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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 SEPTEMBER 30, 2003 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OR 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 LAUDERDALE, FLORIDA, 33309
---------------------------------------------- ------------
(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 November 14, 2003 there were 7,248,460 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. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2003 (unaudited) and
June 30, 2003.............................................3
Condensed Consolidated Statements of Operations
for the three months ended September 30, 2003
(unaudited) and 2002 (unaudited)..........................4
Condensed Consolidated Statements of Cash Flows
for the three months ended September 30, 2003
(unaudited) 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......................11
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 - 22
Signature Page...................................................23
Certifications..............................................24 - 26
2
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND JUNE 30, 2003
(IN 000'S, EXCEPT SHARE AND PER SHARE DATA)
September 30, June 30,
ASSETS 2003 2003
- ---------------------------------------------------- ------------- -----------
(unaudited)
Current assets:
Cash and cash equivalents.......................... $ 2,086 $ 211
Restricted cash.................................... 5 78
Accounts receivable, net .......................... 6,119 6,113
Inventories ....................................... 180 168
Prepaid expenses and other current assets.......... 153 387
---------- -----------
Total current assets.......................... 8,543 6,957
---------- -----------
Property and equipment, net.......................... 8,449 8,741
Note receivable from related party .................. 10 52
Deferred debt costs.................................. 856 186
Other assets......................................... 74 75
---------- -----------
Total assets................................. $ 17,932 $ 16,011
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------
Current liabilities:
Bank line of credit payable ...................... $ 3,541 $ 4,410
Current portion of long-term debt and
subordinated promissory notes................... -- 1,965
Accounts payable and other liabilities ........... 2,847 3,012
---------- -----------
Total current liabilities..................... 6,388 9,387
Long-term liabilities:
Convertible subordinated promissory notes......... -- 734
Long-term debt, excluding current portion......... 6,925 1,779
Unamortized debt discount, net................. (1,581) --
---------- -----------
Long-term debt, net 5,344 1,779
Total liabilities............................. 11,732 11,900
---------- -----------
Shareholders' equity:
Common stock, par value $.01 per share;
50,000,000 and 20,000,000 shares
authorized; 7,248,460 and 7,234,168
issued and outstanding at September 30,
2003 and June 30, 2003, respectively............ 72 72
Additional paid-in capital........................ 13,341 11,458
Accumulated deficit............................... (7,213) (7,419)
---------- -----------
Total shareholders' equity.................... 6,200 4,111
---------- -----------
Total liabilities and shareholders' equity.... $ 17,932 $ 16,011
========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(IN 000'S, EXCEPT SHARE AND PER SHARE DATA)
2003 2002
------------ -----------
Fuel sales and service revenues................. $ 14,268 $ 12,557
Fuel taxes...................................... 5,149 4,522
------------ -----------
Total revenues.............................. 19,417 17,079
------------ -----------
Cost of fuel sales and service.................. 13,446 11,164
Fuel taxes...................................... 5,149 4,522
------------ -----------
Total cost of sales......................... 18,595 15,686
------------ -----------
Gross profit.............................. 822 1,393
Selling, general and administrative expenses.... 1,091 1,080
Gain on extinguishment of debt.................. 757 --
------------ -----------
Operating income .............................. 488 313
Interest expense................................ (284) (230)
Interest and other income....................... 2 20
------------ -----------
Income before income taxes................ 206 103
Income tax expense............................ -- --
------------ -----------
Net income................................ $ 206 $ 103
============ ===========
Basic net income per share.................... $ 0.03 $ 0.01
============ ===========
Diluted net income per share.................. $ 0.03 $ 0.01
============ ===========
Basic weighted average common shares
outstanding................................. 7,248,305 7,213,650
============ ===========
Diluted weighted average common shares
outstanding................................. 7,504,502 7,223,164
============ ===========
SEE ACCOMPANYING NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
(IN 000'S)
2003 2002
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 206 $ 103
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization................... 334 344
Amortization of deferred debt costs ........... 56 5
Amortization of debt discount ................. 30 --
Gain on extinguishment of debt ................. (757) --
Provision for doubtful accounts................. 3 20
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash....... 73 (44)
Increase in accounts receivable.............. (121) (1,327)
Decrease in inventories and other assets..... 220 336
Decrease in accounts payable and other
liabilities ............................... (151) (268)
------------ -----------
Net cash used in operating activities...... (107) (831)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............. (39) (159)
Proceeds from disposal of equipment............. 112 --
Decrease (increase) in note receivable due
from related party............................ 42 (18)
------------ -----------
Net cash provided by (used in) investing
activities................................ 115 (177)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft...................... -- 195
Net (repayments) borrowings on line of credit... (869) 862
Proceeds from issuance of long-term debt........ 6,925 --
Repayment of subordinated debt.................. (1,034) --
Payments of debt issuance costs................. (468) (45)
Repayments of long-term debt.................... (2,687) (505)
------------ -----------
Net cash provided by financing activities... 1,867 507
------------ -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS........................... 1,875 (501)
CASH AND CASH EQUIVALENTS, beginning of period.... 211 815
------------ -----------
CASH AND CASH EQUIVALENTS, end of period.......... $ 2,086 $ 314
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest....................................... $ 151 $ 263
============ ===========
Income taxes................................... $ -- $ --
============ ===========
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 September 30, 2003, the Company had operations in California,
Florida, Georgia, North Carolina, 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 negotiated rate. Included in the rate
are 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
workdays, Monday through Friday, to coincide with customers' fuel service
requirements. 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 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 included herein
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, 2003.
