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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 000-21825
STREICHER MOBILE FUELING, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0707824
------------------------- ------------------------------
(State of Incorporation) (IRS Employer Identification
Number)
800 WEST CYPRESS CREEK ROAD, SUITE 580, FORT 33309
LAUDERDALE, FLORIDA,
--------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(954) 308-4200
------------------------------------------------
(Issuer's telephone number, including area code)
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_|. No |X|.
As of April 24, 2003 there were 7,234,168 shares of the registrant's
common stock outstanding.
STREICHER MOBILE FUELING, INC.
FORM 10-Q
INDEX
FORM 10-Q PART AND ITEM NO.
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31,
2002 and June 30, 2002 (unaudited) ........................3
Condensed Consolidated Statements of Operations for
the three and nine month periods ended March 31,
2003 and 2002 (unaudited)..................................4
Condensed Consolidated Statements of Cash Flows for
the nine month periods ended March 31, 2003 and 2002
(unaudited)................................................5
Notes to Condensed Unaudited Consolidated Financial
Statements.................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................12
Item 3. Quantitative and Qualitative Disclosures About Market
Risk......................................................19
Item 4. Controls and Procedures...................................19
Part II Other Information
Items 1. thru 6. .................................................20
Signature Page....................................................21
Certifications.................................................22-23
PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND JUNE 30, 2002
(UNAUDITED)
(IN 000'S, EXCEPT SHARE AND PER SHARE DATA)
ASSETS March 31, 2003 June 30, 2002
- -------------------------------------------------- -------------- -------------
Current assets:
Cash and cash equivalents....................... $ -- $ 815
Restricted cash................................. 76 245
Accounts receivable, net of allowance for
doubtful accounts of $621 and $510,
respectively................................... 6,297 6,382
Inventories..................................... 182 363
Prepaid expenses and other current assets....... 467 452
-------- --------
Total current assets..................... 7,022 8,257
Property and equipment, net of accumulated
depreciation of $6,288 and $6,244, respectively. 9,170 10,012
Note receivable from related party ............... 97 200
Other assets...................................... 209 91
-------- --------
Total assets.............................. $ 16,498 $ 18,560
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------
Current liabilities:
Bank line of credit payable..................... $ 4,468 $ 4,680
Current portion of long-term debt............... 1,545 2,101
Accounts payable and other liabilities.......... 3,252 3,052
-------- --------
Total current liabilities.................. 9,265 9,833
Long-term liabilities:
Subordinated promissory notes................... 734 284
Long-term debt, excluding current portion....... 2,075 2,767
-------- --------
Total long-term liabilities............... 2,809 3,051
-------- --------
Total liabilities......................... 12,074 12,884
-------- --------
Shareholders' equity:
Common stock, par value $.01 per share;
20,000,000 shares authorized; 7,222,453
and 7,211,751 issued and outstanding at
March 31, 2003 and June 30, 2002,
respectively................................... 72 72
Additional paid-in capital...................... 11,446 11,442
Accumulated deficit............................. (7,094) (5,838)
-------- --------
Total shareholders' equity................ 4,424 5,676
-------- --------
Total liabilities and shareholders' equity. $ 16,498 $ 18,560
======== ========
SEE ACCOMPANYING NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002
(UNAUDITED)
(IN 000'S, EXCEPT SHARE AND PER SHARE DATA)
Three Month Period Ended Nine Month Period Ended
March 31, March 31,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Fuel sales and service revenues............. $ 14,841 $ 9,892 $ 40,064 $ 32,059
Fuel taxes.................................. 4,628 4,167 13,770 12,869
---------- ---------- ---------- ----------
Total revenues........................ 19,469 14,059 53,834 44,928
Cost of fuel sales and service.............. 13,952 8,693 37,038 28,682
Fuel taxes.................................. 4,628 4,167 13,770 12,869
---------- ---------- ---------- ----------
Total cost of sales................... 18,580 12,860 50,808 41,551
Gross profit.......................... 889 1,199 3,026 3,377
Selling, general and administrative
expenses.................................. 1,161 1,104 3,617 3,368
---------- ---------- ---------- ----------
Operating (loss) income................... (272) 95 (591) 9
Interest expense............................ (232) (273) (690) (1,036)
Interest and other income................... 3 14 25 42
Beneficial conversion of debt to equity
Interest expense.......................... -- (241) -- (241)
---------- ---------- ---------- ----------
Loss before income taxes.................. (501) (405) (1,256) (1,226)
Income tax expense.......................... -- -- -- --
---------- ---------- ---------- ----------
Net loss ................................. $ (501) $ (405) $ (1,256) $ (1,226)
========== ========== ========== ==========
Basic and diluted net loss per share........ $ (.07) $ (.06) $ (.17) $ (.24)
========== ========== ========== ==========
Basic and diluted weighted average common
shares Outstanding........................ 7,219,878 6,718,545 7,217,155 5,195,679
========== ========== ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
(IN 000'S)
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................ $ (1,256) $ (1,226)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation........................................ 1,054 1,103
Loss on disposal of asset .......................... -- 8
Provision for doubtful accounts..................... 215 122
Non-cash interest expense........................... -- 81
Beneficial conversion of debt to equity interest
expense .......................................... -- 241
Changes in operating assets and liabilities:
Decrease in restricted cash....................... 169 11
(Increase) decrease in accounts receivable........ (130) 1,121
Decrease (increase) in inventories................ 182 (7)
(Increase) decrease in prepaids and other assets (136) 213
Increase (decrease) in accounts payable and other
liabilities .................................... 6 (635)
-------- ---------
Net cash provided by operating activities....... 104 1,032
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................. (218) (154)
Proceeds from disposal of property.................. 9 280
Decrease (increase) in note receivable due from
related party..................................... 103 (37)
-------- ---------
Net cash (used in) provided by investing
activities.................................... (106) 89
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft.......................... 207 81
Net borrowings on line of credit.................... (212) (1,353)
Proceeds from the issuance of subordinated
promissory notes.................................. 450 1,700
Principal payments on long-term debt................ (1,249) (1,739)
Costs associated with the extension of warrants..... (9) --
Proceeds from issuance of common stock, net......... -- 586
-------- ---------
Net cash used in financing activities........... (813) (725)
-------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS................................ (815) 396
CASH AND CASH EQUIVALENTS, beginning of period........ 815 6
-------- ---------
CASH AND CASH EQUIVALENTS, end of period.............. $ -- $ 402
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.............................. $ 626 $ 863
======== =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES:
Transfer of fixed assets to note receivable
from related party ............................... $ -- $ 60
======== =========
Issuance of common stock in lieu of interest
payments on subordinated promissory notes......... $ 14 $ 87
======== =========
Conversion of subordinated convertible promissory
notes into common stock .......................... $ -- $ 2,617
========= =========
SEE ACCOMPANYING NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS
Streicher Mobile Fueling, Inc., a Florida corporation (the "Company")
was formed in 1996.
