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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: January 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number: 0-21825
STREICHER MOBILE FUELING, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0707824
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
800 West Cypress Creek Road, Suite 580, Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
(954) 308-4200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Redeemable Common Stock Purchase Warrants
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B 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. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of April 26, 2001 was $2,439,343 computed by reference to the
closing price of the Common Stock on such date.
As of April 26, 2001 there were 4,356,943 shares of the registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
PART I
Item 1. Description of Business
This Form 10-K contains "forward-looking statements" which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in Item 7, Management's Discussion
and Analysis and Plan of Operations under the caption "Certain Factors Affecting
Future Operating Results" and elsewhere in this Form 10-K.
The Company provides mobile fueling services, primarily to customers
which operate large fleets of vehicles (such as governmental agencies,
utilities, major trucking lines, hauling and delivery services and national
courier services). Company-owned custom fuel trucks deliver fuel on a regularly
scheduled or as needed basis directly to vehicles at customer locations,
assuring the Company's customers a dependable supply of fuel at competitive
rates. The Company utilizes its proprietary electronic fuel management system to
measure, record and track fuel dispensed to each vehicle fueled at a customer
location. This allows the Company to verify the amount of fuel delivered and
provides its customers with customized fleet fuel data for management analysis
and tax reporting. Additionally, the Company's fuel management system reduces
the risk of employee theft by dispensing fuel only to authorized vehicles. The
Company believes that mobile fueling provides several economic and other
advantages to its customers, including eliminating the costs and potential
environmental liabilities associated with equipping and maintaining fuel storage
and dispensing facilities, reducing labor and administrative costs associated
with fueling vehicles and providing centralized control over fuel inventories
and usage. The Company also believes that federal and state environmental
regulations have created opportunities for the Company to convert to mobile
fueling customers fleet operators that currently utilize underground storage
tanks.
The Company presently operates at seven Florida locations; three
California locations; Atlanta, Georgia; Chattanooga and Kingsport, Tennessee;
and Dallas/Fort Worth and Houston, Texas. During April 2001, the Company
operated a fleet of 109 custom fuel trucks and was delivering fuel at a rate of
4.4 million gallons per month.
The Mobile Fueling Industry
Traditionally, businesses and other entities that operate large fleets
of vehicles have met their fueling requirements by either maintaining their own
supply of fuel in on-site storage tanks or fueling vehicles with credit card
purchases or other credit arrangements at local retail gas stations. On-site
storage tanks and fueling facilities can be expensive to construct and maintain
and expose the property owner and operator to potential liability associated
with fuel leaks or spills. In addition, increasingly stringent federal and state
environmental regulation of underground storage tanks will require businesses
that maintain their own fuel supplies to spend significant amounts to remove or
retrofit underground storage tanks to meet regulatory standards. For example,
federal regulations designed to protect the nation's soil and groundwater from
contamination by leaking underground petroleum storage tanks currently require
that new and existing storage tanks comply with certain construction standards
and contain leak detection systems. Some states, including Florida, have
promulgated their own detailed criteria for new underground storage tanks and
the retrofitting of older underground storage tanks, and in some instances such
criteria are more stringent than the federal regulations. The Company believes
that many fleet operators currently utilizing underground storage tanks will
choose to meet their fueling requirements by other means, including mobile
fueling, instead of investing in upgrading existing facilities.
Fueling fleet vehicles at retail gas stations is an inefficient use of
employee time, creates a significant amount of unnecessary paperwork and exposes
the fleet operator to an increased risk of employee fraud. In addition, while
large users often are able to negotiate favorable fuel pricing from retail gas
stations, the labor time expended by having employees fuel their own vehicles as
well as the costs associated with management and administration of fuel
purchases can exceed the benefits associated with price discounts.
The Company believes that mobile fueling services, such as those
provided by the Company, offer several benefits over traditional fueling
methods:
o Reduced Operating Costs and Increased Labor Productivity. Mobile
fueling enables businesses to reduce operating costs by eliminating
the need for their employees to fuel vehicles either on-site or at
local retail gas stations. Overnight fueling prepares fleet
vehicles for operation at the beginning of each work day and
increases labor productivity by allowing employees to use their
vehicles during time that would otherwise be spent fueling. Mobile
fueling also reduces the administrative burden required to oversee
and administer fuel purchases and inventories.
o Provides Centralized Inventory Control and Management. The
Company's fuel management system provides customers with weekly
reports detailing, among other things, the location, description
and daily and weekly fuel consumption of each vehicle fueled by the
Company. This eliminates customers' need to invest working capital
to maintain adequate fuel supplies, and allows customers to
centralize their fuel inventory controls and track and analyze
vehicle movement and fuel consumption for management and tax
reporting purposes.
o Provides Tax Reporting Benefits. The Company's fuel management
system's ability to track fuel consumption to specific vehicles and
fuel tanks provides tax benefits to customers who consume fuel in
uses that are tax-exempt, such as for off-road vehicles,
government-owned vehicles and fuel used to run refrigerator units
on vehicles. For such uses, the customers receive reports which
provide them with the information required to substantiate such tax
exemptions.
o Eliminates Expenses and Liabilities of On-site Storage. Fleet
operators who previously satisfied their fuel requirements using
on-site storage tanks can eliminate the capital expenditures and
operating costs required to equip and maintain fuel storage and
dispensing facilities and inventory and to comply with increasingly
stringent environmental regulations. In addition, by removing
on-site storage tanks and relying on mobile fueling, customers
avoid potential liabilities associated with the handling and
storage of fuel.
o Prevents Fuel Theft. Fleet operators that rely on employees to fuel
vehicles, whether at on-site facilities or at retail gas stations,
often experience shrinkage of fuel inventories or excess fuel
purchases due to employee fraud. The Company's fuel management
system reduces the risk of employee theft by dispensing fuel only
to authorized vehicles. Utilizing an independent contractor such as
the Company for fueling services rather than allowing employees to
purchase fuel at local retail stations also eliminates employee
fraud due to credit card abuse.
o Emergency Fuel Supplies. Emergency preparedness, including fuel
availability, is critical to the operation of utilities, delivery
services and other fleet operators. The Company provides access to
emergency fuel supplies to allow customers to respond more
effectively to severe local weather conditions or other emergency
situations.
Marketing and Customers
The Company markets its services primarily to customers which operate
large fleets of vehicles in connection with their business (such as governmental
agencies, utilities, major trucking lines, hauling and delivery services and
national courier services). The Company also seeks to obtain the business of
smaller fleet operators which are in geographical proximity to its larger
customers. Once engaged to provide fueling services, the Company is usually the
exclusive service for the fueling of a customer's entire fleet or a particular
yard of vehicles. For potential customers with larger fleets, the Company
generally obtains approval from regional corporate offices to supply fuel within
a newly designated area. Whereas large fleet operators offer immediate market
penetration on a regional basis, small fleet operators are equally important
accounts because they provide geographic density which optimizes fuel delivery
efficiency and minimizes cost.
2
The Company's representatives focus their marketing efforts on fleet
operators within the Company's established service areas. The Company's
representatives identify and directly contact candidates for the Company's
services. Direct marketing, including telephone solicitation, has played a
primary role in the Company's development of new business. Another important
marketing source has been referrals from existing customers.
The Company distributes gas and diesel fuel to approximately 638
customers. Three customers accounted for approximately 19% of the Company's
revenue in the year ended January 31, 2001 and 26% of the company's revenue in
fiscal 2000. Although the Company has contracts to provide mobile fueling
services to several of its larger customers, generally the Company does not
obtain written agreements with its customers.
Operations
The Company currently operates from 15 locations in California,
Florida, Georgia, Tennessee, and Texas. The Company delivers fuel utilizing its
own fleet of 109 custom fuel trucks, most of which are equipped with the
Company's proprietary electronic fuel tracking and reporting system. The
Company's vehicles have fuel capacities ranging from 2,800 to 4,400 gallons.
Generally, each vehicle services between five and fifteen customer locations per
day or night, depending on size of the customers, market density and the
individual customers' fuel requirements. Generally, the custom fuel trucks
acquire fuel inventory daily at local port facilities or large wholesale gas
distributor locations and are assigned to a specified delivery route. The
Company conducts all billing functions from corporate headquarters. Route
drivers and service personnel operate from all the Company's offices.
The Company's fuel management system derives its data from the Fuel
Tracking Controller (the "FTC Computer"), which is a computer that the Company
installs on each customized fuel truck. The FTC Computer can be programmed to
control a variety of truck configurations; single or multiple storage container
trucks; and any number of pumps and hoses attached to the fuel truck. The FTC
Computer details fueling from the Company's trucks to each vehicle in the
customer's vehicle fleet to a measurement of 1/100 of a gallon by reading the
state-calibrated meter installed on the fuel trucks. To accomplish this
measurement, the FTC Computer interfaces with hand-held devices operated by the
Company's driver or operator. The Company has a patent registered with the
United States Patent and Trademark Office for its proprietary electronic fuel
management system.
To permit the Company's customers to track their use of fuel, each
fleet vehicle or piece of equipment fueled by the Company is electronically
identified from a list of the customer's asset number previously registered in
the Company's computer. For security and tracking purposes, the FTC Computer
will not permit fuel to be dispensed from the Company's truck unless both the
fleet yard and the individual vehicle to be fueled electronically correspond to
the FTC Computer registration. A hand-held radio connected to a scanning device
links the operator or driver of the fuel truck with the FTC Computer. Only after
verification of both the yard and the truck or piece of equipment will the FTC
Computer allow operation of the fuel pump on the fuel truck to dispense fuel.
All fuel dispensing from a fuel truck is recorded by the FTC Computer
and stored in a tamper free solid state memory cartridge ("SSC") for downloading
at an operations control center where the data is assimilated into reports and
invoices for the customer. The FTC Computer will not allow fuel to be dispensed
unless this removable SSC cartridge is inserted into the FTC Computer. The SSC
has no moving parts and is not susceptible to damage or data loss under normal
conditions. The SSC also is protected by a dual battery back-up system and a
dual disk system to protect data. The Company also maintains a backup computer
system in the event of failure of the primary system.
The Company also has adapted its FTC Computer for use with fixed site
tanks. Upon conversion of a customer tank, the Company services and manages fuel
delivery to the tank and provides the customer with reports detailing fuel
dispensed by the customer from the tank into each fleet vehicle.
Fuel Supply
Gas and diesel fuel are commodities which are processed and sold by
various sources. The Company purchases fuel from several major suppliers at spot
market prices and sometimes qualifies for volume discounts. The Company monitors
fuel prices and price trends in each of its markets on a daily basis and seeks
to purchase at the lowest available prices with the best terms satisfactory to
the Company.
3
Custom Fuel Trucks
The typical configuration of the Company's custom fuel trucks is a
Kenworth or International chassis with a 3,400 to 4,400 gallon multi-compartment
aluminum tank, a vapor recovery system and the Company's proprietary FTC
Computer, which records and regulates fuel flow from the storage compartments.
For maintenance of the fuel trucks, the Company relies upon equipment
warranties, fixed fee service contracts and on-site repairs. To date, the
Company has not experienced significant down-time on any of its customized fuel
trucks due to maintenance problems.
Competition
The Company competes with other distributors of fuel, including several
regional distributors and numerous small independent operators. Some of the
Company's competitors have significantly greater financial or marketing
resources than the Company. The Company's competitors also could introduce
services that are superior to the Company's or that achieve greater market
acceptance. The Company also competes for customers whose drivers fuel their own
vehicles at retail gas stations. The Company also could encounter potential
competition from a number of well capitalized companies which distribute fuel
and other similar oil products, some of which are larger, more established and
have greater financial, marketing and other resources than the Company. In
addition, some of the Company's customers are capable of providing the same
services to their vehicles directly. The Company believes that its ability to
compete depends on a number of factors, including price, reliability, credit
terms, name recognition, delivery time and service and support. There can be no
assurance that the Company will be able to continue to compete successfully with
respect to these factors.
