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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Year ended December 31, 2000
Commission File Number: 0-27968
METEOR INDUSTRIES, INC.
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(Exact Name of Issuer as Specified in its Charter)
COLORADO 84-1236619
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1401 BLAKE STREET, SUITE 200, DENVER, COLORADO 80202
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(Address of Principal Executive Offices)
Issuer's telephone number including area code: (303)572-1135
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.001 PAR VALUE
Title of Class
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [ ]
At March 16, 2001, 4,260,505 shares of Common Stock (the Registrant's only
class of voting stock) were outstanding. The aggregate market value of the
Common Stock on that date held by non-affiliates was approximately
$13,904,802.
DOCUMENTS INCORPORATED BY REFERENCE: See pages 30 - 34.
PART I
ITEM 1. BUSINESS
GENERAL
Meteor Industries, Inc. and certain subsidiaries ("Meteor" or the "Company")
own, operate and acquire independent refined petroleum product distribution
companies. These marketing and distribution companies sell gasoline, diesel
fuel, lubricants, and propane. Meteor has grown through expansion of its
existing businesses and the acquisition of established companies in this
industry. Since 1993, Meteor has completed eleven acquisitions, nine of which
have been acquisitions of petroleum distributors located in the Rocky Mountain
Region and Western United States.
Early in the year 2000 Meteor's Board of Directors determined that it is in
the best interest of the shareholders of the Company to explore other
alternatives to enhance Meteor's shareholder value including sales of assets,
mergers and joint ventures.
In December 1999, Meteor sold its retail store operating subsidiary, including
all of its retail store operations, to Capco Energy, Inc., its largest
shareholder for $1.5 million: $0.2 million in cash paid in January 2000 and a
$1.3 million secured note. Meteor sold its retail store operating subsidiary
to allow the Company to focus on its core business of commercial, wholesale
and cardlock petroleum distribution.
AGREEMENT WITH ACTIVE IQ TECHNOLOGIES, INC.
On January 11, 2001, Meteor executed a definitive agreement to merge with
Active IQ. The transaction is planned to close prior to April 16, 2001, and
is subject to various contingencies including shareholder approval of both
companies. Meteor, in anticipation of the transaction, invested $1.1 million
to acquire approximately 10% of Active IQ. Upon shareholder approval, Meteor
will issue new shares of common stock and warrants to purchase additional
shares to Active IQ shareholders in exchange for all of the equity of Active
IQ. Immediately after the merger, Active IQ shareholders will own
approximately 50% of the voting shares of the merged company and will control
the Board of Directors.
Active IQ is a privately held Minneapolis, Minnesota-based company with other
offices in Boston, Massachusetts and Las Vegas, Nevada. Active IQ provides
Internet infrastructure software and services for small to medium-sized
companies through an affordable, service-based product line that quickly and
seamlessly connects sellers to buyers with minimal supplier effort. The
company's service, "Epoxy" and its suite of products (Express, Business and
Enterprise), connects directly with supplier and buyer back-end business
systems to streamline the buy/sell process. Active IQ also recently announced
that it has formed a strategic relationship with Intranet Solutions, Inc.
(Nasdaq-INRS) to offer Web content management solutions to small and medium-
sized businesses worldwide. Intranet Solutions, Inc. is a significant
shareholder of Active IQ.
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AGREEMENT WITH CAPCO ENERGY, INC.
On January 30, 2001, Meteor executed a definitive agreement to sell, in
connection with its planned merger with Active IQ, its subsidiaries and
related businesses to its largest shareholder, Capco Energy, Inc.
("Capco")(Nasdaq-CPEG). The sale is contingent upon shareholder approval, the
consummation of the Active IQ merger and certain other conditions. The sale
price for the subsidiaries will be $5.5 million and certain environmental and
other indemnities.
The subsidiaries own substantially all of Meteor's assets and operate all of
its businesses; excluded are 400,000 shares of Active IQ's common stock and
certain amounts of cash which will remain in Meteor at the time of merger.
Also, the subsidiaries contain all of the liabilities of Meteor, except those
associated with certain costs relating to the closing of the Active IQ merger.
Capco, located in Orange, California, is a 20-year-old public company.
Capco's business is to explore for, develop and produce oil and gas
efficiently and to secure strategic acquisitions. Capco holds investments in
shares of various publicly traded companies, real estate and producing oil and
gas properties.
PROXY STATEMENT FILING
In February 2001, the Company filed a definitive proxy statement on Schedule
14A with the Securities and Exchange Commission for the solicitation of
proxies from its shareholders approving three proposals to be considered at a
special meeting (the "Special Meeting") of the Company's shareholders (the
"Shareholders"). At the Special Meeting the shareholders will be asked to
vote on:
(1) A proposal to approve and adopt the Stock Purchase Agreement, dated as of
January 30, 2001, by and between the Company and Capco, and the transactions
contemplated by that agreement, including the sale of substantially all of the
Company's assets (the "Asset Sale") to Capco.
(2) A proposal to approve the reincorporation of the Company under Minnesota
law, which reincorporation would be effected by merging the Company with and
into a newly formed and wholly owned subsidiary of the Company organized under
Minnesota law (the "Reincorporation Merger"), and
(3) A proposal to approve and adopt an Agreement and Plan of Merger, dated as
of January 11, 2001, by and among the Company, its wholly owned subsidiary, MI
Merger, Inc. and Active IQ (the "Merger")
Because the Asset Sale and the Reincorporation Merger are conditions of the
Merger, all three of the above described proposals must be approved by the
Shareholders for any of the three proposed transactions to be consummated by
the Company. The Asset Sale, the Reincorporation Merger, and the Merger are
each subject to the satisfaction or waiver of several conditions, including,
but not limited to, stockholder approval by the Company and Active IQ.
The foregoing summary description is qualified in its entirety by reference to
the Stock Purchase Agreement, dated as of January 30, 2001, the Agreement and
Plan of Merger, dated as of January 11, 2001, and the Company's definitive
proxy on Schedule 14A, filed with the Commission February 14, 2001, which are
attached as Exhibits 10.1, 10.2 and 20.1 to Meteor's Form 8-K filed on
February 13, 2001 and incorporated by this reference.
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THE PETROLEUM DISTRIBUTION INDUSTRY
The Department of Energy estimates that the total volume of refined petroleum
products sold in the United States is approximately 819 million gallons per
day. Refined petroleum products are generally distributed by three types of
entities: pipeline companies that distribute directly to large end-users, such
as utilities and airports; major oil companies that often supply their own
retail outlets and are normally focused on urban areas; and independently
owned wholesale petroleum distributors.
According to Petroleum Marketers Association of America there are approx-
imately 7,850 independent petroleum distributors in the United States.
Collectively, these marketers sell approximately 50% of the gasoline, 60% of
the diesel fuel and 80% of the home heating oil consumed in America. Due to
these industry characteristics, as well as the relative absence of industry
consolidators, the owners of independent petroleum businesses, a majority of
which are smaller owner-operators, have limited alternatives to sell their
operations. The Company believes these factors create an opportunity for it to
be a part of the consolidation of this industry and accomplish additional
acquisitions in its existing region and in additional market areas. The
ability to so participate is contingent on the availability of financial
resources, which availability has been problematic recently, and/or the
willingness of sellers to provide significant financing.
PETROLEUM MARKETING OPERATIONS
Meteor operates its petroleum marketing business primarily from its Colorado,
New Mexico and Wyoming offices. The Company operates this business through
Meteor Marketing, Inc. d/b/a Graves Oil & Butane Co., Inc., Fleischli Oil
Company, Inc., and Tri-Valley Gas Co.
The commercial and wholesale diesel fuel, gasoline and lubricant operations
are the largest part of the Company's business. These operations have
agreements to supply products to customers that include truck stops, retail
gasoline service stations, convenience stores, construction companies,
commercial fleet distribution centers, the federal government, mining
companies and utilities.
The commercial/wholesale operation has distributor agreements to purchase
products from Phillips Petroleum Company, Sun Lubricants, Conoco, Inc., Amoco
Petroleum Products, Exxon Lubricants, Sinclair Oil Company, Shell Oil Company,
Frontier Oil and Refining Company, and Fina Oil Company. These distributor
agreements allow the Company to purchase petroleum products at wholesale
prices directly from distribution centers, pipeline terminals and refineries
controlled by these large oil producer/refiners. The Company is then
authorized to resell those products to its customers.
The Company's distribution agreements generally have three-year terms. The
distribution agreements do not provide for an exclusive territory and can be
terminated by either party upon 30 days notice. There can be no assurance
that these agreements will not have to be renegotiated or that they will be
renewed. Most recently, due to changes in the industry, the Company has been
notified that it will lose certain direct contracts with Sun and Conoco. In
addition, Meteor has recently signed a direct supply contract and commenced
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doing business with Chevron Lubricants. Although the Company is a relatively
long standing distributor of products in the states where it operates, the
consolidation in the industry makes it likely that Meteor will lose or add one
or more additional contracts. In such an event, the Company's operations can
be adversely impacted, however, because Meteor's customer base is larger than
the average distributor in the industry, management believes that it has the
ability to develop relationships with new suppliers and use its remaining
existing suppliers to provide quality products to its customers.
Many of the Company's wholesale customers operate retail gasoline service
stations under the banners of various major oil companies. The banner
arrangements require that a retail operator purchase fuel exclusively from a
distributor, such as the Company, who is authorized to sell branded products.
On occasion the Company has supplied new signage and other improvements to
retailers so they would switch to a Company brand. The Company's suppliers
may subsidize such improvements by providing discounts to the Company or by
forgiving certain obligations based on the volume of product sold to such
retailer.
The Company also markets its products to commercial and governmental accounts
through direct selling efforts of the Company. The majority of the Company's
revenues come from repeat orders from existing customers. The Company also
advertises in trade journals and attends industry trade shows in its markets.
The Company's wholesale transactions and most of its commercial sales begin
with the loading of the Company's trucks at pipeline supplied terminals,
refineries or other storage facilities. When sold in transport quantities,
the trucks deliver the products directly to the customer with no intermediate
storage of fuel. The distribution process for bulk fuel products, from
pick-up to delivery to customers, is typically completed in less than two
days.
The Company's wholesale/commercial customers are primarily located in New
Mexico, Wyoming, Colorado and Nevada. One customer accounted for 12% of the
Company's sales in 2000.
The Company operates 17 automated cardlock locations. The cardlock systems
provide 24-hour-per-day access to fuel dispensing facilities for commercial
fleet customers and customers with automated debit cards. The cardlock
systems do not require that a Company employee be present to process the fuel
purchase. The cardlock facilities are primarily used by commercial fleet
operators in order to take advantage of automated transaction process
technology which allows a user to insert a "user card" activating the fuel
dispenser and records the transaction. The Company's strategy contemplates
increasing the number of cardlock facilities that the Company owns or
controls.
ROCKY MOUNTAIN PROPANE LLC
The Company also has a wholesale, retail and commercial propane business.
Meteor has over 2,900 residential and over 260 commercial propane customers.
Effective in January 2001, Meteor contributed substantially all of its propane
assets into a new entity, Rocky Mountain Propane LLC, and sold an interest in
such company to Meteor's propane management. Management of Rocky Mountain
Propane LLC is actively seeking financing for other propane opportunities in
its market areas.
5
SABA POWER COMPANY LTD.
Saba Power Company Ltd. ("Saba Power") is a limited liability corporation in
Pakistan. It was established in early 1995 to pursue development of a power
plant project in Pakistan. As discussed below, the Company has an interest in
Saba Power, which has a power plant project 40 miles from Lahore, Pakistan
(the "Power Project"). Costs for the 125 megawatt plant were approximately
$160 million. Construction activity was completed in December of 1999 and the
plant began selling electricity in January 2000. Due to the political
situation in Pakistan, the debt financing relating to the project is such that
substantially all of the cash flow is being applied to pay down the existing
debt. If the debt is not restructured, it is estimated to take approximately
7 to 8 years to pay off the existing debt.
At December 31, 2000, the Company had invested $0.7 million for an approximate
1.5% interest in Saba Power. The Company is not required to invest any
additional capital related to the Power Project. If additional capital is
required, then the Company will have the choice of investing more capital or
suffering ordinary dilution to its ownership interest without incurring any
penalties.
INNOVATIVE SOLUTIONS AND TECHNOLOGIES, INC.
In August of 1996, the Company acquired Innovative Solutions and Technologies,
Inc. ("IST"), a Colorado corporation, which provides environmental consulting
services. IST provides consulting services to outside clients as well as
Meteor and its affiliates.
INSURANCE
The Company has a commercial liability policy, an umbrella policy, workmen's
compensation, as well as other policies covering damage to its properties.
These policies cover Company facilities, employees, equipment, inventories and
vehicles in all states of operation. While management believes the Company's
insurance coverage is adequate for most foreseeable problems, and is
comparable with the coverage of other companies in the same business and of
similar size, its coverage does not protect the Company for most third party
liabilities relating to damage of the environment. Such environmental related
coverage to third parties, is generally unavailable or available only at a
prohibitive cost.
COMPETITION AND MARKETS
The petroleum marketing business is highly competitive. The Company competes
on the basis of price, service and corporate capabilities. In all phases of
its operations, the Company encounters strong competition from a number of
companies, including some very large companies. Many of these larger
competitors possess and employ financial and personnel resources substantially
in excess of those which are available to the Company. The Company's
marketing division also competes with integrated oil companies which in some
cases own or control a majority of their own marketing facilities. These
major oil companies may offer their products to the Company's competitors on
more favorable terms than those available to the Company from its suppliers. A
significant number of companies, including integrated oil companies and
petroleum products distribution companies, distribute petroleum products
through a larger number of facilities than the Company.
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The wholesale and commercial distribution of petroleum products is a highly
competitive industry. This competition generally comes from other privately
held petroleum jobbers operating in the same geographic region as the Company.
The competition is primarily focused on the government contract and commercial
fleet segments of the business. The government contract business is awarded
via a lowest sealed bid process and the Company competes heavily with several
wholesale distributors. Competition also occurs for the gasoline service
station customers. In competing for this segment of the business, a customer
must be convinced to change the "brand" of the station (i.e., convert a
station or store from Conoco to Phillips 66). A change of brands can be
expensive and disruptive to the operations of the gasoline service station and
therefore does not occur frequently.
GOVERNMENTAL REGULATIONS
ENVIRONMENTAL MATTERS
Various federal and state statutes are designed to identify environmental
damage, identify hazardous material and operations, regulate operations
engaged in hazardous activities and establish procedures for remedial action.
The Company is inspected on a regular basis by state environmental
authorities. The Environmental Protection Agency ("EPA") and the various
states the Company operates in have instituted environmental compliance
regulations designed to prevent leakage and contamination from underground
storage tanks. The Company continually expends funds when complying with
changing environmental regulations and expects to spend about $0.1 million a
year on environmental compliance.
Various states have established trust funds for the clean up of contaminated
underground sites. Under most circumstances, the Company's exposure is
limited to $10,000 per location, beyond which the state clean-up fund assumes
responsibility. Assistance is not available to repair or replace underground
tanks or equipment. The law specifies requirements which must be met for an
applicant to be eligible, it includes a provision that payments will be made
in accordance with regulations and it states that payments from the trust
funds are limited to amounts in the fund. There can be no assurance that the
trust funds will have sufficient capital, or will agree, to fund remediation
of any particular problem.
ENVIRONMENTAL COMPLIANCE. The Company's Regulated Environmental Activities
are subject to an extensive variety of evolving federal, state and local laws,
rules and regulations governing the storage, transportation, manufacture, use,
discharge, release and disposal of product and contaminants into the
environment, or otherwise relating to the protection of the environment.
While not all-inclusive, exhaustive or complete, below is a listing of the
more significant environmental laws which potentially impact the Company's
Regulated Environmental Activities:
RESOURCE CONSERVATION AND RECOVERY ACT OF 1976, AS AMENDED IN 1984 ("RCRA").
