<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, 1998
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 4,130,228 shares of the Registrant's $.001 par value common stock
outstanding as of March 31, 1998.
<PAGE>
METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1998 1997
CURRENT ASSETS
Cash and cash equivalents $ 448,284 $ 225,694
Restricted cash 738,681 1,150,266
Accounts receivable-trade, net of
allowance of $372,040 and
$455,067, respectively 7,488,939 9,745,318
Accounts receivable, related party 63,610 91,919
Notes receivable, related party 125,668 106,031
Inventory 3,262,646 3,818,332
Deferred tax asset 348,056 404,970
Other current assets 401,414 283,604
Total current assets 12,877,298 15,826,134
Property, plant and equipment, net 13,831,939 13,939,783
Other assets
Notes receivable, net 211,564 179,110
Investments in closely held businesses 1,415,923 1,395,045
Other assets 658,043 601,279
Total other assets 2,285,530 2,175,434
TOTAL ASSETS $28,994,767 $31,941,351
Continued on next page
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METEOR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31 December 31
1998 1997
CURRENT LIABILITIES
Accounts payable, trade $ 5,301,184 $ 5,655,272
Accounts payable, related party 20,539 26,407
Bank overdraft -- 327,734
Current portion, long-term debt 740,552 592,195
Accrued expenses 613,578 826,875
Taxes payable 1,251,342 1,672,586
Revolving credit facility 1,990,430 3,833,572
Total current liabilities 9,917,625 12,934,641
Long-term debt 2,589,860 2,912,183
Deferred tax liability 2,339,388 2,288,349
Minority interest in subsidiaries 4,626,028 4,515,010
Total liabilities 19,472,901 22,650,183
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; authorized
10,000,000 shares, 4,130,228 and
4,130,228 shares issued and
outstanding, respectively 4,130 4,130
Paid-in capital 6,319,071 6,319,071
Treasury stock, at cost, 29,500 and
18,500 shares held, respectively (131,208) (88,694)
Retained earnings 3,329,873 3,056,661
Total shareholders' equity 9,521,866 9,291,168
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $28,994,767 $31,941,351
The accompanying notes are an integral part of the financial statements.
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1998 1997
Net sales $ 26,824,447 $ 13,852,540
Cost of sales 22,084,988 11,628,471
Gross profit 4,739,459 2,224,069
Selling, general and administrative
expenses 3,684,564 1,972,452
Depreciation and amortization 304,277 219,515
Total expenses 3,988,841 2,191,967
Income from operations 750,618 32,102
Other income and (expenses)
Interest income 44,019 101,441
Interest expense (188,245) (115,153)
Gain on sale of assets 1,500 17,500
Other Income -- 480,807
Total other income and (expenses) (142,726) 484,595
Income before income taxes
and minority interest 607,892 516,697
Income tax expense 223,704 201,512
Income before minority interest 384,188 315,185
Minority interest 110,976 100,430
Net income $ 273,212 $ 214,755
Other comprehensive income, net of tax $ -- $ --
Earnings per common share and
equivalent:
Basic
Net income $ .07 $ .06
Diluted
Net income $ .07 $ .06
Weighted average common share and
common share equivalents:
Basic 4,130,228 3,353,561
Diluted 4,135,579 3,506,840
The accompanying notes are an integral part of the financial statements.
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METEOR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,1998 AND 1997
1998 1997
Cash flows from operating activities
Net income $ 273,212 $ 214,755
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 304,277 219,515
Gain/loss on disposal of property & equipment (1,500) (17,500)
Deferred income taxes 107,947 (31,277)
Minority interest 110,976 100,430
(Increase)/decrease in accounts receivable 2,284,729 71,177
(Increase)/decrease in inventories 555,686 (30,753)
(Increase)/decrease in other current assets (117,810) 37,359
(Increase)/decrease in other assets (72,586) 46,170
Increase/(decrease) in accounts payable (359,960) (320,762)
Increase/(decrease)in accrued liabilities (213,297) 62,074
Increase/(decrease) in taxes payable (421,243) 169,803
Net cash provided by operating activities 2,450,431 520,991
Cash flows from investing activities
Cash proceeds from sale of property 1,500 34,893
Purchases of property and equipment (180,605) (126,181)
Investment in closely held business (20,872) (5,258)
Note receivable (loan) payments (52,091) 519,121
Net cash provided (used) by
investing activities (252,068) 422,575
Cash flows from financing activities
Borrowings on revolving credit facilities 26,209,411 14,523,606
Payments on revolving credit facilities (28,052,555) (14,852,004)
(Decrease) in bank overdraft (327,734) (170,308)
Payments on long-term debt (173,966) (103,176)
Proceeds from common stock issued -- 520,000
Purchase of treasury stock (42,514) --
Restricted cash 411,585 (321,081)
Net cash (used) by financing
activities (1,975,773) (402,963)
Net increase in cash and equivalents 222,590 540,603
Cash and equivalents, beginning of period 225,694 151,992
Cash and equivalents, end of period $ 448,284 $ 692,595
Non-cash investing and financing activities
Cash paid for interest $ 187,720 $ 68,075
Cash paid for taxes $ 644,948 $ 31,709
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, 1998
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 in its own account and through
limited liability companies. 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 its own account and
through limited liability companies. 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. Fleischli Oil
Company, Inc. ("Fleischli"), which was acquired effective August 1, 1997, is a
wholesale distributor of petroleum products primarily in Wyoming, Colorado,
Utah and Nebraska.
