U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
(Name of Small Business Issuer in its charter)
FLORIDA 65-0794113
(State of incorporation) (I.R.S. Employer Identification No.)
3391 SOUTHEAST 14TH AVENUE, PORT EVERGLADES, FLORIDA 33316
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (954) 523-8985
Securities to be registered pursuant to 12(b) of the Act: NONE
Securities to be registered pursuant to 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE
(Title of Class)
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
ITEM 1. DESCRIPTION OF BUSINESS
-----------------------
BUSINESS
Jupiter Marine International Holdings, Inc. ("JMIH"), a Florida
corporation, was incorporated on May 19, 1998. JMIH's goal is to become a
consolidator as well as a builder in the highly fragmented marine industry. On
May 26, 1998, JMIH acquired all of the outstanding shares of common stock of
Jupiter Marine International, Inc. ("JMI"), a boat manufacturing company, which
was incorporated under the laws of the State of Florida on November 7, 1997.
JMIH and JMI will sometimes be collectively referred to as the "Company". The
Company's principle offices and manufacturing facilities are located in Port
Everglades, Florida. The Company's web site address is www.jupitermarine.com.
The Company believes that it has assembled a management team that is
not only capable of recognizing opportunities in the marine industry but can
also operate and enhance the value of opportunities in the marine industry.
Management believes that a tremendous number of potential consolidation
candidates can be found. Management also believes that the Company can find
"manufacturing customers" or unrelated manufacturers that may build and supply
the Company with proprietary parts and supplies for it can use in the assembly
and completion of Jupiter boats can be found. The Company intends to locate
consolidation candidates and manufacturing customers primarily through its
contacts within the marine industry and through its professional affiliations
and memberships in nationally recognized marine associations such as the
National Marine Manufacturers Association and the Marine Industries Association
of South Florida.
BOAT MODELS
The Company currently builds four outboard powered boats in three sizes
(the "Jupiter Line").
31' CENTER CONSOLE
The 31' Center Console is designed for the family fisherman and
provides what management of the Company believes is a quality offshore
performance while offering amenities and features not normally found in other
open boats. This model includes a private stand up compartment with 6'2"
headroom containing a vanity with sink and shower and room for optional marine
head.
<PAGE>
31" CUDDY CABIN
This is the same basic boat as the 31" Center Console that includes a
small cuddy cabin forward with cruising amenities and a comfortable 4-place
dinette that converts to a queen berth for sleeping.
27" CENTER CONSOLE
This model is available in either single or twin engines. It was added
to the line in order to enable the entry level boat buyer to acquire a Jupiter
boat at an affordable price. New features in the 27' Center Console design
include an integrated engine mounting platform, above deck livewell, transom
door, and a 6'2" berth built into the console department.
21' SHALLOW WATER SKIFF
The 21' Shallow Water Skiff is unlike "typical" flats boats. This is
due to its size and weight. Most typical flats boats range from 14' to 18' and
are substantially lighter in weight and construction. The greater size and
weight of the Jupiter 21' Shallow Water Skiff allows it to carry more passengers
and operate in rougher conditions than the typical flats boats. Light enough to
operate in shallow water, yet large and stable enough to run in open water or
offshore chop, this boat can also be marketed as a family runabout or a yacht
tender.
To further enhance its sport fishing boat line, the Company plans to
introduce a new 33' walk around cabin model based upon the proven 31' center
console hull design. This model will feature a deck design, which incorporates a
walk-in cabin, enclosed head with shower, and a full galley. With twin outboard
engine power this model will be offered as either a fishing boat for the serious
angler or as a purely recreational sport boat type cruiser. The Company is also
in the process of designing new 32 and 35 foot boats which the Company hopes to
eventually manufacture and sell as part of the Jupiter Line. The new boats will
feature diesel powered, inboard engines. The sale price of the new models will
range from approximately $160,000 to $300,000 depending on customization.
Although the boats are suitable for many different purposes, they are
primarily used for fishing and fishing related activities. The sales prices for
the boats range from $75,000 to $110,000 for the Jupiter 31 models, from $45,000
to $78,000 for the Jupiter 27, and from $24,000 to $39,000 for the Jupiter 21.
The Company provides each boat purchaser with a limited lifetime warranty.
MANUFACTURING
The Company's manufacturing plant is set up with five full length
assembly lines. Each line operates at a rate that is determined by sales and
demand. It is planned that each assembly line run at a consistent line rate so
that the work stations become repetitive and components can be assembled in
quantity more efficiently. A line rate can be increased or decreased by simply
adding or subtracting workers and material on the line. Production capacity is
sufficient to accommodate
-2-
<PAGE>
approximately 20 boats in various stages of construction at any one time.
Construction of a boat currently made, depending on size, takes approximately
five weeks.
The Company is currently on schedule to produce approximately 100 boats
annually and is operating at approximately 50% of its manufacturing capacity. In
order to build 200 boats annually, the Company would need to hire approximately
40 additional employees, both skilled and unskilled. Management believes its
relationship with its employees is good and does not foresee any difficulties in
hiring additional employees. The Company, with additional personnel, currently
has the ability to manufacture approximately 200 boats per year. The Company
believes it can further expand its manufacturing capacity by adding additional
plant space, equipment and tooling.
The Company owns over 60 different molds which are used interchangeably
depending on which model of boat the Company has agreed to build. Through
April 30, 2000, the Company has built 47 boats, all of which are seaworthy.
Jupiter's management team has built approximately 3,000 boats over the last 25
years, all of which were seaworthy.
The first phase of manufacturing involves creating the hulls and decks
of the boats which is accomplished by the hand "laying-up" (taking sheets of
fiberglass material and laying them in place along the bottom and up the hull of
a boat) of vinylester blended resins and high quality stitched, bi- directional
and quad-directional fiberglass material over a foam core in the molds.
Bi-directional fiberglass is a fabric type material that is made of fiberglass
strands and distributed in rolls, much the same as cotton fabrics. There are
many types and styles of fiberglass cloth, the most common being bi-directional,
which means the structural strands of material are woven in two directions
normally at right angles to each other. Quad-directional fiberglass is basically
the same material as bi-directional fiberglass with the difference being that
the structural strands of fiberglass are woven or knitted in four different
directions in a variety of combinations.
This procedure and components create a composite structure with strong
out and inner skins with a thicker, lighter core in between. The "laying-up" of
fiberglass by hand rather than using chopped fiberglass and mechanical
applicators results in superior strength and appearance. The resin used to bind
the composite structure together is a vinylester type, which is stronger, better
bonding and more flexible than the polyester resins used by most other
fiberglass boat manufacturers.
During the second phase of manufacturing, the fuel tanks and inner
liner (or deck), which is made of the same material as the hull, are installed
in the hull. Decks are bonded to the hulls using bonding agents, screws and
fiberglass to achieve a strong, unitized construction. The third phase involves
installing the console, wiring, electrical components, various accessories and
engines. The final segment involves installing custom accessories, upholstery,
seating, electronics and navigational aids.
The third phase involves installing the console, wiring, electrical
components, various accessories and engines. The final segment involves
installing custom accessories, upholstery, seating electronics and navigational
aids.
-3-
<PAGE>
DESIGN
The Jupiter Line's Deep-V hulls are specifically designed to perform at
high speeds in offshore sea conditions, while providing their passengers a
smooth, comfortable and dry ride. There is no lean or cavitation (vibration and
inefficiencies caused by boat propeller slippage occurring when a boat propeller
does not have solid contact with the water) in a turn.
The Jupiter Line's performance characteristics result from its
"posi-stern" hull design, developed by JMI which reduces drag, planes faster,
turns sharper, and increases fuel economy. This hull design, combined with its
stern lifting strakes, creates a variable dynamic lift that provides a level,
stable, and soft ride.
The additional increase in stern lift balances the hull on its lines
and allows the boat to raise on plane very quickly without a loss of visibility
from the helm. The resulting running angle allows the bow to cut through the
water at a sharper angle, which results in deflecting spray out, not up and for
a softer and drier ride that reduces pounding or hopping commonly associated
with boats.
The design and tooling for new boat models and improvements to existing
models is an integral part of the Company's business and will be continuously
ongoing. The time involved will be dependent on the magnitude of the project and
could range from three to twelve months. The anticipated cost in planning and
designing the Company's new boats is approximately $300,000. It is anticipated
that the costs of these projects will be funded with additional financing as
well as from cash flows from operations. The Company does not anticipate that
these costs will be borne by its customers.
JMI SALES AND MARKETING
JMI's marketing efforts will focus on Carl Herndon's name and
reputation in the boat manufacturing industry. Mr. Herndon has over 25 years of
marine experience. His background includes building high quality boats ranging
in length from 16' up to 80' in length and being appointed the C.E.O. of
Blackfin Yacht Corporation and Bertram Yachts, two highly regarded companies
within the marine industry. In addition to his boat building expertise, Herndon
has served as the President of the Marine Industries Association of South
Florida, was appointed to the Boating Advisory Council by Florida's Governor,
has served on numerous committees for the National Marine Manufacturers
Association, and has lobbied in Washington, DC on behalf of the marine industry.
JMI intends to market its boats in nationally circulated magazines and
trade publications including Boating Magazine, Sports Fishing, Florida
Sportsman, Motor Boating and Sailing and Saltwater Sportsman. JMI intends to
attend most major boat shows and exhibitions, as well as possibly sponsoring
boats in fishing tournaments. Boats are sold and distributed through authorized
marine dealers throughout the United States. These dealers are not exclusive to
the Company and may carry the boats of other companies. The territories served
by any dealer are not exclusive to the dealer. However, the Company uses
discretion in locating new dealers in an effort to protect the interests of the
existing dealers. The Company normally does not manufacture boats for inventory.
-4-
<PAGE>
Most boats are pre-sold to a dealer when entering the production line. The
Company currently has agreements with six boat dealers located in Dania,
Florida; Stuart, Florida; Wilmington, North Carolina; Neptune, New Jersey;
Mobile, Alabama; N. Weymouth, Massachusetts and is in the process of seeking
additional qualified boat retailers to act as dealers.