SUPPLEMENTAL CASH FLOW INFORMATION OF NON-CASH ACTIVITIES
The Company recorded unamortized debt discount of $1,608,000
and deferred debt costs of $257,000 as a result of the issuance of long-term
debt for the period ended September 30, 2003. Additionally, the Company recorded
$14,000 and $5,000 related to the issuance of common stock in lieu of payments
on convertible subordinated promissory notes for the three-month periods ended
September 30, 2003 and 2002, respectively.
6
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(3) CAPITAL RESOURCES AND LIQUIDITY
In August 2003 the Company raised $6.925 million from the issuance of
five-year 10% promissory notes (the "August 2003 refinancing" and the "August
2003 promissory notes") and 2,008,250 five-year warrants to purchase the
Company's common stock at $1.00 per share (the "August 2003 warrants"). The
August 2003 promissory notes are collateralized by a first priority security
interest in the Company's specialized fueling truck fleet and related equipment
and by the patents on its proprietary fuel management system. The resulting
liquidity impact of this financing transaction has been the repayment of all
outstanding equipment and subordinated debt; the generation of $2.9 million of
working capital for business expansion; and a $2.8 million improvement in cash
flow resulting from a moratorium of principal payments during the first two
years of the five-year term of the August 2003 promissory notes.
During the quarter ended September 30, 2003, the Company recorded a
pre-tax gain of $757,000 from the prepayment of the outstanding balance owed to
its principal equipment lender and an increase in shareholders' equity of $1.87
million for the value of the 2,008,250 warrants issued in connection with the
August 2003 refinancing.
The Company is highly leveraged and since its inception has financed its
working capital requirements for operations by issuing common stock and debt and
utilizing its bank line of credit and other borrowings. During the period from
February 2001 to September 30, 2003, the Company raised in the aggregate $13.6
million in capital through private placements of common stock and the issuance
of debt.
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 debt and utilizing its bank line of credit. For
the years ended June 30, 2003, 2002 and 2001, the Company had net losses of $1.6
million, $1.2 million, and $2.8 million, respectively.
The Company's material financial commitments, other than payroll and fuel
purchases, relate primarily to maintaining its bank line of credit and making
monthly payments of principal and interest on its prior equipment notes through
August 2003; making semi-annual interest payments of 10% per annum on its August
2003 promissory notes beginning December 31, 2003; and making six $692,500
semi-annual principal payments for three years beginning August 28, 2005, with a
balloon payment of $2,770,000 due August 28, 2008 for the August 2003 promissory
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 its 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'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; and/or raise any required additional capital
through the issuance of debt or equity securities or additional borrowings.
7
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(4) BANK LINE OF CREDIT PAYABLE
On September 26, 2002, the Company entered into a three-year $10 million
credit facility with a national financial institution, replacing its prior
short-term $10 million credit facility. This bank 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% (2.0% over the prime rate of 4.0% at
September 30, 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. In
addition, the credit facility may be extended by the mutual consent of the
Company and the bank after September 25, 2005. 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.
In August 2003, the Company and its bank line of credit lender amended the
loan and security agreement between them in connection with the Company's August
2003 refinancing which (1) released the lender's lien on patents, patent rights
and patent applications; (2) increased the unused line of credit fee by .50%;
(3) revised the effective book net worth covenant to include the August 2003
promissory notes in its calculation; (4) established a covenant to maintain a
minimum cumulative quarterly fixed charge coverage ratio as defined in the
amended loan agreement; (5) established a covenant for the Company to maintain a
minimum excess availability of $500,000; and (6) eliminated the loan prepayment
fee. The Company utilized a portion of the proceeds of the August 2003
refinancing to pay down the bank line of credit.
