United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QT
[ ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X]TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OR THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from February 1, 2001 to June 30, 2001
Commission File Number 000-21825
STREICHER MOBILE FUELING, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0707824
(State of (IRS Employer
Incorporation) Identification Number)
800 West Cypress Creek Road, Suite 580
Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
(954)308-4200
(Issuer's telephone number, including area code)
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports) and has been subject to
such filing requirements for the past 90 days.
Yes [X]. No [ ].
As of August 31, 2001, 4,700,870 shares of the Registrant's common
stock were outstanding.
STREICHER MOBILE FUELING, INC.
FORM 10-QT
INDEX
FORM 10-QT PART AND ITEM NO.
Part I-Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2001 (unaudited) and January 31, 2001 3
Condensed Consolidated Statements of Operations
for the five months ended June 30, 2001
(unaudited) and 2000 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the five months ended June 30, 2001
(unaudited) and 2000 (unaudited) 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 12
Part II - Other Information
Items 1 - 6 12
Signature Page 15
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 and JANUARY 31, 2001
ASSETS June 30, 2001 January 31, 2001
------------------------------- ------------- ----------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 6,206 $ 446,931
Restricted cash 224,232 803,832
Accounts receivable, net 8,669,199 9,637,564
Inventories 253,705 290,906
Prepaid expenses and other
current assets 587,914 765,940
------------- ------------
Total current assets 9,741,256 11,945,173
------------- ------------
Property and Equipment:
Land 223,579 223,579
Leasehold improvements 139,987 189,684
Fuel trucks and automobiles 14,842,878 14,972,927
Machinery and equipment 1,054,031 996,213
Furniture and fixtures 285,760 81,000
Construction in process 29,977 4,456
------------- ------------
16,576,212 16,467,859
Less accumulated depreciation
and amortization (4,927,278) (4,447,173)
------------- ------------
11,648,934 12,020,686
------------- ------------
Account receivable from related party 583,015 540,319
Other assets 220,678 138,558
------------- ------------
Total assets $ 22,193,883 $ 24,644,736
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Bank overdraft $ 318,349 $ -
Bank line of credit payable 6,904,465 7,285,499
Current portion of long-term debt 2,153,876 2,582,933
Accounts payable 2,365,594 3,115,948
Accrued expenses 966,990 731,817
Customer deposits 124,495 119,895
------------ ------------
Total current liabilities 12,833,769 13,836,092
Long-term Liabilities:
Convertible subordinated
promissory notes 1,000,400 -
Long-term debt, excluding current
portion 5,028,144 5,590,202
------------ ------------
Total liabilities 18,862,313 19,426,294
------------ ------------
Shareholders' Equity:
Common stock 43,675 35,103
Additional paid-in capital 7,963,907 7,908,037
Retained deficit (4,676,012) (2,724,698)
------------ ------------
Total shareholders' equity 3,331,570 5,218,442
------------ ------------
Total liabilities and
shareholders' equity $ 22,193,883 $ 24,644,736
============ ============
STREICHER MOBILE FUELING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIVE MONTH PERIODS ENDED
JUNE 30, 2001 AND 2000
(Unaudited)
2001 2000
---------- ---------
Fuel sales and service revenues $ 22,235,405 $ 26,943,953
Fuel taxes 7,274,576 9,537,347
------------ ------------
Total revenues 29,509,981 36,481,300
------------ ------------
Cost of fuel sales and service 21,495,422 25,607,017
Fuel taxes 7,274,576 9,537,347
------------ ------------
Total cost of sales 28,769,998 35,144,364
------------ ------------
Gross profit 739,983 1,336,936
Selling, general and administrative
expenses 2,125,780 1,208,560
------------ ------------
Operating (loss) profit (1,385,797) 128,376
Interest expense (590,507) (664,958)
Interest and other income 24,990 24,926
------------ ------------
Loss before income taxes (1,951,314) (511,656)
Income tax benefit - -
------------ ------------
Net loss $(1,951,314) $ (511,656)
============ ============
Basic and diluted loss per share (0.47) (0.19)
============ ============
Basic and diluted weighted average
common shares outstanding 4,194,283 2,712,220
============ ============
STREICHER MOBILE FUELING, INC, AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTH PERIODS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
2001 2000
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,951,314) $ (511,656)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 612,576 535,421
Loss on disposal of asset 18,128 -
Provision for doubtful accounts 37,500 37,500
Changes in operating assets and
liabilities:
Decrease in restricted cash 579,600 311,896
Decrease in accounts receivable 930,865 540,217
Decrease in inventories 37,201 140,546
Decrease (increase) in prepaid
expenses and other current assets 178,026 (6,466)
(Increase) decrease in other assets (82,120) 7,264
Decrease in accounts payable (750,354) (172,075)
Increase (decrease) in accrued
expenses 235,173 (63,712)
Increase in customer deposits 4,600 -
------------ ------------
Net cash (used in) provided by
operating activities (150,119) 818,935
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (288,099) (1,116,501)
Proceeds from disposal of equipment 29,147 -
Account receivable from related party (42,696) (19,267)
------------ ------------
Net cash used in investing
activities (301,648) (1,135,768)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft 318,349 294,686
Net repayments under line of credit (381,034) (471,378)
Proceeds from issuance of convertible
subordinated promissory notes 1,000,400 -
Borrowings under long-term debt 100,000 916,658
Principal payments on long-term debt (1,091,115) (760,031)
Proceeds from issuance of common stock 64,442 59,657
------------ ------------
Net cash provided by financing
activities 11,042 39,592
------------ ------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (440,725) (277,241)
------------ ------------
CASH AND CASH EQUIVALENTS,
beginning of period 446,931 352,897
------------ ------------
CASH AND CASH EQUIVALENTS,
end of period $ 6,206 $ 75,656
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for-
Interest $ 614,990 $ 667,580
============ ============
Income taxes $ - $ -
============ ============
STREICHER MOBILE FUELING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
(Unaudited)
(1) NATURE OF OPERATIONS
Streicher Mobile Fueling, Inc. (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). At June 30, 2001, the Company had operations
in California, Florida, Georgia, Tennessee and Texas.
(2) 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.
Effective July 19, 2001, the Company changed its fiscal year-end from
January 31 to June 30. The five-month transition period of February 1,
2001 through June 30, 2001 ("transition period") precedes the start of the
new fiscal year. The unaudited financial information for the five months
ended June 30, 2000 ("prior period") is presented for comparative purposes
and includes any adjustments (consisting of normal, recurring adjustments)
which are, in the opinion of management, necessary for fair presentation.
The unaudited consolidated financial statements included herein have
been prepared in accordance with the instructions to Form 10-QT and Rule
10-01 of Regulation S-X, and do not include all the information and
footnotes required by generally accepted accounting principles; however,
they do include all adjustments of a normal recurring nature which, in the
opinion of management, are necessary to present fairly the results of
operations of the Company for the interim periods presented. Certain
amounts have been reclassified to conform with current period
presentation. These interim financial statements should be read in
conjunction with the Company's audited consolidated financial statements
and related notes included in the Company's Annual Report on Form 10-K for
the year ended January 31, 2001. The results of operations for the
interim periods presented are not necessarily indicative of the results to
be expected for the entire year.
(3) WORKING CAPITAL AND LIQUIDITY
The Company incurred a net loss of approximately $2.0 million in the
five months ended June 30, 2001, and has continued to incur operating
losses of approximately $268,000 in July 2001. The current level of the
Company's cash reserves and its ongoing operating losses raise questions
about its ability to continue as a going concern.
In response to the losses incurred, the Company has taken a number of
initiatives to improve its operating results and cash position. These
include:
o Review of field operating expenses, primarily payroll and
vehicle maintenance costs. The Company is seeking to reduce
these costs by analyzing and restructuring delivery routes and
schedules to improve labor efficiency and vehicle utilization
and implementing new repair and maintenance policies
o Evaluation of the current overhead structure of the Company and
implementation of cost reductions where feasible
o Review and increase service pricing on certain lower margin
accounts
o Addition of marketing and sales personnel to market the
Company's fuel sales and services and increase product volumes
sold and delivered and related revenues
o Raise additional operating capital by completing a $2.5 million
private placement of common stock in January and February 2001,
securing $1.0 million in financing in April 2001, securing an
additional $600,000 in financing in July 2001, and raising
$500,000 through the private placement of common stock in August
2001.