The Company delivers boats to its dealers on a cash on delivery basis.
However, approximately one-half of the Company shipments are made pursuant to
commercial dealer "floor plan financing" programs in which the Company
participates on behalf of its dealers. Under these arrangements, a dealer
establishes lines of credit with one or more third-party lenders for the
purchase of showroom inventory. When a dealer purchases a boat pursuant to a
floor plan arrangement, it draws against its line of credit and the lender pays
the invoice cost of the boat, net of shipping charges, directly to the Company.
The Company sells all of its boats through retail dealers. Through
April 30, 2000, the Company has sold a total of 47 boats consisting of:
o five 21' Shallow Water Skiffs;
o eight 27' Center Consoles; and
o an aggregate of thirty four 31' Center Consoles and Cuddy Cabins
EMPLOYEES
JMIH currently has no employees other than its officers and directors
who are not being compensated. JMI currently employs a total of 38 people 32 of
whom are directly involved in the boat manufacturing process and 6 of whom are
administrative and executive personnel. All officers and employees are
full-time. As JMI nears full operating capacity, estimated by the Company to be
in July 2000, JMI expects to employ 65 people in the boat manufacturing area.
ITEM 2. DESCRIPTION OF PROPERTY
-----------------------
The Company leases a 32,140 square foot facility located at 3391 S.E.
14th Avenue, Port Everglades, Florida. The facility houses the Company's boat
manufacturing operation and executive offices. The Company leases the facility
from Carl Herndon, the Company's President, Chief Executive Officer and
Director. The lease agreement requires the Company to pay monthly lease payments
of approximately $10,700.00 per month plus applicable taxes. The lease payments
are subject to a 5% annual increase. The lease terminates in May 2002. The
Company has an exclusive option to purchase the facility during certain periods
until November 1, 2001 at a price between $900,000 and $1,000,000.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND SIGNIFICANT EMPLOYEES
------------------------------------------------------------------
The following table sets forth the names, positions with JMIH and ages
of the executive officers and directors of JMIH. Directors will be elected at
JMIH's annual meeting of shareholders and serve for one year or until their
successors are elected and qualify. Officers are elected by the Board and their
terms of office are, except to the extent governed by employment contract, at
the discretion of the Board of Directors.
-5-
<PAGE>
NAME AGE POSITION HELD
---- --- -------------
Carl Herndon 60 Director, President and Chief Executive
Officer, Secretary
Larry Tierney 53 Director
SIGNIFICANT PERSONNEL
Carl Herndon, Jr. 32 Vice President Sales & Marketing JMI
Paul Douglas 56 Production Manager JMI
CARL HERNDON - Mr. Herndon has been President, Chief Executive Officer
and a Director of JMIH since its inception on May 19, 1998. Mr. Herndon has also
been President, Chief Executive Officer and a Director of JMI since May 15,
1998. Between 1973 and 1997, Mr. Herndon was President, Chief Executive Officer,
Director and sole shareholder of Blackfin Yacht Corporation, a Fort Lauderdale,
Florida based designer, manufacturer and seller of Sportfishing boats
("Blackfin"). Between 1993 and 1995, Mr. Herndon was president and Chief
Executive Officer of Bertram Yacht Corporation in Miami, Florida. During Mr.
Herndon's tenure as officer and director of Blackfin, Blackfin filed for Chapter
11 Bankruptcy Reorganization protection. The bankruptcy proceeding was
subsequently converted to a Chapter 7 proceeding.
LARRY TIERNEY - Mr. Tierney joined JMIH as a Director and Consultant in
January 1999. Since April 1997, Mr. Tierney is owner and operator of AAMCO
transmissions of Plant City, Florida. From March 1995 to March 1997, Mr. Tierney
was Chief Financial Officer of MAKO Marine International, Inc., a manufacturer
of high quality offshore fishing boats. From June of 1993 to March of 1995, Mr.
Tierney served as Chief Financial Officer of Chris Craft Boats, a wholly owned
subsidiary of Outboard Marine Corporation (OMC) a full line manufacturer of
power boats. From June 1991 to June 1993, Mr. Tierney acted as Chief Operating
Officer of Chris Craft boats. From August 1986 to June 1991, Mr. Tierney was Sr.
Vice President of Finance for Chris Craft.
CARL HERNDON, JR. - Mr. Herndon has been Vice President of Sales and
Marketing at JMI since October 1998 and joined JMI on a full-time basis in
January of 1999. From November 1997 to January 1998, Mr. Herndon was selling new
boats and brokering boats at Northside Marine Sales. From January 1992 to July
1997, Mr. Herndon was National Sales Manager for Blackfin Yacht Corporation.
From April 1987 to January 1992, Mr. Herndon was Production Manager for Blackfin
Yacht Corporation.
PAUL DOUGLAS - Mr. Douglas has been the Plant Manager for JMI since May
of 1998. From March 1987 to July 1996, Mr. Douglas was Facilities/Maintenance
Foreman for Blackfin Yacht Corporation. From 1980 to 1987, Mr. Douglas was
Maintenance Craftsman, First Class and Acting Foreman for Special Projects for
Tracor Marine.
-6-
<PAGE>
EMPLOYMENT AGREEMENTS
In November 1998, JMI entered into a five year employment agreement
with Mr. Herndon with 2 one year renewal options. The agreement obligates Mr.
Herndon to devote all his time to supervising, designing and manufacturing boats
for JMI as president and chief executive officer of the JMI. Mr. Herndon will
earn a base salary of $72,000 per year. Mr. Herndon's salary adjustments are
tied to the Company successfully reaching specific financial milestones.
Subsequent salary adjustments will be decided by the board of directors of the
Company. The employment agreement also entitles Mr. Herndon to an aggregate of
options to purchase 600,000 shares of common stock of the Company at prices
between $.50 and $1.00 per share over a period of five years. The employment
agreement includes standard non-compete and confidentiality provisions. Due to
Mr. Herndon's experience, the business of JMI and the Company will be largely
dependent on Mr. Herndon's experience and ability to design, manufacture and
sell boats produced by JMI.
In May 1999, JMI entered into a five year employment agreement with
Carl Herndon, Jr. with 2 one year renewal options. The agreement obligates Mr.
Herndon to devote all his time to supervising the sales and marketing of the
Company's boats as Vice President of Sales and Marketing. Mr. Herndon will earn
a base salary of $70,000 for the first year of the agreement, $85,000 for the
second year of the agreement, $100,000 for the third year of the agreement and a
salary to be determined by the Board of Directors of JMIH for years four, five
and any renewal period. The employment agreement includes standard non-compete
and confidentiality provisions.
ITEM 4. EXECUTIVE COMPENSATION
The following table sets forth information relating to the compensation
paid by the Company during the past two fiscal years to:
o the Company's President and Chief Executive Officer;
o each of the Company's executive officers who earned more than
$100,000 during the period from May 19, 1998 (inception) through
July 31, 1998; and
o each of the Company's executive officers who earned more than
$100,000 during the period from August 1, 1998 through July 31,
1999 (collectively, the "Named Executive Officers")
-7-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
============================================================================================================================
Annual Compensation Long-Term Compensation
------------------------------- -------------------------------------------------
Awards Payouts
----------------------- ----------------------
Securities
Other Under-
Annual Restricted Lying All Other
Name and Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) (#) ($) ($)
-------------------------- ----------- ----------- --------- ---------- ------------ ------------ ----------- -----------
<S> <C> <C>
Carl Herndon, Director
CEO and President(1) 8/98-7/99 $61,734
-------------------------- ----------- ----------- --------- ---------- ------------ ------------ ----------- -----------
5/98-7/98 $10,385
========================== =========== =========== ========= ========== ============ ============ =========== ===========
</TABLE>
(1) Does not include 850,000 shares of Common Stock of the Company
issued to Mr. Herndon as founder's shares.
-8-
<PAGE>
STOCK OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
---------------------------------------------------
Individual Grants
---------------------------------------------------
Percent of
Number Of Total
Securities Options/
Underlying SARs Granted Exercise Of Expiration
Name Options/SARs To Employees Base Price Date
Granted (#) In Fiscal Year (S/Sh)
---------------------- -------------- --------------- -------------- -----------
Carl Herndon, Director 150,000 25% $ .50 11/10/03
CEO and President(1)
---------------------- -------------- --------------- -------------- -----------
150,000 25% $ .625 11/10/03
---------------------- -------------- --------------- -------------- -----------
150,000 25% $ .75 11/10/03
---------------------- -------------- --------------- -------------- -----------
150,000 25% $ 1.00 11/10/03
====================== ============== =============== ============== ===========
OPTION EXERCISES AND HOLDINGS
-----------------------------
The following table sets forth information with respect to the exercise
of options to purchase shares of JMIH's common stock during the period from May
19, 1998 (inception) through July 31, 1999, of each person named in the Summary
Compensation Table and the unexercised options held as of the end of this
period.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
---------------------------------------------------------------------------------------------------------------------
Number of Value Of
Securities Unexercised
Underlying In-The-Money
Unexercised Options/SARs
Options/SARs At Fiscal Year-
Shares At Fiscal Year-End End ($)
Acquired On Value (#) Exercisable/
Exercise (#) Realized Exercisable/ Unexercisable
Name ($) Unexercisable
----------------------------------- --------------- ------------------ ----------------------- --------------------
<S> <C> <C> <C> <C>
Carl Herndon, Director, President N/A N/A 600,000 -0-
and CEO
----------------------------------- --------------- ------------------ ----------------------- --------------------
</TABLE>
ITEM 5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth certain information regarding the
Company's common stock beneficially owned on April 30, 2000, for (i) each
shareholder known by the Company to be the beneficial owner of five (5%) percent
or more of the Company's outstanding common stock, (ii) each of the Company's
executive officers and directors, and (iii) all executive officers and directors
as a
-9-
<PAGE>
group. On April 30, 2000, there were approximately 4,033,500 shares of Company
common stock, par value $.001 (the "Common Stock"), outstanding. This is not
including:
o an aggregate of 600,000 shares of Common Stock issuable upon the
exercise of options;
o 984,000 shares of Common Stock issuable upon the conversion of 328,000
shares of the Company's Series A Preferred Stock;
o 615,000 shares of the Company's Common Stock issuable upon the
conversion of 205,000 shares of the Company's Series B Preferred Stock;
o 885,000 shares of the Company's Common Stock issuable upon the
conversion of 245,000 shares of the Company's Series B Preferred Stock
issuable upon the exercise of warrants exercisable at $1.00; and
o shares of the Company's Common Stock issuable upon the conversion of
shares of the Company's Series C Preferred Stock.
