SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from to
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 Identification No.)
incorporation or organization)
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
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12 (g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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
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
--- ---
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K X
-----
As of the close of trading on January 7, 2000 there were 10,548,132 common
shares outstanding, 5,077,749 of which were held by non-affiliates. The
aggregate market value of the common shares held by non-affiliates, based on the
average closing bid and asked prices on January 7, 2000, was approximately
$1,663,000.
Documents Incorporated By Reference
None
<PAGE>
CLX ENERGY, INC.
FORM 10-K
TABLE OF CONTENTS
SEPTEMBER 30, 1999
_________________________________________________________________________
PART I Page
----
Item 1. Business 2
Item 2. Properties 6
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 16
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 35
PART III
Item 10. Director's and Executive Officers of the Registrant 35
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and
Management 39
Item 13. Certain Relationships and Related Transactions 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 41
<PAGE>
PART I
ITEM 1.
BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
- -------------------------------
CLX Energy, Inc., the registrant (the "Company") is an independent oil and
gas company which was incorporated in the State of Colorado on December 12,
1977. The Company engages in on-shore oil and gas exploration, development and
production in the continental United States. The Company's oil and gas
activities are concentrated primarily in Colorado, Kansas, Oklahoma and Wyoming.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
- ---------------------------------------------
The Company has engaged in only one industry segment and line of business,
namely the acquisition, exploration, development and operation of oil and gas
properties for its own account. See the Company's Financial Statements included
herein.
FORWARD-LOOKING STATEMENTS
- --------------------------
Certain statements contained in this document, including without limitation
statements containing the words "believes," "anticipates," "intends," "expects,"
and words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
DESCRIPTION OF BUSINESS
- -----------------------
CLX Energy, Inc., the Company, is engaged in the operation of producing oil
and gas wells, the acquisition of producing properties, the acquisition of oil
and gas leases, and the development of oil and gas drilling prospects. Drilling
prospects, both development and wildcat, are sold to others on a promoted basis
with the Company recovering its land, legal and geological costs and retaining a
cost free interest in the prospect.
As of September 30, 1999 the Company's significant oil and gas operations
were located in the following areas.
STATE COUNTY
----- ------
Colorado Rio Blanco and Moffat
Kansas Meade and Comanche
Oklahoma Alfalfa and Beaver
Wyoming Campbell and Crook
2
<PAGE>
PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED
- -------------------------------------------------
The Company's principal products are crude oil and natural gas. Crude oil
and natural gas are sold to various purchasers, including pipeline companies,
which generally service the area in which the Company's wells are located. The
Company's oil and gas production is sold to several purchasers, three of which
purchased more than 10% of oil and gas revenues. Prices received for the
Company's oil and gas production is based upon the "spot" market of the National
Commodity Futures Exchange subject to reductions for transportation and product
quality. These prices vary from month to month subject to supply and demand.
See the Company's Financial Statements included herein.
STATUS OF NEW PRODUCTS OR INDUSTRY SEGMENTS
- -------------------------------------------
There has been no public announcement of, and no information otherwise has
been made public about a new product or industry segment, which would require
the investment of a material amount of the Company's assets, or which otherwise
is material.
SOURCES AND AVAILABILITY OF RAW MATERIALS
- -----------------------------------------
The existence of commercial oil and gas reserves is essential to the
ultimate realization of value from the Company's properties and thus may be
considered a raw material essential to the Company's business. However, the
acquisition, exploration, development, production, and sale of oil and gas is
subject to many factors which are outside the Company's control. These factors
include national and international economic conditions, availability of drilling
rigs, casing, pipe and other equipment and supplies, proximity to pipelines, the
supply and price of other fuels. The Company acquires oil and gas properties
from landowners, other owners of interests in such properties, or governmental
entities. For information relating to specific properties of the Company see
Item 2 below. The Company currently is not experiencing any difficulty in
acquiring necessary supplies, including drilling rigs.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
- ---------------------------------------------------------
The Company does not own any patents, trademarks, licenses, franchises, or
concessions, except oil and gas interests granted by governmental authorities
and private land owners.
SEASONAL NATURE OF BUSINESS
- ---------------------------
The Company's business is not seasonal in nature.
WORKING CAPITAL ITEMS
- ---------------------
Working capital is not required to carry inventories to meet rapid delivery
requirements, or to assure continuous allotments of goods from suppliers.
Access to sufficient cash is essential to take advantage of opportunities to
acquire, develop, and operate oil and gas properties.
3
<PAGE>
MAJOR CUSTOMERS
- ----------------
The Company's business does not depend upon a single customer or a very few
customers. Oil and gas purchasers have been readily available in this Company's
market areas (See Note 10 to Financial Statements).
BACKLOG
- -------
Backlog is not relevant to an understanding of the Company's business.
RENEGOTIATION OR TERMINATION OF GOVERNMENT CONTRACTS
- ----------------------------------------------------
No portion of the Company's business is subject to renegotiation of profits
or termination of contracts or subcontracts at the election of the Government.
COMPETITIVE CONDITIONS
- ----------------------
The exploration for and development and production of oil and gas are
subject to intense competition. The principal methods of competition in the
industry for the acquisition of oil and gas leases are the payment of bonus
payments at the time of acquisition of leases, delay rentals, location damage
supplement payments, the use of differential royalty rates, the amount of annual
rental payments and stipulations requiring exploration and production
commitments by the lessee. Companies with greater financial resources, existing
staff and labor forces, equipment for exploration, and vast experience will be
in a better position than the Company to compete for such leases. In addition,
the availability of a ready market for oil and gas will depend upon numerous
factors beyond the Company's control, including the extent of domestic
production and imports of oil, proximity and capacity of pipelines, and the
affect of federal and state regulation of oil and gas sales. The Company has an
insignificant competitive position in the oil and gas industry.
RESEARCH AND DEVELOPMENT
- ------------------------
The Company has not engaged and does not currently engage in any research
and development activities.
ENVIRONMENT PROTECTION
- ----------------------
The Company is subject to various federal, state, and local provisions
regarding environmental matters, the existence of which has not hindered nor
adversely affected the Company's business. Although the Company does not
believe its business operations presently impair environmental quality,
compliance with federal, state and local regulations which have been enacted or
adopted regulating the discharge of materials into the environment could have an
adverse effect upon the capital expenditures, earnings and competitive position
of the Company. Since inception, the Company has not made any material capital
expenditures for environmental control facilities and is not aware of any such
expenditures that will be required in the current or following fiscal years.
4
<PAGE>
EMPLOYEES
- ---------
As of September 30, 1999, the Company employed one person, the President
and Chief Executive Officer, on a full-time basis.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
- ----------------------------------------------------------------------------
The Company has no operations in foreign countries and no portion of its
sales or revenues is derived from customers in foreign countries.
5
<PAGE>
ITEM 2.
PROPERTIES
OFFICE FACILITIES
- -----------------
The Company's offices are located at 518 17th Street, Suite 745, Denver,
Colorado 80202, in space which the Company leases from an unaffiliated entity.
The Company currently occupies approximately 1,138 square feet for which it pays
a monthly rental of $1,138. The lease agreement on this space is for three
years terminating December 31, 2001. Monthly rental for calendar year 2000 will
be $1,233 and for calendar year 2001 will be $1,328.
OIL AND GAS PROPERTIES
- ----------------------
The Company is in only one line of business, that of acquiring, developing
and producing oil and gas properties. The Company's estimated discounted future
net revenue attributable to proved producing reserves of $1,069,500 is
attributed 99.4% to natural gas reserves and 0.6% to oil reserves.
The Company holds interests in producing and non-producing leaseholds as
set forth below.