The United States Congress enacted RCRA in 1976 and amended it in 1984. RCRA
established a comprehensive regulatory framework for the management of
hazardous wastes at active facilities. RCRA creates a "cradle to grave"
system for managing hazardous wastes. Those who generate, transport, treat,
store or dispose of waste above certain quantities are required to undertake
certain performance, testing and record keeping. The 1984 amendments to RCRA,
7
known as Hazardous Solids Wastes Act ("HSWA"), increased the scope of RCRA to
regulate small quantity hazardous waste generators and waste oil handlers and
recyclers as well as require the identification and regulation of underground
storage tanks in which liquid petroleum or hazardous substances were stored.
HSWA and its implementing regulations require the notification to designated
state agencies of the existence and condition of regulated underground storage
tanks and impose design, construction and installation requirements; leak
detection, spill/over fill protection, reporting, and cleanup requirements;
tank closure and removal requirements; and fiscal responsibility requirements.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980
("CERCLA" OR "SUPERFUND") AS AMENDED IN 1982. CERCLA established the
Superfund program to clean up inactive sites at which hazardous substances had
been released. Superfund has been interpreted to create strict, joint and
several liability for the costs of removal and remediation, other necessary
response costs and damages for injury to natural resources. Superfund
liability extends to generators of hazardous substances, as well as to (i) the
current owners and operators of a site at which hazardous substances were
disposed; (ii) any prior owner or operator of the site at the date of
disposal; and (iii) waste transporters who selected such facilities for
treatment or disposal of hazardous substances. CERCLA allows the EPA to
investigate and remediate contaminated sites and to recover the costs of such
activities (response costs), as well as damages to natural resources, from
parties specified as liable under the statute. CERCLA also authorizes private
parties who incur response costs to seek recovery from statutorily liable
parties. CERCLA was amended by the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"). SARA provides a separate funding mechanism for the
clean up of underground storage tanks. CERCLA excludes petroleum including
crude oil or any fraction thereof, with certain limitations from the
definition of "hazardous substances" for which liability for clean up of a
contaminated site will attach. This exclusion also applies to those otherwise
hazardous substances which are inherent in petroleum, but not to those added
to or mixed with petroleum products.
THE CLEAN WATER ACT OF 1972, AS AMENDED (THE "CLEAN WATER ACT"). The Clean
Water Act establishes water pollutant discharge standards applicable to many
basic types of manufacturing facilities and imposes standards on municipal
sewage treatment plants. The Clean Water Act requires states to set water
quality standards for significant bodies of water within their boundaries and
to ensure attainment and/or maintenance of those standards. Many industrial
and governmental facilities must apply for and obtain discharge permits,
monitor pollutant discharges and under certain conditions reduce certain
discharges.
FEDERAL OIL POLLUTION ACT OF 1990 ("OPA"). The OPA amends the Clean Water Act
and expands the liability for the discharge of oil into navigable waters.
Liability is triggered by discharge or substantial threat of a discharge of
oil into navigable waters. OPA defines three classes of parties subject to
liability: (1) owners, operators, and persons chartering vessels; (2) lessees
and permits of areas where off-shore facilities are located; and (3) owners
and operators of on-shore facilities.
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THE CLEAN AIR ACT OF 1970, AS AMENDED (THE "CLEAN AIR ACT"). The Clean Air
Act required the EPA to establish and ensure compliance with national ambient
air quality standards ("NAAQS") for certain pollutants. The NAAQS generally
are to be achieved by the individual states through state implementation plans
("SIPs"). SIPs typically attempt to meet the NAAQS by, among other things,
regulating the quantity and quality of emissions from specific industrial
sources. As required by the Clean Air Act, the EPA also has established
regulations that limit emissions of specified hazardous air pollutants and has
established other regulations that limit emissions from new industrial sources
within certain source categories. The Clean Air Act was amended extensively
in 1990, to, among other things, impose additional emissions standards that
must be implemented by the EPA through regulations.
THE EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT ("EPCRA"). EPCRA was
passed as a part of the Superfund Amendments and Reauthorization Act (SARA).
EPCRA requires emergency planning notification, emergency release
notification, and reports with respect to the storage and release of specified
chemicals. Industry must provide information to communities regarding the
presence of hazardous and extremely hazardous substances at facilities within
those communities.
THE OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION ACT ("OSHA"). OSHA
regulates exposure to toxic substances and other forms of workplace pollution
and hazards. The Department of Labor administers OSHA. OSHA specifies
maximum levels of toxic substance exposure. OSHA also sets out a
"right-to-know" rule which requires that workers be informed of, and receive
training relating to, the physical and health hazards posed by hazardous
materials in the workplace.
OTHER STATE, AS WELL AS, LOCAL GOVERNMENT REGULATION. Many states have been
authorized by the EPA to enforce regulations promulgated under various federal
statutes. In addition, there are numerous other state as well as local
authorities that regulate the environment, some of which impose more stringent
environmental standards than Federal laws and regulations. The penalties for
violations of state laws vary but typically include injunctive relief,
recovery of damages for injury to air, water or property, and fines for
non-compliance.
REGULATORY STATUS AND POTENTIAL ENVIRONMENTAL LIABILITY. The operations and
facilities of the Company are subject to numerous federal, state and local
environmental laws and regulations including those described above, as well as
associated permitting and licensing requirements. The Company regards
compliance with applicable environmental regulations as a critical component
of its overall operation and devotes significant attention to protecting the
health and safety of its employees and to protecting the Company's facilities
from environmental problems. Management believes that the Company has
obtained or applied for all permits and approvals required under existing
environmental laws and regulations to operate its current business. In light
of coverage of the state reimbursement funds and certain indemnification
provisions included in various acquisition contracts, management does not
believe that any pending or threatened environmental litigation or enforcement
action(s) will materially and adversely affect the Company's business. While
the Company has implemented appropriate operating procedures at each of its
facilities designed to assure compliance with environmental laws and
regulations, given the nature of its business, the Company always is subject
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to environmental risks and the possibility remains that the Company's
ownership of its facilities and its operations and activities could result in
civil or criminal enforcement and public as well as private action(s) against
the Company, which may necessitate or generate mandatory clean up activities,
revocation of required permits or licenses, denial of application for future
permits, or significant fines, penalties or damages, any and all of which
could have a material adverse effect on the Company.
EMPLOYEES
The Company employs approximately 220 people, none of whom are represented by
any collective bargaining organizations. Management considers its employee
relations to be satisfactory at the present time.
ITEM 2. PROPERTIES
The Company leases its corporate office in Denver, Colorado from a joint
venture affiliate that owns the building. Meteor owns approximately 25% of
the joint venture.
The Company operates an additional office for accounting and operations in
Cheyenne, Wyoming.
The Company operates fourteen terminals/bulk plants/warehouse combinations. Of
these, eleven are owned and three are leased. Three are located in New
Mexico, four in Wyoming, six in Colorado and one in Nevada.
The Company owns an interest in nine retail locations located in New Mexico
and Colorado which are leased to a third party operator.
The Company operates seventeen cardlock facilities, of which thirteen are
owned. Four are located in New Mexico, seven in Colorado, five in Wyoming and
one in Nevada.
The Company owns a substantial amount of personal property, including above
and below ground tanks located at its bulk plants, warehouses and cardlocks
described above. It also owns approximately 2,650 portable above ground fuel
and propane tanks, 5 automobiles, 97 trucks/bobtails, 72 tractors/trucks, 128
trailers and 18 forklifts. The Company also leases approximately 16
tractors/trucks under operating leases.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to certain litigation that has arisen in the normal
course of its business and that of its subsidiaries. In the opinion of
management, none of this litigation is likely to result in a material effect
on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the calendar year covered by this annual report,
no matter was submitted to a vote of the Company's shareholders through the
solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
PRICE RANGE OF COMMON STOCK
Prices for the Common Stock are quoted on the NASDAQ Small Cap.
Bid
Period High Low
Quarter Ended March 31, 1999. . . . . . $3.00 $2.38
Quarter Ended June 30, 1999 . . . . . . $3.50 $2.50
Quarter Ended September 30, 1999. . . . $4.06 $3.13
Quarter Ended December 31, 1999 . . . . $3.50 $2.63
Quarter Ended March 31, 2000. . . . . . $3.13 $2.31
Quarter Ended June 30, 2000 . . . . . . $4.88 $3.19
Quarter Ended September 30, 2000. . . . $6.38 $4.69
Quarter Ended December 31, 2000 . . . . $4.75 $2.88
__________________
As of the date of this report, there were approximately 62 record holders of
the Company's Common Stock. Based on securities position listings, the
Company believes that there are approximately 500 beneficial holders of
the Company's Common Stock.
DIVIDENDS
The Company has paid no cash dividends on its Common Stock and has no present
intention of paying cash dividends in the foreseeable future. It is the
present policy of the Board of Directors to retain all earnings to provide for
the growth of the Company. Payment of cash dividends in the future will
depend, among other things, upon the Company's future earnings, requirements
for capital improvements and financial condition. Under the current debt
covenant agreements, the Company is subject to restrictions on its ability to
pay cash dividends.
PRIVATE SALES OF SECURITIES
During the years ended December 31, 2000, 1999 and 1998, the Company sold
shares of its Common Stock and issued warrants and options the underlying
shares for which were not registered under the Securities Act of 1933, as
amended, as follows:
In June of 2000, Meteor sold 365,000 shares of Series B Convertible Preferred
Stock in a private placement to five accredited investors. The preferred
shares were sold for $2.00 each for total proceeds of $0.7 million. Each
share of Series B Convertible Preferred Stock is convertible into one share of
the Company's common stock and a 5-year warrant to purchase one share of
common stock at a price of $2.50 per share.
In 2000, the Company issued 23,887 common shares for services and 401(k)
matching.
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In April of 1999, the Company issued 113,750 warrants to outside consultants.
The warrants have an exercise price of $2.90 per share and expire in April
2003.
In September of 1999, the Company issued 64,000 common shares and guaranteed a
note of $1.4 million in exchange for a 25% interest in the office building in
which the Company's offices are located.
In 1999, the Company issued 36,475 common shares for services and 401(k)
matching.
In 1998, the Company issued 10,164 common shares for services and 401(k)
matching.
In 1998, the Company issued a total of 560,000 warrants in exchange for
services by non-employees and non-affiliates. The average exercise price of
these warrants was $3.67 per share. In 1998, 350,000 of these warrants were
cancelled. In 1999, the remaining 210,000 warrants expired.
During January 1999, the Company issued 300 shares of Series A preferred stock
with extraordinary voting rights. This was done in order to ensure that the
Company's current board members remained in control of Meteor until such time
as Nevada Manhattan Group Inc. delivered a valuable contract to Meteor as
required by written agreement. Since the Nevada Manhattan transaction has
been rescinded, Meteor redeemed and cancelled all of the Series A preferred
stock in February 2000 at no cost.
In the first quarter of 2001, the Company completed a private placement to
five accredited investors. The private placement consisted of approximately
123,000 units at $15 per unit for total proceeds of $1.9 million. Each unit
consists of 5 shares of common stock and 3 common stock purchase warrants with
an exercise price of $5.50 per share. The warrants expire 5 years from the
date of issue. The proceeds were issued to purchase approximately 10% of the
outstanding common stock of Active IQ ($1.1 million) and the remaining
proceeds will be used for general working capital needs.
ITEM 6. SELECTED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA:
(Dollars in Thousands, Except Per Share Data)
For the Years Ended December 31,
2000 1999 1998 1997 1996
-------- -------- --------- -------- --------
Sales $196,800 $155,211 $118,362 $88,440 $59,984
Cost of sales 174,497 130,417 97,558 75,439 49,644
Operating expenses 21,409 23,232 17,905 11,814 9,119
Other (expense) income (2,116) (602) (348) 397 (79)
Net (loss) income $ (949) $ 259 $ 1,168 $ 601 $ 462
(Loss) earnings per share:
Basic $ (.27) $ .07 $ .31 $ .16 $ .15
Diluted $ (.27) $ .07 $ .31 $ .16 $ .14
12
Weighted average number of
common shares and common
share equivalents:
Basic 3,537,555 3,454,146 3,792,197 3,821,061 3,184,397
Diluted 3,537,555 3,459,798 3,796,864 3,862,826 3,227,496
BALANCE SHEET DATA:
(Dollars in Thousands)
At December 31,
2000 1999 1998 1997 1996
-------- -------- -------- ------- ---------
Current assets $25,477 $ 22,032 $ 16,096 $15,826 $ 8,488
Property, plant and
equipment, net 16,437 17,905 19,235 13,940 8,277
Other assets 3,241 3,503 4,059 2,175 3,669
Total assets 45,155 43,440 39,390 31,941 20,434
Current liabilities 27,255 22,655 16,506 12,935 8,943
Long-term debt 7,202 5,865 6,390 2,912 446
Deferred tax liability 2,556 2,606 3,686 2,288 1,773
Minority interest 250 5,412 4,952 4,515 4,152
Shareholders' equity 7,424 6,902 7,856 9,291 5,120
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Act of 1995.
Such statements are based on management's current expectations and are subject
to a number of factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking statements.
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the historical financial
statements and notes thereto of Meteor, included elsewhere in this document.
The Company is engaged in the distribution and marketing of refined petroleum
products including gasoline, diesel fuel, propane and lubricants. The
Company's growth, since its inception in 1992, has been primarily through the
acquisition of businesses in the petroleum marketing industry.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2000, the Company had a working capital deficit of $1.8
million compared to a working capital deficit of $0.6 million at December 31,
1999. The decrease in working capital is primarily attributable to the
restructuring agreement with the former shareholder of a subsidiary.
Net cash provided by operating activities totaled $3.3 million for the year
ended December 31, 2000, compared to cash used in operating activities of $1.1
million for the year ended December 31, 1999 and $3.0 million provided by
operating activities for the year ended December 31, 1998. The net cash
provided by operating activities in 2000 is principally related to improved
collections of accounts receivable while pricing has increased.
13
Net cash used in investing activities totaled $0.2 million for the year ended
December 31, 2000, compared to cash used of $3.7 million for the year ended
December 31, 1999 and $4.0 million for the year ended December 31, 1998. The
use of cash in investing activities in 2000 is attributable to purchases of
property, plant and equipment.
Net cash used in financing activities totaled $3.2 million for the year ended
December 31, 2000, compared to cash provided of $4.6 million for the year
ended December 31, 1999 and $1.2 million for the year ended December 31, 1998.
This use of cash for financing activities is related to payments on long-term
debt and the reduction of the revolving credit facility.
The Company has a revolving bank credit facility with Wells Fargo Business
Credit, Inc. allowing for borrowings to a maximum of $12.5 million which
expires December 31, 2002. The credit line is subject to a borrowing base, as
defined. At December 31, 2000, the borrowing base was approximately $11.6
million. $8.6 million was borrowed against the facility and is recorded as a
current liability. During the year the Company was out of compliance with
several covenants contained in the agreement and the Company obtained waivers
from the lender for noncompliance.
The Company has various loans with banks, suppliers and individuals which
require principal payments of $3.8 million in 2001.
The Company is obligated to pay operating lease costs of approximately $1.0
million in 2001 for land, building, facilities and equipment.
The prices the Company pays for gasoline and diesel products are subject to
market fluctuation and not in the control of the Company. Prices for these
products can and have fluctuated significantly. Higher product prices could
have a significant impact on the Company's borrowing capabilities due to the
generally faster timing required for payments to the Company's suppliers
compared to the timing of collection of receivables from its customers. When
necessary, the Company finances these working capital requirements through its
revolving bank credit facility. This facility contains certain financial
covenants which are based on the Company's budgeted results. If, as a result
of price changes or other factors, the Company is unable to meet its debt
covenants, its ability to continue to borrow under the revolving credit
facility could be limited. If that were to occur, the Company would have to
make alternative financial arrangements, which could include seeking
additional debt or equity financing which may or may not be available.
In August 2000, the Company acquired for retirement the Series A Convertible
preferred stock of a subsidiary in exchange for a $4.4 million note payable
and the assumption of certain environmental liabilities. The note is being
amortized over a four-year period plus interest at 8%. The note requires a
$1.5 million payment to be made from the receipts from the future sale or
refinancing of certain assets. This payment was made in connection with the
Rocky Mountain Propane transaction. The note is secured by certain assets of
the subsidiary. The excess of the carrying value of the minority interest (the
preferred shares) over the liabilities recorded in the transaction was
credited to paid in capital.