As of September 30, 2003 and June 30, 2003, the Company had outstanding
borrowings of $3.5 million and $4.4 million, respectively, under its $10 million
bank lines of credit. Based on eligible receivables outstanding at September 30,
2003, the Company had $957,000 of cash availability on the bank line of credit,
and was in compliance with all financial covenants required by the loan and
security agreement.
(5) NET INCOME PER SHARE
Basic income per share is computed by dividing the net income attributable
to common shareholders by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share is computed by
dividing income attributable to common shareholders by the weighted-average
number of common shares outstanding during the period increased to include the
number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued. The dilutive effect of
outstanding stock options and warrants is reflected in diluted earnings per
share by application of the treasury stock method.
At September 30, 2003, common stock equivalents consisting of 4,614,552
employee, director and unrelated third party stock options and common stock
warrants including the August 2003 warrants were outstanding at prices ranging
from $.86 to $9.49 per share. For the period ended September 30, 2003, 256,197
of these common stock equivalents were dilutive and were included in the
computation of diluted net income per share. At September 30, 2002, common stock
equivalents consisting of 2,517,977 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 September 30, 2002, 9,514 of these common stock
equivalents were dilutive and were included in the computation of diluted net
income per share. For the periods ended September 30, 2003 and 2002, the Company
earned net income of $206,000 or $0.03 per diluted share and net income of
$103,000 or $0.01 per diluted share, respectively.
On September 25, 2003, the Company extended from December 11, 2003 to
December 11, 2004 the exercise period for 1,349,900 outstanding common stock
warrants related to the December 11, 1996 initial public offering.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" (as amended by SFAS No. 148). 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 and net income
per share would have been reduced to the pro forma amounts indicated in the
8
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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, pro forma net income (loss), net income per
share, pro forma net income (loss) per share, and related assumptions are as
follows:
For the three For the three
months ended months ended
September 30, 2003 September 30, 2003
------------------ ------------------
Net income as reported $ 206 $ 103
Net income (loss) pro forma $ 204 $ (131)
Diluted net income per share as reported $ .03 .01
Diluted net income (loss) per share pro forma $ .03 (.01)
Risk free interest rate 4.19% 3%
Dividend yield 0% 0%
Expected volatility 100% 100%
Expected life 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 net income (loss) amounts
presented because compensation cost is reflected over the vesting period of the
options.
(6) DEBT SECURITIES
JANUARY 2002 CONVERSION OF SUBORDINATED DEBT
In January 2002, certain holders of the convertible subordinated
promissory notes converted an aggregate of $2.617 million to unregistered 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 holders of the remaining $283,600
of convertible subordinated promissory notes issued by the Company who did not
convert their notes in January 2002 waived any conversion price adjustment.
SUBORDINATED PROMISSORY NOTES
On December 23, 2002, the Company issued a $150,000 short-term promissory
note to an affiliated 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%.
On January 21, 2003, the Company issued $300,000 of subordinated
promissory notes to a director and an affiliated shareholder. The notes were due
on January 31, 2005 and bore interest at an annual rate of 9%.
On May 12, 2003, the Company issued $300,000 of subordinated promissory
notes to a director and an affiliated shareholder. The notes bore interest at an
annual rate of 14% and were payable on demand. The Company repaid $235,500 of
these notes with the proceeds of the May 20, 2003 private placement issuance of
subordinated promissory notes and common stock purchase warrants. The exercise
price of the warrants is $0.86 per share.
9
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
On May 20, 2003, the Company issued $235,500 of subordinated promissory
notes to officers, directors, an affiliated shareholder and certain unaffiliated
shareholders. The notes were due on November 19, 2003 and bear interest at an
annual rate of 14%. The Company also issued warrants to purchase 82,425 shares
of common stock exercisable at $0.86 per share in connection with the notes. The
warrants issued are exercisable for a period of three (3) years from and after
the date on which the notes are repaid or otherwise surrendered to the Company,
but in no event later than November 19, 2006.
The Company repaid the $1,033,600 outstanding balance of all of the
subordinated convertible and non-convertible promissory notes in September 2003
with the proceeds of the August 2003 refinancing.