<TABLE>
<CAPTION>
Number of Percentage of
Beneficially Owned Outstanding Shares
NAME Shares (1) Beneficially Owned
---- ---------- ------------------
<S> <C> <C>
Carl Herndon
3391 S.W. 14th Avenue
Port Everglades, FL 33316 1,487,500(1) 36.9%
Carl Herndon, Jr.
3391 S.W. 14th Avenue
Port Everglades, FL 33316 172,500 (2) 4.2%
Triton Holding International Corp.
700 S. Federal Highway, Suite 200
Boca Raton, FL 33433 500,000 (3) 12.3%
Donald B. Gasgarth
714 S.E. 8th Court
Delray Beach, FL 33483 666,000 (4) 16.5%
Jeffrey K. Zwitter
6680 Serena Lane
Boca Raton, FL 33432 216,000 (5) 5.3%
Four M International, Inc.
1980 Poison Oak, # 1850
Houston, TX 77004 300,000 (6) 7.4%
Alan Lyons
2521 Vestal Parkway East
Vestal, NY 13850 300,000 (7) 7.4%
Lawrence Tierney (8)
3391 S.W. 14th Avenue
Port Everglades, FL 33316 0 0.0%
Officers and Directors as a Group 1,660,000 41.2%
(3 persons)
</TABLE>
-10-
<PAGE>
(1) Mr. Herndon is a Director, President and Chief Executive Officer of
both JMI and the Company. Includes (i) 37,500 shares of Common Stock
issuable upon the conversion of 12,500 shares of Series A Convertible
Preferred Stock; and (ii) up to 600,000 shares of Common Stock issuable
upon the exercise of options at exercise prices between $.50 and $1.00
per share over a five year period beginning November 10, 1998.
(2) Carl Herndon, Jr. is Mr. Herndon's son and is JMI's Vice President of
Sales and Marketing. Includes 22,500 shares of Common Stock issuable
upon the conversion of 7,500 shares of Series A Convertible Preferred
Stock.
(3) Mr. Gasgarth and Mr. Zwitter, principal shareholders of JMIH, are also
principal shareholders and Directors of Triton International Holding
Corp. ("Triton"). Does not include (i) up to 1,400,000 shares of Common
Stock that may be issued upon conversion of the Triton Note; (ii)
66,000 shares of Common Stock owned by Mr. Gasgarth; and (iii) 66,000
shares owned by Mr. Zwitter. Includes 50,000 shares of Common Stock
subject to an option granted to Mr. Tierney.
(4) Includes 300,000 shares of Common Stock issuable upon the conversion of
100,000 shares of Series A Convertible Preferred Stock of the Company,
and (ii) 300,000 shares of Common Stock issuable upon the exercise of
warrants to purchase 100,000 Series B Convertible Preferred Stock at
$1.00 until November, 2004, subsequently convertible into Common Stock
at a 3:1 ratio. Does not include 500,000 shares of Common Stock owned
by Triton Holding International Corp. in which Mr. Gasgarth is a
principal shareholder, and Director.
(5) Includes 75,000 shares of Common Stock issuable upon the conversion of
25,000 shares of Series A Preferred Stock of the Company, and (ii)
75,000 shares of Common Stock issuable upon the exercise 25,000
warrants to purchase Series B Convertible Preferred Stock at $1.00
until November, 2004, subsequently convertible into Common Stock at a
3:1 ratio. Does not
-11-
<PAGE>
include 500,000 shares of Common Stock owned by Triton Holding
International Corp., in which Mr. Zwitter is a principal shareholder
and Director.
(6) Includes 150,000 shares of Common Stock of the Company issuable upon
the conversion of 50,000 shares of Series A Preferred Stock and (ii)
150,000 shares of Common Stock issuable upon the exercise of 50,000
warrants to purchase Series B Convertible Preferred Stock at $1.00
until November, 2004, subsequently convertible into Common Stock at a
3:1 ratio.
(7) Includes 150,000 shares of common stock of the Company issuable upon
the conversion of 50,000 shares of Series B Convertible Preferred
Stock.
(8) Mr. Tierney is a Director of JMIH. Mr. Tierney is also employed by
Triton Holding International Corp. Does not include options to purchase
50,000 shares of Common Stock of JMIH at $.40 per share from Triton
Holding International Corp.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
General
Management's discussion and analysis contains various "forward-looking
statements" within the meaning of the Securities and Exchange Act of 1934. Such
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"expect," "anticipate," "estimate" or "continue" or use of negative or other
variations or comparable terminology.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.
The Company also notes that comparison of the results of operation for:
1) fiscal year ended July 31, 1998 to the fiscal year ended July 31, 1999
(approximately nine months); and 2) nine months ended April 30, 1999 to April
30, 2000 may not provide meaningful comparisons, as the Company was not in
normal business operation during all of fiscal 1998 and most of fiscal 1999.
Nine Months Ended April 30, 2000
Acquisition
During the quarter ended April 30, 2000 the Company, through its
subsidiary, Phoenix Yacht Corporation, acquired the molds and tooling for
Phoenix Marine's 34' and 38' models along with the Phoenix trademark in an all
cash transaction. Phoenix marine is a 24-year-old manufacturer of offshore
sportfishing boats located in Hialeah, Florida.
The new Phoenix 35' and 38' flybridge convertible models will be built
in the Company's Port Everglades, Florida manufacturing facility and will be
distributed through the Company's established dealer organization.
Plan of Operations
Management's operating plan for the fiscal year ending July 31, 2000 is
to be at a slight loss. Sales are expected to be about $5,339,000 with a gross
margin of approximately $1,080,000 (20.2%). Selling, general and administrative
expenses are projected to be approximately $1,100,000.
Net Sales
The Company's net sales for the quarter ended April 30, 2000 (the third
quarter of the fiscal year ending July 31, 2000) were $1,857,607, approximately
$523,000 better than expectations. The demand for the Company's products
remained strong during the third quarter and has continued into the fourth
quarter. The Company has ten dealers with 13 selling locations.
Cost of Products Sold
The gross income for the quarter was $317,387 or 17.1% of net sales.
The percentage of net sales has shown improvement through out the year.
Manufacturing techniques have continued to improve, as the production crew
became more familiar with the manufacturing process. Overhead spending was
better than expectations when based on a percentage of sales.
-12-
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $295,173 for the
quarter ended April 30, 2000 were $67,962 less than the similar quarter of last
year. For the nine months ended April 30, 2000 expenses were $768,112 compared
to $695,668 for the first nine months of last fiscal year. As stated previously,
the Company devoted the majority of fiscal year 1999 to reorganizing the
Company, consequently selling, general and administrative expenses were below
fiscal year 2000.
Equity Financing
During the quarter ended January 31, 2000 the Company commenced a
private placement of Series C Cumulative Preferred Stock at a price of $1.00 per
share. The offering terminated May 31, 2000. The Company sold 619,860 preferred
shares and had net proceeds of approximately $540,000. The proceeds from this
offering will be used for inventory, tooling and demonstration models, repayment
of indebtedness, sales, marketing, web-site development and working capital.
Year Ended July 31, 1999
Net Sales
The Company had net sales for the year ended July 31, 1999 of
$1,201,375 compared to $76,955 for the year ended July 31, 1998. From inception
through July 31, 1998 and into the first nine months of fiscal 1999 the Company
was primarily involved in relocating its manufacturing facility and producing
boats that were an assumed liability of Jupiter 31, Inc. Revenues through April
1999 were primarily related to the delivery of these boats. Effective May 1999
the Company delivered all but one boat pursuant to the assumed liability of
Jupiter 31, Inc. The Company has net sales to dealers of $1,019,385 for the
year ended July 31, 1999.
Cost of Sales
Cost of sales for the year ended July 31, 1999 was $850,494, 23.9% of
net sales. For the year ended July 31, 1998 costs of sales was $115,948, which
exceeded net sales by $38,993. The reason for this unusual occurrence during
1998 is that selling prices, established by Jupiter 31, Inc., were at
unrealistically low levels and were locked in by prior agreement with customers.
The Company has identified certain production inefficiencies which,
when adjusted should lower cost of sales. The Company believes there are various
tooling constraints that, if improved, would reduce labor costs. A study of new
purchasing alternatives is underway that may reduce the cost of material used.
General and Administrative Expenses
The Company, even though it was not selling boats to outside dealers
until May of 1999, still incurred expenses for management, supervision, facility
expenses and depreciation while it was producing boats to satisfy the Jupiter
31, Inc. assumed liability.
Liquidity and Capital Resources
The Company, since its inception, has experienced severe negative cash
flow and has met its cash requirements by issuing, through private placement,
its common and preferred stock. Additional funds were generated by borrowings of
$400,000. The Company anticipates that funds received from these sources, cash
generated from operations and additional financing of $1,000,000 should be
sufficient to satisfy the Company's contemplated cash requirements for at least
the next 12 months. After such time, the Company anticipates that cash generated
from operations will be sufficient to fund its operations, although there can be
no assurances that this will be the case.
The Company does not anticipate any significant purchase of equipment.
The number and level of employees at April 30, 2000 should be adequate to
fulfill the production schedule.