Producing Properties Non-Prod. Properties
-------------------- --------------------
Gross Net Gross Net
Acres Acres Acres Acres
----- ----- ----- -----
State
- -----
Colorado 5,356 1,071 22,405 4,005
Kansas 2,090 464 480 102
Oklahoma 1,120 212 - -
Wyoming 716 58 5,471 1,407
----- ----- ------ -----
9,282 1,805 28,356 5,514
Net acres represent the gross acres in a lease or leases multiplied by the
Company's working interest in such lease or leases.
The Company's undeveloped acreage is all held pursuant to leases from the
landowner or a governmental entity. Such leases have varying dates of execution
and generally expire one to five years after the date of the lease. The Company
is obligated to pay varying delay rentals to the lessors of such properties to
prevent the leases from expiring.
6
<PAGE>
PROVED AND PROVED DEVELOPED RESERVES
- ------------------------------------
The following table shows, for the years indicated, the proved and proved
developed oil and gas reserves attributable to the Company's interests. Proved
oil and gas reserves are the estimated quantities of crude oil, natural gas, and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions, i.e., prices and costs as of
the date the estimate is made. Prices include consideration of changes in
existing prices provided only by contractual arrangements, but not on
escalations based upon future conditions. Proved developed oil and gas reserves
are reserves that can be expected to be recovered through existing wells with
equipment and operating methods.
September 30
------------------------------------
1999 1998 1997
---- ---- ----
Barrels of oil
--------------
Proved 11,100 23,100 30,500
Proved developed 10,800 8,900 16,300
MCF of gas
----------
Proved 1,036,600 214,400 242,600
Proved developed 897,400 214,400 242,600
No oil and gas of the Company is applicable to long term supply or similar
agreements with foreign governments or authorities in which the Company is a
producer.
ESTIMATED FUTURE NET REVENUES
- -----------------------------
The following table shows, for the years indicated, the present value of
estimated future net revenues to be generated by the sales of the estimated
reserves utilizing a discount factor of 10% per year and holding the sales price
of oil and gas constant at the respective year end levels.
September 30
------------------------------------
1999 1998 1997
---- ---- ----
Proved $1,298,800 310,200 417,200
Proved developed $1,069,500 242,500 288,600
The above reserves are located entirely within the United States.
7
<PAGE>
OIL AND GAS RESERVE ESTIMATES FILED
- -----------------------------------
Since September 30, 1999 the Company has filed no estimates of total proved
net oil or gas reserves with or included such information in reports to any
federal authority or agency other than the Securities and Exchange Commission.
NET OIL AND GAS PRODUCTION
- --------------------------
The following table shows, for the periods indicated, the approximate
production attributable to the Company's oil and gas interests.
YEAR ENDED SEPTEMBER 30
-------------------------------------------
1999 1998 1997
---- ---- ----
Crude Oil (Bbls) 1,900 2,200 1,800
Natural Gas (MCF) 53,300 25,600 31,400
The following table shows, for the periods indicated, the approximate
average sales price per barrel of oil and MCF of gas and approximate average
productive cost of oil and gas produced on a relative unit basis.
YEAR ENDED SEPTEMBER 30
----------------------------------------
1999 1998 1997
---- ---- ----
Average Sales Price
Per Barrel of Oil $ 10.85 9.42 16.84
Per MCF of Gas $ 2.25 2.36 2.55
Average Lifting Cost
Per Equivalent MCF $ .42 .23 0.36
Per Equivalent BBL $ 3.07 3.61 6.28
8
<PAGE>
TOTAL GROSS AND NET PRODUCTIVE WELLS AND DEVELOPED ACRES
- --------------------------------------------------------
The following table sets forth the Company's total gross and net productive
wells as of September 30, 1999, which are located on 3,756 gross (564 net)
acres:
Gross Wells Net Wells
----------- ---------
Oil Gas Oil Gas
--- --- --- ---
2 18 .15 2.18
NET PRODUCTIVE AND DRY EXPLORATORY AND DEVELOPMENT WELLS
- --------------------------------------------------------
The following table sets forth the number of net productive and dry
exploratory and development wells drilled by the Company during fiscal 1999,
1998 and 1997.
Exploratory Wells Development Wells
----------------- -----------------
Net Prod. Net Dry Net Prod. Net Dry
--------- ------- --------- -------
1999
----
0.05 .028 .4250 0
1998
----
0 .00 0 0
1997
----
0 .21 0 0
PRESENT ACTIVITIES
- ------------------
As of December 31, 1999, the Company was involved in the drilling of one
well in Kansas. The Company has a five percent working interest with drilling
costs estimated at $6,500.
FUTURE OIL AND GAS DELIVERY CONTRACTS
- -------------------------------------
The Company is not obligated to provide a fixed and determinable quantity
of oil or gas in the future pursuant to existing contracts or agreements.
ITEM 3.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, nor have any
such proceedings been threatened and none are contemplated, except for the
demand for reimbursement of certain taxes as described in Note 9. The Company
knows of no legal proceedings, pending or threatened, or judgments against any
Director or Officer of the Company in their capacity as such, nor are any such
persons involved in "Certain Legal Proceedings" as defined in Section 401(f) of
Regulation SK.
9
<PAGE>
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of security holders during the fourth
quarter of the fiscal year.
PART II
ITEM 5.
MARKET PRICE OF THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market and
listed on the Bulletin Board under the symbol "CLXE". Prior to February 20,
1998, no quotation on the Company's stock was readily available since the
Company's stock was not quoted on either the NASDAQ Small Capitalization level
or the Bulletin Board. Information regarding closing bid prices has been
obtained from the National Quotation Bureau. The following quotations, where
quotes were available, reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not necessarily represent actual transactions.
FISCAL 1998
-----------
HIGH LOW
---- ---
Quarter Ended
March 31, 1998 .15 .125
June 30, 1998 .18 .15
September 30, 1998 .18 .15
FISCAL 1999
-----------
HIGH LOW
---- ---
Quarter Ended
December 31, 1998 .20 .125
March 31, 1999 .20 .15
June 30, 1999 .20 .10
September 30, 1999 .25 .15
The Company has paid no dividends on its common stock and does not expect
to pay dividends in the foreseeable future.
The following table sets forth the approximate number of security holders
of record of the Company's $0.01 par value common stock and $0.01 par value
preferred stock as of September 30, 1999.
TITLE OF CLASS SHARES OUTSTANDING NUMBER OF SHAREHOLDERS
-------------- ------------------ ----------------------
$0.01 Par Value 10,548,132 1,129
Common Stock
10
<PAGE>
The Series A Preferred Stock was converted into common stock on January 11,
1999. See note (5) of the Notes to Financial Statements for details of the
conversion.
On February 2, 1999, the Company executed a Stock Purchase Agreement
pursuant to which the Company issued an aggregate of 5,773,973 shares of its
common stock to ten persons. The Company received a total of $275,000 cash for
the issuance of those shares of common stock and the acquirors of those shares
agreed to loan the Company, or guaranty debt of the Company for, up to $300,000
for oil and gas acquisitions during the period commencing on February 2, 1999
and ending on February 2, 2002. The Company issued its common stock in that
transaction pursuant to an exemption from registration under
Section 4(2) of the Securities Act.
Simultaneous with the completion of the foregoing private placement, the
outstanding preferred stock of the Company, including the accrued but unpaid
interest, was exchanged for 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 interest. A total of 670,005 shares of common stock were issued by
the Company in that exchange pursuant to an exemption from registration under
Section 3(a)(9) of the Securities Act.
ITEM 6.
SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30
---------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Oil and gas sales $167,779 82,019 111,309 108,845 95,648
Total revenues 182,927 83,551 143,092 172,507 120,782
Costs and expenses 247,413 142,987 259,589 184,126 241,676
------- ------- ------- ------- -------
Net loss $ 64,486 ( 59,436) (116,497) ( 11,619) (120,894)
======= ======= ======= ======= =======
Net loss per
common share - basic
and diluted $( .01) ( .02) ( .03) ( .01) ( .04)
====== ======= ======= ======= =======
Weighted average
number of common
shares outstanding -
basic and diluted 8,296,085 4,054,154 3,905,752 3,220,821 3,220,821
========= ========= ========= ========= =========
At year end:
Current assets $2,280,980 37,417 106,244 30,040 16,951
Current liabilities 2,286,660 89,962 124,748 75,522 90,400
Working capital
(deficit) ( 5,680) ( 52,545) ( 18,504) ( 45,482) ( 73,449)
Total assets 2,905,000 172,297 266,519 208,789 239,420
Long-term debt 335,039 - - - 4,134
Stockholders equity 283,301 82,335 141,771 133,267 144,886
Cash dividends per
common share $ - - - - -
========= ======= ======= ======= =======
</TABLE>
11
<PAGE>
ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS
- --------------------------------------------
In fiscal 1999 the Company completed a private placement of 5,773,793
shares of its common stock for $275,000.
In fiscal 1999 the Company purchased interests in six producing gas wells
and participated in the drilling of 4 wells, three of which were productive.
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 $6,000. 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.
12
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
YEAR ENDED SEPTEMBER 30, 1999 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1998:
- --------------------------------------------------------------------------
Operating Revenue
- -----------------
Revenue from oil and gas sales for the year ended September 30, 1999 was
$167,779 compared to $82,019 for the year ended September 30, 1998. This
increase is primarily attributable to purchased oil and gas properties and new
discoveries. The increase in gas sales volumes was also primarily the result of
purchased properties and new discoveries. Management fees increased since the
Company is now acting as operator on several wells.
A comparison of approximate volumes sold and average unit prices is
summarized as follows:
YEAR ENDED SEPTEMBER 30
-----------------------
Quantities Sold 1999 1998
--------------- ---- ----
Oil (Bbls.) 1,900 2,200
Gas (MCF) 53,300 25,600
Average Unit Price
------------------
Oil (Bbls.) $10.85 9.42
Gas (MCF) $ 2.25 2.36
Operating Costs and Expenses
- ----------------------------
Lease operating expense, was $36,006 for the year ended September 30, 1999
compared to $15,505 for the year ended September 30, 1998. This increase is
attributable primarily to expenses associated with purchased oil and gas
properties and new discoveries. The increase in production taxes was
attributable to the increase in oil and gas sales.
Depreciation and depletion increased as a result of increased production
and higher cost basis of purchased properties.
The unusual expenses for the year ended September 30, 1999 includes $9,900
for 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. Unusual
expenses also includes $5,178 of expenses associated with the ad valorem tax
reimbursement described in Note 11.
General and administrative expense for the year ended September 30, 1999
was $118,151 compared to $88,690 for the year ended September 30, 1998. The
increase was the result of increases in salary expense, contract wages and a
general increase in costs associated with increased activities.
13
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
YEAR ENDED SEPTEMBER 30, 1998 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1997:
- --------------------------------------------------------------------------
Operating Revenue
- -----------------
Revenue from oil and gas sales for the year ended September 30, 1998 was
$82,019 compared to $111,309 for the year ended September 30, 1997. This
decrease is primarily attributable to decreases in average unit prices for oil
and gas. The decrease in gas sales volumes was primarily the result of normal
declines. Management fees decreased due to the termination of the drilling
program that the Company managed.
A comparison of approximate volumes sold and average unit prices is
summarized as follows:
YEAR ENDED SEPTEMBER 30
-----------------------
Quantities Sold 1998 1997
--------------- ---- ----
Oil (Bbls.) 2,200 1,800
Gas (MCF) 25,600 31,400
Average Unit Price
------------------
Oil (Bbls.) $ 9.42 16.84
Gas (MCF) $ 2.36 2.55
Operating Costs and Expenses
- ----------------------------
Lease operating expense, was $15,505 for the year ended September 30, 1998
compared to $21,804 for the year ended September 30, 1997, a decrease of 29%.
This decrease is attributable primarily to normal fluctuations in operating
costs caused by mild weather conditions.
Depreciation and depletion declined as a result of declining production on
higher cost basis producing properties.
Dry hole expense and abandoned leases decreased as a result of reduced
drilling activity.
The unusual expenses for the year ended September 30, 1997 represents
estimated costs of settlement of a claim relating to gas prices during the years
1983 through 1985.
General and administrative expense for the year ended September 30, 1998
was $88,690 compared to $133,836 for the year ended September 30, 1997. The
decrease was primarily the result of decreases in salary expense and contract
wages.
14
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
YEAR ENDED SEPTEMBER 30, 1997 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1996:
- --------------------------------------------------------------------------
Operating Revenue
- -----------------
Revenue from oil and gas sales for the year ended September 30, 1997 was
$111,309 compared to $108,845 for the year ended September 30, 1996. This
increase is attributable to increases in average unit prices for oil and gas
offset by a decrease in revenue due to quantities sold in 1997 compared to 1996.
The decrease in sales volumes was primarily the result of normal declines.
Management fees increased due to an increase in activity in a drilling program
that the Company manages.
A comparison of approximate volumes sold and average unit prices is
summarized as follows:
YEAR ENDED SEPTEMBER 30
-----------------------
Quantities Sold 1997 1996
--------------- ---- ----
Oil (Bbls.) 1,800 1,900
Gas (MCF) 31,400 35,200
Average Unit Price
------------------
Oil (Bbls.) $16.84 16.13
Gas (MCF) $ 2.55 2.03
Operating Costs and Expenses
- ----------------------------
Lease operating expense, was $21,804 for the year ended September 30, 1997
compared to $24,292 for the year ended September 30, 1996, a decrease of 10%.
This decrease is attributable primarily to normal fluctuations in operating
costs.
The unusual expenses for the year ended September 30, 1997 represents
estimated costs of settlement of a claim relating to gas prices during the years
1983 through 1985.
General and administrative expense for the year ended September 30, 1997
was $133,836 compared to $110,195 for the year ended September 30, 1996. The
increase was primarily the result of an increase in salary expense.
Dry hole expense increased as a result of additional participation in
exploratory wells.
15
<PAGE>
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
---------------------------------------------------------
Pursuant to Item 305(e) of Regulation S-K, the Company is not required to
disclose the information required by this Item 7A because the Company is a small
business issuer as defined in Rule 12b-2 of the Securities Exchange Act of 1934.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
CLX ENERGY, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's Report 17
Balance Sheets - September 30, 1999 and 1998 18
Statements of Operations - years ended
September 30, 1999, 1998 and 1997 19
Statements of Stockholders' Equity -
years ended September 30, 1999, 1998 and 1997 20
Statements of Cash Flows - years ended
September 30, 1999, 1998 and 1997 21
Notes to financial statements - years
ended September 30, 1999, 1998 and 1997 23
Schedule V. Property and equipment - years
ended September 30, 1999, 1998 and 1997 33
Schedule VI. Accumulated depreciation and
depletion of property and equipment -
years ended September 30, 1999, 1998 and 1997 34
The remaining schedules for which provision is made in
Regulation S-X are not required under the instructions
contained therein, are inapplicable, or the information
required in included in the financial statements or
footnotes.
16
<PAGE>
EASTON AND BARSCH
CERTIFIED PUBLIC ACCOUNTANTS
8790 WEST COLFAX AVENUE, SUITE 106
LAKEWOOD, CO 80215
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
CLX Energy, Inc.
