FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File No. 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 No.)
518 17th Street, Suite 745, Denver, CO 80202
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (303) 825-7080
Indicate by check mark whether the registrant (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.
10,498,132 shares of Common Stock, $.01 par value at May 5, 1999
<PAGE>
CLX ENERGY, INC.
March 31, 1999
INDEX
Form 10-Q
Part I. - Financial Information
Balance Sheets - March 31, 1999 and
September 30, 1998
Statements of Operations for the six months
and three months ended March 31,
1999 and 1998
Statement of Stockholders' Equity for the
six months ended March 31, 1999
Statements of Cash Flows for the six months
ended March 31, 1999 and 1998
Notes to Unaudited Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Part II. - Other Information
Signatures
<PAGE>
<TABLE>
CLX ENERGY, INC.
BALANCE SHEETS
March 31, 1999 and September 30, 1998
(Unaudited)
<CAPTION>
March 31, September 30,
ASSETS: 1999 1998
<S> <C> <C>
Current assets:
Cash $ 264,202 30,024
Accounts Receivable:
Trade 605 294
Oil and gas sales 6,303 7,099
Deposits 1,138 -
------- -------
Total current assets 272,248 37,417
------- -------
Property and equipment, at cost:
Oil and gas properties
(successful effort method):
Proved 327,213 327,213
Unproved 18,972 18,314
Office equipment 6,621 3,618
------- -------
352,806 349,145
Less accumulated depreciation
and depletion (222,914) (214,265)
------- -------
129,892 134,880
------- -------
Total assets $ 402,140 172,297
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 104,676 81,607
Due joint interest owners 8,355 8,355
------- -------
Total current liabilities 113,031 89,962
------- -------
Stockholders' equity:
Preferred stock, $.01 par value,
2,000,000 shares authorized,
600,000 shares designated Series A
$.06 cumulative convertible:
issued and outstanding - none at
March 31, 1999 and 134,000 at
September 30, 1998 - 1,340
Common stock, $.01 par value,
50,000,000 shares authorized,
issued and outstanding - 10,498,132
at March 31, 1999 and 4,054,154
at September 30, 1998 104,981 40,542
Additional paid-in capital 737,770 541,417
Accumulated deficit (553,642) (500,964)
------- -------
Net stockholders' equity 289,109 82,335
------- -------
Total Liabilities and Equities $ 402,140 172,297
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
CLX ENERGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 26,865 45,284 12,246 15,357
Management fees - 900 - -
------- ------- ------- -------
Total revenue 26,865 46,184 12,246 15,357
Operating costs and expenses:
Lease operating and
production taxes 9,141 12,627 4,752 6,282
Lease rentals and abandonments 1,985 1,555 1,914 836
Depreciation and depletion 8,649 12,207 3,929 5,543
Unusual expenses 9,900 - 9,900 -
General and administrative 48,607 60,422 26,906 28,024
------- ------- ------- -------
Total operating costs and expenses 78,282 86,811 47,401 40,685
------- ------- ------- -------
Operating loss ( 51,417) ( 40,627) ( 35,155) ( 25,328)
------- ------- ------- -------
Other income (expenses):
Gain on sale of assets 250 669 250 -
Interest income 433 - 433 -
Interest expense ( 1,944) ( 1,856) ( 972) ( 962)
------- ------- ------- -------
Total other income (expenses) ( 1,261) ( 1,187) ( 289) ( 962)
------- ------- ------- -------
Net loss $( 52,678) ( 41,814) ( 35,444) ( 26,290)
======= ======= ======= =======
Weighted average number of common
shares outstanding - basic and
diluted 6,083,473 4,054,154 8,135,340 4,054,154
========= ========= ========= =========
Net loss per common share
- basic and diluted $( .01) ( .01) ( * ) ( .01)
======= ======= ======= =======
* Less than $( .01) per share.
