1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
===========================
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 0-19793
METRETEK TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-1169358
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Seventeenth Street, Suite 800 North
Denver, Colorado 80202
(Address of principal executive offices) (Zip code)
(303) 416-9200
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
As of July 31, 2001 there were 6,077,764 shares of the issuer's Common
Stock outstanding.
Transitional Small Business Disclosure Format
Yes No X
----- -----
================================================================================
2
METRETEK TECHNOLOGIES, INC.
FORM 10-QSB
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000 3
Unaudited Consolidated Statements of Operations -
For the Three Months Ended June 30, 2001 and
June 30, 2000
For the Six Months Ended June 30, 2001 and
June 30, 2000 5
Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 2001 and
June 30, 2000 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 25
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
2
3
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
ASSETS 2001 2000
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,390,781 $ 468,813
Trade receivables, less allowance for doubtful accounts
of $296,697 and $548,153, respectively 3,657,837 4,476,841
Other receivables 22,575 7,960
Inventories 3,285,573 3,226,995
Net assets of discontinued operations 396,618 545,454
Prepaid expenses and other current assets 648,368 768,474
----------- -----------
Total current assets 9,401,752 9,494,537
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Equipment 4,099,930 4,391,990
Vehicles 50,227 49,185
Furniture and fixtures 579,815 609,472
Land, building and improvements 731,300 881,859
----------- -----------
Total 5,461,272 5,932,506
Less accumulated depreciation 3,063,796 2,862,990
----------- -----------
Property, plant and equipment, net 2,397,476 3,069,516
----------- -----------
OTHER ASSETS:
Customer list (net of accumulated amortization of $3,623,806
and $3,401,183, respectively) 5,269,081 5,491,704
Goodwill (net of accumulated amortization of
$818,866 and $706,871, respectively) 2,479,553 2,344,711
Patents and capitalized software development (net of
accumulated amortization of $761,444 and
$691,406, respectively) 469,123 117,650
Other assets 275,828 277,773
----------- -----------
Total other assets 8,493,585 8,231,838
----------- -----------
TOTAL $20,292,813 $20,795,891
=========== ===========
See notes to unaudited consolidated financial statements.
3
4
METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
------------ --------------
CURRENT LIABILITIES:
Accounts payable $ 1,541,941 $ 780,173
Accrued and other liabilities 2,091,740 1,278,867
Notes payable 2,702,307 2,419,874
Deposits and capital lease obligations 1,896 207,058
------------ ------------
Total current liabilities 6,337,884 4,685,972
------------ ------------
LONG-TERM NOTES PAYABLE -- 1,929,759
------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK - SERIES B,
$.01 PAR VALUE; AUTHORIZED, 1,000,000 SHARES;
7,000 ISSUED AND OUTSTANDING;
REDEMPTION VALUE $1,000 PER SHARE 7,264,438 6,903,485
------------ ------------
STOCKHOLDERS' EQUITY:
Redeemable preferred stock - undesignated, $.01 par value;
authorized, 2,000,000 shares; none issued and outstanding
Redeemable preferred stock - Series C, $.01 par value;
authorized, 500,000 shares; none issued and outstanding
Common stock, $.01 par value; authorized, 25,000,000 shares;
issued and outstanding, 6,077,764 and 5,908,067 shares,
respectively 60,778 59,081
Additional paid-in-capital 55,116,789 54,814,659
Accumulated other comprehensive loss (67,204) (5,926)
Accumulated deficit (48,419,872) (47,591,139)
------------ ------------
Total stockholders' equity 6,690,491 7,276,675
------------ ------------
TOTAL $ 20,292,813 $ 20,795,891
============ ============
See notes to unaudited consolidated financial statements.
4
5
METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
2001 2000 2001 2000
REVENUES:
Sales and services $ 11,389,854 $ 5,547,312 $ 16,278,837 $ 10,155,896
Other 40,111 197,327 299,698 231,141
------------ ------------ ------------ ------------
Total revenues 11,429,965 5,744,639 16,578,535 10,387,037
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales and services 8,758,759 4,072,422 12,497,486 7,543,886
General and administrative 1,362,290 1,338,389 2,765,275 2,616,452
Selling, marketing and service 333,273 531,838 675,932 1,028,408
Depreciation and amortization 374,533 374,211 742,014 689,692
Research and development 146,881 3,947,696 284,788 7,332,439
Interest, finance charges and other 45,286 34,124 80,820 79,656
------------ ------------ ------------ ------------
Total costs and expenses 11,021,022 10,298,680 17,046,315 19,290,533
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) 408,943 (4,554,041) (467,780) (8,903,496)
MINORITY INTEREST IN LOSS -- 580,615 -- 676,416
------------ ------------ ------------ ------------
NET INCOME (LOSS) 408,943 (3,973,426) (467,780) (8,227,080)
PREFERRED STOCK
DEEMED DISTRIBUTION (180,477) (2,564,202) (360,953) (5,077,911)
------------ ------------ ------------ ------------
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS $ 228,466 $ (6,537,628) $ (828,733) $(13,304,991)
============ ============ ============ ============
NET INCOME (LOSS) PER BASIC
AND DILUTED COMMON SHARE $ 0.04 $ (1.27) $ (0.14) $ (2.75)
============ ============ ============ ============
WEIGHTED AVERAGE BASIC
AND DILUTED COMMON
SHARES OUTSTANDING 6,059,116 5,140,093 5,984,009 4,841,335
============ ============ ============ ============
See notes to unaudited consolidated financial statements.