Denver, CO
We have audited the accompanying balance sheets of CLX Energy, Inc. as of
September 30, 1999 and 1998 and the related statements of operations,
stockholders' equity and cash flows for the years ended September 30, 1999, 1998
and 1997. Our audits also included the financial statement schedules listed in
the index at Item 8. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CLX Energy, Inc. as of
September 30, 1999 and 1998 and the results of its operations and its cash flows
for the years ended September 30, 1999, 1998 and 1997 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules V and VI, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
EASTON AND BARSCH
Certified Public Accountants
Lakewood, Colorado
January 12, 2000
17
<PAGE>
CLX ENERGY, INC.
Balance Sheets
September 30, 1999 and 1998
<TABLE>
<CAPTION>
Assets 1999 1998
------ ---- ----
<S> <C> <C>
Current assets:
Cash $ 318,330 30,024
Accounts receivable:
Trade 152,641 294
Oil and gas sales 223,231 7,099
Net assets held for sale 1,585,640 -
Prepaid expenses 1,138 -
--------- -------
Total current assets 2,280,980 37,417
--------- -------
Property and equipment, at cost :
Oil and gas properties (successful
effort method):
Proved 788,131 327,213
Unproved 60,302 18,314
Office equipment 6,621 3,618
--------- -------
855,054 349,145
Less accumulated depreciation
and depletion ( 256,034) (214,265)
--------- -------
Property & equipment, net, 599,020 134,880
Other assets - oil and gas bond deposit 25,000 -
--------- -------
$2,905,000 172,297
========= =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable:
Trade $ 267,122 81,607
Oil and gas sales 284,616 -
Prepaid drilling costs 90,050 -
Current portion of long-term debt 1,631,628 -
Accrued liabilities and other 13,244 8,355
--------- -------
Total current liabilities 2,286,660 89,962
--------- -------
Long-term debt, less current portion 335,039 -
Stockholders' equity:
Preferred stock, $.01 par value,
2,000,000 shares authorized,
600,000 shares designated Series A
$.06 cumulative convertible: - no
shares outstanding (134,000 in 1998) - 1,340
Common stock, $.01 par value,
50,000,000 shares authorized,
10,548,132 shares issued and
outstanding (4,054,154 in 1998) 105,481 40,542
Additional paid-in capital 743,270 541,417
Accumulated deficit ( 565,450) (500,964)
--------- -------
Net stockholders' equity 283,301 82,335
--------- -------
$2,905,000 172,297
========= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
18
<PAGE>
CLX ENERGY, INC.
Statements of Operations
Years Ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Oil and gas sales $ 167,779 82,019 111,309
Management fees 7,267 900 26,783
------- ------- -------
Total revenue 175,046 82,919 138,092
------- ------- -------
Operating expenses:
Lease operating 36,006 15,505 21,804
Production taxes 15,182 9,696 9,748
Lease rentals 2,789 1,358 2,324
Dry holes and abandoned leases 5,599 428 14,580
Depreciation and depletion 41,769 21,130 31,096
Unusual expenses 15,078 - 45,000
Impairment of oil and gas properties 3,088 2,519 -
General and administrative 118,151 88,690 133,836
------- ------- -------
Total operating expenses 237,662 139,326 258,388
------- ------- -------
Operating loss ( 62,616) ( 56,407) (120,296)
------- ------- -------
Other income (expenses):
Gain on sale of assets 6,452 632 5,000
Interest income 1,429 - -
Interest expense ( 9,751) ( 3,661) ( 1,201)
------- ------- -------
Total other income (expenses) ( 1,870) ( 3,029) 3,799
------- ------- -------
Net loss $( 64,486) ( 59,436) (116,497)
======= ======= =======
Weighted average number of common
shares outstanding - basic and
diluted 8,296,085 4,054,154 3,905,752
========= ========= =========
Net loss per common share - basic
and diluted $( .01) ( .02) ( .03)
======= ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
19
<PAGE>
CLX ENERGY, INC.
Statements of Stockholders' Equity
Years Ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
--------------- -------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances,
September 30, 1996 134,000 $ 1,340 3,220,821 $ 32,208 424,750 (325,031)
Issuance of common
stock - - 833,333 8,334 116,667 -
Net loss - - - - - (116,497)
------- ----- ---------- ------- ------- -------
Balances,
September 30, 1997 134,000 1,340 4,054,154 40,542 541,417 (441,528)
Net loss - - - - - ( 59,436)
------- ----- ---------- ------- ------- -------
Balances,
September 30, 1998 134,000 1,340 4,054,154 40,542 541,417 (500,964)
Common stock issued
for preferred stock (134,000) (1,340) 670,005 6,700 ( 5,360) -
Common stock issued
for cash, net of
expenses - - 5,773,973 57,739 201,713 -
Common stock issued
on exercise of
stock options - - 50,000 500 5,500 -
Net loss - - - - - ( 64,486)
------- ----- ---------- ------- ------- -------
Balances,
September 30, 1999 - $ - 10,548,132 $105,481 743,270 (565,450)
======= ===== ========== ======= ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
20
<PAGE>
CLX ENERGY, INC.
Statements of Cash Flows
Years Ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $( 64,486) ( 59,436) (116,497)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and depletion 41,769 21,130 31,096
Impairment of oil and gas
properties 3,088 2,519 -
Abandoned properties 1,171 - -
Gain on sale of assets ( 6,452) ( 632) ( 5,000)
(Increase) decrease in
accounts receivable ( 368,479) 64,088 ( 56,734)
(Increase) decrease in
deposits ( 1,138) - 49
Increase (decrease) in
accounts payable 470,131 ( 34,786) 110,716
Increase (decrease) in
prepaid drilling costs 90,050 - -
Increase (decrease) in
accrued expenses 4,889 - ( 356)
--------- ------- -------
Net cash provided by (used in)
operating activities 170,543 ( 7,117) ( 36,726)
--------- ------- -------
Cash flows from investing activities:
Proceeds from sale of property
and equipment 8,281 7,130 5,000
Purchase of property and equipment ( 511,997) ( 4,752) ( 12,622)
Purchase of assets held for sale (1,585,640) - -
Additions to other assets ( 25,000) - -
--------- ------- -------
Net cash provided by (used
in) investing activities (2,114,356) 2,378 ( 7,622)
--------- ------- -------
Cash flows from financing activities:
New short-term borrowings 202,125 - -
Payments on short-term borrowings ( 202,125) - ( 4,134)
New long-term borrowings 2,000,000 - -
Payments on long-term borrowings ( 33,333) - ( 57,000)
Proceeds from issuance of common stock 265,452 - 125,000
--------- ------- -------
Net cash provided by (used
in) financing activities 2,232,119 - 63,866
--------- ------- -------
Net increase (decrease) in cash 288,306 ( 4,739) 19,518
Cash, beginning of year 30,024 34,763 15,245
--------- ------- -------
Cash, end of year $ 318,330 30,024 34,763
========= ======= =======
Supplemental disclosures of cash
flow information - cash paid
during period for interest $ 5,315 - 1,557
========= ======= =======
</TABLE>
(CONTINUED)
21
<PAGE>
CLX ENERGY, INC.
Statements of Cash Flows
Years Ended September 30, 1999, 1998 and 1997
(Continued)
<TABLE>
<CAPTION>
Supplemental disclosure of noncash investing and financing activities:
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Conversion of Series A preferred
stock to common stock $1,340 - -
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
22
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended September 30, 1999, 1998 and 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Nature of operations
--------------------
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
States, primarily Colorado, Kansas, Oklahoma and Wyoming. The
Company's oil and gas production is sold to several purchasers, some
of which purchase more than 10 percent of oil and gas revenues.
(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.
(c) Property and equipment
----------------------
The Company follows the successful efforts method of accounting.
Lease acquisition and development costs (tangible and intangible)
for expenditures relating to proved oil and gas properties are
capitalized. Delay and surface rentals are charged to expense in the
year incurred. Dry hole costs incurred on exploratory operations are
expensed. Dry hole costs associated with developing proved fields are
capitalized. Expenditures for additions, betterments, and renewals
are capitalized. Geological and geophysical costs are expensed when
incurred.
