repaid with interest approximated $196,000 on the original
due date of March 9, 1998.
On February 6, 1998 the Company Filed a request for Staff review with the FERC
relative to their order. The Company asked that the Company be responsible only
for reimbursement of ad valorem taxes attributable to its working interest in
the properties subject to the FERC order, that the Company not be required to
reimburse taxes on behalf of royalty owners since taxes are not recoverable from
the royalty owners, and that the Company be allowed to service it's membership
obligation over a five year period due to the financial hardship which would
result from one lump sum payment.
The Company has received various correspondence from the FERC concerning its
request for Staff review. The Company was advised by FERC that it was
responsible only for reimbursement of it's working interest share of the total
refund. Additional information was requested prior to the Commission making a
decision to relieve the Company of the obligation to reimburse taxes on behalf
of the royalty owners. The request for installment payments was not addressed.
The Company has booked approximately $56,000 as a current liability to cover the
Company's estimated share of the reimbursable claim.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity, Capital Resources and Commitments
In the three months ended December 31, 1999 the Company participated in drilling
a well which the Company believes is capable of commercial production. Based on
current prices for oil and gas, the Company believes that net cash flow from oil
and gas sales should be adequate to cover the fixed costs of the Company for the
next fiscal year.
The Company currently has a small negative current ratio with current
liabilities exceeding current assets by approximately $2,000. The Company
believes it has adequate cash flow, based on current oil and gas prices, to
service the bank debt for the next fiscal year.
The Company currently has drilling prospects which it will be actively marketing
to industry participants on a promoted basis.
The Company is also attempting to purchase additional oil and gas producing
properties.
Analysis of Results of Operations:
Oil and gas sales increased for the three months ended December 31, 1999
compared to the three months ended December 31, 1998 primarily as a result of
additional revenues from interests in six gas wells purchased effective April 1,
1999 and revenues from four oil and gas wells that the Company participated in
the drilling of in the six months ended September 30, 1999.
For the three months ended December 31, 1999 the Company received $52,695 in
management fees for serving as general partner of a limited partnership. Of the
$52,695 of management fees, $47,695 was for a one time fee associated with the
acquisition of producing oil and gas properties.
Lease operating expenses and production taxes increased for the three months
ended December 31, 1999 due to additional wells and the increase in sales.
Depreciation and depletion increased as a result of the increase in oil and gas
properties and related production. Lease rental expense increased as a result
of additional unproved properties. General and administrative expenses
increased for the three months ended December 31, 1999 as compared to the prior
period primarily due to an increase in salary expense and a general increase in
activity resulting from the additional producing properties. Interest expense
increased due to the bank debt used to purchase producing oil and gas
properties.
7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on From 8-K
None
8
SIGNATURES
Pursuant to the Securities and Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf buy the undersigned thereunto duly
authorized.
CLX ENERGY, INC.
(REGISTRANT)
Date: February 14, 1999 By: /s/ E. J. Henderson
----------------------
By: E. J. Henderson
President and Chief Financial Officer