5
6
METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------------------
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (467,780) $ (8,227,080)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization 742,014 689,692
Minority interest in PowerSpring -- (676,416)
Stock based compensation expense -- 66,387
Loss on disposal of property, plant and equipment 80,857 13,023
Changes in other assets and liabilities, net of effect of acquisitions:
Trade receivables 819,004 177,204
Inventories (58,578) (84,110)
Other current assets 105,491 46,856
Other noncurrent assets (2,042) 2,886
Accounts payable 507,212 1,694,626
Accrued and other liabilities 343,998 884,309
------------ ------------
Net cash provided (used) by operating activities 2,070,176 (5,412,623)
Net cash provided (used) by discontinued operations 148,836 (352,463)
------------ ------------
Net cash provided (used) by operating activities 2,219,012 (5,765,086)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition -- (441,583)
Additions to patents and capitalized software development (421,511) --
Additions to property, plant, equipment (88,521) (1,447,650)
Proceeds from sale of property, plant and equipment 323,810 11,249
------------ ------------
Net cash used by investing activities (186,222) (1,877,984)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placement -- 10,579,585
Net payments on line of credit (780,660) (273,658)
Payment on notes payable (125,000) --
Exercise of stock options and warrants -- 543,990
Payments on capital lease obligations (205,162) --
------------ ------------
Net cash provided (used) by financing activities (1,110,822) 10,849,917
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 921,968 3,206,847
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 468,813 361,658
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,390,781 $ 3,568,505
============ ============
See notes to unaudited consolidated financial statements.
6
7
METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2001 and December 31, 2000 and
For the Three Month Periods Ended June 30, 2001 and 2000 and
For the Six Month Periods Ended June 30, 2000 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of
Metretek Technologies, Inc. and its subsidiaries, primarily Metretek,
Incorporated ("Metretek Florida"), Southern Flow Companies, Inc. ("Southern
Flow"), PowerSecure, Inc. ("PowerSecure") and PowerSpring, Inc. ("PowerSpring")
and have been prepared pursuant to rules and regulations of the Securities and
Exchange Commission. The accompanying consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2000.
Minority interest amounts included in the consolidated financial statements
represented an outside shareholder's 12.5% ownership interest in PowerSpring. As
of March 31, 2001 the Company repurchased that minority interest. In addition,
certain 2000 amounts have been reclassified to conform to current year
presentation.
Due to the short-term nature of the PowerSecure contracts, the Company uses
the completed-contract method of revenue recognition. Under the
completed-contract method, revenue is recognized only when a contract is
completed or substantially completed.
In the opinion of the Company's management, all adjustments (all of which
are normal and recurring) have been made which are necessary for a fair
presentation of the consolidated financial position of the Company and its
subsidiaries as of June 30, 2001 and the consolidated results of their
operations and cash flows for the three and six month periods ended June 30,
2001 and 2000.
2. COMPREHENSIVE LOSS
The Company's comprehensive loss for the six months ended June 30, 2001 and
2000 was $529,058 and $8,228,908, respectively. The Company's comprehensive loss
includes net loss and foreign currency translation adjustments.
3. POWERSPRING TERMINATION
Effective as of March 31, 2001, the Company completed various actions in
furtherance of the discontinuance of its PowerSpring subsidiary as an entity and
the restructuring of its business, including the transfer of management and
control of the PowerSpring product to Metretek Florida. As part of those
actions, the Company, PowerSpring and John A. Harpole entered into a Termination
Agreement and Mutual
7
8
Release that terminated the employment of Mr. Harpole, formerly the Vice
President of PowerSpring, and set forth the terms and conditions of the
termination, which included the termination of various agreements and
instruments to which the Company, PowerSpring and Mr. Harpole were parties.
In connection with the termination: (i) the $741,666 promissory note made
by PowerSpring to Mr. Harpole was cancelled, and the related security agreement
pursuant to which PowerSpring had granted a security interest in its asset to
Mr. Harpole was terminated, (ii) Mr. Harpole transferred his 2,500,000 shares of
PowerSpring common stock, which represented 12.5% of the outstanding capital
stock of PowerSpring, back to PowerSpring, (iii) Mr. Harpole's employment and
non-competition agreement was terminated, (iv) PowerSpring transferred the
assets and business of Mercator to Mercator Energy LLC ("New Mercator"), a new
limited liability company formed by Mr. Harpole, (v) PowerSpring agreed to pay
$250,000 to Mr. Harpole over the next year, (vi) the Company reduced the
exercise prices of Mr. Harpole's warrants to purchase 60,000 shares of Company
common stock by $1.50 per share to a range of $3.00 to $4.00, (vii) the Company
issued Mr. Harpole options to purchase 80,000 shares of common stock at $2.00
per share, (viii) PowerSpring retained New Mercator on an eight month consulting
basis at $5,000 per month, and (ix) the parties entered into a standard mutual
release of all claims.
The Company recorded other income in March 2001 of approximately $255,000,
which represents the difference between the note amount of $741,666 and the
costs to the Company in connection with the termination of PowerSpring.
4. ACQUISITION
On April 10, 2001, the Company, through its wholly-owned subsidiary
PowerSecure, acquired Industrial Automation Corp. ("Industrial Automation"), a
North Carolina corporation. The Company issued 150,000 restricted shares of its
common stock in exchange for all of the issued and outstanding capital stock of
Industrial Automation. As a result of the acquisition, Industrial Automation has
become a wholly-owned subsidiary of PowerSecure.
Industrial Automation, founded in 1991 and headquartered in Greensboro,
North Carolina, is in the business of designing and marketing process controls
used in distributed generation operations. This acquisition is intended to
enhance PowerSecure's technology and time to market in the field of distributed
generation.
PowerSecure also entered into five-year employment and non-competition
agreements with each of the two former owners of Industrial Automation. The
employment and non-competition agreements include an "earn out" that generally
entitles the former owners to any net earnings of PowerSecure arising from
projects commenced by Industrial Automation prior to the acquisition. The
acquisition was accounted for as a purchase, and therefore the results of
operations of Industrial Automation have been combined with those of the Company
effective April 10, 2001. The entire amount of the
8
9
purchase price of $246,836, including costs of the acquisition, have been
allocated to goodwill. Pro forma results of operations for the six months ended
June 30, 2001 and 2000 assuming the acquisition had occurred on January 1, 2001
and 2000 have not been included herein as the effects of the acquisition were
not material to the Company's results of operations.