14
The Company is responsible for any contamination of land it owns or leases.
However, the Company's cost may have limitations on any potential
contamination liabilities, as well as claims for reimbursement from third
parties. For the periods ended December 31, 2000, 1999 and 1998, the Company
recorded expenses of $0.2 million, $0.1 million and $0.1 million,
respectively, for site assessment, cleanup related costs and regulatory
compliance. The Company has accrued $1.0 million at December 31, 2000, for
environmental remediation, which amount management believes to be adequate to
cover known remediation requirements in the future which are not expected to
be reimbursed by third parties.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to interest rate changes is primarily related to its
variable rate debt issued under its $12.5 million revolving credit facility
(See Note 7 to the Financial Statements). Because the interest rate on this
facility is variable, based upon the lender's base rate, the Company's
interest expense and net income are affected by interest rate fluctuations.
If interest rates were to increase or decrease by 100 basis points, the
result, based upon the existing outstanding debt as of December 31, 2000 would
be an annual increase or decrease of approximately $86,000 in interest expense
and a corresponding decrease or increase of approximately $52,000 in the
Company's net income (loss) after taxes.
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO DECEMBER 31, 1999
The Company is primarily engaged in the business of marketing and distributing
refined petroleum products and related products employing wholesale and retail
operations. The Company's principal products are gasoline, diesel fuel,
propane, greases and lubricants, convenience store items and other products
(antifreeze, chemicals, services, hardware and miscellaneous items).
In December 1999, the Company sold its retail stores operating subsidiary to
its largest shareholder. The Company retained the property, plant and
equipment of nine of the retail locations and continues to lease these assets
to the purchaser. The Company will continue to supply gasoline, diesel fuel
and propane to the retail sites.
The Company had sales of $196.8 million in 2000 compared to $155.2 million in
1999, a $41.6 million (27%) increase. The increase is primarily due to
higher product prices during the current period partially offset by a
decrease in sales volumes.
Gross profit for 2000 and 1999 was $22.3 million and $24.8 million respec-
tively, a decrease of $2.5 million (10%). The decrease is due to the exchange
of higher retail margins with lower wholesale margins resulting from the sale
of the retail stores business at the end of 1999, partially offset by an
increase in freight revenue, resulting from the pass-through of higher fuel
prices to our customers.
15
The Company experienced a net loss of $0.9 million for 2000 compared to $0.3
million of net income in 1999. The decrease is due to increased interest
expense as a result of higher product pricing and other expenses related to
environmental compliance and the write off of $0.6 million in costs associated
with an acquisition that was terminated.
Gasoline sales volumes decreased to 49.0 million gallons in 2000 from 53.0
million gallons in 1999, a decrease of 4.0 million gallons (8%) due to a
decrease in demand for gasoline as a result of the pass-through of higher
product prices.
Gasoline sales increased to $50.5 million in 2000 from $41.5 million in 1999,
an increase of $9.0 million (22%) due to higher product prices during the
current period partially offset by the decrease in sales volumes. Gross
profit decreased to $3.3 million in 2000 from $4.8 million in 1999, a decrease
of $1.5 million (31%). Gross profit per gallon of gasoline sold decreased to
$.07 in 2000 from $.09 in 1999 due to the exchange of higher retail margins
with lower wholesale margins resulting from the sale of the retail stores
business.
Diesel sales volumes decreased to 108.3 million gallons in 2000 from 109.9
million in 1999, a decrease of 1.6 million gallons (1%), due to one large
mining customer accepting a bid directly from another diesel supplier,
although the Company retained the trucking services. Diesel sales increased
to $113.2 million in 2000 from $77.7 million in 1999, an increase of $35.5
million (46%) due to the pass-through of higher product prices during the
current period partially offset by the decrease in sales volumes. Gross
profits increased to $8.4 million in 2000 from $8.3 million in 1999, an
increase of $0.1 million (1%). Gross profit per gallon of diesel sold
remained constant at $.08 in 2000 and 1999.
Propane sales volumes decreased to 7.3 million gallons in 2000 from 8.1
million gallons in 1999, a decrease of 0.8 million gallons (10%) due to a
decrease in wholesale volume caused by unseasonably warm weather in our
marketing area. Propane sales increased to $6.7 million in 2000 from $4.8
million in 1999, an increase of $1.9 million (40%) due to higher product
prices during the current period partially offset by the decrease in sales
volumes. Gross profits increased to $2.2 million in 2000 from $1.9 million in
1999 due to an increase in the gross profit per gallon of propane sold to $.31
in 2000 from $.24 in 1999, and a larger decrease in wholesale propane sales
volumes versus a lower decrease of higher margin residential sales volumes.
Greases and lubricants sales increased to $18.4 million in 2000 from $16.7
million in 1999, an increase of $1.7 million (10%) due to higher product
prices during the current period. Gross profit decreased to $3.4 million in
2000 from $3.5 million in 1999, a decrease of $0.1 million (3%) due to an
increase in product pricing resulting in lower demand.
There were no sales of convenience store items in 2000 from $6.7 million in
1999 due to the sale of the retail stores business in December 1999.
Other sales (anti-freeze, chemicals, services, hardware, rental income,
freight revenue and miscellaneous items), increased to $8.0 million in 2000
16
from $7.7 million in 1999, an increase of $0.3 million (4%). Gross profit
increased to $4.9 million in 2000 from $4.6 million in 1999, an increase of
$0.3 million (7%). The increase in sales and gross profit is primarily due to
an increase in freight revenue resulting from the pass-through of higher fuel
prices to our customers.
Selling, general, and administrative expense was $19.0 million for the year
ended December 31, 2000, compared to $21.0 million for the year ended December
31, 1999, a decrease of $2 million (10%). The decrease is due to a reduction
in SG&A expenses resulting from the sale of the retail stores business,
partially offset by the acquisition of Carroll Oil Company and an increase in
the level of activity and costs incurred to build the infrastructure necessary
for future growth of the Company.
Depreciation and amortization for the year ended December 31, 2000, was $2.4
million compared to $2.2 million for the year ended December 31, 1999. The
increase is attributable to the Carroll Oil Company acquisition and property,
plant and equipment additions.
Interest expense increased to $1.7 million for the year ended December 31,
2000, compared to $1.2 million for the year ended December 31, 1999, an
increase of $0.5 million (44%). The increase is due to the additional
financing necessary to carry higher average levels of accounts receivable and
inventory. Accounts receivable and inventory are significantly higher during
2000 versus 1999 due to the rapid increase in the price levels for petroleum
based products.
The Company recognized other expense of $0.4 million for the year ended
December 31, 2000, compared to other income of $0.6 million in 1999. In the
third quarter of 2000, the Company terminated all negotiations to acquire
Jardine Petroleum Company and Innovative Drug Delivery Systems, Inc. resulting
in one time expenses of approximately $0.6 million. The Company recognized
other income for the year ended December 31, 1999, of $0.3 million related to
the sale of 250,000 shares in a Canadian corporation.
The provision for income taxes for the year ended December 31, 2000, was $0.6
million benefit compared to $0.2 million expense for the period ended December
31, 1999. The decrease is primarily due to lower income.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO DECEMBER 31, 1998
The Company had sales of $155.2 million in 1999 compared to $118.4 million in
1998, a $36.8 million (31%) increase. The increase is due to the Company's
acquisitions of subsidiaries and due to higher product prices during 1999.
Gross profit for 1999 and 1998 was $24.8 million and $20.8 million respec-
tively, an increase of $4.0 million (20%). The increase is due to acquisitions
generating greater volume, partially offset by a decline in retail gasoline
margins during the current period.
Net income decreased in 1999 to $0.3 million from $1.2 million in 1998, a
decrease of $0.9 million (78%). The decrease is due to expenses incurred in
building the infrastructure necessary for future growth of the Company and
increased expenses encountered in operating the retail stores. In addition,
interest, depreciation and amortization expense increased due to acquisitions.
These expenses were partially offset by an increase in gross profit resulting
from greater volume and lower income tax expense.
17
Gasoline sales volumes increased to 53.0 million gallons in 1999 from 43.5
million gallons in 1998, an increase of 9.5 million gallons (22%) due
primarily to acquisitions. Gasoline sales increased to $41.5 million in 1999
from $28.1 million in 1998, an increase of $13.4 million (48%) due to the
increase in sales volumes and higher product prices during the current period.
Gross profit increased to $4.8 million in 1999 from $4.3 million in 1998.
Gross profit per gallon of gasoline sold decreased to $.09 in 1999 from $.10
in 1998 due to lower gross margin wholesale accounts acquired in the Carroll
Oil acquisition.
Diesel sales volumes increased to 109.9 million gallons in 1999 from 94.3
million in 1998, an increase of 15.6 million gallons (17%), due primarily to
acquisitions. Diesel sales increased to $77.7 million in 1999 from $56.7
million in 1998, an increase of $21.0 million (37%) due to the increase in
sales volumes and higher product prices during the current period. Gross
profits increased to $8.3 million in 1999 from $6.2 million in 1998. Gross
profit per gallon of diesel increased to $.08 in 1999 from $.07 in 1998, due
to increased purchasing volumes which resulted in lower costs.
Propane sales volumes increased to 8.1 million gallons in 1999 from 8.0
million gallons in 1998, an increase of 0.1 million gallons (1%) due to the
acquisition of Tri-Valley, partially offset by a reduction in wholesale volume
due to unseasonably warm weather in our marketing area. Propane sales
increased to $4.8 million in 1999 from $3.8 million 1998, an increase of $1.0
million (26%) due to generally higher product prices during the current
period. Gross profit increased to $1.9 million in 1999 from $1.4 million in
1998 due to an increase in the gross profit per gallon of propane sold to $.24
in 1999 from $.18 in 1998, and increased sales of residential propane versus
lower-margin wholesale accounts.
Greases and lubes sales decreased to $16.7 million in 1999 from $16.9 million
in 1998, a decrease of $0.2 million (1%). Gross profit increased to $3.5
million in 1999 from $3.4 million in 1998, an increase of $0.1 million (3%).
Greases and lubes remained relatively constant in 1999 as compared to 1998 as
the product group was not the focal point in the latest acquisitions.
Sales of convenience store items increased to $6.7 million in 1999 from $5.7
million in 1998, an increase of $1.0 million (18%). Gross profit increased to
$1.7 million in 1999 from $1.5 million in 1998. Sales and gross profit
increased primarily due to operating four additional convenience stores in
Colorado.
Other sales (anti-freeze, chemicals, services, hardware, rental income and
miscellaneous items), increased to $7.7 million in 1999 from $7.1 million in
1998, an increase of $0.6 million (9%). Gross profit increased to $4.6 million
in 1999 from $3.9 million in 1998, an increase of $0.7 million (17%). The
increase in sales and gross profit is primarily due to acquisitions and an
increase in services to the mining industry.
Selling, general, and administrative expense was $21.0 million for the year
ended December 31, 1999, compared to $16.4 million for the year ended December
31, 1998, an increase of $4.6 million (28%). The increase is related to
acquisitions and corresponding increases in the level of activity and costs
incurred to build the infrastructure necessary for future growth of the
Company.
18
Depreciation and amortization for the year ended December 31, 1999, was $2.2
million compared to $1.5 million for the year ended December 31, 1998. The
increase is attributable to acquisitions and property, plant and equipment
additions.
Other expense for the year ended December 31, 1999, was $0.6 million compared
to $0.3 million for the year ended December 31, 1998. The increase is due to
additional interest expense related to debt for acquisitions and property,
plant and equipment purchases.
The provision for income taxes for the year ended December 31, 1999, was $0.2
million compared to $0.9 million for the period ended December 31, 1998. The
decrease is due to lower income and a reduction in the state tax rate due to
changes in the relative volume of business conducted in various states.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Included at F-1 through F-23 and S-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Directors and Executive Officers of the Company are as follows:
Name Age Positions and Offices Held
--------------- --- -------------------------------------------
Edward J. Names 49 President, Chief Executive Officer and
Director
Richard E. Kisser 46 Chief Financial Officer and Secretary/
Treasurer
Dennis R. Staal 52 Director
Ilyas Chaudhary 53 Director
Irwin Kaufman 64 Director
Richard E. Dana 57 Director
Darrell O. Owen 31 President and Chief Operating Officer of
Subsidiaries
There is no family relationship between any Director or Executive Officer of
the Company.
Capco Acquisub, Inc. has the right to appoint two Directors, however only one,
Ilyas Chaudhary, is currently representing Capco Acquisub, Inc.
19
On November 10, 1998, an Annual Meeting of the Board of Directors was held. A
compensation committee was established and Irwin Kaufman, Richard Dana and
Dennis Staal were appointed to the committee. Also established was an Audit
Committee. Irwin Kaufman, Richard Dana and Edward Names were appointed to the
audit committee. Since November 10, 1998, the Compensation Committee has met
2 times and the audit committee has met 4 as of the date of this filing.
Set forth below are the names of all Directors and Executive Officers of the
Company and its major subsidiaries, all positions and offices with the Company
held by each such person, the period during which he has served as such, and
the principal occupations and employment of such persons during at least the
last five years:
EDWARD J. NAMES - President, Chief Executive Officer and Director. Mr. Names
has been President and a Director of Meteor since it was incorporated in 1993.
Mr. Names has extensive experience in mergers and acquisitions as well as such
business matters as business planning, financing, management and contract
negotiation. Mr. Names was President of Alfa Resources, Inc. and its
subsidiaries from 1983 to 1995 and resigned as a director in 1997. In 1987,
Mr. Names became Special Counsel to the law firm of Wills and Sawyer, P.C.,
Denver, Colorado, and maintained that relationship until December 1992. Mr.
Names was associated with the firm of Nelson & Harding, Denver, Colorado, from
1980 to 1981, and the law firm of Schmidt, Elrod & Wills, Denver, Colorado,
where he practiced corporate and securities law and became a Partner in
October 1982. Mr. Names received a Bachelor of Arts Degree in Economics from
the University of Colorado in 1973, and a Juris Doctorate from the University
of Denver College of Law in 1980. He devotes his full time to the business of
the Company and its subsidiaries.
RICHARD E. KISSER, Chief Financial Officer, Secretary/Treasurer. Mr. Kisser
was hired in June 1998 and was appointed by the Board of Directors to Chief
Financial Officer in June 1999. In March 1999, The Board of Directors
appointed Mr. Kisser as Secretary/Treasurer for the Company. From 1981
through 1997, Total Petroleum, Inc. employed Mr. Kisser. He started as
Assistant Manager of Corporate Accounting in 1981. In 1983, he was appointed
Manager of Crude Oil Accounting and held that position until 1988. In 1988,
he was promoted to Manager of Financial Services and held that position until
1989 when he became Manager of Crude Oil and Products Accounting. He held
that position until 1990 when he was promoted to Director of Internal Audit.
From 1978 through 1981, he was an In-Charge Staff Accountant with Price
Waterhouse LLP. Mr. Kisser graduated from Central Michigan University, where
he received a Bachelor of Science degree in Accounting and Business Management
in 1978.
DENNIS R. STAAL - Director. Mr. Staal has been a Director of the Company
since 1993 and was Secretary/Treasurer from July, 1993 to March 1999. Mr.
Staal was Chief Financial Officer from July 1993 until April 1999. He also
serves as a Director of some of the Company's subsidiaries. Since April 1999,
Mr. Staal has devoted less than 50% of his time to the Company as a
consultant. Mr. Staal is currently a Director and Chief Financial Officer of
Capco Energy, Inc. and Stansbury Holdings Corporation. From 1986 to 1991, Mr.
Staal was a Director and President of Saba Petroleum Company. From 1982
through 1984, he was Chief Financial Officer of High Plains Genetics, Inc.
From 1979 to 1981, Mr. Staal served as President of Wulf Oil Corporation and
as Director from 1977 to 1981. Mr. Staal served as a Director of Chadron
Energy Corporation and as a Director of the First National Bank of Chadron
20
from 1979 through 1982. From 1973 through 1976, he was Controller for the
Health Planning Council of Omaha. Mr. Staal was a CPA with Arthur Andersen &
Co. Mr. Staal is a graduate of the University of Nebraska, where he received
a Bachelor of Science degree in Business Administration in 1970.
