x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
65-0707824
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
No.)
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Title
of Class
|
Name
of exchange on which
registered
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Common
Stock, $.01 Par
Value
|
Nasdaq
Capital
Market
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PAGE
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||
PART
I.
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||
Item
1. Business
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1
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Item
1A. Risk Factors
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8
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Item
1B. Unresolved Staff Comments
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10
|
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Item
2. Properties
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11
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Item
3. Legal Proceedings
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12
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
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12
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PART
II.
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||
Item
5. Market for Common Equity, Related
Shareholder Matters and
Issuer Purchases of Equity Securities
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13
|
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Item
6. Selected Financial Data
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14
|
|
Item
7. Management’s Discussion and Analysis of
Financial Condition and
Results of Operations
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17
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|
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
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36
|
|
Item
8. Financial Statements and Supplementary
Data
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36
|
|
Item
9. Changes in and Disagreements with Accountants
on Accounting and
Financial Disclosure
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36
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Item
9A. Controls and Procedures
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37
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|
Item
9B. Other Information
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38
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PART
III.
|
||
Item
10. Directors, Executive Officers and Corporate
Governance
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39
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Item
11. Executive Compensation
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39
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|
Item
12. Security Ownership of Certain Beneficial Owners and
Management and
Related Stockholder Matters
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39
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|
Item
13. Certain Relationships, Related Transactions, and Director
Independence
|
39
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|
Item
14. Principal Accounting Fees and Services
|
39
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|
PART
IV.
|
||
Item
15. Exhibits, Financial Statement Schedules
|
40
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|
Signatures |
46
|
·
|
market
presence;
|
·
|
growth
potential of product and service lines;
|
·
|
margin
contribution;
|
·
|
impact
on our competition;
|
·
|
customer
loyalty and retention;
|
·
|
commitment
of management and other personnel;
|
·
|
integration
efficiencies and controls; and
|
·
|
transaction
financing alternatives, among others.
|
·
|
Reduced
Operating Costs and Increased Labor Productivity.
Fleet operators are able to reduce operating costs and lower payroll
hours
by eliminating the need for their employees to fuel vehicles either
on-site or at local retail stations and other third party facilities.
Overnight fueling prepares fleet vehicles for operation at the beginning
of each workday and increases labor productivity by allowing employees
to
use their vehicles during time that would otherwise be spent fueling.
Vehicle use is maximized since fueling is conducted during non-operating
hours. The fuel necessary to operate vehicles is reduced since fueling
takes place at customer locations. The administrative burden required
to
manage fuel programs and monitor vehicle utilization is also reduced.
|
·
|
Centralized
Inventory Control and Management.
Our fuel management system provides fleet operators with a central
management data source. Web-based comprehensive reports detail, among
other things, the location, description, fuel type and daily and
weekly
fuel consumption of each vehicle or piece of equipment that we fuel.
This
eliminates customers’ need to invest working capital to carry fuel
supplies and allows customers to centralize fuel inventory controls
as
well as track and analyze vehicle movements and fuel consumption
for
management and fuel tax reporting purposes. We are also able to service
and manage fuel delivery to a customer’s on-site storage tank, and using
our technology we can provide reports detailing fuel dispensed from
the
tank into each of the customer’s vehicles. Our system is specifically
designed for use in commercial fueling and is certified for accuracy
by
The National Conference on Weights and
Measures.
|
·
|
Tax
Reporting Benefits.
Our fuel management system can track fuel consumption to specific
vehicles
and fuel tanks, providing tax reporting benefits to customers consuming
fuel in uses that are tax-exempt, such as for off-road vehicles,
government-owned vehicles and fuel used to operate refrigerator units
on
vehicles. For these uses, the customers receive reports that provide
them
with the information required to substantiate tax
exemptions.
|
·
|
Elimination
of Expenses and Liabilities of On-site Storage.
Fleet operators who previously satisfied their fuel requirements
using
on-site storage tanks can eliminate the capital and costs relating
to
installing, equipping and maintaining fuel storage and dispensing
facilities, including the cost and price volatility associated with
fuel
inventories; complying with escalating environmental government
regulations; and carrying increasingly expensive insurance. By removing
on-site storage tanks and relying on commercial mobile fueling, customers
are able to avoid potential liabilities related to both employees
and
equipment in connection with fuel storage and handling. Customers’
expensive and inefficient use of business space and the diminution
of
property values associated with environmental concerns are also
eliminated.
|
·
|
Lower
Risk of Fuel Theft.
Fleet operators relying on employees to fuel vehicles, whether at
on-site
facilities or at retail stations, often experience shrinkage of fuel
inventories or excess fuel purchases due to employee fraud. Our fuel
management system prevents the risk of employee theft by dispensing
fuel
only to authorized vehicles. Utilizing our fueling services, rather
than
allowing employees to purchase fuel at local retail stations, also
eliminates employee fraud due to credit card
abuse.
|
·
|
Access
to Emergency Fuel Supplies and Security.
Emergency preparedness, including fuel availability, is critical
to the
operation of governmental agencies, utilities, communication companies,
delivery services and numerous other fleet operators. We provide
access to
emergency fuel supplies at times and locations chosen by our customers,
allowing them to react more quickly and effectively to emergency
situations, such as severe weather conditions and related disasters.
Fueling by fleet operators at their own on-site storage facilities,
and/or
at retail and other third party locations may be limited due to power
interruptions, supply outages or access and other natural limitations.
In
addition, since security concerns of fleet operators to terrorism,
hijacking and sabotage are increasing, fueling vehicles at customers’
facilities eliminates security risks to the fleet operators’ employees and
equipment rather than fueling at retail service stations and other
third
party facilities.
|
·
|
our
patented
proprietary electronic fuel tracking control system;
|
·
|
our
reputation for timely, efficient and reliable delivery of products
and
services;
|
·
|
our
well trained drivers and support
staff;
|
·
|
our
technical knowledge of our products and our customers’ needs;
and
|
·
|
our
competitive pricing for products and services as a result of strong
business relationships with our principal
suppliers.
|
Location
|
|
Lease
Expiration
|
Gardena,
California
|
|
7/15/09
|
Bloomington,
California
|
|
7/15/10
|
Port
Everglades, Florida
|
|
5/31/08
|
Orlando,
Florida
|
|
11/1/09
|
Doraville,
Georgia
|
|
1/1/08
|
Houston,
Texas
|
|
9/30/10
|
Ft.
Worth, Texas
|
|
12/31/07
|
Jacksonville,
Florida
|
|
8/31/15
|
Atlanta,
Georgia
|
|
12/31/07
|
Freeport,
Texas
|
|
9/30/10
|
Waxahachie,
Texas
|
|
9/30/10
|
Converse,
Texas
|
|
9/30/07
|
Lufkin,
Texas
|
|
9/30/10
|
Temple,
Texas
|
|
12/31/08
|
Gonzales,
LA
|
|
8/15/07
|
Common
Stock
|
|||||||
High
|
Low
|
||||||
Year
Ended June 30, 2007
|
|||||||
1st
quarter
|
$
|
3.42
|
$
|
1.90
|
|||
2nd
quarter
|
$
|
1.90
|
$
|
1.35
|
|||
3rd
quarter
|
$
|
1.83
|
$
|
1.46
|
|||
4th
quarter
|
$
|
2.07
|
$
|
1.47
|
|||
Year
Ended June 30, 2006
|
|||||||
1st
quarter
|
$
|
5.55
|
$
|
1.90
|
|||
2nd
quarter
|
$
|
4.00
|
$
|
2.35
|
|||
3rd
quarter
|
$
|
3.45
|
$
|
2.50
|
|||
4th
quarter
|
$
|
4.60
|
$
|
2.24
|
Cumulative
Total Return
|
|||||||||||||||||||
June-02
|
June-03
|
June-04
|
June-05
|
June-06
|
June-07
|
||||||||||||||
Summary
Chart Input
|
|||||||||||||||||||
SMF
ENERGY CORPORATION
|
100.0
|
89.6
|
107.2
|
174.4
|
208.0
|
119.2
|
|||||||||||||
NASDAQ
STOCK MARKET (U.S.)