The Company provides mobile fueling and fuel management out-sourced
services to businesses that operate all size fleets of vehicles and equipment,
including governmental agencies, utilities, trucking companies, bus lines,
hauling and delivery services, courier services, construction companies and
others. The Company's specialized truck fleet delivers fuel to customers'
locations on a regularly scheduled or as needed basis, refueling vehicles and
equipment and/or re-supplying fixed-site storage facilities. The Company's
patented proprietary electronic fuel tracking control system is used to measure,
record and track fuel dispensed to each vehicle and tank fueled at a customer
location, allowing verification of the amount and type of fuel delivered and
providing customers with customized fleet fuel data for management analysis and
tax reporting. At March 31, 2003, the Company had operations in California,
Florida, Georgia, Tennessee and Texas.
The Company generates substantially all of its revenue from mobile fueling
and fuel management services. Revenue is comprised principally of delivery
service charges and the related sales of diesel fuel and gasoline. Cost of sales
is comprised principally of direct operating expenses and the cost of fuel.
Included in both revenue and cost of sales are federal and state fuel taxes,
which are collected by the Company from its customers, when required, and
remitted to the appropriate taxing authority. The Company provides mobile
fueling and fuel management services at a minimum rate. Included in the rate are
negotiated service charges and the cost of fuel based on market prices. Revenue
and cost of fuel will vary depending on the upward or downward movement of fuel
prices in each market.
In the mobile fueling business, the majority of deliveries are made on
weekdays, Monday through Friday, to coincide with customers' fuel service
requirements. Thus, the number of workdays in any given month will impact the
quarterly financial performance of the Company. In addition, a downturn in
customer demand generally takes place on and/or in conjunction with national
holidays, resulting in decreased volumes of fuel delivered. This downturn may be
offset during the fiscal year by emergency mobile fueling services and fuel
deliveries to certain customers resulting from impending or actual severe
meteorological or geological events, including hurricanes, tropical storms, ice
and snow storms, forest fires and earthquakes.
(2) BASIS OF PRESENTATION
The condensed unaudited consolidated financial statements include the
accounts of Streicher Mobile Fueling, Inc. and its wholly owned subsidiary,
Streicher Realty, Inc. All significant intercompany balances and transactions
have been eliminated in consolidation.
The condensed unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X, and do not include all the information and footnotes required by
generally accepted accounting principles; however, they do include all
adjustments of a normal recurring nature which, in the opinion of management,
are necessary to present fairly the results of operations of the Company for the
interim periods presented. Certain amounts have been reclassified to conform
with current period presentation. These interim financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and related notes included in the Company's Annual Report on Form 10-K for the
year ended June 30, 2002.
(3) LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and ability to meet its financial obligations is
dependent on, among other things, the Company's ability to generate cash flow
from operating activities; obtain sufficient trade credit from vendors; maintain
compliance with its debt covenants; raise any required additional capital
through the issuance of equity
6
securities; and/or issue additional forms of debt.
The Company is highly leveraged and since its inception has financed its
working capital requirements for operations by issuing common stock and
subordinated debt and utilizing credit facility borrowings.
The Company's material financial commitments, other than payroll, relate
primarily to maintaining its working capital line of credit and making monthly
principal and interest payments on its equipment notes.
The Company's debt agreements contain covenants establishing certain
financial requirements and operating restrictions. The Company's failure to
comply with any covenant or material obligation contained in these debt
agreements, absent a waiver or forbearance from the lenders, would result in an
event of default which could accelerate debt repayment terms under the debt
agreements. Due to cross-default provisions contained in the debt agreements, an
event of default could accelerate repayment terms under the other agreements,
which would have a material adverse affect on the Company's liquidity and
capital resources.
The Company and its principal equipment lender agreed to amend the original
security agreement between the parties, effective as of December 31, 2002, to
extend the maturity dates of the equipment notes payable under it by three
months. This revision modified the repayment schedule by reducing principal
payments for the period of December 2002 through April 2003 by $467,000.
Effective May 1, 2003, the Company and its principal equipment lender agreed to
an additional extension of the maturity dates of the equipment notes by two
months and reduced its payments for the period of May 2003 through August 2003
by $284,000.
From January 2001 through March 2003, the Company raised $6.4 million in
capital through private placements of common stock and subordinated debt. These
proceeds have been used for working capital in the Company's operations as well
as the implementation of its business plan and turnaround program over that
period.