ILYAS CHAUDHARY - Director. Mr. Chaudhary has been a Director of the Company
since November 1995. He has also been an Officer and Director of Capco
Resources, Inc. ("CRI"), which became a wholly-owned subsidiary of the
Company, in October 1993. He was an Officer and a Director of Saba Petroleum
Company, (now Greka Energy Corporation) a publicly held oil and gas company
from 1985 until 1998. Mr. Chaudhary is a Director and controlling
shareholder of Capco Energy, Inc. and Capco Resources Ltd.,an Alberta Stock
Exchange listed company and also Meteor's largest shareholder. Mr. Chaudhary
has 25 years of experience in various capacities in the oil and gas industry,
including eight years of employment with Schlumberger Well Services from 1972
to 1979. Mr. Chaudhary received a Bachelor of Science degree in Electrical
Engineering from the University of Alberta, Canada.
IRWIN KAUFMAN - Mr. Kaufman has been a Director of the Company since August
1997. Mr. Kaufman is a financial consultant facilitating contacts with the
investment community. Mr. Kaufman helps arrange financing for small and mid-
sized companies and consults with management to enhance shareholder value. He
has worked as a financial consultant for the last several years. Mr. Kaufman
has also been a principal consultant for Computer and Mathematics Education
for the Sherman Fairchild Foundation. Mr. Kaufman provides consulting services
to the Company on an as needed basis. Mr. Kaufman also serves as a Director
on the Board of Directors of Capco Energy, Inc.
RICHARD E. DANA - Mr. Dana has been a Director of the Company since September
1998. Mr. Dana is a business manager with experience covering thirty-four
years, the last 28 years of which were in the petroleum industry in both the
upstream (oil and gas exploration and production)and the downstream (refining
and marketing) sectors. From 1971 until 1998 Mr. Dana was employed by Total
Petroleum Ltd. starting as a Controller in 1971, then as Treasurer in 1980 and
became a Senior Vice President and Chief Financial Officer in 1989. Mr. Dana
provides consulting services and temporary management services to varied
enterprises, including the Company on an as needed basis.
DARRELL O. OWEN - President and Chief Operating Officer of the Company's
subsidiaries. Mr. Owen graduated from Fort Lewis College, where he received a
Bachelor of Arts Degree in Business Administration in 1991. From 1991 until
1997 Mr. Owen was employed by Graves Oil & Butane Co., Inc. and held various
positions including Controller, General Manager for Farmington area, and
General Manager of New Mexico Commercial Operations. From 1998 until 2000 Mr.
Owen was employed by Meteor Industries, Inc. as Manager of Information
Systems. Mr. Owen devotes his full time to the business of the Company and
its subsidiaries described above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year, and Forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year
and certain representations, no persons who were either a director, officer,
or beneficial owner of more than 10% of the Company's common stock, failed to
file on a timely basis reports required by section 16(a) of the Exchange Act
during the most recent fiscal year.
21
ITEM 11. EXECUTIVE COMPENSATION
The following is information regarding the executive compensation for the
Company's Chief Executive Officer and President for the fiscal years ended
December 31, 2000, 1999, and 1998. No other Executive Officer received salary
and bonus in excess of $100,000 during such periods.
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
------------------------- ----------------- ----------
Securi-
ties
Under-
Other Re- lying All
Annual stricted Options/ Other
Name and Principal Compen- Stock SARs LTIP Compen-
Position Year Salary Bonus sation Award(s) (Number) Payouts sation
- ----------------- ---- -------- ----- ------ --------- ------- --------- ------
Edward J. Names 2000 $125,000 -- $ 8,978* -- 180,000 -- --
President and 1999 $125,000 - $ 9,015* -- 77,069 -- --
Chief Executive 1998 $105,000 -- $ 8,078* -- 36,910 -- --
Officer
__________________
* Represents premiums paid on health insurance policies and the use of a Company
vehicle.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Potential
Realizable
Percent Value at Assumed
Number of Of Total Annual Rates
Securities Options/SARs Exercise Of Stock Price
Underlying Granted To Or Base Appreciation
Options/SARs Employees In Price Expiration For Option Term
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- --------------- ------------ ------------ -------- ---------- ------ -------
Edward J. Names 15,000 2.1% $2.75 4/11/05 $ 37,720 $ 58,400
35,000 4.8% $2.75 4/11/05 $ 88,013 $136,267
55,000 7.6% $2.75 4/11/05 $138,306 $214,134
75,000 10.4% $2.75 4/11/05 $188,600 $292,002
22
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Securities
Underlying Value of Unexer-
Shares Unexercised cised in-the
Acquired Options SARs Money Options/
On At FY-end SARs AT FY-end
Exercise Value Exercisable/ Exercisable/
Name (Number) Realized Unexercisable Unexercisable
- ---------------- --------- -------- ------------- ----------------
Edward J. Names -0- -0- 393,979/244,979 $-0-/$-0-
EMPLOYMENT ARRANGEMENTS
EDWARD J. NAMES, President of the Company, entered into a five-year employment
agreement with the Company which became effective in January 1994, which
provides that Mr. Names is required to devote substantially full time to the
business of the Company. The agreement was amended in January 1999 to provide
for an annual salary of $125,000 plus an annual bonus based upon the financial
performance of the Company. Pursuant to his employment agreement, Mr. Names
is allowed to devote up to 10 hours per month to other business operations
including his duties as a director or officer in other companies. Absent
notice to the contrary from the Company or Mr. Names, the five-year term of
the employment agreement renews automatically each year and such agreement has
been renewed each year. The Company can terminate his employment, however, at
any time without cause and be obligated only for two years salary. The
employment agreement includes a covenant not to compete which is effective for
one year after termination of employment.
DENNIS R. STAAL, Director of the Company has a three year consulting agreement
which provides for a fee of $430 per day for services as well as restricted
stock bonuses as approved by the Company's compensation committee. He devotes
less than 50% of his time to the business of the Company and its subsidiaries.
The Company may terminate Mr. Staal's consulting agreement at any time and be
obligated for a maximum payment of approximately $50,000. The agreement
includes a covenant not to compete for nine months after termination if Mr.
Staal terminates the contract.
RICHARD E. KISSER, Chief Financial Officer, Secretary/Treasurer, entered into
a three-year employment agreement with the Company which became effective in
January 1999, which provides that Mr. Kisser is required to devote full time
to the business of the Company. The agreement calls for a base salary of
$85,000 per year plus an annual bonus at the discretion of the Board of
Directors. Absent notice to the contrary from the Company or Mr. Kisser, the
agreement renews for succeeding periods of one year. The Company can
terminate his employment, however, at any time without cause and be obligated
to payment of the balance of his base salary or six months base salary
whichever is less and any accrued vacation and bonuses earned through the
termination date. The employment agreement includes a covenant not to compete
which is effective for six months after termination of employment.
23
STOCK OPTION PLAN
A stock option plan providing for the issuance of incentive stock options and
non-qualified stock options to Meteor's employees was approved by Meteor's
shareholders on April 15, 1993. Pursuant to the Plan, 500,000 shares of
Meteor's $.001 par value Common Stock have been reserved for issuance. As of
December 31, 2000, 179,800 options were issued and outstanding under the Plan.
INCENTIVE EQUITY PLAN
The Board of Directors adopted the 1998 Incentive Equity Plan of the Company
(the "Incentive Plan") on November 10, 1998, which was approved by the
Stockholders at the Special Meeting of Shareholders held on the same day. On
April 11, 2000, the Board of Directors amended the Incentive Plan to increase
the number of options that can be awarded from 750,000 shares to 2,500,000
shares. Such amendment was presented to the shareholders of the Company and
approved at the August 11, 2000 annual meeting.
The purpose of the Incentive Plan is to enable the Company to attract officers
and other key employees and consultants and to provide them with appropriate
incentives and rewards for superior performance. The Incentive Plan affords
the Company the ability to respond to changes in the competitive and legal
environments by providing the Company with greater flexibility in key employee
and executive compensation than was available through the previously approved
plan or individual stock option agreements. This plan is designed to be an
omnibus plan allowing the Company to grant a wide range of compensatory awards
including stock options, stock appreciation rights, restricted stock, deferred
stock and performance shares or units. The Incentive Plan is intended to
encourage stock ownership by recipients by providing for or increasing their
proprietary interests in the Company, thereby encouraging them to remain in
the Company's employment. The Incentive Plan has been prepared to comply with
all applicable tax and securities laws, including Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and state and
federal tax laws.
Subject to adjustment as provided in the Incentive Plan, the number of shares
of Common Stock that may be issued or transferred, plus the amount of shares
of common stock covered by outstanding awards granted under the Incentive
Plan, shall not in the aggregate exceed 2,500,000. The number of Performance
Units granted under the Incentive Plan shall not in the aggregate exceed
200,000.
In January of 1999, an officer was granted incentive stock options to purchase
10,000 shares at the exercise price of $3.00 per share. These options vest
over a three year period.
In January 1999, the five members of the Board of Directors of the Company
were issued 250,000 options for services as Directors of the Company. Such
options are more fully described below under Director's Compensation.
In April 1999, 78,987 options were issued to officers and employees of the
Company. 59,003 of such options vested in April 2000 and are exercisable for
five years with an exercise price of $2.87. 19,984 of such options were
granted to Edward Names, Director, President and Chief Executive Officer.
Such options vested in April 2000 and are exercisable for five years with an
exercise price of $3.17.
24
In August of 1999, Meteor issued a total of 44,384 options to certain
employees of the Company as part of the Company 1998 bonus plan. The exercise
price is $3.00 and the options vested on August 31, 2000. These options
expire on August 31, 2004. Meteor issued a total of 7,085 to Edward Names as
part of the Company's incentive equity plan. The exercise price is $3.30.
These options expire on August 31, 2004.
In April 2000, a total of 250,000 options and 375,000 "contingent options"
were issued to the five board members of the Company. The options are more
fully described below under Director Compensation.
In April 2000, 99,500 options were issued to certain key employees of the
Company pursuant to the bonus policies of the Company. Such options vest in
one year and are exercisable for five years. The exercise price of these
options was $2.50. 55,000 options were granted to Edward Names, Director,
President and Chief Executive Officer at an exercise price of $2.75. These
options shall vest in one year and are exercisable for five years.
In April 2000, the Board of Directors issued 115,000 options to Irwin Kaufman,
115,000 options to Richard Dana and 55,000 options to Dennis Staal for
services rendered to the Company over and above those required as directors.
Such options vest immediately and are exercisable for five years. The
exercise price of all such options is $2.75.
The Board of Directors amended all outstanding employee and director options
as of April 2000, to vest immediately upon any change of control of the
Company. For the purposes of this amendment change of control is defined as a
change of 35% or more of the shareholdings of the Company.
In January 2001, 105,000 options were issued to certain key employees of the
Company pursuant to the bonus policies of the Company. Such options vest
quarterly in the first year and are exercisable for three years. The exercise
price of these options is $3.75. 225,000 options were granted to Edward
Names, Ilyas Chaudhary and Dennis Staal at an exercise price of $3.50. These
options shall vest immediately and are exercisable for three years.
As of December 31, 2000, 1,495,444 options were issued and outstanding under
the Incentive Plan.
DIRECTOR COMPENSATION
Outside Directors of the Company received, in prior years, fees of $250 per
meeting for telephone meeting and $750 per meeting for attendance at a meeting
in person. This has been discontinued as directors are now only being
compensated by options. Each Director is reimbursed for all reasonable and
necessary costs and expenses incurred as a result of being a Director of the
Company. In addition, the Company issues options to its Directors as
determined by the Board. In January of 1999 Meteor issued to all five
directors 50,000 options each at the exercise price of $3.75. These options
are non-qualified options granted pursuant to the Company's Incentive Equity
Plan and vested immediately but become exercisable ratably over four years.
In April 2000 the Company issued an additional 50,000 five year options each
at an exercise price of $2.75 per share vesting immediately, but becoming
exercisable over four years. Also, 375,000 five year options exercisable at
$2.75 were issued to the directors. Such options may be deemed to be
contingent options and only vest upon a change of control.
25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of the
Company's common stock owned beneficially, as of March 16, 2001, by any
person, who is known to the Company to be the beneficial owner of 5 percent or
more of the Company's common stock, and, in addition, by each Director and
each Executive Officer of the Company, and by all Directors and Executive
Officers as a group. Information as to beneficial ownership is based upon
statements furnished to the Company by such persons.
NAME AND ADDRESS AMOUNT OF BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
Capco Energy, Inc 1,139,000 27%
2922 E. Chapman Ave. #202
Orange, CA 92869
Ilyas Chaudhary 1,319,000 (1) 30%
2922 E. Chapman Ave. #202
Orange, CA 92869
Edward J. Names 562,619 (2) 13%
1401 Blake Street, Suite 200
Denver, CO 80202
Richard E. Kisser 17,585 (3) *%
1401 Blake Street, Suite 200
Denver, CO 80202
Darrell O. Owen 42,219 (4) 1%
1401 Blake Street, Suite 200
Denver, CO 80202
Dennis R. Staal 253,460 (5) 6%
2922 E. Chapman Ave. #202
Orange, CA 92869
Irwin Kaufman 149,100 (6) 3%
8224 Paseo Vista Drive
Las Vegas, NV 89128
Richard Dana 218,000 (7) 5%
128 Ash Street
Denver, CO 80220
Henry Fong 383,400 (8) 9%
2401 PGA Boulevard #190
Palm Beach Gardens, FL 33040
Wayne Mills 924,000 (9) 20%
5020 Blake Road
Edina, MN 55436
John F. Stapleton 400,000 (10) 9%
3190 High Point Drive
Chaska, MN 55318
26
All Executive Officers and 2,519,764 48%
Directors as a Group
(6 Persons)
*less than 1 percent
__________________
(1) Includes 1,139,000 shares of the Company held by a subsidiary of Capco
Energy, Inc. Mr. Chaudhary is Chairman of the Board, Chief Executive Office
and beneficially owns over 50% of the outstanding stock of Capco Energy, Inc.
Mr. Chaudhary also beneficially owns 180,000 shares of exercisable stock
options.
(2) Represents 40,240 shares held directly by Mr. Names, 265,000 shares held
by NFF, Ltd., a limited partnership of which he served as general partner;
2,400 shares held by his wife of which he disclaims beneficial ownership, and
254,979 shares underlying stock options exercisable within 60 days by Mr.
Names.
(3) Includes 17,585 shares of exercisable stock options held by Richard E.
Kisser, the Company's Chief Financial Officer, Secretary/Treasurer.
(4) Includes 1,201 shares held directly and 41,018 shares of exercisable stock
options held by Darrell O. Owen, who is President and Chief Operating Officer
of certain of the Company's subsidiaries.
(5) Includes 5,400 shares held directly by Mr. Staal; 71,500 shares held by
PAMDEN, Ltd., a limited partnership of which Mr. Staal is general partner;
8,432 shares held by Mystique Resources Company which is wholly owned by
PAMDEN, Ltd.; 600 shares held by an IRA and 167,528 shares of exercisable
stock options by Mr. Staal.
(6) Consists of 135,500 shares underlying stock options and warrants
exercisable by Mr. Kaufman and 13,600 shares owned by Mr. Kaufman directly.
(7) Consists of 218,000 shares of exercisable stock options held by Mr. Dana.
(8) Includes (i) 150,000 common shares and 90,000 warrants exercisable by
Gulfstream Financial Partners LLC, an entity owned 100% by Mr. Fong, (ii)
123,400 common shares held directly by Mr. Fong, and (iii) 20,000 publicly
traded warrants held directly by Mr. Fong. Does not include 120,000 shares of
Series B Preferred Stock held of record by an irrevocable trust for the
benefit of Mr. Fong's children that is convertible into 120,000 common shares
and 120,000 warrants. The preferred stock can be converted immediately and the
warrants are exercisable immediately upon conversion. Mr. Fong disclaims
beneficial ownership of the shares because he has no beneficial interest in
nor any voting power over the trust's assets.
