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 June 30, 2000
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 August 3, 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
Independent Accountants' Report 1
Condensed Balance Sheet
June 30, 2000 2
Condensed Statements of Operations
Nine Months and Three Months Ended
June 30, 2000 and 1999 3
Condensed Statement of Stockholders' Equity
Nine Months Ended June 30, 2000 4
Condensed Statements of Cash Flows
Nine Months Ended June 30, 2000 and 1999 5
Notes to Condensed Financial Statements
Nine Months Ended June 30, 2000 and 1999 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 8
PART II - OTHER INFORMATION 9
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
CLX Energy, Inc.
We have reviewed the accompanying condensed balance sheet of CLX Energy, Inc. as
of June 30, 2000, the related condensed statements of operations for the
nine-month and three-month periods then ended, and the condensed statements of
changes in stockholders' equity and cash flows for the nine-month period then
ended. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
EASTON AND BARSCH
Certified Public Accountants
Lakewood, Colorado
August 10, 2000
1
CLX ENERGY, INC.
Condensed Balance Sheet
June 30, 2000
(Unaudited)
ASSETS
- ------
Current assets:
Cash $ 362,684
Accounts Receivable:
Trade 107,325
Oil and Gas Sales 402,108
Prepaid Expenses 4,751
---------
Total current assets 876,868
---------
Property and Equipment, at cost:
Oil and Gas Properties (successful effort method):
Proved 897,130
Unproved 75,614
Office Equipment 16,353
---------
989,097
Less accumulated depreciation and depletion ( 334,958)
---------
654,139
---------
Other assets - oil and gas bond deposit 25,267
---------
$ 1,556,274
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable:
Trade $ 181,764
Oil and gas sales 578,882
Current portion of long-term debt 83,628
Accrued liabilities and other 35,081
---------
Total current liabilities 879,355
---------
Long-term debt, less current portion 271,043
---------
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 ( 442,875)
---------
Net Stockholders' Equity 405,876
---------
$ 1,556,274
=========
<FN>
The accompanying notes are an integral part of these financial statements.
2
CLX ENERGY, INC.
Condensed Statements of Operations
Nine Months and Three Months Ended June 30, 2000 and 1999
(Unaudited)
Nine Months Ended Three Months Ended
June 30, June 30,
---------------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Oil and gas sales $ 403,841 43,201 193,471 16,336
Management fees and other 108,042 4,170 30,979 3,737
Gain on sale of assets 3,134 5,250 3,134 5,000
----------- ------- ------- -------
Total revenues 515,017 52,621 227,584 25,073
----------- ------- ------- -------
Operating costs and expenses:
Lease operating and
production taxes 109,731 14,873 42,263 5,732
Lease rentals and
abandonments 10,529 2,377 1,334 392
Dry holes 7,621 4,427 4,808 4,427
Depreciation and depletion 79,796 13,310 39,158 4,661
Unusual expenses - 9,900 - -
General and administrative 148,066 76,323 36,820 27,716
Interest expense 36,699 2,947 10,412 1,003
----------- ------- ------- -------
Total operating costs
and expenses 392,442 124,157 134,795 43,931
----------- ------- ------- -------
Net income (loss) $ 122,575 ( 71,536) 92,789 ( 18,858)
=========== ======= ======= =======
Net income (loss) per
common share
Basic $ .01 ( .01) .01 ( * )
=========== ======= ======= =======
Diluted $ .01 ( .01) .01 ( * )
=========== ======= ======= =======
Weighted average number of
common shares outstanding
Basic 10,548,132 7,547,592 10,548,132 10,498,132
========== ========= ========== ==========
Diluted 10,792,132 7,547,592 10,792,132 10,498,132
========== ========= ========== ==========
* Less than $(.01) per share
<FN>
The accompanying notes are an integral part of these financial statements.
3
CLX ENERGY, INC.
Condensed Statement of Stockholders' Equity
Nine Months Ended June 30, 2000
(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 - - - 122,575
---------- ------- -------- -------
Balances,
June 30, 2000 10,548,132 $105,481 743,270 (442,875)
========== ======= ======== =======
<FN>
The accompanying notes are an integral part of these financial statements.
4
CLX ENERGY, INC.