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
CLX ENERGY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Six Months Ended March 31, 1999
(Unaudited)
<CAPTION>
Additional
Preferred Common Paid-in Accumulated
Stock Stock Capital Deficit
<S> <C> <C> <C> <C>
Balance,
September 30, 1998 $ 1,340 40,542 541,417 (500,964)
670,005 shares of
common stock issued
for 134,000 shares of
preferred stock ( 1,340) 6,700 ( 5,360) -
5,773,973 shares of
common stock issued
for cash, net of
expenses - 57,739 201,713 -
Net loss - - - ( 52,678)
------ ------- ------- -------
Balance,
March 31, 1999 $ - 104,981 737,770 (553,642)
====== ======= ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
CLX ENERGY, INC.
STATEMENTS OF CASH FLOWS
Six Months Ended March 31, 1999 and 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $( 52,678) ( 41,814)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and depletion 8,649 12,207
Abandoned properties 1,171 -
Gain on sale of assets ( 250) ( 669)
(Increase) decrease in
accounts receivable 485 62,264
Increase in prepaid expenses ( 1,138) -
Increase (decrease) in
accounts payable 23,069 ( 29,052)
------- -------
Net cash provided by (used in)
operating activities ( 20,692) 2,936
------- -------
Cash flows from investing activities:
Proceeds from sale of property and equipment 250 2,300
Purchase of property and equipment ( 4,832) ( 4,752)
------- -------
Net cash provided by (used in)
investing activities ( 4,582) ( 2,452)
------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 259,452 -
------- -------
Net cash provided by (used in)
financing activities 259,452 -
------- -------
Net increase (decrease) in cash 234,178 484
Cash, beginning of period 30,024 34,763
------- -------
Cash, end of period $ 264,202 35,247
======= =======
Supplemental disclosures of cash
flow information - cash paid
during period for interest $ - -
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
CLX ENERGY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1999
Note A - Basis of Presentation
The balance sheet as of March 31, 1999, the statements of operations
for the six months and three months ended March 31, 1999 and 1998, the
statement of stockholders' equity for the six months ended March 31, 1999 and
the statements of cash flows for the nine months ended March 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
March 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 principals 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, 1998
financial statements of CLX Energy, Inc., the notes thereto and the
Independent Auditors' Report thereon.
Note B - Net income (loss) per common share
Net loss per common share is computed on the basis of the weighted average
number of common shares outstanding during the period as illustrated below:
Six Months Ended Three Months Ended
March 31, March 31,
1999 1998 1999 1998
Net Loss $( 52,678) ( 41,814) ( 35,444) ( 26,290)
Preferred stock dividends ( 2,747) ( 4,020) ( 737) ( 2,010)
------- ------- ------- -------
Net loss, basic and diluted,
applicable to common
stockholders $( 55,425) ( 45,834) ( 36,181) ( 28,300)
======= ======= ======= =======
Weighted average number of
shares outstanding - basic
and diluted 6,083,473 4,054,154 8,135,340 4,054,154
========= ========= ========= =========
Net loss per share, basic and
diluted, applicable to
common shareholders $( .01) ( .01) ( * ) ( .01)
======= ======= ======= =======
* Less than $(.01) per share.
<PAGE>
Options to purchase 50,000 shares of common stock were outstanding at
March 31, 1999 (475,000 at March 31, 1998) but were not included in the
computation of diluted net loss per share because the result would be
antidilutive.
Note C - Preferred stock and common stock
On February 2, 1999, the Company completed a private placement of 5,773,793
shares of it's $.01 par value common stock for $275,000. The investors in the
private placement also agreed to provide guarantees of bank loans or interim
financing as necessary to a maximum of $300,000 for property acquisitions
during the period from February 2, 1999 to February 2, 2002.
Simultaneous with the completion of the private placement, the preferred stock
of the Company, including the accrued but unpaid dividends, was converted into
common stock of the Company at an exchange rate of five shares of common stock
for each share of preferred stock including accrued but unpaid dividends. A
total of 670,005 shares of common stock were issued.
Prior to the completion of the private offering, the Officers and Directors of
the Company agreed to cancel their outstanding stock options previously granted
to them. As a result, options on 425,000 shares of common stock were canceled.
As of February 2, 1999 the Company currently has options for 50,000 shares of
common stock outstanding that were issued in 1994 in connection with the
acquisition of an oil and gas property. The Company did not cancel the
previously adopted stock option plans.