(9) Includes (i) 50,000 shares held of record by his wife of which he
disclaims beneficial ownership, (ii) 90,000 issuable upon exercise of
warrants, (iii) 584,000 common shares held directly, and (iv) 100,000 shares
of Series B Convertible Preferred Stock that is convertible into 100,000
common shares and warrants to purchase 100,000 additional common shares. The
Series B Convertible Preferred Stock can be converted immediately and the
warrants are exercisable immediately upon conversion.
27
(10) Includes 250,000 common shares and 150,000 warrants exercisable by Mr.
Stapleton.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS INVOLVING THE COMPANY'S OFFICERS AND DIRECTORS
Capco, through a majority-owned subsidiary, currently owns approximately 30%
of the Company's Common Stock. Ilyas Chaudhary, a Director of the Company, is
an officer, director and a principal shareholder of Capco; Dennis Staal, a
Director of the Company, is also an officer of Capco and beneficially owns
35,000 common shares of Capco and 2,286 shares of Series A Preferred shares.
Irwin Kaufman, a Director of the Company, is also a director of Capco and owns
20,000 common shares of Capco. Edward Names, President and CEO of the Company
personally and through immediate family members may be deemed to beneficially
own 64,580 common shares of Capco and 2,286 shares of Series A Preferred
shares of Capco.
Effective December 1999, the Company completed the sale of its subsidiary,
Meteor Stores, Inc. ("MSI"), to Capco Energy, Inc. ("Capco"), an affiliate of
the Company.
The sale of this operating subsidiary was made to allow the Company to focus
on its core business of commercial, wholesale and cardlock petroleum
distribution. The Company, through a five year supply contract with Capco,
will continue to be the supplier of refined petroleum products to these
stores.
The total sale price for the sale of MSI was approximately $1,500,000.
$250,000 was paid in cash at closing and the Company received a promissory
note for $1,250,000 payable in monthly installments of interest only with a
balloon payment of the remaining principal balance on December 31, 2001.
Payments may be made either in cash or shares of the Company's common stock at
a value of $3.00 per share. The promissory note bears interest at 9.25% per
annum and is secured by all of the outstanding shares of MSI. No gain or loss
was recognized on the sale. The promissory note and accrued interest have been
classified as an offset to shareholders' equity.
In connection with the sale of MSI to Capco, the Company received a promissory
note for the net working capital on MSI's books at closing and for certain
funding the Company provided to MSI during 2000. The promissory note is
payable in monthly installments of interest only with a balloon payment of the
principal balance on December 31, 2001. The promissory note bears interest at
9.25% per annum and is secured by all of the outstanding shares of MSI.
The Company has obtained a pledge and security agreement from Capco for all
amounts owed to the Company by Capco and its subsidiaries. Under the
agreement Capco grants a security interest in all shares of the Company's
common stock owned by Capco or its subsidiaries. The total notes receivable
balance at December 31, 2000 and 1999 is $2,367,000 and $2,430,000,
respectively.
During 2000, the Company had total sales to Capco of $9,494,000, lease income
of $268,000 and had an accounts receivable balance of $820,000 at December 31,
2000.
28
In September 1999, the Company sold 150,000 shares of a Canadian corporation
to Capco Acquisub, Inc., a subsidiary of Capco, for a $300,000 promissory note
payable over eighteen months at 8% interest payable in cash or shares of the
Company's stock. The total note receivable balance at December 31, 2000 and
1999 is $300,000. The promissory note and accrued interest have been
classified as an offset to stockholders' equity.
In September 1999, the Company acquired a 49.5% interest in Meteor Office LLC
("Meteor Office") in exchange for 64,000 shares of Meteor Industries, Inc.
common shares. Certain officers and employees of the Company have an equity
interest in Meteor Office. Meteor Office is a 50% partner in a joint venture
that purchased and operates an office/residential building in Denver,
Colorado. The Company's corporate offices are located in the building and
are leased from the joint venture at terms that the Company believes are
consistent with the market price for such facilities. The Company has an
accounts receivable balance from Meteor Office at December 31, 2000 and 1999
of $33,000.
The Company leases certain real estate from the Seller of a subsidiary. The
leases were part of the negotiation for the purchase of the subsidiary in
September 1993. For the years ended December 31, 2000, 1999 and 1998, rents
paid were $55,000, $61,000 and $60,000, respectively.
The Company leases a commercial office building and warehouse from a
corporation controlled by a director of one of the Company's subsidiaries.
During the years ended December 31, 2000, 1999 and 1998, lease payments
amounted to $53,400, $50,400 and $50,400, respectively.
The Company leases rolling stock from various related parties under capital
lease agreements. The total obligation paid under these agreements for the
years ended December 31, 2000, 1999 and 1998 was $-0-, $62,000, and $69,000,
respectively.
The Company sold products to and purchased products from entities controlled
by a director of one of the Company's subsidiaries. During the years ended
December 31, 2000, 1999 and 1998, revenues reported amounted to $-0-, $4,000
and $66,000, respectively. During the years ended December 31, 2000, 1999 and
1998, purchases amounted to $-0-, $7,000 and $21,000, respectively.
The Company entered into a consulting agreement with a director of the
Company. During the year ended December 31, 2000, total fees paid were
$67,500.
29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
(a) The following statements are filed as part of this Report:
Page(s)
Report of Independent Accountants ................................ F-1
(1) Consolidated Balance Sheets - December 31, 2000 and 1999 F-2
Consolidated Statements of Operations - years ended
December 31, 2000, 1999 and 1998....................... F-4
Consolidated Statement of Shareholders' Equity - years
ended December 31, 2000, 1999 and 1998................. F-5
Consolidated Statements of Cash Flows - years ended
December 31, 2000, 1999 and 1998....................... F-6
Notes to Consolidated Financial Statements .............. F-9
Financial Statement Schedule
(2) Schedule 2 - Valuation and Qualifying Accounts........... S-1
(b)
Exhibit
Number Description Location
- ------- -------------------------- ------------------------------------
3.1 Articles of Incorporation, Incorporated by reference to Exhibit
as amended 2.1 to Registrant's Form 1-A Offering
Statement (SEC File No. 24D-3802 SML)
3.2 Bylaws Incorporated by reference to Exhibit
2.2 to Registrant's Form 1-A Offering
Statement (SEC File No. 24D-3802 SML)
10.1 Stock Option Plan Incorporated by reference to Exhibit
6.1 to Registrant's Form 1-A Offering
Statement (SEC File No. 24D-3802 SML)
10.2 Stock Purchase Agreement Incorporated by reference to Exhibit
among Registrant, Graves 6.2 to Registrant's Form 1-A Offer-
Oil & Butane Co., Inc. and ing Statement (SEC File No. 24D-3802
Theron J. Graves dated June SML)
23,1993, Amendment dated
August 23, 1993 and Closing
Memorandum dated September
28, 1993
10.3 $2,350,000 Promissory Note Incorporated by reference to Exhibit
payable to Theron J. Graves 6.3 to Registrant's Form 1-A Offering
and Security Agreement Statement (SEC File No. 24D-3802 SML)
10.4 Notes Receivable ($550,000 Incorporated by reference to Exhibit
and $100,000) from Theron 6.4 to Registrant's Form 1-A Offer-
J. Graves ing Statement (SEC File No. 24D-3802
SML)
30
10.5 Registration Agreement Incorporated by reference to Exhibit
regarding Subsidiary's 6.5 to Registrant's Form 1-A Offering
Preferred Stock Statement (SEC File No. 24D-3802 SML)
10.6 Security Agreement regard- Incorporated by reference to Exhibit
ing Subsidiary's Preferred 6.6 to Registrant's Form 1-A Offering
Stock Statement (SEC File No. 24D-3802 SML)
10.7 Consulting Agreement with Incorporated by reference to Exhibit
Theron J. Graves 6.7 to Registrant's Form 1-A Offering
Statement (SEC File No. 24D-3802 SML)
10.8 Lease regarding corporate Incorporated by reference to Exhibit
offices and storage yard 6.11 to Registrant's Form 1-A Offer-
ing Statement (SEC File No. 24D-3802
SML)
10.9 Lease regarding Albuquerque Incorporated by reference to Exhibit
warehouse 6.12 to Registrant's Form 1-A Offer-
ing Statement (SEC File No. 24D-3802
SML)
10.10 Lease regarding East Main Incorporated by reference to Exhibit
Properties 6.13 to Registrant's Form 1-A Offer-
ing Statement (SEC File No. 24D-3802
SML)
10.11 Norwest Credit and Security Incorporated by reference to Exhibit
Agreement 6.14 to Registrant's Form 1-A Offer-
ing Statement (SEC File No. 24D-3802
SML)
10.12 $4,000,000 Note Payable to Incorporated by reference to Exhibit
Norwest (partially drawn 6.15 to Registrant's Form 1-A Offer-
upon) ing Statement (SEC File No. 24D-3802
SML)
10.13 Meteor Corporate Guarantee Incorporated by reference to Exhibit
as regarding Norwest 6.16 to Registrant's Form 1-A Offer-
ing Statement (SEC File No. 24D-3802
SML)
10.14 Employment Agreement with Incorporated by reference to Exhibit
Edward J. Names 6.17 to Registrant's Form 1-A Offer-
ing Statement (SEC File No. 24D-3802
SML)
10.15 Leases regarding Cortez Incorporated by reference to Exhibit
truck stop 6.18 to Registrant's Form 1-A Offer-
ing Statement (SEC File No. 24D-3802
SML)
10.16 Agreement between the Incorporated by reference to Exhibit
Registrant and Hillger Oil 10.16 to Company's Registration
Statement on form 10 (SEC File No.
0-27986)
31
10.17 Lease Agreement between Incorporated by reference to Exhibit
Hillger Oil Co., Inc. and 10.17 to Company's Registration
Hillco, Inc. Statement on Form 10 (SEC File No.
0-27968)
10.18 Credit and Security Agree- Incorporated by reference to Exhibit
ment between Hillger Oil 10.18 to Company's Registration
Co., Inc. and Norwest Statement on Form 10 (SEC File No.
Business Credit, Inc. 0-27968)
10.19 Project Development and Incorporated by reference to Exhibit
Shareholders' Agreement 10.19 to Company's Registration
for Pakistan Power Project Statement on Form 10 (SEC File No.
0-27968)
10.20 Amended and Restated Share Incorporated by reference to Exhibit
Exchange and Reorganization 10.20 to Company's Registration
Agreement Statement on Form 10 (SEC File No.
0-27968)
10.21 Amendment to Employment Incorporated by reference to Exhibit
Agreement with Edward J. 10.21 to Company's Registration
Names Statement on Form 10 (SEC File No.
0-27968)
10.22 Amended and Restated Incorporated by reference to Exhibit
Promissory Note from Saba 10.22 to Company's Registration
Petroleum Company to Capco Statement on Form 10 (SEC File No.
Resources, Inc. 0-27968)
10.23 1997 Incentive Plan Incorporated by reference to Exhibit
10.23 to Company's Form 10-K dated
12/31/96 (SEC File No. 0-27968)
10.24 Second Amended and Restated Incorporated by reference to Exhibit
Agreement between Meteor 10.24 to Company's Form 10-K dated
Industries, Inc., Capco 12/31/96 (SEC File No. 0-27968)
Resources, Inc. and Saba
Petroleum Company
10.25 Shareholder's Agreement Incorporated by reference to Exhibit
among Cogen Technologies, 10.25 to Company's Form 10-K dated
Saba Capital Company, LLC, 12/31/96 (SEC File No. 0-27968)
Capco Resources, Inc., et al
10.26 Letter Agreement with Incorporated by reference to Exhibit
Western Energy Resources 10.26 to Company's Form 10-K dated
Limited 12/31/96 (SEC File No. 0-27968)
10.27 Letter Agreement between Incorporated by reference to Exhibit
Meteor Industries, Inc. 10.27 to Company's Form 10-K dated
and Capco Resources, Ltd. 12/31/96 (SEC File No. 0-27968)
dated April 23, 1996
10.28 Meteor Corporate Guaranty Incorporated by reference to Exhibit
with Norwest Business 10.28 to Company's Form 10-K dated
Credit, Inc. 12/31/97 (SEC File No. 0-27968)
32
10.29 Revolving Note with Nor- Incorporated by reference to Exhibit
west Business Credit, Inc. 10.29 to Company's Form 10-K dated
12/31/97 (SEC File No. 0-27968)
10.30 Credit and Security Incorporated by reference to Exhibit
Agreement 10.30 to Company's Form 10-K dated
12/31/97 (SEC File No. 0-27968)
10.31 Agreement between Tri- Incorporated by reference to Form 8-K
Valley Gas Co.; Share- dated May 29, 1998 (SEC File No.
holders and Fleischli Oil 0-27968)
Company, Inc. to Purchase
Tri-Valley Gas Co.
10.32 Agreement between Capco and Incorporated by reference to Form 8-K
Capco Acquisub, Inc. dated December 31, 1998
and Nevada Manhattan Mining (SEC File No. 0-27968)
Incorporated to sell Capco
shares of Meteor stock
10.33 Agreement between Capco Incorporated by reference to Form 8-K
Acquisub, Inc. and Nevada dated January 11, 1999
Manhattan Mining Incor- (SEC File No. 0-27968)
porated to change control
in of the Corporation
10.34 Agreement with Capco Energy, Incorporated by reference to Form 8-K
Inc., as amended dated February 11, 2000 (SEC File No.
0-27968)
10.35 Promissory Note from Capco Incorporated by reference to Form 8-K
Energy, Inc. dated February 11, 2000 (SEC File No.
0-27968)
10.36 Pledge and Security Agreement Incorporated by reference to Form 8-K
with Capco Energy, Inc. and dated February 11, 2000 (SEC File No.
Capco Asset Management, Inc. 0-27968)
10.37 Product Sales Agreement Incorporated by reference to Form 8-K
between Meteor Stores, Inc. dated February 11, 2000 (SEC File No.
and Meteor Marketing, Inc. 0-27968)
10.38 Stock Purchase Agreement Incorporated by reference to Form 8-K
between Meteor Industries, dated February 13, 2001 (SEC File No.
Inc. and Capco Energy, Inc. 0-27968)
dated January 30, 2001.
10.39 Agreement and Plan of Merger Incorporated by reference to Form
by and among Meteor Indus- 8-K dated February 13, 2001 (SEC File
tries, Inc., its wholly No. 0-27968)
owned subsidiary, MI Merger,
Inc. and activeIQ Technol-
gies, Inc.
33
21 Subsidiaries of the Filed herewith electronically
Registrant
23.1 Consent of Pricewaterhouse- Filed herewith electronically
Coopers LLP
34
Report of Independent Accountants
To the Stockholders and Board of Directors
of Meteor Industries, Inc.:
In our opinion, the consolidated financial statements listed in the
accompanying index appearing under Item 14 (a)(1)on page 27 present fairly, in
all material respects, the financial position of Meteor Industries, Inc. and
its subsidiaries at December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 14(a)(2)
on page 27 presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
As discussed in Note 2, the Company has entered into agreements to sell
substantially all of its assets to a related entity and then merge the Company
with Active IQ Technologies, Inc. Completion of these transactions is
dependent upon approval of the shareholders of both companies and certain
other conditions.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
March 16, 2001
F-1
METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
December 31, December 31,
2000 1999
CURRENT ASSETS
Cash $ 264 $ 288
Restricted cash 2,448 600
Accounts receivable-trade, net of allowance
of $275 and $233, respectively 14,759 14,835
Accounts receivable, related party 1,053 678
Income tax receivable 686 -0-
Notes receivable, net of allowance of $-0-
and $114, respectively 38 290
Notes receivable, related party 1,117 875
Inventory, net 3,921 3,596
Deferred tax asset 324 335
Other current assets 867 535
Total current assets 25,477 22,032
PROPERTY, PLANT AND EQUIPMENT, NET 16,437 17,905
OTHER NONCURRENT ASSETS
Notes receivable 115 123
Investments in closely held businesses 1,629 1,544
Intangibles, net 1,230 1,446
Other assets 267 390
Total other noncurrent assets 3,241 3,503
TOTAL ASSETS $45,155 $43,440
Continued on next page
F-2
METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands, except for share information)
December 31, December 31,
2000 1999
CURRENT LIABILITIES
Accounts payable, trade $11,039 $ 8,323
Accounts payable, related party 40 14
Book overdraft 1,794 1,924
Current portion, long-term debt 3,798 1,438
Accrued expenses 1,440 755
Fuel taxes payable 574 909
Revolving credit facility 8,570 9,292
Total current liabilities 27,255 22,655
NONCURRENT LIABILITIES
Deferred tax liability 2,556 2,606
Long-term debt 7,202 5,865
Accrued expenses 468 -0-
Total noncurrent liabilities 10,226 8,471
MINORITY INTEREST IN SUBSIDIARIES 250 5,412
Total liabilities 37,731 36,538
Commitments and contingencies (Notes 12, 13 and 14)
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value; 365,000
shares authorized, issued and outstanding,
liquidation preference $730 365 -0-
Common stock, $.001 par value; authorized
10,000,000 shares, 3,705,903 and
3,656,267 shares issued, respectively 4 4
Paid-in capital 5,695 4,458
Notes receivable, related party (1,686) (1,555)
Treasury stock, at cost, 132,098 shares held (489) (489)
Retained earnings 3,535 4,484
Total shareholders' equity 7,424 6,902
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $45,155 $43,440
The accompanying notes are an integral part of the financial statements.