The Company's ability to successfully implement its strategic plans
and continue to improve its operating performance 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 conditions
will improve in the future.
The mobile fueling business is capital intensive and the Company will
continue to require substantial capital in order to operate its business.
The Company's cash resources are limited because its cash flows from
operating, financing and investing activities have been used to fund
operating losses, meet the Company's working capital requirements, and
repay term equipment debt. The Company's current cash reserves
availability under its line of credit and from expected operating cash
flow may not be sufficient to meet the Company's short term cash
requirements. The Company is undercapitalized and to continue operations
will require additional equity or debt financing to strengthen its
financial position; restore profitability with respect to existing
operations; and support expansion into new markets. The Company is
currently exploring alternatives to raise additional capital through the
issuance of additional debt and/or equity securities. If the Company is
unable to obtain additional equity or debt financing in the near term, the
Company may be required to reduce the scope of its operations and may not
be able to pay its operating expenses. If additional funds are raised
through the issuance of equity securities, shareholders of the Company may
experience 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 all.
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 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. If the Company's
initiatives to increase sales revenues and reduce operating expenses are
not successful, the Company may not be able to expand its business or
operate profitably.
(4) LOSS PER SHARE
Basic loss per share is computed by dividing the net loss
attributable to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted earnings per share
is computed by dividing income attributable to common shareholders by the
weighted-average number of common shares outstanding during the period
increased to include the number of additional common shares that would
have been outstanding if the dilutive potential common shares had been
issued. The dilutive effect of outstanding options is reflected in
diluted earnings per share by application of the treasury stock method.
For loss periods, weighted average common share equivalents are excluded
from the calculation, as their effect would be antidilutive.
At June 30, 2001, 2,509,052 options and warrants were outstanding at
prices ranging from $1.50 to $9.49 per share. At June 30, 2000, 1,648,752
options and warrants were outstanding at prices ranging from $3.00 to
$9.49 per share.
(5) CONVERTIBLE SUBORDINATED PROMISSORY NOTES
On April 20, 2001, the Company issued $1.0 million of convertible
subordinated promissory notes to two major institutional shareholders, a
director of the Company and two of his adult children. The notes are due
on August 31, 2003 and bear interest at 1% over the prime interest rate
announced from time to time by the Company's principal lender. At the
Company's option, the interest on the notes may be paid in Company stock,
with the stock value based on the average market price of the stock for
the quarter in which interest is due. The notes contain a conversion
feature entitling the note holder to convert the note balance into common
stock of the Company at the rate of $1.35 per share.
On July 11, 2001, the Company issued $600,000 of convertible
subordinated promissory notes to two major institutional shareholders and
a director of the Company. The notes are due on August 31, 2003 and bear
interest at 1% over the prime interest rate announced from time to time by
the Company's principal lender. With the consent of the Payee, the
interest on the notes may be paid in Company stock, with the stock value
based on the average market price of the stock for the quarter in which
interest is due. The notes provide the note holder the right and option
to request a prepayment of the outstanding principal amount and accrued
interest thereon from the net proceeds of any issuance or sale by the
Company of equity or debt securities from and after July 6, 2001. The
notes contain a conversion feature entitling the note holder to convert
the note balance into common stock of the Company at the rate of $1.35 per
share.
(6) LEASES
In May 2001, the Company entered into a lease agreement (the
"Sublease") with an unrelated third party for the lease of the Company's
former corporate offices (the "Property"). The term of the Sublease is
two years and calls for monthly rental payments of $4,600 to be paid to
the Company. The Company is currently obligated under a lease agreement
(the "Lease") dated July 31, 1993 for the Property with a majority
shareholder and former President and Chief Executive Officer of the
Company. The Lease expires July 31, 2013.