Results of Operations
As stated previously, from inception to May 1999 the Company was
primarily involved in relocating its manufacturing facility and producing boats
that were an assumed liability of Jupiter 31, Inc. Consequently the Company
suffered significant operating and cash flow losses.
-13-
<PAGE>
ITEM 7. INTEREST OF MANAGEMENT AND OTHER CERTAIN TRANSACTIONS
-----------------------------------------------------
CERTAIN TRANSACTIONS
Mr. Herndon personally owns the Company's manufacturing facility in
Port Everglades, Florida (the "Manufacturing Facility"). On May 20, 1998, the
Company entered into a lease agreement (the "Lease Agreement") with Mr. Herndon
in which the Company leases the Manufacturing Facility for a period of five
years at $4.50 per square foot or $10,714 per month (the "Lease Amount"). The
Company believes that since the Lease Amount is at fair market value, the Lease
Agreement between the Company and Mr. Herndon was consummated on terms no less
favorable than with an unrelated party. On November 1, 1998 the Company
negotiated a three year option with Mr. Herndon to purchase the property. During
year one, the price is $900,000, year two $950,000 and year three $1,000,000.
LOANS FROM TRITON HOLDINGS INTERNATIONAL CORP.
In November 1998, the Company initiated a loan for $350,000 from Triton
Holdings International Corp. ("Triton"). Two principal shareholders and
Directors of Triton are principal shareholders of the Company. The promissory
note ("the Note") issued to Triton by the Company evidencing the loan accrues
interest at 10% per annum. The note is convertible into shares of Common Stock
of the Company, at the option of Triton at $.50 per share before January 14,
2000, at $.375 per share between January 14, 2001 and January 14, 2002, and at
$.25 after January 14, 2003. The note matures on January 14, 2003, Triton also
received 500,000 shares of Common stock as additional incentive for making the
loan.
The Company also entered into a 5 year management agreement with Triton
under which Triton is to perform general business consulting services in
connection with the Company's conducting of its business, including, but not
limited to, development and maintenance of internal bookkeeping functions,
business planning, consulting and advice with respect to structure and expansion
of the Company. Don Gasgarth and Jeff Zwitter are directors and principle
shareholders of Triton. Messrs. Gasgarth and Zwitter are also principle
shareholders of the Company. Larry Tierney, a director of the Company, is an
employee of Triton. In consideration for its services, the Company will pay
Triton a monthly fee of $5,000. The Company and Triton arrived at this fee by
estimating Triton's service hours to the Company at 100 hours per month and
valuing their services
-14-
<PAGE>
at $50.00 per hour. The Company believes this fee is competitive with consulting
arrangements in the marine industry. To date, Triton has provided services to
the Company in excess of 100 hours per month..
Between February 1999 and March 1999, Premier Global, Inc., a company
controlled by Messrs. Zwitter and Gasgarth loaned the Company $59,000 pursuant
to the terms of a promissory note. The note accrued interest at 12% per annum.
On April 8, 1999, the Company paid $60,000 satisfying in full its obligation.
ITEM 8. DESCRIPTION OF SECURITIES
-------------------------
COMMON STOCK
The authorized capital stock of JMIH currently includes 50,000,000
shares of Common Stock, par value $.001 per share. The holders of Common Stock:
o have equal ratable rights to dividends from funds legally
available therefor, when, as and if declared by the Board of
Directors of JMIH;
o are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of JMIH;
o do not have preemptive subscription or conversion rights and there
are no redemption or sinking fund provisions applicable thereto;
and
o are entitled to one vote per share on all matters on which
shareholders may vote at all meetings of shareholders.
All shares of Common Stock now outstanding are fully paid and
non-assessable. The holders of shares of JMIH's Common Stock do not have
cumulative voting rights, which means that the holders of more than 51% of such
outstanding shares, voting for the election of Directors, can elect all of the
Directors to be elected, if they so choose and in such event, the holders of the
remaining shares will not be able to elect any of JMIH's Directors. JMIH's Board
of Directors is empowered to take all actions necessary to increase the number
of shares authorized of JMIH as necessary, and subject to appropriate financing
arrangements, intends to alter the capital stock structure of JMIH.
PREFERRED STOCK
JMIH is authorized to issue 5,000,000 shares of preferred stock with
such designations, rights and preferences as may be determined from time to time
by the Board of Directors. Accordingly, the Board of Directors is empowered,
without shareholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights which could adversely effect the
voting power or other rights of the holders of the JMIH's Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of JMIH.
-15-
<PAGE>
SERIES A PREFERRED STOCK
The Board of Directors of JMIH has designated 500,000 shares of the
Corporation's authorized preferred stock as Series A Convertible Preferred Stock
(the "Series A Preferred Stock"). There were 328,000 shares of Series A
Preferred Stock issued and outstanding as of July 31, 1999.
DIVIDENDS. The holders of outstanding Series A Preferred Stock shall be
entitled to receive cumulative dividends at the annual rate of 10% based on the
stated value per share, when and if declared by the Board of Directors.
Dividends are payable quarterly on the fifteenth day of April, July, October and
January of each year (the "Dividend Payment Date"). Any accrued interest on
unpaid dividends shall be paid in full or in kind in Series B Preferred Stock
valued at $1.00 as payment in October of each year. The Series A Preferred Stock
shall also entitle the holders thereof to participate, pro rata, in dividends
paid on outstanding shares of Common Stock. The Series A Preferred Stock has
rights to the assets of the Company superior to those of the Series B Preferred
Stock and Common Stock upon the liquidation, dissolution, or winding up of the
Company in an amount equal to $1.00 per share of Series A Preferred Stock.
REDEMPTION. JMIH may redeem the Series A Preferred Stock at a
redemption price of $1.20 per share after providing 120 day prior written notice
to the holders thereof ("Redemption Notice"). The holders of the Series A
Preferred Stock will have 15 days from receiving such Redemption Notice to
convert the Series A Preferred Stock into Common Stock.
VOTING RIGHTS. Holders of the Series A Preferred Stock shall be
entitled to vote with the holders of the Common Stock as a single class on all
matters presented for a vote to the shareholders of the Common Stock. The number
of votes per share of Series A Preferred Stock which can be cast will equal the
number of shares of Common Stock into which each share of Series A Preferred
Stock may be converted.
CONVERSION. Subject to adjustment for mergers, stock splits and stock
dividends, the holders of the Series A Preferred Stock can, at their option,
convert the Series A Preferred Stock into three shares of Common Stock at
any time. In addition, each outstanding share of Series A Preferred Stock will
automatically convert into three shares of Common Stock (1) upon the fifth
anniversary of the date of issue if such shares are not converted prior to such
time, or (2) at such time as a registration statement registering for sale
under the Securities Act of 1933, as amended, the shares of Common Stock
issuable upon such conversion of the Series A Preferred Stock is declared
effective by the Securities and Exchange Commission.
SERIES B PREFERRED STOCK
The Board of Directors of JMIH has designated 205,000 shares of JMIH's
authorized Preferred Stock as Series B Convertible Preferred Stock all of which
are issued and outstanding (the "Series B Preferred Stock"). With the exception
of the fact that the right of the holders of the Series B Preferred Stock is
subordinate to the rights of the holders of the Series A Preferred Stock
-16-
<PAGE>
to the assets of the Company upon liquidation, the Series A Preferred Stock and
the Series B Preferred Stock is for all material purposes identical.
SERIES C PREFERRED STOCK
The Board of Directors will designate shares of JMIH's authorized
Preferred Stock as Series C Convertible Preferred Stock (the "Series C Preferred
Stock"). The Company is currently undertaking a private placement of its Series
C Preferred Stock. With the exception of the fact that the rights of the holders
of the Series C Preferred Stock are subordinate to the rights of the holders of
the Series A Preferred Stock and the Series B Preferred Stock to the assets of
the Company upon liquidation, the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock are for all material purposes identical.
WARRANTS
There are currently 295,000 warrants to purchase 295,000 shares of
Series B Preferred Stock outstanding exercisable for a period of five years at a
price of $1.00 per share. There are currently 225,000 warrants to purchase
225,000 shares of Common Stock at $.48 per share outstanding exercisable for
five years.
CERTAIN FLORIDA LEGISLATION
Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority of a
corporation's disinterested shareholders. The Florida Affiliated Transactions
Act generally requires super majority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of the outstanding voting shares of the corporation (or their
affiliates). Florida law and JMIH's Articles and Bylaws also authorize JMIH to
indemnify JMIH's directors, officers, employees and agents. In addition, JMIH's
Articles and Florida law presently limit the personal liability of corporate
directors for monetary damages, except where the directors (i) breach their
fiduciary duties; and (ii) such breach constitutes or includes certain
violations of criminal law, a transaction from which the directors derived an
improper personal benefit, certain unlawful distributions or certain other
reckless, wanton or willful acts or misconduct.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF JMIH'S ARTICLES OF INCORPORATION
-------------------------------------------------------------------------------
AND BYLAWS
----------
The preceding paragraph, and above under the Section entitled
"Preferred Stock", may be deemed to have an anti-takeover effect and may delay,
defer or prevent a tender offer or takeover attempt, including attempts that
might result in a premium being paid over the market price for the shares held
by shareholders. Despite the belief of JMIH as to the benefits to shareholders
of these provisions of JMIH's Articles of Incorporation, these provisions may
also have the effect of discouraging a future takeover attempt which would not
be approved by JMIH's Board, but pursuant to which the shareholders may receive
a substantial premium for their shares over then current market prices. As a
result, shareholders who might desire to participate in such a transaction may
not have any opportunity to do so. Such provisions will also render the removal
of JMIH's Board of Directors and management more difficult and may tend to
stabilize JMIH's stock price, thus limiting gains which might otherwise be
reflected in price increases due to a potential merger or acquisition. The Board
of Directors, however, has concluded that the potential benefits of these
provisions outweigh the possible disadvantages. Pursuant to applicable
regulations, at any annual or special meeting of its shareholders, JMIH may
adopt additional Articles of Incorporation provisions regarding the acquisition
of its equity securities that would be permitted to a Florida corporation.
