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, 2002
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 3, 2003, 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 3
Condensed Balance Sheet
December 31, 2002 4
Condensed Statements of Operations
Three Months December 31, 2002 and 2001 5
Condensed Statement of Stockholders' Equity
Three Months Ended December 31, 2002 6
Condensed Statements of Cash Flows
Three Months Ended December 31, 2002 and 2001 7
Notes to Condensed Financial Statements
Three Months Ended December 31, 2002 and 2001 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 10
PART II - OTHER INFORMATION 12
2
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, 2002, the related condensed statements of operations and cash
flows for the three-month periods ended December 31, 2002 and 2001, and the
condensed statement of changes in stockholders' equity for the three-month
period ended December 31, 2002. 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 6, 2003
3
CLX ENERGY, INC.
Condensed Balance Sheet
December 31, 2002
(Unaudited)
Assets
------
Current assets:
Cash $ 258,540
Accounts receivable:
Trade 86,197
Oil and gas sales 102,379
Prepaid expenses 2,609
----------
Total current assets 449,725
----------
Property and equipment, at cost:
Oil and gas properties (successful
effort method):
Proved 820,899
Unproved 26,938
Office equipment 16,353
----------
864,190
Less accumulated depreciation
and depletion (627,338)
----------
Property and equipment, net 236,852
Other assets - oil and gas bond deposit 28,154
----------
$ 714,731
==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable:
Trade $ 217,302
Oil and gas sales 152,738
Current portion of long-term debt 120,000
Accrued liabilities and other 8,355
----------
Total current liabilities 498,395
----------
Long-term debt, less current portion 92,857
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 (749,781)
----------
Net stockholders' equity 123,479
----------
$ 714,731
==========
The accompanying notes are an integral part of these condensed financial
statements.
4
CLX ENERGY, INC.
Condensed Statements of Operations
Three Months Ended December 31, 2002 and 2001
(Unaudited)
Three Months Ended
December 31,
-----------------------
2002 2001
----------- ----------
Revenues:
Oil and gas sales $ 62,907 70,669
Management fees 13,424 14,044
----------- ----------
Total revenue 76,331 84,713
----------- ----------
Operating expenses:
Lease operating and production taxes 38,123 82,722
Lease rentals - 958
Dry holes and abandoned leases 8,750 1,417
Depreciation and depletion 12,402 21,008
General and administrative 46,117 57,624
----------- ----------
Total operating expenses 105,392 163,729
----------- ----------
Operating loss ( 29,061) ( 79,016)
----------- ----------
Other income (expenses):
Interest income 1,234 3,039
Interest expense ( 2,747) ( 7,117)
----------- ----------
Total other income (expenses) ( 1,513) ( 4,078)
----------- ----------
Loss before income taxes ( 30,574) ( 83,094)
Income tax benefit - 4,500
----------- ----------
Net loss $ ( 30,574) ( 78,594)
=========== ==========
Net loss per common share:
Basic $ ( .01) ( .03)
=========== ==========
Diluted $ ( .01) ( .03)
=========== ==========
Weighted average number of
common shares outstanding:
Basic 2,631,936 2,631,936
=========== ==========
Diluted 2,631,936 2,631,936
=========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
5
CLX ENERGY, INC.
Condensed Statement of Changes in Stockholders' Equity
Three Months Ended December 31, 2002
(Unaudited)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
--------- ------- ------- ------------
Balances,
October 1, 2002 2,631,936 $26,319 846,941 (719,207)
Net loss - - - ( 30,574)
--------- ------- ------- ------------
Balances,
December 31, 2002 2,631,936 $26,319 846,941 (749,781)
========= ======= ======= ============
The accompanying notes are an integral part of these condensed financial
statements.
6
CLX ENERGY, INC.
