<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number: 0-27968
METEOR INDUSTRIES, INC.
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(Exact Name of Issuer as Specified in its Charter)
COLORADO 84-1236619
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
216 SIXTEENTH STREET, SUITE 730
DENVER, COLORADO 80202
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(Address of Principal Executive Offices)
(303) 572-1137
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(Registrant's Telephone Number,
Including Area Code)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No___
There were 3,440,228 shares of the Registrant's $.001 par value common stock
outstanding as of March 31, 1997.
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METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1997 1996
(Audited)
CURRENT ASSETS
Cash and cash equivalents $ 692,595 $ 151,992
Restricted cash 1,249,436 928,355
Accounts receivable-trade, net of
allowance 5,033,584 5,134,276
Accounts receivable, related party 138,664 109,149
Notes receivable, related party 766,700 736,045
Inventory 1,252,482 1,221,729
Other current assets 172,033 206,401
Total current assets 9,305,494 8,487,947
Property, plant and equipment, net 8,180,489 8,277,368
Other assets
Notes receivable, related party 1,048,654 1,598,430
Investments in closely held businesses 1,290,665 1,285,407
Other assets 724,561 784,579
Total other assets 3,063,880 3,668,416
TOTAL ASSETS $20,549,863 $20,433,731
Continued on next page
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METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31 December 31
1997 1996
(Audited)
CURRENT LIABILITIES
Accounts payable, trade $ 3,191,495 $ 3,512,257
Bank overdraft -- 170,308
Current portion, long-term debt 2,104,604 2,176,357
Accrued expenses 275,014 212,940
Taxes payable 899,837 730,034
Revolving credit facility 1,812,629 2,141,027
Total current liabilities 8,283,579 8,942,923
Long-term debt 414,351 445,774
Deferred tax liability 1,744,954 1,773,240
Minority interest in subsidiaries 4,252,333 4,151,903
Total liabilities 14,695,217 15,313,840
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; authorized
10,000,000 shares, 3,440,228 and
3,310,228 shares issued and
outstanding, respectively 3,440 3,310
Paid-in capital 3,180,843 2,660,973
Retained earnings 2,670,363 2,455,608
Total shareholders' equity 5,854,646 5,119,891
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $20,549,863 $20,433,731
The accompanying notes are an integral part of the financial statements.
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
Net sales $13,852,540 $ 13,385,539
Cost of sales 11,628,471 10,829,923
Gross profit 2,224,069 2,555,616
Selling, general and administrative
expenses 1,972,452 1,961,050
Depreciation and amortization 219,515 221,089
Total expenses 2,191,967 2,182,139
Income from operations 32,102 373,477
Other income and (expenses)
Interest income 101,441 54,701
Interest expense (115,153) (127,700)
Gain on sale of assets 17,500 31,105
Other Income 480,807 --
Total other income and (expenses) 484,595 (41,894)
Income before income taxes
and minority interest 516,697 331,583
Income tax expense 201,512 62,979
Income before minority interest 315,185 268,604
Minority interest 100,430 95,316
Net income $ 214,755 $ 173,288
Net income per common share $ .06 $ .06
The accompanying notes are an integral part of the financial statements.
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<PAGE>
METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,1997 AND 1996
1997 1996
Cash flows from operating activities
Net income $ 214,755 $ 173,288
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 219,515 221,089
Gain/loss on disposal of property & equipment (17,500) (31,105)
Deferred income taxes (31,277) (182,723)
Minority interest 100,430 95,316
Changes in assets and liabilities, net of
effects from reverse acquisitions
(Increase)/decrease in accounts receivable 71,177 (130,557)
(Increase)/decrease in inventories (30,753) (78,566)
(Increase)/decrease in other current assets 37,359 (48,545)
Increase/(decrease) in accounts payable (320,762) 759,486
Increase/(decrease)in accrued liabilities 62,074 46,916
Increase/(decrease) in taxes payable 169,803 107,067
(Increase)/decrease in other assets 46,170 (75,302)
Net cash provided by operating activities 520,991 856,364
Cash flows from investing activities
Cash proceeds from sale of property 34,893 31,105
Purchases of property and equipment (126,181) (125,809)
Investment in closely held business (5,258) --
Note receivable payments 519,121 48,970
Net cash provided (used) by
investing activities 422,575 (45,734)
Cash flows from financing activities
Borrowings from financing activities 14,523,606 12,431,661
Payments on revolving credit facilities (14,852,004) (13,188,226)
Increase (decrease) in bank overdraft (170,308) (71,657)
Borrowings on long-term debt (103,176) --
Payments on long-term debt -- (56,511)
Proceeds from common stock issued 520,000 --
Restricted cash (321,081) 110,069
Net cash provided (used)by financing activities (402,963) (774,664)
Net increase (decrease) in cash and equivalents 540,603 35,966
Cash and equivalents, beginning of period 151,992 95,150
Cash and equivalents, end of period $ 692,595 $ 131,116
The accompanying notes are an integral part of the financial statements.