-17-
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
-------------------------------------------------------------------
OTHER STOCKHOLDER MATTERS
-------------------------
Although JMIH has made application to permit quotation to be made on
the Over-the-Counter Bulletin Board for its shares of Common Stock, there is
currently no public trading market for JMIH's Common Stock. The transfer agent
for JMIH's Common Stock is Florida Atlantic Stock Transfer, Inc., 7130 Nob Hill
Road, Tamarac, FL 33321.
JMIH has never paid cash dividends on its Common Stock. JMIH presently
intends to retain future earnings, if any, to finance the expansion of its
business and does not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on JMIH's earnings,
capital requirements, expansion plans, financial condition and other relevant
factors.
ITEM 2. LEGAL PROCEEDINGS
-----------------
There are no significant material legal proceedings filed, or to the
Company's knowledge, threatened against the Company. However, Jupiter 31, Inc.,
the company from which JMI purchased the assets the Company now uses to operate
its boat manufacturing business, is the subject of tax lien proceedings
instituted by the IRS. In addition, Jupiter 31, Inc. failed to satisfy certain
financial obligations with other parties which were delinquent. As such, both
the IRS and any other creditors of Jupiter 31, Inc. may have rights in the
assets of Jupiter 31, Inc. superior to those the of the Company. While
management of the Company has been informed by the IRS that the liens will be
discharged, the Company has not received a formal discharge notice to date.
Although management of the Company believes that neither the IRS nor any
potential third party claims exist, there can be no assurance that claims will
not be made against the assets.
On October 4, 1999, Windjet Manufacturing, LLC ("Windjet") filed a
lawsuit against the Company alleging the negligent storage of its property which
resulted in a theft. Windjet claims losses of approximately $100,000. A written
agreement between the Company and Windjet required that Windjet procure its own
insurance on the property. The matter has been presented to the Company's
insurance carrier to determine coverage and defense costs.
On May 7, 1998 JMI filed a civil lawsuit against Joseph Maran and
Jupiter 31, Inc., for breach of contract, fraudulent inducement, conspiracy to
defraud, and breach of employment. While the Company is seeking damages in
excess of $250,000, the suit is not presently being pursued since Jupiter 31,
Inc., has no assets, and Joseph Maran has filed personal bankruptcy.
On August 27, 1999, subsequent to JMI's action against Mr. Maran and
Jupiter 31, Inc., Mr. Maran and Sandra Carter, the former owner of Jupiter 31,
Inc. and girlfriend of Mr. Maran, respectively, filed a lawsuit against JMI
requesting rescission, specific performance and negligent infliction of
emotional distress related to the asset purchase of Jupiter 31, Inc. and Mr.
Maran's employment agreement with JMI. They are seeking the return of 1,000,000
shares of Common
-18-
<PAGE>
Stock of JMI which were revoked by the Company and other damages. Mr. Maran
filed a Chapter 7 Bankruptcy Petition on February 1, 1999. Mr. Maran and Ms.
Carter are being represented by counsel retained by the bankruptcy trustee. The
Company intends to vigorously defend the complaint. At this date, the Company
can not opine on any possible outcome.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
A series of two related transactions occurred in May 1998 as part of
the organization of JMIH and acquisition of JMI. While one of the transactions
was done using the exemption provided by Rule 504 rather than 4(2) (see below),
each of the transactions which basically occurred simultaneously were valued at
a nominal amount considering the financial condition of JMI and JMIH at that
moment. This nominal value was par value. The Company valued the transactions at
par since JMI and JMIH were operating at losses and were in debt. These two
transactions are as follows:
o On May 29, 1998, JMIH issued an aggregate of 975,000 shares of
Common Stock after giving effect to the return of 490,000
shares of Common Stock to six founders and officers of JMIH.
These founders and officers had a pre-existing relationship
with the JMIH before they were offered shares of Common Stock.
The founders and officers also had access to financial and
other information concerning the Company and had the
opportunity to ask questions concerning the Company and its
operations. The Company issued these shares relying upon the
exemption from registration requirements of the Act provided
by Section 4(2) of the Act.
o On May 29, 1998, JMIH completed an exchange offer with the
shareholders of JMI in which an aggregate of 460,000 shares of
Common Stock of JMIH were issued to six (6) accredited
investors in exchange for an aggregate of 1,150,000 shares of
Common Stock in JMI. Pursuant to this transaction, five (5) of
the accredited investors of JMI received an aggregate of
360,000 shares of Common Stock of JMIH in exchange for 900,000
shares of Common Stock in JMI pursuant to the exemption from
registration provided by Rule 504 of Regulation D promulgated
under the Act. These five (5) accredited investors each had
access to financial and other information concerning the
Company, had the opportunity to ask questions concerning the
Company and had a pre-existing relationship with JMIH through
on-going negotiations during the exchange offer and,
accordingly, no solicitation or advertisement was involved.
The sixth accredited investor, who was the president of JMI,
received an aggregate of 100,000 shares of Common Stock in
JMIH in exchange for 250,000 shares of Common Stock in JMI
pursuant to the exemption from registration provided by
Section 4(2) of the Act. The sixth accredited investor had
access to financial and other information concerning the
Company, had the opportunity to ask questions concerning the
Company and had a pre- existing relationship with JMIH through
on-going negotiations during the exchange offer and,
accordingly, no solicitation or advertisement was involved.
-19-
<PAGE>
Between June 1998 and September 1998, JMIH completed a private offering
of an aggregate of 205,000 shares of Common Stock to 14 investors, 11 of whom
were accredited, pursuant to the exemption from registration provided by Rule
504 of Regulation D promulgated under the Act at an offering price of $1 per
share. Solicitations were made by directors and officers of the Company. These
investors received a disclosure document and financial information concerning
JMIH before they were sold securities. The investors in this offering
subsequently agreed to convert the 205,000 share of Common Stock into an equal
number of shares of JMIH's Series B Preferred Stock for no additional
consideration.
In November 1998, JMIH issued 295,000 shares of Series A Convertible
Preferred Stock and Warrants to purchase 295,000 shares of JMIH's Series B
Preferred Stock to 10 investors, 9 of whom were accredited. The shares of Series
A Preferred and warrants were issued in exchange for promissory notes issued by
JMI in the aggregate amount of $295,000 and Warrants to purchase 295,000 shares
of JMI's Common Stock at $1 per share. The individuals had access to financial
and other information concerning JMIH and had the opportunity to ask questions
concerning JMIH and its operations. The Company issued these shares relying upon
the exemption from registration requirements of the Act provided by Section 4(2)
of the Act.
In November 1998, JMIH issued 500,000 shares of Common Stock to Triton
Holdings International Corporation as an incentive to make a loan of $350,000 to
JMIH. It is evidenced by a promissory note whose interest at a rate of 10% per
annum and is convertible into shares of Common Stock at the option of Triton at
50 cents per share before January 14, 2000, and at $.375 a share between January
14, 2001 and January 14, 2002, and at $.25 per share after January 14, 2003.
Triton Holdings International Corporation had a prior existing relationship with
the Company and had access to financial and other information concerning the
Company. It had the opportunity to ask questions concerning the Company and its
operations. The Company issued these shares relying upon the exemption from the
registration requirements of the Act provided by Section 4(2) of the Act.
On November 6, 1998, JMIH issued 150,000 shares of Common Stock to an
officer of JMIH in consideration for services performed which were valued at
$30,000. These services included sales and marketing services as a vice
president of the Company. The officer had access to financial and other
information concerning the Company and had the opportunity to ask questions
concerning the Company and its operations. The Company issued these shares
relying upon the exemption from the registration requirements of the Act
provided by Section 4(2) of the Act.
Between February 1999 and March 1999, JMIH issued an aggregate of
1,948,500 shares of Common Stock to 65 investors, 43 of whom were accredited, at
an offering conducted in accordance with Rule 504 of Regulation D promulgated
under the Act at an offering price of $.40 per share. The majority of the
investors were affiliates of the Company or its officers and directors. A
limited number of investors were contacted by Sterling Financial Investment
Group, Inc., a placement agent for the Company in connection with the financing
who received warrants to purchase 225,000 shares of the Company's Common Stock.
All investors received a disclosure document and financial information
concerning JMIH before they were sold securities. JMIH received gross proceeds
of $779,400 from the offering.
In late October, 1999 the Company commenced a private placement of its
Series C Preferred Stock. The Company is offered 1,250,000 shares of Series C
Preferred Stock at $1.00 per share. The offering terminated May 31, 2000. The
Company sold 619,860 shares and received net proceeds of approximately $540,000.
The Company believes that this offering was conducted in accordance with Rule
506 of Regulation D under the Securities Act.
-20-
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The Florida Business Corporation Act (the "Corporation Act") permits
the indemnification of directors, employees, officers and agents of Florida
corporations. The JMIH's Articles of Incorporation (the "Articles") and Bylaws
provide that the JMIH shall indemnify its directors and officers to the fullest
extent permitted by the Corporation Act. Insofar as indemnification for
liabilities arising under the Act may be permitted to directors, officers or
persons controlling JMIH pursuant to the foregoing provisions, JMIH has been
informed that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling JMIH
pursuant to the foregoing provisions, JMIH has been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as express in the act and is therefore unenforceable.
The Articles of Incorporation and Bylaws of JMIH require JMIH to
indemnify its Directors and officers to the fullest extent permitted by the
Business Corporation Act of the State of Florida.
The above indemnification provisions notwithstanding, JMIH is aware
that insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling JMIH
pursuant to the foregoing provisions, JMIH has been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as express in the act and is therefore unenforceable.
PART F/S
The financial statements and supplementary data are included herein.
FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
The following consolidated financial statements of JMIH, include the
audited balance sheet at July 31, 1999 and the related audited statements of
operations, changes in capital deficiency and cash flows for the period
beginning November 18, 1997 through July 31, 1999.