The Company has incurred net losses during most of its operating history
and has met its working capital and long-term debt service requirements by
raising both equity capital and subordinated debt and utilizing its bank credit
facility. For the fiscal year ended June 30, 2002, the Company reduced its net
loss to $1.2 million from a net loss of $2.8 million incurred in the prior year
ended June 30, 2001. The Company earned net income of $63,000 in the fourth
quarter of its fiscal year ended June 30, 2002, and $103,000 in its first
quarter ended September 30, 2002 and it incurred a net loss of $858,000 in its
second quarter ended December 31, 2002 and incurred a net loss of $501,000 in
the third quarter ended March 31, 2003. These results compare to net losses of
$1.2 million, $307,000, $515,000 and $405,000 for the quarters ended June 30,
2001, September 30, 2001, December 31, 2001 and March 31, 2002, respectively.
Current management has made substantive changes in operations, management
and reporting which have resulted in lowering certain operating costs and
improving net margins since January 2001. However, net losses were incurred in
seven of the last nine quarterly reporting periods and may continue in the
fourth quarter of the current fiscal year.
During the second quarter ended December 31, 2002 and third quarter ended
March 31, 2003, deliveries to existing customers declined as a result of the
downturn in the economy and related reduction in customers demand for mobile
fueling. In addition, the Company experienced a slow down in its new business
closure rate due to the depressed economic environment and significantly higher
product prices which impeded the decision making process of potential customers
regarding the use of the Company's mobile fueling services. Further, the rates
paid by the Company for property and liability insurance coverage have increased
materially. Even though the Company experienced substantial improvement in its
loss ratios during the prior policy year, annual renewal premiums increased by
$360,000, $180,000 of which was paid during the nine month period ended March
31, 2003. The Company also incurred expenses of approximately $203,000 related
to its new billing system conversion during the quarter ended December 31, 2002.
The Company's mobile fueling business requires it to utilize considerable
working capital for fuel, labor and equipment costs prior to receiving payments
from customers. The fuel purchased by the Company for resale to customers
generally must be paid for within 10 to 15 days of purchase, with labor costs
and related taxes paid bi-
7
weekly, and equipment related costs generally paid within 30 days. The Company
invoices customers both daily and weekly and generally collects the majority of
its accounts within 30 to 45 days.
The Company recognizes that it must add incremental business from new and
existing customers at acceptable margins; continue to control and reduce
operating costs; improve equipment utilization; and generate additional cash
flow to support its working capital credit facility and long-term debt service
requirements. There is no assurance that the Company will improve its operating
performance in the future, or that it will be able to raise additional capital
to fund any working capital or debt service shortfalls during possible future
business downturns, whether the downturn is caused by depressed economic
conditions or the Company's inability to successfully execute its business plan.
While the Company believes that cash flow from operations, modification of
repayment terms of its long-term debt and/or raising of additional equity and
debt capital should satisfy its liquidity requirements through March 31, 2004,
it will seek additional sources of financing to supplement any cash flow
deficiencies which might arise. However, there is no assurance that any
additional financing will be available to the Company on acceptable terms, or at
all. If the Company does not comply with the covenants in its debt agreements,
or if adequate funds are not available to finance operations and to pay debt
obligations as they become due, the Company may be required to significantly
curtail its operations and the Company's ability to continue as a going concern
would be impaired.
At March 31, 2003, the Company had no cash and cash equivalents as compared
to $815,000 at June 30, 2002. This reduction was primarily due to cash used in
financing activities of $813,000. The funds were primarily used for the
repayment of long-term debt, offset by the proceeds from the issuance of
subordinated promissory notes. However, the Company had $260,000 available on
its bank line of credit and received a working capital infusion of $300,000 on
May 12, 2003.
(4) BANK LINE OF CREDIT PAYABLE
On September 26, 2002, the Company entered into a new three-year $10
million credit facility with a national financial institution, replacing its
prior short-term $10 million credit facility. This new line of credit permits
the Company to borrow up to 85% of the total amount of eligible accounts
receivable. Interest is payable monthly at 6.0% (1.75% over the prime rate of
4.25% at March 31, 2003), and outstanding borrowings under the line are secured
by substantially all Company assets other than its truck fleet and related
equipment. The maturity date of the line of credit is September 25, 2005. Should
the Company elect to terminate the credit facility prior to such date,
prepayment fees of 3%, 1.5% and .5% will apply during years one, two and three,
respectively. In addition, the credit facility may be extended by the mutual
consent of the Company and the bank after year three. Effective March 31, 2003,
the Company and its lender revised one of the financial covenants to include all
subordinated debt in the calculation of its effective book net worth.
As of March 31, 2003 and June 30, 2002, the Company had outstanding
borrowings of $4.47 million and $4.68 million, respectively, under its lines of
credit. Based on eligible receivables outstanding, the Company had approximately
$260,000 of cash availability on its line of credit at March 31, 2003. As of
March 31, 2003, the Company was in compliance with the financial covenants
required by the credit facility.
(5) NET LOSS PER SHARE AND STOCK OPTIONS
Basic and diluted loss per share is computed by dividing the net loss
attributable to common shareholders by the weighted-average number of common
shares outstanding during the period. The dilutive effect of outstanding stock
options and warrants is reflected in diluted loss per share by application of
the treasury stock method. For loss periods, weighted average common share
equivalents are excluded from the calculation since their effect would be
antidilutive.
At March 31, 2003, common stock equivalents consisting of 2,523,227
employee and director stock options and common stock warrants were outstanding
at prices ranging from $.92 to $9.49 per share. For the period ended
8
March 31, 2003, these common stock equivalents were antidilutive and not
included in the computation of diluted net loss per share. At March 31, 2002,
common stock equivalents consisting of 2,513,727 employee and director stock
options and common stock warrants were outstanding at prices ranging from $1.07
to $9.49 per share. For the period ended March 31, 2002, these common stock
equivalents were antidilutive and not included in the computation of net loss
per share.