|
100.0
|
110.9
|
140.0
|
140.6
|
148.4
|
177.9
|
|||||||||||||
RUSSELL
2000
|
100.0
|
96.9
|
127.9
|
138.3
|
156.6
|
180.2
|
|
Year
Ended June 30,
|
|||||||||||||||
|
2007
|
2006
|
2005
|
2004
(5)
|
2003
|
|||||||||||
Selected
Income Statement Data:
|
|
|
|
|
|
|||||||||||
Total
revenue
|
$
|
229,769
|
$
|
248,699
|
$
|
133,563
|
$
|
89,110
|
$
|
71,365
|
||||||
Gross
profit
|
$
|
12,631
|
$
|
12,409
|
$
|
6,588
|
$
|
4,298
|
$
|
4,023
|
||||||
Selling,
general and administrative expense
|
$
|
15,836
|
$
|
13,262
|
$
|
6,145
|
$
|
4,394
|
$
|
4,716
|
||||||
Operating
(loss) income
|
$
|
(3,205
|
)
|
$
|
(853
|
)
|
$
|
443
|
$
|
661
|
$
|
(693
|
)
|
|||
Interest
expense, net of interest and other income
|
$
|
3,384
|
$
|
4,025
|
$
|
1,903
|
$
|
1,361
|
$
|
915
|
||||||
Net
loss
|
$
|
(6,589
|
)
|
$
|
(4,878
|
)
|
$
|
(1,460
|
)
|
$
|
(698
|
)
|
$
|
(1,581
|
)
|
|
|
||||||||||||||||
Share
Data:
|
||||||||||||||||
Basic
and diluted net loss per share
|
$
|
(0.57
|
)
|
$
|
(0.50
|
)
|
$
|
(0.19
|
)
|
$
|
(0.10
|
)
|
$
|
(0.22
|
)
|
|
Basic
and diluted weighted average common
|
||||||||||||||||
shares
outstanding
|
11,509
|
9,819
|
7,857
|
7,261
|
7,221
|
|||||||||||
|
||||||||||||||||
Selected
Balance Sheet Data:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
987
|
$
|
4,103
|
$
|
4,108
|
$
|
2,708
|
$
|
211
|
||||||
Accounts
receivable, net
|
$
|
25,442
|
$
|
24,345
|
$
|
14,129
|
$
|
8,280
|
$
|
6,113
|
||||||
Restricted
cash
|
$
|
1,145
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Line
of credit payable
|
$
|
17,297
|
$
|
15,612
|
$
|
4,801
|
$
|
4,919
|
$
|
4,410
|
||||||
Long-term
debt (including current
|
||||||||||||||||
portion)
|
$
|
10,276
|
$
|
13,136
|
$
|
11,141
|
$
|
5,558
|
$
|
4,478
|
||||||
Shareholders’
equity
|
$
|
4,114
|
$
|
5,540
|
$
|
6,838
|
$
|
5,348
|
$
|
4,111
|
||||||
Total
assets
|
$
|
43,925
|
$
|
48,114
|
$
|
30,125
|
$
|
20,018
|
$
|
16,011
|
||||||
Financial
and Statistical Information:
|
||||||||||||||||
EBITDA
(1)
|
$
|
252
|
$
|
1,781
|
$
|
2,278
|
$
|
1,983
|
$
|
737
|
||||||
Working
capital (deficit) (2)
|
$
|
168
|
$
|
1,298
|
$
|
5,861
|
$
|
2,472
|
$
|
(2,430
|
)
|
|||||
Net
margin (3)
|
$
|
14,333
|
$
|
14,076
|
$
|
8,055
|
$
|
5,428
|
$
|
5,426
|
||||||
Net
margin per gallon (in dollars) (4)
|
$
|
0.169
|
$
|
0.149
|
$
|
0.121
|
$
|
0.099
|
$
|
0.115
|
||||||
Total
gallons
|
84,899
|
94,261
|
66,427
|
54,594
|
47,294
|
|||||||||||
|
||||||||||||||||
Non-GAAP
Measure Reconciliation, EBITDA
Calculation:
|
||||||||||||||||
Net
loss
|
$
|
(6,589
|
)
|
$
|
(4,878
|
)
|
$
|
(1,460
|
)
|
$
|
(698
|
)
|
$
|
(1,581
|
)
|
|
Add
back:
|
||||||||||||||||
Interest
expense, net of interest income (6)
|
3,727
|
4,025
|
1,903
|
1,361
|
915
|
|||||||||||
Stock-based
compensation expense
|
491
|
511
|
-
|
-
|
-
|
|||||||||||
Depreciation
and amortization expense
|
2,623
|
2,123
|
1,835
|
1,320
|
1,403
|
|||||||||||
Subtotal
|
6,841
|
6,659
|
3,738
|
2,681
|
2,318
|
|||||||||||
EBITDA
|
$
|
252
|
$
|
1,781
|
$
|
2,278
|
$
|
1,983
|
$
|
737
|
(1) | EBITDA = Earnings before interest, taxes, depreciation and amortization, and stock-based compensation expense |
(2) | Working capital (deficit) = current assets minus current liabilities |
(3) | Net margin = Gross profit plus cost of sales depreciation |
(4) | Net margin per gallon = Net margin divided by total gallons sold |
(5) | Operating income, net income and EBITDA for the year ended June 30, 2004, includes a $757,000 gain on extinguishment of debt |
(6)
|
The
year ended June 30, 2006 included $472,000, in interest expense
to
write-off debt discounts and deferred debt costs and a prepayment
penalty
related to the warrants issued on June 30, 2006, to convert a portion
of the August 2003, January 2005, and September 2005 Notes.
|
· |
Our
beliefs regarding our position in the commercial mobile fueling and
bulk
fueling; lubricant and chemical packaging, distribution and sales;
integrated out-sourced fuel management services; and transportation
logistics markets;
|
· | Our strategies, plan, objectives and expectations concerning our future operations, cash flows, margins, revenues, profitability, liquidity and capital resources; |
· | Our efforts to improve operational, financial and management controls and reporting systems and procedures; and |
· | Our plans to expand and diversify our business through acquisitions of existing companies or their operations and customer bases. |
· | the avoidance of future net losses; |
· | the avoidance of adverse consequences relating to our outstanding debt; |
· | our continuing ability to pay interest and principal on our debt instruments, and to pay our accounts payable and other liabilities when due; |
· | our continuing ability to comply with financial covenants contained in our credit agreements; |
· | our continuing ability to obtain all necessary waivers of covenant violations, if any, in our debt agreements; |
· | the avoidance of significant provisions for bad debt reserves on our accounts receivable; |
· | the continuing demand for our products and services at competitive prices and acceptable margins; |
· | the avoidance of negative customer reactions to new or existing marketing strategies; |
· | the avoidance of significant inventory reserves for slow moving products; |
· | our continuing ability to acquire sufficient trade credit from fuel and lubricants suppliers and other vendors; |
· | the successful integration of acquired companies into our existing operations, and enhancing the profitability of the integrated businesses; |
· | the successful execution of our acquisition and diversification strategy, including the availability of sufficient capital to acquire additional businesses and to support the infrastructure requirements of a larger combined company; |
· | the success in responding to competition from other providers of similar services; |
· | the impact of generally positive economic and market conditions; and |
· | the ability to retire or convert debt to equity. |
·
|
In
fiscal 2007, we had a net loss of $6.6 million. These results include
$4.6
million in non-cash charges, such as depreciation and amortization
of
fixed assets, debt costs, debt discounts, stock base compensation
and non
cash provision for allowance of doubtful accounts, $2.6 million in
stated
interest expense associated with servicing our debt, non-legal public
company costs of $1.2 million, and legal expenses of $895,000. We
have
made significant investments in building a corporate infrastructure
which
includes the Enterprise Resource Planning (“ERP”) system implementation,
the addition of key personnel, and expansion of office space, among
other
enhancements, which we believe will enable us to execute on our growth
strategy.
|
·
|
During
the fourth quarter, we continued to reduce our outstanding promissory
notes by an additional $939,000, adding up to an aggregate of $1.6
million
during the year, through their conversion into common stock as a
result of
the exercise of common stock purchase warrants with the conversion
of
promissory notes by certain investors.
|
·
|
During
the fourth quarter, we sold 29 pieces of equipment for an aggregate
amount
of $1.1 million, realizing a net gain of approximately $321,000.
The
proceeds of the sale will be used to upgrade our fleet through the
purchase of newer and under warranty equipment, thus reducing future
repair and maintenance costs. Because this equipment will be replacement
collateral under our senior subordinated promissory notes, the proceeds
from the sale of the old equipment are classified in our consolidated
balance sheet as restricted cash.
|
·
|
During
the fourth quarter, we completed the implementation of our information
systems. The ERP operating and accounting systems replaced three
legacy
systems. The effective utilization of the new systems will enable
us to
realize economies of scale and eliminate duplicative costs while
creating
an improved capability to integrate future acquisitions on an accelerated
basis. We believe that the distractions associated with this
implementation impacted our ability to manage the acquisitions, and
the
legacy business was severely hampered by an incomplete and disjointed
set
of information tools, impairing our profitability. We also believe
that
the disruptions to our business created by the implementation of
the new
system are now behind us.
|
·
|
During
the third quarter, we raised additional capital through a $3.3 million
private placement of 2.1 million shares of our common stock and warrants
to purchase an additional 423,800 shares. The proceeds from the placement
were used to satisfy $732,300 in payment obligations related to our
August
2003 promissory notes. The remaining funds were used for general
working
capital purposes.
|
·
|
During
fiscal 2007, we entered into amendments to our line of credit increasing
it from $20.0 million to $25.0 million, extending the maturity date
from
September 25, 2007 to June 30, 2008 and modifying certain financial
covenants. We believe that the increase, extension and modifications
will
enable us to continue to meet the working capital needs of the base
business.
|
·
|
During
fiscal 2007, we significantly strengthened our management team, including
the appointments of a Senior Vice President of Information Services
&
Administration and Chief Information Officer, Senior Vice President
of
Marketing & Sales and Investment Relations Officer and a Vice
President of Finance and Accounting, among others. We believe that
these
management additions provide us with professional resources necessary
to
effectively execute our business plan and growth
strategy.
|
·
|
External
factors beyond our control have continued to impact our results of
operations. While fuel price fluctuations affect our revenues, our
gross
profits are generally not affected by such fluctuations since we
are able
to pass the increased cost of the product on to our customers. However,
higher fuel prices coupled with negative economic conditions in certain
markets have decreased the demand for the services and goods provided
by
the transportation, manufacturing, services and other industries
that
comprise the majority of our customer base. While we have continued
to increase the organic growth in our mobile fueling services through
the
addition of new customers seeking to reduce fuel costs, the decrease
in
our existing customers’ business and their efforts to reduce fuel
consumption on the face of higher prices has resulted in lower volumes
of
fuel being supplied by us to these customers.
|
·
|
Subsequent
to our fiscal year 2007, on August 8, 2007, we sold $11.8 million
in debt
and equity securities (the “Offering”). We satisfied the principal balance
of our then outstanding August 2003, January 2005 and September 2005
promissory notes with the proceeds of the August 2007 placement.
As a
result of this transaction we lowered our senior secured subordinated
debt
from $11.2 million to $10.6 million at August 8, 2007. Since the
new notes
mature in December 31, 2009, the debt associated with the promissory
notes
was classified in our consolidated balance sheet as long-term debt.
|
·
|
The
net loss from operations for fiscal year 2007 was $6.6 million compared
to
$4.9 million for fiscal year 2006. The primary reason for the $1.7
million
increase in the net loss was the $2.6 million increase in selling,
general
and administrative expenses due to the incremental corporate
infrastructure costs of $2.2 million incurred to support our acquisition
and diversification strategies. Additionally, we experienced an increase
of $610,000 in legal fees, from $285,000 to $895,000 that were related
to
our reincorporation in Delaware, legal public company costs, litigation
and general legal matters. We also incurred $273,000 in additional
non-legal public company costs in fiscal 2007, increasing from $910,000
to
$1.2 million. Other selling, general and administrative expenses
increases
include additional depreciation of $393,000 primarily related to
the new
ERP system and expanded corporate office and operations space. These
increases were partially offset by a decrease of $760,000 as a result
of
the integration of the companies acquired. The increase in selling,
general and administrative expenses was also partially offset by
a
$222,000 increase in gross profit resulting from our emphasis on
developing new business with higher overall net margin per gallon
contribution, a decrease in interest expense of $298,000 primarily
due as
a result of lower outstanding debt, and recognition in fiscal year
2007 of
a $321,000 gain from the sale of assets.
|
·
|
For
fiscal year 2007, net margin per gallon was 16.9 cents per gallon
compared
to 14.9 cents per gallon for the same period in the prior year. The
increase in net margin per gallon was the result of our elimination
or
reduction of prior low margin business, including the termination
of
operations in our Baltimore location. With the completion of the
implementation of our ERP systems, we anticipate that, in the future,
management will be in a better position to evaluate and identify
lower
margin operations and services and respond
accordingly.