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METEOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Meteor Industries, Inc.("Meteor" or "Company") was incorporated on December
22, 1992, as a Colorado based holding company. Graves Oil & Butane Co., Inc.
("Graves"), which was acquired effective September 1, 1993, is a wholesale and
retail distributor of petroleum products primarily in northern New Mexico,
Colorado, Arizona and Utah. Graves also operates retail gasoline and
convenience stores in northern New Mexico and Colorado. El Boracho, Inc.,
which was acquired September 1, 1993, holds a liquor license for use by an
Albuquerque, New Mexico convenience store. Hillger Oil Company ("Hillger"),
which was acquired effective April 1, 1995, is a wholesale and retail
distributor of petroleum products primarily in southern New Mexico and
Arizona. In addition, Hillger operates and owns through a subsidiary, Hatch
Pyramid LLC, retail gasoline and convenience stores in southern New Mexico.
Capco Resources, Inc. ("CRI"), is a holding Company involved in the
development of a power project in Pakistan. The acquisition of CRI was
accounted for as a reverse acquisition with CRI treated as the acquirer. In
1996 the Company transferred its ownership of CRI to Meteor Holdings LLC
("MHL"). Innovative Solutions and Technologies, Inc. ("IST") is involved in
providing environmental consulting. Capco Analytical Services, Inc. ("CAS")
is involved in providing laboratory analysis.
PRINCIPLES OF CONSOLIDATION AND ORGANIZATION - The consolidated financial
statements include the accounts of Meteor Industries, Inc., and its wholly
owned subsidiaries, Graves, including its wholly owned subsidiary, El Boracho,
Inc., Hillger including its 75% owned subsidiary Hatch Pyramid LLC, CAS and
IST and Meteor's 73% owned subsidiary, Meteor Holdings LLC. All significant
intercompany transactions and balances have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, such interim statements reflect all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position and the results of operations and cash flows for the
interim periods presented. The results of operations for these interim
periods are not necessarily indicative of the results to be expected for the
full year. These financial statements should be read in conjunction with the
audited consolidated financial statements and footnotes for the year ended
December 31, 1996, filed with the Company's Form 10-K.
Earnings per common and common equivalent share are computed by dividing the
net income by the weighted average number of common shares. The number of
shares used in the earnings per share computation for the three months ended
March 31, 1997, is 3,353,561; and for the three month period March 31, 1996,
is 3,024,903.
NOTE 2 -- NEW ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). The standard requires presentation of earnings per share on a "basic"
(only actual shares outstanding) and "fully diluted" (actual shares
outstanding plus the effect of other dilutive securities) basis. At this
time, the Company does not expect the adoption of SFAS No. 128 to have a
material impact on the Company's earnings per share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR METEOR INDUSTRIES, INC.
This Report contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties which could cause actual
results to differ materially from those described in the forward-looking
statements.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $521,000 for the three
months ended March 31, 1997 compared to $856,000 for the period ended December
31, 1996. The decrease in cash provided is primarily related to the timing of
payments of accounts payable.
As of March 31, 1997, the Company had a working capital of $1,022,000 compared
to a working capital deficit of $455,000 at December 31, 1996. The increase
in the working capital is due primarily to sale of stock and partial
collection of a note receivable from related party.
Net cash provided by investing activities totaled $423,000 for the three
months ended March 31, 1997, compared to cash used of $46,000 for the period
ended March 31, 1996. The increase is primarily a result of the partial
collection of a loan to related party. This was partially offset by
purchases of property and equipment.
Because of the Company's continued expansion and development efforts, the
Company's liquidity requirements have increased and are expected to continue
to increase as a result of the need to reduce the Company's existing debt
related to prior acquisitions. During the quarter the Company raised $520,000
in a private placement of stock.
Net cash used by financing activities totaled $403,000 for the three months
ended March 31, 1997, compared to a use of $775,000 for the period ended March
31, 1996. The decrease in cash used is primarily related to the sale of
stock.
The Company has two revolving bank credit facilities with Norwest Business
Credit, Inc. - one for $3,000,000 and one for $1,500,000. The credit lines
are subject to the borrowing base of the Company's subsidiaries, as defined,
and on March 31, 1997, $1,565,000 and $250,000 were borrowed against the
facilities which are recorded as current liabilities. The Company has been in
default on the timely filing of information with the lender. The Company was
also in default of the net worth requirements for one of the subsidiaries,
which default has been corrected. The lender waived these defaults. The
Company is and will continue to be in default in timely filing of information
and one of the Company's subsidiaries is in violation of its debt service
coverage requirements. The Company has not requested waivers of these
violations. However, it is expected that the lender will continue to waive
these violations as they have in the past.