AUGUST 2003 PROMISSORY NOTES
On August 29, 2003, the Company closed a $6.925 million offering to
institutions and other accredited lenders consisting of five-year 10% promissory
notes and five-year warrants to purchase a total 2,008,250 shares of the
Company's common stock at $1.00 per share. The August 2003 promissory notes are
collateralized by a first priority security interest in its specialized fueling
truck fleet and related equipment and by patents on its proprietary fuel
management system. The August 2003 promissory notes provide for (1) no principal
payments until August 28, 2005; (2) six $692,500 semi-annual principal payments
commencing on August 28, 2005 through February 28, 2008; (3) a balloon payment
of $2,770,000 at maturity on August 28, 2008; (4) semi-annual interest payments
on June 30 and December 31 commencing December 31, 2003; and (5) the Company's
right to call after August 1, 2005 at 105% of par plus accrued but unpaid
interest. The net cash proceeds from the financing were $2.9 million, after
payment of related fees and expenses and repayment of all outstanding equipment
and subordinated debt. In connection with the issuance of the August 2003
promissory notes, the Company negotiated a settlement with its primary equipment
lender and received a $757,000 cash discount by prepaying the $2,204,800
outstanding balance on August 29, 2003. The transaction costs, including
commissions, professional fees and other costs, totaled $761,000, and are being
amortized over the five-year term of the notes.
The issuance of the two million warrants from the August 2003 refinancing
resulted in the Company recording an increase to shareholders equity of $1.87
million; a $1.61 million debt discount; and an increase to deferred debt costs
of $257,000 for the warrants related to the broker commissions. The Company is
amortizing as interest expense the debt discount and deferred debt costs over
the five-year term of the notes.
The $1.61 million debt discount is a non-cash discount related to the
issuance of the warrants and does not reduce the amount of cash payments
required to be made by the Company for the outstanding balance of $6.925 million
owed at September 30, 2003.
(7) RELATED PARTY TRANSACTIONS
As previously reported in the Company's 2003 Form 10-K, beginning 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 September 30, 2003 and June 30,
2003, there was an outstanding balance of $10,000 and $59,000, respectively. As
of November 1, 2003, the Company had set-off the remaining September 30, 2003
outstanding balance. Mr. Streicher's November 7, 2000 employment contract
expired on October 31, 2003 and was not extended or renewed.
Each of the convertible subordinated promissory notes converted in January
2002, the December 23, 2002 short-term promissory note, the January 21, 2003
subordinated promissory notes and the May 12, 2003 promissory notes were issued
to a director or other affiliates of the Company. In addition, a portion of the
May 20, 2003 subordinated promissory notes and related warrants were issued to
officers, directors and other affiliates of the Company. These notes are more
fully described in Note 6.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains "forward-looking statements" which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in the forward-looking statements as a result of certain
factors, including those set forth under the caption "Certain Factors Affecting
Future Operating Results," included in the Company's filing on Form 10-K for the
fiscal year ended June 30, 2003, and in this Form 10-Q. The following discussion
also should be read in conjunction with the Company's consolidated financial
statements and notes thereto included in the above referenced Form 10-K.
This report, including but not limited to this Item 2 and the footnotes to
the financial statements found in Section F, 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.
The forward-looking statements include 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 efforts to improve operational, 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 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 future net losses
o adverse consequences relating to the Company's outstanding debt
o the Company's ability to pay interest and principal on its bank line of
credit, senior secured promissory notes and pay its accounts payable and
other liabilities when due
o the Company's ability to comply with financial covenants contained in
its $10 million bank line of credit
o the Company's ability to obtain, if necessary, waivers of covenant
violations of its debt agreements
o further provisions for bad debts on the Company's accounts receivable
o fluctuations in demand for the Company's mobile fueling services
resulting from changed economic conditions
11
o the Company's ability to acquire sufficient trade credit from fuel
suppliers and other 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 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 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. In the absence of dramatic price changes that affect
customers' actual demand for fuel or materially affect the fuel usage costs of
the Company's own fuel delivery trucks, the Company's gross margin on sales is
not materially affected by fuel price fluctuations because the Company generally
passes all fuel price changes to its customers and charges for its own services
on a flat per gallon basis. For the fiscal quarter ended September 30, 2003,
market prices for fuel were slightly higher than for the quarter ended September
30, 2002, and delivered volumes increased in the current period due primarily to
the addition of new accounts. As a result, revenues increased for the quarter
ended September 30, 2003, as compared to the quarter ended September 30, 2002.
In July 2003, the Company's largest competitor in the markets served by
the Company discontinued operations. Some of the volumes previously delivered by
the former competitor have been redirected to the Company and further
redirection is possible. The Company believes that the failure of this
competitor provides it with the opportunity to further increase deliveries and
generate improved margins in those locations where it previously directly
competed. The Company also intends to enter other locations, including but not
limited to those previously served by this former competitor, where it believes
that market share can be obtained at profitable margins.
In the mobile fueling business, the majority of deliveries are made on
workdays, Monday through Friday, to coincide with customers' fuel service
requirements. Thus, the number of workdays in any given month will impact the
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.
The Company believes that there are significant 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's
marketing and sales function is committed to grow the Company's business.