Upon sale or retirement of proved properties, the cost thereof and the
accumulated depreciation or depletion are removed from the accounts
and any gain or loss is credited or charged to income. Maintenance
and repairs are charged to operating expenses.
Provisions for depreciation and depletion of capitalized exploration
and development costs are computed on the unit-of-production method
based on estimated proved developed reserves of oil and gas on a
property by property basis. An additional impairment provision is
recorded if the estimated fair market value is less than the carrying
amount of the assets on a property by property basis.
23
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Unproved properties are assessed periodically to determine whether
they are impaired. When impairment occurs, an impairment loss is
recognized. When leases for unproved properties expire, any remaining
cost is expensed.
Depreciation on office equipment is provided using accelerated methods
with estimated useful lives of five to seven years.
(d) Cash and cash equivalents
-------------------------
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents.
(e) Fair value of financial instruments
-----------------------------------
The Company's financial instruments consist of cash, accounts
receivable, net assets held for sale, accounts payable, prepaid
drilling costs, bank debt, and accrued liabilities. The carrying
value of cash and cash equivalents, accounts receivable, net assets
held for sale, accounts payable, prepaid drilling costs, bank debt,
and accrued liabilities are considered to be representative of their
fair market value, due to the short maturities of such instruments.
(f) Net 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 year as
illustrated below:
1999 1998 1997
---- ---- ----
Net loss $( 64,486) ( 59,436) (116,497
Preferred stock dividends ( 2,747) ( 8,040) ( 8,040)
------- ------- -------
Net loss, basic and diluted,
applicable to common
stockholders $( 67,233) ( 67,476) (124,537)
======= ======= =======
Weighted average number of
shares outstanding - basic
and diluted 8,296,085 4,054,154 3,905,752
========= ========= =========
Net loss per share, basic and
diluted, applicable to
common shareholders $( .01) ( .02) ( .03)
======= ======= =======
Stock options were not included in the computation of diluted net loss
per share because the result would be antidilutive.
24
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
(g) Comprehensive Income
--------------------
During the year ended September 30, 1999, the company adopted SFAS
No. 130, Reporting Comprehensive Income, which establishes new rules
for the reporting and display of comprehensive income and its
components. During fiscal 1999, 1998 and 1997,the Company did not
have any components of comprehensive income to report.
(2) Oil and Gas Property Acquisition
--------------------------------
In a transaction effective April 1, 1999 the Company acquired
interests in six producing oil and gas wells and an interest in
undeveloped oil and gas leases for $1,935,250. The Company borrowed
$2,000,000 from a bank to pay for the acquisition. The Company agreed
to sell, at its cost, plus an expense reimbursement of 2.5%, 80% of
the properties acquired in the acquisition to a limited partnership in
which the Company will be the general partner. The Company will
contribute 1% of capital contributions to the partnership in exchange
for a 5% interest in the income and expenses of the partnership. The
partnership was organized in early October, 1999 and paid for its
share of the properties on October 12, 1999. A portion of the
proceeds received were used to reduce bank debt by $1,548,000 on
October 12, 1999. At September 30, 1999 costs associated with the
portion of assets to be sold to the partnership were classified as a
current asset under "net assets held for sale".
(3) Risk Considerations
-------------------
The Company is subject to risks and uncertainties common to
independent oil and gas companies, including limited financial
resources, changing oil and gas prices, activities of larger
competitors, and dependence on key personnel.
(4) Notes Payable
-------------
During the year ended September 30, 1999 the Company borrowed
$202,125 from its major shareholder for the deposit on an oil and
gas property purchased by the Company as described in note 2. The
loan was repaid with interest at 8.5% on August 11, 1999 when the
Company obtained bank financing of $2,000,000. At September 30, 1999,
the bank loan had a balance due of $1,966,667 and bears interest at
8.75%. In addition to the principal payment of $1,548,000 on October
12, 1999 (see Note 2), monthly principal payments of $6,969 plus
interest are due on the loan. The loan is secured by the oil and gas
properties of the Company and a portion of the loan is guaranteed by
the major shareholder.
The weighted average balance outstanding and the weighted average
interest rate for 1999 and 1997 were as follows (none in 1998):
1999 1997
---- ----
Weighted average balance
outstanding $297,231 11,428
Weighted average interest rate 8.9% 10.5%
25
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
(5) Stockholders' Equity
--------------------
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 of 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 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. The Company did not
simultaneous cancel the previously adopted stock options plan. Also
simultaneous with the completion of the private offering, the
preferred shareholders converted their 134,000 shares of preferred
stock into 670,005 shares of common stock.
(6) Stock Options
-------------
During the 1994 fiscal year the Company adopted an employee incentive
stock option plan which provides for the issuance to employees,
including officers, of up to 10 percent of the issued and outstanding
shares of common stock in accordance with the plan. Under this plan,
options are exercisable at market price of the Company's common stock
on the date of grant, have a term of ten years and are earned over a
five year period. The Company issued options on 200,000 shares under
this plan during the 1994 fiscal year. Options on 100,000 shares were
canceled during the 1997 fiscal year and options on 100,000 shares
outstanding at September 30, 1998 were canceled on February 2, 1999.
Options on 500,000 shares were granted on April 26, 1999 and remain
outstanding at September 30, 1999.
During the 1994 fiscal year the Company adopted a director stock
option plan which provides for the issuance to members of the board,
who are not full time employees of the Company, options to purchase up
to 125,000 shares of the Company's common stock in accordance with the
plan. Under this plan, options are exercisable at market price of the
Company's common stock on the date of grant, have a term of ten years
and are earned over a five year period. The company issued options on
125,000 shares under this plan during the 1994 and 1997 fiscal years.
All of the options were canceled on February 2, 1999.
The Company granted non-qualified options to two officers of the
Company for 400,000 common shares at $ .25 per share during a prior
fiscal year. The options were exercisable for up to ten years after
the date of grant. Options on 200,000 common shares were canceled
during the 1997 fiscal year and options on 200,000 shares outstanding
at September 30, 1998 were canceled on February 2, 1999.
26
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
In connection with the acquisition of an oil and gas property in
September, 1994, the Company issued non-qualified options for 50,000
shares of common stock at $ .12. The options were exercised in
August, 1999.
A summary of certain stock options information follows:
Outstanding options Exercisable options
------------------- -------------------
Weighted Weighted
Number of average Number of average
shares price shares price
--------- ------- -------- --------
September 30, 1997:
-------------------
Incentive stock options 225,000 $ .12 116,250 $ .12
Non-qualified options 250,000 .224 250,000 .224
September 30, 1998:
-------------------
Incentive stock options 225,000 $ .12 161,250 $ .12
Non-qualified options 250,000 .224 250,000 .224
September 30, 1999:
-------------------
Incentive stock options 500,000 $ .16 - $ -
No options were exercised during the 1998 or 1997 fiscal years.
Options on 50,000 shares were exercised at $ .12 per share in the
1999 fiscal year.
The Company has elected to account for grants of stock options under
APB Opinion No. 25. No compensation cost has been recognized on the
statements of operations through September 30, 1999 for stock options
granted. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", (SFAS No. 123) requires
compensation expense to be determined based on the fair value, as
defined, of options at the grant date. Pro forma net earnings and pro
forma earnings per share must be disclosed based on the additional
compensation expense. No options were granted during the 1998 fiscal
year. For the 1999 fiscal year, additional compensation expense under
SFAS No. 123 would have increased the net loss from $64,486 to a pro
forma net loss of $101,486. The additional compensation expense for
1999 did not change the net loss per share of $.01. The pro forma
adjustment is calculated using an estimated fair market value of each
option on the date of grant based upon an expected life of 7 years,
risk-free interest rate of 6.3%, expected dividend yield of 0% and
volatility of 30%.