|
·
|
Earnings
before interest, taxes, depreciation and amortization and stock-based
compensation expense (“EBITDA”), a non-GAAP measure, for fiscal year 2007
were $252,000 compared to $1.8 million for fiscal year 2006. The
primary
reason for the $1.5 million decrease was the increase in selling,
general
and administrative expenses discussed above, partially offset by
the
increase in gross profit, the decrease in interest expense and the
gain
from the sale of assets, described
above.
|
·
|
Financial
results from our commercial mobile and bulk fueling services business
continue to be largely dependent on the number of gallons of fuel
sold and
the net margin per gallon achieved. The 9.4 million gallon reduction
in
the current year as compared to the prior year was primarily due
to the
termination of operations in our Baltimore location in March 2006
and the
curtailment in August 2006 of a portion of the low margin fuel transport
services business in our Mid-Continent division. In addition, we
believe
our volume decrease is also a result of a decrease in industry demand
stemming from the contraction of the national economy, impacting
the
industries we serve, and our customers’ efforts to reduce fuel consumption
in light of dramatically increased fuel prices.
|
·
|
Identify,
finance, acquire and integrate diversified
businesses:
|
·
|
Continue
to identify acquisition targets based on factors such as market presence,
growth potential of product and service lines, margin contribution,
competition impact, customer loyalty, established management, integration
efficiencies and controls;
|
·
|
Pursue
financing arrangements that would enable us to execute on our acquisition
strategy; and
|
·
|
Integrate
those companies that we acquire timely and effectively realizing
efficiencies and economies of scale expediently.
|
·
|
Expand
and improve our existing business emphasizing higher margin
sales:
|
·
|
Expand
business that provides recurring revenue;
and
|
·
|
Reduce
direct operating expenses and selling, general and administrative
expenses;
|
·
|
Seek
financing arrangements with our vendors that will provide us with
better
extended payment terms and new credit
lines;
|
·
|
Improve
on our collection efforts thereby accelerating and improving our
cash
flows; and
|
·
|
Optimize
our capital expenditures investing our restricted cash in newer equipment
thereby reducing repair and maintenance costs.
|
Corporate
infrastructure costs such as, personnel resources, development and
implementation of a new fully integrated accounting, operations,
internal
control and management information system, and integration
costs
|
$
|
2,169
|
||
Legal
fees related to the Company's reincorporation, public company costs,
and other general matters
|
610
|
|||
Non-legal
public company compliance expenses, including auditing fees,
proxy statements, and name incorporation changes
|
273
|
|||
Increase
in SG&A depreciation related to ERP system
implementation
|
199
|
|||
Increase
in general SG&A depreciation
|
194
|
|||
Provision
for doubtful accounts and collection fees
|
101
|
|||
Increase
in amortization related to intangibles associated with the
acquisitions
|
74
|
|||
Reduction
in acquired SG&A costs associated with H & W and Shank
Services
|
(760
|
)
|
||
Reduction
in facilities expenses related to the integration of
Dallas and Houston locations
|
(271
|
)
|
||
Other,
net
|
(15
|
)
|
||
Total
increase
|
$
|
2,574
|
Year
Ended
|
|||||||
June
30,
|
|||||||
2007
|
2006
|
||||||
Stated
Rate Interest Expense:
|
|||||||
Line
of credit
|
$
|
1,212
|
$
|
870
|
|||
Long
term debt
|
1,363
|
1,471
|
|||||
Other
|
64
|
75
|
|||||
Total
stated rate interest expense
|
2,639
|
2,416
|
|||||
Non-Cash
Interest Amortization:
|
|||||||
Amortization
of deferred debt costs
|
342
|
521
|
|||||
Amortization
of debt discount
|
746
|
1,074
|
|||||
Other
|
-
|
14
|
|||||
Total
amortization of interest expense
|
1,088
|
1,609
|
|||||
Total
interest expense
|
$
|
3,727
|
$
|
4,025
|
Year
ended
|
|||||||
June
30,
|
|||||||
2007
|
2006
|
||||||
Net
loss
|
$
|
(6,589
|
)
|
$
|
(4,878
|
)
|
|
Add
back:
|
|||||||
Interest
expense
|
3,727
|
4,025
|
|||||
Stock-based
compensation expense
|
491
|
511
|
|||||
Depreciation
and amortization expense:
|
|||||||
Cost
of sales
|
1,702
|
1,667
|
|||||
Selling,
general and administrative expenses
|
921
|
456
|
|||||
EBITDA
|
$
|
252
|
$
|
1,781
|
Year
Ended June 30,
|
|||||||
2007
|
2006
|
||||||
Net
loss
|
$
|
(6,589
|
)
|
$
|
(4,878
|
)
|
|
Add:
non-cash items:
|
|||||||
Depreciation
- cost of sales
|
1,702
|
1,667
|
|||||
Depreciation
and amortization - SG&A
|
921
|
456
|
|||||
Amortization
of deferred debt cost
|
342
|
521
|
|||||
Amortization
of debt discount
|
746
|
1,009
|
|||||
Stock-based
compensation expense
|
491
|
511
|
|||||
Other
non-cash expenses
|
(23
|
)
|
79
|
||||
Inventory
reserve
|
(38
|
)
|
172
|
||||
Provision
for allowance of doubtful accounts
|
477
|
404
|
|||||
Total
non-cash items
|
4,618
|
4,819
|
|||||
Net
loss before non-cash items
|
(1,971
|
)
|
(59
|
)
|
|||
Add:
Corporate infrastructure and integration costs
|
2,169
|
2,298
|
|||||
Net
income before non-cash items and corporate
|
|||||||
infrastructure
and integration costs
|
198
|
2,239
|
|||||
Add:
Stated rate interest expense (See interest expense table)
|
2,639
|
2,416
|
|||||
Deduct:
Net gain on sale of assets
|
(321
|
)
|
-
|
||||
Proforma
EBITDA
|
$
|
2,516
|
$
|
4,655
|
Year
Ended June
30,
|
|||||||
2006
|
2005
|
||||||
Stated
Rate Interest Expense:
|
|||||||
Line
of credit
|
$
|
870
|
$
|
239
|
|||
Long
term debt
|
1,471
|
959
|
|||||
Other
|
75
|
18
|
|||||
Total
stated rate interest expense
|
2,416
|
1,216
|
|||||
Non-Cash
Interest Amortization:
|
|||||||
Amortization
of deferred debt costs
|
521
|
270
|
|||||
Amortization
of debt discount
|
1,074
|
425
|
|||||
Other
|
14
|
—
|
|||||
Total
amortization of interest expense
|
1,609
|
695
|
|||||
Total
interest expense
|
$
|
4,025
|
$
|
1,911
|
Year
ended June
30,
|
|||||||
2006
|
2005
|
||||||
Net
loss
|
$
|
(4,878
|
)
|
$
|
(1,460
|
)
|
|
Add
back:
Interest
expense, net of interest income
|
2,416
|
1,208
|
|||||
Non-cash
interest expense
|
1,609
|
695
|
|||||
Stock-based
compensation expense
|
511
|
—
|
|||||
Depreciation
and amortization expense (*):
|
|||||||
Cost
of sales
|
1,667
|
1,467
|
|||||
Selling,
general and administrative expenses
|
456
|
368
|
|||||
EBITDA
|
$
|
1,781
|
$
|
2,278
|
|||
(*)
The Year ended June 30, 2005, includes $461 of depreciation expense
of
excess equipment abandoned after fleet rerouting following the Shank
Services acquisition and accelerated depreciation expense of computer
software for changes in infrastructure
technology.
|
Date
|
Common
|
Principal
|
Prepayment
|
||||||||||
Of
|
Shares
|
Note
|
Amount
|
Penalty
|
|||||||||
Exercise
|
Issued
|
Converted
|
Converted
|
Reduction
|
|||||||||
March
29, 2007
|
424,835
|
January
2005
|
$
|
630,000
|
$
|
16,000
|
|||||||
April
3, 2007
|
203,651
|
August
2003
|
302,000
|
8,000
|
|||||||||
May
18, 2007
|
362,391
|
August
2003
|
538,000
|
13,000
|
|||||||||
June
18, 2007
|
66,406
|
August
2003
|
99,000
|
2,000
|
|||||||||
1,057,283
|
$
|
1,569,000
|
$
|
39,000
|
Year
Ended June 30,
|
||||||||||
2007
|
2006
|
|||||||||
Net
proceeds from issuances of common stock
|
||||||||||
and
warrants
|
$
|
2,910
|
$
|
-
|
||||||
Net
cash borrowings
|
1,685
|
3,273
|
||||||||
Proceeds
from disposal of equipment
|
1,141
|
7
|
||||||||
Proceeds
from exercise of common stock options and warrants
|
31
|
2,484
|
||||||||
Proceeds
from issuance of promissory notes
|
-
|
3,000
|
||||||||
$
|
5,767
|
$
|
8,764
|
Year
Ended June 30,
|
|||||||
2007
|
2006
|
||||||
Cash
used in operations
|
$
|
4,363
|
$
|
2,744
|
|||
Principal
payments on promissory notes
|
1,794
|
1,385
|
|||||
Purchase
of property and equipment
|
1,344
|
2,392
|
|||||
Increase
in restricted cash
|
1,145
|
-
|
|||||
Payments
of debt and warrant issuance costs
|
114
|
299
|
|||||
Capital
lease payments
|
123
|
134
|
|||||
Acquisition
of business
|
-
|
1,798
|
|||||
Repayments
of note payable
|
-
|
17
|
|||||
$
|
8,883
|
$
|
8,769
|
||||
Net
change in cash and cash equivalents
|
$
|
(3,116
|
)
|
$
|
(5
|
)
|
PAYMENTS
DUE BY PERIOD (in 000’s)
|
||||||||||||||||
Less
than
|
More
than
|
|||||||||||||||
Contractual
Obligations
|
Total
|
1
Year
|
2-3
Years
|
4-5
Years
|
5
Years
|
|||||||||||
Long-term
debt
|
$
|
11,277
|
$
|
-
|
$
|
11,277
|
$
|
-
|
$
|
-
|
||||||
Operating
leases for real
|
||||||||||||||||
estate
and equipment
|
4,264
|
1,106
|
1,712
|
965
|
481
|
|||||||||||
Capital
lease obligations
|
26
|
26
|
-
|
-
|
-
|
|||||||||||
Line
of credit
|
17,297
|
17,297
|
-
|
-
|
-
|
|||||||||||
Total
|
$
|
32,864
|
$
|
18,429
|
$
|
12,989
|
$
|
965
|
$
|
481
|
·
|
Interest
payments associated with long-term debt obligations are not included
in
the table above. In addition, in August 2007, the outstanding notes
were
satisfied with the proceeds from a new senior secured convertible
subordinated debt. No principal is due on the new debt until it matures
on
December 31, 2009.