Condensed Statements of Cash Flows
Three Months Ended December 31, 2002 and 2001
(Unaudited)
Three Months Ended
December 31,
-----------------------
2002 2001
------------ ---------
Cash flows from operating activities:
Net loss $ ( 30,574) ( 78,594)
------------ ---------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion 12,402 21,008
(Increase) decrease in accounts receivable ( 15,540) 376,833
(Increase) decrease in prepaid expenses 1,471 ( 4,993)
Increase (decrease) in accounts payable 8,602 (418,549)
Decrease in accrued liabilities
and other - ( 7,500)
------------ ---------
Total adjustments 6,935 ( 33,201)
------------ ---------
Net cash used in
operating activities ( 23,639) (111,795)
------------ ---------
Cash flows from investing activities:
Purchase of property and equipment ( 1,687) ( 8,834)
Addition to other assets ( 199) ( 239)
------------ ---------
Net cash used in
investing activities ( 1,886) ( 9,073)
------------ ---------
Cash flows from financing activities:
Reductions to long-term debt ( 30,000) ( 30,000)
------------ ---------
Net cash used in
financing activities ( 30,000) ( 30,000)
------------ ---------
Net decrease in cash ( 55,525) (150,868)
Cash, beginning of period 314,065 537,344
------------ ---------
Cash, end of period $ 258,540 386,476
============ =========
Supplemental disclosures of cash flow:
Interest paid $ 2,747 7,117
============ =========
The accompanying notes are an integral part of these condensed financial
statements.
7
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
(UNAUDITED)
Note A - Business and Basis of Presentation
The Company is engaged in the oil and gas business which consists of acquiring,
exploring, developing, selling and operating oil and gas properties. The
Company's oil and gas activities are subject to existing Federal, state and
local environmental laws, rules and regulations. All of the Company's
activities are in the United Sates, primarily Colorado, Kansas, Oklahoma and
Wyoming.
The condensed balance sheet as of December 31, 2002, the condensed statements of
operations for the three months ended December 31, 2002 and 2001, the condensed
statement of stockholders' equity for the three months ended December 31, 2002
and the condensed statements of cash flows for the three months ended December
31, 2002 and 2001 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, 2002 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, 2002 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 2002 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.
8
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
(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, 2002 and 2001) would be
to decrease loss per share.
Note D - Income Taxes
An income tax benefit was recorded for the three months ended December 31, 2001
for the potential refund of taxes paid in prior years.
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 make it more likely than not that the net
operating losses will not be utilized by the Company prior to their expiration.
9
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's current liabilities exceed its current assets by $48,670. The
Company believes that current assets and projected cash flow from oil and gas
sales, based on current prices, should be adequate to cover the fixed costs of
the Company for the fiscal year ended September 30, 2003, including servicing
the bank debt.
The Company currently has drilling prospects which it is actively marketing to
industry participants on a promoted basis.
Analysis of Results of Operations:
Oil and gas sales decreased by $7,762 for the three months ended December 31,
2002 compared to the three months ended December 31, 2001 primarily as a result
of the Company's sale of its interest in a Kansas field in August 2002 and
declining production.
Management fees for the three months ended December 31, 2002 decreased by $620
compared to the prior year period primarily due to a reduction in fees charged
in managing properties for a partnership.
10
Lease operating expenses and production taxes decreased for the three months
ended December 31, 2002 compared to the three months ended December 31, 2001 due
to a reduction in workover costs and lease operating expenses (primarily
associated with certain oil and gas wells that were sold in August 2002) and a
reduction in estimated ad valorem taxes. Dry hole expense increased as a result
of costs incurred in drilling of wells. 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, 2002. General and administrative expenses decreased
primarily due to reduced compensation expense.
Interest income decreased as a result of a decrease in the amount of interest
bearing cash accounts and lower interest rates. Interest expense decreased as a
result of a reduction in the average amount of debt outstanding and lower
interest rates.
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 4. Controls and Procedures.
A review and evaluation was performed by the Company's management,
including the Company's Chief Executive Officer (the "CEO') and Chief
Financial Officer (the "CFO"), of the effectiveness of the design and
operation of the Company's disclosure controls and procedures as of a
date within 90 days prior to the filing of this quarterly report.
Based on that review and evaluation, the CEO and CFO has concluded
that Company's current disclosure controls and procedures, as designed
and implemented, were effective. There have been no significant
changes in the Company's internal controls or in other factors that
could significantly affect the Company's internal controls subsequent
to the date of their evaluation. There were no significant material
weaknesses identified in the course of such review and evaluation and,
therefore, no corrective measures were taken by the Company.
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
12
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 7, 2003 By: /s/ E. J. Henderson
-------------------------------------
E. J. Henderson
President and Chief Financial Officer
13
CERTIFICATION
I, E. J. Henderson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CLX Energy, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the
registrant and have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us by
others within that entity, particularly during the period in which
this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date") and
c. Presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: February 7, 2003
/s/ E. J. Henderson
------------------------------------
E. J. Henderson,
Chief Executive Officer, President,
and Chief Financial Officer
14