Executive Officers
The executive officers of the Company as of April 26, 2001 are as
follows:
Name Age Position
Richard E. Gathright....... 47 Chief Executive Office and President
Gary G. Williams........... 45 Senior Vice President, Commercial Operations
Ted E. Honcharik........... 39 Senior Vice President, Fleet Operations &
Business Development
Walter B. Barrett.......... 43 Vice President, Finance; Chief Financial
Officer; and Treasurer
Timothy W. Koshollek....... 37 Vice President, Marketing & Sales
Steven M. Alford........... 35 Vice President, Customer Service & Emergency
Response
Mr. Gathright was appointed Chief Executive Officer and President of
the Company in November 2000 and is responsible for the management of all
business affairs of the Company, reporting directly to the Board of Directors.
He was an advisor on operational and financial matters to the senior management
of several domestic and international energy companies from January 2000 through
October 2000. From September 1996 to December 1999, he was President and Chief
Operating Officer of TransMontaigne, Inc., a publicly owned company providing
logistical services to major energy companies and large industrial customers; a
Director from April 1995 to December 1999; Executive Vice President from April
1995 to September 1996; and from December 1993 to April 1995 was President and
Chief Operating Officer of a predecessor of TransMontaigne.
Mr. Williams was appointed Senior Vice President of the Company in
February 2001 and is primarily responsible for Marketing and Sales and Product
Procurement. Prior to joining the Company he was Vice President, Marketing for
TransMontaigne Product Services Inc. in Fayetteville, Arkansas and Atlanta,
Georgia from 1995 to 2001 where he managed all wholesale marketing functions in
the Mid-Continent, Southeast and Mid-Atlantic areas
4
as well as serving on that company's risk management committee. From 1991 to
1995 he was Regional Manager for Kerr-McGee Refining Corporation responsible for
unbranded gasoline and diesel fuel sales in an eleven state marketing area of
the Southeast.
Mr. Honcharik was appointed Senior Vice President of the Company in
February 2001 and is primarily responsible for Fleet Operations and Corporate
Development. From 1999 to 2000, he served as Vice President of new business
development for Southern Counties Oil Company in Orange, California. From 1993
to 1999 he served as President of Fleet Fuels, LLC in Orange, California where
he was primarily responsible for all aspects of operations, marketing,
acquisitions and business development.
Mr. Barrett has served as Vice President, Finance and Chief Financial
Officer of the Company since July 1997. From 1991 to 1997 Mr. Barrett was Vice
President of Finance and Chief Financial Officer of Devcon International Corp.,
a supplier of construction materials and services throughout the Caribbean and
Southeastern Florida.
Mr. Koshollek has served as the Vice President of Marketing of the
Company since March 1998. From 1994 to February 1998, he served as Vice
President of Marketing and Operations of Enterprises and the Company. From 1991
to 1994, he was responsible for sales and management of a wholesale seafood
company. From 1989 to 1991, he was the operations manager of Enterprises
responsible for its Southeast division fuel delivery operations.
Mr. Alford has served as Vice President, Customer Service & Emergency
Response, since March 2001. Prior to that he served as Vice President,
Operations of the Company from March 1998 through February 2001. From December
1992 to February 1998, he was employed by Enterprises and the Company in various
supervisory and managerial positions.
Employees
At April 26, 2001, the Company had 191 full-time employees, of whom 47
were involved in executive, managerial, supervisory and sales capacities, 125
were route drivers and 19 served in various clerical and other capacities. None
of the Company's employees is covered by a collective bargaining agreement or is
a member of a union. The Company considers its relationship with its employees
to be good.
Governmental Regulation
The Company's operations are affected by numerous federal, state and
local laws, including those relating to protection of the environment and worker
safety. The transportation of gasoline and diesel fuel is subject to regulation
by various federal, state and local agencies, including the U.S. Department of
Transportation ("DOT"). These regulatory authorities have broad powers, and the
Company is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the cost of providing, its services. The
regulations provide that, among other things, the Company's drivers must possess
a commercial drivers license with a hazardous materials endorsement. The Company
is also subject to the rules and regulations of the Hazardous Materials
Transportation Act. For example, the Company's drivers and their equipment must
comply with DOT's pre-trip inspection rules, documentation regulations
concerning hazardous materials (i.e., certificates of shipments which describe
type and amount of product transported), and limitations on the amount of fuel
transported as well as driver time limitations. Additionally, the Company is
subject to DOT inspections which occur at random intervals. Any material
violation of DOT rules or the Hazardous Materials Transportation Act may result
in citations and/or fines upon the Company. In addition, the Company depends on
the supply of gasoline and diesel fuel from the oil and gas industry and,
therefore, is affected by changing taxes, price controls and other laws and
regulations relating to the oil and gas industry generally. The Company cannot
determine the extent to which its future operations and earnings may be affected
by new legislation, new regulations or changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose penalties
or sanctions for damages to natural resources or threats to public health and
safety. Such laws and regulations may also expose the Company to liability for
the conduct of or conditions
5
caused by others, or for acts of the Company that were in compliance with all
applicable laws at the time such acts were performed. Sanctions for
noncompliance may include revocation of permits, corrective action orders,
administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for joint and several liability for remediation of
spills and releases of hazardous substances. In addition, companies may be
subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances, as well as damage to natural
resources.
Although the Company believes that it is in substantial compliance with
existing laws and regulations, there can be no assurance that substantial costs
for compliance will not be incurred in the future. There could be an adverse
affect upon the Company's operations if there were any continuing substantial
violations of these rules and regulations. Moreover, it is possible that other
developments, such as stricter environmental laws, regulations and enforcement
policies thereunder, could result in additional, presently unquantifiable, costs
or liabilities to the Company.
Item 2. Description of Property
The following table sets forth certain information concerning the
property and facilities that are owned or leased by the Company for use in its
operations:
Lease Expiration With
Description Location All Options Notes
----------- -------- ----------- -----
Executive offices Ft. Lauderdale, Florida 2/28/04 (2)
Former executive offices, Ft. Lauderdale, Florida 7/31/13 (1)
truck yard and warehouse space
Truck yard and office Ft. Lauderdale, Florida 3/15/03 (2)
Truck yard and office Ft. Myers, Florida 1/1/02 (2)
Truck yard and office Jacksonville, Florida 8/31/15 (1)
Truck yard and office Orlando, Florida Month to Month (1)
Truck yard and office Tampa, Florida -- (3)
Truck yard and office Tallahassee, Florida Month to Month (2)
Truck yard and office Melbourne, Florida Month to Month (2)
Truck yard and office Atlanta, Georgia 7/31/01 (2)
Truck yard and office Kingsport, Tennessee Month to Month (2)
Truck and yard office Chattanooga, Tennessee Month to Month (2)
Truck yard and office Houston, Texas Month to Month (2)
Truck yard and office Ft. Worth, Texas -- (3)
Truck yard and office Sacramento, California 4/15/02 (2)
Truck yard and office Gardena, California 1/15/03 (2)
Truck yard and office San Jose, California 4/01/02 (2)
- ---------------
(1) Leased from Stanley H. Streicher, the Company's Chairman of the Board.
(2) Leased.
(3) Property owned by the Company.
6
Item 3. Legal Proceedings
The Company has no material legal proceedings pending. From time to
time, the Company may become a party to litigation incidental to its business.
There can be no assurance that any future legal proceedings will not have a
material adverse effect on the Company's business, reputation, financial
condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock, par value $.01 ("Common Stock") and
Redeemable Common Stock Purchase Warrants ("Warrants") have traded in the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
Small-Cap Market under the symbols "FUEL" and "FUELW", respectively, since
December 11, 1996, the date of the Company's initial public offering. The
following table sets forth, for the periods indicated, the high and low closing
prices for the Common stock and Warrants, as reported by NASDAQ.
Common Stock Warrants
-------------------------- --------------------------
High Low High Low
---------- ---------- ---------- ----------
Year Ended January 31, 2001
1st quarter $ 7.19 $ 4.13 $ 1.16 $ .50
2nd quarter $ 4.50 $ 2.25 $ .56 $ .25
3rd quarter $ 4.00 $ 1.50 $ .50 $ .13
4th quarter $ 2.47 $ 1.25 $ .44 $ .06
Year Ended January 31, 2000
1st quarter $ 4.63 $ 2.06 $ 0.66 $ 0.22
2nd quarter $ 8.50 $ 4.25 $ 2.50 $ 0.50
3rd quarter $ 8.63 $ 7.06 $ 2.25 $ 1.50
4th quarter $ 8.50 $ 6.25 $ 1.75 $ 1.03
As of April 26, 2001, there were 45 holders of record of the Company's
Common Stock and approximately 550 beneficial owners of the Company's Common
Stock. On April 26, 2001, the closing price of the Common Stock was $1.20 per
share and the closing price of the Warrants was $0.12 per Warrant.
To date, the Company has not declared or paid any dividends on its
Common Stock. The payment of dividends, if any, is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition and other relevant factors. The Board of
Directors does not intend to declare any dividends in the foreseeable future,
but instead intends to retain future earnings for use in the Company's business
operations.
Issuances of Unregistered Securities
On January 31, 2001, the Company issued 531,667 shares of common stock
at $1.50 per share to four (4) investors in connection with the Company's
private placement of up to 1,500,000 shares of common stock. The Company also
issued, on January 31, 2001, 333,333 shares of common stock to a director of the
Company and certain of his adult children upon their conversion of a
promissory note in the principal amount of $500,000, at a conversion price of
$1.50. The Company believes these issuances were exempt from registration
pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933
and pursuant to Rule 506 of Regulation D promulgated thereunder.
8
Item 6. Selected Financial Data
The following selected financial data of the Company and its
consolidated subsidiaries are qualified in their entirety by, and should be read
in conjunction with, the Consolidated Financial Statements and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The data for each of the 5 years in the period ended January 31,
2001, are derived from the Consolidated Financial Statements of the Company
audited by KPMG LLP, independent certified public accountants for the fiscal
years ended January 31, 2001, 2000 and 1999 and by Arthur Andersen LLP,
independent certified public accountants, for the fiscal years ended January 31,
1998 and 1997. The Consolidated Financial Statements of the Company as of
January 31, 2001 and 2000 and for each of the years in the three year period
ended January 31, 2001 and the reports thereon appear elsewhere herein.