|
·
|
We
have a $25.0 million line of credit security agreement, with an
outstanding balance of $17.3 million, which expires June 30, 2008,
and
therefore, it is shown as due in less than one
year.
|
· |
We
significantly strengthened our management team, including the appointments
of a Senior Vice President of Information Services & Administration
and Chief Information Officer, Senior Vice President of Marketing
&
Sales and Investment Relations Officer and a Vice President of Finance
and
Accounting, among others. We also recruited additional management
and
staff in information technology, accounting and
administration.
|
· |
We
have invested over $2.4 million during calendar years 2007 and 2006
in the
development and implementation of a new fully integrated accounting
and
operations internal control and management information
system.
|
· |
We
expanded our corporate infrastructure in order to upgrade and improve
all
internal accounting procedures and processes supporting our existing
business and anticipated
acquisitions.
|
· |
We
implemented a program to develop and improve policies and procedures
in
connection with the operational performance of our internal finance
and
accounting processes and underlying information and reporting systems;
establish greater organizational accountability and lines of
responsibility and approval; and to better support our processes
operations.
|
· |
We
improved our organizational structure to help achieve the proper
number
of, and quality of our accounting, finance and information technology
functions, including the proper segregation of duties among accounting
personnel.
|
· |
We
refined our period-end financial reporting processes to improve the
quality and timeliness of our financial
information.
|
Exhibits
|
Description
|
2.1
|
Asset
Purchase Agreement by and among SMF Energy Corporation., SMF Services,
Inc., Shank C&E Investments, L.L.C., Jerry C. Shanklin and Claudette
Shanklin dated January 25, 2005 filed as Exhibit 2.1 to the Company’s Form
8-K filed January 31, 2005 and incorporated by reference
herein.
|
2.2
|
Supplemental
Agreement dated February 18, 2005 to the Asset Purchase Agreement
by and
among SMF Energy Corporation., SMF Services, Inc., Shank C&E
Investments, L.L.C., Jerry C. Shanklin and Claudette Shanklin dated
January 25, 2005 filed as Exhibit 2.1 to the Company’s Form 8-K filed
February 25, 2005 and incorporated by reference herein.
|
2.3
|
Stock
Purchase Agreement by and among SMF Energy Corporation, H & W
Petroleum Co., Inc., Eugene Wayne Wetzel, Mary Kay Wetzel, Sharon
Harkrider, William M. Harkrider II, W. M. Harkrider Testamentary
Trust,
Harkrider Distributing Company, Inc. and W & H Interests dated
September 7, 2005 filed as Exhibit 2.1 to the Company’s Form 8-K filed
September 8, 2005 and incorporated by reference herein.
|
2.4
|
Agreement
of Merger and Plan of Merger and Reorganization between Streicher
Mobile
Fueling, Inc. and SMF Energy Corporation dated February 13, 2007.
Filed as
Exhibit 2.1 to the Company’s Form 8-K filed February 14, 2007 and
incorporated by reference herein.
|
3.1
|
Restated
Articles of Incorporation filed as Exhibit 3.1 to the Company’s Form 10-K
for the fiscal year ended June 30, 2003 and incorporated by reference
herein.
|
3.2
|
Amended
and Restated Bylaws filed as Exhibit 3.2 to the Company’s Form 10-Q for
the quarter ended December 31, 2003 and incorporated by reference
herein.
|
3.3
|
Certificate
of Incorporation of SMF Energy Corporation and Certificate of Amendment
of
Certificate of Incorporation of SMF Energy Corporation (incorporated
by
reference to Appendix B to the Company’s Definitive Proxy Statement on
Schedule 14A, filed on October 30, 2006).
|
3.4
|
Bylaws
of SMF Energy Corporation (incorporated by reference to Appendix
D to the
Company’s Definitive Proxy Statement on Schedule 14A, filed on October 30,
2006).
|
4.1
|
Form
of Common Stock Certificate filed as Exhibit 4.1 to the Company’s
Registration Statement on Form SB-2 (No. 333-11541) and incorporated
by
reference herein.
|
4.2
|
Form
of Redeemable Common Stock Purchase Warrant filed as Exhibit 4.2
to the
Company’s Registration Statement on Form SB-2 (No. 333-11541) and
incorporated by reference herein.
|
4.3
|
Underwriters’
Purchase Option Agreement between the Company and Argent Securities,
Inc.
filed as Exhibit 4.3 to the Company’s Registration Statement on Form SB-2
(No. 333-11541) and incorporated by reference herein.
|
4.4
|
Warrant
Agreement between the Company and American Stock Transfer & Trust
Company filed as Exhibit 4.4 to the Company’s Registration Statement on
Form SB-2 (No. 333-11541) and incorporated by reference herein.
|
4.5
|
Indenture
with The Bank of Cherry Creek dated August 29, 2003 filed as Exhibit
10.14
to the Company’s Form 10-K for the fiscal year ended June 30, 2003 and
incorporated by reference herein.
|
4.6
|
Form
of 10% Promissory Note dated January 25, 2005 filed as Exhibit 10.2
to the
Company’s Form 8-K filed January 31, 2005 and incorporated by reference
herein.
|
4.7
|
Form
of Investor Warrant dated January 25, 2005 filed as Exhibit 10.3
to the
Company’s Form 8-K filed January 31, 2005 and incorporated by reference
herein.
|
4.8
|
Indenture
Agreement with American National Bank dated January 25, 2005 filed
as
Exhibit 10.4 to the Company’s Form 8-K filed January 31, 2005 and
incorporated by reference herein.
|
4.9
|
Form
of Placement Agent Warrants dated January 25, 2005 filed as Exhibit
10.5
to the Company’s Form 8-K filed January 31, 2005 and incorporated by
reference herein.
|
4.10
|
Form
of Note for Stock Purchase Agreement in Exhibit 2.3 herein filed
as
Exhibit 10.1 to the Company’s Form 8-K filed September 8, 2005 and
incorporated by reference herein.
|
4.11
|
Form
of 10% Promissory Note filed as Exhibit 10.3 to the Company’s Form 8-K
filed September 8, 2005 and incorporated by reference
herein.
|
4.12
|
Form
of Investor Warrant filed as Exhibit 10.4 to the Company’s Form 8-K filed
September 8, 2005 and incorporated by reference herein.
|
4.13
|
Form
of Indenture Agreement filed as Exhibit 10.5 to the Company’s Form 8-K
filed September 8, 2005 and incorporated by reference
herein.
|
4.14
|
Form
of Warrant. Filed as Exhibit 10.1 to the Company’s Form 8-K filed February
22, 2007 and incorporated by reference herein.
|
4.15
|
Form
of 11% Senior Secured Convertible Promissory Note dated August 8,
2007.
Filed as Exhibit 10.2 to the Company’s Form 8-K filed August 14, 2007 and
incorporated by reference herein.
|
4.16
|
Form
of Indenture dated August 8, 2007. Filed as Exhibit 10.3 to the Company’s
Form 8-K filed August 14, 2007 and incorporated by reference
herein.
|
4.17
|
Form
of Warrant dated August 8, 2007. Filed as Exhibit 10.5 to the Company’s
Form 8-K filed August 14, 2007 and incorporated by reference
herein.
|
*4.18
|
Final
form of 11% Senior Secured Convertible Promissory Note dated August
8,
2007.
|
10.1
|
Registrant’s
1996 Stock Option Plan filed as Exhibit 10.2 to the Company’s Registration
Statement on Form SB-2 (No. 333-1154) and incorporated by reference
herein.
|
10.2
|
2000
Stock Option Plan filed as Exhibit 10.6 to the Company’s Form 10-K for the
fiscal year ended January 31, 2001 and incorporated by reference
herein.
|
10.5
|
2001
Directors Stock Option Plan filed as Appendix A to the Company’s Proxy
Statement for the Annual Meeting of Shareholders on December 9, 2004
and
incorporated by reference herein.
|
10.6
|
Loan
and Security Agreement with Congress Financial Corporation dated
September
26, 2002 filed as Exhibit 99.1 to the Company’s Form 8-K filed September
30, 2002 and incorporated by reference herein.
|
10.7
|
First
Amendment to Loan and Security Agreement with Congress Financial
Corporation dated March 31, 2003 filed as Exhibit 10.13 to the Company’s
Form 10-K for the fiscal year ended June 30, 2003 and incorporated
by
reference herein.
|
10.8
|
Security
Agreement with The Bank of Cherry Creek dated August 29, 2003 filed
as
Exhibit 10.14 to the Company’s Form 10-K for the fiscal year ended June
30, 2003 and incorporated by reference herein.
|
10.9
|
Second
Amendment to Loan and Security Agreement with Congress Financial
Corporation dated August 29, 2003 filed as Exhibit 10.1 to the Company’s
Form 10-Q for the quarter ended September 30, 2003 and incorporated
by
reference herein.
|
10.10
|
Third
Amendment to Loan and Security Agreement with Congress Financial
Corporation dated August 3, 2003 filed as Exhibit 10.1 to the Company’s
Form 10-Q for the quarter ended December 31, 2004 and incorporated
by
reference herein.
|
10.11
|
Form
of Securities Purchase Agreement dated January 25, 2005 filed as
Exhibit
10.1 to the Company’s Form 8-K filed January 31, 2005 and incorporated by
reference herein.
|
10.12
|
Fourth
Amendment to Loan and Security Agreement by and among SMF Energy
Corporation, SMF Services, Inc. and Wachovia Bank, National Association,
successor by merger to Congress Financial Corporation (Florida) dated
February 18, 2005 filed as Exhibit 10.1 to the Company’s Form 8-K filed
February 25, 2005 and incorporated by reference
herein.
|
10.13
|
Subordination
Agreement by, between and among Shank C&E Investments, L.L.C.,
Wachovia Bank, National Association, successor by merger to Congress
Financial Corporation (Florida), SMF Services, Inc. and SMF Energy
Corporation dated February 18, 2005 filed as Exhibit 10.2 to the
Company’s
Form 8-K filed February 25, 2005 and incorporated by reference
herein.