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., its wholly owned subsidiary Bloomfield Pyramid L.L.C., Hillger,
including its 75% owned subsidiary Hatch Pyramid LLC and its wholly owned
subsidiary Socorro Pyramid L.L.C., Fleischli, and IST and Meteor's 73% owned
subsidiary, Meteor Holdings LLC. All significant intercompany transactions and
balances have been eliminated in consolidation.
EARNINGS PER SHARE - Basic earnings per common share is computed by dividing
the net income by the weighted average number of common shares outstanding.
Diluted earnings per common share is computed by taking into account the
dilutive effect of common stock options and warrants and convertible
securities. A reconciliation of the denominator used in the calculation of
basic and diluted earnings per share is presented below. Antidilutive stock
options and warrants of 1,101,634 and -0- for the three months ended March 31,
1998, and 1997, respectively, are omitted from the denominator. The numerator
is unchanged. The shares available upon exchange of a subsidiary's preferred
stock of 1,510,540 and 820,911 for the three months ended March 31, 1998, and
1997, respectively, are omitted as they are antidilutive.
1998 1997
Denominator:
Average common shares outstanding 4,130,228 3,353,561
Average dilutive stock options
and warrants 5,351 153,279
Diluted shares 4,135,579 3,506,840
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INTERIM FINANCIAL INFORMATION - 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, 1997, filed with the Company's Form
10-K.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in the
first quarter of 1998. The Company has no other comprehensive income.
The Company is required to adopt SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," in the fourth quarter of 1998. SFAS
No. 131 will supersede the business segment disclosure requirements currently
in effect under SFAS No. 14. SFAS No. 131, among other things, establishes
standards regarding the information a company is required to disclose about
its operating segments and provides guidance regarding what constitutes a
reportable operating segment. The Company currently believes the segment
disclosures pursuant to SFAS No. 131 will not be materially different from the
current disclosures pursuant to SFAS No. 14.
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<PAGE>
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 Act of 1995.
Such statements are based on management's current expectations and are subject
to a number of factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking statements.
The Company is engaged in the distribution and marketing of refined petroleum
products including gasoline, diesel fuel, propane and lubricants. The
Company's growth, since its inception in 1992, has been primarily through the
acquisition of businesses in the petroleum marketing industry. The Company's
strategy is to continue to pursue acquisitions in the fragmented petroleum
marketing industry.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $2,450,000 for the three
months ended March 31, 1998 compared to $521,000 for the three months ended
March 31, 1997. The increase in cash provided in 1998 is primarily related to
the improved collection of accounts receivable and the Fleischli acquisition.
As of March 31, 1998, the Company had working capital of $2,960,000 compared
to working capital of $2,891,000 at December 31, 1997. The increase in the
working capital is due primarily to improved collection of accounts receivable
offset by payments on the credit facilities.
Net cash used by investing activities totaled $252,000 for the three months
ended March 31, 1998, compared to cash proceeds of $423,000 for the three
months ended March 31, 1997. The Company collected loans to related parties
of $519,000 in 1997.
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.
Net cash used by financing activities totaled $1,976,000 for the three months
ended March 31, 1998 compared to a use of $403,000 for the three months ended
March 31, 1997. The increase in 1998 is primarily related to payments on
debts.
The Company has three revolving bank credit facilities with Norwest Business
Credit, Inc. - one for $3,000,000, one for $1,500,000 and one for $5,000,000.
The credit lines are subject to the borrowing base of the Company's
subsidiaries, as defined and on March 31, 1998, $336,000, $-0- and $1,654,000
were borrowed against the facilities which are recorded as current
liabilities. The Company has been in default on timely filing of information
with the lender. The Company was also in default of the net book value
requirements for one of the subsidiaries. The lender waived these defaults.
The Company has various loans with banks which require payments of $741,000 in
1998.
The Company owns 50% of a limited liability company which in June, 1996,
acquired a convenience store for $610,000 using financing from Phillips 66.
