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 March 31, 2003
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 May 2, 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
March 31, 2003 4
Condensed Statements of Operations
Six Months and Three Months Ended March 31, 2003 and 2002 5
Condensed Statement of Stockholders' Equity
Six Months Ended March 31, 2003 6
Condensed Statements of Cash Flows
Six Months Ended March 31, 2003 and 2002 7
Notes to Condensed Financial Statements
Six Months Ended March 31, 2003 and 2002 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 March 31, 2003, the related condensed statements of operations for the
six-month and three-month periods ended March 31, 2003 and 2002, condensed
statement of stockholders' equity for the six-month period ended March 31, 2003,
and condensed statement of cash flows for the six-month periods ended March 31,
2003 and 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
May 7, 2003
3
CLX ENERGY, INC.
Condensed Balance Sheet
March 31, 2003
(Unaudited)
Assets
------
Current assets:
Cash $ 212,457
Accounts receivable:
Trade 67,202
Oil and gas sales 239,035
Prepaid expenses 1,628
-------
Total current assets 520,322
-------
Property and equipment, at cost:
Oil and gas properties (successful
effort method):
Proved 824,671
Unproved 34,863
Office equipment 16,353
-------
875,887
Less accumulated depreciation
and depletion (641,228)
--------
Property and equipment, net 234,659
Other assets - oil and gas bond deposit 28,355
-------
$ 783,336
=======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable:
Trade $ 184,493
Oil and gas sales 234,523
Current portion of long-term debt 120,000
Accrued liabilities and other 8,355
-------
Total current liabilities 547,371
-------
Long-term debt, less current portion 68,857
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 (706,152)
-------
Net stockholders' equity 167,108
-------
$ 783,336
=======
The accompanying notes are an integral part of these condensed financial
statements.
4
CLX ENERGY, INC.
Condensed Statements of Operations
Six Months and Three Months Ended March 31, 2003 and 2002
(Unaudited)
Six Months Ended Three Months Ended
March 31, March 31,
----------------------- ----------------------
2003 2002 2003 2002
----------- ---------- ---------- ----------
Revenues:
Oil and gas sales $ 179,895 139,226 116,988 68,557
Management fees 27,373 32,611 13,949 18,567
----------- ---------- ---------- ----------
Total revenue 207,268 171,837 130,937 87,124
----------- ---------- ---------- ----------
Operating expenses:
Lease operating and
production taxes 70,070 131,286 31,947 48,564
Lease rentals 68 1,058 68 100
Dry holes and abandoned leases 10,268 1,542 1,518 125
Depreciation and depletion 26,292 40,529 13,890 19,521
General and administrative 84,639 106,019 38,522 48,395
------------ ---------- ---------- ----------
Total operating costs and
expenses 191,337 280,434 85,945 116,705
------------ ---------- ---------- ----------
Operating income (loss) 15,931 (108,597) 44,992 (29,581)
------------ ---------- ---------- ----------
Other income (expenses):
Interest income 2,172 5,220 938 2,181
Interest expense (5,048) (12,981) (2,301) (5,864)
------------ ---------- ---------- ----------
Other income (expenses) (2,876) (7,761) (1,363) (3,683)
------------ ---------- ---------- ----------
Income (loss) before
income taxes 13,055 (116,358) 43,629 (33,264)
Income tax benefit - 6,200 - 1,700
------------ ---------- ---------- ----------
Net income (loss) $ 13,055 (110,158) 43,629 (31,564)
============ ========== ========== ==========
Net income (loss) per
common share:
Basic $ .00 ( .04) .02 ( .01)
=========== ========== ========== ==========
Diluted $ .00 ( .04) .02 ( .01)
=========== ========== ========== ==========
Weighted average number of
common shares outstanding:
Basic 2,631,936 2,631,936 2,631,936 2,631,936
=========== ========== ========== ==========
Diluted 2,631,936 2,631,936 2,631,936 2,631,936
=========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
5
CLX ENERGY, INC.
Condensed Statement of Stockholders' Equity
Six Months Ended March 31, 2003
(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 income - - - 13,055
--------- ------- ------- ---------
Balances,
March 31, 2003 2,631,936 $26,319 846,941 (706,152)
========= ======= ======= =========
The accompanying notes are an integral part of these condensed financial
statements.
6
CLX ENERGY, INC.
Condensed Statements of Cash Flows
Six Months Ended March 31, 2003 and 2002
(Unaudited)
Six Months Ended
March 31,
---------------------
2003 2002
---------- ---------
Cash flows from operating activities:
Net income (loss) $ 13,055 (110,158)
---------- ---------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion 26,292 40,529
(Increase) decrease in accounts receivable (133,201) 474,348
(Increase) decrease in prepaid
expense and other 2,452 (9,130)
Increase (decrease) in accounts payable 57,578 (499,904)
Increase (decrease) in accrued
liabilities and other - (7,500)
---------- ---------
Total adjustments (46,879) (1,657)
---------- ---------
Net cash used in
operating activities (33,824) (111,815)
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment (13,384) (9,833)
Addition to other assets (400) (478)
---------- ---------
Net cash used in
investing activities (13,784) (10,311)
---------- ---------
Cash flows from financing activities:
Reductions to long-term debt (54,000) (60,000)
---------- ---------
Net cash used in
financing activities (54,000) (60,000)
---------- ---------
Net increase (decrease) in cash (101,608) (182,126)
Cash, beginning of period 314,065 537,344
---------- ---------
Cash, end of period $ 212,457 355,218
========== =========
Supplemental disclosures of cash flow:
Interest paid $ 5,048 12,981
========== =========
The accompanying notes are an integral part of these condensed financial
statements.
7
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
Note A - 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 March 31, 2003, the condensed statements of
operations for the six months and three months ended March 31, 2003 and 2002,
the condensed statement of stockholders' equity for the six months ended March
31, 2003 and the condensed statements of cash flows for the six months ended
March 31, 2003 and 2002 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
March 31, 2003 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 2003 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
SIX MONTHS ENDED MARCH 31, 2003 AND 2002
(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 that are dilutive. 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 March 31, 2002)
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 six months ended March 31, 2002.
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 currently has a negative current ratio with current liabilities
exceeding current assets by $27,049. 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 increased for the six months and three months ended March 31,
2003 compared to the six months and three months ended March 31, 2002 primarily
as a result of higher prices for gas and oil.
Management fees for the six months and three months ended March 31, 2003
decreased over the prior year periods primarily due to a reduction in fees
charged in managing properties for a partnership.
10
Lease operating expenses and production taxes decreased for the six months and
three months ended March 31, 2003 compared to the six months and three months
ended March 31, 2002 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 primarily as a result of the 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
Exhibit 32. Rule 13a-14(a)/15d-14(a) Certification
Exhibit 99. Section 1350 Certification
(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: May 7, 2003 By: /s/ E. J. Henderson
------------------------
By: E. J. Henderson
President and Chief Financial Officer
13