-21-
<PAGE>
JUPITER MARINE
INTERNATIONAL HOLDINGS,
INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL
STATEMENTS
July 31, 1999 and 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGES
-----
<S> <C>
Independent Auditor's Report F-1
Consolidated Balance Sheets F-2-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) F-5-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8-14
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Jupiter Marine International Holdings, Inc. and subsidiary
Fort Lauderdale, Florida
We have audited the accompanying consolidated balance sheets of Jupiter
Marine International Holdings, Inc. and subsidiary as of July 31, 1999 and 1998,
and the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for the period from November 18, 1997,
(inception) through July 31, 1998 and for the year ended July 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Jupiter
Marine International Holdings, Inc. and subsidiary as of July 31, 1999 and 1998,
and the results of its operations and its cash flows for the period from
November 18, 1997, (inception) through July 31, 1998 and for the year ended July
31, 1999, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
12 to the consolidated financial statements, the Company has sustained net
operating losses, has deficit cash flows from operations, and working capital
deficiencies at July 31, 1999 and 1998, all of which raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
these matters are described in Note 12. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
KEEFE, McCULLOUGH & CO., LLP
Fort Lauderdale, Florida
September 10, 1999
F-1
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
July 31, 1999 and 1998
A S S E T S
<TABLE>
<CAPTION>
1999 1998
----------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 59,351 $ 2,539
Accounts receivable 1,736 411
Inventories 421,191 330,810
Prepaid expenses 11,749 15,385
-------------- --------------
Total current assets 494,027 349,145
-------------- --------------
PROPERTY AND EQUIPMENT, at cost or allocated cost:
Boat molds 822,181 822,181
Leasehold improvements 114,659 --
Machinery and equipment 97,804 39,700
Office equipment 8,406 7,000
-------------- --------------
1,043,050 868,881
Less accumulated depreciation 272,821 86,888
-------------- --------------
Total property and equipment 770,229 781,993
-------------- --------------
OTHER ASSETS:
Deposits 24,000 --
-------------- --------------
Total other assets 24,000 --
-------------- --------------
Total assets $ 1,288,256 $ 1,131,138
============== ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-2
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
July 31, 1999 and 1998
L I A B I L I T I E S A N D S T O C K H O L D E R S '
E Q U I T Y (D E F I C I T)
<TABLE>
<CAPTION>
1999 1998
----------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 146,481 $ 19,570
Payroll taxes payable 33,125 47,099
Accrued expenses 82,877 32,049
Customer deposits 248,386 156,189
Current portion of debt 50,000 --
Warranty reserve 50,553 49,084
Other current liabilities -- 604,406
-------------- --------------
Total current liabilities 611,422 908,397
-------------- --------------
DEBT, less current portion 350,000 295,000
-------------- --------------
Total liabilities 961,422 1,203,397
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8) -- --
STOCKHOLDERS' EQUITY:
Capital stock, 5,000,000 shares of $ .001 par value preferred stock
authorized, 500,000 shares designated as 10% cumulative Series A preferred
stock, $ .001 par value ($ 328,000 aggregate liquidation preference),
328,000 shares issued and outstanding 328 --
Capital stock, 205,000 shares designated as 10% cumulative Series B preferred
stock, $ .001 par value ($ 205,000 aggregate liquidation preference), 205,000
shares issued and outstanding 205 --
Capital stock, 50,000,000 shares of $ .001 par value common stock authorized,
4,033,500 and 2,130,000 shares issued and outstanding as of July 31, 1999 and
1998, respectively 4,034 2,130
Additional paid-in capital 1,357,068 204,795
Accumulated deficit (1,034,801) (279,184)
-------------- --------------
Total stockholders' equity 326,834 (72,259)
-------------- --------------
Total liabilities and stockholders' equity $ 1,288,256 $ 1,131,138
============== ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-3
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period From November 18, 1997 (inception)
through July 31, 1998 and for the Year Ended July 31, 1999
<TABLE>
<CAPTION>
Period from
November 18,
1997
(inception)
Year ended through
July 31, 1999 July 31, 1998
------------- -------------
<S> <C> <C>
SALES $1,201,375 $ 76,955
COST OF SALES 850,494 115,948
--------- ---------
Gross profit (loss) 350,881 (38,993)
GENERAL AND ADMINISTRATIVE EXPENSES, including
provision for depreciation of $ 185,933 and $ 86,888 992,077 234,632
--------- ---------
Loss from operations (641,196) (273,625)
OTHER INCOME (EXPENSE):
Other income 13,642 86
Interest expense (128,063) (5,645)
--------- ---------
Total other income (expense) (114,421) (5,559)
--------- ---------
Loss before provision (credit) for income taxes (755,617) (279,184)
PROVISION (CREDIT) FOR INCOME TAXES (Note 5) -- --
--------- ---------
Net loss $(755,617) $(279,184)
========= =========
Earnings (loss) per common share - basic $ (.09) $ (.14)
========= =========
Earnings (loss) per common share - diluted $ (.07) $ (.14)
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For the Period From November 18, 1997 (inception)
through July 31, 1998 and for the Year Ended July 31, 1999
<TABLE>
<CAPTION>
Preferred Preferred Additional
Stock Stock Common Paid-In Accumulated
Series A Series B Stock Capital Deficit
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCES,
November 18,
1997 (inception) $ -- $ -- $ -- $ -- $ --
Issuance of 125,000 shares
of common stock to
founders -- -- 125 -- --
Issuance of 850,000 shares
of common stock to Carl
Herdon, Sr. -- -- 850 -- --
Issuance of 490,000 shares to
Atlantis Capital Partners, Inc.
(these share were subsequently
canceled) -- -- 490 -- --
Issuance of 460,000 shares
of common stock in exchange
for old JMI shares -- -- 460 -- --
Issuance of 205,000 shares
of common stock (subsequently
exchanged for 205,000 Series
B Preferred shares -- -- 205 204,795 --
Net loss for the period
ended July 31, 1998 -- -- -- -- (279,184)
------------- ------------- ------------- ------------- -------------
BALANCES,
August 1, 1998 -- -- 2,130 204,795 (279,184)
Cancellation of shares
issued to Atlantis
Capital Partners, Inc. -- -- (490) -- --
Issuance of 150,000
shares of common stock
to Carl Herdon, Jr. for
services rendered to the
Company -- -- 150 29,850 --
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(continued)
For the Period From November 18, 1997 (inception)
through July 31, 1998 and for the Year Ended July 31, 1999
<TABLE>
<CAPTION>
Preferred Preferred Additional
Stock Stock Common Paid-In Accumulated
Series A Series B Stock Capital Deficit
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of 295,000
shares of Series A
preferred stock in
exchange for canceling
$ 295,000 in promissory
notes 295 -- -- 294,705 --
Issuance of 33,000 shares
of Series A preferred
stock for services
rendered to the Company 33 -- -- 32,967 --
Issuance of 500,000
shares of common stock
to Triton Holdings
International Corp. in
connection with a loan
to the Company -- -- 500 99,500 --
Issuance of 205,000 shares
of Series B preferred
stock in exchange for
205,000 shares of common
stock -- 205 (205) -- --
Issuance of 1,948,500 shares
of common stock -- -- 1,949 695,251 --
Net loss for the year
ended July 31, 1999 -- -- -- -- (755,617)
-------- ------- --------- ------------ -------------
BALANCES,
July 31, 1999 $ 328 $ 205 $ 4,034 $ 1,357,068 $ (1,034,801)
======== ======= ========= ============ =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period From November 18, 1997 (inception)
through July 31, 1998 and for the Year Ended July 31, 1999
<TABLE>
<CAPTION>
Period from
November 18,
1997
(inception)
Year ended through
July 31, 1999 July 31, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (755,617) $ (279,184)
Adjustments to reconcile net loss to
net cash (used in) provided by operating activities:
Provision for depreciation 185,933 86,888
Loss on disposition of property and equipment 1,554 --
Changes in assets and liabilities:
Increase in accounts receivable (1,325) (411)
Increase in inventories (90,381) (330,810)
Decrease (increase) in prepaid expenses 3,636 (15,385)
Increase in deposits (24,000) --
Increase in accounts payable 126,911 19,570
Decrease (increase) in payroll taxes payable (13,974) 47,099
Increase in accrued expenses 50,827 32,049
Increase in customer deposits 92,197 156,189
Increase in warranty reserve 1,469 49,084
Decrease (increase) in other current liabilities (604,406) 604,406
-------------- --------------
Net cash (used in) provided by
operating activities (1,027,186) 369,495
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the disposition of property and equipment 5,600 --
Payments for purchase of property and equipment (174,169) (868,881)
-------------- --------------
Net cash used in investing activities (168,569) (868,881)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 852,567 206,925
Proceeds from debt 400,000 295,000
-------------- --------------
Net cash provided by financing activities 1,252,567 501,925
-------------- --------------
Net increase in cash 56,812 2,539
CASH, Beginning of year (period) 2,539 --
-------------- -------------
CASH, End of year (period) $ 59,351 $ 2,539
============== ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND OPERATIONS
Jupiter Marine International, Inc. ("JMI") was incorporated under
the laws of the State of Florida in November, 1997. Shortly thereafter, JMI
acquired the assets of Jupiter 31, Inc., some of which they now use to
manufacture their boats. Jupiter Marine International Holdings, Inc.
("JMIH") was incorporated under the laws of the State of Florida on May 19,
1998. Shortly thereafter, JMI transferred it's assets and liabilities to
JMIH the newly formed entity. This transaction was accounted for as a
recapitalization. (JMIH and JMI are sometimes collectively referred to as
the "Company"). The Company is located in Fort Lauderdale, Florida and is
engaged in the manufacture and sale of offshore fishing and pleasure boats.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation:
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Jupiter Marine International, Inc.
All significant intercompany transactions and balances have been eliminated
in consolidation.
Provision for depreciation:
--------------------------
The Company provides for depreciation of its property and
equipment using the straight-line method over estimated useful lives of 5
and 7 years.