|
10.14
|
Amended
and Restated Employment Agreement by and between SMF Energy Corporation
and Richard E. Gathright executed May 14, 2005, effective as of March
1,
2005 filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter
ended March 31, 2005, and incorporated by reference
herein.
|
10.15
|
Form
of Note Purchase Agreement filed as Exhibit 10.2 to the Company’s Form 8-K
filed September 8, 2005 and incorporated by reference
herein.
|
10.16
|
Form
of Security Agreement filed as Exhibit 10.6 to the Company’s Form 8-K
filed September 8, 2005 and incorporated by reference
herein.
|
10.17
|
Fifth
Amendment to Loan and Security Agreement by among SMF Energy Corporation,
SMF Services, Inc. and Wachovia Bank, National Association, successor
by
merger to Congress Financial Corporation (Florida) dated October 1,
2005. Filed as Exhibit 10.1 to the Company’s Form 8-K filed October 6,
2005 and incorporated by reference herein.
|
10.18
|
Subordination
Agreement executed effective as of the 1st day of October, 2005,
by,
between and among Eugene Wayne Wetzel, Mary Kay Wetzel, Sharon Harkrider,
William M. Harkrider II, W. M. Harkrider Testamentary Trust, Harkrider
Distributing Company, Inc. and W & H Interests, Wachovia Bank,
National Association, successor by merger to Congress Financial
Corporation (FLORIDA), and SMF Energy Corporation Filed as Exhibit
10.2 to
the Company’s Form 8-K filed October 6, 2005 and incorporated by reference
herein.
|
10.19
|
Warrant
Purchase Agreement dated June 30, 2006. Filed as Exhibit 10.1 to
the
Company’s Form 8-K filed July 7, 2006 and incorporated by reference
herein.
|
10.20
|
Form
of Stock Purchase Warrant. Filed as Exhibit 10.2 to the Company’s Form 8-K
filed July 7, 2006 and incorporated by reference
herein.
|
10.21
|
Sixth
Amendment to Loan and Security Agreement by among SMF Energy Corporation,
SMF Services, Inc., H & W Petroleum Company, Inc. and Wachovia Bank,
National Association, successor by merger to Congress Financial
Corporation (Florida) dated September 22, 2006 and effective March
31,
2006. Filed as Exhibit 10.1 to the Company’s Form 8-K filed October 2,
2006 and incorporated by reference herein.
|
10.22
|
Seventh
Amendment to Loan and Security Agreement by among SMF Energy Corporation,
SMF Services, Inc., H & W Petroleum Company, Inc. and Wachovia Bank,
National Association, successor by merger to Congress Financial
Corporation (Florida) effective September 22, 2006. Filed as Exhibit
10.2
to the Company’s Form 8-K filed October 2, 2006 and incorporated by
reference herein.
|
10.23
|
Amendment
to Warrant Purchase Agreement and Stock Purchase Warrant between
Streicher
Mobile Fueling, Inc. and the Purchasers dated September 28, 2006.
Filed as
Exhibit 10.1 to the Company’s Form 8-K filed October 3, 2006 and
incorporated by reference herein.
|
10.24
|
Second
Amendment to Warrant Purchase Agreement and Stock Purchase Warrant
between
Streicher Mobile Fueling, Inc. and the Purchasers dated November
29, 2006.
Filed as Exhibit 10.1 to the Company’s Form 8-K filed December 4, 2006 and
incorporated by reference herein.
|
10.25
|
Third
Amendment to Warrant Purchase Agreement and Stock Purchase Warrant
between
Streicher Mobile Fueling, Inc. and the Purchasers dated January 14,
2007.
Filed as Exhibit 10.1 to the Company’s Form 8-K filed January 19, 2007 and
incorporated by reference herein.
|
10.26
|
Assumption
Agreement and Eighth Amendment to Loan and Security Agreement by
and among
SMF Energy Corporation, success by merger to Streicher Mobile Fueling,
Inc., SMF Services, Inc., H & W Petroleum Company, Inc. and Wachovia
Bank, National Association, successor by merger to Congress Financial
Corporation (Florida) dated February 14, 2007. Filed as Exhibit 10.1
to
the Company’s Form 8-K filed February 21, 2007 and incorporated by
reference herein.
|
10.27
|
Ninth
Amendment to Loan and Security Agreement by and among SMF Energy
Corporation, success by merger to Streicher Mobile Fueling, Inc.,
SMF
Services, Inc., H & W Petroleum Company, Inc. and Wachovia Bank,
National Association, successor by merger to Congress Financial
Corporation (Florida) dated February 15, 2007. Filed as Exhibit 10.2
to
the Company’s Form 8-K filed February 21, 2007 and incorporated by
reference herein.
|
10.28
|
Fourth
Amendment to Warrant Purchase Agreement and Stock Purchase Warrant
between
SMF Energy Corporation, Triage Capital Management, L.P. and Triage
Capital
Management B L.P. dated February 14, 2007. Filed as Exhibit 10.3
to the
Company’s Form 8-K filed February 21, 2007 and incorporated by reference
herein.
|
10.29
|
Form
of Securities Purchase Agreement. Filed as Exhibit 10.2 to the Company’s
Form 8-K filed February 22, 2007 and incorporated by reference
herein.
|
10.30
|
Fifth
Amendment to Warrant Purchase Agreement and Stock Purchase Warrant
between
SMF Energy Corporation, Triage Capital Management, L.P. and Triage
Capital
Management B L.P. dated March 29, 2007. Filed as Exhibit 10.1 to
the
Company’s Form 8-K filed April 3, 2007 and incorporated by reference
herein.
|
10.31
|
Tenth
Amendment to Loan and Security Agreement by and among SMF Energy
Corporation, success by merger to Streicher Mobile Fueling, Inc.,
SMF
Services, Inc., H & W Petroleum Company, Inc. and Wachovia Bank,
National Association, successor by merger to Congress Financial
Corporation (Florida) dated August 8, 2007. Filed as Exhibit 10.1
to the
Company’s Form 8-K filed August 14, 2007 and incorporated by reference
herein.
|
10.32
|
Form
of Security Agreement, dated August 8, 2007. Filed as Exhibit 10.4
to the
Company’s Form 8-K filed August 14, 2007 and incorporated by reference
herein.
|
*10.33
|
Form
of Note Purchase Agreement dated August 8, 2007.
|
*10.34
|
Form
of Securities Purchase Agreement dated August 8, 2007.
|
*10.35
|
Subordination
Agreement dated July 13, 2007.
|
*21.1
|
Subsidiaries
of the Company
|
*23.1
|
Consent
of Grant Thornton LLP
|
*31.1
|
Certificate
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
*31.2
|
Certificate
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
*32.1
|
Certificate
of Chief Executive Officer and Chief Financial Officer pursuant to
Section
906 of The Sarbanes-Oxley Act of 2002
|
SMF
ENERGY CORPORATION
|
||
|
|
|
Dated:
September 28, 2007
|
By: | /s/ Richard E. Gathright |
Richard
E. Gathright, Chief Executive Officer and
President
|
Name
|
Title
|
Date
|
||
By: /s/
Richard E. Gathright
Richard E. Gathright |
Chairman
of the Board, Chief Executive Officer and President (Principal Executive
Officer)
|
September
28, 2007
|
||
By:
/s/
Michael S. Shore
Michael S. Shore |
Chief
Financial Officer and Senior Vice President (Principal Financial
and
Accounting Officer)
|
September
28, 2007
|
||
By:
/s/
Wendell R. Beard
Wendell
R. Beard
|
Director
|
September
28, 2007
|
||
By: /s/
Steven R. Goldberg
Steven
R. Goldberg
|
Director
|
September
28, 2007
|
||
By:
/s/
Nat Moore
Nat Moore |
Director
|
September
28, 2007
|
||
By:
/s/
Larry S. Mulkey
Larry
S. Mulkey
|
Director
|
September
28, 2007
|
||
By:
/s/
C. Rodney O’Connor
C.