F-3
METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands except per share information)
For the Year Ended December 31,
2000 1999 1998
Net sales $196,800 $155,211 $118,362
Cost of sales, excluding depreciation 174,497 130,417 97,558
Gross profit 22,303 24,794 20,804
Selling, general and administrative
expenses 18,971 21,036 16,369
Depreciation and amortization 2,438 2,196 1,536
Total operating expenses 21,409 23,232 17,905
Income from operations 894 1,562 2,899
Other income and (expenses)
Interest income 376 172 128
Interest expense (1,690) (1,177) (828)
Other (803) 37 152
Gain on sale of assets 1 366 200
Total other (expenses) (2,116) (602) (348)
(Loss) income before income taxes and
minority interest (1,222) 960 2,551
Income tax (benefit) expense (641) 210 939
Minority interest 368 491 444
Net (loss) income $ (949) $ 259 $ 1,168
(Loss) earnings per share:
Basic $ (.27) $ .07 $ .31
Diluted $ (.27) $ .07 $ .31
Weighted average common share
and common share equivalents:
Basic 3,537,555 3,454,146 3,792,197
Diluted 3,537,555 3,459,798 3,796,864
The accompanying notes are an integral part of the financial statements.
F-4
METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2000, 1999 and 1998
(Dollars in Thousands)
Note
Prefer- Addi- Receiv-
red tional able, Trea- Retain-
Stock Common Stock Paid-In Related sury ed Earn-
Shares Amount Shares Amount Capital Party Stock ings Total
Balance -
December
31, 1997 -0- $-0- 4,130,228 $ 4 $ 6,319 $ -0- $ (89) $3,057 $9,291
Stock issued
for 401(k)/
services 10,164 21 21
Treasury stock
acquisitions (2,624)
(2,624)
Treasury stock
retired (584,600) (2,224) 2,224
Net income 1,168 1,168
Balance -
December
31, 1998 -0- -0- 3,555,792 4 4,116 -0- (489) 4,225 7,856
Stock issued
during the year 100,475 342 342
Sale of assets to
related party (1,550)
(1,550)
Interest on note
receivable (5)
(5)
Net income 259 259
Balance -
December
31, 1999 -0- -0- 3,656,267 4 4,458 (1,555) (489) 4,484 6,902
Stock and
Options
issued for
401(k)/
services 23,887 216 216
Options exer-
cised 25,749 55 55
Interest on note
receivable (131) (131)
Issuance of
preferred
stock,
net 365,000 365 342 707
Acquisition
of subsid-
iary's pre-
ferred stock 624 624
Net loss (949) (949)
Balance -
December
31, 2000 365,000 $365 3,705,903 $ 4 $ 5,695 $(1,686) $(489) $3,535 $7,424
The accompanying notes are an integral part of the financial statements.
F-5
METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Year Ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net (loss) income $ (949) $ 259 $1,168
Adjustments to reconcile net (loss) income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,438 2,196 1,536
Equity earnings from investment in closely
held business (39) -0- -0-
(Gain)loss on disposal of assets (1) (366) 10
Deferred income tax (benefit) provision (39) 30 (149)
Minority interest 368 491 444
Stock and options issued for 401(k)/services 216 102 21
Write-off of acquisition costs 552 -0- -0-
Change in assets and liabilities (net
of acquisitions and disposals):
Decrease (increase) in:
Accounts receivable, net (842) (5,625) 398
Income tax receivable (686) 0- -0-
Inventory, net (325) (340) 175
Other current assets (584) (48) (184)
Other assets 123 (28) (183)
Increase (decrease) in:
Accounts payable 2,742 3,139 (415)
Accrued liabilities 705 (462) 479
Fuel taxes payable (335) (419) (343)
Net cash provided by (used in) operating
activities 3,344 (1,071) 2,957
Cash flows from investing activities:
Acquisition of businesses, net
of acquired cash -0- (1,168) (2,238)
Proceeds from sale of property,
plant and equipment 203 100 376
Purchases of property, plant and
equipment (558) (2,831) (2,358)
Investment in closely held business -0- 157 (44)
Note receivable payments 278 85 295
Note receivable advances (78) -0- -0-
Net cash (used in) investing activities (155) (3,657) (3,969)
Continued on next page
F-6
METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Continued)
For the Year Ended December 31,
2000 1999 1998
Cash flows from financing activities:
Borrowings (payments) on revolving
credit facility, net (722) 4,125 1,334
Increase (decrease)in book overdraft (130) 471 1,126
Borrowings on long-term debt -0- 1,008 2,300
Payments on long-term debt (1,275) (1,590) (1,399)
Proceeds from preferred stock issued 707 -0- -0-
Purchase of treasury stock -0- -0- (2,124)
Proceeds from stock options exercised 55 -0- -0-
Restricted cash (1,848) 622 (71)
Net cash (used in) provided by
financing activities (3,213) 4,636 1,166
Net(decrease) increase in cash and
equivalents (24) (92) 154
Cash and equivalents, beginning of
period 288 380 226
Cash and equivalents, end of period $ 264 $ 288 $ 380
NON CASH INVESTING AND FINANCING ACTIVITIES
Disposal of assets in exchange for
notes receivable from a related party $ -0- $1,597 $ -0-
Acquisition of property, plant and
equipment with debt $ 641 $ -0- $ 1,850
Capital lease assets and
obligations assumed $ 57 $ -0- $ 100
Accounts receivable replaced with
note receivable $ 341 $ 153 $ 296
Accounts receivable offset with debt $ 182 $ -0- $ -0-
Acquisition of minority interest with re-
demption of subsidiary's preferred stock $ 624 $ -0- $ -0-
Acquisition of minority interest with debt $ 4,456 $ -0- $ -0-
Acquisition of minority interest with
assumption of liabilities $ 448 $ -0- $ -0-
Stock issued for investment $ -0- $ 240 $ -0-
Debt issued to purchase treasury stock $ -0- $ -0- $ 500
Other operating cash flow information:
Income taxes (refunded) paid $ (207) $ 984 $ 1,333
Interest paid $ 1,234 $1,173 $ 660
Continued on next page
F-7
METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Continued)
For the Year Ended December 31,
2000 1999 1998
ACQUISITION OF BUSINESSES
Accounts and notes receivable $ -0- $ 263 $ 487
Inventory -0- 132 331
Deferred tax asset -0- -0- 47
Property, plant and equipment -0- 639 2,849
Intangible assets -0- 529 1,709
Accounts payable and accrued expenses -0- -0- (474)
Current portion, long term debt -0- (98) (248)
Long term debt -0- (297) (830)
Deferred tax liability -0- -0- (1,633)
Cash paid $ -0- $1,168 $ 2,238
The accompanying notes are an integral part of the financial statements.
F-8
METEOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Meteor Industries, Inc. ("Meteor" or "Company") was incorporated on December
22, 1992, as a Colorado based holding company. Meteor contributed
substantially all of its assets and all of its businesses to its newly formed
wholly owned subsidiary, Meteor Enterprises, Inc. ("Meteor Enterprises").
Meteor Enterprises was incorporated in December 2000, as a Colorado based
holding company. In January 2000, Meteor Marketing, Inc. ("Meteor Marketing"),
a Colorado corporation and a wholly owned subsidiary of the company, merged
downstream with and into Fleischli Oil Company, Inc. ("Fleischli"), a Wyoming
corporation and a wholly owned subsidiary of Meteor Marketing. Fleischli
become the surviving corporation and immediately changed its name to "Meteor
Marketing, Inc." In addition, the significant wholly owned subsidiaries
included in Meteor Marketing are: Graves Oil & Butane Co., Inc. ("Graves"),
and Tri-Valley Gas Co. ("Tri-Valley") merged their marketing and distribution
operations with and into Meteor Marketing. The Company also owns 73% of
Meteor Holdings LLC ("MHL") and 100% Innovative Solutions and Technologies,
Inc. ("IST").
In April 1999, the Company acquired certain assets of Carroll Oil Company
("Carroll Oil") for $1.2 million in cash and a $0.4 million promissory note.
The acquisition was financed with cash and short and long-term debt. Carroll
Oil is a petroleum marketing company doing business in northeastern Colorado.
In December 1999, the Company sold its retail store operating subsidiary for
$1.5 million: $0.2 million in cash paid in January 2000 and a $1.3 million
secured note. No gain or loss was recognized on the sale. The sale will
allow the Company to focus on its core business of commercial, wholesale and
cardlock petroleum distribution. (See Note 11 - Related Party Transactions.)
In June 1998, the Company acquired all of the common stock of Tri-Valley Gas
Co. for $2.4 million in cash and a $0.6 million promissory note. The purchase
price was allocated to the assets acquired based on their estimated fair
values. The excess of the purchase price over the fair value of the net
assets acquired (goodwill) was approximately $1.7 million and is being
amortized on a straight-line basis over 15 years. Tri-Valley is a petroleum
marketing and distribution company doing business in Colorado.
In November 1998, the Company acquired certain assets of R & R Oil Company ("R
& R") for $0.9 million in cash and $1.2 million in notes. R & R was a
petroleum marketing and distribution company doing business in Wyoming.
PRINCIPLES OF CONSOLIDATION AND ORGANIZATION - The consolidated financial
statements include the accounts of Meteor Industries, Inc., and its
subsidiaries. All significant intercompany transactions and balances have
been eliminated in consolidation. The equity method of accounting is used for
the Company's 50% or less owned affiliates over which the Company has the
ability to exercise significant influence.
F-9
USE OF ESTIMATES - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in these financial statements. Actual results may differ from these
estimates.
PRICE LEVEL CHANGES - The prices the Company pays for gasoline and diesel
products are subject to market fluctuation and not in the control of the
Company. Prices for these products can and have fluctuated significantly.
Higher product prices could have a significant impact on the Company's
borrowing capabilities due to the generally faster timing required for
payments to the Company's suppliers compared to the timing of collection of
receivables from its customers. When necessary, the Company finances these
working capital requirements through its revolving bank credit facility. This
facility contains certain financial covenants which are based on the Company's
budgeted results. If, as a result of price changes or other factors, the
Company is unable to meet its debt covenants, its ability to continue to
borrow under the revolving credit facility could be limited. If that were to
occur, the Company would have to make alternative financial arrangements,
which could include seeking additional debt or equity financing which may or
may not be available.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of short-term,
highly liquid investments readily convertible into cash with an original
maturity of three months or less. At times, cash balances held at financial
institutions are in excess of Federal Deposit Insurance Corporation insurance
limits. The Company places its temporary cash investments with high-credit
quality financial institutions. The Company believes no significant
concentration of credit risk exists with respect to these cash investments.
RESTRICTED CASH - The Company has revolving bank credit facilities which
require the use of depository accounts from which collected funds are
transferred to the lender. The lender then applies these collections to the
revolving credit facilities. These accounts are controlled by the lender.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses are stated at fair value due
to their short-term nature. The carrying value of notes receivable
approximates fair value. The carrying value of the revolving credit facility
approximates fair value due to the variable nature of the interest rate. The
fair value of long-term debt at December 31, 2000 approximates $10,741,000
compared with the carrying value of $11,000,000. The Company estimated the
fair value of the long-term debt using estimates of current interest rates for
similar debt. The Company does not believe it is practicable to determine the
fair value of the notes receivable, related party due to their related party
nature.
ACCOUNTS RECEIVABLE - The Company has a diversified customer base. The
Company controls credit risk related to accounts receivable through credit
approvals, credit limits and monitoring procedures. Credit risk with respect
to accounts receivable is primarily concentrated in the diesel, gasoline and
greases and lubricants segments.
F-10
INVENTORIES - Inventories are stated at the lower of cost or market.
Inventories of petroleum products, greases and lubricants, and related
products are stated at the last in first out (LIFO) basis. The amount of
inventory valued using the LIFO method is $3,526,000 and $3,596,000 at
December 31, 2000 and 1999, respectively. The LIFO reserve at December 31,
2000 and 1999 is $504,000 and $219,000, respectively.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost; major
renewals and improvements are charged to the property and equipment accounts;
while replacements, maintenance and repairs which do not improve or extend the
lives of the respective assets, are expensed currently.
At the time property and equipment are retired or otherwise disposed of, the
asset and related accumulated depreciation accounts are relieved of the
applicable amounts. Gains or losses from retirements or sales are credited or
charged to operations.
DEPRECIATION - Depreciation is recorded on the straight-line method at rates
based on the estimated useful lives of the assets. The estimated useful lives
are as follows:
DESCRIPTION LIVES
Buildings and improvements 5 to 40 years
Equipment 5 to 20 years
IMPAIRMENT - The Company periodically evaluates its long-lived assets to
determine whether any impairment of these assets has occurred. In making such
determination the Company evaluates performance using cash flows, on an
undiscounted basis, of the underlying businesses or assets which gave rise to
such amount. Any impairments are recognized using discounted cash flows or
fair values, whichever is more readily determinable.
INTANGIBLES - Goodwill attributable to businesses acquired is being amortized
on the straight-line method over fifteen years.
Other intangibles, including the costs of license agreements and covenants not
to compete are amortized over five years using the straight-line method.
REVENUE RECOGNITION - The Company recognizes revenue from product sales when
the products are delivered, net of applicable provisions for discounts and
allowances. Revenue from services is recognized when the services are
performed and billable.
INCOME TAXES - The Company provides for the tax effects of transactions
reported in the financial statements which consist of taxes currently due plus
deferred taxes. Deferred income taxes reflect the differences between the
assets and liabilities recognized for financial reporting purposes and amounts
recognized for tax purposes.
ENVIRONMENTAL EXPENDITURES - The Company expenses environmental remediation
costs related to conditions resulting from past or current operations and from
which no future benefit is discernible. Expenditures which extend the life of
the related property or mitigate or prevent future environmental contamination
are capitalized. The Company determines and records its liability on a site
by site basis at the time when it is probable and the costs can be reasonably
F-11
estimated. Recoveries of environmental remediation costs from other parties
are recorded as assets when their receipt is deemed probable. Both
environmental liabilities and recoveries are discounted to their present value
when the future cash flows are determinable with reasonable certainty.
EARNINGS (LOSS) PER SHARE - Basic earnings (loss) per common share are
computed by dividing net income (loss) by the weighted average number of
common shares outstanding. Diluted earnings (loss) per share are calculated
taking into account all potentially dilutive securities. A reconciliation of
the denominator used in the calculation of basic and diluted earnings per
share is presented below. Antidilutive stock options and warrants of 825,600,
1,366,749, and 1,867,733 for the years ended December 31, 2000, 1999 and 1998,
respectively, are omitted from the denominator. The numerator is unchanged.
The shares available upon exchange of a subsidiary's preferred stock of -0-,
1,043,305 and 1,014,635 for the years ended December 31, 2000, 1999, and 1998,
respectively, are omitted as they are antidilutive.