27
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
(7) Unusual Expenses
----------------
The amount reflected as unusual expenses for the 1999 fiscal year in
the statements of operations includes $9,900 representing 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. Unusual expenses for fiscal
1999 also includes $5,178 of expenses associated with the ad valorem
tax reimbursement described in Note 11. Unusual expenses for fiscal
1997 of $45,000 represented the estimated current liability at
September 30, 1997 associated with the ad valorem tax reimbursement
described in Note 11.
(8) Income Taxes
------------
For tax reporting purposes, after giving effect to ownership changes
that occurred in the 1999 fiscal year, the Company has a net operating
loss carryforward of approximately $470,000 at September 30, 1998,
which expires in varying amounts from September 30, 2003 through 2017.
Of the $470,000 carryforward, $390,000 is subject to an annual
limitation of approximately $23,500. Differences between income tax
and financial statement basis of assets consists of basis difference
of oil and gas properties ($40,000) as a result of a purchase
acquisition in the 1993 fiscal year and intangible drilling costs
($70,000) which are expensed for tax purposes.
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.
Components of deferred tax liabilities and deferred tax assets of the
Company are comprised of the following at September 30, 1999:
Gross deferred tax liabilities:
Proved properties
basis differences $( 37,000)
Gross deferred tax assets:
Net operating loss carryforward 160,000
Valuation allowance for deferred
tax assets (123,000)
-------
Net deferred amount $ -
=======
CLX Exploration, a predecessor Company, has not filed state income tax
returns for the years ended September 30, 1983 through 1992. The
Company has filed its federal and state income tax returns for the
fiscal years ended September 30, 1993 through 1998.
28
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
(9) Lease
-----
The Company leases office space under a non-cancelable operating lease
agreement. This lease requires monthly rent of $1,138. The lease
also requires the Company to pay certain operating costs of the leased
property. Rent expense for all operating leases totaled $12,962,
$13,292 and $13,614 during 1999, 1998 and 1997, respectively. Minimum
lease payments under the lease are $14,511 in fiscal 2000.
(10) Major Customers
---------------
During the years ended September 30, 1999, 1998 and 1997 the Company
had the following major customers which acquired 10% or more of total
oil and gas revenues:
1999 1998 1997
---- ---- ----
Cabot Oil & Gas 39% - % - %
Credo Petroleum Corp 23% 58% 47%
Kansas Gas Supply 18% - % - %
Texaco - Equiva - % 19% 18%
Dolphin - Lariat - % 10% 12%
(11) Contingency and Unusual Expenses
--------------------------------
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 recover 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.
A 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 will approximate $196,000 on the due date of
March 9, 1998.
29
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
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 has booked approximately $55,000 as a current liability to
cover the Company's estimated share of the reimbursement claim.
(12) Oil and Gas Expenditures
------------------------
The Company's results of operations from oil and gas exploration and
production activities (all within the United States) for fiscal 1999,
1998 and 1997 were as follows:
1999 1998 1997
---- ---- ----
Revenues from oil and gas
producing activities $167,779 82,019 111,309
Producing costs ( 51,188) ( 25,201) ( 31,552)
Depreciation, depletion and
impairment provision ( 44,181) ( 23,394) ( 30,715)
------- ------- -------
Results of operations from
oil and gas producing
activities (excluding
general and administrative
and interest costs) $ 72,410 33,424 49,042
======= ======= =======
The following table sets forth the costs incurred in oil and gas
producing activities during 1999, 1998 and 1997:
1999 1998 1997
---- ---- ----
Property acquisition costs:
Unproved $ 44,988 1,171 12,622
Proved 369,963 3,581 -
Exploration costs 55,586 - 14,580
Development costs 38,457 - -
30
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Depreciation and depletion of oil and gas properties per $1.00 of
gross revenue was $0.24, $0.25 and $0.28 in 1999, 1998 and 1997,
respectively. The impairment provision of oil and gas properties
was $.02 and $.03 per $1.00 of gross revenue in 1999 and 1998,
respectively.
The capitalized costs related to oil and gas properties were as
follows at September 30, 1999, 1998 and 1997:
1999 1998 1997
---- ---- ----
Proved properties $788,131 327,213 329,732
Unproved properties 60,302 18,314 20,060
------- ------- -------
Total capitalized costs 848,433 345,527 349,792
Less accumulated depreciation
and depletion (251,839) (210,746) (189,871)
------- ------- -------
Net capitalized costs $596,594 134,781 159,921
======= ======= =======
(13) Supplemental Schedules of Reserve Information (Unaudited)
---------------------------------------------------------
The following reserve related information for 1999, 1998 and 1997 is
based on estimates prepared by management of the Company. 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.
All of the Company's oil and gas reserves are located in the United
States.
Oil (Bbl) Gas (MCF)
--------- ---------
Proved reserves at September 30, 1996 38,200 183,400
Revisions in previous estimates ( 5,900) 90,600
Production ( 1,800) ( 31,400)
------- ---------
Proved reserves at September 30, 1997 30,500 242,600
Revisions in previous estimates ( 5,200) ( 2,600)
Production ( 2,200) ( 25,600)
------- ---------
Proved reserves at September 30, 1998 23,100 214,400
Revisions in previous estimates ( 10,700) ( 31,000)
Purchase of reserves - 612,400
Discoveries 600 294,100
Production ( 1,900) ( 53,300)
------- ---------
Proved reserves at September 30, 1999 11,100 1,036,600
======= =========
Proved developed reserves:
September 30, 1997 16,300 242,600
September 30, 1998 8,900 214,400
September 30, 1999 10,800 897,400
31
<PAGE>
CLX ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
The following is the standardized measure of discounted future net
cash flows and changes therein relating to proved oil and gas
reserves. Future net cash flows were computed using year-end prices
and costs related to existing proved oil and gas reserves in which the
Company has mineral interests. No future income tax expense was
provided due to the Federal income tax carryover. All of the reserves
are located in the United States.
September 30
----------------------------
1999 1998 1997
---- ---- ----
Future cash inflows $2,675,400 759,600 1,081,200
Future production costs 654,000 260,000 421,300
--------- --------- ---------
Future cash flows 2,021,400 499,600 659,900
10% annual discount for estimated
timing of cash flows 722,600 189,400 242,700
--------- --------- ---------
Standardized measure of
discounted cash flows $1,298,800 310,200 417,200
========= ========= =========
The following are the principal sources of change in the standardized
measure of discounted future net cash flows:
September 30
---------------------------
1999 1998 1997
---- ---- ----
Standardized measure,
beginning of year $ 310,200 417,200 448,900
Sales of oil and gas,
net of production costs ( 124,300) ( 56,800) ( 79,800)
Purchase of reserves 719,800 - -
Discoveries 457,700 - -
Net changes in prices and
future production costs 41,200 ( 4,500) ( 48,800)
Revisions of previous
quantity estimates ( 127,200) ( 66,600) 70,600
Accretion of discount 21,400 20,900 26,300
--------- ------- -------
Standardized measure,
end of year $ 1,298,800 310,200 417,200
========= ======= =======
Future net cash flows were computed using year-end prices for oil of
$16.68 in 1999, $9.44 in 1998 and $17.49 in 1997 and for gas of $2.40
in 1999, $2.31 in 1998 and $2.26 in 1997.
32
<PAGE>
CLX ENERGY, INC.
