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, 2001
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 8, 2002, there were 2,631,936 shares of the Registrant's sole
class of Common Stock outstanding.
Transitional Small Business Disclosure Format Yes No X
---
CLX ENERGY, INC.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Independent Accountants' Report 1
Condensed Balance Sheet
December 31, 2001 2
Condensed Statements of Operations
Three Months December 31, 2001 and 2000 3
Condensed Statement of Stockholders' Equity
Three Months Ended December 31, 2001 4
Condensed Statements of Cash Flows
Three Months Ended December 31, 2001 and 2000 5
Notes to Condensed Financial Statements
Three Months Ended December 31, 2001 and 2000 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
PART II - OTHER INFORMATION 11
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
CLX Energy, Inc.
We have reviewed the accompanying condensed balance sheet of CLX Energy, Inc. as
of December 31, 2001, the related condensed statements of operations for the
three-month periods ended December 31, 2001 and 2000, condensed statement of
stockholders' equity for the three-month period ended December 31, 2001, and
condensed statement of cash flows for the three-month periods ended December 31,
2001 and 2000. These condensed financial statements are the responsibility of
the Company's management.
We conducted our reviews 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 auditing standards generally accepted in the United States of
America, 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 reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States of America.
EASTON AND BARSCH
Certified Public Accountants
Lakewood, Colorado
February 13, 2002
1
CLX ENERGY, INC.
Condensed Balance Sheet
December 31, 2001
(Unaudited)
Assets
------
Current assets:
Cash $ 386,476
Accounts receivable:
Trade 133,950
Oil and gas sales 112,519
Prepaid expenses and other 8,552
------------
Total current assets 641,497
------------
Property and equipment, at cost:
Oil and gas properties (successful
effort method):
Proved 1,110,965
Unproved 55,771
Office equipment 16,353
------------
1,183,089
Less accumulated depreciation
and depletion (555,793)
------------
Property and equipment, net 627,296
Other assets - oil and gas bond deposit 27,253
------------
$ 1,296,046
============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable:
Trade $ 241,016
Joint interest owner advances 17,181
Oil and gas sales 127,323
Current portion of long-term debt 120,000
Accrued liabilities and other 8,355
------------
Total current liabilities 513,875
------------
Long-term debt, less current portion 337,857
Stockholders' 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,
2,631,936 shares issued and
outstanding 26,319
Additional paid-in capital 846,941
Accumulated deficit (428,946)
------------
Net stockholders' equity 444,314
------------
$ 1,296,046
============
The accompanying notes are an integral part of these condensed financial
statements.
2
CLX ENERGY, INC.
Condensed Statements of Operations
Three Months Ended December 31, 2001 and 2000
(Unaudited)
Three Months Ended
December 31,
-----------------------
2001 2000
----------- ----------
Revenues:
Oil and gas sales $ 70,669 240,068
Management fees and other 14,044 17,620
----------- ----------
Total revenue 84,713 257,688
----------- ----------
Operating expenses:
Lease operating and production taxes 82,722 49,143
Lease rentals 958 935
Dry holes and abandoned leases 1,417 30,266
Depreciation and depletion 21,008 32,504
General and administrative 57,624 57,222
----------- ----------
Total operating expenses 163,729 170,070
----------- ----------
Operating income (loss) (79,016) 87,618
----------- ----------
Other income (expenses):
Gain on sale of assets - 7,305
Interest income 3,039 2,254
Interest expense (7,117) (9,719)
----------- ----------
Other income (expenses) (4,078) (160)
----------- ----------
Income (loss) before income taxes (83,094) 87,458
Income tax (provision) benefit 4,500 -
----------- ----------
Net income (loss) $ (78,594) 87,458
=========== ==========
Net income (loss) per common share:
Basic $ (.03) .03
=========== ==========
Diluted $ (.03) .03
=========== ==========
Weighted average number of
common shares outstanding:
Basic 2,631,936 2,636,283
=========== ==========
Diluted 2,631,936 2,677,950
=========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
3
CLX ENERGY, INC.
Condensed Statement of Stockholders' Equity
Three Months Ended December 31, 2001
(Unaudited)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
---------- ----------- ---------- -----------
Balances,
October 1, 2001 2,631,936 $ 26,319 846,941 (350,352)
Net loss - - - 78,594
---------- ----------- ---------- -----------
Balances,
December 31, 2001 2,631,936 $ 26,319 846,941 (428,946)
========== =========== ========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
4
CLX ENERGY, INC.
Condensed Statements of Cash Flows
Three Months Ended December 31, 2001 and 2000
(Unaudited)
Three Months Ended
December 31,
------------------------
2001 2000
------------ -----------
Cash flows from operating activities:
Net income (loss) $ (78,594) 87,458
------------ -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion 21,008 32,504
Gain on sale of assets - (7,305)
(Increase) decrease in accounts receivable 376,833 (515,377)
(Increase) decrease in prepaid
expense and other (4,993) 1,204
Increase (decrease) in accounts payable (418,549) 480,796
Decrease in accrued
liabilities and other (7,500) (3,500)
------------ -----------
Total adjustments (33,201) (11,678)
------------ -----------
Net cash provided by (used in)
operating activities (111,795) 75,780
------------ -----------
Cash flows from investing activities:
Proceeds from sale of property and equipment - 36,525
Purchase of property and equipment (8,834) (364,609)
Addition to other assets (239) (369)
------------ -----------
Net cash used in
investing activities (9,073) (328,453)
------------ -----------
Cash flows from financing activities:
New long-term borrowings - 265,000
Reductions to long-term debt (30,000) (20,907)
------------ -----------
Net cash provided by (used in)
financing activities (30,000) 244,093
------------ -----------
Net decrease in cash (150,868) (8,580)
Cash, beginning of period 537,344 604,532
------------ -----------
Cash, end of period $ 386,476 595,952
============ ===========
Supplemental disclosures of cash flow:
Interest paid $ 7,117 8,357
============ ===========
Income taxes paid $ - 4,300
============ ===========
The accompanying notes are an integral part of these condensed financial
statements.