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
Earnings Statement Data:
Revenues $86,457,384 $74,170,995 $47,375,571 $43,041,814 $33,844,969
Cost of sales 83,364,104 69,542,201 44,621,496 39,736,507 31,458,794
------------ ------------ ------------ ------------ ------------
Gross profit 3,093,281 4,628,794 2,754,075 3,305,307 2,386,175
Selling, general and administrative
expenses 2,847,513 3,050,785 2,801,278 3,575,368 2,640,609
------------ ------------ ------------ ------------ ------------
Operating income (loss) 245,768 1,578,009 (47,203) (270,061) (254,434)
Loss on asset disposal (4,564) (18,965) (6,877) (62,399) (5,928)
Interest expense (1,645,493) (1,151,707) (839,907) (474,923) (432,498)
Interest and other income 69,023 65,103 73,391 178,811 31,071
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes (1,335,266) 472,440 (820,596) (628,572) (661,789)
Income tax benefit (expense) -- -- (261,018) 153,146 232,551
------------ ------------ ------------ ------------ ------------
Net income (loss) $(1,335,266) $ 472,440 $(1,081,614) $ (475,426) $ (429,238)
============ ============ ============ ============ ============
Basic net income (loss) per share $ (.49) $ .17 $ (.42) $ (.18) $ (.26)
============ ============ ============ ============ ============
Diluted net income (loss) per share $ (.49) $ .16 $ (.42) $ (.18) $ (.26)
============ ============ ============ ============ ============
Basic weighted average common shares
outstanding 2,716,855 2,710,400 2,575,000 2,575,000 1,631,250
============ ============ ============ ============ ============
Diluted weighted average common shares
outstanding 2,716,855 2,880,529 2,575,000 2,575,000 1,631,250
============ ============ ============ ============ ============
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
Balance Sheet Data:
Working capital (deficit) $(1,890,919) $(1,797,471) $(2,324,495) $ 3,392,012 $ 2,495,181
Total assets $24,644,736 $23,930,924 $16,194,149 $13,995,540 $11,402,970
Long term debt $ 5,590,202 $ 6,470,171 $ 4,284,271 $ 5,915,049 $ 1,123,498
Total stockholders' equity $ 5,218,442 $ 4,289,172 $ 3,359,636 $ 4,441,250 $ 4,961,413
Unaudited Quarterly Financial Data:
Fiscal quarter Gross Operating Net Earnings (loss)
ended Revenues profit income (loss) income (loss) per share
- ------------------------ ------------ ------------ ------------ ------------ ------------
January 31, 2001 $20,739,628 $ 541,473 $ (251,050) $ (653,590) $(.24)
October 31, 2000 22,951,247 921,997 292,680 (118,010) (.04)
July 31, 2000 20,479,663 1,152,471 524,378 133,875 .05
April 30, 2000 22,286,846 477,340 (320,240) (697,541) (.26)
------------ ------------ ------------ ------------ ------------
Total FYE 1/31/01 $86,457,384 $ 3,093,281 $ 245,768 $(1,335,266) $(.49)
============ ============ ============ ============ ============
January 31, 2000 $20,440,192 $ 841,568 $ (32,841) $ (362,854) $(.15)
October 31, 1999 20,483,150 1,420,360 602,546 304,404 .10
July 31, 1999 17,730,022 1,248,447 521,564 280,769 .11
April 30, 1999 15,517,631 1,118,419 486,740 250,121 .10
------------ ------------ ------------ ------------ ------------
Total FYE 1/31/00 $74,170,995 $ 4,628,794 $ 1,578,009 $ 472,440 $ .16
============ ============ ============ ============ ============
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains "forward-looking statements" which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain factors, including those set forth under the caption "Certain Factors
Affecting Future Operating Results," below, and elsewhere in this Form 10-K. The
following discussion also should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Form 10-K.
9
General
The Company derives all of its revenue from selling fuel and providing
mobile fueling services. Revenue is comprised principally of sales of gasoline
and diesel fuel and related service charges. Cost of sales is comprised
principally of the cost of fuel and transportation costs (primarily payroll and
delivery vehicle operating expenses). Included in both revenue and cost of sales
are federal and state fuel taxes, which are collected by the Company from its
customers, when required, and remitted to the appropriate taxing authority.
Comparison of Fiscal Year Ended January 31, 2001 to Fiscal Year Ended January
31, 2000.
Revenues
Revenue increased $12.3 million, or 16.6%, for the year ended January
31, 2001 ("fiscal 2001") compared to the year ended January 31, 2000 ("fiscal
2000"). The increase in revenue resulted from an overall increase in the
wholesale price of gasoline and diesel fuel, offset by declines in the actual
quantity of fuel delivered and, to a lesser extent, declines in the average
delivery service fee as a result of changes in the mix of business. The Company
delivered 57.6 million gallons of fuel to its customers in fiscal 2001, a
decrease of 3.0% over the 59.4 million gallons delivered in fiscal 2000. The
Company sells fuel at prices based upon the daily market averages in each
operating location and provides delivery services at a fixed price per gallon.
Revenue levels can vary depending on the upward or downward movement of fuel
prices in each market. The Company has rebuilt its marketing and sales function
in an effort to increase the volume of mobile fueling business. While there
appear to be opportunities for the Company to increase the volume of fuel sold
and delivered, such volume growth is dependent upon a number of factors, many of
which are beyond the Company's control.
Gross Profit
Gross profit decreased $1.5 million, or 32.6%, in fiscal 2001 compared
to fiscal 2000. The average margin per delivered gallon of fuel in fiscal 2001
was 5.37 cents compared to 7.79 cents in fiscal 2000. A number of factors
contributed to the decrease in gross profit, including decreases in volume,
reduced historical inventory gains from gross volumes sold to net volumes
purchased, increases in inventory shortages arising from inefficiencies in field
control and reporting systems, increased product procurement costs, increased
vehicle expenses, primarily depreciation, running fuel and insurance, and
decreases in the average delivery service fee resulting from the loss of higher
margin mobile fueling business and the replacement of a portion of that business
with lower margin bulk delivery business. The Company is currently undertaking a
number of measures to reduce its product procurement and operating costs;
however, it cannot currently estimate to what extent direct field operating
expenses will be reduced, if at all.
Selling and General and Administrative Expenses
Selling and general and administrative expenses decreased $203,000, or
6.7%, in fiscal 2001 compared to fiscal 2000. The decrease in these expenses
primarily resulted from eliminating marketing and sales personnel in the first
quarter of the year, including related travel and entertainment expenses and
reduced financial/public relations expenses, offset by increases in corporate
payroll costs in the last quarter of the year.
Interest Expense
Interest expense increased $493,000, or 43.3%, in fiscal 2001 compared
to fiscal 2000 as a result of increased borrowings, primarily in prior years, to
pay for new custom fuel trucks for the Company's operations and as a result of
interest rate increases throughout fiscal 2001.
Income Taxes
The Company recorded no income tax expense in fiscal 2001 or 2000. The
Company has sufficient net operating loss carryforwards to offset any taxable
income for at least the next several years.
10
Net Income (Loss)
The Company incurred a net loss of $1.3 million, or $.49 per diluted
share, in fiscal 2001 compared to net income of $472,440, or $.16 per diluted
share, in fiscal 2000. The Company's net loss in fiscal 2001 resulted primarily
from losses of higher margin mobile fueling business, inefficiencies in product
procurement, underutilization of equipment and increased costs related to
maintaining its equipment.
Comparison of Fiscal Year Ended January 31, 2000 to Fiscal Year Ended
January 31, 1999
Revenues
Revenue increased $26.8 million, or 56.5%, for the year ended January
31, 2000 ("fiscal 2000") compared to the year ended January 31, 1999 ("fiscal
1999"). The Company delivered 59.4 million gallons of fuel to its customers in
fiscal 2000, an increase of 41.8% over the 41.9 million gallons delivered in
fiscal 1999. The increase in revenue resulted from a higher volume of fuel sales
and services to existing customers, acquisition of new customers in existing
locations, the introduction of mobile fueling operations into additional
metropolitan areas and an overall increase in the wholesale price of gasoline
and diesel fuel.
Gross Profit
Gross profit increased $1.9 million, or 67.9%, in fiscal 2000 compared
to fiscal 1999. This increase was due primarily to increases in volume, offset
by increases in driver payroll costs, repair and maintenance costs and other
costs associated with the Company's expansion into new markets in fiscal 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $250,000, or
8.9%, in fiscal 2000 compared to fiscal 1999. The increase in selling, general
and administrative expenses primarily resulted from an increase in marketing,
travel and entertainment and promotion expenses associated with the expansion of
the Company's mobile fueling operations.
Interest Expense
Interest expense increased $312,000, or 37.1%, in fiscal 2000 compared
to fiscal 1999 as a result of increased borrowings to fund the Company's
expansion into new markets and to acquire new custom fuel trucks for existing
and new locations.
Income Taxes
The Company recorded no income tax expense in fiscal 2000 compared to
an income tax expense of $261,000 in fiscal 1999. The Company has sufficient net
operating loss carryforwards to offset any taxable income for the next several
years. The tax expense in fiscal 1999 resulted from the Company fully reserving
a deferred tax asset.
Net Income (Loss)
The Company earned net income of $472,000, or $.16 per diluted share,
in fiscal 2000 and incurred a net loss of $1,082,000, or $.42 per share, in
fiscal 1999. The Company's net loss in fiscal 1999 resulted primarily from the
Company's expansion into new markets, underutilization of equipment in such
markets and increases in personnel, equipment, and facilities to support current
and future growth. The increase in earnings in fiscal 2000 is due primarily to
the combination of factors discussed above.
11
Liquidity and Capital Resources
The Company's business requires it to expend considerable amounts of
funds for fuel, labor and equipment costs before any payments are received from
the Company's customers. The fuel purchased by the Company for resale to its
customers must generally be paid for within 10 to 15 days of purchase, labor
costs and related taxes are paid bi-weekly and equipment related costs are
generally paid within 30 days. The Company bills its customers weekly and
generally collects the majority of its accounts within 35 to 40 days. Days sales
outstanding at January 31, 2001 was 39 days compared to 41 days sales
outstanding at January 31, 2000.
The Company incurred a net loss of $1.3 million in fiscal 2001 and has
continued to incur operating losses subsequent to January 31, 2001. Higher fuel
costs, increases in interest rates, costs associated with the Company's
expansion of its vehicle fleet, resulting from previously committed purchases of
custom fuel trucks and decreases in higher margin mobile fueling business have
continued to affect operating results since year end. The Company expects to
report a loss of approximately $1.0 million for the first quarter of fiscal
2002, which ends April 30, 2001, primarily due to increased general and
administrative expenses, restructuring of the marketing, operations and
management functions and reduced volumes of fuel delivered.
The Company has taken a number of initiatives to improve its operating
results by reducing operating costs and attempting to increase revenues. These
include:
o Review of field operating expenses, primarily payroll and vehicle
maintenance costs. The Company is seeking to reduce these costs by
implementing new repair and maintenance policies, reviewing and
analyzing route and delivery structures to improve efficiency and
reduce costs.
o Evaluating the current overhead structure of the Company and
implementation of reductions where feasible
o Price increases on certain lower margin accounts
o Restoring the marketing and sales function personnel in order to
market the Company's services and increase current sales volume
levels
o Raising additional operating capital by completing a privately
placed $2,500,000 equity capital infusion in January and February
2001 and securing $1.0 million in bridge financing in April 2001.
The current level of the Company's cash reserves, and its ongoing
operating losses raise doubt as to the Company's ability to continue as a going
concern. The Company believes that the actions noted above, if successfully
implemented, should allow the Company to continue as a going concern. The
Company's ability to successfully implement its plans and improve its operations
is dependent upon a number of factors, some of which are beyond its control.
There is no assurance that the Company's operating results or financial
condition will improve in fiscal year 2002.
The mobile fueling business is capital intensive and the Company will
continue to require substantial capital in order to operate and expand its
business. The Company is presently undercapitalized and to continue operations
in the future will require additional equity or debt financing to strengthen its
financial position, restore profitability with respect to existing operations
and to support expansion into new markets. If the Company is unable to obtain
additional equity or debt financing in the future, the Company's growth will be
limited and Company may not be able to pay for all of its operating expenses. If
additional funds are raised through the issuance of equity securities,
shareholders of the Company may experience significant dilution. The Company has
no current arrangements with respect to, or sources of, additional financing and
there can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at al1.
The Company has outstanding borrowings of $7.3 million as of January
31, 2001 under a $10.0 million bank line of credit. This line permits the
Company to borrow up to 85% of the total amount of eligible accounts
12
receivable. Based on eligible receivables outstanding at January 31, 2001 the
line has been fully drawn as of that date. Interest is payable monthly at 1.0%
over the prime rate (8.0% as of January 31, 2001) and outstanding borrowings
under the line are secured by substantially all of the Company's assets. The
credit agreement contains covenants requiring the maintenance of certain
financial ratios and minimum net worth and working capital requirements. As of
January 31, 2001, the Company was in compliance with these requirements. In
April 2001, the due date of the line of credit was extended to April 30, 2002
and the interest rate was increased to 2.0% over the prime interest rate. A
renewal fee of $100,000 is payable in six equal monthly installments commencing
June 1, 2001 and a termination fee of $100,000 is payable upon the termination
of the lending arrangement.