5. SEGMENT INFORMATION
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies.
The Company has four reportable business segments: automated energy data
management; natural gas measurement services; distributed generation; and
Internet-based energy information and services.
The operations of the Company's automated energy data management segment
are conducted by Metretek Florida. Metretek Florida's manufactured products fall
into three categories: remote data collection products; electronic corrector
products; and application-specific products. Metretek Florida also provides
energy data collection and management services and post-sale support services
for its manufactured products.
The operations of the Company's natural gas measurement services segment
are conducted by Southern Flow. Southern Flow's services include on-site field
services, chart processing and analysis, laboratory analysis, and data
management and reporting. These services are provided principally to customers
involved in natural gas production, gathering, transportation and processing.
The operations of the Company's distributed generation segment are
conducted by PowerSecure. PowerSecure commenced operations in September 2000.
The primary elements of PowerSecure's distributed generation products and
services include: project design and engineering, negotiation with utilities to
establish tariff structures and power interconnects, generator acquisition and
installation, process control and design, switch gear acquisition and
installation, assistance in obtaining third-party project financing, and ongoing
project monitoring and servicing. PowerSecure markets its distributed generation
service package primarily through outsourcing partnerships with utilities.
The operations of the Company's Internet-based energy information and
services segment were conducted by PowerSpring through March 31, 2001.
PowerSpring commenced limited revenue generating operations in the second
quarter of 2000. Effective April 1, 2001, PowerSpring's business was
restructured and transferred to Metretek Florida.
The Company evaluates the performance of its operating segments based on
income (loss) before income taxes, nonrecurring items and interest income and
expense. Intersegment sales are not significant.
9
10
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes corporate
related items, results of insignificant operations and, as it relates to segment
profit or loss, income and expense not allocated to reportable segments.
INTERNET-BASED
AUTOMATED NATURAL GAS ENERGY
ENERGY DATA MEASUREMENT DISTRIBUTED INFORMATION
MANAGEMENT SERVICES GENERATION AND SERVICES (1) OTHER TOTAL
JUNE 30, 2001
Revenues $ 3,164,396 $ 6,509,946 $ 6,327,910 $ 276,585 $ 299,698 $ 16,578,535
Segment profit (loss) (449,284) 864,666 474,682 (612,371) (745,473) (467,780)
Total assets 7,626,461 9,542,500 1,048,244 -- 2,075,608 20,292,813
JUNE 30, 2000
Revenues $ 4,703,825 $ 5,373,677 $ -- $ 78,394 $ 231,141 $ 10,387,037
Segment profit (loss) (491,753) 461,679 -- (8,085,947) (787,475) (8,903,496)
Total assets 9,053,437 9,793,780 -- 3,718,072 3,217,911 25,783,200
(1) Effective April 1, 2001, the Company's Internet-Based Energy Information and
Services segment was restructured and transferred into its Automated Energy Data
Management segment.
10
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion of our results of operations for the six month
periods ended June 30, 2001 and 2000 and of our financial condition as of June
30, 2001 should be read in conjunction with our consolidated financial
statements and related notes thereto included elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth selected information related to our primary
business segments and is intended to assist you in an understanding of our
results of operations for the periods presented. All amounts shown are prior to
the deduction of minority interest in PowerSpring.
Six Months Ended
June 30,
----------------------------
2001 2000
---- ----
(amounts in thousands)
REVENUES:
Southern Flow $ 6,510 $ 5,374
Metretek Florida 3,164 4,704
PowerSecure 6,328 --
PowerSpring 277 78
Other 300 231
-------- --------
Total $ 16,579 $ 10,387
======== ========
GROSS PROFIT:
Southern Flow $ 1,738 $ 1,359
Metretek Florida 1,113 1,396
PowerSecure 1,041 --
PowerSpring (111) (142)
-------- --------
Total $ 3,781 $ 2,613
======== ========
SEGMENT PROFIT (LOSS):
Southern Flow $ 864 $ 462
Metretek Florida (449) (492)
PowerSecure 474 --
PowerSpring (612) (8,086)
Other (745) (787)
-------- --------
Total $ (468) $ (8,903)
======== ========
Our reportable segments are strategic business units that offer different
products and services. They are managed separately because each business
requires different technology and marketing strategies.
11
12
We currently have four reportable business segments: automated energy data
management; natural gas measurement services; distributed generation; and
internet-based energy information and services.
The operations of our automated energy data management segment are
conducted by Metretek Florida. Metretek Florida's manufactured products fall
into three categories: remote data collection products; electronic corrector
products; and application-specific products. Metretek Florida also provides
energy data collection and management services and post-sale support services
for its manufactured products.
The operations of our natural gas measurement services segment are
conducted by Southern Flow. Southern Flow's services include on-site field
services, chart processing and analysis, laboratory analysis, and data
management and reporting. These services are provided principally to customers
involved in natural gas production, gathering, transportation and processing.
The operations of our distributed generation segment are conducted by
PowerSecure. PowerSecure commenced operations in September 2000. The primary
elements of PowerSecure's distributed generation products and services include:
project design and engineering, negotiation with utilities to establish tariff
structures and power interconnects, generator acquisition and installation,
process control and design, switch gear acquisition and installation, assistance
in obtaining third-party project financing, and ongoing project monitoring and
servicing. PowerSecure markets its distributed generation service package
primarily through outsourcing partnerships with utilities.
The operations of our internet-based energy information and services
segment were conducted by PowerSpring through March 31, 2001. PowerSpring
commenced limited revenue generating operations in the second quarter of 2000.
Effective April 1, 2001, PowerSpring's product was restructured and transferred
to Metretek Florida.
We evaluate the performance of our operating segments based on income
(loss) before taxes, nonrecurring items and interest income and expense.