Note D - Unusual expenses
The amount reflected as unusual expenses in the statements of operations
represents the Company's share of a settlement with the Wind River Tax
Commission concerning royalty calculations for gas sold from a gas field from
1988 to 1995. All working interest owners approved settling the dispute to
avoid the cost of litigation. The Company sold its interest in the gas
property in 1995.
Note E - Contingency
The Company has been advised by 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
covering the period from October 3, 1983 through June 28, 1988. This order
reversed the FERC rules in effect during that time period 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.
<PAGE>
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 such taxes are not
recoverable from the royalty owners, and that the Company be allowed to service
it's reimbursement 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 latest dated December 4, 1998. In this letter
the Company was advised 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 was futher advised
that the FERC staff expected to make a decision on the Company's request by
May 4, 1999 which date has been extended to October 1, 1999.
On March 12, 1999 the Missouri Public Service Commission filed a Petition for
Review with the U.S. Court of Appeals. The Petition requests a review of
certain orders issued by FERC with respect to the Company. Counsel for the
Company has filed a motion for Leave to Intervene in the proceeding.
A total of $47,300 has been booked as a current liability as March 31, 1999
($45,400 at September 30, 1998) covering the Company's working interest share
of the total reimbursement claim. If the FERC rules that the Company is
responsible for reimbursement for its proportionate share of tax refunds
received by royalty owners, this amount would be increased by approximately
$5,400.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity, Capital Resources and Commitments
On February 2, 1999, the Company completed a private placement of 5,773,793
shares for $275,000. The investors in the private placement also agreed to
provide guarantees of bank loans or interim financing as necessary to a
maximum of $300,000 for property acquisitions.
Under current prices for oil and gas, net cash flows from oil and gas sales
does not cover fixed costs of the Company. Cash flows from oil and gas sales
have decreased by approximately 40% as a result of depressed oil and gas
prices and declining production. This has resulted in net cash flow failing to
cover fixed costs. The Company currently has a working capital of
approximately $159,000.
Internally, the Company does not expect to be adversely affected by the year
2000 (Y2K) problem. The Company's use of computers is minimal and any work
performed by computer programs can be done manually. The Company does not know
the extent to which purchasers of its oil and gas production will be affected
by the Y2K problem.
The Company currently is attempting to purchase producing oil and gas
properties.
Analysis of Results of Operations
Oil and gas sales decreased for the six months and the three months ended
March 31, 1999 as a result of lower oil and gas prices and declining
production.
Lease operating expenses and production taxes decreased for the six months and
the three months ended March 31, 1999 due to lower production taxes as a result
of the decrease in sales, and a general decrease in operating costs caused by
mild weather conditions. Depreciation and depletion decreased as a result of
declining oil and gas production. General and administrative expenses
decreased for the six months and the three months ended March 31, 1999 as
compared to the prior periods primarily due to reduced salary expense.
Unusual expenses in 1999 represented an amount paid to resolve a dispute
regarding Royalty calculations for gas sold from 1988 to 1995. There were no
unusual expenses in 1998.
<PAGE>
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 Form 8-K.
On February 9, 1999 a Form 8-K was filed regarding a change in
control of registrant and the appointment of James Burkhart and
Robert E. Gee to the Board of Directors.
SIGNATURES
Pursuant to the requirements of the Securities 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.
/s/ E. J. Henderson
By: E. J. Henderson
President and Chief
Financial Officer
Dated: May 6, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 264,202
<SECURITIES> 0
<RECEIVABLES> 6,908
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 272,248
<PP&E> 352,806
<DEPRECIATION> 222,914
<TOTAL-ASSETS> 402,140
<CURRENT-LIABILITIES> 113,031
<BONDS> 0
<COMMON> 104,981
0
0
<OTHER-SE> 184,128
<TOTAL-LIABILITY-AND-EQUITY> 402,140
<SALES> 26,865
<TOTAL-REVENUES> 26,865
<CGS> 17,450
<TOTAL-COSTS> 17,450
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,944
<INCOME-PRETAX> (52,678)
<INCOME-TAX> 0
<INCOME-CONTINUING> (52,678)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,678)
<EPS-PRIMARY> ( .01)
<EPS-DILUTED> ( .01)
</TABLE>