In April 2001 the Company relocated its corporate offices and
simultaneously entered into a lease agreement for its new corporate
offices. In conjunction with the change in corporate offices and upon
entering into the Sublease, the Company essentially abandoned the
Property.
As the Property is marketable from a sales and sublease standpoint,
it is grandfathered under an ordinance change that allows heavy equipment
to be stored at the Property and the subleasee is currently negotiating to
purchase the Property from the Company's former President and Chief
Executive Officer, management believes that a loss contingency as defined
in SFAS No. 5, " Accounting for Contingencies" as of June 30, 2001 has not
occurred and therefore the remaining lease payments called for under the
Lease have not been reflected in the accompanying condensed consolidated
financial statements. The remaining lease payments called for under the
Lease approximate $550,000.
(7) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 141 "Business
Combinations" ("SFAS 141") and Statement of Financial Accounting Standards
No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. SFAS 142 will
require that goodwill and intangible assets with indefinite useful lives
no longer be amortized, but instead tested for impairment at least
annually. SFAS 141 is effective immediately, except with regard to
business combinations initiated prior to July 1, 2001 and SFAS 142 is
effective January 1, 2002.
Furthermore, any goodwill and intangible assets determined to have
indefinite useful lives that are acquired in a purchase business
combination completed after June 30, 2001 will not be amortized. Goodwill
and intangible assets acquired in business combinations completed before
July 1, 2001 will continue to be amortized until the adoption of SFAS 142.
SFAS 141 will require upon adoption of SFAS 142 that goodwill acquired in
a prior purchase business combination be evaluated and any necessary
reclassifications be made in order to conform to the new criteria in SFAS
141 for recognition apart from goodwill. Any impairment loss will be
measured as of the date of the adoption and recognized as a cumulative
effect of a change in accounting principles in the first interim period.
Management does not expect the adoption of these standards to have a
material effect on the Company's consolidated financial statements.
In July 2001, the FASB issued Statement No. 143 (Standard on
Accounting for Asset Retirement Obligations). That standard requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability is
initially recorded, the entity capitalizes a cost by increasing the
carrying amount of the related long-lived asset. Over time, the liability
is accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of
the liability, an entity either settles the obligation for its recorded
amount or incurs a gain or loss upon settlement. The standard is
effective for fiscal years beginning after June 15, 2002, with earlier
application encouraged.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains "forward-looking statements"
which involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in the forward-looking statements
as a result of certain factors, including those set forth under the
caption "Certain Factors Affecting Future Operating Results," included in
the Company's filing on Form 10-K for the fiscal year ended January 31,
2001. The following discussion also should be read in conjunction with the
Company's consolidated financial statements and notes thereto included in
the above referenced Form 10-K.
GENERAL
The Company generates 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 delivery 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 FIVE MONTHS ENDED JUNE 30, 2001 TO FIVE MONTHS ENDED JUNE
30, 2000
REVENUES
Revenue decreased $7.0 million, or 19.1%, for the five months ended
June 30, 2001 compared to the five months ended June 30, 2000. The
decrease in revenue resulted from a decrease in the wholesale price of
gasoline and diesel fuel, declines in the actual quantities 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 21.8 million gallons of fuel to its customers in the five months
ended June 30, 2001, a decrease of 13.9% compared to the 25.3 million
gallons delivered in the five months ended June 30, 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 reestablished its
marketing and sales function in order to increase the volume of mobile and
bulk fueling business. There appear to be opportunities for the Company
to increase the volume of fuel sold and delivered, although such volume
growth is dependent upon a number of business and economic factors, of
which many are beyond the Company's control, such as the success of the
Company's marketing, pricing and other business strategies, the
availability of qualified workers to provide the level of service required
by customers, the availability of sufficient debt or equity capital to
grow the Company's business, and changes in market conditions in the
transportation or petroleum industries including the entry of new
competitors.