The Company has previously financed approximately 85% to 95% of the
purchase price of custom fuel trucks and cannot estimate the amount of cash
required for the future acquisition of fuel trucks, if any, as such amount is
dependent upon the terms and conditions of financing available, if any, to the
Company at the time of delivery. At January 31, 2001, the Company had no
purchase commitments for custom fueling vehicles since its present fleet will
meet anticipated future delivery requirements.
A significant portion of the Company's outstanding debt bears interest
at variable interest rates. The Company's financial results will be impacted by
significant increases or decreases in interest rates.
Certain Factors Affecting Future Operating Results
The following important factors have affected, and may in the future
continue to affect, the Company's business, results of operations and financial
condition, and could cause the Company's operating results to differ materially
from those expressed in any forward-looking statements made by or on behalf of
the Company.
No Assurances of Future Profitability; Losses from Operations. The
Company incurred a net loss of $1.3 million for the fiscal year ended January
31, 2001; earned a net profit of $472,440 in the fiscal year ended January 31,
2000; and incurred a net loss of $1.1 million in the fiscal year ended January
31, 1999. The Company expects to report a loss of approximately $1.0 million in
its first quarter ended April 30, 2001 and there can be no assurance that the
Company will not continue to incur net losses in the future. The Company has
received "going concern" opinions from its auditors for the fiscal years ended
January 31, 2001 and 2000. The Company's growth over the past several years and
its negative cash flows from operating and investment activities have been
financed by additional bank borrowings; private sales of the Company's common
stock; proceeds received from the exercise of stock options and warrants; and
the net proceeds from the issuance of Common Stock and Warrants from the
Company's initial public offering. The Company's operating expenses have
increased as its business has grown and can be expected to increase as a result
of the Company's efforts to expand its business. There can be no assurance that
the Company will be able to generate sufficient revenue to meet its operating
expenditures or to operate profitably. See "Results of Operations - Liquidity
and Capital Resources."
Need for Capital; Uncertainty of Additional Financing. The mobile
fueling business is capital intensive and the Company will continue to require
substantial capital in order to operate and expand its business. The Company has
used long-term and working capital financing to fund capital expenditures for
its fuel truck fleet, product procurement requirements and to carry customer
accounts receivable. The Company is presently undercapitalized and to continue
operations in the future will require additional equity or debt financing to
strengthen its financial position, restore profitability with respect to
existing operations and to support expansion into new markets. If the Company is
unable to obtain additional equity or debt financing in the future, the
Company's growth will be limited and Company may not be able to pay for all of
its operating expenses. If additional funds are raised through the issuance of
equity securities, shareholders of the Company may experience significant
dilution. The interest rate on the Company's principal credit facility
fluctuates with the prime lending rate, resulting in greater interest costs to
the Company in the event of rising interest rates.
The Company has no current arrangements with respect to, or sources of,
additional financing and there can be no assurance that any additional financing
will be available to the Company on acceptable terms, or at all.
Trading Market for the Company's Common Stock. The Company's stock has
been thinly traded which might make it difficult for investors to sell their
Shares at a predictable price or at all. Additionally, there may be
13
volatility in the market price of the Company's Common Stock due to factors
beyond the Company's control. The Company's quarterly operating results, changes
in general conditions in the economy, the financial markets or other
developments affecting the Company could cause the market price of the Company's
Common Stock to fluctuate, thus making it difficult for shareholders to sell
their Shares.
Growth Dependent Upon Expansion; Risks Associated With Expansion into
New Markets. A significant component of the Company's future growth strategy
will be to expand the Company's business into new markets. The Company intends
to expand into additional major and secondary metropolitan areas. Expansion will
largely be dependent on the Company's ability to demonstrate the benefits of
mobile fueling to potential new customers; successfully establish and operate
new locations; hire and retain qualified management, operating, marketing and
sales personnel; obtain financing for capital expenditures and working capital
purposes; secure reliable sources of product supply on a timely basis and on
commercially acceptable credit terms; and successfully manage growth by
effectively supervising operations, controlling costs and maintaining
appropriate quality controls. The Company's growth will depend upon its ability
to achieve greater penetration in existing markets and to successfully penetrate
new markets. The Company may also seek to expand through the acquisition of
existing companies or their customer bases. There can be no assurance that the
Company will be able to successfully expand its operations.
Acquisition Availability; Integrating Acquisitions. The Company's
future growth strategy may involve the acquisition of fuel distributors in
existing and new markets. There can be no assurance that the Company will be
able to locate or acquire suitable acquisition candidates on acceptable terms or
that future acquisitions will be effectively and profitably integrated into the
Company. Acquisitions involve risks that could adversely affect the Company's
operating results, including management commitment; integration of the
operations and personnel of the acquired operations; amortization of acquired
intangible assets; and possible loss of key employees of the acquired
operations.
Dependence on Key Personnel. The future success of the Company will be
largely dependent on the continued services and efforts of Richard E. Gathright,
the Company's President and Chief Executive Officer, and other key personnel.
The loss of the services of Mr. Gathright or other key personnel could have a
material adverse effect on the Company's business and prospects. The Company's
success and plans for future growth will also depend on its ability to attract
and retain additional qualified management, operating, marketing, sales and
financial personnel. There can be no assurance that the Company will be able to
hire or retain such personnel on terms satisfactory to the Company. Mr.
Gathright and the Company have entered into a three year employment agreement.
Fuel Pricing; Effect on Profitability. Gasoline and diesel fuel are
commodities, the wholesale prices of which are subject to volatility in response
to changes in supply or other market conditions over which the Company has no
control. The Company endeavors to sell fuel to its customers at prices in excess
of its wholesale costs. The Company's margin from the sale of fuel fluctuates as
a result of changes in the wholesale procurement cost of diesel fuel and
gasoline. If the Company cannot pass on future increases in wholesale prices of
diesel fuel and gasoline to its customers, margins would decrease or a loss
could be incurred. The Company has not engaged in derivatives or futures trading
to hedge fuel price movements.
Risks Associated with Customer Concentration; Absence of Written
Agreements. Revenue from three major customers totaled approximately $12.1
million, $13.4 million and $10.8 million in fiscal 2001, 2000, and 1999,
respectively. Although the Company has contracts to provide mobile fuel services
to several of its larger customers, most of the Company's customers do not have
written agreements with the Company and can terminate the Company's mobile
fueling services at any time and for any reason. As a result of this customer
concentration and absence of written agreements, the Company's business, results
of operations and financial condition could be materially adversely affected by
the loss of one or more of its major customers or if the Company were to
experience a high rate of contract terminations.
Management of Growth. The Company has experienced significant growth
over the past several years. For the Company to continue to grow effectively it
will need to improve its operational, financial and other internal systems, and
to attract, train, motivate, manage and retain its employees. If the Company is
unable to manage growth effectively, the Company's results of operations will be
adversely affected.
14
Competition. The Company competes directly and indirectly with other
distributors of fuel, including several regional distributors and numerous small
independent operators. Some of the Company's competitors have significantly
greater financial or marketing resources than the Company. The Company's
competitors also could introduce services that are superior to the Company's or
that achieve greater market acceptance. The Company also competes for customers
whose drivers fuel their own vehicles at retail gas stations. The Company could
encounter potential competition from a number of well capitalized companies
which distribute fuel and other similar petroleum products, some of which are
larger, more established and have greater financial, marketing and other
resources than the Company. In addition, some of the Company's customers are
capable of providing the same services to their vehicles directly. The Company
believes that its ability to compete depends on a number of factors, including
price, reliability, credit terms, name recognition, delivery time and service
and support. There can be no assurance that the Company will be able to continue
to compete successfully with respect to these factors.
Operating Risks May Not Be Covered by Insurance. The Company's
operations are subject to all of the operating hazards and risks normally
incidental to handling, storing and transporting gasoline and diesel fuel, which
are classified as hazardous materials. The Company maintains insurance policies
in such amounts and with such coverages and deductibles as the Company believes
are reasonable and prudent. However, there can be no assurance that such
insurance will be adequate to protect the Company from liabilities and expenses
that may arise from claims for personal and property damage arising in the
ordinary course of business or that such levels of insurance will be maintained
by the Company or will be available at economical prices.
Governmental Regulation. The Company's operations are affected by
numerous federal, state and local laws, including those relating to protection
of the environment and worker safety. The transportation of gasoline and diesel
fuel is subject to regulation by various federal, state and local agencies,
including the DOT. These regulatory authorities have broad powers, and the
Company is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the cost of providing, its services. The
regulations provide that, among other things, the Company's drivers must possess
a commercial drivers license with a hazardous materials endorsement thereon. The
Company is also subject to the rules and regulations of the Hazardous Materials
Transportation Act. For example, the Company's drivers and their equipment must
comply with DOT's pre-trip inspection rules, documentation regulations
concerning hazardous materials (i.e., certificates of shipments which describe
type and amount of product transported), and limitations on the amount of fuel
transported as well as driver time limitations. Additionally, the Company is
subject to DOT inspections which occur at random intervals. Any material
violation of DOT rules or the Hazardous Materials Transportation Act may result
in citations and/or fines upon the Company. In addition, the Company depends on
the supply of gasoline and diesel fuel from the oil and gas industry and,
therefore, is affected by changing taxes, price controls and other laws and
regulations relating to the oil and gas industry generally. The Company cannot
determine the extent to which its future operations and earnings may be affected
by new legislation, new regulations or changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose penalties
or sanctions for damages to natural resources or threats to public health and
safety. Such laws and regulations may also expose the Company to liability for
the conduct of or conditions caused by others, or for acts of the Company that
were in compliance with all applicable laws at the time such acts were
performed. Sanctions for noncompliance may include revocation of permits,
corrective action orders, administrative or civil penalties and criminal
prosecution. Certain environmental laws provide for joint and several liability
for remediation of spills and releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances, as well as damage to
natural resources.
Although the Company believes that it is in substantial compliance with
existing laws and regulations, there can be no assurance that substantial costs
for compliance will not be incurred in the future. There could be an adverse
affect upon the Company's operations if there were any continuing substantial
violations of these rules and regulations. Moreover, it is possible that other
developments, such as stricter environmental laws, regulations and enforcement
policies thereunder, could result in additional, presently unquantifiable, costs
or liabilities to the Company.
15
Changes in Environmental Requirements. The Company expects to derive
future business by converting to mobile fueling customers those fleet operators
currently utilizing underground fuel storage tanks for their fueling needs. The
owners of underground storage tanks have been required to remove or retrofit
those tanks to comply with technical requirements pertaining to their
construction and operation. If other more economical means of compliance are
developed or adopted by owners of underground storage tanks, the opportunity for
the Company to market its services to such operator may be adversely affected.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk is limited primarily to the
fluctuating interest rates associated with variable rate debt outstanding to
finance working capital needs and a portion of the Company's fleet of delivery
vehicles. These debts bear interest at the United States prime interest rate
plus a fixed markup and are subject to change based upon interest rate changes
in the United States. The Company does not currently use, and has not
historically used, derivative instruments to hedge against such market interest
rate risk. Increases or decreases in market interest rates could have a material
impact on the financial condition, results of operations and cash flows of the
Company.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Company required by Form 10-K are
attached following Part III of this report, commencing on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
16
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The information required by this item is incorporated by reference from
the Company's Definitive Proxy Statement in connection with its 2001 Annual
Meeting of Shareholders to be filed with the Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this
report.