Intersegment sales are not significant.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
Revenues. Our consolidated revenues for the six months ended June 30, 2001
increased $6,191,000, or 59.6%, compared to the same period in 2000. The
increase was primarily due to the first-time generation of revenue by
PowerSecure, as well as an increase in revenues by Southern Flow and
PowerSpring, which increases were partially offset by a decrease in revenues by
Metretek Florida. PowerSecure generated revenues of $6,328,000, all of which
occurred during the three months ended June 30, 2001, representing the
completion of its first distributed generation projects. Southern Flow's
revenues increased $1,136,000, or 21.1% compared to the same period in 2000,
primarily due to an increase in equipment sales and services resulting from an
improving domestic
12
13
natural gas market. PowerSpring generated revenues of $536,000 during the six
months ended June 30, 2001, which included approximately $255,000 relating to
the termination of PowerSpring. Comparable revenues for PowerSpring for the same
period in 2000 were $78,000. We do not anticipate any material revenues by
PowerSpring as an entity in future quarters due to the disposition of the
Mercator business as discussed below and the transfer of the PowerSpring
products and business to Metretek Florida. Any future revenues attributable to
PowerSpring's business will be recorded as revenues of Metretek Florida.
Metretek Florida's revenues decreased $1,539,000, or 32.7%, compared to the same
period in 2000, consisting of a decrease in domestic sales of $1,574,000,
partially offset by an increase in international sales of $35,000. The decrease
in Metretek Florida's domestic sales was primarily due to a decrease in contract
manufacturing activities, attributable to the loss of a major contract
manufacturing customer which sold its business. A comparison of Metretek
Florida's current domestic and international product mix is as follows:
Six Months Ended June 30,
--------------------------
2001 2000
---- ----
(dollar amounts in thousands)
Remote data collection
products and systems $2,022 64% $2,564 55%
Electronic corrector products 980 31% 849 18%
Circuit board assembly sales 162 5% 1,291 27%
------ ------
Total $3,164 $4,704
====== ======
Costs and Expenses. Costs of sales and services include materials, labor,
personnel and related overhead costs incurred to manufacture products and
provide services. Cost of sales and services for the six months ended June 30,
2001 increased $4,954,000, or 65.7%, compared to the same period in 2000.
PowerSecure's costs of sales on completed distributed generation projects
totaled $5,287,000, for which there were no comparable costs incurred in the
same period in 2000. PowerSecure's gross profit margin after costs of sales and
services was 16.5% for the six months ended June 30, 2001. Southern Flow's cost
of sales and services for the six months ended June 30, 2001 increased $757,000,
or 18.9%, compared to the same period in 2000, almost entirely attributable to
increased sales. Southern Flow's gross profit margin after costs of sales and
services increased slightly to 26.7% for the six months ended June 30, 2001
compared to 25.3% for the comparable period in 2000. Metretek Florida's cost of
sales and services for the six months ended June 30, 2001 decreased $1,257,000,
or 38.0%, compared to the same period in 2000. This decrease was primarily due
to lower contract manufacturing sales. Contract manufacturing sales generally
result in lower gross margins than that of traditional products at Metretek
Florida. As a result, although Metretek Florida's revenues for the six months
ended June 30, 2001 decreased approximately 33% compared to the same period in
2000, Metretek Florida's overall gross profit margin increased from 29.7% to
35.2% compared to the same period in 2000. PowerSpring incurred costs of sales
and services in the amount of $388,000 during the
13
14
six months ended June 30, 2001, compared to $221,000 during the same period in
2000.
General and administrative expenses include personnel and related overhead
costs for the support and administrative functions. General and administrative
expenses for the six months ended June 30, 2001 increased $149,000, or 5.7%,
compared to the same period in 2000. This increase was the net result of
first-time personnel, travel and overhead costs in the amount of $550,000
associated with PowerSecure, for which there were no comparable costs during the
same period in 2000, which increase was partially offset by a $409,000 decrease
in general and administrative activities at PowerSpring.
Selling, marketing and service expenses consist of personnel and related
overhead costs, including commissions for sales and marketing activities,
together with advertising and promotion costs. Selling, marketing and service
expenses for the six months ended June 30, 2001 decreased $352,000, or 34.3%,
compared to the same period in 2000. This decrease in selling, marketing and
service expenses was primarily due to the discontinuation of independent sales
activity by PowerSpring and a reduction in sales personnel at Metretek Florida.
Depreciation and amortization expenses include the depreciation and
amortization of real property, customer list, goodwill, patents and capitalized
software development costs. Depreciation and amortization expenses for the six
months ended June 30, 2001 increased $52,000, or 7.6%, compared to the same
period in 2000, due to the additional depreciation expenses related to computer
equipment purchased during 2000 to facilitate our Internet-based activities.
Research and development expenses include payments to third parties,
personnel and related overhead costs for product and service development,
enhancements, and upgrades. Research and development expenses for the six months
ended June 30, 2001 decreased $7,048,000, or 96.1%, compared to the same period
in 2000. The decrease is due almost exclusively to the substantial reduction
commenced in the second half of 2000 of research and development expenses
related to PowerSpring's business.
Interest, finance charges and other expenses include interest and finance
charges on our credit facility as well as other non-operating expenses.
Interest, finance charges and other expenses for the six months ended June 30,
2001 increased $1,000, or 1.5%, compared to the same period in 2000. The
increase reflects increased bank borrowings in the first six months of 2001
compared to the same period in 2000.
QUARTERLY FLUCTUATIONS
Our quarterly revenues, expenses, margins and results of operations are
difficult to predict and have fluctuated significantly in the past and are
expected to continue to fluctuate significantly in the future due to a variety
of factors, many of which are outside of our control. These factors include,
without limitation, the following:
- the size, timing and terms of sales, orders, contracts and projects,
14
15
including customers choosing to push out their purchase commitments,
or purchases in smaller than expected quantities;
- our ability to implement our business plans and strategies and the
timing of such implementation;
- the timing, pricing and market acceptance of our new products and
services, and those of our competitors;
- the pace of development of our new businesses;
- the growth of the market for distributed generation and online energy
products, services and information;
- changes in our pricing policies and those of our competitors;
- variations in the length of our product and service implementation
process;
- the mix of products and services sold;
- the mix of international and domestic revenues;
- the life cycles of our products and services;
- budgeting cycles of utilities;
- general economic and political conditions;
- economic conditions in the energy industry in general and the natural
gas and electricity industries in particular;
- the effects of governmental regulations and regulatory changes in our
current and new markets;
- changes in the prices charged by our suppliers;
- the timing of acquisitions of technology or businesses;
- changes in our operating expenses; and
- the development and maintenance of business relationships with
strategic partners.