The Company has a term loan with a New Mexico bank which is due in January,
1998 and a term loan with Norwest Business Credit, Inc. which is due in June,
1998.
The balances at March 31, 1997, were $160,000 and $156,000, respectively. The
loans are collateralized by real estate and buildings and equipment and
require approximately $29,000 per month in payments.
At March 31, 1997, the Company owned 50% of a limited liability company which
in June 1996 acquired a convenience store for $610,000 using financing from
Phillips
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<PAGE>
Performance Fund Inc. The balance of the loan at March 31, 1997 was $496,000.
The Company is a co-signer on this loan which has a term of 10 years. The
Company records its investment using the equity method, which reflects only
the Company's share of the net worth of the limited liability company.
The Company owns 75% of a limited liability company which in December 1996
acquired a convenience store for $415,000 using seller financing of $315,000.
The loan has quarterly payments of $14,000 and a term of 7 years.
A subsidiary of the Company has preferred stock outstanding which requires no
periodic payments but accrues an 8% dividend and must be redeemed for
$3,543,000 plus accrued dividends at the holder's request any time after
September 15, 2000 unless earlier converted into common stock pursuant to its
terms. This preferred stock is treated as a minority interest on the balance
sheet and recorded at its discounted value.
The Company owes the founder of one of its subsidiaries $1,759,000 payable in
semi-annual installments of $200,000 which includes principal and interest
calculated at 2 percentage points in excess of Citibank's prime rate. All
previously unpaid principal and interest is due October 1, 1997. It is
anticipated that $670,000 will be offset by payments on notes receivable from
the founder also due October 1, 1997. The Company plans to pay this debt by
drawing down its $3,000,000 line of credit or possibly selling or refinancing
one of its convenience stores.
The Company is obligated to pay lease costs of approximately $66,000 monthly
for land, building, facilities, and equipment.
In order to pay its obligations, the interest on such obligations and other
expenses, the Company must generate cash flow from operations which exceeds
that which has been achieved in the past. In addition, even if historical
cash flow is exceeded throughout the terms of its obligations, the Company
will probably be required to raise capital or refinance its existing debt in
order to pay its obligations as they become due. The Company has filed a
registration statement pursuant to which it expects to sell 600,000 shares of
stock during the second quarter of 1997.
The Company utilizes underground tanks at various locations to store petroleum
products and is therefore subject to various federal and state statutes
concerning environmental protection, as well as the New Mexico Ground Water
Protection Act. The various federal and state statutes are designed to
identify environmental damage, identify hazardous material and/or operations,
regulate operations engaged in hazardous activities, and establish procedures
for remedial action as necessary.
The state of New Mexico has recognized the potential cleanup costs resulting
from regulations, and the New Mexico Ground Water Protection Act has included
the establishment of a corrective action fund. The purpose of the fund is to
provide monetary assistance in both assessing site damage and correcting the
damage where such costs are in excess of $10,000. Assistance is not available
to repair or replace underground tanks or equipment. The law specifies
requirements which must have been met for an applicant to be eligible,
including a provision that payments will be made in accordance with
regulations (which have not yet been issued), and states that payment from the
corrective action fund are limited to amounts in that fund. The Company is
responsible for any contamination of land it owns or leases; however, the
Company's responsibilities may be limited as a result of possible claims for
reimbursement from third parties.
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<PAGE>
The Company maintains detailed inventory records and performs tank and line
tightness tests on a regular basis on all underground storage tanks.
Management has assessed the environmental contingencies and does not
anticipate any potential liabilities that will have a material adverse effect
on the consolidated financial position, results of operation, or liquidity of
the Company.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 TO MARCH 31, 1996
The Company is primarily engaged in the business of marketing and distributing
refined petroleum and related products employing wholesale, convenience store
operations and environmental services.
The Company's sales for the three months ended March 31, 1997, were
$13,853,000 compared to $13,386,000 for the comparable period ending March 31,
1996. The increase in revenue of $467,000 is primarily related to increases in
propane sales and sales at the convenience stores. Sales are expected to be
similar to the previous year assuming no significant acquisitions are made.
The Company's cost of sales for the three months ended March 31, 1997, were
$11,628,000 (83.9% of sales) compared to $10,830,000 (80.1% of sales) for the
comparable period ended March 31, 1996. The increase of $798,000 in cost of
sales is primarily due to an increase in fuel costs which the Company was not
able to pass on to its customers due to competition.
The Company's gross profit for the three months ended March 31, 1997, was
$2,224,000 compared to $2,556,000 for the comparable period ended March 31,
1996. The decrease of $332,000 is primarily related to a decrease in gasoline
margins. Gasoline margins are dictated by competition in a given area and the
Company has limited control over such margins.