GROSS PROFIT
Gross profit decreased $597,000, or 44.7%, in the five months ended
June 30, 2001 compared to the five months ended June 30, 2000. The
average margin per delivered gallon of fuel in the five months ended June
30, 2001 was 3.4 cents compared to 5.3 cents in the five months ended June
30, 2000. Several 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 shrink
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 that are expected to reduce its product procurement
costs and decrease field operating expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $917,000, or
75.9%, in the five months ended June 30, 2001 compared to the five months
ended June 30, 2000. The increase in these expenses primarily resulted
from increases in payroll costs associated with a restructuring of the
marketing, information technology and management functions; increases in
direct marketing and sales payroll; and increases in insurance expense,
legal fees and other employee benefits.
INTEREST EXPENSE
Interest expense decreased $74,000, or 11.2%, in the five months
ended June 30, 2001 compared to the five months ended June 30, 2000 as a
result of decreased borrowings, primarily due to repayment of existing
equipment debt.
INCOME TAXES
The Company recorded no income tax expense in the five-month periods
ended June 30, 2001 or 2000. The Company has sufficient net operating
loss carryforwards to offset any taxable income for at least the next
several years.
NET LOSS
The Company incurred a net loss of approximately $2.0 million, or
$0.47 per basic and diluted share, in the five months ended June 30, 2001
compared to a net loss of $512,000, or $0.19 per basic and diluted share,
in the five months ended June 30, 2000. The increase in net loss in fiscal
period 2001 resulted primarily from reductions in product sales and
delivery service margins; increased costs related to equipment
maintenance; and increases in selling, general and administrative
expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires it to expend substantial funds for
fuel, labor and equipment costs before any payments are received from
customers. Fuel purchased by the Company for resale to customers must
generally be paid for within 10 to 15 days of purchase; labor costs and
related taxes are paid bi-weekly; equipment related expenses are generally
paid within 30 days; and repayments on equipment financing obligations are
paid monthly. The Company bills its customers weekly and generally
collects the majority of its accounts within 35 to 40 days. Days sales
outstanding at June 30, 2001 was 42 days compared to 36 days sales
outstanding at June 30, 2000.
Costs associated with the Company's vehicle fleet, including
depreciation, interest and insurance; decreases in product sales and
delivery service margins; increased general and administrative expenses;
restructuring of the marketing, operations and management functions; and
reduced volumes of fuel delivered have continued to negatively impact
operating results in July 2001.
Initiatives undertaken by the Company are expected to improve its
operating results by reducing operating costs and increasing revenues.
These include:
o Review of field operating expenses, primarily payroll and
vehicle maintenance costs. The Company is seeking to reduce
these costs by analyzing and restructuring delivery routes and
schedules to improve labor efficiency and vehicle utilization
and implementing new repair and maintenance policies
o Evaluation of the current overhead structure of the Company and
implementation of cost reductions where feasible
o Review and increase service pricing on certain lower margin
accounts
o Addition of marketing and sales personnel to market the
Company's fuel sales and services and increase product volumes
sold and delivered and related revenues
o Raise additional operating capital by completing a $2.5 million
private placement of common stock in January and February 2001,
securing $1.0 million in financing in April 2001, securing an
additional $600,000 in financing in July 2001, and raising
$500,000 through the private placement of common stock in August
2001.
The current level of the Company's cash reserves, and its ongoing
operating losses raise questions about its ability to continue as a going
concern. The Company's ability to successfully implement its strategic
plans and continue to improve its operations is dependent upon a number of
factors, some of which are beyond its control, such as the level of demand
for the Company's products, changes in market conditions in the
transportation or petroleum industries including the entry of new
competitors, the availability of sufficient debt or equity capital to
sustain and grow the Company's business, adverse regulatory actions, the
availability of qualified workers to provide the level of service required
by customers, the success of the Company's marketing, pricing and other
business strategies, as well as economic conditions, particularly in the
geographic areas served by the Company. There is no assurance that the
Company's operating results or financial condition will improve in the
future.
The mobile fueling business is capital intensive and the Company will
continue to require substantial capital in order to operate its business.