Item 11. Executive Compensation
The information required by this item is incorporated by reference from
the Company's Definitive Proxy Statement in connection with its 2001 Annual
Meeting of Shareholders to be filed with the Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this
report.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference from
the Company's Definitive Proxy Statement in connection with its 2001 Annual
Meeting of Shareholders to be filed with the Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this
report.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference from
the Company's Definitive Proxy Statement in connection with its 2001 Annual
Meeting of Shareholders to be filed with the Commission pursuant to Regulation
14A not later than 120 days after the end of the fiscal year covered by this
report.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Exhibits
Exhibits Description
---------------- ----------------------------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation (6)
3.2 Amended and Restated Bylaws (6)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Redeemable Common Stock Purchase Warrant (1)
4.3 Underwriters' Purchase Option Agreement between the Registrant and
Argent Securities, Inc. (1)
4.4 Warrant Agreement between the Registrant and American Stock Transfer &
Trust Company (1)
10.1 Employment Agreement, dated November 1, 2000 between the Registrant and
Stanley H. Streicher (2)(6)
17
10.2 Registrant's 1996 Stock Option Plan (1)(2)
10.3 $10,000,000 Amended and Restated Loan Agreement, dated May 25, 1999, between the
Registrant and Bank Atlantic and First Amendment, dated December 22, 1999, to Amended
and Restated Loan Agreement (5)
10.4 Employment Agreement between the Registrant and Walter B. Barrett (2)(4)
10.5 Amended and Restated $10,000,000 Promissory Note, dated May 9, 2001,
between the Registrant and Bank Atlantic (6)
10.6 Registrant's 2000 Stock Option Plan (2)(6)
10.7 Employment Agreement, dated October 26, 2000 between the Registrant and
Richard E. Gathright (2)(6)
10.8 Second Amendment, dated May 9, 2001, to Amended and Restated Loan
Agreement, dated May 25, 1999. (6)
10.9 Promissory Note, dated July 7, 2000, between the Registrant and
C. Rodney O'Connor (6)
10.10 Form of Convertible Subordinated Promissory Note (6)
23.1 Consent of KPMG LLP(6)
(1) Incorporated by reference to the exhibit of the same number filed with the
Company's Registration Statement on Form SB-2 (No. 333-11541)
(2) Management Contract or Compensatory Plan
(3) Incorporated by reference to the exhibit of the same number filed by the
Company with Form 10K for the fiscal year ended January 31, 1998.
(4) Incorporated by reference to the exhibit of the same number filed by the
Company with Form 10-K for the fiscal year ended January 31, 1999.
(5) Incorporated by reference to the Exhibit of the same number filed by the
Company with Form 10K for the fiscal year ended January 31, 2000.
(6) Filed herewith.
(b) Financial Statement Schedule
(c) Reports on Form 8-K
(1) The Company filed a Form 8-K dated November 21, 2000 to
report under Item 5, Other Events, the appointment of
Richard E. Gathright as the Company's new President and
Chief Executive Officer.
18
(2)
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 15, 2001 STREICHER MOBILE FUELING, INC.
By: /s/ Richard E. Gathright
-----------------------------------------
Richard E. Gathright, Chief Executive
Officer and President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Name Title Date
---- ----- ----
By:/s/ Stanley H. Streicher Chairman of the Board May 15, 2001
---------------------------------------
Stanley H. Streicher
By:/s/ Richard E. Gathright Director, Chief Executive Officer and May 15, 2001
---------------------------------------
Richard E. Gathright President (Principal Executive Officer)
By:/s/ Walter B. Barrett Vice President-- Finance and Chief May 15, 2001
---------------------------------------
Walter B. Barrett Financial Officer (Principal Financial
and Accounting Officer)
By: Director
---------------------------------------
E. Scott Golden
By:/s/ Joseph M. Murphy Director May 15, 2001
---------------------------------------
Joseph M. Murphy
By:/s/ C. Rodney O'Connor Director May 15, 2001
---------------------------------------
C. Rodney O'Connor
By: Director
---------------------------------------
John H. O'Neil, Jr.
By:/s/ Robert S. Picow Director May 15, 2001
---------------------------------------
Robert S. Picow
19
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants.............................. F-2
Consolidated Balance Sheets as of January 31, 2001 and 2000..................... F-3
Consolidated Statements of Operations for Each of the Years in the Three Year
Period Ended January 31, 2001................................................ F-5
Consolidated Statements of Shareholders' Equity for Each of the Years in the
Three Year Period Ended January 31, 2001..................................... F-6
Consolidated Statements of Cash Flows for Each of the Years in the Three Year
Period Ended January 31, 2001................................................ F-7
Notes to Consolidated Financial Statements...................................... F-8
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Streicher Mobile Fueling, Inc.:
We have audited the accompanying consolidated balance sheets of Streicher Mobile
Fueling, Inc. and subsidiaries as of January 31, 2001 and 2000 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended January 31, 2001. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule for each of the years in the three-year period
ended January 31, 2001. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United State of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Streicher Mobile
Fueling, Inc. and subsidiaries as of January 31, 2001 and 2000 and the results
of their operations and their cash flows for each of the years in the three-year
period ended January 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming the Company will continue as a going
concern. As discussed in Note 3 to the consolidated financial statements, the
Company incurred an operating loss for the current fiscal year and these
operating losses have continued in periods subsequent to year end. These losses
and the reduction in the Company's cash reserves have raised substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The consolidated financial
statements and financial statement schedule do not include any adjustments that
might result from the outcome of this uncertainty.
KPMG LLP
Fort Lauderdale, Florida
April 30, 2001
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2001 AND 2000
ASSETS 2001 2000
- -------------------------------------------------------------- ------------ ------------
Current Assets:
Cash and cash equivalents................................. $ 446,931 $ 352,897
Restricted cash........................................... 803,832 522,075
Accounts receivable, net of allowance for doubtful
accounts of $55,159 and $111,600, respectively......... 9,637,564 9,587,686
Inventories............................................... 290,906 434,871
Prepaid expenses and other current assets................. 765,940 476,581
------------ ------------
Total current assets................................ 11,945,173 11,374,110
Property and Equipment:
Land...................................................... 223,579 249,302
Leasehold improvements.................................... 189,684 189,684
Fuel trucks and automobiles............................... 14,972,927 12,280,350
Machinery and equipment................................... 996,213 956,980
Furniture and fixtures.................................... 81,000 79,157
Construction in process................................... 4,456 1,328,113
------------ ------------
16,467,859 15,083,586
Less accumulated depreciation and amortization...... (4,447,173) (3,098,177)
------------ ------------
12,020,686 11,985,409
Account receivable from related party (Note 7)................ 540,319 500,952
Other assets.................................................. 138,558 70,453
------------ ------------
Total assets........................................ $ 24,644,736 $ 23,930,924
============ ============
See accompanying notes to consolidated financial statements
(Continued)
F-3
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2001 AND 2000
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY 2001 2000
- -------------------------------------------------------------- ------------ ------------
Current Liabilities:
Bank line of credit payable (Note 4)...................... $ 7,285,499 $ 7,679,219
Current portion of long-term debt (Note 5)................ 2,582,933 1,560,893
Accounts payable.......................................... 3,115,948 3,058,460
Accrued expenses.......................................... 731,817 753,114
Customer deposits......................................... 119,895 119,895
------------ ------------
Total current liabilities........................... 13,836,092 13,171,581
Long-term Liabilities:
Long-term debt, excluding current portion (Note 5)........ 5,590,202 6,470,171
------------ ------------
Total liabilities................................... 19,426,294 19,641,752
------------ ------------
Commitments and Contingencies (Notes 3 and 9)
Shareholders' Equity (Notes 11 and 12)
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock, $.01 par value, 20,000,000 shares
authorized, 3,510,257 and 2,710,400 shares issued and
outstanding in 2001 and 2000, respectively............. 35,103 27,104
Additional paid-in capital................................ 7,908,037 5,651,500
Accumulated deficit....................................... (2,724,698) (1,389,432)
------------ ------------
Total shareholders' equity.......................... 5,218,442 4,289,172
------------ ------------
Total liabilities and shareholders' equity.......... $ 24,644,736 $ 23,930,924
============ ============
See accompanying notes to consolidated financial statements
F-4
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED JANUARY 31, 2001
2001 2000 1999
-------------- -------------- --------------
Fuel sales and service revenues...................... $ 65,001,991 $ 50,801,184 $ 30,331,571
Fuel taxes........................................... 21,455,393 23,369,811 17,044,000
-------------- -------------- --------------
Total revenues (Note 6)......................... 86,457,384 74,170,995 47,375,571
Cost of fuel sales and service....................... 61,908,710 46,172,390 27,577,496
Fuel taxes........................................... 21,455,393 23,369,811 17,044,000
-------------- -------------- --------------
Total cost of sales............................. 83,364,103 69,542,201 44,621,496
Gross profit.................................. 3,093,281 4,628,794 2,754,075
Selling, general and administrative expenses......... 2,847,513 3,050,785 2,801,278
-------------- -------------- --------------
Operating income (loss)....................... 245,768 1,578,009 (47,203)
Loss on asset disposal............................... (4,564) (18,965) (6,877)
Interest expense..................................... (1,645,493) (1,151,707) (839,907)
Interest and other income............................ 69,023 65,103 73,391
-------------- -------------- --------------
Income (loss) before income taxes............. (1,335,266) 472,440 (820,596)
Income tax expense................................... -- -- (261,018)
-------------- -------------- --------------
Net income (loss)............................. $ (1,335,266) $ 472,440 $ (1,081,614)
-------------- -------------- --------------
Basic net income (loss) per share.................... $ (.49) $ .17 $ (.42)
-------------- -------------- --------------
Diluted net income (loss) per share.................. $ (.49) $ .16 $ (.42)
-------------- -------------- --------------
Basic weighted average common shares outstanding..... 2,716,855 2,710,400 2,575,000
-------------- -------------- --------------
Diluted weighted average common shares outstanding... 2,716,855 2,880,529 2,575,000
============== ============== ==============
See accompanying notes to consolidated financial statements
F-5
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED JANUARY 31, 2001
Common Stock Additional
----------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ---------- ------------- ------------ -------------
BALANCE, January 31, 1998....................... 2,575,000 $ 25,750 $ 5,195,758 $ (780,258) $ 4,441,250
Net loss........................................ -- -- -- (1,081,614) (1,081,614)
--------- ---------- ------------- ------------ -------------
BALANCE, January 31, 1999....................... 2,575,000 25,750 5,195,758 (1,861,872) 3,359,636
Net income...................................... -- -- -- 472,440 472,440
Exercise of stock options and warrants.......... 105,400 1,054 412,292 -- 413,346
Stock exchanged for services.................... 30,000 300 43,450 -- 43,750
--------- ---------- ------------- ------------ -------------
BALANCE, January 31, 2000....................... 2,710,400 27,104 5,651,500 (1,389,432) 4,289,172
Net loss........................................ -- -- -- (1,335,266) (1,335,266)
Exercise of stock options ...................... 2,200 22 8,096 -- 8,118
Net proceeds from private placement of stock.... 531,667 5,317 1,898,007 -- 1,903,324
Conversion of note payable to equity............ 333,333 3,333 496,667 -- 500,000
Treasury stock purchased and retired............ (67,343) (673) (146,233) -- (146,906)
--------- ---------- ------------- ------------ -------------
BALANCE, January 31, 2001....................... 3,510,257 $ 35,103 $ 7,908,037 $(2,724,698) $ 5,218,442
========= ========== ============= ============ =============
See accompanying notes to consolidated financial statements
F-6
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED JANUARY 31, 2001
2001 2000 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).............................................. $(1,335,266) $ 472,440 $(1,081,614)
Adjustments to reconcile net income (loss) to net cash used in
in operating activities:
Loss on asset disposal...................................... 4,564 18,965 6,877
Depreciation and amortization............................... 1,348,996 1,085,813 833,851
Deferred income tax (benefit) provision..................... -- -- 259,392
Provision for doubtful accounts............................. 90,000 77,500 65,000
Stock exchanged for services................................ -- 43,750 --
Changes in operating assets and liabilities.................