Because many of our operating expenses are relatively fixed, a shortfall in
anticipated revenue or delay in recognizing revenue could cause our operating
results to vary significantly from quarter-to-quarter and could result in
operating losses in any particular quarter. The timing of large individual sales
is also difficult for us to predict. As a result, quarterly comparisons of
operating results are not necessarily meaningful or indicative of future
performance.
PowerSecure's operations have generated revenues for the first time during
the three month period ended June 30, 2001. Although we only have a limited
operating history with PowerSecure, consisting of less than a full fiscal year,
we expect the revenues and associated costs, gross margins, cash flow and other
operating results of PowerSecure to vary from quarter to quarter for a number of
reasons, including the factors mentioned above. PowerSecure's revenues will
depend in large part upon the timing of projects being awarded to PowerSecure,
as well as the timing of the completion
15
16
of those projects. Because we are using the completed-contract method of revenue
recognition, under which we will recognize revenue only when a contract is
completed or substantially completed, our recognition of revenues will be
dependent upon the timing of completion of project, although certain costs may
continue to be recognized prior to completion. In addition, distributed
generation is an emerging market and PowerSecure is a new competitor in the
market, so there is no established customer base on which to rely or certainty
as to future contracts. Another factor that could cause material fluctuations in
PowerSecure's quarterly results is the amount of recurring, as opposed to
non-recurring, sources of revenue.
Metretek Florida historically derives substantially all of its revenues
from sales of its products and services to the utility industry. Metretek
Florida has experienced variability of operating results on both an annual and a
quarterly basis due primarily to utility purchasing patterns and delays of
purchasing decisions as a result of mergers and acquisitions in the utility
industry and changes or potential changes to the federal and state regulatory
frameworks within which the utility industry operates. The utility industry,
both domestic and foreign, is generally characterized by long budgeting,
purchasing and regulatory process cycles that can take up to several years to
complete.
FINANCIAL CONDITION AND LIQUIDITY
We require capital principally for (i) the financing of inventory and
accounts receivable, (ii) research and development expenses, (iii) capital
expenditures for property and equipment and software development, and (iv) the
funding of possible future acquisitions.
Net cash provided by operating activities of approximately $2,219,000 for
the six months ended June 30, 2001 was the result of the following: (i)
approximately $355,000 of cash provided by continuing operations, before changes
in assets and liabilities; (ii) approximately $1,715,000 of cash provided by
changes in working capital and other asset and liability accounts; and (iii)
approximately $149,000 of cash provided by discontinued operations.
We plan to continue our research and development efforts to enhance our
existing products and services and to develop new products. Research and
development expenses in the amount of $285,000 were incurred in the six months
ended June 30, 2001. We anticipate that our research and development costs in
2001 will total approximately $720,000, of which $600,000 is expected to relate
to Metretek Florida's business, including further development and enhancement of
the PowerSpring product, and $120,000 is expected to relate to PowerSecure's
business.
We anticipate capital expenditures in 2001 of approximately $600,000,
primarily for product software development for the PowerSpring and PowerSecure
products. Capital expenditures for the six months ended June 30, 2001 were
approximately $510,000.
16
17
On April 14, 1998, we entered into a loan and security agreement (the "Loan
Agreement") with a commercial bank (the "Lender") providing for a combined
$5,000,000 credit facility consisting of loans (the "Loans") and letters of
credit subject to limitations described below. The Loan Agreement provides for
daily advances in the form of Loans to fund capital requirements, and daily
paydowns on outstanding balances of the Loans from collection of customer
accounts receivable. We make monthly interest payments currently computed at
prime plus 2% (8.75% at June 30, 2001) on outstanding balances of the Loans. On
March 1, 2001, the Loan Agreement was amended to extend the maturity date from
March 14, 2001 to May 31, 2001. On May 31, 2001, the Loan Agreement was further
amended (the "Sixth Amendment") to extend the maturity date to September 30,
2001. The Sixth Amendment also modified certain provisions in the Loan
Agreement, including (i) reducing the maximum available amount of loan
availability from $5 million to $3 million; (ii) increasing the rate of interest
by one percent (1%); (iii) modifying the minimum tangible net worth covenant to
not less than $5,387,000, counting all approved subordinate debt and Series B
Preferred Stock as equity; (iv) requiring us, on a consolidated basis, to
maintain a positive net profit before taxes, preferred stock dividends,
depreciation, amortization, extraordinary gains and income from cancellation of
debt; and (v) waiving the requisite 2 to 1 ratio of consolidated earnings before
interest, taxes, depreciation, amortization and extraordinary gains to interest
expense for the period ending March 31, 2001.
The Loans are secured by our tangible and intangible assets, including the
equipment, inventory, receivables and cash deposits, and the pledge of the
shares of our subsidiaries. The Loan Agreement requires us to maintain a minimum
tangible net worth, a maximum debt to tangible net worth ratio, minimum annual
net income, a minimum debt service coverage ratio, and contains other standard
covenants related to our operations, including prohibitions on the payment of
dividends and the issuance or repurchase of securities (with certain exceptions)
without the Lender's consent. Under the terms of our Series B Preferred Stock,
our borrowings under the Loan Agreement cannot exceed $3 million without the
consent of the holders of a majority of the outstanding shares of Series B
Preferred Stock.