However, this growth is dependent upon a number of business and economic
factors, including the success of the Company's sales and marketing and other
business strategies; the availability in new and existing markets of sufficient
acceptable margin mobile fuel service business; the availability of qualified
workers to provide the level of service required by customers; the continuation
of cash flow from operating activities; the availability of sufficient debt or
equity capital to meet the Company's financing requirements; and changes in
market conditions in the related transportation or petroleum industries, some of
which factors are beyond the Company's control.
12
CAPITAL RESOURCES AND LIQUIDITY
In August 2003 the Company raised $6.925 million from the issuance of
five-year 10% promissory notes (the "August 2003 refinancing" and the "August
2003 promissory notes") and 2,008,250 five-year warrants to purchase the
Company's common stock at $1.00 per share. The August 2003 promissory notes are
collateralized by a first priority security interest in the Company's
specialized fueling truck fleet and related equipment and by the patents on its
proprietary fuel management system. The resulting liquidity impact of this
financing transaction has been the repayment of all outstanding equipment and
subordinated debt; the generation of $2.9 million of working capital; and a $2.8
million improvement in cash flow resulting from a moratorium of principal
payments during the first two years of the five-year term of the August 2003
promissory notes.
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 its bank line of credit. The August 2003
refinancing has significantly strengthened the Company's financial position,
enabling it to achieve a stronger balance sheet and improve cash flow resulting
from the two-year principal moratorium on principal payments under the August
2003 promissory notes. The Company believes that this transaction enhances its
business credibility with present and prospective customers, fuel suppliers,
trade creditors, other lenders and the investment community, and its ability to
compete in its business sector. Furthermore, during the period from February
2001 to September 30, 2003, the Company raised in the aggregate $13.6 million in
capital through private placements of common stock and the issuance of debt.
During the quarter ended September 30, 2003, the Company recorded a
pre-tax gain of $757,000 from the repayment of the outstanding balance owed to
its principal equipment lender and an increase in shareholders' equity of $1.87
million for the value of the 2,008,250 warrants issued in connection with the
August 2003 refinancing.
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 its 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.
In May 2003, the Company and its principal equipment lender agreed to an
extension of the maturity dates of the equipment notes by two months and reduced
its payments for the period from May 2003 through August 2003 by $284,000. In
August 2003 this lender was repaid in full in the amount of $2,204,800 from the
proceeds of the August 2003 refinancing. The Company received a $757,000 cash
discount from the lender in consideration of the prepayment of the equipment
debt.
The Company's material financial commitments, other than payroll and fuel
purchases, relate primarily to maintaining its bank line of credit and making
monthly payments of principal and interest on its prior equipment notes through
August 2003; making semi-annual interest payments of 10% per annum on its August
2003 promissory notes beginning December 31, 2003; and making six $692,500
semi-annual principal payments for three years beginning August 28, 2005, with a
balloon payment of $2,770,000 due August 28, 2008.
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
issuing debt and equity securities and utilizing its bank line of credit. For
the years ended June 30, 2003, 2002 and 2001, the Company had net losses of $1.6
million, $1.2 million, and $2.8 million, respectively.
13
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.
The Company believes that cash flow from operations; the additional
working capital from the August 2003 refinancing; and the two-year principal
payment moratorium on the August 2003 promissory notes will satisfy its
anticipated liquidity requirements for the foreseeable future. However, it may
seek additional sources of financing if a cash flow deficiency were to arise in
the future. There is no assurance that additional financing would 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 or to pay debt service obligations as they
become due, the Company may be required to significantly alter its operations.
At September 30, 2003, the Company had cash and cash equivalents of
$2,086,000 as compared to $211,000 at June 30, 2003. The increase was primarily
due to the net proceeds available from the August 2003 refinancing.
$10 MILLION THREE-YEAR CREDIT FACILITY
On September 26, 2002, the Company entered into a three-year $10 million
credit facility with a national financial institution, replacing its prior
short-term $10 million credit facility. This bank 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% (2.0% over the prime rate of 4.0% at
September 30, 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. In
addition, the credit facility may be extended by the mutual consent of the
Company and the bank after September 25, 2005. 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.
In August 2003, the Company and its bank line of credit lender amended the
loan and security agreement between them in connection with the Company's August
2003 refinancing which (1) released the lender's lien on patents, patent rights
and patent applications; (2) increased the unused line of credit fee by .50%;
(3) revised the effective book net worth covenant to include the August 2003
promissory notes in its calculation; (4) established a covenant to maintain a
minimum cumulative quarterly fixed charge coverage ratio as defined in the
amended loan agreement; (5) established a covenant for the Company to maintain a
minimum excess availability of $500,000; and (6) eliminated the loan prepayment
fee. The Company utilized a portion of the proceeds of the August 2003
refinancing to pay down the bank line of credit. The proceeds that were used to
pay down the outstanding line of credit balance are available to the Company for
future working capital purposes.