Increase in restricted cash ............................... (281,757) (367,820) --
Increase in accounts receivable............................. (286,783) (3,890,274) (774,475)
(Increase) Decrease in inventories.......................... 143,965 (353,535) 52,588
(Increase) Decrease in prepaid expenses and other current
assets.................................................... (289,362) (230,043) 104,993
Increase in deferred income tax asset....................... -- -- (4,544)
(Increase) Decrease in other assets......................... (68,105) (38,268) 24,724
(Decrease) Increase in accounts payable and accrued
expenses.................................................. 36,192 1,348,454 (281,670)
------------ ------------ ------------
Net cash used in operating activities................... (637,556) (1,833,018) (794,878)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment......................................... -- -- 69,227
Purchases of property and equipment............................ (1,409,996) (3,648,120) (4,143,743)
Proceeds from disposal of equipment............................ 21,159 63,740 13,477
Note receivable due from related party......................... (39,367) (54,996) 5,850
------------ ------------ ------------
Net cash used in investing activities........................ (1,428,204) (3,639,376) (4,055,188)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on line of credit.................. (393,721) 3,108,430 1,301,076
Borrowings under long-term debt................................ 2,091,608 7,880,002 3,424,166
Principal payments on long-term debt........................... (1,949,535) (5,545,193) (1,163,349)
Net proceeds from issuance of common stock and common stock
warrants..................................................... 2,411,442 413,346 --
------------ ------------ ------------
Net cash provided by financing activities................... 2,159,794 5,856,585 3,561,893
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. 94,034 384,191 (1,288,173)
CASH AND CASH EQUIVALENTS, beginning of year...................... 352,897 (31,294) 1,256,879
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year............................ $ 446,931 $ 352,897 $ (31,294)
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest...................................................... $ 1,641,712 $ 1,102,645 $ 800,222
------------ ------------ ------------
Income taxes.................................................. $ -- $ 1,791 $ 4,544
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON CASH TRANSACTIONS:
The Company exchanged a receivable from its Chairman
totaling $146,906 for 67,343 shares of its common stock
See accompanying notes to consolidated financial statements
F-7
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2001, 2000 AND 1999
(1) NATURE OF OPERATIONS
Streicher Mobile Fueling, Inc. (the "Company") was incorporated in the
State of Florida in October 1996.
The Company delivers mechanized mobile fleet fueling and electronic fuel
management primarily to customers that operate large fleets of vehicles
(such as governmental agencies, utilities, major trucking lines, hauling
and delivery services, and national courier services). The Company
currently has operations in Florida, Georgia, Tennessee, California and
Texas.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of
Streicher Mobile Fueling, Inc. and its wholly owned subsidiaries,
Streicher West, Inc., Streicher Realty, Inc., and Mobile Computer
Systems, Inc. All significant intercompany balances and transactions
have been eliminated in consolidation.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Included in
cash and cash equivalents in the accompanying consolidated balance
sheets is interest bearing cash of approximately $452,900 and $552,600
as of January 31, 2001 and 2000, respectively.
(c) Restricted Cash
Restricted cash at January 31, 2001 consists of $697,500 received as
payment on stock subscriptions, which were closed in February 2001 and
$106,332 in collections on customer accounts receivable, which were
deposited in a restricted account and used to repay advances made to
the Company on its working capital line of credit.
Restricted cash at January 31, 2000 consists of $522,075 in
collections on customer accounts receivable, which were deposited in a
restricted account and used to repay advances made to the Company on
its working capital line of credit.
(d) Accounts Receivable
Accounts receivable are due from companies within a broad range of
industries and are generally unsecured. The Company provides for
credit losses based on management's evaluation of collectibility based
on current and historical performance of the customer.
(e) Inventories
Inventories, consisting primarily of gasoline and diesel fuel, are
stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.
F-8
(f) Property and Equipment
Property and equipment is stated at cost less accumulated depreciation
and amortization. Ordinary maintenance and repairs are expensed as
incurred. Improvements which significantly increase the value or
useful life of property and equipment are capitalized. Property and
equipment is depreciated or amortized using the straight-line method
over the following estimated useful lives:
Years
--------------------
Mobile fueling delivery trucks 10
Mobile fueling delivery tanks 25
Machinery and equipment 3-5
Furniture and fixtures 10
Leasehold improvements Lesser of lease
term or useful life
(g) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date.
(h) Revenue Recognition
The Company recognizes revenue at the time services are performed and
fuel is delivered.
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions. These assumptions, if not realized could affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
(j) Fair Value of Financial Instruments
The Company's financial instruments, primarily consisting of cash and
cash equivalents, investments, accounts receivable, note receivable
from related party, accounts payable, bank line of credit payable, and
long-term debt, approximate fair value due to their short-term nature
or interest rates that approximate current market rates.
(k) Net Income or Loss Per Share
Net income or loss per share is determined by dividing net income or
loss by the weighted average common shares outstanding. Common stock
equivalents, consisting of employee stock options and common stock
warrants totalling 2,379,052 and 2,660,052 in fiscal 2001 and fiscal
1999, respectively were antidilutive and were not included in the
computation of net loss per share in those fiscal years. Certain
common stock equivalents, consisting of employee stock options and
common stock warrants totalling 2,423,752 were dilutive and were
included in the computation of net income per share in fiscal 2000.
Other common stock equivalents totalling 240,500 were antidilutive and
were not included in the computation of earnings per share in fiscal
2000.
F-9
(l) Accounting for Long-Lived Assets
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceed the
fair market value of the assets. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell.
(m) Stock Options
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock Based Compensation," allows entities to choose
between a fair value based method of accounting for employee stock
options or similar equity instruments and the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion
No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees."
Entities electing to account for employee stock options or similar
equity instruments under APB No. 25 must make pro forma disclosures of
net income and earnings per share as if the fair value method of
accounting had been applied. The Company has elected to apply the
provisions of APB No. 25 in the preparation of its consolidated
financial statements and provide pro forma disclosure of net income
(loss) and earnings per share as required under SFAS 123 in the notes
to the consolidated financial statements.
(n) Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting
Standards No 130, "Reporting Comprehensive Income" ("SFAS No. 130"),
which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a
full set of general-purpose financial statements. This Statement
requires that all items that are required to be recognized under
accounting standards as components of comprehensive income, be
reported in a financial statement that is displayed with the same
prominence as other financial statements. This Statement is effective
for fiscal years beginning after December 15, 1997. For the years
ended January 31, 2001, 2000 and 1999, comprehensive income or loss
equaled net income or loss.
(o) Segment Reporting
Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which
establishes standards for reporting information about operating
segments in annual financial statements and requires that selected
information about operating segments be reported in interim financial
statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The
adoption of this pronouncement did not have a significant effect on
the Company's consolidated financial position, results of operations
or cash flows. The Company operates in one reporting segment as
determined under the guidance in SFAS No. 131.
(p) Recent Accounting Pronouncements
In June 1999, the FASB issued Statement of Financial Accounting
Standards (SFAS) Nos. 137 and 138, Accounting for Derivative
Instruments and Hedging Activities, which amends the effective
F-10
date of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 establishes accounting and reporting
standards for derivative financial instruments and hedging activities
and requires the Company to recognize all derivatives as either assets
or liabilities on the balance sheet and measure them at fair value.
Gains and losses resulting from changes in fair value would be
accounted for based on the use of the derivative and whether it is
designated and qualifies for hedge accounting. SFAS Nos. 133 and 138
are effective for all fiscal quarters of the fiscal years beginning
after June 30, 2000. The Company's adoption of SFAS Nos. 133 and 138
on July 1, 2000 did not have an impact on the accompanying
consolidated financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101
summarizes certain of the SEC's views in applying accounting
principles generally accepted in the United States of America to
revenue recognition in financial statements. In March 2000, the SEC
issued SAB 101A, which delayed the implementation date of SAB No. 101.
In June 2000, the SEC issued SAB 101B, which further delayed the
implementation date of SAB 101. We adopted SAB 101 beginning October
1, 2000. The adoption of SAB 101 did not have an impact on our
financial position or results of operations.
In March 2000, the FASB issued Financial Interpretation No. 44 ("FIN
44"). "Accounting for Certain Transactions Involving Stock
Compensation - an Interpretation of APB No. 25." FIN 44 clarifies the
application of APB 25 for certain issues including: (a) the definition
of employee for purposes of applying APB 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c)
the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an
exchange of stock compensation awards in business combination. FIN 44
was effective July 1, 2000, except for the provisions that relate to
modifications that directly or indirectly reduce the exercise price of
an award and the definition of an employee, which were effective after
December 15, 1998. The adoption of FIN 44 did not have an impact on
our financial position or results of operations.
(q) Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
(3) LIQUIDITY AND WORKING CAPITAL
The Company incurred a net loss of $1.3 million for fiscal 2001 and has
continued to incur operating losses in the periods subsequent to January
31, 2001. The Company expects to report a loss of approximately $1.0
million (unaudited) for the first quarter of fiscal year 2002, which ends
on April 30, 2001. The current level of the Company's cash reserves and its
ongoing operating losses raise questions about the Company's ability to
continue as a going concern.
In response to the losses incurred, the Company has taken a number of steps
to improve its operating results and cash position. The steps taken
include:
o Review of field operating expenses, primarily payroll and vehicle
maintenance costs. The Company is seeking to reduce these costs by
implementing new maintenance policies, and, reviewing and analyzing
route and delivery structures to improve efficiency and reduce costs.
o Evaluating the current overhead structure of the Company and
implementation of reductions where feasible
o Price increases on certain lower margin accounts
F-11
o Hiring additional sales and marketing personnel to market the
Company's services and increase current sales volume levels
o Raising additional operating capital by completing a $2.5 million
private placement of common stock in January and February 2001 and
securing $1.0 million in bridge financing in April 2001. See Footnote
13 for additional disclosures.
Management believes that continued implementation of the Company's fiscal
year 2002 operating plan will enable the Company to continue as a going
concern. The Company's ability to successfully implement its plans and
continue to improve its operations is dependent upon a number of factors,
some of which are beyond its control. There can be no assurance that the
Company's operating results or financial conditions will improve in fiscal
year 2002.
(4) BANK LINE OF CREDIT PAYABLE
The Company has outstanding borrowings of $7.3 million as of January 31,
2001 under a $10.0 million bank line of credit. This line permits the
Company to borrow up to 85% of the total amount of eligible accounts
receivable. Based on eligible receivables outstanding at January 31, 2001
the line has been fully drawn as of that date. Interest is payable monthly
at 1.0% over the prime rate (8.0% as of January 31, 2001) and is secured by
substantially all of the Company's assets. The credit agreement contains
covenants requiring the maintenance of certain financial ratios and minimum
net worth requirements. As of January 31, 2001, the Company was in
compliance with these requirements. In April 2001, the due date of the line
of credit was extended to April 30, 2002 and the interest rate was
increased to 2.0% over the prime interest rate. A renewal fee of $100,000
is due in six equal monthly installments commencing June 1, 2001 and a
termination fee of $100,000 is due in full upon the termination of the
lending arrangement.