Additions and major renewals to property and equipment are
capitalized. Maintenance and repairs are charged to expense when incurred.
The cost and accumulated depreciation of assets sold or retired are removed
from the respective accounts and any gain or loss is reflected in income.
The Company continually evaluates the propriety of the carrying
value of property and equipment based on the estimated future undiscounted
cash flows of the related investment, as well as the amortization period to
determine whether current events and circumstances warrant adjustments to
carrying value and/or revised estimates of useful lives. At this time, the
Company believes that no significant impairment of the long-lived assets
has occurred and that no reduction of the estimated useful lives is
warranted.
Revenue recognition:
-------------------
Revenue from the sale of boats is recognized when they are
delivered. No right of return currently exist between the Company and its
dealers.
Use of estimates:
----------------
The presentation of a financial statement in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from
those estimates.
F-8
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventories:
-----------
At July 31, 1999 and 1998, inventories consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----------------- --------------
<S> <C> <C>
Finished boats $ 99,646 $ --
Boats in process, including
overhead applied 219,518 295,420
Materials and parts 102,027 35,390
-------------- --------------
$ 421,191 $ 330,810
============== ==============
</TABLE>
Inventories are stated at the lower of cost or market. The cost of
boats in process and finished boats includes labor, materials and allocated
production overhead. The first-in, first-out method is used to cost parts
and supplies for production. Boats in process and finished boats are valued
using the average cost method. Provision is made to reduce excess on
obsolete inventories to their estimated net realizable value.
Warranty reserves:
-----------------
The Company furnishes limited warranties from twelve to eighteen
months on its manufactured boats, and a lifetime hull warranty to the
original purchaser. The Company provides for warranty related expenses and
accruals as a percentage of net sales based on historical experience.
Stock based compensation:
------------------------
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," encourages, but does not require companies
to record compensation cost for stock-based employee compensation plans at
fair value. The Company has elected to account for stock-based compensation
plans using the intrinsic value method prescribed in Accounting Principles
Board ("APB") Opinion No.25, "Accounting for Stock Issued to Employees,"
and related interpretations. Accordingly, compensation costs for stock
options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock. The Company did however issue common stock
totalling $ 30,000 to an employee for services rendered in the year ending
July 31, 1999.
Advertising:
-----------
The Company expenses marketing and advertising costs as they are
incurred. For the periods ended July 31, 1999 and 1998, these costs were
approximately $ 116,000 and $ 28,000 respectively.
Cash equivalents:
----------------
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents. The
Company occasionally maintains cash balances at financial institutions in
excess of Federally insured amounts.
Earnings (loss) per share:
-------------------------
In calculating earnings (loss) per common shares, basic earnings
(loss) per share is computed by dividing net loss by the weighted average
number of common shares outstanding. Diluted
F-9
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
earnings (loss) per share includes the dilution caused by common stock
options and warrants. The weighted average number of shares for basic
earnings (loss) per share was 9,228,750 and 2,130,000 in 1999 and 1998,
respectively. The weighted average number of shares used in the diluted
computation was 10,827,750 and 2,130,000 in 1999 and 1998, respectively.
Recent accounting pronouncements:
--------------------------------
In June, 1997, the Financial Accounting Standards Board (the
"FASB") issued SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income generally represents all changes
in shareholders' equity during the period except those resulting from
investment by, or distributions to, shareholders. SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997, and requires
restatement of earlier periods presented. We adopted SFAS 130 as of July
31, 1998, and have presented comprehensive income, if applicable, for all
periods presented in the statement of shareholders' equity.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of and Enterprise and related information." SFAS No. 131
establishes standards for the way that a public enterprise reports
information about operating segments in annual financial statements, and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997, and
requires restatement of earlier periods presented. The Company has
determined that it does not have any separately reporting business
segments.
In March, 1998, the AICPA issued SOP 98-1, "Accounting for the
Costs of Corporate Software Developed or Obtained for Internal Use", which
establishes guidelines for the accounting for the costs of all computer
software developed or obtained for internal use. The Company adopted SOP
98-1 effective for the year ended July 31, 1998. The adoption of SOP 98-1
is not expected to have a material impact on the Company's financial
statements.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivated instruments, including
derivated instruments embedded in other contracts, and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. This statement does not apply to the
Company because it does not have any derivative instruments or hedging
activities.
Reclassification:
----------------
Certain prior period amounts have been reclassified in order to
conform with the current year financial statement presentation.
NOTE 3 - LEASE COMMITMENT
The Company leases office and manufacturing space from its
principal stockholder. The lease provides for monthly payments adjusted
annually for cost of living adjustments and space utilization until it
expires in May, 2002. The monthly rental was $ 13,184 at July 31, 1999 and
$ 12,525 at July 31, 1998, including sales and real estate taxes.
The Company previously received a four month rental abatement in
consideration for making various leasehold improvements and modifications.
Rental expense for the period ended July 31, 1999 and 1998, totaled
approximately $ 119,000 and $ 45,000 respectively.
F-10
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE 3 - LEASE COMMITMENT (continued)
The following is a schedule of approximate future lease payments
required by this lease:
Year ending
July 31
2000 $ 141,800
2001 $ 148,800
2002 $ 65,100
Thereafter $ NONE
In connection with the lease above, the Company has been granted
an option to purchase the building as discussed in Note 6.
NOTE 4 - DEBT
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
--------- -------
Note payable to Triton Holdings International Corp., a stockholder
and related party, interest only at 10% through January, 2003, at
which time the principal balance is due. The note is
collateralized by substantially all of the assets of the Company.
The note is convertible into shares of common stock of the
Company, at the option of Triton at $ .50 per share before January
14, 2000, at $ .375 per share from January 14, 2000 to January 14,
2002, and at $ .25 thereafter until January 14, 2003. $ 350,000 $ --
Note payable to Triton Holdings International Corp. a stockholder
and related party, interest only at 12% through January, 2000, at
which time the principal balance is due. The note is
collateralized by certain assets of the Company. 50,000 --
10% note of the subsidiary payable in full upon the earlier of 18
months from February, 1998, or upon the completion of a private
offering of the Company's common stock of not less than 500,000
shares. During the year ended July 31, 1999 this note was
converted to Series A preferred stock. -- 295,000
----------- ---------
400,000 295,000
Less current portion 50,000 --
----------- ---------
$ 350,000 $ 295,000
=========== =========
</TABLE>
F-11
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE 4 - DEBT (continued)
Future debt principal payments in the aggregate are approximately
as follows:
Year ending
July 31 1999 1998
------- --------- ------
1999 $ -- $ 295,000
2000 $ 50,000 $ --
2001 $ -- $ --
2002 $ -- $ --
2003 $ 350,000 $ --
Thereafter $ NONE $ NONE
NOTE 5 - PROVISION (CREDIT) FOR INCOME TAXES
Deferred taxes, if applicable, are provided at the combined
effective Federal and state statutory rates on timing differences which
occur when certain income and expense items are recognized at different
times for financial reporting and tax purposes.
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the recognition of deferred tax liabilities and
assets at currently enacted tax rates for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. A valuation allowance is recognized to reduce the net
deferred tax asset to an amount that is more likely than not to be
realized. The tax provision (credit) shown on the accompanying statements
of operations is zero, because the deferred tax asset that is generated
from net operating losses through July 31, 1999 is offset in its entirety
by a valuation allowance. Net operating loss carryforwards for financial
reporting and tax purposes total approximately $ 880,000. The tax losses
expire $ 210,000 in 2018 and $ 670,000 in 2019.
NOTE 6 - RELATED PARTY TRANSACTIONS
In connection with the lease agreement with its principal
stockholder (Note 3), the Company has been granted a purchase option on the
leased property for a three year period ending November 1, 2001. The option
price is as follows:
a. If option is exercised prior to November 1, 1999; purchase
price is $ 900,000
b. If option is exercised after November 1, 1999 but prior to
November 1, 2000; purchase price is $ 950,000
c. If option is exercised after November 1, 2000 but prior to
November 1, 2001; purchase price is $ 1,000,000
As more fully discussed in Note 4, the Company is obligated on
notes payable in the amounts of $ 350,000 and $ 50,000 to Triton Holdings
International Corp. (Triton) a stockholder of the Company. Interest expense
applicable to these notes was $ 28,563 and $ 5,645 for the year ended and
period ended July 31, 1999, and July 31, 1998, respectively. In addition,
several of the directors of Triton are also stockholders of the Company.
In addition, the Company has entered into a management agreement
with Triton which is more fully discussed in Note 7.
F-12
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE 7 - COMMITMENTS
The Company entered into an employment agreement with its
President for his services until October, 2003 at $ 72,000 per year. The
agreement provides for an additional $ 2,500 per month when the Company has
achieved a positive cash flow from operations for three consecutive months
and $ 2,000 per month when the Company has net income from operations for
three consecutive months. The agreement may be automatically renewed for up
to two successive one year periods by mutual agreement between the parties.
In addition, the employment agreement provides for the President
to receive options to purchase 150,000 shares of common stock at $ .50 per
share, 150,000 shares of common stock at $ .625 per share, 150,000 shares
of common stock at $ .75 per share and 150,000 shares of common stock at $
1.00 per share. The options vest equally and may be exercised over a period
of five years. The employment agreement includes certain non-compete and
confidentiality provisions.
Further, the Company also entered into a five year management
agreement with Triton Holdings International Corp., a stockholder and
related party, Notes 4 and 6, until December, 2003. The agreement calls for
a payment of $ 5,000 per month for general business consulting services
during the term of the agreement.
The Company has made commitments to sell boats at cost or at a
dealer discount to certain stockholders and other related parties. Cost is
the actual material and labor plus allocated overhead. The dealer discount
is the manufacturers suggested list price less a dealer discount of 25%.
All dealers receive the same discount. No boats have been sold to and none
have been ordered by stockholders as of July 31, 1999.