On October 29, 2002, the Company extended the exercise period for all
outstanding common stock warrants from December 11, 2002 to December 11, 2003.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." As permitted under the provisions of SFAS No. 123, the Company
applies the principles of APB Opinion 25 and related interpretations in
accounting for its stock option plans. If the Company had elected to recognize
compensation cost based on the fair value of the options granted at grant date
as prescribed by SFAS No. 123, net income (loss) and income (loss) per share
would have been reduced (increased) to the pro forma amounts indicated in the
table below. The fair value of each option grant was estimated at the date of
grant using the Black-Scholes option pricing model.
The Company's net income or loss, pro forma net loss, net income or loss
per share, pro forma net loss per share, and related assumptions are as follows:
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
March 31, 2003 March 31, 2002 March 31, 2003 March 31, 2002
-------------- -------------- -------------- --------------
Net loss as reported $ (501) $ (405) $ (1,256) $ (1,226)
Net loss pro forma $ (534) $ (427) $ (1,814) $ (1,339)
Fully diluted net loss per
share as reported $ (.07) $ (.06) $ (.17) $ (.24)
Fully diluted net loss per
share pro forma $ (.07) $ (.08) $ (.26) $ (.25)
Risk free interest rate 3% 3% 3% 3%
Dividend yield 0% 0% 0% 0%
Expected volatility 100% 100% 100% 100%
Expected life 10 years 10 years 10 years 10 years
The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma loss amounts presented because
compensation cost is reflected over the vesting period of the options.
(6) SUBORDINATED DEBT SECURITIES
Convertible Subordinated Debt Securities
In January 2002, certain holders of the convertible subordinated promissory
notes converted an aggregate of $2.617 million to shares of the Company's common
stock at a conversion price of $1.24 per share, for a total of 2,110,322 shares
of common stock. The notes converted contained conversion rates ranging from
$1.35 to $1.50 per share. The holders of the remaining $283,600 of convertible
subordinated promissory notes issued by the Company who did not elect to convert
their notes in January 2002 waived any conversion price adjustment. With the
consent of the holder, interest on two of these notes may be paid in the
Company's common stock, with the stock value based on the average closing price
of the stock during the most recent quarter. In September 2002, the maturity
dates of these non-converted notes were extended to August 31, 2004.
9
Subordinated Debt Securities
On December 23, 2002, the Company issued a $150,000 short-term promissory
note to a shareholder. The note was due on January 31, 2003, with interest at 5%
over the prime interest rate. On January 21, 2003 the Company and the holder of
the note substituted the note for a $150,000 subordinated promissory note due on
January 31, 2005, bearing interest at an annual rate of 9%. With the consent of
the holder, interest on the note may be paid in the Company's common stock, with
the stock value based on the closing bid price of the stock for the five trading
days before the last day of the quarter in which the interest is due but in no
event less than the closing bid price at the time of issuance or the average of
the closing bid prices for the five trading days prior to such time, whichever
is lower.
On January 21, 2003, the Company issued $300,000 of subordinated promissory
notes to two shareholders. The notes are due on January 31, 2005 and bear
interest at an annual rate of 9%. With the consent of the holders, interest on
the notes may be paid in the Company's common stock, with the stock value based
on the closing bid price of the stock for the five trading days before the last
day of the quarter in which the interest is due but in no event less than the
closing bid price at the time of issuance or the average of the closing bid
prices for the five trading days prior to such time, whichever is lower.
On May 12, 2003, the Company issued $300,000 of subordinated promissory
notes to certain shareholders. The notes bear interest at an annual rate of 14%
and are payable on demand. With the consent of the holders, the Company may
elect to pay interest on the notes in shares of the Company's common stock, with
the stock value based on the most recent closing bid price of the stock at the
time the notes were executed or for the five trading days before such date,
whichever is lower. The Company intends to repay these notes in the near future
with the proceeds of a private placement of $300,000 in convertible subordinated
promissory notes and common stock purchase warrants. The conversion price of any
such convertible notes and the exercise price of any warrants will not be less
than the most recent closing bid price when the documents are executed or the
average of the five trading days preceding such execution, whichever is lower.
All the outstanding subordinated notes issued by the Company have
cross-default provisions related to the other outstanding debt agreements.
(7) RELATED PARTY TRANSACTION
As previously reported in the Company's Form 10-K, in July 2002 the Company
suspended further payments of salary to Stanley H. Streicher, the Company's
former chairman, under his November 7, 2000, employment agreement because of an
unpaid note receivable. As of March 31, 2003, the Company had set off $126,000
of Mr. Streicher's net salary against the outstanding note receivable and
accrued interest.
(8) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 146, Costs Associated with Exit or Disposal Activities, was issued
in June 2002. The Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies EITF Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
This statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. The statement is
effective for exit or disposal activities that are initiated after December 31,
2002, and will result in a change in accounting policy associated with the
recognition of liabilities in connection with future exit and disposal
activities.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of FASB Statements No.
5, 57 and 107 and a rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under
10
guarantees issued. The Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability for the fair
value of the obligation undertaken. The disclosure requirements are effective
for financial statements of interim and annual periods ending after December 15,
2002. The initial recognition and measurement provisions of the Interpretation
are applicable to guarantees issued or modified after December 31, 2002 and did
not have a material effect on the Company's financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements. Certain of the disclosure modifications are required for
fiscal years ending after and interim periods beginning after December 15, 2002.
SFAS No. 148 was adopted during the quarter ended March 31, 2003, and did not
have a material effect on the Company's financial statements.