As of September 30, 2003 and June 30, 2003, the Company had outstanding
borrowings of $3.5 million and $4.4 million, respectively, under its $10 million
bank lines of credit. Based on eligible receivables outstanding at September 30,
2003, the Company had $957,000 of cash availability on the bank line of credit,
and was in compliance with all financial covenants required by the loan and
security agreement.
Management believes that the Company's bank line of credit will provide
the working capital needed to maintain and grow its business and to accomplish
its business plan. However, if additional financing is required, there can be no
assurance that the Company will be able to obtain such financing from its
present bank line of credit or another lender 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 large portion of the
Company's outstanding debt, the Company's financial results could be materially
affected by significant increases or decreases in interest rates.
14
JANUARY 2002 CONVERSION OF SUBORDINATED DEBT
In January 2002, certain holders of the convertible subordinated
promissory notes converted an aggregate of $2.617 million to unregistered 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 holders of the remaining $283,600
of convertible subordinated promissory notes issued by the Company who did not
convert their notes in January 2002 waived any conversion price adjustment.
SUBORDINATED PROMISSORY NOTES
On December 23, 2002, the Company issued a $150,000 short-term promissory
note to an affiliated 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%.
On January 21, 2003, the Company issued $300,000 of subordinated
promissory notes to a director and an affiliated shareholder. The notes were due
on January 31, 2005 and bore interest at an annual rate of 9%.
On May 12, 2003, the Company issued $300,000 of subordinated promissory
notes to a director and an affiliated shareholder. The notes bore interest at an
annual rate of 14% and were payable on demand. The Company repaid $235,500 of
these notes with the proceeds of the May 20, 2003 private placement issuance of
subordinated promissory notes and common stock purchase warrants. The exercise
price of the warrants is $0.86 per share.
On May 20, 2003, the Company issued $235,500 of subordinated promissory
notes to officers, directors, an affiliated shareholder and certain unaffiliated
shareholders. The notes were due on November 19, 2003 and bore interest at an
annual rate of 14%. The Company also issued warrants to purchase 82,425 shares
of common stock exercisable at $0.86 per share in connection with the notes. The
warrants issued are exercisable for a period of three (3) years from and after
the date on which the notes are repaid or otherwise surrendered to the Company,
but in no event later than November 19, 2006.
The Company repaid the $1,033,600 outstanding balance of all of the
subordinated convertible and non-convertible promissory notes in September 2003
with the proceeds of the August 2003 refinancing.
AUGUST 2003 PROMISSORY NOTES
On August 29, 2003, the Company closed a $6.925 million offering to
institutions and other accredited lenders consisting of five-year 10% promissory
notes and five-year warrants to purchase a total 2,008,250 shares of the
Company's common stock at $1.00 per share. The August 2003 promissory notes are
collateralized by a first priority security interest in its specialized fueling
truck fleet and related equipment and by patents on its proprietary fuel
management system. The August 2003 promissory notes provide for (1) no principal
payments until August 28, 2005; (2) six $692,500 semi-annual principal payments
commencing on August 28, 2005 through February 28, 2008; (3) a balloon payment
of $2,770,000 at maturity on August 28, 2008; (4) semi-annual interest payments
on June 30 and December 31 commencing December 31, 2003; and (5) the Company's
right to call after August 1, 2005 at 105% of par plus accrued but unpaid
interest. The net cash proceeds from the financing were $2.9 million, after
payment of related fees and expenses and repayment of all outstanding equipment
and subordinated debt. In connection with the issuance of the August 2003
promissory notes, the Company negotiated a settlement with its primary equipment
lender and received a $757,000 cash discount by prepaying the $2,204,800
outstanding balance on August 29, 2003. The transaction costs, including
commissions, professional fees and other costs, totaled $761,000, and are being
amortized over the five-year term of the notes.
15
The issuance of the two million warrants from the August 2003 refinancing
resulted in the Company recording an increase to shareholders equity of $1.87
million; a $1.61 million debt discount; and an increase to deferred debt costs
of $257,000 for the warrants related to the broker commissions. The Company is
amortizing as interest expense the debt discount and deferred debt costs over
the five-year term of the notes.
The $1.61 million debt discount is a non-cash discount related to the
issuance of the warrants and does not reduce the amount of cash payments
required to be made by the Company for the outstanding balance of $6.925 million
owed at September 30, 2003.