(5) LONG-TERM DEBT
Long-term debt consists of the following:
January 31,
---------------------------
2001 2000
----------- ------------
Equipment and other loans payable (9.89% weighted
average interest rate at January 31, 2001) due
in monthly installments with varying maturities
through January 2006 $ 8,173,135 $ 8,031,064
Less: current portion (2,582,933) (1,560,893)
----------- ------------
Long-term debt, excluding current portion $ 5,590,202 $ 6,470,171
=========== ============
Future principal payments on long-term debt are due as follows as of
January 31, 2001:
Year Ending January 31,
2002 $ 2,582,933
2003 2,001,349
2004 1,876,970
2005 1,619,967
2006 91,916
-------------
$ 8,173,135
=============
F-12
(6) MAJOR CUSTOMERS
Revenue from three major customers, excluding fuel taxes, was approximately
$12.1 million, $13.4 million and $10.8 million in fiscal 2001, 2000 and
1999, respectively. Accounts receivable from these customers totaled $2.1
million at January 31, 2001 and $2.0 million at January 31, 2000.
(7) RELATED PARTY TRANSACTIONS
The Company has an account receivable from Streicher Enterprises, Inc.
(hereafter "Enterprises"), which is wholly owned by the Company's Chairman,
amounting to $540,319 and $500,952 as of January 31, 2001 and 2000,
respectively, and bearing interest at 8.25 percent per annum. Such amounts
represent tax benefits of the Company used by Enterprises, certain expenses
of Enterprises paid by the Company prior to its initial public offering and
cash advances to Enterprises prior to the Company's initial public
offering. Interest income includes approximately $41,300 in fiscal 2001,
$37,400 in fiscal 2000, and $36,000 in fiscal 1999 relating to the account
receivable from Enterprises. The terms of the agreement with Enterprises
require annual payments of interest only with a final payment of all
accrued interest and unpaid principal due on January 31, 2007. The account
is secured by a pledge of 360,213 shares of the Company's common stock,
which is owned by an affiliate of Enterprises. Collection of the receivable
may be dependent upon the value of the collateral at the time of maturity.
A permanent decline in the value of the shares could impact the
recoverability of the receivable. Enterprises is not currently engaged in
active business operations and does not appear to posses the financial
resources to satisfy this account without liquidating the stock of the
Company.
The Company has entered into three operating leases with Enterprises, or
Stanley H. Streicher for the lease of the Company's former headquarters and
two division offices. These leases expire at varying times through August
2015. Rent expense totaling approximately $114,736, $99,400 and $99,000 for
the years ended January 31, 2001, 2000 and 1999, respectively, was paid to
Enterprises or Stanley H. Streicher.
(8) INCOME TAXES
The benefit (provision) for income taxes consists of the following for the
years ended January 31, 2001, 2000 and 1999:
2001 2000 1999
-------- -------- ----------
Federal $ -- $ -- $(236,725)
State -- -- (24,293)
-------- -------- ----------
$ -- $ -- $(261,018)
-------- -------- ----------
Current -- -- $ (1,626)
Deferred -- -- (259,392)
-------- -------- ----------
$ -- $ -- $(261,018)
======== ======== =========
The actual tax benefit (provision) of the Company for the years ended
January 31, 2001, 2000 and 1999 differs from the statutory Federal tax rate
of 34% due to the following:
2001 2000 1999
---- ---- ----
Expected benefit (provision) for income
taxes at statutory Federal income tax rates $ 453,990 $(160,630) $ 279,003
State income taxes 50,340 (17,811) 30,940
Other (88,687) 10,085 36,099
Deferred tax valuation allowance (393,630) 185,441 (594,822)
Nondeductible expenses (22,013) (17,085) (12,238)
---------- ---------- ----------
Actual benefit (provision) for income taxes $ -- $ -- $(261,018)
========== ========== ==========
F-13
Deferred income taxes reflect the net effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and their income tax bases, and (b) operating loss
carryforwards.
The tax effects of temporary differences and operating loss carryforwards
that give rise the significant portions of the deferred tax assets and
liabilities at January 31, 2001 and 2000 are presented below:
2001 2000
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 2,690,058 $ 1,753,199
Asset basis adjustment for Reorganization 318,229 384,223
------------ ------------
Total gross deferred tax assets 3,008,286 2,137,422
Less valuation allowance (1,278,100) (884,470)
------------ ------------
Total deferred tax assets 1,730,186 1,252,952
============ ============
Deferred tax liabilities:
Depreciation (1,709,786) (1,215,322)
Other (20,400) (37,630)
------------ ------------
Total deferred tax liabilities (1,730,186) (1,252,952)
============ ============
Net deferred tax assets $ -- $ --
============ ============
Realization of deferred tax assets is dependent upon generating sufficient
taxable income in future periods. Management believes that these net
operating loss and credit carryforwards may expire unused and will not meet
the "more likely than not" criteria of SFAS No. 109, and, accordingly has
established a valuation allowance for the excess of deferred tax assets
over deferred tax liabilities.
The net change in the valuation allowance for the years ended January 31,
2001 and 2000 was an increase of $393,630 and a decrease of $185,411,
respectively. As of January 31, 2001, the Company has net operating loss
carryforwards of approximately $7.9 million which will begin to expire in
the year 2011.
(9) COMMITMENTS AND CONTINGENCIES
(a) Operating Leases
The Company leases real property and buildings under operating leases
that expire at various times through the year 2015. Future minimum
lease payments under non cancelable operating leases as of January 31,
2001, including the related party leases discussed in Note 7 are as
follows:
Year ending Operating Lease
January 31 Payments
2002 293,487
2003 233,337
2004 227,341
2005 85,682
2006 73,209
Thereafter 559,501
-----------
$ 1,472,557
===========
F-14
(b) Governmental Regulation
The Company's operations are affected by numerous Federal, state and
local laws, including those relating to protection of the environment
and worker safety. The transportation of gasoline and diesel fuel is
subject to regulation by various Federal, state and local agencies.
These regulatory authorities have broad powers, and the Company is
subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices
or influencing the demand for, and the cost of providing, its
services. The Company is also subject to the rules and regulations of
the Hazardous Materials Transportation Act. In addition, the Company
depends on the supply of gasoline and diesel fuel from the oil and gas
industry and, therefore, is affected by changing taxes, price controls
and other laws and regulations relating to the oil and gas industry.
The Company cannot determine the extent to which its future operations
and results may be affected by new legislation, new regulations or
changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose
penalties or sanctions for damages to natural resources or threats to
public health and safety. Such laws and regulations may also expose
the Company to liability for the conduct of or conditions caused by
others, or for acts of the Company that were in compliance with all
applicable laws at the time such acts were performed. Sanctions for
noncompliance may include revocation of permits, corrective action
orders, administrative or civil penalties and criminal prosecution.
Certain environmental laws provide for joint and several liability for
clean up of spills and releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or
property damage as a result of alleged exposure to hazardous
substances, as well as damage to natural resources. The Company
carries liability insurance of $30,000,000 to cover such occurrences.
Although the Company believes that it is in substantial compliance
with existing laws and regulations, there can be no assurance that
substantial costs for compliance will not be incurred in the future.
Moreover, it is possible that other developments, such as stricter
environmental laws, regulations and enforcement policies thereunder,
could result in additional, presently unquantifiable, costs or
liabilities to the Company.
(c) Employment Agreements
The Company entered into an employment agreement with Richard E.
Gathright on October 26, 2000 pursuant to which Mr. Gathright serves
as President and Chief Executive Officer of the Company. The agreement
has a term of three years, commencing on October 26, 2000, provides
for an annual base salary of $300,000, participation, with other
members of management, in a bonus program, whereby up to 10% of the
Company's pretax profits will be set aside for bonus payments, and the
grant of 500,000 options to purchase shares of the Company's common
stock at a price of $1.50 per share. The agreement further provides
that it may be terminated by the Company at any time and for any
reason. If the agreement is terminated by the Company without cause,
Mr. Gathright shall be due the greater of all base salary due through
October 31, 2003 or eighteen months base salary. If the agreement is
terminated for cause, as defined, Mr. Gathright will not be entitled
to the severance payments specified.
The Company entered into a new employment agreement with Stanley H.
Streicher on November 1, 2000, pursuant to which Mr. Streicher serves
as Chairman of the Board of Directors of the Company and performs
other functions as requested by the Board and management. The
agreement has a term of three years, commencing on November 1, 2000
and provides for an annual salary of $300,000, bonus payments or
incentive compensation, if any, as determined by the Board of
Directors and that 980,000 options to purchase common stock of the
Company, held by Mr. Streicher, will be forfeited to the Company
without additional consideration, upon the request of the Board. At
the request of the Board, Mr. Streicher forfeited and relinquished
these stock
F-15
options on December 21, 2000. The agreement further provides that it
may be terminated by the Company at any time and for any reason. If
the Agreement is terminated without cause, Mr. Streicher shall be
entitled to receive his base salary until the later of eighteen months
following the actual date of termination or October 31, 2002. If the
agreement is terminated for cause, as defined in the agreement, Mr.
Streicher will not be entitled to the severance payments specified.
The Company has also entered into written employment agreements with
certain other company officers. The agreements vary in term from one
to three years and automatically renew for successive one year periods
unless notice of termination is given by the Company prior to a
renewal period.
(d) Absence of Written Agreements
Most of the Company's customers do not have written agreements with
the Company and can terminate the Company's mobile fueling services at
any time and for any reason. If the Company were to experience a high
rate of terminations, the Company's business and financial performance
could be adversely affected.
(e) Litigation
The Company may be subject to legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management
no litigation or claims exist that would have a material effect on the
consolidated financial position or results of operations of the
Company.
(f) Other Commitments
At January 31, 2001, the Company had no purchase commitments for
custom fuel delivery vehicles.
(10) EMPLOYEE BENEFIT PLAN
In May 1998, the Company adopted a 401(k) plan for all employees over the
age of 21 with 1,000 hours of service in the previous six months of
employment. The Plan provides for a discretionary match of employee
contributions as determined by the Board of Directors. No Company
contributions were made for the fiscal years ended January 31, 2001, 2000
or 1999.
(11) COMMON STOCK WARRANTS
The Company issued 1,150,000 common stock warrants in conjunction with its
initial public offering in December 1996. Each warrant entitles the holder
to purchase one share of common stock at a price of $6.90 per share for a
period of four years commencing in December 1997 (the "First Exercise
Date"). Each warrant is redeemable by the Company at a redemption price of
$0.01 per warrant, at any time after the First Exercise Date, upon thirty
days' prior written notice to the holders, if the average closing bid price
of the common stock, as reported on the principal exchange on which the
common stock is traded, equals or exceeds $10.50 per share for 20
consecutive trading days ending three days prior to the date of the notice
of redemption. Any warrant holder who does not exercise prior to the
redemption date, as set forth in the Company's notice of redemption, will
forfeit the right to purchase the common stock underlying the warrants, and
after the redemption date or upon conclusion of the exercise period any
outstanding warrants will become void and be of no further force or effect,
unless extended by the Board of Directors of the Company.
The number of shares of common stock that may be purchased is subject to
adjustment upon the occurrence of certain events including a dividend
distribution to the Company's shareholders, or a subdivision, combination
or reclassification of the outstanding shares of common stock. Further, the
warrant exercise
F-16
price is subject to adjustment in the event the Company issues additional
stock or rights to acquire stock at a price per share that is less than the
current market price per share of common stock on the record date
established for the issuance of additional stock or rights to acquire
stock. The term "current market price," is defined as the average of the
daily closing prices, will not be adjusted in the case of the issuance or
exercise of options pursuant to the Company's stock option plans, the
issuance or exercise of the underwriter's warrants (or the warrants
included therein) or any other options or warrants outstanding as of
December 1996. The warrant exercise price is also subject to adjustment in
the event of a consolidation or merger where a distribution by the Company
is made to its stockholders of the Company's assets or evidences of the
indebtedness (other than cash or stock dividends) or pursuant to certain
subscription rights or other rights to acquire common stock.