Condensed Statements of Cash Flows
Nine Months Ended June 30, 2000 and 1999
(Unaudited)
Nine Months Ended
June 30,
------------------
2000 1999
---- ----
Cash flows from operating activities:
Net income (loss) $ 122,575 ( 71,536)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion 79,796 13,310
Abandoned properties - 1,171
Gain on sale of assets ( 3,134) ( 5,250)
(Increase) decrease in accounts receivable ( 133,561) ( 3,084)
Increase in prepaid expense ( 3,613) ( 1,138)
Increase (decrease) in accounts payable 208,908 64,656
Decrease in due joint interest owners ( 90,050) 26,492
Increase in accrued liabilities and other 21,837 -
Other ( 1,719) -
--------- --------
Net cash provided by
operating activities 201,039 24,621
--------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment 8,849 5,250
Reduction in assets held for sale 1,585,640 -
Purchase of property and equipment ( 139,178) ( 48,814)
--------- --------
Net cash provided by (used in)
investing activities 1,455,311 ( 43,564)
--------- --------
Cash flows from financing activities:
Proceed from issuance of common stock, net - 259,452
Reductions to long-term debt (1,611,996) -
--------- --------
Net cash provided by (used in)
financing activities (1,611,996) 259,452
--------- --------
Net increase in cash 44,354 240,509
Cash, beginning of period 318,330 30,024
--------- --------
Cash, end of period $ 362,684 270,533
========= ========
Supplemental disclosures of cash flow
information - cash paid during period for
interest $ 32,975 -
========= ========
<FN>
The accompanying notes are an integral part of these financial statements.
5
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
Note A - Basis of Presentation
The condensed balance sheet as of June 30, 2000, the condensed statements of
operations for the nine months and three months ended June 30, 2000 and 1999,
the condensed statement of stockholders' equity for the nine months ended June
30, 2000 and the condensed statements of cash flows for the nine months ended
June 30, 2000 and 1999 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
June 30, 2000 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 of the Company, the notes thereto and
the independent Auditors' Report thereon.
Note B - Net income(loss) per common share
SFAS No. 128, Earnings per Share, requires dual presentation of basic and
diluted earnings or loss per share (EPS) with a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Income (loss) per share of common stock is computed based on the average number
of common shares outstanding during the year. Stock options are not considered
in the calculation for those periods with net losses as the impact of the
potential common shares (50,000 shares at June 30, 1999) would be to decrease
loss per share.
6
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 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 $59,000 as a current liability to cover the
Company's estimated share of the reimbursable claim.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General
The statements contained in this Form 10-QSB, if not historical, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve risks and uncertainties that could
cause actual results to differ materially from the results, financial or
otherwise, or other expectations described in such forward-looking statements.
Any forward-looking statement or statements speak only as of the date on which
such statements were made, and the Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statements are made or reflect the occurrence of unanticipated
events. Therefore, forward-looking statements should not be relied upon as
prediction of actual future results.
Liquidity, Capital Resources and Commitments
In the nine months ended June 30, 2000 the Company participated in drilling of
six wells, four of which the Company believes are 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 $2,500. 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 producing oil and gas
properties.
Analysis of Results of Operations:
Oil and gas sales increased for the nine months and three months ended June 30,
2000 compared to the nine months and three months ended June 30, 1999 primarily
as a result of additional revenues from interests in seven gas wells purchased
effective April 1, 1999, revenues from four oil and gas wells that the Company
participated in drilling in the six months ended September 30, 1999 and revenues
from wells that the Company participated in drilling in the nine months ended
June 30, 2000.
Management fees and other income received for the nine months and three months
ended June 30, 2000 increased over the prior year periods due to operating fees
received for operating certain producing wells and management fees received for
serving as general partner of a limited partnership.
Lease operating expenses and production taxes increased for the nine months and
three months ended June 30, 2000 due to additional wells and the increase in oil
and gas 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 nine months and three months ended
June 30, 2000 as compared to the prior periods primarily due to an increase in
salary expense and a general increase in other expenses resulting from the
increased activity due to additional producing properties. Interest expense
increased due to the bank debt used to purchase producing oil and gas
properties.
8
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 11. Statement of Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None
9
SIGNATURES
Pursuant to the Securities and Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CLX ENERGY, INC.
(REGISTRANT)
Date: August 10, 2000 By: /s/ E. J. Henderson
------------------------
By: E. J. Henderson
President and Chief Financial Officer
10