NOTE 8 - CONTINGENCIES
From time to time the Company is subject to legal proceedings and
claims arising in the ordinary course of business. The Company is not aware
of any legal proceedings or claims that will have, individually or in the
aggregate, a material adverse effect on the Company.
NOTE 9 - CAPITAL STOCK
The capital stock structure of the Company is as follows:
Preferred stock, voting:
Series A, $ .001 par value, 10% cumulative, callable at $ 1.20 per
share, convertible into three shares of common stock until the
fifth anniversary of the date of issue at which time automatic
conversion will occur, 5,000,000 shares authorized, including
500,000 designated as 10% cumulative, 328,000 shares issued and
outstanding.
Preferred stock, nonvoting:
Series B, $ .001 par value, 10% cumulative, callable at $ 1.20 per
share, convertible into three shares of common stock until the
fifth anniversary of the date of issue at which time automatic
conversion will occur, 205,000 shares authorized, issued and
outstanding.
Common stock, voting, $ .001 par value, 50,000,000 shares
authorized and 4,033,500 shares issued and outstanding.
F-13
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999 and 1998
NOTE 10 - EQUITY TRANSACTIONS
In December, 1998, the Company issued 295,000 shares of Series A
Preferred Stock along with warrants to purchase 295,000 shares of the
Series B Preferred Stock at $ 1.00 per share, exercisable for a period of
five years from the date of issuance. The stock was issued in consideration
for the cancellation of a $ 295,000 promissory note. As of July 31, 1999,
all of the warrants were still outstanding. Warrants are considered to be
of no value, consequently they are not recorded on the books of the
Company.
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental Disclosure of Cash Flow Information:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash paid during the year for -
Interest $ 31,584 $ 2,250
Other Noncash Financing Activities:
Issuance of stock $ 1,277,567 $ --
Stock issued in lieu of
employee compensation (30,000) --
Debt reduction in connection
with issuance of Series A
preferred stock (295,000) --
Stock issued relating to
note payable (100,000) --
----------- -----------
Proceeds from issuance of stock $ 852,567 $ --
=========== ===========
</TABLE>
NOTE 12 - GOING CONCERN MATTERS
As shown in the accompanying financial statements, the Company
sustained net operating losses totalling $ 931,826 through July 31, 1999,
and as of that date, had current liabilities exceeding current assets by $
117,395. These deficiencies, as well as a significant deficit cash flow
from current operations, create an uncertainty about the Company's ability
to continue as a going concern.
From the inception of the Company through April, 1999, the Company
was primarily involved in satisfying certain obligations and commitments
relative to the purchase of assets from Jupiter 31, Inc. (Note 1), and in
relocating and modifying its manufacturing facility. During the last
quarter of the fiscal year the Company commenced normal operations and
generated approximately $ 1,000,000 of the total sales for the year ended
July 31, 1999. Management believes that it has assembled a management team
capable of recognizing and capitalizing on opportunities in the marine
industry, and they are committed to identifying business and financing
opportunities and strategic partners to infuse additional capital into the
Company until future profitable operations can be achieved. In addition,
the Company has completed the improvements to its facility and the
modifications to its production methods which should improve efficiency and
favorably impact future operations.
F-14
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2000 AND APRIL 30, 1999
<TABLE>
<CAPTION>
ASSETS
April 30, 2000 April 30, 1999
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 279,521 $ 167,011
Accounts receivable 36,997 --
Inventories 416,735 399,997
Prepaid expenses 6,115 8,272
---------- ----------
Total current assets 739,368 575,280
PROPERTY AND EQUIPMENT, at cost or allocated cost
Boat molds 1,029,124 822,181
Leasehold improvements 138,566 97,837
Machinery and equipment 126,449 34,847
Office equipment 10,112 7,000
---------- ----------
1,304,251 961,865
Less accumulated depreciation 416,467 236,171
---------- ----------
Total property and equipment 887,784 725,694
---------- ----------
OTHER ASSETS:
Deposits 30,510 20,000
---------- ----------
Total other assets 30,510 20,000
---------- ----------
Total assets $1,657,662 $1,320,974
========== ==========
F-15
<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 363,510 $ 41,522
Payroll taxes payable -- 63,125
Accrued expenses 123,729 74,022
Customer deposits 28,124 199,194
Current portion of debt 50,000
Warranty reserve 56,005 49,084
----------- -----------
571,368 476,947
LONG TERM DEBT, less current portion 350,000 350,000
----------- -----------
Total liabilities 921,368 826,947
STOCKHOLDER'S EQUITY:
Capital stock, 5,000,000 shares of $.001
par value preferred stock authorized,
500,000 shares designated as 10% cumulative
Series A preferred stock, $.001 par value
($328,000 aggregate liquidation preference),
328,000 shares issued and outstanding 328 328
Capital stock, 205,000 shares designated as
as 10% cumulative Series B preferred stock,
$.001 par value ($205,000 aggregate
liquidation preference), 205,000 shares
issued and outstanding 205 205
Capital stock, 228,000 shares designated as
as 10% cumulative Series C preferred stock,
$.001 par value ($228,000 aggregate
liquidation preference), 228,000 shares
issued and outstanding 620 --
Capital stock, 50,000,000 shares of $.001
par value common stock authorized,
4,033,500 shares issued and outstanding 4,034 4,034
Additional paid-in capital 1,902,113 1,357,068
Accumulated deficit (1,171,006) (867,608)
----------- -----------
Total stockholder's equity 736,294 494,027
Total liabilities and stockholder's equity $ 1,657,662 $ 1,320,974
=========== ===========
</TABLE>
F-16
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS (LOSS)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
April 30, 2000 April 30, 1999 April 30, 2000 April 30, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ 1,857,607 $ 182,864 $ 4,143,548 $ 182,864
COST OF SALES 1,540,220 125,683.00 3,484,979 125,683
----------- ----------- ----------- -----------
Gross income 317,387 57,181 658,569 57,181
SELLING, GENERAL AND 295,173 363,135 768,112 625,668
ADMINISTRATIVE EXPENSES ----------- ----------- ----------- -----------
Profit (Loss) from operations 22,214 (305,954) (109,543) (568,487)
OTHER EXPENSE:
Interest expense 8,750 9,167 26,663 19,937
----------- ----------- ----------- -----------
Total other expense 8,750 9,167 26,663 19,937
Profit (Loss) before income taxes 13,464 (315,121) (136,206) (588,424)
PROVISION FOR INCOME TAXES -- -- -- --
Net Profit (Loss) $ 13,464 $ (315,121) $ (136,206) $ (588,424)
=========== =========== =========== ===========
Earnings (loss) per common share
Basic $ 0.001 $ (0.148) $ (0.015) $ (0.276)
=========== =========== =========== ===========
Earnings (loss) per common share
Diluted $ 0.001 $ (0.148) $ (0.013) $ (0.276)
=========== =========== =========== ===========
</TABLE>
F-17
<PAGE>
JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 2000 AND APRIL 30, 1999
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
April 30, 2000 April 30, 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (136,206) $ (588,424)
adjustments to reconcile net loss to
net cash (used) provided by operating activities:
Provision for depreciation 143,646 149,283
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (35,261) 411
(Increase) Decrease in inventories 4,456 (69,187)
(Increase) decrease in prepaid expenses 5,635 7,113
(Increase) decrease in other assets (6,510) (20,000)
Increase (decrease) in accounts payable 217,029 21,952
Decrease (increase) in payroll tax payable (33,125) 16,026
Increase in accrued expenses 40,852 41,973
(Decrease) increase in customer deposits (220,262) 43,005
Increase in warranty reserve 5,452 --
Decrease in other liabilities -- (604,406)
----------- -----------
Net cash (used in) provided by
operating activities (14,294) (1,002,254)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchase of property and equipment (261,201) (92,984)
----------- -----------
Net cash used in investing activities (261,201) (92,984)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payment) proceeds in debt (50,000) 105,000
Proceeds from stock transactions 545,665 1,154,710
----------- -----------
Net cash provided from financing activities 495,665 1,259,710
----------- -----------
Net increase (decrease) in cash 220,170 164,472
CASH, Beginning of period 59,351 2,539
----------- -----------
CASH, End of period $ 279,521 $ 167,011
=========== ===========
</TABLE>
F-18
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBITS DESCRIPTION OF DOCUMENT
-------- -----------------------
3.1 Articles of Incorporation of Jupiter Marine International Holdings,
Inc. (1)
3.2 Articles of Amendment to the Articles of Incorporation of Jupiter
Marine International Holdings, Inc. (1)
3.3 Bylaws of Jupiter Marine International Holdings, Inc. (1)
10.1 Employment Agreement between Jupiter Marine International Holdings,
Inc. and Carl Herndon, Sr. dated November 10, 1998. (1)
10.2 Employment Agreement between Jupiter Marine International Holdings,
Inc. and Carl Herndon, Jr. dated May 28, 1999. (1)
10.3 Management Agreement between Jupiter Marine International Holdings,
Inc. and Triton Holdings International Corp. dated January 14,
1999. (1)
10.4 Secured Promissory Note issued by Jupiter Marine International
Holdings, Inc. and Triton Holdings International Corp. dated
January 14, 1998. (1)
10.5 Lease Agreement between Jupiter Marine International Holdings, Inc.
and Carl Herndon, Sr. dated May 19, 1998. (1)
21 Subsidiaries of Jupiter Marine International Holdings, Inc. (1)
27 Financial Data Schedule.
(1) Filed Previously
----------------
-22-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
JUPITER MARINE INTERNATIONAL
HOLDINGS, INC.
Date: June 16, 2000 By: /S/ Carl Herndon
----------------------------------
Carl Herndon, Director,
CEO and President
Date: June 16, 2000 By: /S/ Lawrence Tierney
----------------------------------
Lawrence Tierney, Director
Date: June 16, 2000 By: /S/ Carl Herndon, Jr.
----------------------------------
Carl Herndon, Jr.,
Vice President of Sales
and Marketing
-23-