Borrowings on the Loans are limited to the sum of 80% of eligible accounts
receivable of Southern Flow and Metretek Florida and 50% of raw materials and
finished goods inventory (up to a combined maximum of $1,500,000) of Southern
Flow and Metretek Florida. At June 30, 2001, we had a combined $2,734,745 in
Loan availability, of which $230,881 had been borrowed by Southern Flow and
Metretek Florida, leaving $2,503,864 in unused Loan availability.
We intend to pay off the balance of the Loans and terminate our existing
credit facility by no later than the maturity date of the Loan Agreement, and we
have made a refinancing commitment in the Sixth Amendment to that effect. While
we currently intend to refinance the Loans with a credit facility from a
commercial bank or other similar lending institutions, we may also, or in lieu
thereof, seek to raise capital from the proceeds of public or private
financings, debt financings or other sources. We may seek additional capital
funds through financing at the parent or the subsidiary level, depending
17
18
upon the availability of capital, market conditions, its consolidated operations
and operations of that subsidiary. Depending on how it is structured, any
capital raising could require the consent of the holders of the Company's B
Preferred Stock. If we raise additional capital by issuing capital stock or
securities convertible into convertible stock, holders of Common Shares could
suffer dilution of their respective ownership interests, and the new capital
stock or other securities could have rights, preferences or privileges senior to
those holders of Common Shares.
Effective as of March 31, 2001, we completed various actions in furtherance
of the discontinuance of our PowerSpring subsidiary as an entity and the
restructuring of its business, including the transfer of management and control
of the PowerSpring product to Metretek Florida. As part of those actions, we,
PowerSpring and John A. Harpole entered into a Termination Agreement and Mutual
Release that terminated the employment of Mr. Harpole and set forth the terms
and conditions of the termination, which included the termination of various
agreements and instruments to which we, PowerSpring and Mr. Harpole were
parties.
In connection with the termination, among other things: (i) the $741,666
promissory note made by PowerSpring to Mr. Harpole was cancelled, and the
related security agreement pursuant to which PowerSpring had granted a security
interest in its asset to Mr. Harpole was terminated, (ii) PowerSpring agreed to
pay $250,000 to Mr. Harpole over the next year, and (iii) we reduced the
exercise prices of Mr. Harpole's warrants to purchase 60,000 shares of Company
common stock by $1.50 per share to a range of $3.00 to $4.00. We recorded other
income during the three six months ended March 31, 2001 of approximately
$255,000, which represents the difference between the note amount of $741,666
and our costs in connection with the termination of PowerSpring.
On September 28, 2000, we issued a $2.8 million unsecured convertible
promissory note to Scient Corporation ("Scient") in connection with Scient's
consulting services relating to our Internet-based PowerSpring business. The
convertible note is payable in quarterly installments, due March 31, 2002, bears
no interest, and is convertible at any time at Scient's discretion into either
shares of our Common Stock at the rate of $5.94 per share or shares of
PowerSpring common stock at the rate of $0.60 per share. As of June 30, 2001,
the outstanding balance of the unsecured note is approximately $2.4 million.
Based on our current plans and assumptions, management believes that our
capital resources, including cash and cash equivalents, amounts available under
credit facilities (assuming we enter into a new credit facility of sufficient
size) and funds generated from continuing operations will be sufficient to meet
our anticipated cash needs during the next 12 months, including our working
capital needs, capital requirements and debt service requirements. However,
unanticipated events, over which we have no control, could increase our
operating costs or decrease our ability to generate revenues from product and
service sales. In addition, we will also require additional capital in the
future in order to make any significant acquisitions of businesses or
technologies.
18
19
Obtaining additional financing will depend on many factors, including
market conditions, our operating performance and investor sentiment. Terms of
debt financing could restrict our ability to operate our business or to expand
our operations. In addition, if we raise additional capital by issuing capital
stock or securities convertible into capital stock, stockholders could suffer a
significant dilution of their percentage ownership interests, and the new
capital stock or other new securities could have rights, preferences or
privileges senior to those of our current stockholders. Our capital raising will
be subject to the consent of the Lender, if our credit facility is then in
effect, and after it is refinanced to any new lender. In addition, depending on
how it is structured, our capital raising could require the consent of the
holders of our Series B Preferred Stock. We cannot assure you that we will be
able to refinance our current credit facility or to do so on terms favorable to
us, although we currently believe we will be able to do so. We also cannot
assure you that sufficient additional funds will be available to us on a timely
basis or that, if available on a timely basis, such funds can be obtained on
terms satisfactory to us, to our lender and to the holders of our Series B
Preferred Stock, if their consents are required. Our inability to obtain
sufficient additional capital on a timely basis on terms that are acceptable
could have a material adverse effect on our business, financial condition and
results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which was amended in June 2000
by FAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities". FAS 133, as amended, establishes methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities including hedging foreign
currency expenses. We have adopted FAS 133 for our fiscal year ending December
31, 2001. Because we do not utilize derivative financial instruments, the
adoption of FAS 133 did not have a material impact on our financial position or
results of operations.
In July 2001, the FASB issued FAS No. 141 "Business Combinations". FAS 141
requires that all business combinations be accounted for under the purchase
method of accounting. FAS 141 also changes the criteria for the separate
recognition of intangible assets acquired in a business combination. FAS 141 is
effective for all business combinations initiated after June 30, 2001.
In July 2001, the FASB issued FAS No. 142 "Goodwill and Other Intangible
Assets". FAS 142 addresses accounting and reporting for intangible assets
acquired, except for those acquired in a business combination. FAS 142 presumes
that goodwill and certain intangible assets have indefinite useful lives.