2000 1999 1998
---- ---- ----
Denominator:
Average common shares outstanding 3,537,555 3,454,146 3,792,197
Average dilutive stock options and
warrants -0- 5,652 4,667
Diluted shares 3,537,555 3,459,798 3,796,864
NEW ACCOUNTING PRONOUNCEMENT - In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("FAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting standards
requiring that every derivative instrument be recorded on the balance sheet as
either an asset or liability measured at its fair value. FAS No. 133 also
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. In June 1999,
the FASB issued FAS No. 137 which defers the effective date of FAS No. 133 to
fiscal years beginning after June 15, 2000. The Company will adopt FAS No.
133 in the first quarter of fiscal 2001, but does not expect such adoption to
materially affect its financial statement presentation.
RECLASSIFICATION - Certain amounts have been reclassified in prior years to be
consistent with the classification as of December 31, 2000.
NOTE 2 - PROPOSED SALE OF ASSETS AND MERGER OF THE COMPANY
On January 11, 2001, Meteor executed a definitive agreement to merge with
Active IQ. The transaction is planned to close prior to April 16, 2001, and
is subject to various contingencies including shareholder, approval of both
companies. Meteor, in anticipation of the transaction, invested $1,100,000 to
acquire approximately 10% of Active IQ. Upon shareholder approval, Meteor
will issue new shares of common stock and warrants to purchase additional
shares to Active IQ shareholders in exchange for all of the equity of Active
IQ. Immediately after the merger, Active IQ shareholders will own
approximately 50% of the voting shares of the merged company and will control
the Board of Directors.
F-12
On January 30, 2001, the Company executed a definitive agreement to sell, in
connection with its planned merger with Active IQ, its subsidiaries and
related businesses to its largest shareholder, Capco Energy, Inc. ("Capco").
The sale is contingent upon shareholder approval, the consummation of the
Active IQ merger and certain other conditions. The sale price for the
subsidiaries will be $5,500,000 and certain environmental and other
indemnities.
The subsidiaries to be sold own substantially all of the Company's assets;
excluded are 400,000 shares of Active IQ's common stock purchased as described
above and certain amounts of cash which will remain in the Company at the time
of merger. Also, the subsidiaries contain all of the liabilities of the
Company, except those associated with certain costs relating to the closing of
the Active IQ merger. All of the Company's sales and operating activities are
managed through its subsidiaries.
In February 2001, the Company filed a definitive proxy statement on Schedule
14A with the Securities and Exchange Commission for the solicitation of
proxies from its shareholders approving three proposals to be considered at a
special meeting (the "Special Meeting") of the Company's shareholders (the
"Shareholders"). At the Special Meeting the shareholders will be asked to
vote on:
(1) A proposal to approve and adopt the Stock Purchase Agreement, dated as of
January 30, 2001, by and between the Company and Capco, and the transactions
contemplated by that agreement, including the sale of substantially all of the
Company's assets to Capco.
(2) A proposal to approve the reincorporation of the Company under Minnesota
law, which reincorporation would be effectuated by merging the Company with
and into a newly formed and wholly owned subsidiary of the Company organized
under Minnesota law, and
(3) A proposal to approve and adopt an Agreement and Plan of Merger, dated as
of January 11, 2001, by and among the Company, its wholly owned subsidiary, MI
Merger, Inc. and Active IQ.
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
The major classifications of property, plant and equipment are as follows at
December 31:
(Dollars in Thousands)
2000 1999
DESCRIPTION
Land $ 3,164 $ 3,108
Buildings and improvements 5,294 5,133
Equipment 14,268 13,466
In process 5 320
Property, plant and equipment 22,731 22,027
Accumulated depreciation (6,294) (4,122)
Property, plant and equipment, net $16,437 $17,905
Depreciation expense for the years ended December 31, 2000, 1999 and 1998 was
$2,218,000, $1,905,000 and $1,476,000, respectively.
F-13
NOTE 4 -- INTANGIBLES
Intangibles are as follows at December 31:
(Dollars in Thousands)
2000 1999
Goodwill $ 1,203 $ 1,203
Other intangibles 501 605
Accumulated amortization (474) (362)
Intangibles, net $ 1,230 $ 1,446
Amortization expense for the years ended December 31, 2000, 1999 and 1998 was
$219,000, $291,000, and $60,000, respectively.
NOTE 5 -- INVESTMENTS IN CLOSELY HELD BUSINESSES
The Company owns 33% of American L.P., Ltd. Co. ("American L.P."). The Company
reports its investment in this limited liability Company using the equity
method. This investment is not publicly traded. The carrying value was $-0-
at December 31, 2000 and 1999. During the fourth quarter of 1999, the Company
wrote down its investment by $73,000 based upon the deterioration in the
financial condition of American L.P.
At December 31, 2000, the Company has a $690,000 investment in Meteor Holdings
LLC ("MHL") and owns 73% of MHL. MHL owns an interest of approximately 1.5%
in Saba Power Company, Ltd. (the "Power Project"). MHL's investment in the
Power Project is reported using the cost method. Greka Energy Company,
formerly Saba Petroleum Company which was a related party, invested $250,000
and owns approximately 27% of MHL. The MHL percentage interest in the Power
Project, however, could be reduced in the event that other shareholders are
required to make additional contributions to equity. The Company is not
required to invest any additional capital related to the Power Project. If
additional capital is required then the Company will have the choice of
investing more capital or suffering ordinary dilution to its ownership
interest without incurring any penalties.
The Company owns 50% of two entities, which are accounted for under the equity
method. Neither of these entities has securities that are publicly traded.
The carrying value at December 31, 2000 and 1999 is $307,000 and $317,000,
respectively.
NOTE 6 -- REVOLVING CREDIT FACILITY
The Company has a revolving credit facility with a maximum commitment of
$12,500,000, which expires on December 31, 2002. The amount available under
the revolving credit facility is a function of the sum of eligible accounts
receivable and inventory as defined by the revolving credit agreement up to
the maximum commitment. Advances requested by the Company are subject to an
interest rate of the lender's base rate plus 0.5% (10.0% and 8.5% at December
31, 2000 and 1999, respectively). Additionally, the Company pays a commitment
fee of 0.25% of the maximum commitment. The revolving credit facility is
collateralized by the Company's trade accounts receivable and inventory.
F-14
The terms of the revolving credit agreement contain, among other provisions,
requirements for maintaining certain net worth, minimum earnings after taxes,
minimum debt service coverage, and other financial ratios and specific limits
on additional indebtedness, equity financing, liens and merger activity.
During 2000, the Company was out of compliance with several covenants
contained in the agreement and the Company obtained waivers from the lender
for noncompliance.
The credit agreement contains a subjective acceleration clause, therefore the
entire borrowings under the revolving credit facility are classified as a
current liability.
NOTE 7 -- LONG-TERM DEBT
Long-term debt is as follows at December 31:
(Dollars in Thousands)
2000 1999
Notes payable to banks with monthly payments
ranging from $2,913 to $47,744, interest at 8.75%
to 10.0%, maturing from April 2000 to May
2014; collateralized by property and
equipment $ 3,216 $ 3,925
Notes payable to suppliers with monthly payments
of $4,853 and $8,082, interest at 8.0% and 8.59%,
maturing in December 2006 and July 2007;
collateralized by property and equipment. 738 789
Notes payable to individuals with monthly payments
ranging from $1,111 to $217,963, interest at 7.0%
to 8.5%, maturing from June 2001 through November
2013; collateralized by property and equipment. 6,213 2,047
Notes payable to financial institutions with
monthly payments ranging from $485 to $6,137,
interest at 8.5% to 10.25%, maturing from January
2002 to August 2005; collateralized by vehicles
and equipment 771 504
Other 62 38
Total 11,000 7,303
Current portion (3,798) (1,438)
Long-term debt $ 7,202 $ 5,865
F-15
Maturities of long-term debt are as follows for the years ended December 31:
2001 $ 3,798
2002 2,768
2003 1,734
2004 1,174
2005 292
Thereafter 1,234
Total $11,000
NOTE 8 -- MINORITY INTEREST IN SUBSIDIARIES
Until September 2000, when the Company acquired the Series A Convertible
Preferred Stock of a subsidiary, this stock was limited voting stock and was
entitled to cumulative annual dividends at a rate of 8% of the liquidation
value. These securities were convertible into common stock of either Graves
or Meteor at the option of the holder(s), and at the bid price on the date of
conversion, not to exceed 22.2% of the outstanding shares of Meteor.
In August 2000, the Company acquired for retirement the Series A Convertible
preferred stock in exchange for a $4,456,000 note payable and the assumption
of certain environmental liabilities. The note is being amortized over a four-
year period plus interest at 8%. The note requires a $1,500,000 payment to be
made from the receipts from the future sale or refinancing of certain assets.
This payment was made in January 2001 in connection with the Rocky Mountain
Propane transaction (See Note 19 - Subsequent Events). The note is secured by
certain assets of the subsidiary. The excess of the carrying value of the
minority interest (the preferred shares) over the liabilities recorded in the
transaction was credited to paid in capital.
Dividends in arrears amounted to $1,795,000 as of December 31, 1999. The
minority interest is recorded at its discounted value in the amount of
$5,162,000 at December 31, 1999. Dividends and accretion of the preferred
stock discount are reflected in minority interest on the income statement in
the amount of $368,000, $491,000 and $444,000 for the years ended December 31,
2000, 1999 and 1998, respectively.
The Company owns 73% of MHL which owns 100% of Capco Resources, Inc. The
minority interest of 27% is recorded at $250,000 at December 31, 2000 and
1999.
NOTE 9 -- INCOME TAXES
The provision for income tax (benefit) expense consists of the following
components for the years ended December 31:
(Dollars in Thousands)
2000 1999 1998
Current $ (602) $ 180 $1,088
Deferred (39) 30 (149)
Total (benefit) provision $ (641) $ 210 $ 939
F-16
The following reconciles the income tax provision with the expected provision
obtained by applying the federal statutory rate to pretax income for the years
ended December 31:
(Dollars in Thousands)
2000 1999 1998
Expected tax (benefit)provision $ (416) $ 326 $ 867
Nondeductible expenses 44 35 9
Change in state income tax rate -0- (171) -0-
Current year credits (213) -0- -0-
State income taxes, net of
federal benefit (56) 20 63
Total (benefit) provision $ (641) $ 210 $ 939
The components of deferred tax assets and liabilities are as follows at
December 31:
(Dollars in Thousands)
2000 1999
Deferred tax asset:
Accounts receivable $ 101 $ 128
Inventory -0- 94
NOL carryforwards 34 -0-
Accrued environmental costs 268 29
Other 116 84
Total deferred tax asset $ 519 $ 335
Deferred tax liability:
Inventory $ 133 $ -0-
Prepaids 62 -0-
Depreciation and amortization 2,556 2,606
Total deferred tax liability $ 2,751 $ 2,606
Net deferred tax liability $ 2,232 $ 2,271
Financial statements:
Current deferred tax asset $ 324 $ 335
Noncurrent deferred tax liability 2,556 2,606
$2,232 $2,271
F-17
NOTE 10 -- DEFINED CONTRIBUTION PLAN
The Company has a 401(k) Profit-Sharing Plan. Employee contributions to the
plan are voluntary through a salary reduction agreement and eligible
participants may contribute on a pre-tax basis up to 20% of their qualifying
annual compensation. Matching contributions and other additional
contributions may be made by the Company at its sole discretion. The
Company's contributions and payments for administrative fees for the years
ended December 31, 2000, 1999, and 1998 were $101,000, $120,000, and $38,000,
respectively.
NOTE 11 -- RELATED PARTY TRANSACTIONS
Capco, through a majority-owned subsidiary, currently owns approximately 30%
of the Company's Common Stock. Ilyas Chaudhary, a Director of the Company, is
an officer, director and a principal shareholder of Capco, Dennis Staal, a
Director of the Company, is also an officer of Capco and beneficially owns
35,000 common shares of Capco and 2,286 shares of Series A Preferred shares.
Irwin Kaufman, a Director of the Company, is also a director of Capco and owns
20,000 common shares of Capco. Edward Names, President and CEO of the Company
personally and through immediate family members may be deemed to beneficially
own 64,580 common shares of Capco and 2,286 shares of Series A Preferred
shares of Capco.
Effective December 31, 1999, the Company completed the sale of its subsidiary,
Meteor Stores, Inc. ("MSI"), to Capco, an affiliate of the Company. The sale
of this operating subsidiary was made to allow the Company to focus on its
core business of commercial, wholesale and cardlock petroleum distribution.
The Company, through a five year supply contract with Capco, will continue to
be the supplier of refined petroleum products to these stores.
The total sale price for the sale of MSI was approximately $1,500,000.
$250,000 was paid in cash at closing and the Company received a promissory
note for $1,250,000 payable in monthly installments of interest only with a
balloon payment of the remaining principal balance on December 31, 2001.
Payments may be made either in cash or shares of the Company's common stock at
a value of $3.00 per share at the discretion of Capco. The promissory note
bears interest at 9.25% per annum and is secured by all of the outstanding
shares of MSI. No gain or loss was recognized on the sale. The promissory
note and accrued interest have been classified as an offset to shareholders'
equity.
In connection with the sale of MSI to Capco, the Company received a promissory
note for the net working capital on MSI's books at closing and for certain
funding the Company provided to MSI during 2000. The promissory note is
payable in monthly installments of interest only with a balloon payment of the
principal balance on December 31, 2001. The promissory note bears interest at
9.25% per annum and is secured by all of the outstanding shares of MSI.
In September 1999, the Company sold 150,000 shares of a Canadian corporation
to Capco Acquisub, Inc., a subsidiary of Capco, for a $300,000 promissory note
payable over eighteen months at 8% interest payable in cash or shares of the
Company's stock at the discretion of Capco Acquisub, Inc. The promissory note
and accrued interest have been classified as an offset to shareholders'
equity.
F-18
The Company has obtained a pledge and security agreement from Capco for all
amounts owed to the Company by Capco and its subsidiaries. Under the
agreement Capco grants a security interest in all shares of the Company's
common stock owned by Capco or its subsidiaries.
Activity with Capco as of December 31, 2000 and 1999 and for the years ended
December 31, 2000 an 1999 is as follows:
(Dollars in Thousands)
2000 1999
Accounts receivable, related party $ 820 $ -0-
Notes receivable, related party $ 2,667 $ 2,430
Accrued interest receivable $ 233 $ 5
Accounts payable, related $ 60 $ -0-
Sales $ 9,494
Lease income $ 268
Interest income $ 242
Lease expense $ 30
On September 30, 1999, the Company acquired a 49.5% interest in Meteor Office
LLC ("Meteor Office") in exchange for 64,000 shares of the Company's common
stock. Certain officers and employees of the Company have an equity interest
in Meteor Office. Meteor Office is a 50% partner in a joint venture that
purchased and operates an office/residential building in Denver, Colorado.
The Company's corporate offices are located in the office/residential building
and are leased from the joint venture at terms that the Company believes are
consistent with the market price for such facilities. The Company's accounts
receivable balance from Meteor Office at December 31, 2000 and 1999 is
$33,000.
The Company leases certain real estate from the preferred stockholder of a
subsidiary. The leases were part of the negotiation for the purchase of the
subsidiary in September 1993. For the years ended December 31, 2000, 1999 and
1998, rents paid were $55,000, $61,000, and $60,000, respectively.
The Company leases a commercial office building and warehouse from a
corporation controlled by a director of one of the Company's subsidiaries.
During the years ended December 31, 2000, 1999, and 1998, lease payments
amounted to $53,400, $50,400, and $50,400, respectively.
The Company leases rolling stock from various related parties under capital
lease agreements. The total obligation paid under these agreements for the
years ended December 31, 2000, 1999, and 1998 was $-0-, $62,000, and $69,000,
respectively.
The Company sold products to and purchased products from entities controlled
by a director of one of the Company's subsidiaries. During the years ended
December 31, 2000, 1999 and 1998, revenues reported amounted to $-0-, $4,000,
and $66,000, respectively. During the years ended December 31, 2000, 1999 and
1998, purchases amounted to $-0-, $7,000 and $21,000, respectively.
The Company entered into a consulting agreement with a director of the
Company. During the year ended December 31, 2000, total fees paid were
$67,500.