In January 2003, the FASB issued Interpretation No. 46 ("FIN No. 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,
which establishes guidance to identify variable interest entities ("VIEs")
including, but not limited to special purpose entities. FIN No. 46 requires VIEs
to be consolidated by the primary beneficiary who is exposed to the VIEs'
expected losses, expected residual returns or both. FIN No. 46 will be effective
immediately for variable interests in VIEs created after January 31, 2003. For
variable interests in VIEs created before February 1, 2003, the recognition
provisions of FIN No. 46 shall apply no later than the first interim or annual
period beginning after June 15, 2003. The adoption of FIN No. 46 is not expected
to have a material effect on the Company's financial statements.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
condensed unaudited consolidated financial statements and the related notes
included elsewhere in this Form 10-Q. In addition, reference should be made to,
and the following discussion should be read in conjunction with, the Company's
audited consolidated financial statements and related notes and the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2002.
This report, including but not limited to this Item 2 and the footnotes to
the financial statements found in Item 1, contains "forward looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements concern expectations, beliefs,
projections, future plans and strategies, anticipated events or trends and
similar expressions concerning matters that are not historical facts. Statements
preceded by, followed by, or that include the words "believes," "expects,"
"anticipates," or similar expressions are generally considered to be
forward-looking statements.
This report contains forward-looking statements, including the following:
o The Company's beliefs regarding its position in the mobile fueling
industry
o The Company's strategies, plans and objectives and expectations
concerning its future operations, cash flow, margins, revenue,
profitability, liquidity and capital resources
o The Company's plans to improve financial and management controls,
reporting systems and procedures
The forward-looking statements reflect the Company's current view about
future events and are subject to risks, uncertainties and assumptions. The
Company cautions readers of this report that certain important factors may have
affected, and could in the future affect, its actual results and could cause
actual results to differ significantly from those expressed in any
forward-looking statement. The following important factors, in addition to
factors discussed elsewhere in this report and in the section "Certain Risk
Factors Affecting Future Operating Results" in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2002, could prevent the Company
from achieving its goals, and cause the assumptions underlying the
forward-looking statements and the actual results to differ materially from
those expressed in or implied by those forward-looking statements:
o continued net losses
o adverse consequences relating to the Company's outstanding debt
o the Company's ability to comply with financial covenants contained in
its three-year $10 million credit facility, equipment notes
security agreements and subordinated debt securities
o the Company's ability to repay its bank line of credit, equipment
notes payable, subordinated promissory notes and pay its accounts
payable and other liabilities when due
o the Company's ability to reach an agreement with its lenders with
regard to a waiver of possible covenant violations and an amendment to
the financial covenants contained in its debt agreements in the event
of the Company were not in compliance with such financial covenants
o the likelihood that the Company's bank line of credit lender would
exercise remedies afforded to it in the event of the Company's default
under its credit facility agreement and the impact of such remedies on
the Company
12
o the likelihood that the Company's equipment lenders would exercise
remedies afforded to them in the event of the Company's default under
their security agreements and the impact of such remedies on the
Company
o further provisions for bad debts on the Company's accounts receivable
o fluctuations in demand for the Company's services which are largely
dependent upon economic conditions
o the Company's ability to acquire sufficient trade credit from vendors
o competitive pricing for the Company's services at acceptable net
margins
GENERAL
The Company generates substantially all of its revenue from providing
mobile fueling and fuel management services. Revenue is comprised principally of
delivery service charges and the related sale of diesel fuel and gasoline. Cost
of sales is comprised principally of the cost of fuel and direct operating
expenses. Included in both revenue and cost of sales are federal and state fuel
taxes, which are collected by the Company from its customers, when required, and
remitted to the appropriate taxing authorities.
The Company provides mobile fueling and fuel management services at a
negotiated rate for service plus the cost of fuel based on market prices.
Revenue levels will vary depending on the upward or downward movement of fuel
prices in each market. For the quarter ended March 31, 2003, market prices for
fuel were substantially higher than for the quarter ended March 31, 2002.
Volumes declined between the comparable nine month periods due primarily to the
elimination of non-profitable markets and customers. Revenues, however,
increased for the nine months ended March 31, 2003, as compared to the quarter
ended March 31, 2002, since the Company delivered more higher priced mobile
fueling volumes and reduced lower priced bulk deliveries.
In the mobile fueling business, the majority of deliveries are made on
weekdays, Monday through Friday, to coincide with customers' fuel service
requirements. Thus, the number of workdays in any given month will impact the
quarterly financial performance of the Company. In addition, a downturn in
customer demand generally takes place on and/or in conjunction with national
holidays, resulting in decreased volumes of fuel delivered. This downturn may be
offset by emergency mobile fueling services and fuel deliveries to certain
customers resulting from impending or actual severe meteorological or geological
events, including hurricanes, tropical storms, ice and snow storms, forest fires
and earthquakes.
The Company believes that there are opportunities to increase the size of
its mobile fueling and fuel management services business and the volumes of fuel
sold and delivered in conjunction with it. The Company also believes its
marketing and sales function will help grow the Company's business. However,
this growth is dependent upon a number of business and economic factors,
including the success of the marketing and sales function and other business
strategies; the availability of qualified personnel to provide the level of
service required by customers; the generation of cash flow from operating
activities; the availability of sufficient trade credit, debt or equity capital
to meet business requirements; and changes in market conditions in the related
transportation or petroleum industries, some of which factors are beyond the
Company's control.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and ability to meet its financial obligations is
dependent on, among other things, the Company's ability to generate cash flow
from operating activities; obtain sufficient trade credit from vendors; maintain
compliance with its debt covenants; raise any required additional capital
through the issuance of equity securities; and/or issue additional forms of
debt.