The Company's selling, general and administrative expenses were $1,973,000 for
the three months ended March 31, 1997, compared to $1,961,000 for the
comparable period ended March 31, 1996. Even though the Company has cut
expenses at the subsidiary levels, total expenses have increased due to an
increase in corporate overhead related to acquisition activity and capital
raising activities.
The Company's depreciation for the three months ended March 31, 1997, was
$220,000 compared to $221,000 for the comparable period ended March 31, 1996.
The Company's other income for the three months ended March 31, 1997 was
$485,000 compared to $0 for the comparable period ended March 31, 1996. The
increase is related to a settlement of litigation for $480,000, net of
expenses.
The Company's provision for income taxes for the three months ended March 31,
1997, was $202,000 compared to $63,000 for the comparable period ended March
31, 1996. This increase is due to more income and the utilization of a loss
carryforward in 1996.
The Company's net income for the three months ended March 31, 1997, was
$215,000 compared to $173,000 in the prior period. The change in net income
is due to the above described items. It should be noted that if the Company
had not had other income from the settlement of litigation of approximately
$480,000, the Company would have recorded a net loss of approximately $78,000
for the three months ended March 31, 1997.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In March 1997, the Company agreed to an out of court settlement with
one of its former insurers whereby such insurer has agreed to pay the Company
an amount which, after deducting the Company's costs and attorney's fees, will
result in the Company receiving approximately $480,000. The Company expects
to receive such payment during May 1997.
Item 2. Changes in Securities.
During the quarter ended March 31, 1997, the Company issued securities
in a transaction which was not registered under the Securities Act of 1933, as
amended (the "Act"), as follows:
On January 2, 1997, the Company granted options under its Stock Option
Plan to four employees to purchase an aggregate of 20,000 shares of Common
Stock at $5.07 per share. These options vest over five years and expire on
January 2, 2002.
On February 14, 1997, the Company granted an option under its Stock
Option Plan to Dennis R. Staal, Secretary and Treasurer of the Company, to
purchase 25,000 shares of Common Stock at $3.50. Also on February 14, 1997,
the Company granted an option under its Stock Option Plan to the president of
one of the Company's subsidiaries, to purchase 5,000 shares of Common Stock at
$3.50 per share. These options vest over three years on an annual basis and
expire five years from the date of grant.
On February 14, 1997, the Company granted options to three
consultants to purchase an aggregate of 130,000 shares of the Company's Common
Stock. These options are exercisable at $3.50 per share and expire on
February 13, 1998.
In February and March of 1997, the Company sold shares and warrants
to purchase the Company's Common Stock to 16 accredited investors in a private
offering. A total of 130,000 shares of Common Stock and 130,000 warrants were
sold in this offering for an aggregate of $520,000 in cash. The Company paid
no commissions in connection with this offering. Each warrant allows the
holder to purchase one share of Common Stock at $5.00 per share from March 28,
1998 until March 27, 1999.
With respect to these sales, the Company relied on Section 4(2) of
the Act, and Rule 506 of Regulation D promulgated thereunder. Each investor
was given a copy of a Private Placement Memorandum containing information
concerning the Company, a Form D was filed with the SEC and the Company
complied with the other applicable requirements of Rule 506. Each investor
signed a subscription agreement in which he represented that he was purchasing
the shares for investment only and not for the purpose of resale or
distribution. The appropriate restrictive legends were placed on the
certificates and stop transfer instructions were issued to the transfer agent.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 Financial Data Schedule Filed herewith
electronically
(b) Reports on From 8-K. None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Issuer caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
METEOR INDUSTRIES, INC.
By/s/ Dennis R. Staal
Dennis R. Staal, Treasurer(duly author-
ized officer and Chief Financial and
Accounting Officer)
Dated: May 15, 1997
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<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 3, 4 and 5 of the Company's Form 10-Q for the year to date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,942,031
<SECURITIES> 0
<RECEIVABLES> 5,938,948
<ALLOWANCES> 0
<INVENTORY> 1,252,482
<CURRENT-ASSETS> 171,033
<PP&E> 14,048,061
<DEPRECIATION> (5,867,572)
<TOTAL-ASSETS> 20,549,863
<CURRENT-LIABILITIES> 8,283,579
<BONDS> 0
<COMMON> 3,440
0
0
<OTHER-SE> 5,851,206
<TOTAL-LIABILITY-AND-EQUITY> 20,549,863
<SALES> 13,852,540
<TOTAL-REVENUES> 13,852,540
<CGS> 11,628,471
<TOTAL-COSTS> 2,191,967
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115,153
<INCOME-PRETAX> 516,697
<INCOME-TAX> 201,512
<INCOME-CONTINUING> 214,755
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 214,755
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