F-19
NOTE 12 -- ENVIRONMENTAL PROTECTION EXPENDITURES
The Company is subject to various federal, state and local environmental laws
and regulations. Although Company environmental policies and practices are
designed to ensure compliance with these laws and regulations, future
developments and increasing stringent regulations could require the Company to
make additional unforeseen environmental expenditures. The Company accrues
for environmental remedial actions, operations, maintenance and monitoring
costs based on the net present value of the costs after a remediation plan has
been developed. These costs are discounted using a risk free interest rate
over the estimated period which the remediation, operation, maintenance and
monitoring costs are to be expended.
Environmental accruals are routinely reviewed on an interim basis as events
and developments warrant.
The Company operates in various states which have established environmental
remediation trusts. The purpose of the funds is to provide monetary
assistance in both assessing and correcting a site for environmental
problems. As a result, the Company may have limitations on any potential
contamination liabilities as well as claims for reimbursement from third
parties.
Included in selling, general and administrative expenses, for the years ended
December 31, 2000, 1999, and 1998, are $150,000, $136,000, and $144,000,
respectively, for site assessment, related cleanup costs and regulatory
compliance. Included in other assets at December 31, 2000, and 1999, are
unreimbursed costs from the environmental remediation trusts of $454,000 and
$91,000, respectively. Included in accrued expenses at December 31, 2000 and
1999 are $990,000 and $79,000, respectively, for environmental remediation
which management believes is adequate to cover known environmental remediation
problems.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
The Company is a co-signer on a note for its 50% owned equity investment in a
subsidiary. The amount payable on the note at December 31, 2000 and 1999 is
$338,866 and $381,000, respectively.
The Company has guaranteed a $1,350,000 note payable on the office building in
which the Company's corporate offices are located. (See Note 11 - Related
Party Transactions). The principal balance owing on the note at December 31,
2000 and 1999 is $1,135,000 and $1,150,000, respectively.
The Company is a party to certain litigation that has arisen in the normal
course of its business and that of its subsidiaries. In the opinion of
management, none of this litigation is likely to have a material effect on the
Company's financial position or results of operations.
F-20
NOTE 14 -- OPERATING LEASES
The Company has entered into various noncancellable leases for land, buildings
and equipment with terms ranging from 3 to 15 years. Under most leasing
arrangements the Company pays the property taxes, insurance, maintenance and
expenses related to the leased property. Total rent expense under operating
leases (including related party rent discussed in Note 11) for the years ended
December 31, 2000, 1999, and 1998, was $948,000, $1,210,000, and $1,086,000,
respectively.
Minimum future obligations on leases in effect at December 31, 2000, are as
follows:
(Dollars in Thousands)
2001 $1,003
2002 677
2003 399
2004 305
2005 150
Thereafter 461
Total $2,995
NOTE 15 -- STOCK OPTION AND INCENTIVE EQUITY PLANS
The Company has two Stock Option Plans, the 1994 Stock Option Plan providing
for the issuance of incentive stock options and non-qualified stock options to
the Company's key employees and the 1998 Incentive Equity Plan. Under the two
plans a maximum of 500,000 and 2,500,000 options to purchase shares,
respectively, may be granted. Incentive stock options may be granted at
prices not less than 100% of the fair market value at the date of the grant.
Non-qualified stock options may be granted at prices not less than 75% of the
fair market value at the date of the grant. In addition, 200,000 Performance
Units may be granted. These units, if and when granted, will be converted to
shares of common stock based on the achievement of certain performance
criteria as determined by the Board of Directors. These grants may be less
than (at least 75% of market value), equal to or greater than the market value
per share on the date of grant.
The Company's common stock options were granted at exercise prices equal to,
or in excess of, market prices on the grant dates, and therefore no
compensation cost was recognized. The options were granted with maximum terms
of between one and ten years.
A summary of the status of the Company's stock option plans as of December 31,
2000, 1999, and 1998, is presented below:
F-21
2000 1999 1998
------------------ ------------------- ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE EXERCISE EXERCISE
PRICE SHARES PRICE SHARES PRICE
------ ---------- ------- -------- ------ ---------
Outstanding
at beginning
of year 1,069,606 $ 3.57 792,950 $ 3.73 599,300 $ 3.82
Granted at
market 99,500 $ 2.50 54,384 $ 3.00 135,550 $ 3.57
Granted ex-
ceeding
market 1,000,000 $ 2.75 436,072 $ 3.45 294,000 $ 3.92
Exercised (25,749) $(3.15) -0- $ -0- -0- $ -0-
Forfeited (468,113) $(3.46) (213,800) $(3.79) (235,900) $(4.21)
Outstanding
at end of
year 1,675,244 $ 3.05 1,069,606 $ 3.57 792,950 $ 3.73
Options exer-
cisable at
Year-End 725,044 $ 3.21 641,749 $ 3.57 525,233 $ 3.68
Options Avail-
able for Future
Grant 1,324,756 N/A 180,394 N/A 457,050 N/A
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
YEAR RANGE OF NUMBER REMAINING AVERAGE AVERAGE
OPTIONS EXERCISE OUTSTAN- CONTRACTUAL EXERCISE NUMBER EXERCISE
GRANTED PRICES DING LIFE PRICE EXERCISABLE PRICE
- ------- -------- --------- ----------- -------- ----------- --------
1993 $3.00 21,500 2.8 years $3.00 21,500 $3.00
1994 $5.25 15,300 3.1 years $5.25 15,300 $5.25
1995 $3.00 6,000 0.6 years $3.00 6,000 $3.00
1997 $3.50 to $5.07 35,000 1.1 years $3.72 21,000 $3.72
1998 $3.06 to $4.50 181,901 2.7 years $3.70 163,868 $3.65
1999 $2.87 to $3.75 336,043 3.1 years $3.57 179,376 $3.43
2000 $2.50 to $2.75 1,079,500 4.3 years $2.73 318,000 $2.75
-------------- --------- --------- ------- --------- -----
$2.50 to $5.25 1,675,244 3.8 years $3.05 725,044 $3.21
Had compensation cost been determined based on the fair value at grant dates
for stock option awards consistent with the SFAS No. 123, the Company's net
income and earnings per share for the years ended December 31, 2000, 1999, and
1998, would have been reduced to the pro forma amounts indicated below:
F-22
(Dollars in thousands except per share information)
2000 1999 1998
Net (loss) income: As reported $ (949) $ 259 $1,168
Pro Forma $(1,325) $ (103) $1,010
(Loss) earnings per
share: Basic
As reported $ (.27) $ .07 $ .31
Pro Forma $ (.37) $ (.03) $ .27
Diluted
As reported $ (.27) $ .07 $ .31
Pro Forma $ (.37) $ (.03) $ .27
The pro forma compensation expense based on the fair value of the options is
estimated on the grant date using the Black-Scholes option-pricing model with
the following assumptions used for grants: no dividends; expected lives of 5
years for 2000, 4.54 years for 1999, and 3.49 years for 1998; expected
volatility of 52%, 69%, and 63%,for 2000, 1999, and 1998, respectively; and a
risk free rate of return of 6.19, 5.88, and 5.29 percent, respectively. The
weighted average fair value of those purchase rights granted in 2000, 1999,
and 1998 was $1.25, $1.60, and $1.64 respectively.
Options were granted to directors, employees and consultants in 2000 resulting
in compensation expense recognized by the Company of $137,000.
NOTE 16 -- SHAREHOLDERS' EQUITY
REDEEMABLE WARRANTS
In June of 1997, the Company sold redeemable warrants to purchase up to
690,000 shares of common stock as part of a public offering. In May of 1999,
the Company extended by two years the expiration date of its publicly traded
warrants. The 690,000 redeemable purchase warrants now expire on June 4,
2001.
In 1998, the Company issued a total of 560,000 warrants in exchange for
services by non-employees and non-affiliates. The average exercise price of
these warrants was $3.67 per share. In 1998, 350,000 of these warrants were
cancelled. In 1999, the remaining 210,000 of these warrants expired.
In April of 1999, the Company issued 113,750 warrants to outside consultants.
The warrants have an exercise price of $2.90 per share and expire in April
2003.
PRIOR UNDERWRITING WARRANTS
In connection with the Company's initial public offering, the Company issued
to the managing underwriter 17,000 warrants to purchase shares of common stock
at $1.00 per share. 10,000 warrants were exercised and 7,000 warrants expired
June 30, 2000.
F-23
PRIVATE PLACEMENT WARRANTS
In February and March 1997, the Company sold warrants to purchase up to
130,000 shares of common stock as part of a private placement. These warrants
were exercisable at $5.00 per share during the period from March 28, 1998 to
March 27, 1999. These warrants expired in 1999.
PREFERRED STOCK
During June 2000, the Company issued 365,000 shares of Series B Convertible
Preferred Stock. The Company received $707,000, net of issuance costs of
$23,000. Each share is: (1) not entitled to dividends, (2) entitled to a
liquidation preference of $2.00, (3) entitled to one vote, and (4) not
redeemable. Holders of the Series B Convertible Preferred Stock have the
right to convert all or a portion of their shares into units, each unit
consisting of one share of common stock and one warrant to purchase common
stock. The warrants to be issued as part of the units shall be exercisable
until May 15, 2005, at an exercise price of $2.50 per share.
TREASURY STOCK
The Company began in November 1997 acquiring shares of its common stock in
connection with stock repurchase programs. The programs authorize the Company
to purchase up to $2,700,000 in common shares on the open market or pursuant
to negotiated transactions at price levels the Company deems attractive. The
Company purchased 19,000 shares of common stock in 1997 at an aggregate cost
of $89,000 and 698,000 shares of common stock in 1998 at an aggregate cost of
$2,600,000. Of the shares purchased in 1998, 533,000 shares were purchased
from a Director at a cost of $2,000,000. As of December 31, 1998, 585,000
shares were retired.
NOTE 17 -- BUSINESS SEGMENTS
For the year ended December 31, 2000, the Company operated in five business
segments: gasoline, diesel, propane, grease and lubricants, and other products
(anti-freeze, chemicals, services, hardware and miscellaneous items). During
the years ended December 31, 1999 and 1998, in addition to these five
segments, the Company also operated in the segment of convenience store items.
In December, 1999 Meteor sold its retail store operating subsidiary to allow
the Company to focus on its core business of commercial, wholesale and
cardlock petroleum distribution.
For the year ended December 31, 2000, one customer comprised 12% of total
sales. No one customer was greater than 10% of sales in 1999 or 1998.
Senior management evaluates and makes operating decisions about each of these
operating segments based on a number of factors. The most significant factors
used by management in evaluating the operating performance are net sales and
gross profit as presented below:
F-24
Year ended December 31,
2000 1999 1998
Net sales
Gasoline $ 50,524 $ 41,480 $ 28,136
Diesel 113,208 77,741 56,704
Propane 6,723 4,803 3,848
Greases and lubes 18,378 16,744 16,916
Convenience store items -0- 6,696 5,672
Other 7,967 7,747 7,086
Total net sales $ 196,800 $155,211 $118,362
Gross profit
Gasoline $ 3,323 $ 4,847 $ 4,280
Diesel 8,364 8,253 6,181
Propane 2,243 1,946 1,414
Greases and lubes 3,435 3,508 3 445
Convenience store items -0- 1,664 1,547
Other 4,938 4,576 3,937
Total gross profit $ 22,303 $ 24,794 $ 20,804
Reconciliation to net (loss) income:
Selling, general and administrative $ 18,971 $ 21,036 $ 16,369
Depreciation and amortization 2,438 2,196 1,536
Income from operations 894 1,562 2,899
Other (expense) (2,116) (602) (348)
Income tax (benefit)expense (641) 210 939
Minority interest 368 491 444
Net (loss) income $ (949) $ 259 $ 1,168
The Company does not account for assets by business segment and, therefore,
depreciation and amortization are not factors used in evaluating operating
performance.
NOTE 18 -- QUARTERLY INFORMATION (UNAUDITED)
The summarized quarterly financial data presented below reflects all
adjustments which, in the opinion of management, are of a normal and recurring
nature necessary to present fairly the results of operations for the periods
presented.
F-25
(Dollars in Thousands except per share)
2000 Total Fourth Third Second First
- ------------- ----------- ----------- ----------- ---------- -----------
Sales $ 196,800 $ 52,693 $ 53,485 $ 48,605 $ 42,017
Gross profit $ 22,303 $ 5,633 $ 5,591 $ 5,441 $ 5,638
(Loss) income
before income
taxes and minor-
ity interest $ (1,222) $ (887) $ (597) $ 30 $ 232
Net (loss) income $ (949) $ (398) $ (454) $ (106) $ 9
(Loss) earnings
per share:
Basic $ (.27) $ (.11) $ (.13) $ (.03) $ .00
Diluted $ (.27) $ (.11) $ (.13) $ (.03) $ .00
1999 Total Fourth Third Second First
- ------------- ----------- ----------- ----------- ---------- -----------
Sales $ 155,211 $ 46,437 $ 44,659 $ 36,965 $ 27,150
Gross profit $ 24,794 $ 6,541 $ 6,911 $ 5,899 $ 5,443
Income (loss)
before income
taxes and minor-
ity interest $ 960 $ (898) $ 660 $ 559 $ 639
Net income (loss) $ 259 $ (547) $ 294 $ 231 $ 281
Earnings (loss)
per share:
Basic $ .07 $ (.17) $ .09 $ .07 $ .08
Diluted $ .07 $ (.16) $ .08 $ .07 $ .08
NOTE 19 - SUBSEQUENT EVENTS
In the first quarter of 2001, the Company completed a private placement to
five accredited investors. The private placement consisted of approximately
123,000 units at $15 per unit for total proceeds of $1,850,000. Each unit
consists of 5 shares of common stock and 3 common stock purchase warrants with
an exercise price of $5.50 per share. The warrants expire 5 years from the
date of issue. The proceeds were used to purchase approximately 10% of the
outstanding common stock of Active IQ ($1,100,000) and the remaining proceeds
were used for general working capital needs.
Effective in January 2001, Meteor contributed substantially all of its propane
assets into a new entity, Rocky Mountain Propane LLC and sold an interest in
such company to Meteor's propane management. Management of Rocky Mountain
Propane LLC is actively seeking financing for other propane opportunities in
its market areas.
F-26
SCHEDULE 2
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
Additions
Balance Charged Balance
beginning Charged to other end
Description of the year to costs accounts Deductions of year
- ----------- ----------- -------- -------- ---------- --------
2000
----
Inventory reserve $ 36 $ -0- $ -0- $ (11) $ 25
Bad debt reserve -
Accounts receivable $ 233 $ 390 $ -0- $ (348) $ 275
Bad debt reserve -
Notes receivable $ 114 $ -0- $ -0- $ (114) $ -0-
1999
----
Inventory reserve $ 41 $ 22 $ -0- $ (27) $ 36
Bad debt reserve -
Accounts receivable $ 201 $ 249 $ -0- $ (217) $ 233
Bad debt reserve -
Notes receivable $ 167 $ 56 $ -0- $ (109) $ 114
1998
----
Inventory reserve $ 38 $ 27 $ -0- $ (24) $ 41
Bad debt reserve -
Accounts receivable $ 455 $ 40 $ 11(a) $ (305) $ 201
Bad debt reserve -
Notes receivable $ 101 $ 85 $ -0- $ (19) $ 167
(a) Acquisition of Tri-Valley Gas Company
S-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
METEOR INDUSTRIES, INC.
/s/ Edward J. Names
Dated: 3/22/01 By:_________________________________
Edward J. Names, President
/s/ Richard E. Kisser
Dated: 3/22/01 By:_________________________________
Richard E. Kisser, Secretary/
Treasurer, Chief Financial Officer
(Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dated indicated.
/s/ Ilyas Chaudhary
Dated: 3/22/01 By:____________________________________
Ilyas Chaudhary, Director
/s/ Edward J. Names
Dated: 3/22/01 By:____________________________________
Edward J. Names, President, Chief
Executive Officer and Director
/s/ Dennis R. Staal
Dated: 3/22/01 By:____________________________________
Dennis R. Staal, Director
/s/ Irwin Kaufman
Dated: 3/22/01 By:____________________________________
Irwin Kaufman, Director
/s/ Richard E. Dana
Dated: 3/22/01 By:____________________________________
Richard E. Dana, Director