13
The Company is highly leveraged and since its inception has financed its
working capital requirements for operations by issuing common stock and
subordinated debt and utilizing credit facility borrowings.
The Company's material financial commitments, other than payroll, relate
primarily to maintaining its working capital line of credit and obligation to
make monthly payments of principal and interest on its equipment notes.
The Company's debt agreements contain covenants establishing certain
financial requirements and operating restrictions. The Company's failure to
comply with any covenant or material obligation contained in these debt
agreements, absent a waiver or forbearance from the lenders, would result in an
event of default which could accelerate debt repayment terms under the debt
agreements. Due to cross-default provisions contained in the debt agreements, an
event of default could accelerate repayment terms under the other agreements,
which would have a material adverse affect on the Company's liquidity and
capital resources.
The Company and its principal equipment lender agreed to amend the original
security agreement between the parties, effective as of December 31, 2002, to
extend the maturity dates of the equipment notes payable under it by three
months. This revision modified the repayment schedule by reducing principal
payments for the period of December 2002 through April 2003 by $467,000.
Effective May 1, 2003, the Company and its principal equipment lender agreed to
an additional extension of the maturity dates of the equipment notes by two
months and reduced its payments for the period of May 2003 through August 2003
by $284,000.
From January 2001 through March 2003, the Company raised $6.4 million in
capital through private placements of common stock and subordinated debt. These
proceeds have been used for working capital in the Company's operations as well
as the implementation of its business plan and turnaround program over that
period.
The Company has incurred net losses during most of its operating history
and has met its working capital and long-term debt service requirements by
raising both equity capital and subordinated debt and utilizing its bank credit
facility. For the fiscal year ended June 30, 2002, the Company reduced its net
loss to $1.2 million from a net loss of $2.8 million incurred in the prior year
ended June 30, 2001. The Company earned net income of $63,000 in the fourth
quarter of its fiscal year ended June 30, 2002, and $103,000 in its first
quarter ended September 30, 2002 and it incurred a net loss of $858,000 in its
second quarter ended December 31, 2002 and incurred a net loss of $501,000 in
the third quarter ended March 31, 2003. These results compare to net losses of
$1.2 million, $307,000, $515,000 and $405,000 for the quarters ended June 30,
2001, September 30, 2001, December 31, 2001 and March 31, 2002, respectively.
Current management has made substantive changes in operations, management
and reporting which have resulted in lowering certain operating costs and
improving net margins since January 2001. However, net losses were incurred in
seven of the last nine quarterly reporting periods and may continue in the
fourth quarter of the current fiscal year.
During the second quarter ended December 31, 2002 and third quarter ended
March 31, 2003, deliveries to existing customers declined as a result of the
downturn in the economy and related reduction in customers demand for mobile
fueling. In addition, the Company experienced a slow down in its new business
closure rate due to the depressed economic environment and significantly higher
product prices which impeded the decision making process of potential customers
regarding the use of the Company's mobile fueling services. Further, the rates
paid by the Company for property and liability insurance coverage have increased
materially. Even though the Company experienced substantial improvement in its
loss ratios during the prior policy year, annual renewal premiums increased by
$360,000, $180,000 of which was paid during the nine months ended March 31,
2003. The Company also incurred expenses of approximately $203,000 related to
its new billing system conversion during the quarter ended December 31, 2002.
The Company's mobile fueling business requires it to utilize considerable
working capital for fuel, labor and equipment costs prior to receiving payments
from customers. The fuel purchased by the Company for resale to customers
generally must be paid for within 10 to 15 days of purchase, with labor costs
and related taxes paid bi-
14
weekly, and equipment related costs generally paid within 30 days. The Company
invoices customers both daily and weekly and generally collects the majority of
its accounts within 30 to 45 days.
The Company recognizes that it must add incremental business from new and
existing customers at acceptable margins; continue to control and reduce
operating costs; improve equipment utilization; and generate additional cash
flow to support its working capital credit facility and long-term debt service
requirements. There is no assurance that the Company will improve its operating
performance in the future, or that it will be able to raise additional capital
to fund any working capital or debt service shortfalls during possible future
business downturns, whether the downturn is caused by depressed economic
conditions or the Company's inability to successfully execute its business plan.
While the Company believes that cash flow from operations, modification of
repayment terms of its long-term debt and/or raising of additional equity and
debt capital should satisfy its liquidity requirements through March 31, 2004,
it will seek additional sources of financing to supplement any cash flow
deficiencies which might arise. However, there is no assurance that any
additional financing will be available to the Company on acceptable terms, or at
all. If the Company does not comply with the covenants in its debt agreements,
or if adequate funds are not available to finance operations and to pay debt
obligations as they become due, the Company may be required to significantly
curtail its operations and the Company's ability to continue as a going concern
would be impaired.
At March 31, 2003, the Company had no cash and cash equivalents as compared
to $815,000 at June 30, 2002. This reduction was primarily due to cash used in
financing activities of $813,000. The funds were primarily used for the
repayment of long-term debt, offset by the proceeds from the issuance of
subordinated promissory notes. However, the Company had $260,000 available on
its bank line of credit and received a working capital infusion of $300,000 on
May 12, 2003.
NEW THREE-YEAR $10 MILLION CREDIT FACILITY
On September 26, 2002, the Company entered into a new three-year $10
million credit facility with a national financial institution, replacing its
prior short-term $10 million credit facility. This new line of credit permits
the Company to borrow up to 85% of the total amount of eligible accounts
receivable. Interest is payable monthly at 6.0% (1.75% over the prime rate of
4.25% at March 31, 2003), and outstanding borrowings under the line are secured
by substantially all Company assets other than its truck fleet and related
equipment. The maturity date of the line of credit is September 25, 2005. Should
the Company elect to terminate the credit facility prior to such date,
prepayment fees of 3%, 1.5% and .5% will apply during years one, two and three,
respectively. In addition, the credit facility may be extended by the mutual
consent of the Company and the bank after year three. Effective March 31, 2003,
the Company and its lender revised one of its financial covenants to include all
subordinated debt in the calculation of its effective book net worth.