Accordingly, goodwill and certain intangibles will not be amortized but rather
will be tested at least annually for impairment. FAS 142 also addresses
accounting and reporting for goodwill and other
19
20
intangible assets subsequent to their acquisition. FAS 142 is effective for
fiscal years beginning after December 15, 2001. We have not yet completed our
assessment of the impact of FAS 141 and 142 on our financial statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-QSB contains forward-looking statements within the meaning of
and made under the safe harbor provisions of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements are all statements other than statements of
historical facts, including statements concerning management's plans,
objectives, goals, strategies, hopes and beliefs; projections about earnings,
revenues and other financial and non-financial items, events and performance;
statements about proposed products, services, technologies and operations; and
statements of assumptions underlying any of the foregoing. The words "may",
"could", "should", "will", "project, "intend", "continue", "believe",
"anticipate", "estimate", "expect", "plan", "potential", or "scheduled",
variations of such words, and similar expressions are intended to identify
forward-looking statements. Examples of forward-looking statements include
statements regarding, among other matters, our plans, intentions, beliefs and
expectations about the following:
- our future prospects, including our revenues, income, margins,
profitability, cash flow, liquidity, financial condition and results
of operations;
- the sufficiency of funds, from operations, available borrowings and
other capital resources, to meet our future working capital, capital
expenditure and business growth needs;
- our products and services, market position and strategic
relationships;
- our business plans and strategies;
- market demand for and customer benefits attributable to our products
and services;
- competition and industry and market conditions, segments and trends;
- our ability to successfully develop and operate our PowerSecure
business;
- our ability to successfully develop and operate our restructured
PowerSpring business;
- the effects of litigation; and
- future economic, business and regulatory conditions.
These forward-looking statements are based on the current plans,
intentions,
20
21
goals, strategies, type, beliefs and expectations of management as well as
assumptions made by and information currently available to management. You are
cautioned not to place undue reliance on these forward-looking statements.
Forward-looking statements are not guarantees of future performance or events,
but are subject to and qualified by a number of known and unknown risks,
uncertainties and other factors that could cause actual results to differ
materially from those express or implied by the forward-looking statements.
These risks, uncertainties and other factors include, but are not limited to,
the following:
- our history of losses and uncertainty of future profitability;
- our ability to obtain and maintain sufficient capital and liquidity to
meet our operating and capital requirement and growth needs, including
our ability to refinance our existing line of credit, which is
currently set to expire on September 30, 2001;
- our ability to successfully and timely develop and market
PowerSecure's products, services, and technologies;
- our lack of operating history in our new businesses and the unproven
business models in our PowerSecure and PowerSpring businesses;
- the successful and timely development and market acceptance of the
product, service and technology offerings of PowerSecure;
- the successful restructuring of PowerSpring as a division of Metretek
Florida;
- the complexity, uncertainty and time constraints associated with the
development and market acceptance of new product and service designs
and technologies;
- the effects of competition in our markets, including the introduction
of competitors' products, services and technologies and our timely and
successful response thereto;
- utility purchasing patterns and delays and potential changes to the
federal and state regulatory frameworks within which the utility
industry operates;
- fluctuations in our quarterly operating results;
- the effect of pending and future lawsuits;
- our ability to attract, retain and motivate key personnel;
- our ability to secure and maintain key contracts, business
relationships and alliances;
21
22
- our ability to make successful acquisitions and in the future to
successfully integrate and utilize any acquired product lines, key
employees and businesses;
- changes in the energy industry in general, and technological and
market changes in the natural gas and electricity industries in
particular;
- the impact and timing of the deregulation of the natural gas and
electricity markets;
- our ability to manage the anticipated growth of PowerSecure;
- the capital resources, technological requirements, and internal
business plans of the natural gas and electricity utilities industry;
- restrictions on our capital raising ability imposed by the terms of
our current credit facility and the Series B Preferred Stock;
- dividends on the Series B Preferred Stock increasing our future net
loss available to common shareholders and net loss per share;
- general economic and business conditions;
- effects of changes in product mix on our expected gross margins and
net income;
- risks inherent in international operations;
- risks associated with our management of private energy programs;
- the receipt and timing of future customer orders;
- unexpected events affecting our ability to obtain funds from
operations, debt or equity to finance operations, pay interest and
other obligations, and fund needed capital expenditures and other
investments;
- our ability to protect our proprietary information and technology;
- the impact of current and future laws and government regulations
affecting the energy industry in general and the natural gas and
electricity industries in particular; and
- other risks and uncertainties that are discussed in this report or
that are discussed from time to time in our other reports and filings
with the SEC, including but not limited to our Annual Report on Form
10-KSB for the fiscal year ended December 31, 2000.
22
23
We do not intend, and we undertake no duty or obligation, to update or
revise any forward-looking statements for any reason, whether as the result of
new information, future events or otherwise.
23
24
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 5, 2001, Douglas W. Heins, individually and purportedly on
behalf of a putative class of other persons similarly situated, filed a
complaint in the District Court for the City and County of Denver, Colorado
against the Company, Marcum Midstream 1997-1 Business Trust (the "Trust"),
Marcum Midstream-Farstad, LLC, Marcum Gas Transmission, Inc. ("MGT"), Marcum
Capital Resources, Inc. ("MCR"), W. Phillip Marcum, Richard M. Wanger, and
Daniel J. Packard (the foregoing, collectively, the ("Metretek Defendants"),
Farstad Gas & Oil, LLC ("Farstad LLC") and Farstad Gas & Oil, Inc. ("Farstad
Inc.") (and collectively with Farstad LLC, the "Farstad Entities"), and Jeff
Farstad ("Farstad" and collectively with the Farstad Entities, the "Farstad
Defendants"). The complaint alleges that the defendants, either directly or as
"controlling persons", violated certain provisions of the Colorado Securities
Act in connection with the sale of interests in Marcum Midstream 1997-1 Business
Trust, an energy program of which MGT, a wholly-owned subsidiary of Metretek, is
the managing trustee and Messrs. Marcum, Wanger and Farstad are or were the
active trustees. Specifically, the plaintiff claims that his damages resulted
from the defendants allegedly negligently, recklessly or intentionally making
false and misleading statements, and/or willfully participating in a scheme or
conspiracy and/or aiding or abetting violations of Colorado law, which scheme
and statements related to the specification of the natural gas liquids product
to be delivered under certain contracts, for the purpose of selling the Trust's
units. The Trust raised $9.25 million from investors in a private placement in
1997 in order to finance the purchase, operation and improvement of a natural
gas liquids processing plant located in Texas. The plaintiff seeks, among other
things, to have the court declare the suit a proper class action and award
compensation and/or punitive damages in an unspecified amount, together with
interest, attorneys fees and other costs.