----------------
SCHEDULE V - PROPERTY AND EQUIPMENT
-----------------------------------
Balance at Changes
beginning Additions Retire- add Balance at
of period at cost ments (deduct) end of period
--------- -------- ------ -------- -------------
Description
-----------
Year ended September 30, 1997
- -----------------------------
Oil and gas properties:
Proved $329,732 - - - 329,732
Unproved 7,438 12,622 - - 20,060
Office equipment 3,618 - - - 3,618
------- ------- ------- ------- -------
$340,788 12,622 - - 353,410
======= ======= ======= ======= =======
Year ended September 30, 1998
- -----------------------------
Oil and gas properties:
Proved $329,732 3,581 - ( 4,867)*
1,286 **
( 2,519)*** 327,213
Unproved 20,060 1,171 - ( 1,631)* 18,314
( 1,286)**
Office equipment 3,618 - - - 3,618
------- ------- ------- ------- -------
$353,410 4,752 - ( 9,017) 349,145
======= ======= ======= ======= =======
Year ended September 30, 1999
- -----------------------------
Oil and gas properties:
Proved $327,213 464,006 - ( 3,088)*** 788,131
Unproved 18,314 44,988 1,171 ( 1,829)* 60,302
Office equipment 3,618 3,003 - - 6,621
------- ------- ------- ------- -------
$349,145 511,997 1,171 ( 4,917) 855,054
======= ======= ======= ======= =======
* Sales of properties.
** Transfer.
*** Impairment provision.
33
<PAGE>
CLX ENERGY, INC.
----------------
SCHEDULE VI - ACCUMULATED DEPRECIATION
--------------------------------------
AND DEPLETION OF PROPERTY AND EQUIPMENT
---------------------------------------
Additions
Balance at charged to
beginning costs and Retire- Balance at
of period expenses ments end of period
--------- --------- ------ -------------
Description
-----------
Year ended September 30, 1997
- -----------------------------
Oil and gas properties:
Proved $159,156 30,715 - 189,871
Unproved - - - -
Office equipment 2,883 381 - 3,264
------- ------- ------- -------
$162,039 31,096 - 193,135
======= ======= ======= =======
Year ended September 30, 1998
- -----------------------------
Oil and gas properties:
Proved $189,871 20,875 - 210,746
Unproved - - - -
Office equipment 3,264 255 - 3,519
------- ------- ------- -------
$193,135 21,130 - 214,265
======= ======= ======= =======
Year ended September 30, 1999
- -----------------------------
Oil and gas properties:
Proved $210,746 41,093 - 251,839
Unproved - - - -
Office equipment 3,519 676 - 4,195
------- ------- ------- -------
$214,265 41,769 - 256,034
======= ======= ======= =======
34
<PAGE>
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have not been any disagreements between the Company and its auditors
on accounting and financial disclosure.
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's Directors and Executive Officers is
set forth below:
PERIOD OF
NAME & AGE POSITION SERVICE
---------- -------- --------
James L. Burkhart Chairman of the board, February 2, 1999
65 Director to Present
Robert E. Gee Director February 2, 1999
68 to Present
E. J. Henderson President, CEO, March 26, 1993
65 Treasurer & Director to Present
Ronald M. Sitton Secretary and Director February 2, 1999
53 to Present
S. W. Houghton Director March 26, 1993
59 to Present
Donald B. Lamont Director December 1, 1996
80 to Present
George H.C. Lawrence Director December 2, 1993
62 to Present
Kerry L. Phelps Director May 1, 1993 to
56 Present
35
<PAGE>
James L. Burkhart
- -----------------
Mr. Burkhart graduated from Texas A&M University in 1957 with a B.S. Degree in
Petroleum Engineering and attended the graduate school of business of the
University of Tulsa in 1968-1969 and Stanford University's advanced management
program in 1974. He joined a predecessor to Amoco Production Company in 1957
and held various staff and engineering management positions with them until
1969. At that time, he joined Cotton Petroleum Corporation, Denver, Colorado,
as Vice President, Production. He became a Director of Cotton in 1971,
Executive Vice president in 1973 and was made President and Chief Operating
Officer in 1976. He joined Santa Fe Industries as president of Santa Fe Natural
Resources, Inc. and Chief Executive Officer of Santa Fe Energy Company in 1979.
In mid-1980, Mr. Burkhart formed Burkhart Petroleum Corporation in Tulsa,
Oklahoma, and was its Chairman, President and Chief Executive Officer until
leaving at the end of 1986 to form BRG Petroleum, Inc. in June 1987. After the
sale of BRG Petroleum, Inc. in June 1998, he co-founded BRG Petroleum
Corporation. Cotton Petroleum Corporation, Burkhart Petroleum Corporation and
BRG Petroleum, Inc. each operated investor funded joint ventures and limited
partnerships. BRG Petroleum Corporation currently manages and operates an
investor funded drilling program and income fund limited partnership.
Robert E. Gee
- -------------
Mr. Gee graduated from Virginia Military institute in 1954 with a B.S. Degree in
Civil Engineering and from Stanford University in 1961 with a MBA in Business
Administration. He joined IBM Corporation in 1961 and held various marketing
and financial position until 1969. After a marketing career with Microform Data
Systems and Memorex, Mr. Gee entered the investment field on a full time basis
in 1973 with Capital Analysis, Inc. In 1976, he was a co-founder of Capital
Concepts Investment Corp. Subsequently, in January, 1982, after resigning from
Capital Concepts, he co-founded Stanford Investment Group, Inc. and has been
chairman of that organization since inception. Stanford Investment Group, Inc.
is a broker/dealer and registered investment advisor.
E. J. Henderson
- ---------------
Mr. Henderson is a graduate of Texas A & M University with a B.S. in Petroleum
Engineering. Mr. Henderson served in Engineering/Operations positions with Pan
American Petroleum and Hunt Oil Company and in Engineering/Management positions
with Consolidated Oil & Gas, Inc., and K.R.M. Petroleum Corporation. Mr.
Henderson founded Henderson Petroleum Corporation in September 1978. Henderson
Petroleum Corporation, a public corporation, was acquired by Burkhart Petroleum
Corporation in December 1985. Mr. Henderson has served as President of E & S
Investments, Inc., since its formation in April 1981 until the merger with CLX
Energy, Inc. in March 1993.
36
<PAGE>
Ronald M. Sitton
- ----------------
Mr. Sitton is a graduate of McMurry University in Abilene, Texas. From 1976
through 1983, Mr. Sitton served as Vice President of Sitton Drilling Company in
Lubbock, Texas. He became President of that Company in 1983, and served as
President until January, 1998 at which time Sitton Drilling Company was sold to
Key Energy Corp. Since that time, Mr. Sitton has managed various personal oil
and gas and real estate investments.
S. W. Houghton
- --------------
Mr. Houghton is a graduate of the Wharton School of Finance and Commerce with a
B.S. in Economics. Mr. Houghton has an extensive background in investment
banking in the financial and natural resources industries serving in corporate
management, an investor in, and a Director in several public and private oil,
gas and mining companies. Some of the companies with which Mr. Houghton has
been associated are Cotton Petroleum Corporation, Henderson Petroleum
Corporation, Siskon Mining Corporation and Hadson Corporation. Since resigning
as President and Chief Executive Officer of Hadson Corporation in February 1990,
Mr. Houghton has been active as a private investor and in the management of
Houghton & Company, Inc.
Donald B. Lamont
- ----------------
Mr. Lamont is a graduate of the Harvard Graduate School of Business (MBA) and
Yale University (BA) and has extensive experience in the oil and gas industry.
Mr. Lamont is President of Interocean Oil & Gas Company (USA), Interocean Oil
Company of Canada, Interocean Oil Company of Abu Dhabi, Interocean Oilfields
Ltd. and Interocean Oil Exploration Ltd. He serves as a Director for American
Independent Oil Company and South American Gold & Copper Company. Mr. Lamont
has also served as an officer and director of several other international oil
and gas companies.
George H.C. Lawrence
- --------------------
Mr. Lawrence is a graduate of Columbia College (NYC) and Pace University. Mr.
Lawrence has extensive experience in investment banking, having served with W.