As of March 31, 2003 and June 30, 2002, the Company had outstanding
borrowings of $4.47 million and $4.68 million, respectively, under its lines of
credit. Based on eligible receivables outstanding, the Company had approximately
$260,000 of cash availability on its line of credit at March 31, 2003. As of
March 31, 2003, the Company was in compliance with the financial covenants
required by the credit facility.
Management believes that the Company's three-year credit facility will
provide the financing needed to maintain and grow its business. However, if
additional financing is required, there can be no assurance that the Company
will be able to obtain such financing from the bank or another bank at
acceptable terms or at all. Further, since the Company's borrowings under its
bank line of credit bear interest at variable interest rates and represent a
significant portion of the Company's outstanding debt, the Company's financial
results will be impacted by significant increases or decreases in interest
rates.
ISSUANCE OF SUBORDINATED DEBT
CONVERTIBLE SUBORDINATED DEBT SECURITIES
In January 2002, certain holders of the convertible subordinated promissory
notes converted an aggregate of
15
$2.617 million to shares of the Company's common stock at a conversion price of
$1.24 per share, for a total of 2,110,322 shares of common stock. The notes
converted contained conversion rates ranging from $1.35 to $1.50 per share. The
holders of the remaining $283,600 of convertible subordinated promissory notes
issued by the Company who did not elect to convert their notes in January 2002
waived any conversion price adjustment. With the consent of the holder, interest
on two of these notes may be paid in the Company's common stock, with the stock
value based on the average closing price of the stock during the most recent
quarter. In September 2002, the maturity dates of these non-converted notes were
extended to August 31, 2004.
SUBORDINATED DEBT SECURITIES
On December 23, 2002, the Company issued a $150,000 short-term promissory
note to a shareholder. The note was due on January 31, 2003, with interest at 5%
over the prime interest rate. On January 21, 2003 the Company and the holder of
the note substituted the note for a $150,000 subordinated promissory note due on
January 31, 2005, bearing interest at an annual rate of 9%. With the consent of
the holder, interest on the notes may be paid in the Company's common stock,
with the stock value based on the closing bid price of the stock for the five
trading days before the last day of the quarter in which the interest is due but
in no event less than the closing bid price at the time of issuance or the
average of the closing bid prices for the five trading days prior to such time,
whichever is lower.
On January 21, 2003, the Company issued $300,000 of subordinated promissory
notes to two shareholders. The notes are due on January 31, 2005 and bear
interest at an annual rate of 9%. With the consent of the holders, interest on
the notes may be paid in the Company's common stock, with the stock value based
on the closing bid price of the stock for the five trading days before the last
day of the quarter in which the interest is due but in no event less than the
closing bid price at the time of issuance or the average of the closing bid
prices for the five trading days prior to such time, whichever is lower.
On May 12, 2003, the Company issued $300,000 of subordinated promissory
notes to certain shareholders. The notes bear interest at an annual rate of 14%
and are payable on demand. With the consent of the holders, the Company may
elect to pay interest on the notes in shares of the Company's common stock, with
the stock value based on the most recent closing bid price of the stock at the
time the notes were executed or for the five trading days before such date,
whichever is lower. The Company intends to repay these notes in the near future
with the proceeds of a private placement of $300,000 in convertible subordinated
promissory notes and common stock purchase warrants. The conversion price of any
such convertible notes and the exercise price of any warrants will not be less
than the most recent closing bid price when the documents are executed or the
average of the five trading days preceding such execution, whichever is lower.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2003 TO THREE MONTHS ENDED MARCH 31,
2002
REVENUES
Revenue increased approximately $5.4 million, or 38.5%, for the three
months ended March 31, 2003 compared to the three months ended March 31, 2002.
The increase in revenue resulted primarily from substantially higher wholesale
fuel prices and an increase in mobile fueling deliveries of 760,000 gallons
during the current period. The Company delivered 11.5 million gallons of fuel to
its customers in the three months ended March 31, 2003, an increase of 6.5%
compared to the 10.8 million gallons delivered in the three months ended March
31, 2002. The increase in volume in the current period was primarily due to net
new business added over the prior year.
GROSS PROFIT
Gross profit decreased approximately $310,000, or 25.9%, in the three
months ended March 31, 2003 compared to the three months ended March 31, 2002.
The net margin per delivered gallon of fuel in the three months ended March 31,
2003 was 10.8 cents compared to 14.4 cents in the three months ended March 31,
2002. (Total net margin is comprised of gross profit of $889,000 plus
depreciation of $346,000 for the three months ended March 31, 2003, and gross
profit of $1.2 million plus depreciation of $371,000 for the three months ended
March 31, 2002.) The decrease in gross profit in 2003 was due primarily to
increases in the cost of fuel used to operate the
16
Company's delivery fleet of $110,000; higher fixed costs associated with an
increase in property and liability insurance premiums of $90,000; and decreases
in other service charge revenue of $82,000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses increased approximately
$57,000, or 5.2%, in the three months ended March 31, 2003 compared to the three
months ended March 31, 2002. The increase in these expenses resulted from higher
professional service fees of $56,000, bank fees of $11,000, and were offset by
decreases in other selling and administrative costs totaling $10,000.
INTEREST EXPENSE
Interest expense decreased approximately $41,000, or 15.0%, in the three
months ended March 31, 2003 compared to the three months ended March 31, 2002.