Rodney O’Connor
|
Director
|
September
28, 2007
|
||
By:
/s/
Robert S. Picow
Robert
S. Picow
|
Director
|
September
28, 2007
|
||
Page
|
||||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|||
Consolidated
Balance Sheets as of June 30, 2007 and 2006
|
F-3
|
|||
Consolidated
Statements of Operations for the Years Ended June 30, 2007, 2006,
and
2005
|
F-4
|
|||
Consolidated
Statements of Shareholders’ Equity for the Years Ended June 30, 2007,
2006, and 2005
|
F-5
|
|||
Consolidated
Statements of Cash Flows for the Years Ended June 30, 2007, 2006,
and
2005
|
F-6
|
|||
Notes
to Consolidated Financial Statements
|
F-8
|
June
30, 2007
|
June
30, 2006
|
||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
987
|
$
|
4,103
|
|||
Accounts
receivable, less allowances of $1,401 and $1,252
|
25,442
|
24,345
|
|||||
Inventories,
less reserve of $238 and $276
|
2,283
|
3,321
|
|||||
Prepaid
expenses and other current assets
|
471
|
413
|
|||||
Total
current assets
|
29,183
|
32,182
|
|||||
Restricted
cash
|
1,145
|
-
|
|||||
Property
and equipment, net
|
10,017
|
11,739
|
|||||
Identifiable
intangible assets, net
|
2,771
|
3,148
|
|||||
Goodwill
|
228
|
228
|
|||||
Deferred
debt costs, net and other assets
|
581
|
817
|
|||||
Total
assets
|
$
|
43,925
|
$
|
48,114
|
|||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Line
of credit payable
|
$
|
17,297
|
$
|
15,612
|
|||
Accounts
payable
|
7,887
|
10,367
|
|||||
Accrued
expenses and other liabilities
|
3,805
|
2,787
|
|||||
Current
portion of long-term debt and capital leases
|
26
|
2,118
|
|||||
Total
current liabilities
|
29,015
|
30,884
|
|||||
Long-term
liabilities:
|
|||||||
Promissory
notes, net of unamortized debt discount of $1,027
and
$1,652
|
10,250
|
10,993
|
Capital
lease obligation
|
-
|
25
|
|||||
Long-term
debt, net
|
10,250
|
11,018
|
|||||
Other
long-term liabilities
|
546
|
672
|
|||||
Total
liabilities
|
39,811
|
42,574
|
|||||
Commitments
and contingencies
|
|||||||
Shareholders’
equity:
|
|||||||
Common
stock, par value $.01 per share; 50,000,000 shares
authorized;
|
|||||||
13,702,426
and 10,491,143 issued and outstanding at June 30, 2007
|
|||||||
and
2006, respectively
|
137
|
105
|
|||||
Additional
paid-in capital
|
25,021
|
19,890
|
|||||
Accumulated
deficit
|
(21,044
|
)
|
(14,455
|
)
|
|||
Total
shareholders’ equity
|
4,114
|
5,540
|
|||||
Total
liabilities and shareholders’ equity
|
$
|
43,925
|
$
|
48,114
|
Year
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Petroleum
product sales and service revenues
|
$
|
203,375
|
$
|
219,393
|
$
|
109,207
|
||||
Petroleum
product taxes
|
26,394
|
29,306
|
24,356
|
|||||||
Total
revenues
|
229,769
|
248,699
|
133,563
|
|||||||
Cost
of petroleum product sales and service
|
190,744
|
206,984
|
102,619
|
|||||||
Petroleum
product taxes
|
26,394
|
29,306
|
24,356
|
|||||||
Total
cost of sales
|
217,138
|
236,290
|
126,975
|
|||||||
Gross
profit
|
12,631
|
12,409
|
6,588
|
|||||||
Selling,
general and administrative expenses
|
15,836
|
13,262
|
6,145
|
|||||||
Operating
(loss) income
|
(3,205
|
)
|
(853
|
)
|
443
|
|||||
Interest
expense
|
(3,727
|
)
|
(4,025
|
)
|
(1,911
|
)
|
||||
Gain
on sale of assets and other income
|
343
|
-
|
8
|
|||||||
Loss
before income taxes
|
(6,589
|
)
|
(4,878
|
)
|
(1,460
|
)
|
||||
Income
tax expense
|
-
|
-
|
-
|
|||||||
Net
loss
|
$
|
(6,589
|
)
|
$
|
(4,878
|
)
|
$
|
(1,460
|
)
|
|
Basic
and diluted net loss per share
|
$
|
(0.57
|
)
|
$
|
(0.50
|
)
|
$
|
(0.19
|
)
|
|
Basic
and diluted weighted average common
|
||||||||||
shares
outstanding
|
11,509
|
9,819
|
7,857
|
Additional
|
||||||||||||||||
Common
Stock
|
Paid-in
|
Accumulated
|
||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||
Balance
at June 30, 2004
|
7,317,960
|
$
|
73
|
$
|
13,392
|
$
|
(8,117
|
)
|
$
|
5,348
|
||||||
Net
loss
|
-
|
-
|
-
|
(1,460
|
)
|
(1,460
|
)
|
|||||||||
Exercise
of warrants and stock options
|
1,635,484
|
17
|
1,640
|
-
|
1,657
|
|||||||||||
Issuance
of warrants
|
-
|
-
|
1,293
|
-
|
1,293
|
|||||||||||
Balance
at June 30, 2005
|
8,953,444
|
90
|
16,325
|
(9,577
|
)
|
6,838
|
||||||||||
Net
loss
|
-
|
-
|
-
|
(4,878
|
)
|
(4,878
|
)
|
|||||||||
Exercise
of warrants & stock options
|
1,537,699
|
15
|
2,469
|
-
|
2,484
|
|||||||||||
Issuance
of warrants
|
-
|
-
|
585
|
-
|
585
|
|||||||||||
Stock-based
compensation expense
|
-
|
-
|
511
|
-
|
511
|
|||||||||||
Balance
at June 30, 2006
|
10,491,143
|
105
|
19,890
|
(14,455
|
)
|
5,540
|
||||||||||
Net
loss
|
-
|
-
|
-
|
(6,589
|
)
|
(6,589
|
)
|
|||||||||
Exercise
of warrants
|
35,000
|
-
|
31
|
-
|
31
|
|||||||||||
Issuance
of common stock through the
|
||||||||||||||||
exercise
of warrants related to the
|
||||||||||||||||
conversion
of promissory notes, net of
|
||||||||||||||||
unamortized
debt discount of $206
|
1,057,283
|
11
|
1,393
|
-
|
1,404
|
|||||||||||
Issuance
of common stock and warrants
|
||||||||||||||||
from
private placement, net of
|
||||||||||||||||
issuance
costs of $364
|
2,119,000
|
21
|
2,889
|
-
|
2,910
|
|||||||||||
Adjustment
for warrant extensions
|
-
|
-
|
327
|
-
|
327
|
|||||||||||
Amortization
of stock compensation expense
|
-
|
-
|
491
|
-
|
491
|
|||||||||||
Balance
at June 30, 2007
|
13,702,426
|
$
|
137
|
$
|
25,021
|
$
|
(21,044
|
)
|
$
|
4,114
|
Year
Ended June 30,
|
||||||||||
2007
|
|
2006
|
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
Net
loss
|
$
|
(6,589
|
)
|
$
|
(4,878
|
)
|
$
|
(1,460
|
)
|
|
Adjustments
to reconcile net loss to net cash (used in)
|
||||||||||
provided
by operating activities:
|
||||||||||
Depreciation
and amortization:
|
||||||||||
Cost
of sales
|
1,702
|
1,667
|
1,467
|
|||||||
Selling,
general and administrative
|
921
|
456
|
368
|
|||||||
Amortization
of deferred debt cost
|
342
|
521
|
270
|
|||||||
Amortization
of debt discount
|
746
|
1,009
|
425
|
|||||||
Stock-
based compensation expense
|
491
|
511
|
-
|
|||||||
Gain
on sale of assets
|
(321
|
)
|
-
|
-
|
||||||
Inventory
reserve
|
(38
|
)
|
172
|
-
|
||||||
Provision
for allowance for doubtful accounts
|
477
|
404
|
(59
|
)
|
||||||
Other
|
(23
|
)
|
79
|
-
|
||||||
Changes
in operating assets and liabilities, net of effects of
acquisitions:
|
||||||||||
Increase
in accounts receivable
|
(1,588
|
)
|
(4,681
|
)
|
(2,454
|
)
|
||||
(Increase)
decrease in prepaid expenses and other assets
|
(36
|
)
|
515
|
(255
|
)
|
|||||
(Increase)
decrease in inventories
|
1,076
|
567
|
(162
|
)
|
||||||
(Decrease)
increase in accounts payable and other liabilities
|
(1,523
|
)
|
914
|
3,152
|
||||||
Net
cash (used in) provided by operating activities
|
(4,363
|
)
|
(2,744
|
)
|
1,292
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||
Cash
used in business acquisitions, net of cash acquired
|
-
|
(1,798
|
)
|
(6,436
|
)
|
|||||
Purchases
of property and equipment
|
(1,344
|
)
|
(2,392
|
)
|
(811
|
)
|
||||
Proceeds
from sale of equipment
|
1,141
|
7
|
28
|
|||||||
Increase
in restricted cash
|
(1,145
|
)
|
-
|
-
|
||||||
Net
cash used in investing activities
|
(1,348
|
)
|
(4,183
|
)
|
(7,219
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||
Proceeds
from line of credit
|
246,210
|
268,038
|
151,070
|
|||||||
Repayments
of line of credit
|
(244,525
|
)
|
(264,765
|
)
|
(151,188
|
)
|
||||
Proceeds
from issuance of promissory notes
|
-
|
3,000
|
6,100
|
|||||||
Principal
payment on promissory notes
|
(1,794
|
)
|
(1,385
|
)
|
-
|
|||||
Net
proceeds from exercise of common stock options and warrants
|
31
|
2,484
|
1,656
|
|||||||
Proceeds
from issuance of common stock, net of issuance costs
|
2,910
|
-
|
-
|
|||||||
Debt
issuance costs
|
(114
|
)
|
(279
|
)
|
(311
|
)
|
||||
Capital
lease payments
|
(123
|
)
|
(134
|
)
|
-
|
|||||
Registration
costs, issue of warrants
|
-
|
(20
|
)
|
-
|
||||||
Repayment
of note payable
|
-
|
(17
|
)
|
-
|
||||||
Net
cash provided by financing activities
|
2,595
|
6,922
|
7,327
|
|||||||
NET
INCREASE (DECREASE) CASH AND CASH EQUIVALENTS
|
(3,116
|
)
|
(5
|
)
|
1,400
|
|||||
CASH
AND CASH EQUIVALENTS, beginning of year
|
4,103
|
4,108
|
2,708
|
|||||||
CASH
AND CASH EQUIVALENTS, end of year
|
$
|
987
|
$
|
4,103
|
$
|
4,108
|
(Continued)
|
Year
Ended June 30,
|
|||||||||
2007
|
|
2006
|
|
2005
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||
Cash
paid for interest
|
$
|
2,475
|
$
|
2,264
|
$
|
876
|
||||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES:
|
||||||||||
Conversion
of promissory notes, net of unamortized