In March, 2001, the defendants filed motions to dismiss the complaint, and
the plaintiff filed briefs in response to these motions to dismiss. On May 11,
2001, the court denied the defendants' motions to dismiss the complaint,
although the court granted the motion to dismiss Farstad LLC and Farstad Inc.
and dismissed the fourth claim for relief, the allegation that the Farstad
Defendants, Mr. Packard, MCR and MGT are liable under Colorado law for giving
substantial assistance and further of securities violations, as to all
defendants except MCR.
On March 27, 2001, plaintiff filed a motion seeking certification of a
class with respect to this matter and filed a brief in support of his motion for
class certification. On July 27, 2001, the Metretek Defendants and the Farstad
Defendants each filed a brief in opposition to the plaintiff's motion for class
certification. As of the date of this report, the court has not ruled on the
motion for class certification.
24
25
On May 24, 2001, the Metretek Defendants filed an answer to the complaint,
generally denying the allegations and claims therein and setting forth
cross-claims against the Farstad Defendants. On July 13, 2001, the Metretek
Defendants filed additional cross-claims against the Farstad Defendants.
On May 30, 2001, Michael Mongiello and Charlotte Mongiello, trustees of the
Mongiello Family Trust dated 8/1/90, et.al., filed, and subsequently served on
defendants, a first amended complaint in the Superior Court in the State of
California for the County of San Diego against the Metretek Defendants, the
Farstad Defendants, United Pacific Securities, Inc., JBS Financial Corporation,
IFG Network Securities, Inc., and numerous officers, directors, employees and
brokers related to such brokerage houses. The complaint contains allegations
similar to those contained in the complaint filed by Heins, along with
allegations of wrong doing in and with the sale of interest in the Trusts
against the additional defendants. The plaintiffs' claims for relief include a
breach of fiduciary duty, sale securities in violation of California blue sky
laws, fraud and deceit, negligent misrepresentation and omission, mutual
mistake, justify and rescission, negligence, fraud on senior citizens and
declaratory relief. The plaintiffs seek, among other things, damages of not less
than $712,500, interest, attorneys fees, rescission and restitution, punitive
and exemplary damages, prejudgment interest, a declaratory judgment and other
damages. The Company and the rest of the Metretek Defendants intend to file an
answer denying the material allegations of the complaint or to file appropriate
motions or both.
Because the foregoing litigation is in early stages, the Company cannot
predict the outcome of this litigation or the impact the resolution of these
claims will have on the business, financial position or results of operations of
the Company. The Company intends to vigorously defend the claims against it and
the other Metretek Defendants, and intends to vigorously pursue appropriate
counter-claims.
From time to time, the Company is involved in other disputes and legal
actions arising in the ordinary course of business. The Company intends to
vigorously defend all outstanding claims against it. Although the ultimate
outcome of these claims cannot be predicted with certainty due to the inherent
uncertainty of litigation, in the opinion of management, based upon current
information, none of the other currently pending or overtly threatened disputes
is expected to have a material adverse effect on the business, financial
condition or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 10, 2001, as part of a royalty payment to a licensor under a
license agreement, the Company issued 19,697 shares of its common stock to the
licensor. On April 10, 2001, in connection with the acquisition of all
outstanding capital stock of Industrial Automation, Inc., the Company issued
150,000 shares of its common stock to the two owners of Industrial Automation.
These issuances were made in reliance upon exemptions from the registration
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act of 1933
25
26
as transactions not involving a public offering. The Company reasonably believed
that the purchasers had such knowledge and experience in financial and business
matters to be capable of evaluating the risks and merits of the investment, and
the purchasers represented their intention to acquire the securities for
investment purposes only and not with a view to or for the sale in connection
with any unregistered distribution thereof. No broker or dealer was involved in
the transactions, and the securities were not publicly offered. The purchasers
had adequate access, through contractual provisions and/or their relationship
with the Company, to information about the Company and its business and
operations, and the securities. Appropriate restrictive legends were affixed to
the certificate issued to the purchasers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders, held on June 11, 2001, the
following proposals were submitted to and approved by the stockholders of the
Company:
PROPOSAL 1: To elect two directors, each for a three-year term
expiring at the 2004 Annual Meeting of Stockholders:
For Withhold
--- --------
W. Phillip Marcum 5,446,855 29,422
Basil M. Briggs 5,346,855 129,422
PROPOSAL 2: To approve amendments to the Company's 1998 Stock
Incentive Plan to increase the number of shares
authorized thereunder by 1,000,000 shares to an
aggregate of 1,750,000 shares, and to eliminate the
current limitation on the maximum number of shares
granted during any calendar year to any individual
participant:
For Against Abstain Not Voted
--- ------- ------- ---------
2,584,929 375,081 6,637 2,509,630
PROPOSAL 3: To ratify the appointment by the Board of Directors of
Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year ending December 31, 2001.
For Against Abstain
--- ------- -------
5,461,646 10,631 4,000
26
27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
Since March 31, 2000, the Company filed the following Current Report on
Form 8-K with the Securities and Exchange Commission:
Filing Date Item No Description
----------- ------- -----------
June 11, 2001 5,7 Sixth Amendment to Loan
and Security Agreement
27
28
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
METRETEK TECHNOLOGIES, INC.
Date: August 9, 2001 By: /s/ W. Phillip Marcum
-------------------------------------
W. Phillip Marcum
President and Chief Executive Officer
Date: August 9, 2001 By: /s/ A. Bradley Gabbard
-------------------------------------
A. Bradley Gabbard
Executive Vice President
and Chief Financial Officer
28