5
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(UNAUDITED)
Note A - Basis of Presentation
The condensed balance sheet as of December 31, 2001, the condensed statements of
operations for the three months ended December 31, 2001 and 2000, the condensed
statement of stockholders' equity for the three months ended December 31, 2001
and the condensed statements of cash flows for the three months ended December
31, 2001 and 2000 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, 2001 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, 2001 financial statements of the Company, the notes thereto and
the independent Auditors' Report thereon.
Certain amounts reported in the prior period financial statements have been
reclassified to conform with the 2001 presentation.
Note B - Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Oil and gas reserve estimates
are inherently imprecise and are continually subject to revisions based on
production history, results of additional exploration and development, price of
oil and gas and other factors. Accordingly it is at least reasonably possible
those estimates could be revised in the near term and those revisions could be
material.
6
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(UNAUDITED)
Note C - 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.
Basic income (loss) per share of common stock is computed based on the average
number of common shares outstanding during the period. Diluted EPS includes the
potential conversion of stock options. Stock options are not considered in the
diluted EPS calculation for those periods with net losses, as the impact of the
potential common shares (250,000 shares at December 31, 2001) would be to
decrease loss per share.
Note D - Income Taxes
An income tax benefit was recorded for the potential refund of taxes paid in
prior years as a result of the net loss for the three months ended December 31,
2001. No provision for income taxes is required for the three months ended
December 31, 2000.
The following table reconciles the U.S. statutory rate to the Company's
effective tax rate:
2001 2000
------- -------
Federal statutory rate (35.0%) 35.0%
Graduated rate benefit 20.0 0.0
Net operating losses 0.0 ( 2.4 )
State taxes 0.0 ( 0.0 )
Statutory depletion 9.6 ( 7.8 )
Intangible drilling costs 0.0 (24.8 )
------- -------
Effective tax rate ( 5.4%) 0.0%
======= =======
At September 30, 2001, after giving effect to ownership changes that occurred in
the 1999 fiscal year, the Company has a net operating loss carryforward of
approximately $337,000 which expires in varying amounts from September 30, 2003
through 2017. The $337,000 carryforward is subject to an annual limitation of
approximately $23,500. Differences between income tax and financial statement
basis of assets ($37,000) consists of intangible drilling costs ($78,000) which
are expensed for tax purposes offset by basis difference of oil and gas
properties ($41,000) that have a lower financial statement basis than income tax
basis.
7
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(UNAUDITED)
Deferred tax benefit relating to the net operating loss carryforward has not
been reflected as a net deferred tax asset because the limited carryover period
combined with the history of losses of the Company, prior to the year ended
September 30, 2000, make it more likely than not that the net operating losses
will not be utilized by the Company prior to their expiration.
8
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
The Company currently has a positive current ratio with current assets exceeding
current liabilities by approximately $127,622. The Company believes that current
assets and projected cash flow from oil and gas sales should be adequate to
cover the fixed costs of the Company for the fiscal year ended September 30,
2002, including servicing the bank debt.
The Company currently has drilling prospects which it will be actively marketing
to industry participants on a promoted basis and the Company is attempting to
purchase additional producing oil and gas properties.
Analysis of Results of Operations:
Oil and gas sales decreased for the three months ended December 31, 2001
compared to the three months ended December 31, 2000 as a result of declining
production and lower prices for gas and oil.
Management fees and other income for the three months ended December 31, 2001
decreased over the prior year period due to one time management fees received in
connection with the drilling of certain oil and gas wells.
9
Lease operating expenses and production taxes increased for the three months
ended December 31, 2001 due to significant workover costs incurred on certain
oil and gas wells and higher than estimated ad valorem taxes. Dry hole expense
decreased as a result of limited participation in drilling of wells during the
three months ended December 31, 2001. Depreciation and depletion decreased as a
result of the decrease in oil and gas production and the lower carrying value of
the oil and gas properties due to the impairment provision in the fiscal year
ended September 30, 2001. General and administrative expenses did not change
significantly.
During the three months ended December 31, 2000 the Company had a gain of $7,305
from selling part of its interest in undeveloped oil and gas leases. Interest
income increased as a result of an increase in the amount of interest bearing
cash accounts. Interest expense decrease as a result of a reduction in the
average amount of debt outstanding and lower interest rates.
10
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 (Loss)
Per Share
(b) Reports on Form 8-K
None
11
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: February 13, 2002 By: /s/ E. J. Henderson
-------------------------
By: E. J. Henderson
President and Chief Financial Officer
12