|
||||||||||
debt
discount of $206
|
$
|
1,404
|
$
|
-
|
$
|
-
|
||||
Unamortized
debt discount related to warrants consisting of warrant
|
||||||||||
extensions
in 2007 and warrant issuance in 2006
|
$
|
327
|
$
|
605
|
$
|
-
|
||||
Debt
discount costs and deferred debt costs related to issuance of
January
|
||||||||||
2005
promissory note
|
$
|
-
|
$
|
-
|
$
|
1,293
|
June
30,
|
||||||||||
2007
|
|
2006
|
|
2005
|
||||||
Balance
- beginning of period
|
$
|
1,252
|
$
|
1,806
|
$
|
426
|
||||
Acquisitions
|
-
|
714
|
1,877
|
|||||||
Increase
(decrease) in provision for
doubtful accounts
|
477
|
404
|
(59
|
)
|
||||||
Write-offs,
net of recoveries
|
(328
|
)
|
(1,672
|
)
|
(438
|
)
|
||||
Balance
- end of period
|
$
|
1,401
|
$
|
1,252
|
$
|
1,806
|
June
30,
|
Estimated
Useful
|
|||||||||
2007
|
|
2006
|
|
Life
|
||||||
|
||||||||||
Fuel
trucks, tanks and vehicles
|
$
|
16,964
|
$
|
17,877
|
5
- 25 years
|
|||||
Machinery
and equipment
|
1,334
|
1,078
|
3
- 5 years
|
|||||||
Furniture
and fixtures
|
587
|
433
|
5
- 10 years
|
|||||||
Leasehold
improvements
|
457
|
408
|
Lesser
of lease term or useful life
|
|||||||
Software
|
2,415
|
1,675
|
3
- 5 years
|
|||||||
Land
|
67
|
67
|
—
|
|||||||
21,824
|
21,538
|
|||||||||
Less:
Accumulated depreciation
|
(11,807
|
)
|
(9,799
|
)
|
||||||
Property
and equipment, net
|
$
|
10,017
|
$
|
11,739
|
June
30,
|
|||||||
2007
|
2006
|
||||||
Deferred
Debt Costs
|
|||||||
Balance,
net - beginning of period
|
$
|
749
|
$
|
991
|
|||
Amortization
|
(342
|
)
|
(366
|
)
|
|||
Write
off of debt costs related to the
|
|||||||
conversion
of debt
|
-
|
(155
|
)
|
||||
Additional
loan costs incurred during the year
|
114
|
279
|
|||||
Balance
- end of period
|
$
|
521
|
$
|
749
|
|||
Debt
Discount
|
|||||||
Balance,
net - beginning of period
|
$
|
1,652
|
$
|
2,056
|
|||
Amortization
|
(746
|
)
|
(692
|
)
|
|||
Adjustment
for warrant extensions
|
327
|
-
|
|||||
Write
off of debt discount related to the
|
|||||||
conversion
of debt
|
(206
|
)
|
(317
|
)
|
|||
Valuation
of warrants issued
|
-
|
605
|
|||||
Balance
- end of period
|
$
|
1,027
|
$
|
1,652
|
Year
Ended June 30,
|
||||||||||
2007
|
|
2006
|
|
2005
|
||||||
Net
loss
|
$
|
(6,589
|
)
|
$
|
(4,878
|
)
|
$
|
(1,460
|
)
|
|
Net
loss per common share - basic and diluted
|
$
|
(0.57
|
)
|
$
|
(0.50
|
)
|
$
|
(0.19
|
)
|
|
Weighted
average shares outstanding:
|
||||||||||
Basic
and diluted
|
11,509
|
9,819
|
7,857
|
Year
Ended June 30,
|
||||
2005
|
||||
Net
loss, as reported
|
$
|
(1,460
|
)
|
|
Stock-based
employee compensation expense
not included in reported net loss,
net of tax
|
(107
|
)
|
||
Net
loss - pro forma
|
$
|
(1,567
|
)
|
|
Basic
and diluted net loss per share - as Reported
|
$
|
(0.19
|
)
|
|
Basic
and diluted net loss per share - Proforma
|
$
|
(0.20
|
)
|
Year
Ended June 30,
|
||||||
2007
|
2006
|
2005
|
||||
Risk
free interest rate
|
4.7%
|
5.2%
|
4.3%
|
|||
Dividend
yield
|
0%
|
0%
|
0%
|
|||
Expected
volatility
|
106.5%
|
108.1%
|
107.6%
|
|||
Expected
life
|
7.9
years
|
7.9
years
|
8.6
years
|
2007
|
2006
|
|||||||||||||||||||||
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
Estimated
|
||||||||||||||||
Amount
|
Amortization
|
Amount
|
Amount
|
Amortization
|
Amount
|
Life
|
||||||||||||||||
Amortized
intangible assets:
|
||||||||||||||||||||||
Customer
relationships
|
$
|
1,768
|
$
|
253
|
$
|
1,515
|
$
|
1,768
|
$
|
121
|
$
|
1,647
|
15
|
|||||||||
Favorable
leases
|
196
|
68
|
128
|
196
|
29
|
167
|
5
|
|||||||||||||||
Trademarks
|
687
|
80
|
607
|
687
|
34
|
653
|
15
|
|||||||||||||||
Supplier
contracts
|
801
|
280
|
521
|
801
|
120
|
681
|
5
|
|||||||||||||||
Total
|
$
|
3,452
|
$
|
681
|
$
|
2,771
|
$
|
3,452
|
$
|
304
|
$
|
3,148
|
||||||||||
Goodwill
|
$
|
228
|
$
|
228
|
Fiscal
year:
|
||||
2008
|
$
|
381
|
||
2009
|
371
|
|||
2010
|
357
|
|||
2011
|
208
|
|||
2012
|
157
|
|||
Thereafter
|
1,297
|
|||
|
$
|
2,771
|
2007
|
2006
|
||||||
August
2003 promissory notes (the “August 2003 Notes”) (10% interest due
semi-annually, December 31 and June 30); remaining two principal
payments of $752,800 and $552,600 due on August 28, 2007 and February
28, 2008; balloon payment of $2,111,925 due at maturity on August
28,
2008; effective interest rate of 19.9% includes cost of warrants
and other
debt issue costs. The notes were issued as a result of the August
29, 2003
offering to institutions and other accredited lenders consisting
of the
$6.925 million notes and five-year warrants to purchase a total
2,008,250
shares of the Company’s common stock at $1.00 per share. The
notes are collateralized by a first priority security interest in its
specialized fueling truck fleet and related equipment and by
patents on
its proprietary fuel management system. The notes were subsequently
refinanced on August 8, 2007. See Note 14 - Subsequent Event.
|
$
|
3,417
|
$
|
5,540
|
|||
January
2005 promissory notes (the “January 2005 Notes”) (10% interest due
semi-annually, July 24 and January 24); remaining five principal
payments
of $540,000 due semi-annually on January 24 and July 24; balloon
payment
of $2,160,000 due at maturity on January 24, 2010; effective
interest rate
of 20.4% includes cost of warrants and other debt issue costs.
The notes
were issued as a result of a January 25, 2005 offering to a limited
group
of institutions and other accredited investors in connection
with the
acquisition of the assets and business of Shank Services consisting
of
$6.1 million in notes and four-year warrants to purchase 1,006,500
shares
of the Company’s common stock at $1.60. The January 2005 Notes are
secured by a first priority security interest in the Shank Services
assets. The notes were subsequently refinanced on August 8, 2007.
See Note
14 - Subsequent Event.
|
4,860
|
6,100
|
|||||
September
2005 promissory notes (the “September 2005 Notes) (10% interest due
semi-annually, February 28 and August 31); six principal payments
of
$300,000 due semi-annually on August 31 and February 28; balloon
payment
of $1,200,000 due at maturity on August 31, 2010; effective interest
rate
of 20.3% includes cost of warrants and other debt issue costs.
The notes
were issued as a result of a September 1, 2005 private debt placement
with
institutional and other accredited investors in order to fund
the H &
W acquisition discussed in Note 9, develop its operations and for
other general working capital purposes. The offering consisted
of $3.0
million notes and four year warrants to purchase a total of 360,000
shares
of the Company’s common stock at an exercise price of $2.28 per share. The
September 2005 Notes are secured by a first priority interest in the
vehicles, equipment and other physical assets, other than inventory
of H
& W. The notes were subsequently refinanced on August 8, 2007.
See
Note 14 - Subsequent Event.
|
3,000
|
3,000
|
|||||
Various
capital leases, interest rates range from 5.27% to 15.78%, monthly
principal and interest payments, leases expire August 2006 to
March
2008
|
26
|
148
|
|||||
Unamortized
debt discount, net of amortization
|
(1,027
|
)
|
(1,652
|
)
|
|||
10,276
|
13,136
|
||||||
Less:
current portion
|
(26
|
)
|
(2,118
|
)
|
|||
Long-term
debt, net
|
$
|
10,250
|
$
|
11,018
|
Date
Of
Exercise
|
Common
Shares
Issued
|
Note
Converted
|
Principal
Amount
Converted
|
Prepayment
Penalty
Reduction
|
|||||||||
March
29, 2007
|
424,835
|
January
2005
|
$
|
630,000
|
$
|
16,000
|
|||||||
April
3, 2007
|
203,651
|
August
2003
|
302,000
|
8,000
|
|||||||||
May
18, 2007
|
362,391
|
August
2003
|
538,000
|
13,000
|
|||||||||
June
18, 2007
|
66,406
|
August
2003
|
99,000
|
2,000
|
|||||||||
1,057,283
|
$
|
1,569,000
|
$
|
39,000
|
1996
and 2000 Plans
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
($000)
|
||||||||||
Outstanding
at June 30, 2004
|
1,084,952
|
$
|
1.77
|
||||||||||
Granted
|
235,000
|
$
|
1.66
|
||||||||||
Cancelled
|
(44,000
|
)
|
$
|
1.58
|
|||||||||
Exercised
|
(69,800
|
)
|
$
|
1.37
|
|||||||||
Outstanding
at June 30, 2005
|
1,206,152
|
$
|
1.78
|
6.33
|
$
|
479
|
|||||||
Granted
|
408,500
|
$
|
2.94
|
||||||||||
Cancelled
|
(167,200
|
)
|
$
|
2.34
|
|||||||||
Exercised
|
(3,600
|
)
|
$
|
1.24
|
|||||||||
Outstanding
at June 30, 2006
|
1,443,852
|
$
|
2.05
|
6.14
|
$
|
1,179
|
|||||||
Granted
|
202,000
|
$
|
1.86
|
||||||||||
Cancelled
|
(113,000
|
)
|
$
|
2.89
|
|||||||||
Exercised
|
—
|
$
|
—
|
||||||||||
Outstanding
at June 30, 2007