As a result of the August 2003 refinancing, the Company's components of
interest expense has changed. The table below shows the interest expense (in
thousands) recorded prior to and after the completion of the August 2003
refinancing, as well as the portions that are recurring and other:
Quarter ended
September 30 September August July
2003 2003 2003 2003
------------- --------- -------- --------
STATED RATE INTEREST EXPENSE:
-----------------------------
Bank line of credit $ 63 $ 14 $ 25 $ 24
Long term equipment debt 104 50 26 28
Subordinated debt 20 - 8 12
Other 6 2 2 2
--------- -------- ------- -------
TOTAL STATED RATE INTEREST
EXPENSE 193 66 61 66
NON-CASH INTEREST AMORTIZATION:
-------------------------------
Amortization of deferred
debt costs 38 18 10 10
Amortization of debt discount 30 30 - -
--------- -------- ------- -------
TOTAL AMORTIZATION OF
INTEREST EXPENSE 68 48 10 10
--------- -------- ------- -------
TOTAL RECURRING INTEREST EXPENSE 261 114 71 76
TOTAL OTHER INTEREST EXPENSE 23 19 4 -
--------- -------- ------- -------
TOTAL INTEREST EXPENSE $ 284 $ 133 $ 75 $ 76
========= ======== ======= =======
The primary increase in the recurring interest expense from August to
September 2003 relates to the higher non-cash interest amortization of $38,000
per month. The additional non-cash interest amortization of $38,000 per month
will continue to be charged to interest expense over the 5-year term of the
notes. Other interest expense of $23,000 primarily consists of the expensing of
deferred debt costs on previous debt which was repaid with the proceeds of the
August 2003 refinancing.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2003 TO THREE MONTHS ENDED
SEPTEMBER 30, 2002
REVENUES
The Company's revenues increased by $2.3 million, or 13.7%, on deliveries
of 13.3 million gallons of fuel during the three months ended September 30,
2003, compared with 11.9 million gallons delivered in the three months ended
September 30, 2002. The volume increase of 1.4 million gallons, or 11.8%, in the
current quarter resulted in $1.6 million of the increase in revenues. This
increase in gallons delivered was due to the addition of new accounts in the
quarter ended September 30, 2003. Additionally, the average wholesale price of
fuel was higher in the three months ended September 30, 2003 resulting in
increased revenues of $700,000.
16
GROSS PROFIT
Gross profit decreased $571,000, or 41.0%, in the three months ended
September 30, 2003 compared to the three months ended September 30, 2002. Of the
reduction in gross profit, $221,000 resulted from a decrease in the average
service charge per gallon of fuel delivered which was only partially offset by a
1.4 million gallon increase in the volume delivered during the three months
ended September 30, 2003. This decrease in the average service charge resulted
from the Company's lowering of service charges to many of its customers which
was necessary to counter an extremely aggressive pricing scheme undertaken by
the Company's largest competitor from October 2002 until it discontinued its
operations in July 2003. The remaining decrease in gross profit resulted from
higher insurance costs of $202,000 and increases in direct operating expenses of
$148,000.
The average net margin per delivered gallon of fuel (defined as gross
profit plus depreciation divided by gallons delivered) decreased 5.7 cents to
8.7 cents for the three months ended September 30, 2003 from 14.4 cents for the
three months ended September 30, 2002. The decrease in net margin per gallon
resulted from a lower average selling price per gallon and higher direct
operating expenses due to the aforementioned.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $11,000, or 1.0%,
in the three months ended September 30, 2003 compared to the three months ended
September 30, 2002. The increase was due to additional depreciation of $19,000
related to the billing system conversion which was completed in the quarter
ended December 31, 2002 and was partially offset by decreases in other general
and administrative expenses.
GAIN ON EXTINGUISHMENT OF DEBT
In connection with the issuance of the August 2003 promissory notes, the
Company negotiated a settlement with its primary equipment lender and received a
$757,000 cash discount by prepaying the $2,204,800 outstanding balance on August
29, 2003. This discount was recorded as gain on extinguishment of debt and is
included in operating profit and net income for the three months ended September
30, 2003.
INTEREST EXPENSE
Interest expense of $284,000 increased $54,000, or 23.5%, in the three
months ended September 30, 2003 compared to the three months ended September 30,
2002. The increase was comprised of the non-cash debt discount amortization
totaling $30,000 relating to the August 2003 refinancing. Additionally, the
Company wrote-off the remaining deferred debt costs of $23,000 resulting from
the repayment of the former equipment debt and subordinated notes.
INCOME TAXES
The Company recorded no income tax expense in the three months ended
September 30, 2003 or 2002. The Company had net operating loss carryforwards of
approximately $13.9 million at September 30, 2003, which begin to expire in the
year 2011.