The decrease was primarily due to lower interest rates on variable rate credit
facility debt and a reduction in outstanding long-term equipment debt, resulting
from the repayment of principal.
INCOME TAXES
The Company recorded no income tax expense in the three-month periods ended
March 31, 2003 or March 31, 2002. The Company has significant net operating loss
carryforwards which may be available to offset future taxable income.
COMPARISON OF NINE MONTHS ENDED MARCH 31, 2003 TO NINE MONTHS ENDED MARCH 31,
2002
REVENUES
Revenue increased approximately $8.9 million, or 19.8%, for the nine months
ended March 31, 2003 compared to the nine months ended March 31, 2002. The
increase in revenue resulted primarily from substantially higher wholesale fuel
prices and additional higher priced mobile fueling deliveries of 3.1 million
gallons during the current period. The Company delivered 34.9 million gallons of
fuel to its customers in the nine months ended March 31, 2003, a decrease of
8.6% compared to the 38.2 million gallons delivered in the nine months ended
March 31, 2002. The decrease in volume of 3.3 million gallons net of the 3.1
million increase in mobile fueling gallons in the current period was due to a
greater than normal reduction in seasonal deliveries during the quarter ended
December 31, 2002; reduced demand by certain customers arising from depressed
economic conditions throughout the nine month period and modifications of
certain customers' mobile fueling delivery programs in response to substantially
increased fuel prices; and the elimination of low margin bulk fuel deliveries
and nonprofitable accounts.
GROSS PROFIT
Gross profit decreased by $351,000, or 10.4%, in the nine months ended
March 31, 2003 compared to March 31, 2002. The decrease in gross profit was due
to increases in the cost of fuel used to operate the Company's delivery fleet of
$110,000 during the third quarter ended March 31, 2003, higher fixed costs
associated with an increase in property and liability insurance premiums of
$90,000 and decreases in other service charge revenue of $82,000. The net margin
per delivered gallon of fuel in the nine months ended March 31, 2003 and March
31, 2002 was 11.7 cents. (Total net margin is comprised of gross profit of $3.0
million plus depreciation of $1.1 million for the nine months ended March 31,
2003, and gross profit of $3.4 million plus depreciation of $1.1 million for the
nine months ended March 31, 2002.)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses increased approximately
$249,000, or 7.4%, in the nine months ended March 31, 2003 compared to the nine
months ended March 31, 2002. The increases in these expenses were attributable
to increased sales and marketing costs of $111,000, higher professional service
fees of $118,000
17
and increases in temporary labor expense of $43,000 incurred in connection with
the Company's billing system conversion in the second quarter ended December 31,
2002.
INTEREST EXPENSE
Interest expense decreased approximately $346,000, or 33.4%, in the nine
months ended March 31, 2003 compared to the nine months ended March 31, 2002.
The decrease was primarily due to lower interest rates on variable rate credit
facility debt and a reduction in outstanding long-term equipment debt, resulting
from the repayment of principal.
INCOME TAXES
The Company recorded no income tax expense in the nine-month periods ended
March 31, 2003 or March 31, 2002. The Company has significant net operating loss
carryforwards which may be available to offset future taxable income.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk is limited primarily to the
fluctuating interest rates associated with variable rate debt outstanding to
finance working capital and a portion of the Company's mobile fueling truck
fleet. These debts bear interest at the United States prime interest rate plus a
fixed markup and are subject to change based upon interest rate changes in the
United States. The Company does not currently use, and has not historically
used, derivative instruments to hedge against such market interest rate risk.
Increases or decreases in market interest rates could have a material impact on
the financial condition, results of operations and cash flows of the Company.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and participation of the Company's
Chief Executive Officer and Chief Financial Officer (the "Officers") of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Securities Exchange Act Rule 13a-14. Based upon that
evaluation, the Officers concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Company's periodic SEC
filings, including this report.
INTERNAL CONTROLS
There were no significant changes made in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the three months ending March 31, 2003, the Company issued 3,566
shares of common stock to the holders of four subordinated convertible
promissory notes for interest earned to date at a price of $1.35 per share. The
offer and sale of the subordinated convertible promissory notes, and the
underlying shares of stock into which the notes are convertible or which are
issued as payment of interest, were exempt from registration under the Act as
private offerings to "accredited investors" under Sections 4(2) and 4(6) of the
Act and Rules 505 and 506 of Regulation D thereunder. The Company has agreed to
register the shares into which the notes may be converted for resale by filing a
Form S-3 registration statement with the Securities and Exchange Commission,
which it intends to do sometime after the filing of this Form 10-Q.
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 NO. DESCRIPTION
99.1 Certification of the President and Chief Executive
Officer, and the Senior Vice President and Chief
Financial Officer
(B) REPORTS ON FORM 8-K
The Company filed a Form 8-K dated January 15, 2003 to report, under
Item 5, Other Events, that Sherrill W. Hudson, a director of the
Company, resigned from the Company's Board of Directors effective
January 15, 2003.
20
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 hereunto duly authorized.
STREICHER MOBILE FUELING, INC.
May 15, 2003 By: /S/ RICHARD E. GATHRIGHT
--------------------------------------
Richard E. Gathright
President and Chief Executive Officer
By: /S/ MICHAEL S. SHORE
--------------------------------------
Michael S. Shore
Senior Vice President and Chief
Financial Officer
21
CERTIFICATIONS
I, Richard E. Gathright, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Streicher Mobile
Fueling, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/S/ RICHARD E. GATHRIGHT
- -------------------------------------
Richard E. Gathright
President and Chief Executive Officer
22
I, Michael S. Shore, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Streicher Mobile
Fueling, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/S/ MICHAEL S. SHORE
- --------------------------------
Michael S. Shore
Senior Vice President and Chief
Financial Officer
23