The Company may at any time, and from time to time, extend the exercise
period of the warrants, provided that written notice of such extension is
given to the warrant holders prior to the expiration of the date then in
effect. Also, the Company may reduce the exercise price of the warrants for
limited periods or through the end of the exercise period in accordance
with the terms of the Company's warrant agreement with the transfer agent
if deemed appropriate by the Board of Directors. The Company does not
presently contemplate any extension of the exercise period nor does it
contemplate any reduction in exercise price of the warrants.
(12) STOCK OPTION PLAN
In December 2000, the Company adopted a Stock Option Plan (the "2000 Plan")
under which 1,000,000 shares of common stock are reserved for issuance upon
the exercise of options. The 2000 Plan provides that the amount of shares
reserved for issuance shall be increased each year by ten percent of the
amount of options available for grant under the 2000 Plan at the end of the
previous calendar year. As of the effective date of the 2000 Plan, there
will be no additional options granted under the 1996 Stock Option Plan.
The 2000 Plan provides that it shall be administered by our Board or a
committee appointed by the Board (the "Committee") which shall be composed
of two or more directors, all of whom shall be "outside directors" (as
defined in the Plan) in compliance with Rule 16b-3 of the Exchange Act and
Section 162(m) of the tax code (although Rule 16b-3 also may be complied
with if the option grants are approved by the board of directors). The
Committee or the Board, in its sole discretion, determines the terms of the
Options. For any Option granted under the 2000 Plan, the exercise price per
share of common stock may be any price determined by the Committee or the
Board; however, the exercise price per share of any Incentive Stock Option
may not be less than the Fair Market Value of the common stock on the date
such Incentive Stock Option is granted. The Committee or the Board may
permit the exercise price of an Option to be paid for in cash, by certified
or official bank check or personal check, by money order, with already
owned shares of common stock that have been held by the optionee for at
least six (6) months (or such other shares as we determine will not cause
us to recognize for financial accounting purposes a charge for compensation
expense), the withholding of shares of common stock issuable upon exercise
of the Option, by delivery of a properly executed exercise notice together
with such documentation as shall be required by the Committee or the Board
of Directors (or, if applicable, the broker) to effect a cashless exercise,
or a combination of the above. The 2000 Plan also authorizes us to lend
money to Optionee, guarantee a loan to Optionee, or otherwise assist
Optionee in obtaining the cash necessary to exercise all or a portion of
the Option granted thereunder or to pay any of Optionee's tax liability
attributable to such exercise. If the exercise price is paid in whole or
part with the Optionee's promissory note, such note shall (i) provide for
full recourse to the maker, (ii) be collateralized by the pledge of the
shares that the Optionee purchases upon exercise of such Option, (iii) bear
interest at the prime rate of our principal lender or such other rate as
the board of directors shall determine, and (iv) contain such other terms
as the board of directors in its sole discretion shall reasonably require.
No Incentive Stock Option, and unless the prior written consent of the
Committee or the Board is obtained (which consent may be withheld for any
reason) and the transaction does not violate the requirements of Rule 16b-3
of the Exchange Act, no non-qualified stock option granted under the Plan
is assignable or transferable, other than by will or by the laws of descent
and distribution. The expiration date of an Option under the plan will be
determined by the Committee or the Board at the time of grant, but
F-17
in no event may such an Option be exercisable after 10 years from the date
of grant. Each outstanding Option granted under the 2000 Plan may become
immediately fully exercisable in the event of certain transactions,
including certain changes in control, certain mergers and reorganizations,
and certain dispositions of substantially all of our assets. The 2000 Plan
will expire on December 20, 2010, and any Option outstanding on such date
will remain outstanding until it expires or is exercised.
In December 1996, the Company adopted a Stock Option Plan (the "1996
Plan"), under which 500,000 shares of common stock are reserved for
issuance upon exercise of options. The 1996 Plan is designed to serve as an
incentive for retaining qualified and competent employees. The Company's
Board of Directors administers the 1996 Plan and is authorized to grant
options thereunder to all eligible employees of the Company, including
officers and directors (whether or not employees) of the Company and
consultants. The Plan provides for the granting of both "incentive stock
options" (as defined in Section 422A of the Internal Revenue Code) and
nonqualified stock options. Options are granted under the 1996 Plan on such
terms and at such prices as determined by the Board of Directors, except
that the per share exercise price of incentive stock options cannot be less
than the fair market value of the common stock on the date of grant and the
per share exercise price of nonqualified stock options will not be less
than 85% of the fair market value on the date of grant. Each option is
exercisable after the period or periods specified in the option agreement,
but no option can be exercised until six months after the date of grant or
after the expiration of 10 years from the date of grant. Options granted
under the 1996 Plan are not transferable other than by will or by the laws
of descent and distribution. The 1996 Plan also authorizes the Company to
make loans to optionees to enable them to exercise their options and to
allow them to use common stock to pay for the exercise of their options.
Such loans must (i) provide for recourse to the optionee, (ii) bear
interest at a rate no less than the rate of interest payable by the Company
to its principal lender at the time the loan is made, and (iii) be secured
by the shares of common stock purchased. The following table summarizes
stock option activity for the periods indicated:
Weighted
1996 Average
and 2000 Exercise
Plans Price
--------- ---------
Options outstanding as of January 31, 1998.... 98,000 $ 3.34
Granted..................................... 112,052 $ 3.68
Exercised................................... -- --
Expired..................................... -- --
---------
Options outstanding as of January 31, 1999.... 210,052 $ 3.49
=========
Granted..................................... 159,000 $ 5.49
Exercised................................... (60,300) $ 3.44
Expired..................................... (32,200) $ 4.60
---------
Options outstanding as of January 31, 2000.... 276,552 $ 4.55
=========
Granted..................................... 738,000 $ 1.50
Exercised................................... (2,200) $ 3.69
Expired..................................... (13,200) $ 5.16
---------
Options outstanding as of January 31, 2001.... 999,152 $ 2.30
=========
Exercisable................................. 447,819
=========
Available for future grant.................... 264,500
=========
F-18
The following table summarizes information about stock options outstanding
under the Plans as of January 31, 2001:
Weighted
Average Weighted Weighted
Remaining Average Number Average
Exercise Number Contractual Exercise Of Shares Exercise
Price Outstanding Life (years) Price Exercisable Price
- ----------------------------------------------------------------------------------------
$1.50 to $3.00 755,500 9.81 $ 1.54 204,167 $ 1.65
$3.38 to $4.13 187,152 7.39 $ 3.89 187,152 $ 3.89
$6.56 to $7.63 56,500 8.57 $ 7.26 56,500 $ 7.26
------- -------
999,152 447,819
======= =======
In connection with the Company's public offering in December 1996, the
underwriter was granted an option to purchase up to 100,000 shares of
common stock at $9.30 per share and 100,000 warrants at a price of $.19375
per warrant. Each warrant entitles the underwriter to purchase one share of
common stock at $9.30 per share. The underwriter options and warrants are
exercisable for a period of four years, commencing on December 11, 1997,
and expire on December 11, 2001. As of January 31, 2001, none of these
options and warrants have been exercised.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." As permitted under the provisions of SFAS No. 123, the
Company applies the principles of APB Opinion 25 and related
interpretations in accounting for its stock option plans. If the Company
had elected to recognize compensation cost based on the fair value of the
options granted at grant date as prescribed by SFAS No. 123, net income
(loss) and income (loss) per share would have been reduced (increased) to
the pro forma amounts indicated in the table below. The fair value of each
option grant was estimated at the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used
for all grants made to date: risk-free interest rate of 7%, dividend yield
of 0%, expected volatility of 50% and expected life of 10 years.
2001 2000 1999
---- ---- ----
Net income (loss) as reported $(1,335,266) $ 472,440 $(1,081,614)
Net income (loss) pro forma $(1,509,210) $ (37,658) $(1,526,401)
Fully diluted net income (loss) $ (.49) $ .16 $ (.42)
per share as reported
Fully diluted net income (loss) $ (.56) $ (.01) $ (.59)
per share pro forma
The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma loss amounts presented
because compensation cost is reflected over the vesting period of the
options.
(13) SUBSEQUENT EVENTS
On February 28, 2001, the Company closed the remaining portion of a $2.5
million private placement of its common stock. As a result of this
transaction, approximately 800,000 additional shares of common stock were
issued for gross proceeds of approximately $1.1 million.
On April 20, 2001, the Company received $1,000,400 in new financing from a
director, certain of the director's adult children and the managing
corporate partner of two limited partnerships who are shareholders in the
Company.
F-19
SCHEDULE II
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
For each of the years in the three-year period
ended January 31, 2001
BALANCE AT BALANCE
BEGINNING OF (A) (B) AT END
YEAR CHARGES DEDUCTIONS OF YEAR
------------ ----------- ------------ ----------
Description:
Reserves and allowances deducted from
asset accounts
FYE 1/31/99
Allowance for doubtful accounts 148,149 65,000 (133,265) 79,884
============ =========== ============ ==========
Description:
Reserves and allowances deducted from
asset accounts
FYE 1/31/00
Allowance for doubtful accounts 79,884 77,500 (45,810) 111,574
============ =========== ============ ==========
Description:
Reserves and allowances deducted from
asset accounts
FYE 1/31/01
Allowance for doubtful accounts 111,574 90,000 (146,415) 55,159
============ =========== ============ ==========
(a) Charges to the reserve account represent increase in reserve levels and
establishment of specific reserves charge.
(b) Deductions to the reserve account represent write-offs net of recoveries
which occurred during the year.
F-20
EXHIBIT INDEX
-------------
Exhibits Description
-------- ----------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation (6)
3.2 Amended and Restated Bylaws (6)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Redeemable Common Stock Purchase Warrant (1)
4.3 Underwriters' Purchase Option Agreement between the Registrant
and Argent Securities, Inc. (1)
4.4 Warrant Agreement between the Registrant and American Stock
Transfer & Trust Company (1)
10.1 Employment Agreement, dated November 1, 2000 between the
Registrant and Stanley H. Streicher (2)(6)
10.2 Registrant's 1996 Stock Option Plan (1)(2)
10.3 $10,000,000 Amended and Restated Loan Agreement,
dated May 25, 1999, between the Registrant and Bank Atlantic
and First Amendment, dated December 22, 1999, to Amended and
Restated Loan Agreement (5)
10.4 Employment Agreement between the Registrant and
Walter B. Barrett (2)(4)
10.5 Amended and Restated $10,000,000 Promissory Note, dated
May 9, 2001, between the Registrant and Bank Atlantic (6)
10.6 Registrant's 2000 Stock Option Plan (2)(6)
10.7 Employment Agreement, dated October 26, 2000 between the
Registrant and Richard E. Gathright (2)(6)
10.8 Second Amendment, dated May 9, 2001, to Amended and Restated
Loan Agreement, dated May 25, 1999. (6)
10.9 Promissory Note, dated July 7, 2000, between the
Registrant and C. Rodney O'Connor (6)
10.10 Form of Convertible Subordinated Promissory Note (6)
23.1 Consent of KPMG LLP (6)
(1) Incorporated by reference to the exhibit of the same number filed with the
Company's Registration Statement on Form SB-2 (No. 333-11541)
(2) Management Contract or Compensatory Plan
(3) Incorporated by reference to the exhibit of the same number filed by the
Company with Form 10K for the fiscal year ended January 31, 1998.
(4) Incorporated by reference to the exhibit of the same number filed by the
Company with Form 10-K for the fiscal year ended January 31, 1999.
(5) Incorporated by reference to the Exhibit of the same number filed by the
Company with Form 10K for the fiscal year ended January 31, 2000.
(6) Filed herewith.