NET INCOME
Net income for the three-months ended September 30, 2003 was $206,000
compared to $103,000 for the prior year period, an increase of $103,000 or 100%,
resulting primarily from the August 2003 $757,000 gain on extinguishment of
debt, which was partially offset by the lower gross profit of $571,000 during
the three-month period ended September 30, 2003.
17
EBITDA
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $147,000 to $824,000 for the three months ended September 30, 2003
from $677,000 for the three months ended September 30, 2002. The increase in
EBITDA was primarily due to the gain from extinguishment of debt of $757,000,
offset by the decrease in gross profit of $571,000.
The components of EBITDA for the three months ended September 30, 2003 and
2002 are as follows:
September 30, September 30,
2003 2002
------------- -------------
Net income $ 206,000 $ 103,000
Add back:
Interest expense 198,000 225,000
Non-cash interest expense 86,000 5,000
Depreciation and amortization
expense 334,000 344,000
------------- -------------
EBITDA $ 824,000 $ 677,000
============= =============
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 needs 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. In the absence of dramatic price changes that affect customers' actual
demand for fuel or materially affect the fuel usage costs of the Company's own
fuel delivery trucks, the Company's gross margin on sales is not materially
affected by fuel price fluctuations because the Company generally passes all
fuel price changes to its customers and charges for its own services on a flat
per gallon basis.
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 September 30, 2003, the Company issued
14,292 shares of common stock to the holders of four subordinated convertible
promissory notes for interest earned to date at a price range from $0.91 to
$1.07 per share. The offer and sale of the convertible subordinated 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.
On August 29, 2003, the Company closed a $6,925,000 offering consisting
of five-year 10% promissory notes and five-year warrants to purchase a total of
2,008,250 shares of the Company's common stock at $1.00 per share. The offer and
sale of the notes, the warrants and the shares underlying the warrants were
exempt from registration 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. Philadelphia Brokerage Corporation acted as placement agent for the
offering and received a cash commission of $346,250 and 277,000 warrants. The
placement agent warrants are the same as the warrants issued to the investors in
the offering except that they are not redeemable by the Company and carry
"cashless" exercise rights. The Company has agreed to register the shares
underlying the warrants 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
A Special Meeting of Shareholders of Streicher Mobile Fueling, Inc. was
held at the Westin Fort Lauderdale, 400 Corporate Drive, Fort Lauderdale,
Florida, on July 23, 2003. At the meeting, the shareholders approved the
following three proposals with the vote as set forth thereunder:
o To approve an amendment to the Company's articles of incorporation to
increase the number of authorized shares of common stock from 20,000,000
to 50,000,000 shares
FOR AGAINST WITHHELD NON-VOTE
--------------- ------------ ------------- ------------
4,911,467 93,207 -0- -0-
--------------- ------------ ------------- ------------
20
o To grant authority to the Board of Directors to cause the Company to issue
up to 5,000,000 shares of its common stock or common stock equivalents for
proceeds of up to $10,000,000 in one or more private placements during the
three months following approval of the proposal, at prices up to 50% lower
than the NASDAQ definition of market value, and to permit officers and
directors of the company to purchase some or all of such securities in
such placements.
FOR AGAINST WITHHELD NON-VOTE
--------------- ------------ ------------- ------------
4,901,605 103,069 -0- -0-
--------------- ------------ ------------- ------------
o To grant authority to the Board of Directors to cause the Company to issue
up to 25,000,000 shares of its common stock for proceeds of as much as
$75,000,000 at a price per share up to 50% less than NASDAQ market value
for one or more acquisitions of businesses or assets by the company during
the three (3) months following shareholder approval of this proposal.
FOR AGAINST WITHHELD NON-VOTE
--------------- ------------ ------------- ------------
4,901,330 103,344 -0- -0-
--------------- ------------ ------------- ------------
Abstentions and broker non-votes were counted for purposes of establishing
a quorum only. Only those votes cast for the proposals were counted as
voted in favor or affirmative votes.
ITEM 5. OTHER INFORMATION
None.
21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit No. Description
----------- -----------
10.1 Second Amendment to Loan and Security Agreement with
Congress Financial Corporation dated August 29, 2003
31.1 Certificate of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (16)
31.2 Certificate of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (16)
32.1 Certificate of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002 (16)
(B) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K under Item 5 on September 30,
2003 announcing the completion of major refinancing.
22
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.
November 14, 2003 By: /S/ RICHARD E. GATHRIGHT
--------------------------------------
Richard E. Gathright
Chief Executive Officer and President
By: /S/ MICHAEL S. SHORE
------------------------------------
Michael S. Shore
Senior Vice President and Chief
Financial Officer