|
1,532,852
|
$
|
1.96
|
5.71
|
$
|
54
|
|||||||
Exercisable
|
1,069,052
|
$
|
1.76
|
4.42
|
$
|
52
|
|||||||
Available
for future grant (2000
Plan only)
|
231,261
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Exercise
Price
|
Number
Outstanding
|
Weighted
Average
Remaining
Contractual
Life
(years)
|
Weighted
Average
Exercise
Price
|
Number
of
Shares Exercisable
|
Weighted
Average
Exercise
Price
|
|||||||||||
$
.95 to $1.90
|
1,153,900
|
5.19
|
$
|
1.48
|
946,900
|
$
|
1.45
|
|||||||||
$1.90
to $2.85
|
112,500
|
8.54
|
$
|
2.59
|
16,100
|
$
|
2.50
|
|||||||||
$2.85
to $3.80
|
227,952
|
7.57
|
$
|
3.37
|
67,552
|
$
|
3.46
|
|||||||||
$3.80
to $4.75
|
15,000
|
1.81
|
$
|
4.13
|
15,000
|
$
|
4.13
|
|||||||||
$5.70
to $6.65
|
4,000
|
1.98
|
$
|
6.56
|
4,000
|
$
|
6.56
|
|||||||||
$7.60
to $8.54
|
19,500
|
2.26
|
$
|
7.63
|
19,500
|
$
|
7.63
|
|||||||||
Totals
|
1,532,852
|
1,069,052
|
2001
Plan
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
($000)
|
||||||||||
Outstanding
at June 30, 2004
|
219,375
|
$
|
1.50
|
||||||||||
Granted
|
14,375
|
$
|
1.93
|
||||||||||
Cancelled
|
—
|
—
|
|||||||||||
Exercised
|
—
|
—
|
|||||||||||
Outstanding
at June 30, 2005
|
233,750
|
$
|
1.52
|
6.78
|
$
|
155
|
|||||||
Granted
|
56,200
|
$
|
2.73
|
||||||||||
Cancelled
|
—
|
—
|
|||||||||||
Exercised
|
—
|
—
|
|||||||||||
Outstanding
at June 30, 2006
|
289,950
|
$
|
1.75
|
6.51
|
$
|
253
|
|||||||
Granted
|
26,700
|
$
|
1.65
|
||||||||||
Cancelled
|
—
|
—
|
|||||||||||
Exercised
|
—
|
—
|
|||||||||||
Outstanding
at June 30, 2007
|
316,650
|
$
|
1.74
|
5.86
|
$
|
17
|
|||||||
Exercisable
|
316,650
|
$
|
1.74
|
5.86
|
$
|
17
|
|||||||
Available
for future grant
|
33,350
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Exercise
Price
|
Number
Outstanding
|
Weighted
Average
Remaining
Contractual
Life
(years)
|
Weighted
Average
Exercise
Price
|
Number
of
Shares Exercisable
|
Weighted
Average
Exercise
Price
|
|||||||||||
$0.00
to $0.95
|
3,125
|
5.76
|
$
|
0.92
|
3,125
|
$
|
0.92
|
|||||||||
$0.95
to $1.90
|
246,100
|
5.14
|
$
|
1.51
|
246,100
|
$
|
1.51
|
|||||||||
$1.90
to $2.85
|
59,925
|
8.51
|
$
|
2.55
|
59,925
|
$
|
2.55
|
|||||||||
$2.85
to $3.80
|
7,500
|
8.38
|
$
|
3.30
|
7,500
|
$
|
3.30
|
|||||||||
Totals
|
316,650
|
316,650
|
Cash
at closing
|
$
|
82
|
|||||
Borrowings
under line of credit
|
1,454
|
||||||
Acquisition
costs — direct
|
654
|
||||||
Contingent
earn out
|
2,463
|
||||||
Total
purchase price
|
$
|
4,653
|
|||||
|
|||||||
Less:
Fair value of identifiable assets acquired:
|
|||||||
Cash
|
392
|
||||||
Plant,
property and equipment
|
1,767
|
||||||
Accounts
receivable (Includes $250 from Harkrider)
|
5,961
|
||||||
Inventory
|
3,565
|
||||||
Other
current assets
|
249
|
||||||
Fair
value of identifiable assets acquired
|
11,934
|
||||||
Plus:
Fair value of liabilities assumed:
|
|||||||
Line
of credit payable (Includes $387 from Harkrider)
|
7,086
|
||||||
Accounts
payable and other liabilities
|
5,510
|
||||||
Capital
lease obligations
|
282
|
||||||
Current
portion of long-term debt
|
452
|
||||||
13,330
|
|||||||
Less:
Contingent earn out not due yet
|
2,463
|
||||||
Excess
of purchase price over fair value of net assets acquired to be
allocated
among intangible assets and goodwill
|
$
|
3,586
|
Amortizable
intangible assets:
|
||||
Customer
relationships
|
$
|
1,674
|
||
Supplier
contracts
|
801
|
|||
Trademarks
|
687
|
|||
Favorable
leases
|
196
|
|||
Total
amortizable intangible assets
|
$
|
3,358
|
||
Goodwill
|
$
|
228
|
Year
ended June 30,
|
|||||||
2006
|
2005
|
||||||
Petroleum
product, tax and service revenue
|
$
|
264,593
|
$
|
188,014
|
|||
Cost
of petroleum products tax and service
|
250,751
|
176,572
|
|||||
Gross
Profit
|
$
|
13,842
|
$
|
11,442
|
|||
Net
loss
|
$
|
(5,150
|
)
|
$
|
(1,988
|
)
|
|
Basic
and diluted net loss per share
|
$
|
(0.52
|
)
|
$
|
(0.25
|
)
|
Year
Ended June 30,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Expected
benefit for income taxes
at
the statutory Federal income tax rate of 34%
|
$
|
2,198
|
$
|
1,659
|
$
|
496
|
||||
Net
operating loss carryforward adjustment
|
(49
|
)
|
—
|
—
|
||||||
Change
in tax rate
|
—
|
—
|
(12
|
)
|
||||||
State
income taxes
|
134
|
273
|
81
|
|||||||
Other
|
(1
|
)
|
11
|
6
|
||||||
Nondeductible
expenses
|
(38
|
)
|
(48
|
)
|
(10
|
)
|
||||
Deferred
tax valuation allowance
|
(2,244
|
)
|
(1,895
|
)
|
(561
|
)
|
||||
Benefit
(provision) for income taxes
|
$
|
—
|
$
|
—
|
$
|
—
|
June
30,
|
|||||||
2007
|
2006
|
||||||
Deferred
tax assets:
|
|||||||
Net
operating loss carryforwards
|
$
|
9,524
|
$
|
7,574
|
|||
Asset
basis adjustment for Section 357 gain
|
155
|
189
|
|||||
Reserves
and allowances
|
371
|
360
|
|||||
Intangible
assets
|
188
|
—
|
|||||
Stock-based
compensation expense
|
394
|
203
|
|||||
Accrued
expenses and deferred income
|
429
|
412
|
|||||
Other
|
133
|
126
|
|||||
Total
gross deferred tax assets
|
11,194
|
8,864
|
|||||
Less:
valuation allowance
|
(8,984
|
)
|
(6,740
|
)
|
|||
Total
deferred tax assets
|
2,210
|
2,124
|
|||||
Deferred
tax liabilities:
|
|||||||
Property
and equipment
|
(2,210
|
)
|
(2,124
|
)
|
|||
Total
deferred tax liabilities
|
(2,210
|
)
|
(2,124
|
)
|
|||
Net
deferred tax assets
|
$
|
—
|
$
|
—
|
Year
Ended
June
30,
|
Operating
Lease
Payments
|
|||
2008
|
$
|
1,106
|
||
2009
|
911
|
|||
2010
|
801
|
|||
2011
|
549
|
|||
2012
|
416
|
|||
Thereafter
|
481
|
|||
$
|
4,264
|
Fiscal
2007 Quarter Ended
|
|||||||||||||
|
|
September
30,
|
|
December
31,
|
|
March
31,
|
|
June
30,
|
|||||
Total
revenue
|
$
|
65,628
|
$
|
54,798
|
$
|
51,817
|
$
|
57,526
|
|||||
Gross
profit
|
4,122
|
3,110
|
2,478
|
2,921
|
|||||||||
Selling,
general and administrative
|
3,650
|
4,159
|
4,077
|
3,950
|
|||||||||
Operating
income (loss)
|
472
|
(1,049
|
)
|
(1,599
|
)
|
(1,029
|
)
|
||||||
Interest
expense and other
|
|||||||||||||
income,
net
|
(934
|
)
|
(846
|
)
|
(1,019
|
)
|
(585
|
)
|
|||||
Net
income (loss)
|
(462
|
)
|
(1,895
|
)
|
(2,618
|
)
|
(1,614
|
)
|
|||||
Basic
and diluted net loss per share
|
$
|
(0.04
|
)
|
$
|
(0.18
|
)
|
$
|
(0.23
|
)
|
$
|
(0.12
|
)
|
|
Basic
and diluted weighted average
|
|||||||||||||
number
of shares outstanding
|
|||||||||||||
during
the period
|
10,496
|
10,523
|
11,600
|
13,678
|
Fiscal
2006 Quarter Ended
|
|||||||||||||
September
30,
|
(2)
December
31,
|
(3)
March
31,
|
(3)
June
30,
|
||||||||||
Total
revenue (1)
|
$
|
52,796
|
$
|
66,376
|
$
|
59,296
|
$
|
70,231
|
|||||
Gross
profit
|
3,813
|
3,829
|
2,258
|
2,509
|
|||||||||
Selling,
general and administrative
|
2,534
|
3,007
|
3,569
|
4,152
|
|||||||||
Operating
income (loss)
|
1,279
|
822
|
(1,311
|
)
|
(1,643
|
)
|
|||||||
Interest
expense and other
|
|||||||||||||
income,
net (4)
|
(675
|
)
|
(964
|
)
|
(905
|
)
|
(1,481
|
)
|
|||||
Net
income (loss)
|
615
|
(142
|
)
|
(2,216
|
)
|
(3,135
|
)
|
||||||
Net
income (loss) per share:
|
|||||||||||||
Basic
|
$
|
0.07
|
$
|
(0.01
|
)
|
$
|
(0.23
|
)
|
$
|
(0.30
|
)
|
||
Diluted
|
$
|
0.06
|
$
|
(0.01
|
)
|
$
|
(0.23
|
)
|
$
|
(0.30
|
)
|
||
Weighted
average shares outstanding:
|
|||||||||||||
Basic
|
9,339
|
9,776
|
9,814
|
10,350
|
|||||||||
Diluted
|
10,197
|
9,776
|
9,814
|
10,350
|
(1) |
Certain
revenue amounts have been reclassified to cost of goods sold
to conform to
the current period presentation. These changes had no impact
on previously
reported results of operations or shareholders’ equity. In accordance with
EITF Issue No. 04-13, “Accounting for Purchases and Sales of Inventory
with the Same Counterparty”, the Company has reclassified its treatment of
reporting for sales of inventory to Company’s vendors from a gross basis
to a net basis (net of service charges).
|
(2) |
The
Company acquired H & W Petroleum on October 1,
2005.
|
(3) |
The
Company incurred a net loss of $2.2 million and $3.1 million
for the
quarters ended March 31, 2006 and June 30, 2006, respectively,
primarily
due to increased selling, general and administrative costs and
interest
expense associated with the
H
& W acquisition, corporate infrastructure development and relocation
and integration costs.
|
(4) |
The
Company recorded additional non-cash interest expense of
$537,000 during
the quarter ended June 30, 2006 associated with the write-off
of deferred
debt costs, debt discount and a prepayment penalty related to
the June 30,
2006 issuance of warrants to convert a portion of the August
2003 and
January 2005 Notes.
|