E. Hutton & Co., R. W. R/Pressrich & Co., and G. H. Walker & Co. from 1960 to
1970. Since 1970, Mr. Lawrence has been President and CEO of Lawrence Investing
Co., a 100 year old family owned real estate development company. Mr. Lawrence
has served on the Board of Directors of several companies, including Cotton
Petroleum Corporation from 1971 to 1986. He has served as a Trustee of Sarah
Lawrence College and as a member of the Board of Governors of Lawrence Hospital.
37
<PAGE>
Kerry L. Phelps
- ---------------
Mr. Phelps is a graduate of Bowling Green State University with a B.S. in
Geology. Mr. Phelps has a broad background in petroleum exploration including
the management of large geographically diverse exploration and drilling
programs. Mr. Phelps served in various positions with Amerada Hess Corporation
in Canada for seven years, then in Denver worked for several independent
producers including Duncan Oil Properties and Resources Investment Corporation.
Mr. Phelps was Senior Vice President/Exploration for General Atlantic Energy
from 1982 to 1989, then formed Cavalier Petroleum where he served as President
until joining CLX Energy, Inc. in May 1993 as Executive Vice President,
Secretary and Director. Mr. Phelps resigned as Executive Vice President and
Secretary on February 1, 1997, but remains a Director.
The Board of Directors of the Company does not have a standing nominating
committee, compensation committee, audit committee, or other committee
performing similar functions.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Under the U.S. securities laws, directors, certain executive officers and
persons holding more than ten percent of the Company's common stock must report
their initial ownership of the common stock and any changes in the ownership to
the SEC. The SEC has designated specific due dates for those reports and the
Company must identify in this report those persons who did not file those
reports when due. Based solely on the Company's review of copies of the reports
filed with the SEC and written representations of its directors and executive
officers, the Company believes that all persons subject to reporting filed
required reports on time in the fiscal year ended September 30, 1999.
ITEM 11.
EXECUTIVE COMPENSATION
The following table sets information regarding compensation of certain
Executive Officers of the Company, none of whom received compensation in excess
of $30,000 during 1999.
Name Principal Position Year Annual
---- ------------------ ---- Compensation
------------
E. J. Henderson President, Chief Executive 1999 $38,000
Officer and Chief Financial 1998 33,500
Officer 1997 48,000
The officers receive no benefits other than cash compensation.
38
<PAGE>
The Company does not have any plans for its Executive Officers involving
stock appreciation rights, long term incentive, employment contracts,
termination of employment and change in control agreements. An officer of the
Company has stock options totaling 500,000 shares which were granted in 1999.
These options are detailed in Item 8, footnote (6).
Directors are not compensated for their services; however, directors are
currently reimbursed travel expenses and the cost of overnight accommodations
incurred in connection with attendance of Directors meetings.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
equity securities by the directors and executive officers of the Company, and
certain individuals who own 5% or more of the Company's outstanding common
stock.
COMMON STOCK
NAME POSITION PAR VALUE $0.001 % OF CLASS
------ -------- ---------------- ----------
Officers & Directors:
- ---------------------
James L. Burkhart Chairman of the 2,569,551(1) 24.36
4904 Lakeridge Dr. Board, Director &
Lubbock, TX 79424 Member of the
Executive Committee
E. J. Henderson CEO, President 285,000(2) 2.70
518 17th St., Suite 745 Treasurer, Director
Denver, CO 80202 Member of the
Executive Committee
Ronald M. Sitton Secretary, Director 314,944 2.99
4904 Lakeridge Dr. Member of the
Lubbock, TX 79424 Executive Committee
Robert E. Gee Director 944,832(3) 8.96
69 DeBell Drive
Atherton, CA 94027
Donald B. Lamont Director 416,666(4) 3.95
654 Madison Ave., Ste 709
New York, NY 10017
Kerry Phelps Director 485,000(5) 4.60
44 Inverness Drive East, Bldg. D
Englewood, CO 80112
39
<PAGE>
S. W. Houghton Director 412,390 3.91
420 Madison Ave., Suite 901
New York, NY 10017
George H.C. Lawrence Director 42,000(6) 0.39
198 Spinnaker Drive
Vero Beach, FL 32963
Officers and Directors
as a group (8 Persons) 5,470,383 51.86
(1) Held in the name of James L. Burkhart Living Trust dtd 9-17-97.
(2) Does not include an option to acquire 500,000 shares of the Company's
common stock granted April 26, 1999 at a price of $0.16 per share under the
terms of the Company's Qualified Employees Stock Option Plan of March 1, 1994.
(3) Held in the name of Gee Family Trust dtd 12-23-92 - 104,981 shares and
BKM Family Limited Partnership - 839,851 shares.
(4) Held in the name of Donald B. Lamont Trust - 1998.
(5) Held in the name of Cavalier Petroleum Corp., a company of which Mr.
Phelps is its sole stockholder.
(6) Held in the name of Lawrence Properties, Inc.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information on these matters refer to Notes 4 and 6 of "Notes to Financial
Statements".
40
<PAGE>
PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules
See "Index to Financial Statements and Supplemental Schedules" in Part II, Item
8.
(3) Exhibits - Exhibit 10.1. Stock Purchase Agreement between the
Company and James L. Burkhart, Trustee of the James L.
Burkhart Living Trust (Incorporated by reference herein
from Exhibit 10.1 of the Company's Form 8-K reporting an
event dated February 2, 1999)
Exhibit 27. Financial Data Schedule
(b) No reports on Forms 8-K were filed during the Company's fiscal
quarter ended September 30, 1999.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CLX ENERGY, INC.
Date: January 12, 2000 By /s/ E. J. Henderson
--------------------
E. J. Henderson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on dates indicated:
Date: January 12, 2000 By /s/ James L. Burkhart
----------------------
James L. Burkhart, Chairman of the
Board and Director
Date: January 12, 2000 By /s/ Robert E. Gee
------------------
Robert E. Gee, Director
Date: January 12, 2000 By /s/ E. J. Henderson
--------------------
E. J. Henderson, CEO, President,
Treasurer and Director
Date: January 12, 2000 By /s/ Ronald M. Sitton
---------------------
Ronald M. Sitton, Secretary and Director
Date: January 12, 2000 By /s/ S. W. Houghton
-------------------
S. W. Houghton, Director
Date: January 12, 2000 By /s/ Donald B. Lamont
---------------------
Donald B. Lamont, Director
Date: January 12, 2000 By /s/ George H.C. Lawrence
-------------------------
George H.C. Lawrence, Director
Date: January 12, 2000 By
--------------------
Kerry L. Phelps, Director
42
<PAGE>
EXHIBIT INDEX
Exhibit No Description
10.1 Stock Purchase Agreement between the Company
and James L. Burkhart, Trustee of the James L.
Burkhart Living Trust (Incorporated by reference
herein from Exhibit 10.1 of the Company's Form 8-K
reporting an event dated February 2, 1999)
27 Financial Data Schedule
43
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 318,330
<SECURITIES> 0
<RECEIVABLES> 375,872
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,280,980
<PP&E> 855,054
<DEPRECIATION> 256,034
<TOTAL-ASSETS> 2,905,000
<CURRENT-LIABILITIES> 2,286,660
<BONDS> 0
<COMMON> 105,481
0
0
<OTHER-SE> 177,820
<TOTAL-LIABILITY-AND-EQUITY> 2,905,000
<SALES> 167,779
<TOTAL-REVENUES> 175,046
<CGS> 95,369
<TOTAL-COSTS> 95,369
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,751
<INCOME-PRETAX> ( 64,486)
<INCOME-TAX> 0
<INCOME-CONTINUING> ( 64,486)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 64,486)
<EPS-BASIC> ( .01)
<EPS-DILUTED> ( .01)
</TABLE>