The balance of the loan at March 31, 1998 was $457,000. 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 LLC.
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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. In order to pay its obligations,
the interest on such obligations and other expenses, the Company must generate
cash flows from operations which exceed that which has been achieved in the
past. In addition, the Company will probably be required to raise capital or
refinance its existing debt in order to pay such long term obligations as they
become due.
The Company is obligated to pay lease costs of approximately $893,000 in 1998
for land, building, facilities, and equipment.
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 states the Company operates in have recognized the potential cleanup costs
resulting from regulations, and have included the establishment of
corrective action funds. The purpose of the funds are to provide monetary
assistance in both assessing site damage and correcting the damage.
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 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.
The Company is responsible for any contamination of land it owns or leases.
However, the Company may have limitations on any potential contamination
liabilities as well as claims for reimbursement from third parties. The
Company has accrued for environmental remediation which management believes is
required to cover known remediation problems.
Meteor and its subsidiaries have checked with the manufacturers of their
various software packages and have been told that new versions addressing the
year 2000 will be available between mid-year through end of 1998. At this
time the Company has no reason to believe that there will be any problems with
its various software packages.
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in the
first quarter of 1998. The Company has no other comprehensive income.
The Company is required to adopt SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," in the fourth quarter of 1998. SFAS
No. 131 will supersede the business segment disclosure requirements currently
in effect under SFAS No. 14. SFAS No. 131, among other things, establishes
standards regarding the information a company is required to disclose about
its operating
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<PAGE>
segments and provides guidance regarding what constitutes a reportable
operating segment. The Company currently believes the segment disclosures
pursuant to SFAS No. 131 will not be materially different from the current
disclosures pursuant to SFAS No. 14.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 TO MARCH 31, 1997
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, 1998, were
$26,824,000 compared to $13,853,000 for the comparable period ending March 31,
1997. The increase in revenue of $12,971,000 is primarily related to the
Fleischli acquisition offset by lower prices for the Company's products.
The Company's cost of sales for the three months ended March 31, 1998, were
$22,085,000 (82.0% of sales) compared to $11,628,000 (83.9% of sales) for the
comparable period ended March 31, 1997. The increase of $10,457,000 in cost of
sales is primarily due to the Fleischli acquisition offset by a lower price
for the Company's purchases.
The Company's gross profit for the three months ended March 31, 1998, was
$4,739,000 compared to $2,224,000 for the comparable period ended March 31,
1997. The increase of $2,515,000 is primarily related to the Fleischli
acquisition and an increase in fuel margins due primarily to lower prices on
products sold at set per gallon prices over cost. Fuel 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 $3,685,000 for
the three months ended March 31, 1998, compared to $1,973,000 for the
comparable period ended March 31, 1997. Even though the Company has cut
expenses at the subsidiary levels, total expenses have increased due to the
Fleischli acquisition and an increase in corporate overhead related to
acquisition activity.
The Company's depreciation and amortization for the three months ended March
31, 1998, was $304,000 compared to $220,000 for the comparable period ended
March 31, 1997. The increase is primarily due to the Fleischli acquisition.
The Company's other income (expense) for the three months ended March 31, 1998
was $(143,000) compared to $485,000 for the comparable period ended March 31,
1997. The decrease is related to a settlement of litigation for $480,000, net
of expenses in 1997 and an increase in interest expense in 1998 due to the
Fleischli acquisition.
The Company's provision for income taxes for the three months ended March 31,
1998, was $224,000 compared to $202,000 for the comparable period ended March
31, 1997. This increase is due to more taxable income.
The Company's net income for the three months ended March 31, 1998, was
$273,000 compared to $215,000 in the prior period. The change in net income
is due to the above described items.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K. None.
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<PAGE>
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(Chief
Financial and Accounting Officer)
Dated: May 15, 1998
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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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,186,965
<SECURITIES> 0
<RECEIVABLES> 7,678,217
<ALLOWANCES> 0
<INVENTORY> 3,262,646
<CURRENT-ASSETS> 12,877,298
<PP&E> 15,910,745
<DEPRECIATION> 2,086,804
<TOTAL-ASSETS> 28,994,767
<CURRENT-LIABILITIES> 9,917,625
<BONDS> 0
<COMMON> 4,130
0
0
<OTHER-SE> 9,517,736
<TOTAL-LIABILITY-AND-EQUITY> 28,994,767
<SALES> 26,824,447
<TOTAL-REVENUES> 26,824,447
<CGS> 22,084,988
<TOTAL-COSTS> 3,988,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,245
<INCOME-PRETAX> 607,892
<INCOME-TAX> 223,704
<INCOME-CONTINUING> 273,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 273,212
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