The Company's cash resources are limited because its cash flows from
operating, financing and investing activities have been used to fund
operating losses; meet the Company's working capital requirements; and
repay term equipment debt. The Company's current cash reserves
availability under its line of credit and from expected operating cash
flow may not be sufficient to meet the Company's short term cash
requirements. The Company is undercapitalized and to continue operations
will require additional equity or debt financing to strengthen its
financial position; restore profitability with respect to existing
operations; and support expansion into new markets. The Company is
currently exploring alternatives to raise additional capital through the
issuance of additional debt and/or equity securities. If the Company is
unable to obtain additional equity or debt financing in the near term, the
Company may be required to reduce the scope of its operations and may not
be able to pay its operating expenses. If additional funds are raised
through the issuance of equity securities, shareholders of the Company may
experience 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 all.
The Company had outstanding borrowings of $6.9 million as of June 30,
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 June 30, 2001,
the line was almost fully drawn as of that date. Interest is payable
monthly at 2.0% over the prime rate (6.75% as of June 30, 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 June 30, 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. 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.
At June 30, 2001, the Company had no purchase commitments for the
purchase of additional fuel trucks since its present fleet is anticipated
to meet 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.
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.
PART II. OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS
None.
ITEM 2
CHANGES IN SECURITIES
On February 28, 2001 and March 20, 2001, the Company issued a total
of 846,666 shares of common stock at $1.50 per share to an aggregate of 11
individual and institutional investors in connection with the Company's
private placement of up to 1,500,000 shares of common stock. The
investors are listed in the Company's Form S-3, effective June 8, 2001,
that registered the resale of such shares. 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.
In August 2001, the Company issued 333,333 shares of common stock in
a private placement, at $1.50 per share. The Company is obligated to
register the resale of all such shares through the filing of Form S-3 no
later than October 31, 2001. 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. The Company may privately place additional
shares during the quarter ending September 30, 2001.
ITEM 3
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a special shareholders meeting on February 28, 2001.
The matters submitted to a vote of the shareholders and the results of
voting follow:
PROPOSAL #1 - Amend the Articles of Incorporation to increase the
size of the Board of Directors from five to seven directors and
establish director terms at one year
FOR AGAINST ABSTAIN BROKER NON VOTES
1,848,206 20,200 -- 824,194
The proposal was passed.
PROPOSAL #2 - Adopt the 2000 Stock Option Plan
FOR AGAINST ABSTAIN BROKER NON VOTES
1,730,469 135,837 2,100 824,194
The proposal was passed.
PROPOSAL # 3 - Approve a Private Placement of Common Stock
FOR AGAINST ABSTAIN BROKER NON VOTES
1,832,606 32,300 3,500 824,194
The proposal was passed.
The Company held its annual shareholders meeting on July 19, 2001. The
matters submitted to a vote of the shareholders and the results of voting
follow:
PROPOSAL #1 - Elect seven directors to the Company's Board of
Directors, to serve until the next Annual Meeting of Shareholders or
until their successors are elected
FOR AGAINST ABSTAIN BROKER NON VOTES
3,784,655 9,100 -- 563,168
All of the directors were elected with the same vote for each one.
PROPOSAL #2 - Approve the 2001 Directors Stock Option Plan
FOR AGAINST ABSTAIN BROKER NON VOTES
3,174,008 33,452 586,295 563,168
The proposal was passed.
PROPOSAL # 3 - Approve the appointment of KPMG, LLP as the Company's
independent auditors for the fiscal year ended January 31, 2002
FOR AGAINST ABSTAIN BROKER NON VOTES
3,786,649 1,130 5,976 563,168
The proposal was passed.
ITEM 5
OTHER INFORMATION
None.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K:
1) The Company filed a report on Form 8-K on February 28, 2001
to report the closing of a $2.5 million private placement of
its common stock and the hiring of two new executive
officers.
2) The Company filed a report on Form 8-K on July 19, 2001 to
report a change in fiscal year-end from January 31 to June
30, effective June 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
STREICHER MOBILE FUELING, INC.
August 31, 2001 By: /s/ David S. Clodfelter
David S. Clodfelter
Senior Vice President and
Chief Financial Officer